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Nearly a year after Apple implemented privacy changes that make it harder for digital advertisers to track how consumers use their smartphone apps, the iPhone maker has already introduced two other privacy features that mask the identity of Apple device users. Together, they threaten to further constrain the online ad industry’s ability to track customers, according to ad tech company executives and advertising consultants.

The two privacy features, which Apple launched last fall, are currently available only to people who pay for its iCloud+ storage service. Some ad industry executives fear, however, that Apple could expand or promote the features to more of its customers, similar to how it launched and expanded previous privacy features. That would cause further chaos or crimp revenue for incumbents such as Google and Facebook parent Meta Platforms, whose advertisers are only now starting to recover from the implementation of earlier iPhone ad-tracking restrictions.

“It’s got the industry holding their collective breath,” said Grant Simmons, a vice president at Kochava, which helps advertisers measure the performance of online ad campaigns.

THE TAKEAWAY

• Industry execs fear Apple will expand two new privacy features

• Such a move would block industry’s iPhone privacy workarounds

• The new features obscure or block users’ email, IP addresses

Released in September, one of the Apple features, called Private Relay, acts like a virtual private network, masking the iPhone user’s IP address and encrypting web traffic when the person uses Apple’s Safari browser. The net result is that the internet provider for the phone can see the person’s IP address but not which websites they visited, while the websites can’t tell who is visiting their pages because the IP address remains hidden from them. To enable the feature, Apple iCloud+ customers must manually turn it on in their device settings.

If the Private Relay service expanded beyond Safari to stop the transmission of user IP addresses across mobile apps, ad industry executives say it would hobble the efforts many ad networks and ad tech companies have made to adapt to Apple’s earlier changes, known as App Tracking Transparency. Many of the workarounds that firms including Meta, Snap and Google developed in the wake of Apple’s changes rely in part on having access to groups of user IP addresses to measure whether ads the users saw led to sales.

The second potential new Apple threat comes from a privacy feature made available in December to iCloud+ customers, Hide My Email. The feature creates a randomly generated email address they can provide an app or website rather than sharing their real email address. That way, they can hide who they are from any app that asks for their contact information. Without that information, it is harder for the app or website to know who bought its goods or services, and it complicates efforts to target that customer with ads in the future.

App and website developers also collect such information and share it with ad networks, like the one operated by Meta, to aid the developers’ ad campaigns targeting new and existing customers. When customers voluntarily share such data, businesses are free to use it to sell ads. Apple’s iPhone restrictions, which allowed users to block the trackers advertisers use to keep tabs on their activities, made it even more crucial for developers to collect visitors’ email addresses.

‘Tax’ on Advertisers

Apple for years allowed iPhone users to manually turn on a little-noticed privacy feature blocking ad trackers before rolling it out last year as a mandatory prompt within many apps across more than a billion devices. Ad industry executives and consultants anticipate the company will do the same for the new privacy features, which work on both iPhones and Macs, or promote them to all of its customers.

“They will just continue to take out different parts of advertising and marketing,” said Robert Jewe, a consultant who helps businesses with their marketing strategies. “You can almost think of it as a tax” on advertisers, he said.

An Apple spokesperson did not have a comment for this article.

Apple isn’t alone in creating services that mask consumer email addresses by autogenerating new addresses. Search engine DuckDuckGo offers its own “email protection” service, and the Firefox browser offers a feature that creates an alternative email for users to give companies when they don’t want to share their primary email address. But Apple, which has said it powers more than 1.8 billion active devices, could have a much greater impact.

Apple’s moves also could put pressure on Google to implement similar features in its Android mobile operating system as well as its Chrome browser, which has more users than Apple’s Safari. In response to the earlier iPhone ad-tracking restrictions implemented by Apple, Google is developing new ways to measure the effectiveness of digital ads to keep its ad machine humming for the next couple of years. At that point, it too will make changes to how advertisers can target users on Android and Chrome, The Information has reported.

Killing the Workarounds?

While Apple initially said it would pull apps from its App Store if they didn’t comply with its ATT privacy rules, so far it has not taken action against Snap, Facebook or other ad-tech companies that have developed workarounds to its privacy rules. Some of these firms are using IP addresses and other methods of gleaning who saw an ad and took an action based on it, such as buying goods or downloading an app. App developers that have adopted a stricter interpretation of the rules say some of those workarounds violate their spirit.

But if Apple expanded Private Relay, that would automatically block some of the more aggressive workarounds. Broadening the feature also could impact the growing market for ads on internet-connected TVs; internet providers and ad tech companies currently use IP addresses to track the performance of ads viewed by streaming-app customers. Eliminating information about Apple users and what they do online would make it harder for connected-TV developers to piece together who lives in a household, what devices they have and what their preferences are. (Digiday earlier reported on ad execs’ concern about the expansion of Private Relay.)

While Meta and the rest of the ad industry have been reeling from the earlier iPhone restrictions, Apple’s own ad business has benefited. AllianceBernstein analysts say Apple’s privacy changes and its role as an App Store gatekeeper give its ad network an advantage over rivals. They estimate Apple’s ad business generated about $4 billion in revenue last year, up from $300 million in 2017.

Analysts expect Apple to expand its ad business to include selling ads in non-Apple apps, which it tried to do years ago. That effort failed in part because it restricted how those apps could share user data with advertisers. By reviving that type of business, Apple could eventually generate at least another $10 billion in new revenue, the AllianceBernstein analysts estimate.

Despite Apple CEO Tim Cook’s long history of rhetoric that criticized ad-tracking practices similar to the ones used by Meta, Apple’s decision to implement last year’s iPhone restrictions actually bubbled up from its privacy team, The Information recently reported. The group wanted to clamp down on the most egregious forms of abuse on the iPhone—for example, weather apps that sold data about users’ locations to brokers.

For his part, Cook said in an October earnings call that consumer feedback about the iPhone ad-tracking restrictions was “overwhelmingly positive.” He said individuals own their data and should have the ability to decide whether to share it.

“There’s no other motivation,” Cook said.