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Ad revenues could take a big hit as tracking issues continue

App developers could see their advertising revenues drop by as much as 24 percent as a result of reported moves by Apple to phase out the use of a key mobile tracking tool, according to a new report from MoPub.

Smartphone ad server MoPub took a look at mobile ad impressions over a three month period and found that those without unique device identifier data bring in 24 percent less revenue that those impressions with UDID data. This information is widely used by advertisers to track how well an ad converts into an action on iOS devices but is being phased out by Apple over privacy concerns.

?Most developers were already aware of the fact that conversion tracking and UDID drives a lot of performance ad dollars, but we haven't had a market-based, quantifiable estimate of the loss before,? said Jim Payne, CEO of MoPub, San Francisco.

Feeling the impact
While Apple said last year that it would begin deprecating UDIDs, the issue of finding an adequate replacement took on greater urgency recently when it was reported that several applications had been rejected recently by Apple because of how they use UDIDs.

The performance data advertisers gather from UDIDs is used to decide how much advertisers and ad networks are willing to pay application publishers for in-app ads.

The MoPub study found that publisher inventory with UDIDs that were sent to advertisers earned an average eCPM of $0.76 compared with $0.58 for ad impressions without any UDID.

Developers of free apps, in particular, rely on advertising at their primary source of revenue and could feel the impact as UDID use is phased out.

Apple is presumably phasing out UDIDs to address the growing concerns by regulators and privacy advocates over consumers? privacy in mobile. UDIDs have been one area of focus because they can conceivably be linked to a specific user and the information shared with third parties.

Alternative methods
As a result of these developments, marketers and advertisers are considering an array of alternatives. Currently, none of the UDID alternatives has taken the lead and the mobile advertising ecosystem is pursuing several different ways to track ad conversions.

Certainly, one of the criteria for a UDID replacement that would be widely embraced is that advertisers would not see any decrease in performance as a result.

UDID alternatives such OpenUDID or first-party cookies would provide similar monetization. They also address some or most of the concerns around user privacy.

However, until they become more widely used, their effectiveness as a tracking device is limited.

?The problem here is fragmentation - other alternatives would need to achieve widespread adoption to be effective,? Mr. Payne said.

Holding tight
Mobile advertising networks are trying to come up with their own solution for the problem. For example, Smaato's iOS SDK version 5.2 does not access or transmit UDID, resolving most privacy issues, and supporting app developers? efforts to gain quick approval from Apple for their apps.

Some developers have already removed UDIDs while others are continuing to use the data.

Without the identifier to track conversions, ad networks will likely also experience a decline in ad performance and ultimately their bottom line.

?Right now, our recommendation is to hold tight -- we have not heard reports of apps being pulled because of UDID since the initial news broke,? Mr. Payne said.

?If developers run into problems, they can move to OpenUDID,? he said.

?We hope and expect that we'll get a better solution than UDID in upcoming releases of iOS and we can put this dilemma behind us.?