The Big Story

Apple's privacy changes are a boon to Android game developers

It's been roughly one month since Apple released its iOS 14.5 update, allowing people to opt out of mobile ad tracking. In the process, the company is disrupting a key pillar of the mobile gaming business, and now we're starting to see the first signs of the aftermath. Turns out it's not all doom and gloom for iOS — and it is in fact proving to be quite the boon for Android.

Mobile games are far and away the biggest revenue drivers on smartphones, and game developers are among the biggest advertisers. They use app install ads to drive user acquisition and rely on tracking to measure the effectiveness of those ads on major platforms like Facebook.

• One perhaps predictable side effect of iOS 14.5 has been a major jump in spending on Android, says a study published last week from the newly formed ad and marketing consortium called The Post-IDFA Alliance.
• The study says spending on Android has jumped by between 8% and 21%, whereas spending on iOS fell by a more modest 2% to 3%, according to alliance members like mobile ad platforms AdColony and Liftoff. The cost of advertising on iOS has also dropped, although the study says this may be temporary.

Apple's privacy shift could have long-lasting consequences for the future growth of the mobile game business, so long as Google doesn't follow suit. The issue lies in the opt-in rate of App Tracking Transparency (ATT), Apple's name for the feature that blocks apps from collecting an iPhone owner's unique identifier (known in the industry as IDFA) without user permission.

• The Post-IDFA Alliance paints a rosier picture for advertisers than most of the opt-in rate of ATT, writing in the study that between 16.8% and 36.5% of users agreed to allow tracking when asked. The study also says iOS 14.5 had an unusually low adoption rate of 12.9% two weeks after launch, insinuating that fewer people than might be expected even have access to the new update's privacy benefits.
• That may be an optimistic view of the situation. Separate data collected by Flurry Analytics paints a more dismal picture for the opt-in rate: that only 6% of users in the U.S. have opted into ad tracking across all apps as of May 16.
• Flurry says the figures are higher globally (15%) and higher in the U.S. among iPhone owners who have been shown a prompt (14%), as some apps have not yet shown the prompt to all of their users. But those are still grim numbers for any advertiser relying heavily on mobile tracking.

But the iPhone is where the money is, accounting for more than 65% of global mobile revenue despite having a fraction of the install base. That means game developers can't afford to forgo iOS entirely. Game makers and ad platforms will have to figure out ways to advertise that don't rely on cross-app tracking and rethink their user acquisition strategies.

• "The way that marketing is done and the way publishers value their users is going to have to change quite dramatically," Craig Chapple, an analyst at Sensor Tower, told Protocol. "While you hear terms like 'apocalypse,' it's not the end of times. Publishers will have to adapt."
• We're already seeing that happen through major acquisitions, like Zynga's purchase of Chartboost, and mobile marketing consolidation, like with Vungle's purchase of TreSensa Technologies.
• "Due to changes related to the deprecation of IDFA and the ways in which mobile ads are tracked, attributed and targeted, the mobile advertising industry is currently moving in a direction that places greater emphasis on ad creative," Vungle CEO Jeremy Bondy said in an interview with VentureBeat.

Apple's push for privacy may yet be a net positive. The mobile ad industry has relied on public ignorance and ambivalence toward privacy, and iOS 14.5 signals the beginning of the end of the consent-free era of tracking, at least with respect to the iPhone customer base.

To reach consumers, advertisers will now have to get smarter and savvier instead of relying on surreptitiously collected information. In the interim, Android presents an opportunity for advertisers to continue clinging to the old model while they figure out a new one.

OVERHEARD

• "I'm not a gamer." — Apple CEO Tim Cook owned up to his lack of gaming credentials as he took to the stand on the final day of testimony in Epic v. Apple on Friday. The quote, like so many of the more surreal moments of the trial, is a good reminder of how much more fun it is to hear industry titans talk without a prepared script.
• "Some of the gaming arm will stay with AT&T and some will go with the new company." — A representative for AT&T told Axios last week of the uncertain fate of Warner Bros. Interactive Entertainment and its 11 in-house studios, which are part of the WarnerMedia unit now being merged with Discovery in the aftermath of one of the biggest media acquisition flops in recent history.
• "While we have guidelines about sexually suggestive content, being found to be sexy by others is not against our rules, and Twitch will not take enforcement action against women, or anyone on our service, for their perceived attractiveness." — Twitch took an unusually forceful stance on Friday against complaints of so-called hot tub streams, creating a new category called "Pools, Hot Tubs, and Beaches" and allowing narrow exceptions to its nudity and attire rules.

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Lootbox

• On Protocol: Apple CEO Tim Cook faced harsh questioning from Judge Yvonne Gonzalez Rogers on the final day of testimony in the Epic v. Apple antitrust trial Friday. The back-and-forth, focused on Apple's anti-steering rules, hints at how the judge may eventually rule in the case.
• The SPAC boom comes to mobile gaming. Jam City, the maker of Harry Potter: Hogwarts Mystery, has filed to go public through a special purpose acquisition company, which will see it merge with Canadian game publisher Ludia for $175 million, VentureBeat reported.
• Netflix might be getting more serious about gaming. After it dabbled in interactive media with "Bandersnatch," Netflix is now looking to hire an executive to expand into the gaming space, The Information reported. According to Axios, Netflix is eyeing a service similar to Apple Arcade as an add-on for subscribers.
• The NBA is coming to Fortnite for the first time. After numerous successful partnerships with Marvel, the NFL and countless others, Epic's Fortnite has courted the NBA to debut official team jerseys in the game. Epic v. Apple revealed that just one NFL deal generated as much as $50 million, so it's likely a lucrative arrangement.
• Bad Robot Games raised $40 million. J.J. Abrams' game division, formed in 2018 as a joint venture with gaming giant Tencent, has raised a new round of funding led by venture capital firm Galaxy Interactive, Variety reported.
• Call of Duty's battle royale is finally getting an esports series. Warzone, the hugely popular battle royale variant of Activision's shooter, revealed a $1.2 million esports prize program called World Series of Warzone. BR games have had trouble sustaining successful esports circuits, so this should be a test of whether Activision can replicate the success of its existing Overwatch League and CDL series.
• Tencent invested in Control maker Remedy and took a 3.8% stake. According to Niko Partners, Tencent has made 51 such investments and acquisitions in 2021 alone.
• EA opened a new Seattle studio with help from Middle-earth. Electronic Arts tapped former Monolith Productions studio head Kevin Stephens — who worked on Warner Bros.' pair of Middle-earth games — to run a new Seattle studio working on an open-world action game, reported Gameindustry.biz.
• Epic sued Nreal for violating its trademark on Unreal. Nreal, the China-based AR firm, is in a legal battle with Epic over its name sounding too much like Unreal, the game engine Epic has produced for decades, The Verge reported. The two have been quietly squabbling for years, but with Nreal's U.S. launch imminent, Epic is escalating the feud.

Look out for

Gaming's all-digital summer of news

The game industry will once more be flooding the news cycle starting next month with its summer programming, starting with Ubisoft's Forward showcase on the first day of the second all-digital E3 on June 12 and continuing on with steady events until EA Play on July 22. In addition to Ubisoft, the official E3 will include showcases from Microsoft, Nintendo and more than a dozen major participating game publishers and developers. Geoff Keighley's Summer Game Fest also kicks off June 10, and an all-digital GDC starts July 19. It's going to be a busy couple of months.

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