Cookies (Sort of) on Mobile Devices? Boon to Google, Facebook, Pandora et. al.

Tracking the click-through movements of Internet surfers on iPhones and iPads became a lot more copacetic in September, when Apple’s (AAPL) new operating system included features that allowed advertisers to collect data both anonymously and with implied user permission. Privacy advocates continue to rail against the invasion. But investors might want to wonder if the market has underestimated what a boon this development might be to certain ad-dependent companies, like Google (GOOG), Facebook (FB) and Pandora Media (P). Yet we don't see much excitement in a stock chart.

GOOG Chart

GOOG data by YCharts

Apple’s iOS6 included a new “identifier for advertisers” (IDA, or IDFA) that acts like cookies do on desktop computers. The data collected through it cannot be traced to a specific user, and like a cookie, it can be physically blocked. Advertisers can use it to watch click activity that lets them know when you’re, say, in the market for a wedding dress or a trip to Paris.

Before IDFA, developers often tapped into a smartphone’s or tablet’s traffic though its UDID, a unique ID that could lead to the name of the user. A sort of serial number specific to the device, the UDID also could not be erased or turned off. Even Congress raised alarms about potential privacy threats there, leading some companies to voluntarily curb their use of it and to Apple cutting off access on its own devices. Device users can block access to their IDFA, although many argue that it’s difficult despite reassurances.

The lack of an anonymous, opt-out-able identifier had created serious problems for ad companies trying to make money on mobile devices, as Mobile Theory CEO Scott Swanson does a nice job explaining. But as YCharts explained earlier, mobile is Google’s opportunity for renewed growth, not it's problem.

Internet ad rates on mobile devices remain far below rates on desktop ads, and the fast adaption of such devices means a growing percentage of revenues from this cheaper platform. Profit margins at Google and friends have been greatly squeezed.

GOOG Gross Profit Margin TTM Chart

GOOG Gross Profit Margin TTM data by YCharts

The key to boosting mobile ad rates, and therefore profit margins, is making mobile ads more effective. The new IDFA and the freedom to collect more data that it brings would seem to bode well for these efforts.

But will it give a serious boost to mobile ad performance that will culminate in higher profit margins? That’s not a discussion any of those companies want to have. Google and Facebook keep secret the specifics of their data gathering activities for many reasons, not the least of which involve fear of riling the data-tapped public with the extent of their knowledge. GPS-enabled iPhones and Android phones consistently feed location data to Apple and Google, but you don’t hear those companies bragging about their troves. Apple did not, one might note, hype its new data tracking capabilities at the iOS6 launch. Google made certain with its latest earnings report that investors knew mobile revenues are growing hugely, but it intentionally obscured in the figures how such gains came about.

In other word, progress on mobile monetization remains really damned important to Google and the like; perhaps the single most critical factor in their future. As investors, it remains extremely difficult to see whether they’re getting close to the goal. But it does look like they just got closer.

Dee Gill, a contributing editor at YCharts, is a former foreign correspondent for AP-Dow Jones News in London, where she covered the U.K. equities market and economic indicators. She has written for The New York Times, The Wall Street Journal, The Economist and Time magazine.



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