P&G Worked With China Trade Group To Sidestep Apple Privacy Rules
One of the world’s largest ad buyers built a marketing machine reliant on digital user data.
One of the world’s largest ad buyers built a marketing machine reliant on digital user data.
Procter & Gamble Co. helped develop a technique being tested in China to gather iPhone data for targeted ads, a step intended to give companies a way around Apple Inc.’s new privacy tools, according to people familiar with the matter.
The move is part of a broader effort by the consumer-goods giant to prepare for an era in which new rules and consumer preferences limit the amount of data available to marketers. P&G—among the world’s largest advertisers, with brands such as Gillette razors and Charmin toilet paper—is the biggest Western company involved in the effort, the people said.
The company has joined forces with dozens of Chinese trade groups and tech firms working with the state-backed China Advertising Association to develop the new technique, which would use technology called device fingerprinting, the people said. Dubbed CAID, the advertising method is being tested through apps and gathers iPhone user data. Through the use of an algorithm, it can track users for purposes of targeting ads in a way that Apple is seeking to prevent.
Apple is planning a software update in coming weeks that will require app users to choose whether they want their activity to be tracked across other companies’ apps and websites. Apple has touted the new software as an important step for putting privacy controls in users’ hands. Device fingerprinting runs afoul of Apple’s rules, and the tech company has said it would ban any app that violates its policies.
“The App Store terms and guidelines apply equally to all developers around the world, including Apple,” an Apple spokesman said. “We believe strongly that users should be asked for their permission before being tracked. Apps that are found to disregard the user’s choice will be rejected.”
Facebook Inc. and ad-tech firms have been vocal critics of the Apple changes, fearing users won’t consent to being tracked. They say the flow of user data is critical to providing more tailored digital advertising that better resonates with consumers.
P&G, whose involvement hasn’t been previously reported, said in a statement that it is providing input to the trade group consistent with the company’s goal of finding ways to “deliver useful content consumers want in a way that prioritizes data privacy, transparency and consent. That means partnering with platforms and publishers—both directly and through our advertising associations across the globe,” it said.
The company declined to provide additional details about the program, including whether it intends to use the technology.
P&G was involved in testing CAID, the people said. The testing has also involved ByteDance Ltd., the parent company of TikTok, and Tencent Holdings Ltd., according to people familiar with the matter. Those companies operate some of the most widely used apps in China.
Through apps, CAID collects user device data, such as the device start-up time, model, time zone, country, language and IP address. Based on China’s personal information security standards, most of those data aren’t counted as “personal information.” But a so-called device ID can be generated by algorithm based on these data. That device ID can achieve a similar tracking effect as the identifier that Apple is allowing users to block.
CAID can be used without having to obtain user consent. If in operation, it could track activity even if a user had opted out of tracking through a pop-up prompt Apple is using with the rollout of new privacy controls. Recently, Apple has issued warning letters to app developers who have used tools like CAID, asking for their removal within 14 days.
Also involved in the China-based effort are business units of accounting firms Deloitte LLP and PricewaterhouseCoopers as well as ratings company Nielsen Holdings PLC, according to documents of the advertising association that were viewed by The Wall Street Journal. Representatives for PwC and Nielsen didn’t respond to requests for comment, and a spokeswoman for Deloitte declined to comment.
Apple’s changes are expected to most affect marketers, such as game makers, that aim to get apps installed on iPhones. Large advertisers such P&G, which can use their own data for advertising, will see less impact, said Aaron Shapiro, former chief executive and co-founder of Huge, a digital ad agency that has worked with P&G and McDonald’s and was acquired by Interpublic Group.
Still, P&G—which has spent years building a formidable data operation—has a lot at stake.
“Advertising effectiveness in digital is all about the data,” Mr. Shapiro said. “Even if this issue is not a problem, they might just be forward-thinking, which is they have to proactively put in place solutions for future clampdowns that are going to happen.”
Apple’s privacy changes are set to upend the digital ad industry and come after P&G has sought for years to carefully target digital ads at would-be buyers. The consumer-goods giant spent $7.3 billion on advertising in the past fiscal year and has long used its hefty ad budgets to push the tech industry for better ways to prove that digital ads reach their intended targets.
P&G marketing chief Marc Pritchard has advocated for a universal way to track users across platforms, including those run by Facebook and Alphabet Inc.’s Google, that protects privacy while also giving marketers information to better hone their messages.
Frustrated with what it saw as tech companies’ lack of transparency, P&G began building its own consumer database several years ago, seeking to generate detailed intelligence on consumer behavior without relying on data gathered by Facebook, Google and other platforms. The information is a combination of anonymous consumer IDs culled from devices and personal information that customers share willingly. The company said in 2019 that it had amassed 1.5 billion consumer identifications world-wide.
China, where Facebook and Google have a limited presence, is P&G’s most sophisticated market for using that database. The company funnels 80% of its digital-ad buying there through “programmatic ads” that let it target people with the highest propensity to buy without presenting them with irrelevant or excessive ads, P&G Chief Executive Officer David Taylor said at a conference last year.
“We are reinventing brand building, from wasteful mass marketing to mass one-to-one brand building fueled by data and technology,” he said. “This is driving growth while delivering savings and efficiencies.”
China is P&G’s second-largest market. The company said in 2017 that it would invest $100 million into its China digital innovation centre, in part to bolster its digital marketing.
Facebook has been among the most vocal opponents of Apple’s proposed changes, which could hurt its core ad business. If users opt out of sharing their info with the social-media giant, for example, the company would lose some of the data it uses to create profiles of individuals for ad targeting. Advertisers say they would also have a harder time measuring the return they get for their ads.
