Tech privacy fight a threat to businesses
As a thirdgeneration coffee roaster and a coowner of Henry’s House of Coffee in San Francisco’s Sunset District, Hrag Kalebjian has been working to bring the business into the internet age while keeping it rooted in his family’s Armenian identity.
“This is not just a business for me, it’s part of my heritage,” said Kalebjian, who owns the cafe with his father, Henry.
The pandemic has been hard enough, forcing the store to close its cozy indoor space and instead focus on togo orders and selling its signature powdery Armenian grounds online. While the cafe’s business is down by more than a third, online sales have shot up during the last year.
“If it wasn’t for the online business, I’d be crushed,” the younger Kalebjian said.
But now the family could be facing another challenge, one that places the neighborhood coffee shop in the middle of a battle over privacy and advertising between Apple and Facebook.
A fracas erupted between the two tech titans late last year over Apple’s plans to prompt users to opt in or out of sharing data with apps like Facebook that can be used to track people’s activity on its apps and other sites. Right now Facebook users can opt out but aren’t automatically prompted to do so. That will change when Apple implements changes to its operating system in the spring.
Facebook uses the information it collects to help businesses like Kalebjian’s find and market themselves to more receptive audiences. Kalebjian targets his Facebook ads — about $8,000 worth each month — to people whose online presence indicates interest in his coffee, culture or similar topics.
“The challenge opting in with customers is if they see something on their screen and think Facebook wants to share my data, they’re probably thinking ‘Hell no!’ ” Kalebjian said. “As an advertiser myself, it becomes a lot harder to filter that data because the customers on the other end is blocking that.”
The new feature is part of Apple’s strategy to position itself as a champion of individual user privacy. The company’s CEO, Tim Cook, has talked about other companies’ data collection practices as something Apple would never do, staking a userfocused privacy claim difficult to match for companies who thrive on monetizing user data through advertising.
Apple did not respond to The Chronicle’s emailed request for comment.
Facebook has responded to the expected changes from Apple by placing the focus on small businesses and taking out full page ads in publications last year to make the case that lesstargeted ads will mean less revenue for small shops already teetering because of the pandemic.
But Facebook also stands to lose revenue because of the changes, although how much isn’t certain. In a blog post from December, the company said that it expected the change to hurt its ad business, but that the businesses who rely on it will suffer more.
More recently, the company launched a campaign underscoring the connection between personalized ads and small and mediumsize businesses. As part of that effort, the company is waiving some fees for some businesses and making it easier for those shops to advertise on the site and make marketing plans.
That initiative, called Good Ideas Deserve to Be Found, is part of the company’s long running support for small businesses, according to Michelle Klein, vice president of global customer marketing at Facebook.
“The last number of years, we’ve had a very concerted effort around the world to invest in a range of small businesses,” Klein said, pointing to training and events run by the company to help businesses reach a wider audience.
Facebook has insisted that privacy and targeted ads are not mutually exclusive, but some researchers disagree.
“Dealing with privacy, in the case of Facebook, is against their business model,” said Ahmed Banafa, a San Jose State University professor who studies social media and cybersecurity.
Increased privacy measures for Facebook means, “You are telling them to make less money,” he said. Facebook would likely find other ways to track users for advertising purposes if many people choose to opt out, Banafa added.
Some of those changes are already under way. Google announced Wednesday that it will stop targeting ads based on individuals’ browsing history. “Advertisers don’t need to track individual consumers across the web to get the performance benefits of digital advertising,” David Temkin, the company’s director of product management, ads privacy and trust, wrote in a blog post.
Lourdes Turrecha studies privacy law at Santa Clara University School of Law and said apps like Facebook have not always been transparent about the data they gather on people and how they use it.
“Privacy is one of these things that creates a competitive advantage for (Apple),” Turrecha said, adding that a focus on privacy increases trust in Apple products and helps sales.
Facebook has also argued the move by Apple will drive more traffic to the company’s App Store, resulting in increased revenue for the computer maker.
Despite the advertising challenges faced by businesses like Henry’s House of Coffee, the focus on small businesses could be one positive outcome from the clash between the companies, according to Banafa.
Back in the Sunset, Kalebjian is grappling with the changes. “At the highest high level, I absolutely value my privacy,” he said, adding that he is a fan of Apple and its products, but that the new feature will likely mean increased costs for him.
That conflict is in part driving him to find other ways to connect with customers old and new. Kalebjian said he uses email marketing software to promote his products and is trying out a new texting service to connect with customers, along with advertising on Facebook and Instagram.
To him the digital tools are a continuation of what his family has done for decades. “That’s what my dad has been doing for 30 years,” he said. “Building relationships.”