S2 #6 Is Apple making GDPR and other regulatory frameworks irrelevant?

KRISTINA PODNAR, HOST: Welcome back to another episode of the Power of digital policy. Thanks for joining me today. Also, a big thank you to my guest, Jeff Cunning. Jeff is an experienced product management and product marketing professional and the co-founder and chief product officer at Pattern89. I've invited him to hang out and talk about online privacy and some of the major digital evolutions we see in the marketplace, and how brands may want to respond. So Jeff, welcome to the show. I was thinking about you this morning because I saw the new Apple ad where the guy is shouting out on the bus that he searched for online divorce lawyers; there's that woman who's on a date announcing to the restaurant that she bought prenatal vitamins and pregnancy tests. I don't know if you've seen that ad or not, but it's really great. The ads basically for Apple and concludes, on a simple note, where the stem of the Apple is normally, there's actually a lock. Let me just start and ask you a really broad question, which is to help us understand what's going on. Why do we see these types of ads from Apple, and why are we seeing Apple push privacy and especially with iOS 14, we're used to seeing phones from Apple, not privacy stuff?

JEFF CUNNING, GUEST: Yeah. Well, it's a great question. And, I think it extends well beyond Apple. I think we see a movement overall toward consumer privacy with Apple products, but really with every device people are using. And I think this movement has been going on for a while. You think of GDPR and some of the restrictions that have really come into place there. And now iOS 14, which we can talk about in a lot more detail about consumers are not wanting all that information to be shared. And there, they're worried about it. They're wondering why, why do I feel like everything that I do is being tracked, and I'm seeing these weird signs where all of a sudden an advertisement is coming up, and it's like, they're listening to me. It's like big brother is out there and. And frankly, people's data is out there to a large extent. And I think it's unclear how that data has been chaired and is being shared. And, it worries people. It makes them feel weird or violated sometimes. And so I think IOS 14 is the latest in a trend that will continue, which is empowering consumers to be in more control of their data and have it shared less frequently.

KRISTINA: What are some of the really big highlights in iOS 14? Like what's changing?

JEFF: At a technical level, what's happening with iOS 14 is specifically related to devices that people use and how they track people. So, everybody who has an Apple device, a smartphone, an iPad, Apple TV has an IDFA associated with it. And what that literally means is it's an identifier for advertisers and that IDFA has been something that for as long as you've ever had an Apple device, it's shared by default with any website that you browse, any mobile app that you use, that, that information you're being tracked, and it's not tracking, me, Jeff Cunning and what I'm doing, but it is an ID that is persistent, and everywhere I go, everything I do, those actions can be related back to my IDFA. And so what's changing with iOS 14 is that they are going to start requiring mobile apps to say, Hey, Jeff, Cunning, is it okay if I track your IDFA when you use my app? And that prompt has never been surface to people before. And so, you've always just been automatically opted in, but now consumers are going to be prompted with that. And what the industry at large believes will happen is people will see this prompt, and they'll say, Hmm, why would I want to proactively give up all of this data to use so that you can advertise to me? So it's widely believed that people will just decline, and their IDFAs, will stop being shared. And that will mean that advertisers will be less capable of targeting people with the precision that they have had in the past. And you might also need to think, well, wait, didn't iOS 14 get released last year, which it did. And it's now installed on basically every Apple device there is. But they haven't started enforcing the need for this prompt. And there's been a lot of pushback from the advertising industry, of course, because it's such a pivot in terms of the industry. And so, I think that's bought the advertising industry some time to kind of grapple with the changes that are going to come, but at some date, that is not disclosed but is always said to be right around the corner, Apple will start enforcing this, and you'll start to see all kinds of apps such as Facebook and Instagram displaying a prompt that says, Hey, is it okay if we track you and everything that you do, and you will have the ability to opt-out of that.

KRISTINA: You brought up Facebook and Instagram. We've heard a lot over the last few weeks, especially around Facebook, Google, Twitter, being very upset about these changes that Apple is looking to enforce; what's your take? Can they do anything to stop it? Or is this just a natural evolution of where we are with our data privacy and advertising?

