Brian Bowman: Apple’s IDFA change has triggered 15% to 20% revenue drops for iOS developers

Apple critics such as Epic Games CEO Tim Sweeney have complained about Apple’s alleged anticompetitive behavior with the App Store. But Consumer Acquisition’s Brian Bowman has frequently sounded the alarm on Apple’s decision to favor user privacy over targeted ads by changing access to its Identifier for Advertisers (IDFA).

Based on Consumer Acquisition’s analysis of $300 million in paid social ad spending, IDFA has had a devastating impact, Bowman said in an interview with GamesBeat. In a report issued today, Bowman said that iOS advertisers are experiencing a 15% to 20% revenue drop and inflation in unattributed organic traffic.

Starting in April, Apple began releasing iOS 14.5, which prompted users to answer whether they would allow their data to be tracked for advertising purposes. Apple believes this puts privacy front and center. But Consumer Acquisition and many of its game developer advertisers worry it will break personalized advertising.

Only 20% of consumers are saying yes to Apple’s App Tracking Transparency prompt, which means they will enable apps to personalize ads by tracking their personal data. For the traffic Bowman’s company evaluated, performance has faded. Across paid social platforms, downstream event optimization and “lookalike audience performance” is also eroding.

Advertisers aren’t helpless. In a post-IDFA world, Facebook, Branch, and Consumer Acquisition recommend focusing on “persona-led creative” (or marketing to a type of person) to regain efficiency by allowing paid social algorithms to cluster users based on behaviors and creative trends. Bowman believes — or at least holds out hope — that Apple will roll back or soften the IDFA changes by Black Friday. It’s rare to see such direct criticism of Apple, which has become one of the leader of the tech economy, but Bowman is quite fed up. (We’ve asked Apple for their own comment).

Here’s the edited transcript of our interview.

GamesBeat: How’s the post-IDFA life?

Brian Bowman: Well, we’re not post-IDFA yet. We’re still in transition. It’s what I expected. There’s a loss of a portion of revenue, depending on how people are evolving. I don’t expect the full impact to be felt until the end of July. The rollout of 14.6 has been slow. It’s obviously picking up. Apple intentionally delayed app tracking transparency until 14.6. Certain clients are down 30% to 40% percent in revenue. Others are feeling less of an impact. It’s a mess.

GamesBeat: What does that mean as far as just what other things happen to cause that drop in revenue? I think you also said CPIs have been all over the place.

Bowman: As to what caused the drop in revenue, one, clients that are dependent on lookalike audiences, specifically targeting “whales” as an example, those people with a higher propensity to pay, are the most impacted today. There’s a collapse of VO bidding. The ability to specifically target people who are going to transact is diminished, and will continue to erode as ATT rolls out.

It’s clear, when you look at the big three — Facebook, Google, TikTok — they’re experimenting with changes to the algorithm, which is causing odd perturbations in CPMs. CPMs for a particular client will increase 300-to-500 percent for a few days, and then it’ll magically drop back down. There’s experiments being run, clearly, to try and understand the marketplace better.

GamesBeat: And for those who are less affected, what do you see there?

Bowman: The same stuff we’ve always said, which is if you’re fortunate enough to be in — I’ll just name a genre, but take casual gaming. The right way of saying it from an algorithmic standpoint, if you’re targeting a very broad base of users that generically monetize consistently, meaning you don’t need a particular niche or kind of human — they all monetize in a blob — those are the least impacted. In fact those will probably benefit, because as RNG or midcore to hardcore gets more impacted, those seeking high-value payers have to pull back and adjust based on LTV models. Casual games will benefit.

GamesBeat: And hypercasual as well?

Bowman: So far, not yet. What is very clearly a negative in that space is the revenue they’re able to earn is in fairly significant flux. Part of that is due to FAN moving into header bidding. Part of it is just as CPMs slop around, the ability to predictably acquire consumers at a low CPI, which is obviously tied to the cost of the marketplace, is in flux.

GamesBeat: On your apocalypse scale, then, where are we?

