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Small businesses are cutting back marketing spending due to Apple’s sweeping privacy changes that have made it harder to target new customers online, in a growing trend that has led to billions of dollars in lost revenues for platforms like Facebook.

Apple last year began forcing app developers to get permission to track users and serve them personalized adverts on iPhones and iPads in changes that have transformed the online advertising sector.

Many small companies which are reliant on online ads to attract new customers told the Financial Times they did not initially notice the full impact of Apple’s restrictions until recent months, when price inflation squeezed consumer demand in major markets worldwide.

#Cookie popups came from the #adtech industry’s disinclination to comply with #ePrivacy #law and make it so annoying to avoid #surveillance #advertising that people wouldn’t bother

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Enlarge / Vizio's 65-inch 4K OLED TV. (credit: Vizio )

Over the past several years, TV-maker Vizio has achieved a reputation among home theater enthusiasts as the company that makes TVs that provide superior picture quality relative to their cost. While the most expensive TVs from Samsung and LG beat Vizio's in quality assessment by reviewers, Vizio is widely regarded as one of the best bang-for-buck brands.

But for consumers, those competitive prices may come with a downside: becoming subject to targeted advertising and monetized personal data collection. As reported previously on Engadget , Vizio just posted its first public earnings report, wherein it revealed that profits from the part of its business that is built around collecting and selling user data as well as targeting advertising at users totaled $38.4 million in the quarter.

That's less than the $48.2 million of profit generated by device sales in the same quarter, but data and advertising profits grew significantly year-over-year while actual device sales grew comparatively slowly. These digital products are still nowhere close to device sales in total revenue, however; the data and ad-related business unit (dubbed Platform+) added up to only 7.2 percent of global revenue.

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Enlarge / None of these companies are keen to hand over a slice of their revenue to Maryland. (credit: Malik Evren | Getty Images )

Maryland today became the first state in the nation to impose a tax on digital advertising revenue, overriding an earlier veto from the governor and incurring the wrath of piles of Big Tech businesses that are all but guaranteed to sue.

The bill ( PDF ) levies a state tax of up to 10 percent on the annual gross revenues of all digital advertising aimed at users inside Maryland state. Proceeds from the new tax are explicitly earmarked to go into an education fund dedicated to improving Maryland public schools.

"Right now, they don’t contribute," the bill's primary sponsor, Sen. Bill Ferguson (D) said of the bill. "These platforms that have grown fast, and so enormously, should also have to contribute to the civic infrastructure that helped them become so successful."

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Enlarge / Apple CEO Tim Cook delivers a speech on privacy at a virtual conference. (credit: CPDP )

Today, Apple announced plans to finally roll out its previously delayed change in policy on apps' use of IDFA (ID for Advertisers) to track users for targeted advertising. The feature will be in the next beta release of iOS 14 (the company just rolled out the public release of iOS 14.4 this week) and will reach all iOS devices supported by iOS 14 "in early spring."

Apple made the announcement with a white paper and Q&A targeted at its users. To illustrate the benefits Apple claims the change will offer to users, the document describes in detail a typical scenario where a father and daughter would have data about them tracked and updated while doing normal, everyday things in the current digital ecosystem.

Apple's document goes on to explain Apple's stated philosophy on user data protection and privacy, and it announces the release window for this upcoming change. The document explains the change this way:

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Enlarge (credit: Chesnot | Getty Images )

Facebook is warning developers that privacy changes in an upcoming iOS update will severely curtail its ability to track users' activity across the entire Internet and app ecosystem and prevent the social media platform from serving targeted ads to users inside other, non-Facebook apps on iPhones.

The next version of Apple's mobile operating system, iOS 14, is expected to hit an iPhone near you this fall. Along with its many new consumer-facing features , iOS 14 requires app developers to notify users if their app collects a unique device code, known as an IDFA (ID for Advertisers).

The IDFA is a randomly-generated code that Apple assigns to a device. (Google assigns similar numbers to Android devices.) Apps can then use those codes to tie together user activity. For example, Facebook, a local shopping app, and a local weather app might all access that identifier. Facebook and other advertising businesses can then use that cross-app use data to place targeted ads for advertisers on other apps, which is what Facebook does with its Audience Network program.

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Most pirate sites and apps won’t survive without advertising revenue. This is why the advertising industry is seen as an important partner to combat piracy.

Over the years several ad-focused anti-piracy initiatives have emerged. In the UK, hundreds of advertising agencies began banning pirate sites and elsewhere similar measures have followed.

Anti-Piracy ‘Advertising’ Agreement

One of the more prominent plans was orchestrated by the European Commission. In 2016 , this resulted in a set of guiding principles and two years later several leading EU advertising organizations, including Google, officially promised to reduce ad placements on pirate sites.

The memorandum of understanding (MoU) also promised to keep a close eye on the effectiveness of the measures. And indeed, this week the EU Commission released a report documenting the progress made thus far. The same report also gives an indication of how the partnership will move forward.

“This initiative will help deprive these websites and mobile applications of the revenue flows that make their activities profitable,” the EU Commission notes, summing up the ultimate goal.

Drop in Ad Placements

While there is no data on how the revenue of pirate operators has evolved in the first year after the deal was signed, the EU Commission reports that the effect on ad placements is clearly visible in Europe. Specifically, the number of ads served per visit dropped by 12%.

“There has been a 12% decrease in the average number of ads collected per visit to IPR infringing websites following the introduction of the MoU, down from 2.02 in the pre-MoU comparison dataset to 1.77 in the post-MoU comparison dataset,” the EU Commission reports.

This is a positive outcome but at the same time, data show that the number of branded advertising campaigns increased significantly. These refer to ads that can be attributed directly to a specific brand, including well-known companies.

“Although fewer ads were found per visit, the percentage of branded advertising post-MoU has increased from 38% to 52%. The largest increases came from the UK, the Netherlands, Germany and Italy,” the report reads.

The term ‘brand,’ as used in the report, is very broad. It includes both smaller and larger EU brands that operate in a wide variety of industries. While these branded ads increased overall, ads from gaming brands and EU brands decreased.

Fewer Ads From EU Intermediaries

In addition, the number of ads that appear on pirate sites through EU intermediaries, such as advertising outfits, also decreased from 28% to 22% in the year following the signing of the deal.

The reported data comes from a study that was conducted by White Bullet Solutions, which are part of the deal as well. The company monitored ad placements on 7,627 websites from 19 EU countries, using the US as a control group.

The pirate sites offer a wide variety of content but nearly three quarter (72%) was dedicated, at least in part, to film piracy. Most of these sites were so-called linking portals, followed by direct-download and torrent sites respectively.

Overall the data suggest that there are fewer ads on pirate sites. However, what that means for their revenue is not clear. This will be the topic of a follow-up study, the EU Commission writes.

Follow-Up Study Will Look at Ad Revenue

“The second study will provide an estimation of the ad revenues collected by IPR-infringing website owners, in addition to quantifying the evolution of online advertising on IPR-infringing websites over time.”

Despite the well-intentioned efforts, these anti-piracy measures may also have an undesired side-effect. When legitimate advertising companies and brands avoid ‘pirate’ sites, the percentage of ads sourced from dubious partners may increase. Those may be more prone to misleading or harmful practices.

The EU Commission is positive about the future, however, and hopes that more and more companies will join the deal. This applies to advertise companies but also social media firms, payment providers, and others. The more companies that are on board, the more effective the measures will be.

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A copy of the EU Commission’s report is available here (pdf)

From: TF , for the latest news on copyright battles, piracy and more.