JEFF: Well, it's been interesting to watch, right? Facebook has put up a huge, anti-Apple PR campaign essentially kind of bashing Apple for these changes and talking about all the issues that are going to cause for small businesses for publishers and for all kinds of companies. And kind of stating that Apple is ultimately going to benefit from this. , it's been interesting to watch, but at least at this point, it still feels like these changes are, are imminent. They're going to happen. And really, these publishers like Facebook, Instagram, Snapchat, they're major application, mobile applications that thrive on advertising, have they've been successful in delaying it. But I don't think that they will ultimately be able to stop any of this from happening. Because like I was saying earlier, it's part of this ongoing trajectory toward more and more consumer privacy. And so I think we'll only see more of this in the future.

KRISTINA: It's not just that the giant tech landscape is getting disturbed by the shift. Should other large brands like folks actually advertising or rely on that underlying data, like Visa, Coca-Cola, McDonald's, Unilever, should they also be preparing for what's to come? How will they be impacted?

JEFF: Everybody! Truly advertisers are the ones that are being most impacted upfront. So if you think about this loss of ability to have precise targeting, that's been the oxygen for advertisers that's, what's been enabling them to reach the people that they want to reach when they want to reach them and get a great return on investment for all their advertising dollars. So, as that gets taken away, what we're going to see is advertisers are just simply not going to get the same results, not going to get the same bang for the buck on if they continue to do the same thing, and that can have consequences beyond just for the advertisers. So you think about, what did those advertiser dollars really end up supporting? They support the publishers out there who are offering free content to consumers but supported by advertisers and if advertisers begin to see declining results in all of their campaigns, they're not going to be able to put the same amount of money into those campaigns, anymore. And that can cause downstream impacts on publishers, potentially not making the same revenues that they used to, which could lead to even more changes. Do publishers eventually have to monetize in a different way? Are we going to see more paywalls? Are we going to see, or are we just going to see, triple the ad units on all of these sites? I always think about anybody who has ever looked up a recipe to cook with you get to hear the life story of the chef and scroll through about a thousand ads on your way to the recipe. Imagine that tripling, quadrupling it's, it's going to be interesting, I think to see. There there's a lot of ways that the industry will grapple with this. But it's not just advertisers who impacted; it's not just Facebook impacted. It's, it's really the whole ecosystem. And consumers who are wanting this privacy may not realize the downstream effect that it might have on them—not being able to get the same ad-supported content for free anymore in the future.

KRISTINA: That's a really good point, especially when we think about the types of relationships that brands need to start curating with users; it's always been about, I can get at you in a different way. I don't have to approach you directly. Do you anticipate that brands will be looking to have a more direct relationship than for users? Is this sort of like a point where we start to cut out the advertising industry, or is it a transformation to how we target and doing so with more permissions-based approaches?

JEFF: I think all of the above, really. I certainly think the more that a brand can curate a relationship with an individual, the better, right? Because, well, in an impersonal way, if somebody logs in to your site, maybe they're not your best friend, but that's an identifier, just like an IDFA has been. And that allows a marketer to continue to reach that person. And, maybe doing so with permission instead of if this kind of already opted in IDFA that people really didn't even know existed. So, I think that brands curating relationships with consumers have been a focus in the past, but we'll need to continue to be more of an opportunity for brands to continue to be effective. I think there are all kinds of tools that marketers have to reach individuals. And I think that everybody has gotten so comfortable with audience targeting because it's been so effective that they almost haven't had to step outside of the box or think outside of the box and come up with other creative ways of reaching people. Because if you know that somebody was on your website or was searching for the product that you have or whatever that action was, and you can reach that person again, you're reaching this person that is so likely to want to purchase your product or engage with your brand or buy your concert tickets. It almost doesn't even matter what you say to them at that point. You just need to show up again. And that's enabled people to really not have a huge focus on building the right message or coming up with the right creativity. And so I think there's also going to be a big resurgence of creativity for marketers in coming up with more compelling messages. It almost like we've seen on TV where those brand commercials are so interesting. They're so unique. You have to work so hard to come up with those messages to reach such a broad audience because you're not so targeted. I think we may have to see more of that creativity occurring across other advertising channels, like banners and display ads, and things that you generally are much quicker to pass over.