Bowman: I still believe everything I’ve said at a high level, which is that small to medium-sized app developers who are dependent on ad revenue will be significantly impacted. That impact will start to be materially felt running through July and into August. The companies that are able to have a large first-party data footprint, like AppLovin or EA, which now owns Glu — they’ll be less impacted because they’re able to understand, across a very large pool of users, who the payers are.

At the very high end, the companies that are amassing a walled garden of IDFVs are on a path to do better. Small to medium-sized developers just don’t have the financial ability to move into in-app purchases. You need an awful lot of money to do that. As CPMs become more expensive, both on Android and iOS, they will be negatively impacted. Again, I don’t know, but I’m guessing — it’s illogical to me that Android would be impacted. It should be normal. It hasn’t lost anything. It seems that people are moving money to Android to try and recover the efficiency they lost on iOS. That’s creating some marketplace dynamics where it’s more expensive.

GamesBeat: Does that work very well? It seems to help a little, but if the behavior doesn’t change and most people spend money on iOS and not on Android, it doesn’t do anything.

Bowman: Exactly. It’s a short term attempt to find an alternative and see what happens. We’re also seeing money flow into TikTok and other platforms, because of course people want to diversify risk. Going back to your hypercasual question, there’s an influx of money going into the IronSources and the AppLovins and so on, because hypercasual is doing quite well there. They have a very large distribution and they’re less affected on those platforms.

GamesBeat: All these acquisitions that have happened, what makes sense to you about that? What seems to be obviously driven by IDFA? We have Zynga and ChartBoost. Vungle has bought four companies. Does that all make sense to you? Is it the smart thing to do?

Bowman: If you look at it through the lens of the big getting bigger, and they want a rigid walled garden to play in, yes. The more data, the more optics, the more sensibility you have in terms of shoring up your internal walled garden, it makes total sense. You’re looking at companies trying to shore up AI and machine learning on the optimization side, and then creative capabilities on the side where it’s going to touch the primary social networks.

GamesBeat: If ChartBoost goes to Zynga, do its customers dissipate? I think Zynga likes that, because they get more insight from more companies to help them do better targeting. But those companies might not feel like that’s a good place for their data to be.

Bowman: To answer that question in a kind of marketplace way, look at what’s going on at Adjust and these others we’ve discussed. You’d assume that if AppLovin had all your data, there would be competitive leakage. It doesn’t appear that that’s happening. Wherever there are pockets of efficiency, people will go. Of course, if you’re the buyer of entities like that and it gives you more first-party data, there’s an advantage for you. CPM flow, targeting, IDFVs. Again, the play is to get huge to maintain both efficiency and optics. It doesn’t appear that people are opposed to that type of exposure. It’s like a river. They’re following the path of least resistance to figure out where the efficiencies are.

GamesBeat: There still appears to be companies out there that are trying to use probabilistic (where you can figure out the probable user) in a way that would violate Apple’s rules. Are we just waiting for the hammer to drop on them?

Bowman: Everyone should continue using what they can, because I think the whole thing is absurd. For example, I don’t understand why someone doesn’t just set up a pool of IDFVs outside of Apple and everyone exchanges their IDFVs and throws Apple the middle finger. What are you going to do about it? Apple’s not the only reservoir in the universe. You can quickly build an offshore implementation of IDFAs if people trust each other. Should they do that? Absolutely, because I think what Apple is doing is monopolistic. Will they?

GamesBeat: Wouldn’t they take that hit on the other side? People getting upset about privacy?

Bowman: You’re in my favorite bucket. If people actually cared about privacy, then anything tied to Edward Snowden would have been a big deal. The government reading my emails and listening to my phone calls. People look at it like this. I’m not doing anything inappropriate. I’m a normal person. I don’t care. The whole question is upside down. It’s not a question of privacy. It’s a question of personalization. Apple has done a phenomenal job of PR. They don’t offer privacy. What they’re doing is centralizing and curating data. You have to use their app store. You have to use their payment gateway. They understand your voice, your fingerprint, and your health data. They understand the way you purchase. That’s not privacy. Apple is defining privacy by saying they get all the data and therefore it’s private. It’s absurd.

I believe that this is a wonderful battle. Apple’s definition of privacy versus Minority Report, which is Google. A full, transparent personalization and customization with world class recommendation. That’s the direction Google is going to go. Apple is going to go into human curation. In the end Apple will lose because it’s a worse user experience.

