"Personal Data Tracking Continues" How Apple Changed the Advertising Market [Next.Jjin]

[Asia Economy Reporter Jeong Hyunjin] "The next auction is about digital personal belongings. The attractive personal information of Ellie."

At Sotheby's auction house in London, UK, an 'auction of Ellie's personal information' was held without Ellie herself knowing. Everything from the emails she opened, pharmacy purchase lists, location information, internet usage, and text records was sold. Seeing this scene, Ellie took out her iPhone and pressed a button on the application (app) to prevent it from tracking her actions. All the participants in the auction disappeared, and the screen displayed the message, "This is your personal information. iPhone helps protect it."

Apple's Privacy Protection Advertisement Capture

This is the content of an iPhone privacy-related advertisement released by Apple on the 18th (local time). It was a 90-second ad unveiled about a year after Apple introduced the 'App Tracking Transparency (ATT)' policy in April last year to protect personal information. Through this, Apple symbolically showed how personal information had been traded without the knowledge of the individuals involved. At the same time, Apple emphasized that personal information can be protected on the iPhone through its ATT policy.

The biggest change brought about by Apple's introduction of the ATT policy was in the advertising market. Especially companies like Facebook, which have earned money through targeted ads by receiving third-party data such as smartphone users' search activities and app usage records, faced restrictions. If users do not consent, it becomes impossible to receive records of other app usage on the smartphone, making advertising based on this data impossible. Not only Apple but also search engine Google announced privacy policies in February to limit indiscriminate access and use of personal information.

Transferring information is impossible... Track within the app

This trend emerged as awareness of personal information protection strengthened. Over the year following Apple's announcement, the advertising market has been busy finding new methods instead of personalized ads based on personal information. The New York Times (NYT) reported on the 6th of last month that "You are still being tracked on the internet in other ways," analyzing that changes in Apple and Google's privacy regulations provide greater advertising advantages to some platforms with large digital ecosystems. The key point is that Apple's regulations prohibit the use of data from other apps but do not restrict records accumulated within its own apps.

[Image source=Reuters Yonhap News]

For example, previously, if you searched for bread on a search portal app, social networking services (SNS) that received this search record would display bread-related content. However, this method has become difficult to use now. Instead, the search portal itself uses the search records for advertising, or if you search for bread on an e-commerce homepage, related products like jam or butter are displayed on that homepage. Ultimately, the important factor in advertising is whether it can be accurately exposed within the target's behavioral range. Rather than using information between apps, the focus is on tracking behavior within a single app and finding ways to increase accuracy within it.

NYT noted that companies like Google, Snap, TikTok, and Amazon are benefiting from this, stating, "Many small and medium-sized businesses are reallocating marketing budgets from Facebook or Instagram ads, which rely on third-party data, to platforms like Google or Amazon that directly own the information." For example, Stoggles, an eyewear company based in California, USA, revealed that it used to spend 80% of its online advertising budget on Facebook and Instagram but has now reduced that to 60%, allocating the rest to ads on Google, Amazon, and TikTok.

Retail media in the spotlight... Retailers entering the advertising business

As a result, retail media is gaining attention. Retail media involves placing ads in spaces throughout the purchasing process using consumer data owned by retailers. In a situation where using personal information from other apps has become difficult, retailers utilize their own consumer data to display ads.

[Image source=AP Yonhap News]

Not only e-commerce companies like Amazon but also offline retailers such as Walmart, department stores like Macy's and Nordstrom, grocery stores like Kroger and Albertsons, and pharmacies like Walgreens and CVS are starting retail media businesses. The Wall Street Journal (WSJ) recently reported that Marriott International, a global hotel chain, plans to collaborate with Yahoo to use hotel data to target customers and place ads on hotel websites and hotel room TVs. The travel industry is also entering retail media.

Boston Consulting Group (BCG) estimated in a March report that the retail media market will grow at an annual rate of 25% over the next five years, expanding to $100 billion (about 127 trillion KRW). By 2026, it is expected to account for more than 25% of total digital media spending. Market research firm Insider Intelligence forecasts that US retail media advertising revenue will grow from $41 billion this year to over $60 billion in 2024.

Is Amazon dominating the world?..."Small businesses growing fast"

In fact, there is a company that tightly controls the retail media market: Amazon. Amazon operates various businesses including e-commerce, cloud computing, and streaming services. Through this, it can acquire diverse data such as what customers purchase, where they live, and what movies or TV shows they stream. By actively utilizing this data, it can expose highly targeted and accurate ads.

[Image source=Reuters Yonhap News]

In February, Amazon disclosed for the first time the scale of its advertising business last year, revealing sales of $31.2 billion, ranking third after e-commerce and cloud businesses. US economic media Business Insider recently analyzed Amazon's rapidly growing advertising business in 10 articles, citing the influx of advertisers such as insurance companies, movie studios, and automobile manufacturers that do not sell products on Amazon as a reason for the tripling of Amazon's advertising revenue over the past three years. Advertisers judged that Amazon is not just a space for consumers for e-commerce but a platform valuable for ad exposure, attracting many advertisers.

BCG predicted that Amazon holds a 60% share in the retail media sector and will continue to maintain the top position for the time being. Following Amazon, major US retailers like Walmart and Target, with advertising business revenues exceeding $1 billion, account for 25% of the market. However, BCG noted, "Small businesses will grow rapidly in the future," forecasting that companies with advertising revenues under $1 billion will have an average annual growth rate of 49% over five years, faster than Amazon's 22%.

Business Insider mentioned that unlike the past when advertising was resolved through Facebook or Instagram, advertisers now have to target customers by examining multiple retailers individually, making the situation more complex. The market will be reshaped once again amid this. We will watch how changes in privacy regulations initiated by Apple will shape the advertising market.

Editor's Note[Next.Jjin] means 'looking ahead to the real next of business' and is a section delivering news about major companies' preparations for the future. We will uncover and explain both prominent big issues and hidden but important small issues in an easy-to-understand manner.