Explained: How Apple’s latest software update will affect small businesses on Facebook

Apple has rolled out its iOS 14.5 software update this week for iPhone users, including a major change that could restrict the reach of small businesses’ paid Facebook ads.

Following Apple’s announcement of a raft of new products at its annual Spring launch earlier this week, the tech giant said in a statement that the iOS 14.5 update would soon follow.

As part of the update, users will receive a pop-up asking permission for Apple to track their activity across the internet — potentially blocking the collection of the very data that Facebook uses to target ads.

So, how will it affect advertising?

The problem for advertisers is that if many iPhone users click ‘no’ to internet tracking, the ability of paid Facebook ads to find the right potential customers will be skewed.

Adam Boote, director of digital at Queensland-based Localsearch, a marketing and directory business, says advertisers are “learning on the fly” about how the changes will affect ad campaigns.

“With the updates and Apple refusing to give Facebook the data to advertise to the right people, we’re really concerned that small business owners aren’t going to get the return on their ad spend that they were previously getting,” Boote tells SmartCompany.

Will many Apple users opt out?

At this stage, it’s hard to gauge just how many users will click ‘no’ to the pop-up when updating their iPhones.

But if many users block Apple from sharing data with Facebook, it will certainly make paid ad campaigns less effective.

“If half of iPhone users say no to the update, the ability of us to put the targeted ads to half of our potential clients is gone,” Boote says.

Why is internet tracking valuable?

Small businesses pay to target their Facebook ads based on location, gender, age and search history.

So, if less Facebook users can be identified based on those metrics, ads won’t be as effective, or it will cost more for an ad to find as many potential customers.

“If the ability for us to target ads is gone, then we’d need to put up more ads to find the right customer, pushing the cost up,” Boote says.

In terms of organic Facebook posts, Boote says the reach of these doesn’t seem to be affected so far.

This is because the reach of regular posts is “at the mercy of Facebook’s algorithm as to whether it gets any sort of traction”.

Why is Apple doing it?

iPhone users will need to download the update to use the latest functions, such as AirTag.

Launching on April 30, AirTag gives users a private and secure way to locate personal items through Apple’s Find My app.

Apple’s push to add more privacy features to its products is part of a wider movement among large tech companies to meet the public’s growing expectation that their personal data won’t be exploited.

But given Facebook — which profits from data collected through Apple’s internet trackers — doesn’t like Apple’s new features, a fight over data is expected.

Facebook is reportedly considering suing Apple.

“These are huge businesses — Apple and Facebook — they’re competitors when it comes to their size and category,” Boote says.