There's a lot to love about the new Apple operating system iOS 14. From the app library to the redesigned home screen, enthusiasts are already in awe of this update.

Perhaps the most noteworthy upgrade, however, centers around the concept of digital privacy. Long a leader in this regard, Apple has upped the ante with both iOS 14 changes and the update known as 14.5. These add new notifications to improve transparency.

Many people are excited about Apple's enhanced privacy features, but the upgrades have several tech giants worried or downright furious. Facebook, in particular, takes issue with this setup, which is already having a significant impact on social media advertising.

Will Apple's upgrades be as devastating at the small business level as Facebook's leaders would have us believe? We delve into the drama—and the most likely outcomes—below:

Which Privacy Enhancements Does iOS 14 Include?

Apple has long prided itself as being the game-changing company in the tech world—and it certainly doesn't disappoint with iOS 14. But while Apple is known for shaking things up in terms of design, it's clearly trying to make a shift towards becoming the brand most associated with data privacy.

Central to this effort? App Tracking Transparency (ATT), which was originally intended with the initial release of iOS 14. It was delayed, however, to give developers a bit more time to make adjustments.

With the 14.5 update, ATT is about to make its mark on the digital advertising world. To truly grasp the revolutionary nature of this technology, however, it's important to first understand how tracking works.

Each Apple device is equipped with an advertising identifier which is used to pinpoint specific phones or tablets for the purposes of tracking your behavior—and targeting ads accordingly. Previously, developers had few restrictions on their ability to associate such identifiers with other information.

As users install the 14.5 update, apps are now required to use the App Tracking Transparency framework to ask for permission to engage in tracking activity that occurs outside of the company's apps. Facebook, for example, would need to seek permission before tracking how a particular individual uses Airbnb or Lyft. But Facebook can continue to track behavior within its own suite of apps (such as Messenger, WhatsApp, or Instagram) without seeking approval.

While it was previously possible to limit tracking on Apple devices, users needed to make an overt effort to do so. It wasn't difficult to turn this function off—a quick visit to Settings > Privacy—but many people had no idea that such an action would be desirable. Now, while it's possible to continue to allow tracking, the increased awareness brought on by Apple's update means that this function is more likely to be disabled.

How Does iOS 14 Impact Facebook Ads?

Many Apple users previously had no idea that how they behaved on one app could impact the extent to which their information could be tracked on others. This will quickly become more evident, however, as the previously described pop-up notifications begin to appear on a regular basis. Many types of data collection will be prohibited unless users explicitly opt-in, so those with apps known for extensive user tracking can expect to receive a lot of requests.

It should come as no surprise that the iOS privacy update affects Facebook. The social network is notorious for using tracking solutions with the intention of delivering personalized ad experiences for its users. In repeated objections to Apple's updates, Facebook has referenced how the personalized ads made possible by tracking help to keep apps and services free.

The small business implications are also worth noting. Through tracking, businesses are able to gain a better sense of the unique types of advertising that might appeal to Facebook and Instagram users. This, in turn, allows for more precise targeting so that businesses are able to make better use of limited marketing resources. With ad customization comes an impressive return on investment.

According to Facebook, "without personalized ads powered by their own data, small businesses could see a cut of over 60% of website sales from ads" as a result of the iOS privacy update. Facebook argues that this development is not truly aimed at improving privacy but actually seeks to increase profits by forcing businesses “to turn to subscriptions and other in-app payments for revenue."

Beyond opt-ins, campaigns may also be impacted by limitations on tools known as Facebook pixels. Installed on a variety of apps and websites, these pieces of code provide insights into who uses various sites and how they behave. This, in turn, helps businesses determine which types of ads are most effective.

Previously, it was possible to place as many pixels as desired. The iOS update will usher in significant restrictions, however, allowing for a mere eight-pixel objectives for a single domain. What's more, Facebook pixel tracking will not apply to users who opt-out of data sharing.

How Is Facebook Responding?

Obviously, Facebook is not pleased with Apple's updates. That said, the site "will be showing [Apple's] prompt to ensure stability for the businesses and people who use [Facebook's] services."

Rather than find ways to skirt Apple's prompt, Facebook will add an extra screen featuring detailed information about the role of tracking in delivering personalized ads. Users are still free to choose their preferred approach. Either way, they will continue to receive ads—these just might not be as targeted if users opt-out of tracking.

Another noteworthy development: Facebook has announced its intention to use a system known as Aggregated Event Measurement for "processing pixel conversion events." The Aggregated Event Measurement protocol examines various web events and how they relate to conversion.

Facebook claims that its Aggregated Event Measurement solution resembles Apple’s Private Click Measurement. While tracking for conversion events will be limited from here on out, extensive guidance and priority rankings aim to help businesses continue to measure campaign performance and make prudent advertising decisions based on these insights.

Will Apple's New Privacy Features Hurt Small Businesses?

Many small businesses rely on the customized, targeted nature of Facebook's ad campaigns to reach specific types of customers or clients. As more Apple users opt-out, advertisers may struggle to target content accordingly.

This is the clear conclusion of a paper published on the Social Science Research Network (SSRN). The report's title does an excellent job of stating its argument: Harming Competition and Consumers under the Guise of Protecting Privacy—An Analysis of Apple’s iOS 14 Policy Updates.

The report's official summary states that Apple's iOS 14 update forms an explicitly "anti-competitive strategy disguised as a privacy-protecting measure," adding that the policy could have the "pernicious effects of enhancing the dominance of iOS among mobile operating systems."

It's important to note that, while the paper's authors insist "the views expressed here are solely our own," the study was funded by Facebook. Still, results from this initiative echo concerns that many influential individuals from the small business community began expressing as soon as Apple announced its intentions to enhance its operating system's privacy features.

The analysis highlighted above seems alarming, but not all marketing experts anticipate that small business campaigns are doomed based on the iOS 14 update. After all, while this impacts a significant share of Facebook users, it has little to do with how those on Android devices will operate. While tracking has previously provided detailed insights into behavior among both iOS and Android users, it's possible that some businesses will shift their approach to focus exclusively on Android.

Another key step to take as the iOS 14 update becomes the new law of the land: verifying domains to prevent ad account misuse. According to Facebook, domain verification will ensure that any data received by pixels is accurately conveyed to the social networking platform. Alternative solutions such as the Conversions API can also be expected. Focusing on unique optimization strategies such as email open rates, this solution should have fewer issues with compliance.

There's no simple solution to the ongoing drama between Apple and Facebook. For now, businesses committed to targeted marketing will be best served by taking advantage of alternative solutions for gaining insights into campaign efficacy. As the nature of social media and digital privacy continue to evolve, it's more important than ever to keep up with the rapid pace of change. Businesses that adjust accordingly will find it easiest to deal with ongoing shifts in the digital landscape.

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