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Summary:

With the sunset of UDID this coming week, a major barrier to mobile ads will fall. The new system for iOS will benefit advertisers while still protecting consumers, and will become a revenue juggernaut for Apple.

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Later this week, Apple will start rejecting any apps that collect UDID, the series of letters and numbers Apple uses that make each device individually identifiable. This is great news for advertisers and marketers. The use of UDID, while once popular with some advertisers and marketers, has rightly been under intense scrutiny by privacy advocates and their legal experts.

Now with that behind us, and iOS  adopting device-level legal compliance, it is poised to become a juggernaut of mobile advertiser revenue – and eventually will be second only to television in overall ad spending.

UDID inadvertently stifled advertising

The legal gray area around UDID became a serious and expensive issue for two of the biggest apps in the iOS ecosystem in May of 2011. Pandora and The Weather Channel were both named in a lawsuit because of how they used personal data, namely UDID, and combined it with location-based data or other demographic data. The lawsuit specifically called out the fact that with UDID, users were not able to opt out of ad tracking. In response to this lawsuit, both apps stopped using any ID at all for tracking. Many other apps followed suit and some platforms in the ecosystem switched to using different IDs.

This stymied advertisers and marketers, who understandably sought a legally compliant way to track downloads, and so many simply stopped advertising via mobile at all. Others opted to advertise apps without any tracking in place – they would rather market their products blindly than deal with the legal fallout from the use of UDID – drastically reducing their ability to track ROI.

The good news is this legal gray area will be cleared up on May 1. In response to critics of UDID, Apple has created a legally compliant alternative called, simply enough, IFA, or ID for Advertisers that is built directly into iOS 6. Crucially it also allows users to opt out of any advertising tracking method by changing a setting at the device level. This solution means that starting next month, anyone advertising on the iOS platform will be legally compliant. The device level solution also puts iOS somewhat ahead of the PC web, where legal compliance with ad tracking has to be handled on a site-by-site basis and is currently a messy struggle with no system-level opt out.

Why accurate conversion tracking matters

For a new medium to grow, showing clear ROI to marketers is key. Once they know the ROI, their ability to scale budgets is only limited by maintaining that ROI. Google has shown just how scalable this model is on the PC with AdWords, with massive year-over-year growth.

Facebook also clearly understands the value that conversion tracking can provide. After testing their conversion tracking system with major advertisers for almost a year, it recently opened up the program to all its advertisers. With conversion tracking in place and the ability to optimize campaigns, it claims a 40 percent lower cost per conversion. The savings per acquisition can now be applied to acquiring more users, effectively increasing the total budget.

Even Apple’s iAd, which has always had conversion tracking, has seen significant growth in this transition period away from UDID. The platform was originally marketed as a rich-media advertising option for brands, but pivoted to performance advertising. The high prices and low ROI of rich media ads sent a chill up the spine of the Madison Avenue executives who bought them.

At TapSense, we meet with agencies and customers all the time that tell us their number one barrier to spending on mobile is conversion tracking (Disclosure: the author’s company is one of many that offer mobile tracking services, among other things.) They don’t know what options they have and how it works without UDID, which means they’re not spending. Once conversion tracking is in place on iOS, marketers will be able to see beyond the download and deep into their conversion funnel.

iOS revenues will skyrocket in 2013

With the legal issues around UDID cleared up, a lot of the friction that was holding back large advertising budgets will be reduced. Additionally, the 14 percent decline in PC sales in the first quarter of 2013 confirms that consumers are quickly moving to mobile. Despite having a smaller overall mobile market share, Apple’s iOS  dominates both mobile ad traffic and mobile revenue; a recent study shows overall that iOS accounts for 44.5 and 49 percent respectively, versus Android’s 31 and 26.7 percent shares. And so with the continued shift away from PCs, marketers will flock even more to iOS, where they can best reach an affluent demographic.

Gregory Kennedy is vice president of marketing at TapSense. Follow him on Twitter @tapsense.

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  1. Akshay Svali Sunday, April 28, 2013

    Well, I guess this is good for Apple. They need all the help they can get with mobile advertising. Unfortunately for Apple, the primary reason that Android continues to gain market share is because mobile ads are generally more attractive, effective, and malleable on Android. You really can’t put iAd, for example, in the same category as Airpush – an Android mobile ad network – in terms of innovation. Developers and advertisers are flocking to Android because there’s more opportunities and advantages there (not to mention a bigger market). But this should still help iOS to a considerable extent.

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    1. Advertisers might flock to Android, but not developers. They are merely porting from iOS into Android, and it shows.

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    2. “the primary reason that Android continues to gain market share is because mobile ads are generally more attractive, effective, and malleable on Android”

      Really? People are buying Android devices because the ads are better?

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  2. Nicholas Paredes Monday, April 29, 2013

    It amazes me that Spple took this long to create a legal and privacy enabling mechanism. We were looking at in app advertising and interface customization, and the only method available was the UDID which had to be obfuscated.

    It would be nice if Apple had a better dialog with developers and entrepreneurs. It would be nice if Google had a better dialog as well!

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  3. Three issues with this world. 1 Apple due to their ownership of the customer have been using the upfront customer data to target ads. No one else has that right. Unfair advantage they give themselves. Why isnt anyone talking about that innapropriate use? 2 I really don’t give an S if conversion data can be tracked. Mobile is less about direct marketing and a immediate cpa. Lets not mess this media up to like desktop into an end all be all. 3 This IFA is for app only. 60% of all traffic is mobileweb and growing. We need a browser based anomonous solution that track views, not conversions.

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  4. James Madison Monday, April 29, 2013

    I disagree with the article. The challenge continues for web based advertising and this includes desktop Safari not just mobile. BFD, I can advertise in app now. That was never a challenge to begin with.

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