Facebook CEO Mark Zuckerberg has reiterated in recent weeks that the change could make it harder for small businesses to market to customers. He also said it might bolster his own company’s platform, making it a more appealing place to conduct transactions if online advertising in general isn’t as effective.
Reprinted by permission of The Wall Street Journal, Copyright 2021 Dow Jones & Company. Inc. All Rights Reserved Worldwide. Original date of publication: April 8, 2021.
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Food prices continue to rise at a rapid pace, surprising central banks and pressuring debt-laden governments
LONDON—Fresh out of an energy crisis, Europeans are facing a food-price explosion that is changing diets and forcing consumers across the region to tighten their belts—literally.
This is happening even though inflation as a whole is falling thanks to lower energy prices, presenting a new policy challenge for governments that deployed billions in aid last year to keep businesses and households afloat through the worst energy crisis in decades.
New data on Wednesday showed inflation in the U.K. fell sharply in April as energy prices cooled, following a similar pattern around Europe and in the U.S. But food prices were 19.3% higher than a year earlier.
The continued surge in food prices has caught central bankers off guard and pressured governments that are still reeling from the cost of last year’s emergency support to come to the rescue. And it is pressuring household budgets that are also under strain from rising borrowing costs.
In France, households have cut their food purchases by more than 10% since the invasion of Ukraine, while their purchases of energy have fallen by 4.8%.
In Germany, sales of food fell 1.1% in March from the previous month, and were down 10.3% from a year earlier, the largest drop since records began in 1994. According to the Federal Information Centre for Agriculture, meat consumption was lower in 2022 than at any time since records began in 1989, although it said that might partly reflect a continuing shift toward more plant-based diets.
Food retailers’ profit margins have contracted because they can’t pass on the entire price increases from their suppliers to their customers. Markus Mosa, chief executive of the Edeka supermarket chain, told German media that the company had stopped ordering products from several large suppliers because of rocketing prices.
A survey by the U.K.’s statistics agency earlier this month found that almost three-fifths of the poorest 20% of households were cutting back on food purchases.
“This is an access problem,” said Ludovic Subran, chief economist at insurer Allianz, who previously worked at the United Nations World Food Program. “Total food production has not plummeted. This is an entitlement crisis.”
Food accounts for a much larger share of consumer spending than energy, so a smaller rise in prices has a greater impact on budgets. The U.K.’s Resolution Foundation estimates that by the summer, the cumulative rise in food bills since 2020 will have amounted to 28 billion pounds, equivalent to $34.76 billion, outstripping the rise in energy bills, estimated at £25 billion.
“The cost of living crisis isn’t ending, it is just entering a new phase,” Torsten Bell, the research group’s chief executive, wrote in a recent report.
Food isn’t the only driver of inflation. In the U.K., the core rate of inflation—which excludes food and energy—rose to 6.8% in April from 6.2% in March, its highest level since 1992. Core inflation was close to its record high in the eurozone during the same month.
Still, Bank of England Gov. Andrew Bailey told lawmakers Tuesday that food prices now constitute a “fourth shock” to inflation after the bottlenecks that jammed supply chains during the Covid-19 pandemic, the rise in energy prices that accompanied Russia’s invasion of Ukraine, and surprisingly tight labor markets.
Europe’s governments spent heavily on supporting households as energy prices soared. Now they have less room to borrow given the surge in debt since the pandemic struck in 2020.
Some governments—including those of Italy, Spain and Portugal—have cut sales taxes on food products to ease the burden on consumers. Others are leaning on food retailers to keep their prices in check. In March, the French government negotiated an agreement with leading retailers to refrain from price rises if it is possible to do so.
Retailers have also come under scrutiny in Ireland and a number of other European countries. In the U.K., lawmakers have launched an investigation into the entire food supply chain “from farm to fork.”
“Yesterday I had the food producers into Downing Street, and we’ve also been talking to the supermarkets, to the farmers, looking at every element of the supply chain and what we can do to pass on some of the reduction in costs that are coming through to consumers as fast as possible,” U.K. Treasury Chief Jeremy Hunt said during The Wall Street Journal’s CEO Council Summit in London.
The government’s Competition and Markets Authority last week said it would take a closer look at retailers.
“Given ongoing concerns about high prices, we are stepping up our work in the grocery sector to help ensure competition is working well,” said Sarah Cardell, who heads the CMA.
Some economists expect that added scrutiny to yield concrete results, assuming retailers won’t want to tarnish their image and will lean on their suppliers to keep prices down.
“With supermarkets now more heavily under the political spotlight, we think it more likely that price momentum in the food basket slows,” said Sanjay Raja, an economist at Deutsche Bank.
It isn’t entirely clear why food prices have risen so fast for so long. In world commodity markets, which set the prices received by farmers, food prices have been falling since April 2022. But raw commodity costs are just one part of the final price. Consumers are also paying for processing, packaging, transport and distribution, and the size of the gap between the farm and the dining table is unusually wide.
The BOE’s Bailey thinks one reason for the bank having misjudged food prices is that food producers entered into longer-term but relatively expensive contracts with fertilizer, energy and other suppliers around the time of Russia’s invasion of Ukraine in their eagerness to guarantee availability at a time of uncertainty.
But as the pressures being placed on retailers suggest, some policy makers suspect that an increase in profit margins may also have played a role. Speaking to lawmakers, Bailey was wary of placing any blame on food suppliers.
“It’s a story about rebuilding margins that were squeezed in the early part of last year,” he said.
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