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Apple’s upcoming iOS14 data privacy changes have gotten a lot of attention from tech journalists and this newsletter. This week, Ben Thompson interviewed mobile advertising analyst Eric Seufert about this very topic. Eric’s macro perspective is informative in understanding the intersection of the tech behemoths. The whole article is worth a read, but I wanted to highlight one key portion below.
BT: How do you think this plays out going forward then? Facebook talked about next year, there’s going to be a difficult comp both because of the way advertising stormed back on the second half the year and also because of iOS 14. I thought they’d be a little stronger in saying there might be some difficulties here, how do you think this is going to play out both for Facebook but also for the advertisers that rely on the system as it is today?
ES: Well, I’ll start with the second group, I think this is existential for certain groups of advertisers. Any type of product, and here I’m talking about both app developers and websites that advertise on mobile. So any company that’s advertising to a niche audience and expecting that niche audience to monetize at a very high level individually is going to face real challenges here because Facebook simply won’t be able to do the kind of granular precision targeting that these companies have grown accustomed to. So I think, you’re going to see a lot of these companies just being unable to acquire users profitably, the unit economics won’t work out anymore.
BT: I just wanted double down on that because to me, this is why I get frustrated about this specific debate, because to me the promise of the internet, I think the whole point of Stratechery or Mobile Dev Memo is you can run a business, you can reach just a specific audience and that’s one of the promises of the internet because the whole world’s your addressable market. Advertising is an essential part of any business and you need the advertising that matches that business model and that is Facebook. Apple referring to TV advertising, “We did advertising for decades and we didn’t have this tracking”. Well, you’re doing advertising for Procter & Gamble, do we want a world of nothing but Procter & Gamble’s? This is the fundamental issue at play.
ES: Yeah and I think that’s a very apt reference point there because I think what we’re going to see on mobile is just TV-esque ads, un-targeted, irrelevant ads. The reason people were happy to move into digital advertising is it’s targetable and measurable in a direct way and TV, you can’t really do any of that and that’s why people hate TV ads and they complain about them and see them as intrusive. So I think there’s different classes of advertisers that are going to face real challenges here and be heavily impaired by this. I think a bunch of different gaming verticals are especially susceptible to this and are vulnerable. I think a lot of DTC companies are very vulnerable to this.
BT: The entire Shopify ecosystem.
ES: Well, actually it’s funny because no one really brings up Shopify when they approach this topic but my sense is, a lot of their customers are very heavily dependent on precision targeting from Facebook.
BT: Absolutely. And you see this too, Facebook’s response is going to be emphasizing Facebook Shops because if the conversion event happens on Facebook’s platform, then of course they can track it perfectly so Shopify is just getting squeezed out of this, which is a real shame because that’s the exact sort of company and idea that to my mind, is the best part of the internet. This idea of unblocking all these individual entrepreneurs and it’s weird because Apple is actually helping Facebook when it comes to DTC.
ES: Absolutely. And Facebook, that’s kind of like the medium term play here. Facebook is just going to start subsuming all of this content into the Blue App, all this content interaction and commerce. They’ve already kind of done it, I think that’s one reason why Apple was all too happy to sort of instigate this privacy policy change that sort of disproportionately impacts Facebook because Facebook’s really been drifting out of its lane for like three years. They’ve got instant articles, that’s content interaction, they’ve got videos and they’ve got the whole new gaming initiative, that’s content interaction happening in the app. They’ve got Facebook Shopping, that’s commerce happening in the app. They’ve got Instant Games, that’s gaming happening in the app. They’ve subsumed all of this content interaction within the app and I think they’ve kind gotten away almost on a technicality because it’s not an app store. Apple famously has this rule, no app stores in the app store. Well, I don’t see an app store in here, do you? This isn’t an app. It’s kind of Netflixesque, there’s a content catalog and you explore it in this app and a lot of this content is published by third parties, but not an app store.
Sharecropping on the internet is a dangerous business. And now we have dozens of players all vying for their rights to the crop.
Phrase match will now expand to cover broad match modified instances. Google notes it will “continue to respect word order when it’s important to meaning.”
Advertisers will not have to take any specific action. Performance data will stay where it is, but the new matching behavior will start to take place.
Broad match modified keywords can continue to be added until July. At that point, it’s anticipated the full roll-out will be completed and no new ones will be added. Existing broad match modified keywords will continue to serve, but will be matched based on this update.
Core Web Vitals are Google’s new standards for evaluating whether a page provides a good user experience.
The metrics consist of:
Largest Contentful Paint (LCP): Measures the speed at which a page’s main content is loaded. This should occur within 2.5 seconds of landing on a page.
First Input Delay (FID): Measures the speed at which users are able to interact with a page after landing on it. This should occur within 100 milliseconds.
Cumulative Layout Shift (CLS): Measures how often users experience unexpected layout shifts. Pages should maintain a CLS of less than 0.1.
Google offers 6 different ways of measuring Core Web Vitals. As we learn from Mueller, all minimum requirements need to be met to benefit from the upcoming algorithm update.
