Apple CEO Tim Cook gives an important speech at the European Union Confidentiality Conference at the EU Parliament in Brussels, Belgium, on October 24, 2018.
Yves Herman | Reuters
Snap and Unity Software, which reported fourth-quarter earnings after Thursday’s bell, both warned of the future impact of Apple’s privacy changes set for this spring.
To target mobile ads and measure how effective they are, app developers and other industry players often use the Apple ID for Advertisers (IDFA), a unique string of letters and numbers on each Apple device. But once a privacy update is released, app makers will be required to request permission to access a user’s IDFA at a prompt. A significant portion of users are expected to say no, which will make targeted advertising less effective.
The changes have become a major point of contention for advertising-backed companies, such as Facebook, which appear to be losing revenue from the change. But Facebook is far from alone.
Unity Software said in its revenue report that the changes to IDFA will affect how mobile game developers receive new customers and “how they optimize customer value for life.”
“Although difficult to estimate, our guidelines assume that IDFA changes will begin in the spring and reduce our revenue by approximately $ 30 million, or 3% of revenue, by 2021,” the company wrote.
In remarks prepared for its fourth-quarter earnings report, Snap’s chief financial officer Derek Andersen said Apple’s changes would present a risk of demand disruption once implemented.
“It is not yet clear what the long-term impact of these changes may be for the maximum momentum of our business and this may not be clear until a few months or more after the changes are implemented,” he said.
Apple is currently testing the privacy update in a beta version of iOS 14, which it expects to release to all users in “early spring”.
Jeremi Gorman, Snap’s business director, said Snap worked with Apple to prepare for the changes, educated its advertisers and made long-term investments to use more primary data for advertising. In addition, the company intends to offer advertisers more opportunities to provide their products and services to Snap users directly through Snapchat.
“The reality is that we admire Apple and we think it’s trying to do the right thing for their customers,” she said. “Their focus on protecting privacy is aligned with our values and the way we have built our business from the beginning.”
She added: “In general, we feel very well prepared for these changes, but the changes to this ecosystem are usually disruptive and the outcome is uncertain.”
The shares of both companies fell on Thursday after trading after business hours, with Snap more than 10% and Unity less than 15%.
CNBC Salvador Rodriguez contributed to the reporting.
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