A screen shot of Apple's new tracking setting from the Tik Tok app.

Starting this week, a new Apple privacy setting will let consumers conduct more of their online lives without the tech industry peering over their shoulders.

The setting will sharply limit the ability of apps to track what you do online and to share that information with others. That will disrupt the way many developers make money, and could end up changing the mix of apps you see in Apple's app store. It will also lead to fewer ads that are tailored specifically to your likes or activities. 

The new tracking setting is being implemented in the newest iPhone operating system, iOS 14.5. It requires apps to ask iPhone users for permission before collecting and sharing data for targeted advertising.

That's a big shift in the way mobile apps collect data on their users, and it promises to cut off a key way consumer data is monetized on the Apple platform. 

Once the new OS is installed on your phone, you'll see a prompt when an app wants to track you, with two choices: “Allow” or “Ask App Not To Track.” Apps that exchange your information with advertising companies or data brokers without permission will risk being banned from the App Store.

How to Use the New No-Tracking Setting

  • You'll see a pop-up similar to the one pictured above. Just tap "Ask App not to Track" or "Allow."
  • Say no if you want a bit more privacy. The app won’t be able to collect a special ID number linked to your phone that's used to tie together all of your behavior on various apps, combine it with other information about you, and target you with ads.
  • Allow tracking if you like targeted ads, want the app to make more money, and don't mind companies trading information about you. 
  • You can tell your phone to say no automatically and avoid the pop-ups. Open your phone settings, select "Privacy," tap "Tracking," and switch the toogle off for "Allow Apps to Request to Track."
  • Apps get a few lines in the pop-up to explain why they want to track you, and they may pitch you even more details before the new setting shows up.
  • You may not see the pop-ups immediately. Apps are allowed to choose when they show it to you, but they aren't allowed to track you until you say yes.

See below for more on what the setting does on a technical level.

This new iPhone tracking setting will affect your personal data, but the implications are far bigger. The way Apple designed the setting could disrupt many companys' business model and alter what kinds of ads and apps you see online. It's also a major strike in an ongoing turf war between Apple and other tech giants, such as Facebook and Google.

More On Privacy

 “Our goal is to create technology that keeps people’s information safe and protected. We believe privacy is a fundamental human right, and our teams work every day to embed it in everything we make,” said Craig Federighi, Apple’s senior vice president of software engineering, in a January blog post explaining the upcoming change. 

The new tracking setting is part of an Apple initiative called App Tracking Transparency, introduced last June, which includes other updates such as “privacy nutrition labels” that detail how apps use your information.

The new do-not-track option could help transform the mobile advertising business. "It's an earthquake. It will be a tectonic shift in the industry,” says Eric Seufert, an independent analyst and owner of Mobile Dev Memo, an app development trade publication.

Some privacy advocates are applauding the move. "We may be at the beginning of a sea change,” says Justin Brookman, director of privacy and technology policy at Consumer Reports. “With platforms increasingly cracking down on tracking and new laws coming into play, the data free-for-all is hopefully coming to an end.”

However, tracking isn't going away entirely. Apple itself collects a great deal of information on how consumers interact with apps and ads on its devices, and the company will be providing more of that data to advertisers, with certain privacy protections.

How the iPhone Privacy Setting Works

The tech industry collects massive sets of data about consumers from a variety of sources. To tie it all together, companies use a number of identifiers, unique strings of letters and numbers linked to your devices, accounts, and behavior online.

Apple’s tracking setting controls whether apps can access a special identifier called the IDFA, or Identifier for Advertisers, which Apple provides for mobile apps to track and monetize your activity.

App developers, ad networks, and data brokers can use that identifier to pull together all the various things you do into a profile for advertising purposes. This can help them determine that someone using a cooking app is the same person who's been searching for skin care tips online, in order to trigger an ad for facial cleanser. The ID is also tied to information such as the location data that some apps sell, so the marketing industry knows that this is the same person who goes to a particular supermarket on Saturday mornings.

Additionally, developers who advertise their apps use the IDs to keep track of who downloads their products after seeing ads for them.

