Wednesday, June 9, 2021
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Apple and Facebook don't get along, but they're going to have to learn to live together
Apple (AAPL) doubled down on its big privacy push this week, rolling out changes making it tougher for digital advisers to track users in Safari and enabling iPhone users to know about the data that apps are collecting on them and where that data is being shared.
While the latest changes could benefit users interested in privacy, they will also hurt companies that sell targeted ads and a certain social network that made over $25 billion from advertising in the first quarter of 2021 — Facebook. The move came the same day Facebook (FB) CEO Mark Zuckerberg criticized Apple for the 30% fee it charges developers on its App Store.
This latest blow could cool the already frosty relationship between Zuckerberg and Apple CEO Tim Cook, notorious foes with divergent views on online privacy. Here’s the thing neither company wants to admit, though: they need each other.
“It's in both of the companies’ best interests to find a way to work together,” explained Stern School of Business professor Arun Sundararajan.
Apple needs to keep Facebook's nearly 3 billion monthly active users happy by ensuring the social network's apps work on their iPhones. On the flip side, Facebook needs to play well with Apple to ensure it continues to show up on the company’s App Store, Sundararajan added.
Either way you cut it, the companies are going to have to learn to work together if not as friends, then at least as frenemies.
Apple’s privacy updates will smack advertisers and Facebook
Apple and Facebook didn’t always hate each other. But the dynamic between the two changed after the Cambridge Analytica scandal, which saw the Facebook data of tens of millions of users misused by a political consultancy working to elect former President Donald Trump in 2016.
Since then, Apple has made privacy a major selling point of the iPhone, and Cook and Zuckerberg have repeatedly taken shots at each other in interviews and speeches.
Among the many privacy announcements Apple made at WWDC, its developers conference this week, two will hurt advertisers and Facebook: an IP masking feature for its new iCloud+ subscription service, and its so-called app report card.
The IP masking feature will allow you to send your internet traffic through two web relays that prevent websites from seeing your IP address and exact geographic location.
The app report card, which doesn’t require a subscription, will give users information on how often their apps are accessing things like their location or microphone, as well as what third-party websites the apps are sharing data with. That could drive some iPhone users to delete apps that suck up more data than they’d like, which would further hurt advertisers.
“In some cases very sophisticated advertising workflows are going to have to be overhauled, or retired and stuff, so it will hurt those advertisers,” explained Gartner senior research director Eric Schmitt. “Whether or not it hurts Facebook, the logical answer would seem to be yes.”
While many people believe Facebook sells user data, that’s not exactly true. The social network vacuums up as much data as possible to allow advertisers to target specific audiences. If you own a bike repair shop in Brooklyn, for instance, Facebook’s knowledge of where people live, their interests, and age, gives you the ability to purchase ads that reach potential customers.
But Facebook doesn’t just collect information from its own apps — it also gathers data from other third-party websites and apps. Apple’s App Tracking Transparency (ATT), an existing feature that allows users to choose whether apps can track them and share data, has already hurt Facebook’s ability to gather that information.
“Facebook's ability to harvest that data in particular from other iOS apps...is greatly impacted,” Schmitt said.
Facebook isn’t taking these changes lying down
Recognizing that Apple’s changes threaten its livelihood, Facebook has done everything it can to paint the Cupertino, California-based company as the bad guy.
On Monday, just hours before WWDC kicked off, Zuckerberg called attention to the 30% fee the tech giant takes from sales of apps purchased through its App Store, which has spawned an antitrust suit from “Fortnite” maker Epic.
“To help more creators make a living on our platforms, we're going to keep paid online events, fan subscriptions, badges, and our upcoming independent news products free for creators until 2023,” Zukerberg wrote in a Facebook post. “And when we do introduce a revenue share, it will be less than the 30% that Apple and others take.”
Apple can’t drop Facebook, and Facebook can’t drop Apple
Despite this war of words, Apple can’t just drop Facebook. Doing so would not only anger Facebook users, but it would also draw the attention of antitrust regulators who are watching the iPhone maker’s App Store policies for any sign it applies them arbitrarily.
Facebook, meanwhile, can’t stop working with Apple, because iOS customers, Sundararajan said, are the most profitable for advertisers. And with most Facebook users coming from mobile devices, losing iOS would be a huge blow to Facebook’s bottom line.
While Facebook and Apple are unlikely to become best friends overnight, the CEOs may eventually have to thaw their cold war so the two tech giants can work together.
By Daniel Howley, tech editor. Follow him at @DanielHowley
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