By Daniel Newman
The feud between Apple and Facebook is heating up, as Apple turns its attention to protecting the privacy of its users and implementing aggressive measures to increase the bar for platforms to extract user data without their consent.
It won’t happen immediately, but over the next several years, as Apple /zigman2/quotes/202934861/composite AAPL +1.28% deepens its commitment to privacy, ad personalization will decline. Facebook /zigman2/quotes/205064656/composite FB +1.59% estimates that this could lead to a 60% decline in sales from targeted ads using personal data.
As is often the case, this is a tale of two stories, and very different ones at that.
Also by Daniel Newman: This is how the great chip shortage happened — and how it gets solved
Apple is telling a story of deep love and commitment to its customers, a story it has long loved to tell, featuring privacy as fundamental to consumers’ rights. With this comes the Ad Tracking Transparency (ATT) privacy-protection framework from Apple, which rolled out this spring with iOS 14.
Meanwhile, Facebook is sticking its long-told story, featuring Apple as just another greedy mega-corporation with its eyes on profit and its heart set on destroying small businesses while creating even greater dependence on iOS.
Facebook goes as far as to say that Apple is making two sets of rules. One for Facebook, and another for itself — proclaiming Apple won’t follow its own privacy rules in its advertising endeavors on iOS 14.
Facebook isn’t entirely wrong in its assessment of the situation. Apple’s apparent passion for privacy will come with costs. And while Apple somewhat uniquely checks the box of “Love Brand,” it is anything but the lone protagonist in this situation. Just ask Imagination Technology, Qualcomm /zigman2/quotes/206679220/composite QCOM +1.00% and Intel /zigman2/quotes/203649727/composite INTC +1.22% , how shrewd Apple can be when it sees opportunities to enter, expand and win market share.
Privacy takes center stage
As we continue to debate the Apple-Facebook saga, the ongoing turn to privacy is likely going to have a lasting impact on more than just social media and platform giants. Facebook’s claims that ad personalization will harm small businesses will also impact an entire ecosystem of social media sites, whose revenue is largely supported by data-driven ad tech platforms. These platforms lose access to personalized advertising to large swaths of users who opt out of ad tracking in iOS 14.
The list of affected companies includes Snap /zigman2/quotes/205087158/composite SNAP -2.74% , Pinterest /zigman2/quotes/211319641/composite PINS -4.22% , TikTok and Twitter /zigman2/quotes/203180645/composite TWTR +0.47% , to name a few. Alphabet’s /zigman2/quotes/205453964/composite GOOG +1.04% Google Search, to a lesser extent, will also be impacted by this change. All of these companies leverage the IDFA (Identifier for Advertisers) to target advertising. The current benefit of using IDFA is multi-faceted:
User data is collected and able to be tracked to an individual through the IDFA.
Advertisers can more accurately choose whom they advertise to, yielding greater conversions.
Precision targeting and greater conversions lead to higher ad spend, creating a revenue/profit cycle for platforms and advertisers.
As Apple rolls out its ATT framework, this model for optimizing advertising will instantly be impacted, devaluing core revenue streams for all of the companies mentioned above.
Prior to the iOS 14 update, which will explicitly notify users of apps that track their personal information, users did have the ability to opt-out. This wasn’t a simple process, and most had little idea it was an option.
That is the key pivot with the new update. Users will now have to choose to be in or out, and Apple will offer a privacy dashboard for its users to know what apps they are enabling to use their data. Estimates show this could bring the number from about 70% of app users IDFA being available to advertisers to as little as 10% to 15%.