KRISTINA: So Jeff, I've spoken with several developers recently frustrated with Apple's attempt to increase user privacy but not providing development teams with a detailed list of the kind of information that developers must provide for their apps. Thinking about those developers and digital teams out there, how should developers interpret current guidance and what they should do, especially when Apple gives no clear guidance to app developers. And it seems to be a little bit fuzzy.

JEFF: Yeah, it's not going to be easy, and it's not easy for anybody trying to deal with these changes because not only are the instructions unclear of what's changing and how you should be dealing with it, but it's also just changing so much to the way that you do business, right? As an app publisher, you have been able to monetize in large waves because it's easy for advertisers to target people in your app with a high degree of precision. And so, not only are you going to have to deal with less accurate or less precise data being shared with advertisers, and that possibly causing drops in revenue for you. But you're also going to have to deal with actually making the tangible and logistical structural changes; it's really unfortunate that everybody has to deal with this, but I think that what publishers and, and what advertisers will need to do is get creative. What are other ways that we might be able to be effective without the same revenue expectations that we've had in the past? Could it be through creating paywalls for lack of a better term? Could it be through an ad unit that has become really effective and in the past few years has been around rewarded video where people are kind of putting themselves out there in their willingness to watch an advertising video in response to extra coins or extra tokens in your game. Are there other, other ways like that where you can get people to want to engage with advertising, or are there ways that you can show prompts to people in your app to try to help explain and provide more context to what's happening with and, and the, the literal impact, whether they share their IDFA or not? I think once that these Apple prompts becomes enforced and all of these mobile apps are going to have to pose that prompt and ask for that permission, I think that's a moment in time that's going to be really important and what I would recommend to publishers and what I'm sure all of them are thinking about is how do I make that moment as context-rich as possible. How can I make sure that the moment that somebody sees this, this prompt of, Hey, will you, or will you not share this? That I have a plan for informing them of how this might change their experience with my app. Maybe you say, look, if you want to continue to use all the features that you love the most, you need to click: Yes. Then prompts the then show the prompt, or maybe you can come up with a story that will get people to be more willing to accept the terms of sharing their IDFA because you can show them the value that they're going to get in return for doing so.

KRISTINA: I'm always asked by listeners who are doing the right thing in terms of accessibility, in terms of security, in terms of privacy, thinking about the shifts, especially from an app developer perspective, who's doing it right. Or who's kind of ahead of the game right now, in terms of really being ready to take on all of the shifts that Apple is making to its privacy model. But inevitably, having the industry really shift. Is there anybody doing it well out there right now?

JEFF: Kristina, I wish that I had a perfect example for you, but I really don't. I think that for one. It's just so early. I don't think we've really seen the ramifications of this yet. And I think it's also come on so quickly that people are still scrambling to figure out how to deal with these changes. And then, thirdly, I think that. It's going to be a domino effect that, and we don't know how to forecast what happens on, domino three and four. And it's all kind of this waiting game for when is this enforcement actually going to occur? And then what's going to be the impact to the kind of marketplace or the ecosystem. Who's going to kind of shift first. Is it going to be advertisers lowering spend? Is it going to be publishers adding more ad units? Is it going to be consumers out of nowhere coming in and just accepting the terms of sharing their IDFA, and all of a sudden, nothing changes. And we were all getting prepared like this for nothing. I think that's the hard thing is that it's very new and it's—still more of a waiting game. Things aren't really inaction yet.

