Apple Just Killed Performance Advertising As We Know It

// THREAD //

In the new version of iOS14 released yesterday, users will get the option to opt-in to apps tracking their internet browsing activities.

Layman's terms: Social networks will no longer be able to track what sites you visit and what actions you take on those sites if you opt-out

Facebook and other social networks have been tracking all of our internet browsing history for years so they can build better advertising audiences and give advertisers the option to retarget people who visited their website

But given the fact that everyone will now have the option to opt-in, my agency anticipates that about 75% of the general public will opt-out of Facebook and other apps being able to track their data (using data gathered from our own surveys and research)

The producers of The Social Dilemma may be happy but the advertising industry is not.

And rather than complaining or boycotting Apple, advertisers seem to be rather chill about it.

Taking the approach "if it's happening to everyone, there isn't much we can do"

In simplistic form, here is what happens if 75% of people decide not opt-in:

FIRST- Ads Effectiveness Will Diminish

I’m leading with this because it’s the one no one wants to talk about

Facebook ads’ brilliance is that it knows who to show your ads to based on the data it has on each user to know who is most likely to take your desired action or not

For example, if you tell Facebook

“I want to get as many purchases as possible for my pet food brand”

They are going to comb through their billions of users and show your ads to people they think are most likely to purchase your pet food

And they know who is most likely to purchase your pet food based on the data they have on other people who purchased similar products in the last 90 days because they know who bought what

You see, thanks to all this web tracking of its users, Facebook knows whether each person is likely to click on ad and not purchase or click on ad and purchase... they also know the average order value each person is likely to purchase and many more details that are valuable

So here’s the easy way to understand the impact of Apple’s new privacy update:

If Facebook can’t see that you bought pet food yesterday for $45, they won’t include you in the audience for a similar brand with a similar product

They might include someone who likes "Chewy" on Facebook or follows a dogfluencer on Instagram... but who knows if that person they are replacing you with in their audience is actually a dog owner who may purchase the pet food

So the overall quality of their audiences decrease

Here’s another way to think about it:

Facebook ads are extremely effective because they show ads that are relevant to your interests and current purchase intent

If they don’t know people’s current purchase intent, the quality of the audience isn’t as valuable

Long story short: the less Facebook or any social platform knows about its audience, the less effective its audience targeting becomes

Facebook is about to know wayyyyy less about all of us so their audiences are about to get alooooooot dumber

SECOND - Attribution Becomes Cloudy

Much of advertising is considered black-box. Let's say you place a billboard on the side of the road telling people to visit your site. There is no real way to tell how many people visited your site because of that billboard.

Brands spend TONS of money on attribution software and studies trying to attribute a website visitor or in-person store visitor or purchaser or lead... back to a specific marketing / advertising campaign that drove them to visit that store.

Well, Facebook's tracking was so robust (before people were prompted to opt-out) that you could track a purchase back to a Facebook ad with about 90% accuracy.

This lead to what I call the Golden Era of advertising. For the first time ever a company can see almost exactly the direct impact of their investment into a marketing / advertising channel.

And as Brian Moran writes in The 12 Week Year:

“Too often in business we fail to keep score, and without some objective measure, we cannot know for certain if we are being effective. Just as in athletics, measurement drives business process.”

-Brian Moran, The 12 Week Year

So now that you could measure the effectiveness of an ad with 90% accuracy compared to virtually no accuracy before Facebook ads, or as Moran calls it keeping score, companies began pouring millions into ads...

...and scaling their businesses because now they know that if they spend $1 on a Facebook ad, they will likely generate $4 in revenue (or whatever their metrics are) so why not spend $1m to generate $4m?

This attribution accuracy became incredibly valuable to small businesses. To small businesses, every penny matters because they don’t have the luxury of burning $$$ on ads thanks to some deep-pocketed investors.

So now small businesses know the ROI on their investment, YAY!

But because Facebook won’t be able to see that someone purchased a product from a website, they won’t be able to attribute that purchase back to an ad or back to a company’s investment in ads

This loss in attribution tracking is arguably the biggest way that Apple is killing Performance Marketing as we know it

Without the ability to "keep score" as Moran calls it, we can't optimize our advertising performance to even 75% of what we could just a few weeks ago.

Think about it like this, if you were training five racehorses but could only see how they ran the first 25% of each race, how do you know which one to pick to run the big race? How do you know which one is likely to succeed if you can't measure their true performance accurately?

If you can't see the whole race, you can't judge each horse fairly.

It becomes a crap shoot.

Well, advertising was a crapshoot until Facebook Ads came along.

But now with Apple's new privacy update, we are back to playing craps

And I wanna be clear here before I go on to my third and final point... I am not taking a stance on if this is good or bad

I'm just saying, APPLE KILLED PERFORMANCE ADVERTISING

THIRD - Irrelevant Ads

People will start seeing ads that are not relevant to their interests at all

This is less about killing performance advertising and more about the effect it has on how people consumer ads

If Facebook doesn't know what site you visited yesterday, they are not going to be able to show you ads for things you are interested in or in the market for.

Are people really willing to see ads completely irrelevant in exchange for privacy? We are about to find out.

SO - let's bring my first Twitter thread home:

Most of the general public won't care about the downsides of the death of performance advertising because it protects their privacy.

But the truth is that the ability to track people's website behavior across the internet has added trillions of dollars to our economy.

The saddest part of this whole thing is the damage it will have to small businesses.

Many small and local businesses like dentists and restaurants and solar panel installation companies and dry cleaners and others rely on Facebook ads to generate most of their business.

Now if:

1. the cost to advertise on Facebook goes up even higher
2. the effectiveness is not there
3. they can't track their ROI

they are back to playing craps! Just hoping that Red 7 hits.

Not being able to track a true return on investment from ads is devastating to small businesses. Every penny of theirs counts.

With the old way of tracking, a small business can spend $1k on ads & see that it directly contributes to let's say $2k in revenue.

As a small business, if you can’t track the direct impact of your investment into digital ads, you are much less likely to invest in digital ads at all because each penny is so precious that you can't be spending on ads and hoping that you are getting sales from it.

If you don't have a solid strategy to play craps, you wouldn't walk up to a craps table. You might go for the blackjack table which will at least give you enough data points at the end of each hand, to know if you made the right decision or the wrong decision.

Facebook ads were blackjack until yesterday. After each campaign you would run, you could know your return on it. Then the more you play, the smarter your decision-making would get.

Now it's craps. Blindly throwing money at the red 7, hoping you might make a few bucks.

Again, this thread is not a complaint. It's not a protest. It's not a cry for help. Businesses always have to adapt to the changing times. I just hope small businesses capitalized on the effectiveness of Facebook ads for the last 10 years.

And I sure hope something as powerful and effective as FB Ads comes along soon so small businesses can have a slightly easier time growing than the already INSANELY challenging techniques at their disposal now.

Until then, we'll be building our e-mail lists, growing our followings, and testing out new ad platforms because we are all in this sinking ship together.

TL:DR; the effectiveness of Facebook ads will be cut at least in half and small businesses won't be able to track their return on investment...

simply because Apple is giving users the right to opt-in to letting our networks track them.

“In God we trust; all others must bring data.” - W. Edwards Deming

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