Top Insights
- Two big tech heavyweights are going at it over privacy
- After their relationship has allegedly been fraying for years, Tim Cook and Apple dropped the hammer on Facebook and Zuckerberg with new privacy features in Monday’s iOS 14.5 update
- “App Tracking Transparency” allows users to select which apps they want to share out-of-app data with
- This is an incredibly savvy move by Apple on two levels:
- they can take a chunk out of Facebook’s ~$84B annual ad revenue
- they can potentially alleviate congressional heat on themselves while turning the heat UP on Facebook
- Facebook’s best chance to fight back: give users an option to pay ~$100/year for access to an ad-free Facebook, Instagram, and WhatsApp with no data tracking
What happened on Monday, 4/26:
- Apple released its long-awaited iOS 14.5 update, which includes a new feature called “App Tracking Transparency” that allows users to select which apps they want to share out-of-app data with
- This means that if you choose not to share your data with Facebook, they won’t be able to track what you do outside of their apps and target you with ads based on that data
- Why is this so important for Facebook?
- Facebook (and companies like it) follow people’s online habits as they click on other programs to feed them highly targeted ads
- their ad platform relies on massive data sets gathered from other apps
- they don’t have “intent” behind searches (like Google does), so it’s more difficult for Facebook to refine their ads based solely on in-app data
- 98% of their revenue is ad-based
- New York Times reporters Mike Isaac and Jack Nicas published an article titled “Breaking Point: How Mark Zuckerberg and Tim Cook Became Foes” detailing the fraying relationship and escalating tensions between the Apple and Facebook CEOs
Why now? Escalation of extreme philosophical differences
After the 2016 election meddling and the 2018 Cambridge Analytica scandal, a disturbed Tim Cook began distancing Apple from Facebook, first by adopting a new corporate motto: “Privacy is a fundamental human right.”
We believe users should have the choice over the data that is being collected about them and how it’s used. Facebook can continue to track users across apps and websites as before, App Tracking Transparency in iOS 14 will just require that they ask for your permission first. – Tim Cook on Twitter
- Cook and Apple want customers to pay a premium for incredible products and a more private, safer version of the internet
- Steve Jobs always hated advertising, so that feeling is entrenched in Apple’s DNA
“Apple made unilateral decisions without consulting the industry about a policy that will have far-reaching harm on businesses of all sizes,” – Facebook product director via NYT
- Zuckerberg and Facebook want an open internet where ad-based platforms are free with users “paying” by allowing their data to be sold
- Facebook is concerned app tracking disclosures will hurt their business and others so they took out a full-page ad in the New York Times saying Apple’s privacy changes would hurt small businesses
- Zuckerberg also said that Apple’s decision may strengthen their position because Facebook already has massive data sets, which newer companies won’t be able to build
- Essentially, he’s saying it would act as a form of regulatory capture
Breaking down the numbers
- Facebook market cap today: $861B
- $84B, ad revenue in 2020 (~98% of total revenue)
- US Facebook users: 190M (via Statista) as of Feb. 2021
- Apple market cap today: $2.2T, ~2.5x greater than Facebook
- $137B in iPhone sales in 2020 (~200M iPhones sold globally every year)
- US iPhone users: 113M (via Statista) as of March 2021
- If half of all US iPhone users elected NOT to share data with Facebook after Apple’s privacy update… what happens to Facebook’s revenue and market cap?
Facebook’s big fix
- Zuckerberg has one silver bullet: allow users to pay ~$100/year for an ad-free, privacy-focused version of Facebook, Instagram, and WhatsApp
- This would make them appear more favorable to Congress while also allowing them to be less dependent on iPhone users
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