Internet industry braces for new privacy rules

The days of unwieldy internet user tracking by advertisers are coming to an end, sending the web's largest publishers scrambling.

Why it matters: The new online privacy changes are a massive pivot from the decades-long practice of selling hyper-targeted ads to users based on their web history. Many big web publishers rely on targeted ads to support their businesses.

Driving the news: Apple on Monday began rolling out its long-awaited app tracking transparency feature that asks Apple iOS users whether they would like to opt out of having their data tracked by third-party apps.

• The change, arriving in conjunction with Apple's iOS 14.5 software update, has Apple's tech rivals — especially Facebook — nervous about the impact that the update will have on their advertising businesses.
• Beginning Monday, users began receiving notifications when they updated their devices with Apple's latest software asking them whether they want to share their data.
• Gaming app publishers originally told Axios that they expected very few people — 15-20% — to actually opt-in to having their data be shared. But a new analysis from AppsFlyer, a mobile software company, says opt-in rates may be higher, possible minimizing the impact of Apple's changes on the ad ecosystem.

Between the lines: For publishers that rely on user data to sell banner ads, new privacy changes coming to web browsers will also force them to make significant changes and important business decisions.

• Google said earlier this year that it — along with other web browsers like Apple's Safari and Mozilla's Firefox — would begin phasing out web cookies, the technology that's been used for decades to track people's web history for the primary purpose of selling ads.
• Last month, Google said it had begun working with publishers and advertisers to test a new solution called Federated Learning of Cohorts (FLoC), which targets groups of people instead of tracking individuals.

The catch: Google's solution requires broad industry support, and many web publishers are skeptical.

• WordPress, the blogging platform that supports a huge chunk of the internet's websites, last week called Google's alternative a "security concern" that could unintentionally facilitate disparities amongst people on the web.

• Digiday reported this week that some publishers, like The Guardian, are blocking Google's new tech, while others, like The New York Times, are open to experimenting with it.
• While many publishers have begun rolling out their own first-party data solutions to get ahead of new targeting restrictions, others are tying to navigate whether and how they should work with Google on its new experiment.

Be smart: Some industry bodies, like ad tech giant The Trade Desk, are proposing alternative to third-party cookies that still allow marketers to track individuals.

• The Trade Desk's solution, called the Unified ID 2.0, also requires broad buy-in from the industry. Already several big companies have joined the movement, like The Washington Post, ad tech company Criteo and Nielsen.

The big picture: The privacy changes enacted by big companies across the web are happening in response to regulatory pressure around new privacy laws.

• Analysts predict digital ad growth will skyrocket, putting more pressure on internet giants and web publishers to come up with ad-targeting solutions.