Apple uses demographics data from a user’s Apple ID (including user age, their interests, what apps have been downloaded from the App Store before, and more) to enable App Store Search Ads targeting. This targeting is enabled by default, a fact that is currently facing scrutiny by regulators. Ad networks like Facebook have said that small businesses will suffer as they will no longer be able to target their mobile ad campaigns as precisely. It is also likely to have a negative impact on Facebook’s revenue. App Tracking Transparency prohibits third-party tracking without user consent; first-party tracking is allowed. App Store Search Ads are technically first-party as Apple owns the App Store. Critics argue that Apple wrote the App Tracking Transparency rules in this manner specifically to ensure its own business interests were not impacted.
This will likely fuel the flames of the ongoing antitrust arguments and debates, which focus on Apple’s monopolistic control over the app economy. Search Ads supplement that income and are currently estimated to bring in up to $1 billion annually for Apple. The new “Suggested” ad types appear in a more prominent position inside the App Store app, as they are shown on the main Search tab screen and do not require the user to actually perform a search.
iOS 14.5 will be released next week and that brings with it the new App Tracking Transparency policy. This will mean that third-party ad networks have to go through an extra user permission step to be able to collect user data and show targeted advertising. App Store Search Ads were introduced in 2016 as Apple aimed to diversify revenue streams. The App Store drives the majority of Apple services revenue today through the 15-30% commission Apple takes on in-app purchases.
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