“The Sell Sider” is a column written by the sell side of the digital media community.
Today's column is written by Mike Brooks, SVP of revenue at WeatherBug.
Recent analysis from PubMatic highlights two trends that we at WeatherBug have been experiencing firsthand.
One, iOS CPMs have dropped over the last two quarters and, two, the global demand mix has shifted toward Android. But why exactly is that happening, what’s the impact and what does this mean for the future?
First and foremost, the gravitational pull behind these tides is attributable to Apple’s introduction of the AppTrackingTransparency framework with the release of iOS 14.5. This framework, which was rolled out to the iOS community between April and July of this year, prohibits the use of tracking and access to the IDFA without using an opt-in mechanism designed by Apple.
WeatherBug, presumably like many other publishers, experienced IDFA loss.
The idea of “tracking” governs many bidding and digital monetization strategies, including retargeting, behavioral targeting, frequency capping and attribution (the last of which is addressed to some extent by the reintroduction of Apple’s aggregated app attribution service, SKAdNetwork).
In sum, the growth, bidding and monetization strategies from which the ad tech and publisher ecosystem have derived value for years may be less viable in the future.
According to the aggregated data in PubMatic’s research, CPMs increased 2.4x with the presence of an IDFA. Consider that number now as if you were a primarily ad-supported app. Ostensibly, half of your user base is iOS, and two-thirds of that base loses their value by half.
Now think about what that means for the performance of buyers that place a high premium on targeting and attribution. What are they going to do – spend all their money on Android?
It turns out, yes.
We almost jokingly discussed this topic at AdExchanger over a year ago, and PubMatic confirms that is exactly what’s happening. A historical Apple/Android ad spend gap of 46% and 54%, respectively, has deepened to a 37% and 63% fissure. Advertisers are spending almost twice as much on Android now, which, for the moment, remains free of an opt-in mechanism or tracking prohibition.
That’s nice for publishers in the short term, but it (a) doesn’t make up for the monetization loss being experienced today and (b) is a fad I don’t expect to last long. App owners are microeconomists, and we can assume that in a world with mostly non-advertising monetized apps, their average revenue per user on Android ARPU didn’t go up.
Spend may rush to Android, but I would argue the long-term microeconomics aren’t sustainable. I’m assuming that if there was ROI from profitable users with existing margins on Android, the growth teams would already be buying them and the app economy would normalize in the end by acquiring fewer iOS users.
So, where does that leave our app growth and monetization ecosystem? The promise of identity solutions like The Trade Desk’s UID 2.0 or LiveRamp’s ATS are a good fit for publishers that have authentication via email, but WeatherBug, for example, doesn’t scale there today. Still, staying connected and covered where you can will provide incremental value. The answer lies in two concepts, perhaps the only two ideas that Apple’s ATT and Google’s Privacy Sandbox frameworks agree on: the importance of first-party data and on-device computing.
Within both Apple’s and Google’s frameworks, first-party data is specifically carved out as being kosher. The information WeatherBug itself collects from its users can help to bridge that monetization gap, but today it’s accessible only by direct sales.
The first problem publishers would love ad tech to solve is this: How can publishers make first-party data valuable and accessible to programmatic buyers? There is promising early work being done by PubMatic, Prebid Publishers Clearing House and others on mapping first-party data to IAB contextual parameters, but we need to accelerate these tests at scale.
Secondly, on-device technology is specifically mentioned in both Apple’s and Google’s frameworks as adhering to their terms. When audiences, attribution or tracking decisions occur on-device and don’t leave the device, the usual restrictions do not apply. Think of Google’s FLoC and FLEDGE and Apple’s SKAdNetwork as scaled platform versions of on-device tech tackling specific use cases.
But the industry also needs to do more here. There are computational challenges in mobile that mean we have fewer inputs to decision on, less processing power to decision with and less memory to save the results in. As an industry, we need to figure out how to balance these constraints.
Back-of-the-napkin math shows that iOS CPM loss will cost between $4 billion and $6 billion industrywide. PubMatic’s research demonstrates the pain individual apps feel today, but the road ahead is clear.
We and publishers like us look forward to working with partners that have been innovating and scaling in advance of the whims of Apple and other tech giants. Together we will solve the challenges we face and win back some of that multibillion-dollar upside.