Ten-year conflict over web enterprise

Tim Cook, Apple’s CEO, gave an insight into the business practices of big tech competitors during a passionate speech at a data protection conference in Brussels in October 2018.

“Billions of dollars change hands every day and countless decisions are made based on our likes and dislikes, our friends and families, our relationships and conversations. Our wants and fears, our hopes and dreams,” said Cook. “These scraps of data, each of which is harmless enough in itself, are carefully compiled, synthesized, traded and sold.”

Although Cook didn’t call Facebook by name, it was clear that Mark Zuckerberg’s company was one of the targets. Facebook built an empire by gathering data from its users to inform its targeted ad system. Revenue was over $ 20 billion last quarter, and nearly 99% of that came from advertising.

The speech was just one in a series of bumps Cook and Zuckerberg did to each other for nearly a decade. The tension between Facebook and Apple extends into the childhood of the iPhone and the pursuit of control over the next wave of computers.

For example, in a 2014 cover story in Time, Zuckerberg criticized Apple and Cook’s stance on data protection:

“One of the frustrations I have is that many people seem increasingly to equate an advertising business model with a mismatch with your customers,” Zuckerberg said. “I think it’s the most ridiculous concept. What do you think, because you’re paying Apple, that you’re somehow consistent with them? If you were consistent with them, they would make their products a lot cheaper.”

The war of words over the past decade underscores the fundamental disagreement between two giants about how business should be done on the Internet.

According to Facebook, the Internet is the Wild West with a multitude of competing platforms offering innovative services for free. You may not pay them with your money, but you do pay by allowing your information to be tracked and packaged so advertisers can toss things you want to buy right in front of your face when you switch between devices and services.

In Apple’s view, the internet is just an extension of the personal computing revolution that the company helped shape in the 1980s, and your phone is the most personal device of all. You should know what companies will do with the information collected over this phone before disclosing it.

A ten year struggle

Facebook CEO Mark Zuckerberg appears on a monitor behind a stenographer as he testifies from a distance during the Senate Committee on Commerce, Science and Transportation hearing on Capitol Hill October 28, 2020 in Washington, DC

Michael Reynolds | Pool | Getty Images

The war of words culminated last week with Facebook’s two-day campaign against Apple. The ads are known as foul of an upcoming iPhone operating system change to alert you when an app is collecting your personal information such as location and browsing history, which companies like Facebook use to target their ads. The warning gives you the option to block tracking before using the app.

Facebook claimed that Apple’s move is aimed at crushing small businesses that rely on these targeted advertisements to reach their customers online. It also warned – without evidence – that Apple’s move would force app makers to stop offering their customers free, ad-supported apps. Instead, they would have to charge customers through digital subscriptions or other fees. It’s convenient for Apple to shorten transactions through the platform, including purchases or subscriptions that users make through apps they download from the App Store.

Facebook painted the wrong picture of Apple in the campaign: Here is a company that has complete control over the rules of its platform and is making a change to force small businesses to adopt a paid model that Apple will cut back on. Facebook delivered this news in newspaper ads, blog posts, Instagram posts, and a dazzling website with small business owners using Facebook for advertising.

Apple has pushed back Facebook’s allegations. The company said the popup you see in apps is only there to let you know when and how an app wants to track you, not to ban tracking altogether. App makers like Facebook also have pop-up and other screens to explain why they should allow tracking. Apps can still collect all the data about you that they were before. However, you need to give them permission to do so on purpose. According to Apple, it’s just the latest in a series of privacy-conscious features that products have added over the years.

A mockup of the pop-up window iPhone users see before using an app that tracks their data. This image was provided by Apple.

Apple

The roots of the dispute go back more than a decade.

In the infancy of the iPhone, there was a lot of debate about what the mobile internet should look like. Would it look like the internet on a desktop pc where people mostly used a mobile web browser to visit websites, all based on openly published standards? Or would users switch between a collection of “apps” for internet-connected software to give more control to the companies that owned the mobile platforms?