KRISTINA: Do you think this is actually going to make it easier to deal with privacy challenges? I think about just the discrepancies around regulatory and legal frameworks. We have GDPR, California has CCPA, Nevada has SB220 that nobody ever talks about or concerned about at least, Brazil's coming on board next year with their data privacy regulation, POPIA in South Africa has been around for years, although not enforced. Do you feel like this is actually going to be maybe a benefit to brands out there because they're no longer going to have to deal with the plethora of different regulatory frameworks? It's coming from a single industry source that says, look, we're taking a stance on a very specific aspect of privacy, but an important one that levels the playing field. And so, I don't care if you're in the EU. I don't care if you're in the US. I don't care if you're in Asia. Everybody has to play by the same rules now,

JEFF: It's an interesting take. To an extent, but at the same time, it's just Apple. Right? What about Android devices? And what about people on browsers and desktops? Even where Apple can enforce a lot of these restrictions and privacy guidelines in a uniform way, there are still all kinds of places that aren't impacted by it yet. Like non-Apple devices or like web browsers and  I don't see this being uncomplicated, I guess. Regardless I think, privacy regulation, just saying those two words kind of probably makes a lot of people go hide in the corner to start with but, I think it's, it's a trend that's only going to continue, but I don't think it's going to be an easy one. And while there are, there will be a lot of consistency from Apple. In terms of engagement interaction with privacy in mobile apps on Apple devices, I think there are still so many places that are going to still be treated with different specifics.

KRISTINA: So that's a really good point because it seems like in the backdrop of all of this Apple activity, we're also hearing that Google is dropping third-party cookies. And so, thinking about digital marketing, on the whole, it seems like it is fundamentally shifting, maybe not as fast as it's perceived in the headlines. But, kind of thinking about it from that digital team, digital marketing team perspective. Educated guesses aren't good enough anymore. It seems, but what is going to be the alternative? So you talked a little bit about this but help me understand a little bit more how all of these different pieces are connected, if at all, from your perspective.

JEFF: The biggest unknown I think is going to be as these changes occur, right? We kind of talked a little bit earlier about this domino effect of, as advertisers have less precise data, then that can turn into publishers getting lower revenues, and that can turn into changes that publishers make to creating paywalls or adding ad units. And eventually, it comes back to the consumer, right? Where it started. The consumer has the power in their hands to either say yes or no to this prompt. And ultimately, that's going to be what sets off this train of dominoes. And when we get to the end of that, and when publishers are either closing up shop because they're not getting the revenue enough revenue to keep their businesses up or they're changing the way that they're making content available. That's what's going to come back and impact the consumer. And I think that's going to be where we really start to understand. Is there any sort of backlash? Are people going to be so annoyed by these ad units that they're not willing to engage with content anymore? Are we going to see a movement toward more curated content that people are willing to pay for? Maybe there's just too much content out there, and people only want the best of the best, and they're willing to pay for it, but don't want to be monetized through kind of the free content, more than likely, it's going to be a little bit of everything. And I think that's going to be the most interesting part of this trajectory is once all the implications of consumers, demanding privacy really come all back around full circle to the consumer themselves. How do they react and where, where the demands go next?

KRISTINA: Jeff, I recently read a quote by your Pattern89 co-founder and CEO, R.J. Talyor, who said: "Marketing isn't about educated guesses anymore. It's about data and creativity; brands and agencies want to use artificial intelligence to unlock the data behind every creative idea." And that resonated with me because I love this idea, obviously, of having digital policies that unleash creativity. I think that that's what happens when you give people boundaries and let them play within that framework. And that is freeing, freeing to have people innovate, to create, et cetera. But I'm wondering if you can maybe help explain a little bit what that means from your perspective. Talk to us a little bit about what does that really at the end of the day means when we say that brands and agencies want to use AI to unlock all of this data and really, I guess, drive a lot of that creativity through data. What does that all about?