GamesBeat: If Apple has declared war on Facebook and Google, are those two responding in any strategic way?

Bowman: I can’t speak to how they’re responding. What Apple’s doing makes sense for Apple. Apple is terrible at merchandising apps. They’re terrible at recommending what you’re going to enjoy. Google is very good at it. Facebook is very good at it. Basically, they’ve rendered the App Store as an unnecessary step in the funnel for the user. So they just ratchet back the ability to make those suggestions. From Apple’s viewpoint on the world it makes sense. The positioning of privacy is warped, but smart. It’s a very poor definition of what privacy is, but because there are so many fans of Apple, they allow them to do that without being challenged.

GamesBeat: Do you think this is an area where anti-trust is going to be raised, as in the case between Epic and Apple?

Bowman: It’ll be fascinating to see how that plays out. In all possible ways, it makes no sense that Apple will not allow a different app store to distribute apps. The moment at which you breach that, if you can have multiple app stores, everything changes. Is it monopolistic? Yes. Will it be rendered as such? I don’t know.

By the way, to the question on privacy, let’s just roll over to Amazon. Amazon couldn’t do what Amazon does without very smart personalized recommendations. It’s a very clear path. Do you want spam, or do you want quality recommendations? If you want quality recommendations, you have to give. It’s utterly ludicrous to think that a developer is going to give you something for free and you surrender nothing. You don’t pay for it and they have no ability to monetize you? That’s not the way life works. It’ll be interesting to see what developers do. If you don’t surrender your ATT, do you pay 99 cents? At that point you’re essentially worthless to the developer other than ad monetization. It’ll be very interesting to see how the whole thing matures.

GamesBeat: Are you happy at all with the response from the targeted advertising community? Are they raising enough alarm about this?

Bowman: In my younger days, a buddy of mine gave me some shit. He said, “Sometimes, Brian, it seems like you’re trying to stop the sun from rising.” It feels like that. There’s nothing you can do when you’re in Apple’s sandbox. It’s their rules. It doesn’t matter whether you’re screaming or not screaming. It’s happening and there’s nothing anyone can do. Now it’s a function of — this econometric way of looking at the world, will it recover and allow people to function efficiently in this new space? Who knows? It’s literally direct response mail. It’s the same methodologies used there to know what to mail to my house. It’s a shade above spam. How will it work? I don’t know. Will the big get bigger? Absolutely. Will the small get smaller? Absolutely.

GamesBeat: By what date do you think we’ll get the full effect of the changes? Is it just whenever 14.6 is at 80 percent?

Bowman: That’s exactly right. At 80 percent plus 30 days. You have the LTV windows from the buyers that look out at about a month. Most folks are operating at day seven, but they’ll start dialing down slowly. When it gets to about 80 percent, that’ll be the hammer. Somewhere between seven to 30 days after that, you’ll start to see the decrease in spend, which will be the reaction to the loss of efficiency. Then there will be this lull of a month or so where they try to — everyone’s already doing all of these experiments. What we hear is they can’t figure it out so far. Not to say the industry won’t, but they’re pulling back. Spend will continue to pull back until there’s pockets of efficiency that express themselves.

Everyone has to grow, right? All these big companies that are buying each other, the public companies, they have to continue to spend money. They can’t not invest in user acquisition. It’s just a function of how efficiently they can do it.

GamesBeat: I was surprised that IDFA didn’t come up more in the Apple v. Epic case. There was so much data that came out about the state of the game industry and things like how much Epic was paying for exclusives on the Epic game store, but there wasn’t a single document I saw that came out related to why Apple made its move on IDFA.

Bowman: It’s a bit too esoteric. It’s also probably orthogonal to the core question about the app stores. If, in essence, you pop open the app store and there can be more than one app store, it resolves the IDFA issue. People can do things differently. If you surrender on one, you surrender on it all, I think. That’s up to Apple.

GamesBeat: It almost seems like a lost opportunity to push back, though, or to find out more about their intentions, their decision-making process, and other sorts of things that seem so important to know.

