Apple’s new update will affect Facebook’s revenue
There is an old Zen koan that queries possible outcomes when an irresistible force meets an immovable object. The world may be seeing a digital version, as giants Apple and Facebook get into a public face-off. The outcome will impact digital advertising, and revenue models. Apple will roll out an update, iOS14, to iPhones and iPads in early 2021. This will alert users when they are being tracked by any app, and give them the ability to block such tracking, or allow it if they so choose. Apple has already released a new feature, Privacy Labels, in its App Store. This label lists how every specific app running on iOS collects and uses user-data. In a response to the proposed privacy tracking control, Facebook has taken out full-page advertisements criticising Apple. In its ads, the social network said it was campaigning on behalf of small businesses. It stated 44 per cent of small businesses had increased the use of personalised ads during the pandemic. It also claimed small business advertisers would see a drop of 60 per cent in sales revenue per advertising dollar spent, if personalisation stopped.
Apple explains its position thus: “Users should know when their data is being collected and shared across other apps and websites — and they should have the choice to allow that or not.” It has also pointed out that “App Tracking Transparency in iOS 14 does not require Facebook to change its approach to tracking users and creating targeted advertising, it simply requires they give users a choice”. However, Facebook, which generated over 98 per cent of its 2019 revenues of $70 billion from advertising, sees this as a big threat. If users opt out, it becomes hard for Facebook to learn browsing history. A large part of Facebook’s ability to micro-target ads depends on efficient tracking of its users across other websites, and the analysis of browsing patterns. Facebook also accused Apple of having a profit motive in that it would prefer to push users towards a subscription model, away from the model of free services supported by targeted advertising, which Facebook and many others use. It is true Apple has little ad revenue and plenty of it from selling apps via its App Store.
However, it is also true that Apple has generally been privacy-conscious. Apple devices and the iCloud are encrypted to the point where law-enforcement officials have complained about difficulty of access. So giving users a chance to secure their browsing history is consistent with Apple’s philosophy. Privacy advocates have welcomed the concept. These controls would, however, have to be studied in the context of the European Union’s new Digital Markets Act and Digital Services Act. These Acts introduce new rules for digital platform holders to ensure fair access, and to protect the fundamental rights of users including privacy. Personal data privacy is sacrosanct under EU regulations like the General Data Protection Regulation (GDPR). But Facebook may argue Apple’s new move hinders its access to the iOS platform. The GDPR stance has generally been that users should have control over personal data, superseding commercial considerations. Most Apple users also use Facebook. Moreover, the Apple user base has a higher net worth than the average Facebook user. If a significant percentage do block tracking, it will surely impact the personalised ad model. This will not be a bad thing, given an over-reliance on mining personal data, which can be misused in many ways.