Facebook and Apple are sparring over privacy.
James Martin/CNETA privacy change coming to the software that powers Apple's popular iPhone has prompted a war of words in Silicon Valley.
The iPhone maker will in the coming months roll out an update to its iOS 14 operating system that prompts you to give apps permission to track their activity across other apps and the web. That change may seem small. Lots of apps already track our web activity through default settings we accept when we install them.
Facebook, however, has been fuming about the change, which threatens the source of its $86 billion in annual revenue: targeted ads. The social network has waged a months-long campaign against Apple, running full-page ads in national newspapers and testing pop-ups inside the Facebook app to encourage users to accept its tracking. It's also alleged that Apple's changes are designed to help the iPhone maker's own business, rather than protect consumer privacy.
"Apple may say that they're doing this to help people, but the moves clearly track their competitive interests," Facebook CEO Mark Zuckerberg said in January during the company's fourth-quarter earnings call. Apple CEO Tim Cook says the change is rooted in the company's belief that "users should have the choice over the data that is being collected about them and how it's used."
The dispute underscores a fundamental difference between the tech giants: how they make money. Apple sells smartphones and laptops and takes a cut of fees charged to app developers. Facebook sells ads that it can target precisely based on the trove of data it collects on its 2.8 billion monthly users. Those business models inform their approach to privacy.
Here's what you need to know about the fight between Apple and Facebook:
I've got the basic idea. But would you go back to the beginning?
Sure. It's complicated and it's been a slow boil. Apple said at its annual developers conference in June that it would introduce a feature to iOS that required users to give apps permission to track them across various apps and websites. Like we've said, this is a common practice, but users are often unaware of it because it's buried in the terms of service or privacy policies. Who reads those?
With the iOS update, iPhone users will see a pop-up that explicitly says an app wants to track them. App developers can use this pop-up to explain how user data will be used. Facebook, for example, uses this data to show people personalized ads.
The pop-up will also give users a chance to opt out of tracking. Many probably will.
"Tracking refers to the act of linking user or device data collected from your app with user or device data collected from other companies' apps, websites, or offline properties for targeted advertising or advertising measurement purposes. Tracking also refers to sharing user or device data with data brokers," Apple explained to developers in a blog post about the iOS 14 updates.
How could this change affect me?
Depends how often you look at advertisements. If you don't deal with them very often, you probably won't notice much of a change by opting out of tracking.
If you rely on Facebook's advertising to direct you to services and products you buy, expect the ads you see to be less relevant if you opt out.
The prompt will also give you a sense of which apps are tracking you across other apps and websites to serve you ads.
How did Facebook respond to the upcoming change?
Facebook was clearly unhappy with Apple, and the company made that known publicly. The social network ran full-page newspaper ads in The Wall Street Journal, The New York Times and The Washington Post arguing that Apple's update will harm small businesses and consumers. The social network's claims have been challenged by academics. (More about that below.)
The social network also launched a website where small businesses could share their stories. The page includes videos from small business owners who support personalized ads and encourages others to tell their story by using #SpeakUpforSmall. Many of these small businesses say they rely on social media ads to attract more customers.
Watch this: Facebook slams Apple's privacy changes, FTC requests...
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Facebook's arguments also reflect its own interest in the effects of the change, which will surely weigh on its revenue. During its fourth-quarter earnings call, Zuckerberg repeatedly revisited the topic and complained about Apple.
"We have a lot of competitors who make claims about privacy that are often misleading," he said. He added that Facebook, which has its own messaging service, Messenger, and which also owns WhatsApp, sees Apple as a competitor because of the popularity of iMessage.
Dan Levy, who runs Facebook's ad business, said in a blog post that Apple's policy change is "about profit, not privacy." He said the iOS change would force some apps to turn to in-app purchases and subscription fees, from which Apple can take a cut of up to 30%. (Apple launched a new program earlier this year to reduce the commission to 15% for small businesses with proceeds of up to $1 million per year.)
Facebook has a poor track record when it comes to user privacy, and it seems unlikely that users will give it permission to track them. The company's reputation for protecting privacy was tarnished by the 2018 scandal involving Cambridge Analytica, a UK political consulting firm that harvested the data of up to 87 million users without their permission.
Zuckerberg defends Facebook's business model, saying ads allow the social network to offer the site to users for free. "If we're committed to serving everyone, then we need a service that is affordable to everyone," he said in a 2019 op-ed in The Wall Street Journal.
What's Apple's argument?
Apple says its changes give users more control over their data and transparency into what is collected.
"If a business is built on misleading users, on data exploitation, on choices that are no choices at all, it does not deserve our praise," Cook said during a speech last month in a thinly veiled jab at Facebook. "It deserves reform."
The view isn't new. In the wake of the Cambridge Analytica scandal, Cook told tech journalist Kara Swisher and MSNBC's Chris Hayes that "if our customer was our product, we could make a ton of money. We've elected not to do that."
Is Facebook overreacting?
It depends on who you ask. Facebook says in its blog post that "without personalized ads powered by their own data, small businesses could see a cut of over 60% of website sales from ads."
The Harvard Business Review says Facebook's findings are "misleading" and suggests the impact will be modest. "These customers would have generated high revenues anyway," the Review found. "That's why they were targeted in the first place. So it would be a mistake to conclude that these customers spent more because of the personalized ads."
Cook has also pointed out that Facebook can still track users. It just needs to get their permission first.
Facebook isn't alone in cautioning that the changes could harm their ad sales. Snapchat expressed support for Apple's changes, but CFO Derek Andersen said during its earnings call that the change represents "a risk of interruption" to demand for advertising. Twitter suggested in its fourth-quarter shareholder letter that the changes could have a modest impact on its performance but didn't elaborate.
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