Brands have reduced their spending on iOS ads by about a third since the start of June alone, according to market data made public in a Wall Street Journal report today.

Industry insiders have tied the spending drop to a privacy feature that Apple released for iOS as part of an April update. The reduced demand is significant for the digital advertising ecosystem because iOS, along with Android, is one of the main platforms through which marketers target mobile users. The decline in ad spending is also significant because of its potential impact on tech giants such as Facebook Inc. that generate parts of their revenue from selling mobile ads.

The Wall Street Journal attributed the data about the drop in spending to Tenjin Inc., a San Francisco-based marketing analytics backed by Y Combinator. Marketing agency Tinuiti told the Journal that it has seen a “similar pattern” in its clients’ spending on iOS ads. Year-over-year growth in those clients’ iOS spending dropped from 42% in May to 25% in June, according to the agency.

The effectiveness of digital ads depends on the degree to which brands can personalize them for their target audiences’ interests. Personalization, in turn, requires collecting data about those audiences. Consequently, the more user data a brand has, the more effectively it can personalize its ads, which translates into more revenue. 

The opposite is also true. The less data brands can collect about their target audiences’ interests, the more difficult it is to deliver relevant ads that persuade users to make a purchase. The new Apple privacy feature tied to the drop in iOS spending is believed to be responsible for the declining ad demand because it reduced brands’ ability to collect user data.

Marketers use an Apple technology called Identifier for Advertisers to track users’ interests on iOS. The new privacy feature, which rolled out on April 26, made the technology opt-in, meaning consumers have to specifically give apps permission to gather their data.

The Journal today cited market research that estimates less than a third of consumers opt into using Identifier for Advertisers. That has led to a sharp decline in the amount of data available to brands and thereby reduced their ability to deliver effective personalized promotions.

The development is believed to have affected, among other companies, Facebook. The social network generates a portion of its revenue by enabling brands to display ads in the iOS versions of its apps, as well as in third-party apps that integrate with its Audience Network product. Tinuiti estimates its clients were allocating only about 20% of their Audience Network ad spending on iOS as of the end of June, down from 50% at the start of April.

Apple’s release of the privacy feature also affects Google LLC. It appears that some marketers have shifted parts of their iOS ad budgets to Android, which Tinuiti estimates pushed the price of Android advertisements 30% above those of their iOS counterparts.

The change to the way companies can target potential customers via iOS is among several major developments that have occurred in the digital ad ecosystem recently. Previously, in May, Google LLC announced plans to require that Android apps disclose what data they collect about users.

In another effort aimed at improving privacy, the search giant is working to replace the third-party cookies that marketers rely on to track users on the web with a homegrown technology called FLoC. However, Google last month said it would delay the rollout of the technology until 2023. The move came after the European Union opened a broad antitrust probe of the search giant that will focus on, among other things, Google’s efforts to replace third-party cookies. 

Photo: Andrew/Flickr