Why is Apple rebuilding the App Economy?

What motivated Apple to deprecate the IDFA? In order to get there, it’s important to try to understand what kind of a future Apple wants for the App Store and the app economy more broadly.

Gauging the impact on the mobile ecosystem of Apple’s recent decision to deprecate the IDFA, it seems that the tendency to minimize the scale of what this decision accomplishes — that is, to believe that IDFA deprecation won’t have a significant impact on the mobile ecosystem, and that simple workarounds will be found to provide user-level attribution — is commonly predicated on a belief that Apple fundamentally supports a robust mobile app advertising industry. Apple increasingly sees services revenue as its primary growth vector, and platform fees from the App Store make up some substantial component of that.

Many arguments I’ve heard around why the IDFA deprecation is actually not going to have a tremendous impact on the mobile app economy center around the idea that Apple would not cripple the industry, mobile app advertising, that drives almost all app adoption because doing so would harm its services revenue growth. Surely Apple wouldn’t cut off its nose to spite its face — it wouldn’t cause great injury to a very important revenue stream just because it systemically holds strong antipathy towards advertising and the freemium business model. Right?

My sense is that understanding the what of IDFA deprecation — that is, how it will be implemented and what its consequences will be — requires understanding the why. I believe that there are four broad motivations that explain why Apple deprecated the IDFA:

User privacy. This is obvious: with the IDFA deprecated via the tracking opt-in mechanic, users have more granular control over what data is collected about them and used for ad targeting purposes. Given that Limit Ad Tracking (LAT) rates on iOS currently stand at 30%, and the LAT setting is relatively difficult to find, it stands to reason that consumers actually care about their privacy and appreciate the power to control how companies use data about them.

Growing its own advertising network. As I wrote about back in May, Apple has increased the scope of its Apple Search Ads network to include placements in owned-and-operated apps. It’s unclear to me how IDFA deprecation could give Apple a competitive advantage in targeting ads except that, since Apple operates the storefront and the last point of contact with the user in the app discovery journey, perhaps ASA ads are seen as more attractive than those from other providers and ASA revenues increase as a result. To be clear, I don’t believe that this was the primary motivation behind deprecating the IDFA, but surely it factored into the decision.

Hurting Facebook. Apple has been engaged in something of a Cold War with Facebook since at least 2017, which I detail in this long article.

Taking back control over app distribution. This is, I feel, is Apple’s primary motivation in deprecating the IDFA: ads have become the foremost mechanic through which apps are discovered, and Apple has lost total editorial control over content distribution. Related to the point above, Facebook is the primary beneficiary of this dynamic: Facebook ads front-run organic search and discovery, and Facebook effectively serves as the principal point of app discovery.

Apple is obsessed with the consumer experience in its products, yet it has no control over which apps are popular or even which apps appear in the Top Charts because it has ceded editorial control to ad platforms. Deprecating the IDFA helps Apple to regain some of that control.

None of the motivations above suggest that Apple will not fully and aggressively police both the spirit and the letter of its new ad tracking policy (implemented via the opt-in mechanic). Taken together, as a whole, they suggest that Apple sees this decision as an opportunity to completely rebuild the App Economy: to fundamentally change the way in which apps are discovered and attain popularity by impairing the kind of precision targeting that currently drives app adoption.

The whys provided in the above four motivations don’t seem likely to be accomplished with a half-hearted, milquetoast implementation of limited ad tracking: for example by allowing ad tech companies to fingerprint users. The whys that inspired the deprecation of the IDFA speak to a modernization of the app economy that targets its very foundation.

Photo by Scott Blake on Unsplash