You’ve actually been able to go into your phone settings and stop apps from collecting the IDFA for years, using a setting called Limit Ad Tracking, but privacy conscious users had to know about the option and go find it.

Similarly, Google offers its own control for the advertising ID on Android phones—the setting is called “opt-out of ads personalization” or “opt-out of interest-based ads,” depending on your phone. But just like with iPhone owners, most Android users never seek the setting out. 

The new iPhone control brings the decision about tracking front and center, using strong language. It's likely to push many people toward the more private option, according to both marketers and privacy experts.

Apple is trying to ensure that app developers don't use other tricks for tracking iPhone users. Your phone can generate lots of other IDs that could also be used to track individuals, and beyond those IDs the tech industry has devised additional techniques to monitor people's activities across apps and websites. But if you say no to data sharing using the new setting, iPhone apps are forbidden from turning around and tracking you in other ways.

Many app developers will feel an incentive to circumvent the rules, according to privacy experts, and some organizations are already discussing workarounds. “The ad industry is going to go down kicking and screaming,” CR’s Brookman says. But developers who break the rules could find their apps banned from the app store. 

“This policy applies to tracking writ large,” and Apple has a strong incentive to enforce it, Seufert says.

But It's Not the End of All Tracking

Commonly cited estimates suggest 80 to 90 percent of users will choose to block the tracking with the new setting. That's a massive change. Just about 25 percent of people used Apple's older Limit Ad Tracking control, according to Adjust, an ad technology company.

However, Apple collects plenty of data about iPhone users, and that won't slow down as the company makes it easier for consumers to block the apps from collecting data. Apple helps app developers harness that data using its own, little-known advertising network.

Developers spend a lot of money advertising their apps, and a great deal of that gets spent on promotion in the app store itself. Tamping down the IDFA makes that app store advertising even more appealing, and to sweeten the deal, Apple is going to start sharing more data about user behavior with app developers.

Apple says it won’t provide information about individual users, but instead deliver metrics about how certain demographics and groups of people are responding to developers’ ads, more data than the company has shared in the past.

However, that program won't provide app makers and their business partners all the information they want about consumers. And some other tech companies are reacting strongly.

When Apple announced the new setting was coming. Facebook argued in newspaper ads and blog posts that the enhanced privacy protection would hurt small businesses that rely on targeted ads to market their products and services. Seufert predicts the change could cost the Facebook a 7 percent drop in revenue, amounting to billions of dollars.

Developers may look for greener pastures and spend more time making apps for Android. Google hasn’t signaled any updates to its Android privacy settings, but the company has announced its own sweeping privacy change that has interesting similarities to Apple's move.

Google says it will soon block third-party cookies in its Chrome browser, while providing its own data about how groups of users behave. That will likely consolidate Google’s power in the advertising market.

“Apple and Google are redefining privacy, but they’re doing it in a way that benefits themselves,” says Casey Oppenheim, co-founder of data security firm Disconnect.

Less Data Means a Different Internet

A move toward more privacy will have some big ramifications. For one, you may start to see different kinds of advertisements. That shift will be far more apparent in mobile apps, but less data floating around will affect the ads you see on other parts of the web, too.

Instead of targeted ads based on who you are and what you do online, you’ll probably see more ads based on the content you’re looking at, which are called contextual ads—for example, an ad for running shoes in a weight loss app. “Contextual advertising becomes a lot more attractive,” Seufert says.

Advertisers pay less for contextual ads, though, which means some app developers will have a harder time making money. That will mean a shift in the business model of iPhone apps.

“You'll see fewer low-quality apps with questionable monetization channels,” says Zach Edwards, a privacy researcher and founder of Victory Medium, a digital consulting firm. Gaming will likely be particularly affected, an arena where developers often pump out clones of popular apps filled with tracking technology and ads to try and make a quick profit. You may even start seeing more premium paid apps and content in the long term.

Advertising insiders say Apple's new tracking setting is a win for consumer privacy, but it could come at a cost. “Ad targeting fuels the open internet. It's what makes apps free,” Seufert says. If Apple’s efforts are truly successful, you may have to start breaking out your wallet more often.