What we learned from the iOS 14.5 privacy update and what to focus on for iOS 15

David Murphy

Adam Lasky, Vice President of Marketing for TeePublic, explains how the company coped with Apple's iOS 14.5 privacy update, and the knock-on effects it had on Facebook and Google's revenue attribution accuracy.

The iOS 14.5 privacy update turned the performance marketing world on its head. Marketers and third-party platforms like Facebook and Google scrambled to find workarounds to capture consumer data, target the right audiences, and run personalized ads.

At TeePublic, which is the world’s largest online marketplace for subculture designs by independent artists, we updated our software development toolkit (SDK), prioritized our Adobe Experience Manager (AEM) conversion events, and leaned into first-party email lists, all the while assuming that our third-party reporting sources for advertising performance (e.g. Facebook Business Manager, Google Ads) were correct. We were aware that Cost Per Mille/Thousand (CPM) and Cost Per Click (CPC) numbers might be rising because of Facebook's limited ability to segment its audiences and match users’ intent to convert, but believed the in-platform metrics like conversions, revenue, and Return on Ad Spend (ROAS) were accurate. This was not the case. Once we realised this, we had to learn fast and move quickly to pivot our strategy.

After discovering the advertising performance reporting on Facebook and Google was misleading, we confirmed that both platforms are missing large quantities of transactions that are actually happening downstream of ads.

Revenue attribution
Due to the new privacy updates, it is now harder for these platforms to properly attribute revenue to the right ads. We’ve seen Google Analytics give revenue credit to the wrong channels because the user privacy policy masks the incoming referrer. When Google can't match a referrer to the site session, it lumps that session and corresponding revenue into the ‘Direct’ channel. This distorts people's perceived ROAS and causes advertisers to needlessly pull back. We found that the blessing of automated bidding strategies like Google's target ROAS or Facebook's Campaign Budget Optimization (CBO) was also a curse: when Google and Facebook don't see the real revenue numbers, they get more conservative with their spend.

TeePublic saw this unfold first-hand: we cut our Google spend in half and saw a 25 per cent decrease in Google attributed revenue month-over-month. As for Facebook, we saw a 49 per cent decline in attributed ROAS and a 42 per cent decline in impressions. In general, our total paid marketing attributed revenue dropped 36 per cent while total spend dropped 42 per cent per month after the iOS 14 update took full effect.

We took an unorthodox approach at TeePublic to mitigate the privacy update effects. We stopped utilizing the in-platform reporting and started trusting our in-house attribution and ROAS model to measure our ad spend against the actual revenue we were generating. Any time we started seeing poor ROAS performance in-platform while total in-house revenue was up, we stayed the course and didn’t pull back our investments. We found that both Facebook and Google undercounted transactions by upwards of 25 per cent. In Facebook's case, it wasn't undercounting transactions tied to ads but its pixel was undercounting total site transactions.

Once we made that mental switch, we were able to reverse the downward revenue spiral and generate not only strong revenue growth but strong profit growth as well. This wouldn't have happened if we had trusted Facebook and Google’s performance reports, as both platforms were telling us that we were hemorrhaging profit. We also saw a 27 per cent increase in topline revenue month-over-month growth that we would have bypassed if we cut our ad spend. iOS made tracking hard, but it didn't make ads less effective. That was our biggest key learning.

Google sellers
Facebook and Google are well incentivized to figure this out, and they probably will, but it speaks to a more macro trend that won't change: Facebook and Google will continue to commoditize Direct-to-Consumer (DTC) brands and actively seek to convert customers to engage with them as their primary source for goods. They've already started to build their own ecosystems with Google Shopping Actions and Facebook Shop to own the entire shopping experience. People can search and purchase a product without ever having to leave Google or Facebook, relegating DTC brands to the role of glorified ‘Google sellers.’ The iOS privacy update has only accelerated this war over who owns product search and consumer data.

We believe DTC brands can combat this issue, but not through doubling down on Google or Facebook. We recommend focusing on driving customer retention and loyalty. Start by acquiring customers from those third-party sites and encourage them to be repeat customers by building an ecosystem based on forging an emotional connection with your brand. Email and first-party communication still matter, and perhaps are more important than ever. They are the primary way to build that connection and foster brand loyalty.

We expect the new iOS 15 update to present an issue with email as a marketing tool as it will allow users to opt in to mail privacy features that mask IP addresses, block email server providers from tracking email opens, and enable users to give sites cloaked email addresses. The way marketers segment and prune their email lists need to be re-examined. At TeePublic, we plan to throw out segmentation logic based on email opens and focus our email content strategy to drive clicks. That means easing up on the hard sell, direct response marketing tactics, and giving our subscribers a reason to engage with us by providing value with no strings attached.

Apple has thrown marketers and third-party platforms for a loop with its privacy updates and is forcing marketers to think more holistically about their marketing programs, where they invest, and how they measure success. Instead of relying on third-party platforms like Facebook and Google to help solve the privacy issues, marketers should create a more comprehensive marketing mix, question the third-party reporting data in an effort to fight back against commoditization, and own your customers' journey.