JEFF: Yeah. Earlier, we were also talking about how advertisers have had it, this, this oxygen of a precise audience targeting that has made it so that they almost don't even have to care about the message, they're reaching the right person at the right time so perfectly that it almost doesn't even matter what they say. They're going to get whatever conversion they want or whatever action to occur. And as that goes away, all of a sudden, the importance of creativity skyrockets. And not only that, but it's kind of the tool that marketers do have to be effective or to regain a lot of recouping, a lot of the losses that they might see from the lack or loss of transparency in audience targeting, they can potentially make up for, with an increased focus in creativity. When we think about marketing creatively, and with the customers that we work with today, generally, creativity is the least data-driven part of marketing. When, when a marketer goes to create a campaign, a lot of times, the ideas for creativity are simply, well, what works last time? Does anybody have any good ideas? Let's just use whoever has the best idea that we think will work, or maybe at best, we have a handful of ideas, and we're going to AB test them, or maybe ABC tests them. And we're going to see if one of those outperforms the others, and we'll go with that one. Would that really all amounts to is educated guesses or some kind of tedious efforts around testing to try to get a better answer. But what our CEO, R.J., was talking about is that there's a whole world of creative data out there that can help you make a lot more informed decisions and understand a lot more deeply what are the elements and some creative that are important? Is it the people that are in your advertisements? Is it the message that you're sharing? Is it the tone of your voice to see the color scheme of your creative? Is it the number of scenes changes in your video? Is it the specific objects or the way that you've placed your products? There are so many nuances to creative. I mean that there are infinite possibilities to what a marketer could put together in an advertisement. But yet we haven't really treated it. We, we just, haven't been very data-driven about it as, as a marketing industry in the past. And not only that, but we're kind of newly able to treat it with a lot more data. When you think about technologies like computer vision that can automatically look and image and understand what objects are in it, are there people present what's the color scheme now that there's computer vision, we can kind of turn a piece of creative into the data elements that, that make it up. And that allows a lot more interesting tools can be built to be really effective with your creative strategy, really data-driven with your creative strategy. So, why did something work? What will work next time? And you can be really precise with what you build instead of just kind of using your best ideas. And even more than that, we think that there's a big place for humans and technology to work together here. And humans are still the ones that are more creative than machines. And it'll always be that way, but machines can tell you what works and what doesn't work, and they can give you that brief or that recipe of what should go together. But you really need a chef, right? You can line 10 chefs up with the same ingredients, and they'll make ten different things. And so what, what a machine can do is give you that right recipe and then partnering with it with a human or that chef that can really deliver the best dish.

KRISTINA: So thinking about all of those chefs out there, what type of skills should they be thinking about as we work our way forward, and as we start to sort of shift the culture to be more data-driven.

JEFF: Yeah. It's interesting because I almost think that marketers should be more data-driven, but they should allow technology to handle a lot of the data processing, and marketers should be these stewards of the brand of ethics, of, and of creativity and new ideas. I think that people are and always will be more effective than machines and those things because machines can't come up with new ideas. They can only look at what's happened in the past. But people understand and have imaginations that where they can be creative and introduce new ideas and machines can help understand whether they are likely to be effective or not at, getting the end result marketer wants. A human can read the room for, for lack of a more technical term, and be able to kind of present or know what a message needs to include to kind of be that, steward of ethics and a human knows what a brand's story and values are all about and can really bring that to the table. But a machine can say great. And put that logo in the lower right-hand corner and use your darkest background to accentuate the hue of your logo in this place. So, working side by side, I think humans being, having that focus on creativity on brand and on ethics paired with technology that can really understand how can I take those components and put them together in the best way possible can lead to really, really great results and, and can be kind of this future opportunity for marketers to overcome a lot of the challenges that the industry is going to be faced with this loss of transparency and identity.

KRISTINA: That's a great way to bring us full circle and back to our original topic. So, appreciate you being with us here today, Jeff, and providing us with great insights, both around what's happening with iOS 14. What's coming down the pike in terms of data and creativity. Thanks for stopping by and helping us understand Apple's evolving privacy efforts and what's happening in the broader area.