Apple CEO Tim Cook will deliver a keynote address at the European Union privacy conference in the EU Parliament in Brussels, Belgium, on October 24, 2018.
Yves Herman | Reuters
Snap and Unity Software, which reported fourth-quarter revenues after the bell Thursday, both warned of the impending impact of Apple’s privacy changes for this spring.
To target mobile ads and measure their effectiveness, app developers and other industry players currently often use Apple’s Advertiser ID (IDFA), a unique string of letters and numbers on each Apple device. But once a privacy update comes out, app makers will be forced to ask for permission to access a user’s IDFA via a prompt. A significant proportion of users are expected to say no, which is expected to make targeted ads less effective.
The changes have become a major point of contention for ad-supported companies like Facebook, who seem to be losing revenue from the change. But Facebook is far from alone.
Unity Software said in its earnings report that the changes in IDFA will affect the way mobile game developers get new customers and “optimize lifetime customer value.”
“Although difficult to estimate, our guidelines assume that IDFA changes will begin in the spring and will reduce our revenues by approximately $ 30 million or 3% of sales by 2021,” the company wrote.
In prepared comments for his Q4 earnings report Derek Andersen, Snap’s chief financial officer, said the Apple changes would pose a risk of interruption in demand after they are implemented.
“It is not yet clear what the longer-term impact of those changes might be on the momentum of our business’ sales, and this may not be until a few months or more after the changes are implemented,” he said.
Apple is currently testing the privacy update in a beta version of iOS 14, which is expected to be available to all users in “early spring”.
Snap chief business officer Jeremi Gorman said Snap has worked with Apple to prepare for the changes, trained its advertisers, and is making long-term investments to use more first-party data for ads. In addition, the company plans to provide advertisers with more options to deliver their products and services directly through Snapchat to Snap users.
“The reality is that we admire Apple, and we believe they are trying to do the right thing for their customers,” she said. “Their focus on protecting privacy is consistent with our values and the way we built our business from the very beginning.”
She added, “Overall, we feel well prepared for these changes, but changes in this ecosystem are usually disruptive and the outcome is uncertain.”
Shares of both companies fell during out of hours trading Thursday, with Snap off by more than 10% and Unity by more than 15%.
CNBCs Salvador Rodriguez contributed reporting.
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