This is the first time I have seen target values shared by Google.
Consistent and accurate pricing is one of the most important factors shoppers take into considerations when making a purchase. If the product’s price at checkout is higher than the price shown in an ad, free product listing, or on a product landing page, shoppers are more likely to abandon the purchase.
Beginning April 6, in addition to reviewing and enforcing price accuracy between your Merchant Center product data and your landing pages, we will begin to review and enforce price accuracy at checkout.
If during an account review Google finds that the price provided for one of your products at checkout is higher than the price provided for that product on its landing page, you will receive a 28-day warning to resolve these mismatches, otherwise your account will be subject to suspension at the end of the warning period.
It is not the rule that is new, but the enforcement.
In a new report, eMarketer found that US social commerce sales will reach $36 billion in 2021, a nearly 35% increase from 2020.
Even with that growth, receipts from Instagram et al will only account for 4.3% of total e-comm sales.
The holdup? Users still see apps like Pinterest and TikTok as places to build their personal brands—not to shop brand brands. Only 9% of US social media users “regularly” made purchases via social commerce as of August 2020, per an eMarketer and Bizrates Insights survey.
You know I have been bearish on social stores like Facebook Shop. It was not just me, but shoppers too.
If social commerce can not launch during a pandemic, can it ever? Per Eric Seufert’s point, will iOS14 get it over the adoption hump?
In prepared remarks for its Q4 earnings report, Snap chief financial officer Derek Andersen said the Apple changes would present a risk of interruption to demand after they’re implemented.
“It is not clear yet what the longer term impact of those changes may be for the topline momentum of our business, and this may not be clear until several months or more after the changes are implemented,” he said.
In unpacking the upcoming iOS14 changes, we have primarily focused on Facebook, since they have been making the biggest public spectacle. But all social networks are in the boat with them.
P.S. Jon Loomer has a wonderful summary of the changes and the steps you should take to prepare for them.
Facebook began testing a new in-app screen Monday that will appear before the opt-in prompt required in iOS 14 apps by Apple’s upcoming AppTrackingTransparency (ATT) policy.
The test will roll out globally across both Instagram and the core Facebook app.
The additional prompt is meant to provide more information about Facebook’s privacy controls and how it uses data to personalize advertising before users are presented with the choice to allow or deny app tracking.
Instagram is now conducting a test which stops some users from sharing feed posts within their Stories.
That, interestingly, means that you can now share tweets in your IG Stories, but you can’t share Instagram posts, while you can also share IGTV previews, but not normal feed updates.
We are planning to test a solution that will allow an advertiser to select a topic, like Crime and Tragedy. That selection would help define how we’ll show the ad on Facebook, including News Feed. For example, a children’s toy company may want to avoid content related to a new crime show, so they could select the “Crime and Tragedy” topic.
Marketers should be thinking about how they can create episodic content at the intersection of brand purpose and things their customers care about. For example, hypothetically:
Dove could get some influencers together and have a weekly conversation about real beauty.
Ritz Carlton could start a conversation about luxury travel destinations.
Tesla could let Elon Musk ramble about whatever crazy shit is going on in his head and attract droves.
Hiring Beyonce to be in your Super Bowl spot? Throw a postgame Clubhouse conversation into her contract and keep the conversation going for hours!
Google’s plan is to target ads against people’s general interests using an AI system called Federated Learning of Cohorts (FLoC). The machine learning system takes your web history, among other things, and puts you into a certain group based on your interests. Google hasn’t defined what these groups will be yet but they will include thousands of people that have similar interests. Advertisers will then be able to put ads in front of people based on the group they’re in. If Google’s AI works out you really like sneakers, for example, then you’ll be chucked in a group with other similarly-minded sneaker fans.
It all works in a similar way to how Netflix’s algorithm works out what you might like to watch. In essence, your viewing history is similar, but not identical to, plenty of others. If Person A and Person B both like the same four horror films, for example, then chances are Person A will like a fifth horror film that Person B has just watched. Now just expand that out to cover billions of people.
Unlike with third-party cookies, all the data used to determine what group you go in will be processed in Chrome. Third party cookies, by contrast, are sprayed around like confetti. Bindra claims that, despite this fundamental change in how data is stored and processed, the system is 95 per cent as effective at targeting ads as third-party cookies. Others have questioned this claim.
Last week I introduced you to FLoC’s. I thought this explanation was an excellent summary of how this new technology would work.
Though the pandemic has made it difficult for some brands to execute their growth strategies, it has been the root cause of demand for casual and self-care products as consumers continue to work from home. And for digital natives like Thinx, Ipsy and Bombas, expanding into these categories seems like a natural extension of their brand.
As top brands lose market share in certain categories, DTC companies have the opportunity to expand their product offerings. Social distancing measures have only made customers more reliant on e-commerce platforms, and in entering new markets, DTC brands are finding creative ways to retain their new customers.
👋 Holla!
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