Facebook, which was born on the open internet, favored the earlier option, pushing for massive web apps written to new standards. But it lost the battle in large part because Apple introduced the app model as the standard way to perform tasks on the iPhone and insisted that its own app store was the only legal and easy way to find and install those apps . (Google played both sides intelligently, invested in the mobile Android platform and its own Google Play app store, expanded the Chrome web browser and exerted influence on web standards.)

When the future became clear, Facebook made attempts to build its own smartphone so it wouldn’t have to give Apple or Google so much control. The device never saw the light of day and instead, Facebook developed a software “skin” for Android devices that had its own services. That was a flop too.

Today, Facebook lays the foundation for owning the next major computing platform so that another company’s rules don’t have to be followed again. Because of this, products such as digital glasses are currently being developed, which the company is expected to launch in 2021.

In the meantime, Facebook has to deal with Apple.

Facebook’s final is unclear

It is ironic that Facebook accused Apple last week of abusing its market power just days after the FTC and a group of attorneys general sued Facebook for alleging antitrust violations and recommending that the company be wound up.

Additionally, Facebook’s argument has made its own impact on the digital ad market clear. Small businesses wouldn’t have to rely on Facebook as much if Facebook had a viable competitor for those companies to advertise through.

Apple faces similar government scrutiny, even though there have been no formal antitrust lawsuits. In October, the House of Representatives Antitrust Subcommittee released an epic report on the “monopoly power” of the four largest technology giants claiming that Apple was using control of the App Store to suppress potential competitors.

Both companies have denied claims that their companies violated antitrust laws. But Facebook has now created an environment in which two giants, subject to antitrust scrutiny in the US and around the world, are barbs that are more guilty of abuse of market power.

It’s also hard to tell which Facebook endgame is here. Apple won’t be tapping a major privacy feature for the iPhone, and Facebook won’t risk losing millions of users by pulling its apps from the App Store.

Steve Satterfield, Facebook’s director of privacy and public order, told CNBC this week that the company will continue to abide by Apple’s new rules and that there is no chance Facebook will overtly violate them over a lawsuit like Apple’s and Fortnite’s “Developers of Epic trigger games are now involved. (Facebook said last week it would back Epic in its lawsuit against Apple.)

“Our goal is simple,” said Satterfield. “We want Apple to listen. You dropped this policy back in June without meaningful consultation. … Given the wide-ranging implications, it’s important that companies can plan for this.”

It’s also difficult to buy Facebook’s stated argument against the popup. For years, the company has argued that its users prefer the personalized and targeted ads that data collection enables, as opposed to random ads that are served to wide audiences without targeting. If so, users should have no problem turning on tracking when Apple shows them the popup.

In August, Facebook undercut that argument when it released data from a study that found enough people would turn off tracking to cause a 50% drop in sales through its third-party ad networks. The company also warned investors earlier this year that its own earnings would take a hit if Apple begins enforcing the tracking tool.

Facebook said it would prefer to use its own privacy checking tools to help users restrict the data to share, rather than the notification Apple shows you.

Apple said its customers want more privacy controls in the iPhone. After years of criticizing Facebook’s business practices, the company has routinely added privacy features to help curb the abuses detected on its devices.

“Look what we did with the controls we built in,” Cook said in an interview with Axios in 2018 when asked why companies like Google and Facebook are on the market despite his criticism of their practices iPhone to flourish. “We have private web surfing. We have intelligent tracker prevention. We have tried to find ways to help our users throughout the day.”

It wasn’t just Apple fighting Facebook’s arguments. Groups of small business advertisers who also wanted to protect Facebook took the hashtag #SpeakUpForSmall from Facebook on Twitter and filled it with complaints about the lack of attention they received on the day the campaign launched compared to Facebook’s larger advertisers.

And Bloomberg released a report earlier this week full of similar complaints from advertisers about the company’s automated ad buying tools. BuzzFeed posted a story Tuesday quoting Facebook employees as being as confused about the anti-Apple crusade as the small business advertisers.

Facebook spokeswoman Ashley Zandy told CNBC that the company has heard of many supporting companies and has allowed employees to speak freely and question corporate strategy.

“I think we saw a lot of balanced and nuanced coverage of the announcement,” said Satterfield. “I think we’re happy.”

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