Apple's ATT Slashes
E-Commerce Revenue
by 37%

In a landmark study pre-published this week, researchers unveiled the profound economic impact of Apple’s App Tracking Transparency (ATT) on the e-commerce industry. This groundbreaking research, co-authored by Maximilian Kaiser, a lead data scientist from Grips Intelligence, alongside esteemed professors Guy Aridor (Northwestern University), Yeon-Koo Che (Columbia University), Brett Hollenbeck (UCLA Anderson School of Management), and Daniel McCarthy (Emory University Goizueta Business School), offers a comprehensive analysis of ATT’s ramifications on advertising effectiveness and firm revenues.

Apple’s ATT, introduced in 2021, marked a significant shift in the digital advertising landscape. The policy requires apps to obtain explicit permission from users before tracking their activities across other apps and websites. This change aimed to enhance user privacy by limiting the amount of third-party data accessible for targeted advertising. Companies dependant on Meta advertising or iOS users experienced a 37% drop in firm-wide revenue, highlighting the critical need for businesses to understand its impact.

The study reveals a significant decline in the performance of conversion-optimized Meta advertisements. These ads, which have traditionally relied heavily on third-party data for targeting and measurement, experienced a 37% reduction in click-through rates compared to click-optimized campaigns following the implementation of ATT. This decline underscores the critical role that third-party data played in the effectiveness of digital advertising. Without this data, advertisers face substantial challenges in reaching their target audiences with relevant ads, which in turn affects the overall success of their marketing campaigns.

Despite attempts to mitigate these effects, such as reallocating budgets from Meta to Google ads, the overall ad effectiveness did not recover over time. This further emphasizes the lasting impact of ATT on digital advertising strategies. The research highlights the necessity for businesses to adapt to this new landscape by exploring alternative advertising channels and optimizing the use of first-party data to maintain their marketing effectiveness.

E-commerce firms, particularly those heavily dependent on Meta for advertising, have seen substantial revenue declines. The study found that companies with a higher reliance on Meta experienced a 37% decrease in overall firm-wide revenue. This significant drop was primarily driven by a sharp reduction in new customer acquisition, emphasizing the difficulties smaller firms face in attracting new customers without the detailed insights provided by third-party data. The shift in advertising effectiveness necessitates innovative approaches to customer acquisition and retention, as businesses heavily reliant on targeted advertising must now explore alternative channels and optimize first-party data collection and usage.

In response to the decreased effectiveness of Meta ads, many advertisers have shifted their budgets towards the Google ecosystem. However, despite this reallocation, firms with a higher baseline dependence on Meta still faced significant revenue losses. This suggests that alternative advertising channels cannot fully compensate for the reduced performance of Meta ads, necessitating innovative approaches to maintain advertising effectiveness. The study documented a 6.8% fall in Meta ads’ spending share, which largely moved to Google, especially Google Display ads. However, this reallocation was not sufficient to offset the negative impact on revenue for firms more reliant on Meta ads.

The research indicates that smaller firms—those generating less than $500,000 in monthly revenue—have borne the brunt of ATT’s economic impact. These companies experienced steeper declines in new customer acquisitions compared to larger firms, which could better absorb the changes in advertising effectiveness. The study estimates a 40% relative revenue drop for small firms, driven largely by the negative impact on new customer acquisition. This raises concerns about the long-term viability of small e-commerce businesses in a post-ATT landscape, as they struggle to attract new customers without the granular data they once relied on.

The implementation of Apple’s ATT has ushered in a new era of privacy-focused digital advertising, with significant economic consequences for e-commerce firms. While larger companies may weather the storm, smaller firms must adapt quickly to survive. The shift in advertising effectiveness necessitates innovative approaches to customer acquisition and retention. For businesses heavily reliant on targeted advertising, exploring alternative channels and optimizing first-party data collection and usage will be crucial.

Grips Intelligence played a central role in this groundbreaking research. The detailed global view of firm-level traffic and revenue data provided by Grips was instrumental in quantifying the impact of ATT. Maximilian Kaiser, a lead data scientist from Grips, co-authored the study, highlighting Grips’ commitment to advancing the understanding of digital advertising dynamics and its economic implications.

As e-commerce businesses navigate the challenges posed by ATT, leveraging insights from Grips Intelligence can offer a strategic advantage. By understanding competitive performance and market trends, firms can make informed decisions to optimize their advertising strategies in this evolving landscape.

Read the full study here.

For more detailed insights and data-driven strategies, e-commerce managers and analysts are encouraged to explore Grips Intelligence’s platform and consider booking a demo to stay ahead in this competitive market.