Against the backdrop of a new era of consumer privacy, Apple started enabling players to opt out of IDFA two years ago, giving rise to limited ad tracking (LAT) which applied to around 30% of players. Subsequently the tech giant introduced a pop-up asking players whether they wish to share their device’s identifier, and this figure shot up to 70-80%. Companies consequently lost traction on user acquisition trends and had to find other ways to monetise in ad-based games.
“Obviously, it’s different between industries and even genres of games, but at the end of the day, this really hurts the mobile acquisition on iOS,” a former VP at Tripledot Studios told us in September 2021. “We lost capability for about 70% of the population which heavily affects our ability to acquire users.” This has different implications for advertising versus purchases-driven games. Speaking to Third Bridge Forum again in 2022, our expert highlighted how the shift to an essentially IDFA-free world has been a boon for some, but a challenge for others.
We heard that when IDFA was the default setting, some developers, including Zynga, were already tracking users via alternative methods, such as demand-side platforms. Less sophisticated but established mechanisms include login systems. “That’s the biggest advantage in a world where you have players that are committed and engaged enough to provide you with these details, which is not true in most of the industry, but it is true in companies like Zynga and Playtika and King, etc,” the expert said.
Indeed, although the IDFA sea-change is said to have dampened engagement and increased player turnover, some companies found themselves poised to benefit. “The companies that have access to more data are the companies that are performing well and benefiting from this change,” the expert said. Some of those that were able to nimbly switch to Android from iOS “managed to get 80% of their DAU and 50-60% of their revenue coming from Android, which is amazing”, we heard in the Interview. The specialist remarked that “everybody was surprised by the fact that Android is capable of pulling all of this weight at the expense of iOS”. They are also of the view that these changes ultimately force the industry to “work harder to sustain our growth”.
The biggest beneficiary has been Google, which has “hit the jackpot”, our expert said. “I wouldn’t say that they made dramatic changes to their platform,” the specialist continued. “It’s just that they have the best grasp on Android by default…so it played to their advantage without making too many changes.” It is also worth highlighting that Android is reportedly seeking to emulate a more privacy-centric approach to mobile advertising identification. However, as our expert noted, not enough is known at present to fully understand its impact, though “we do know that it’s going to affect Android 12 only”.
AppLovin and Unity, meanwhile, seized the opportunity to improve their infrastructure. AppLovin is now “potentially in a much better place” thanks to its strong understanding of the advertising value chain, we were told. Unity has also been “working very hard” to enhance its platform and targeting capabilities. “The platform is very stable today, and I believe that it’s going very nicely and it will continue doing so,” according to our specialist.
Digital Turbine, which is skewed towards Android, is also “doing quite well”, with a strong variety of services and offerings. “They have some fields in which they even have some exclusivity in the market and they offer a very different product, so I think that they are definitely well positioned in today’s market,” the specialist said.
For others, the shift has not been as easy to adapt to. ironSource seemed “promising” and prior to the IDFA change was successful at monetising LAT sales. Our specialist described the company as “relatively stable” and similar to AppLovin, but remarked that AppLovin is “several levels above”. However, they raised a concern that ironSource is too reactive to industry change rather than being innovative.
Facebook, meanwhile, still has “amazing access” but now operates in a tougher data environment. “They deprecated a lot of the user data, also because of privacy changes, not only because of IDFA, so it also hurt them on the Android front,” the expert said. “Our ability to read user-level data coming from Facebook has diminished dramatically.” Although the company is “still in a good place because they are Facebook”, it’s “definitely not the best source as it used to be”, according to our specialist.
Discussing the broader context, we were told that “the market reacted to the IDFA change”, with demand rushing from iOS to Android. While iOS is clearly “still a very important platform”, Android has become the more compelling option for ad-based companies. Overall, “this change did not serve Apple well”, the expert said, as it “scared off a lot of advertisers that before believed that Apple is superior”. From a gaming perspective, hyper-casual companies are suffering the most from the IDFA fallout, according to the Interview, as “they are the most sensitive to this kind of traffic and to changes in user acquisition cost, and they really live off a low-margin, higher-volume market”.
Although there is widespread sentiment that Apple’s IDFA U-turn has dampened player engagement and increased player churn rates, our expert does not see it as a major blow for the gaming industry as a whole and its participants. Indeed, the market is continuing to expand, they noted, with player numbers and money flows still growing consistently. “This is why I don’t believe that it’s going to cause a decrease in spending,” the specialist said.
The shift could, however, spur an uptick in M&A as larger incumbents see an opportunity to acquire the hyper-casual studios that are struggling to adapt to the new norm. We also heard that skills-based games and NFTs or blockchain-based games are at the forefront of powerful trends that are expected to further transform how publishers generate revenue. Referring to Microsoft’s recent acquisition of Activision Blizzard, the expert said: “It’s inevitable that some of these big giants would like to enter gaming, not only through the classic entertainment kinds of games, but also through these new things, regulation-dependent.”
The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.
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