Bowman: If you just look at it through the lens of, is it monopolistic in its behavior — of course it is. It’s removing and centralizing your ability to increase your value and the value of your own network at the expense of competitors, at a scale which has never been done, not since mobile apps started running around 2012.

GamesBeat: This is all kind of depressing. How do you cheer yourself up?

Bowman: It’s funny you say that. I read this book called Maxout Your Life, by Ed Mylett. It’s basic philosophy about the things you can control and the things you can’t. Focus on the things you can and surrender to those you can’t. That’s what it is. From a business perspective we’ve never signed up this many clients for creative. It’s clear that the industry is moving in this direction, and by “industry,” I don’t just mean mobile apps. I think there’s a confluence of events. The “appification” of TV is also an accelerator in this space, where smart direct response advertising will become the mandate as apps start to dominate television distribution too.

As soon as you can measure it — you measure what matters. As soon as you can measure advertising, all this nonsense around awards goes away. It turns into, what’s the profitability of your creative? The world is going to move in this direction. Google has it right in terms of personalization. Apple will continue to do one of those things, which is very small distribution, not for the masses. It’ll have a strong ecosystem that it plays in.

I really struggled, since July, trying to figure out the pieces. As you know, I’ve been pretty vocal about this. The outlook that hit me back in September or so, it was pretty ugly, and that’s what’s playing out right now. From a financial perspective, we’ve been a little innovative. We’ve changed the way our clients can use our creative. For example, we didn’t care if Glu ran creative anywhere they wanted, as long as we had the ability–go do what you want with it, but starting April 26 forward, for all new deals we get a percentage of spend wherever someone runs our creative.

Basically, as Apple isolates out these — it’s not just the loss of IDFA. It’s the limitation of the SKAdNetwork. It means there’s only one iOS account, where in the old days there were 20. Now there’s only one. That one account is going to go into the primary app developer’s account, unless you’re the sole agency of record. There’s multiple things going on. Automation by Facebook and Google is making it easier to buy media. SKAdNetwork limits the number of accounts to one on the iOS side. There’s a whole confluence of events that’s radically reshaping the way media buying is working.

GamesBeat: As far as your own business goes, are there any particular impacts or changes for consumer acquisition?

Bowman: Absolutely. Our highest-spending media buying accounts have decreased. Revenue per account on the managed service side is down. The revenue per creative account is up. As managed service compresses, we’re able to increase the number of creative studio clients. We’re fortunate that we have these two levers that give the developers options to do things differently. There was a period that was super scary. It’s playing out. Hopefully that exchange will work out.

GamesBeat: Are there any other things that are a big part of your insight or analysis here?

Bowman: I haven’t fully read it or understood it, so I want to be transparent about that part, but the article I shot over to you about Private Relay from Eric at Mobile Dev Memo — I would encourage you to listen to their podcast series and dig into that. That’s a bit scarier as far as how Apple is trying to corner all tracking, whether it’s web-based or mobile app-based by obfuscating the IPs of users. It’s a very interesting, probably real view of what will happen, because it’s to Apple’s advantage to do it.

Basically, most people who use iOS don’t install Chrome. They use Safari. If Apple obfuscates all of that mobile web data, the material advantage that gives Apple — again, it’s the walled garden. That’s when you start to impact Amazon. That’s when you start to impact the ad networks. That’s when a lot of other non-gaming-centric players really feel the pinch. I need to dig into that. I’m not well-versed in it yet.

GamesBeat: I do wonder why there’s been a lot of attention given to antitrust this year, but almost no mention of anything related to IDFA. If it were better understood, regulators and Congress would be making more noise about it. There’s a strong chance that Epic is going to lose its case on all fronts, but if antitrust law were adjusted to head off this kind of behavior, they’d win in the end. It’s almost like they’re going to be the poster child for why the law has to change. Once that happens, the behavior of all the big companies would have to change. But I don’t know how strong these movements are. It would be interesting or illuminating to have a Congressional hearing related to IDFA, to have Apple come and explain.

Bowman: Those things only work if Congressmen aren’t so arrogant that they feel the need to ask questions versus have some expert who understands it actually ask the questions. It’ll be very interesting, for certain, to see how it plays out.