Since Apple’s new privacy update, e-commerce companies are being forced to pay higher prices for advertising. The new update has made it harder to track iPhone users’ data usage which marketers usually use to target them with personalized advertising. This update will be especially hard for direct-to-consumer companies who relied heavily
on social media apps as part of their advertising and customer acquisition strategy in the past. The rising costs of mobile ads are pushing e-commerce companies to once again find new ways to innovate and improve their marketing strategies, which has been a common theme over the past year.  

Apple’s iOS 14.5 software update, released in April of this year, introduced privacy protections that asked iPhone users to consent to be tracked by apps. The feature is called App Tracking Transparency or ATT. With many users opting out, a study found that the portion of tracked users fell from 73% at the beginning of 2021 to 32% by the end of June. In turn, the average cost of conversions for e-marketers rose 200% for tracked users and 155% for non-tracked users during the six-month period. These trends are expected to continue as the competition for ad space continues to intensify, specifically in targeting the shrinking user base that still consents to tracking. 

Disruption challenges 

With the pandemic constantly changing the impact of consumer behavior, e-commerce brands have had to be more adaptable than ever to keep up with the competition and ever-changing ad spaces. Apple’s privacy changes have only added to the uncertainty that marketers have faced this past year. Unfortunately, these challenges have been hitting small businesses the hardest throughout the pandemic. 

Facebook foresaw these negative effects in mid-2020 and protested Apple’s update after their announcement at the developer conference. They argued that the change would only amplify the painful recovery that small businesses have faced due to the pandemic by making their ad campaigns less effective. The social media giant, whose revenue mostly comes from mobile ads, also contended that non-targeting ads will begin to annoy consumers since the content will no longer be relatable to them and their interests. 

What does this mean for marketers?

Marketers should continue to adapt their ad performance and avoid wasteful spending. A key strategy is to diversify their ad channels to see what’s performing best for them and their customer acquisition goals. They should have a budget for campaigns optimized for return on ad spend (ROAS) while monitoring cost per acquisition (CPA) trends, which have been changing rapidly with the software updates. 

The rising difficulties with audience tracking are also forcing e-commerce companies to consider contextual targeting. Contextual targeting is the placing of ads amid digital content that’s relevant to a consumer group. Determining your audience used to be a no-brainer up to six months ago, but with fewer user-level signals e-commerce companies are really having to rely more on contextual signs to determine which is the right place for an ad. This may even drive the potential for new innovation in the tech marketing space, as e-commerce companies of all sizes continue to compete to find the best new ad format and consumer acquisition strategies.