How tech giants swing between villain and hero
Apple poses as customer privacy leader with its new anti-tracking app
This week you’re the villain, next week the hero. That must be how Apple executives felt on Wednesday as they reported a record March-quarter revenue of $89.6bn (about R1.2-trillion), up a massive 54% on the previous year. Shareholders were unimpressed, as the stock price softened a little, although still near its all-time high.
The shadow of last week’s US Senate hearings into Apple’s alleged abuse of market domination via its App Store may well have been weighing on their minds.
The saga of how its new AirTags were brought to market in the wake of attempting to crush Tile, its rival in the object-tracking category, may well have cast a shadow.
However, analysts were probably more concerned about the impact on revenues of an entirely different Apple move, and one that casts it as the hero of the story.
This week, Apple released the latest update to its iOS operating system, namely iOS 14.5. Normally, interim releases contain bug fixes and tweaks. This one came with a feature that was long expected but still sent shockwaves through the tech industry.
No, not the option to unlock your phone while wearing a face mask. Which is a real thing. The new feature is called App Tracking Transparency and it is designed to prevent third-party apps from tracking users across the web.
Already, when one downloads a new app from the App Store, a prompt appears asking permission for the app to track one’s online activity. Now, it will also apply to existing apps once one has upgraded to 14.5.
Suddenly, stalking-hungry ad-dependent companies see their revenues flash before their eyes.
Naturally, Facebook has been bleating loudly since the feature was announced last year, mounting a vigorous campaign against Apple. It has even positioned itself as the champion of small business, claiming that its tracking activity helps businesses target customers better.
Not every small business would agree, but Facebook’s pages and marketplace features have proven to be the birthplace for many entrepreneurial ventures.
This week, Facebook took the war to a new battlefield, sending a memo to advertisers to advise them how they would be affected. Mainly, said Facebook, they would lose the ability to target an advertisement with an estimated time frame to result in a conversion.
It is a technical set of metrics but comes down to a warning that advertisers should expect a decrease in the audience for their ads over the coming weeks as more users opt out of being tracked.
What Facebook is really saying is that it will experience a knock in its own revenue.
However, the complaints are somewhat disingenuous. As World Wide Worx data analyst Bryan Turner told John Maytham on CapeTalk radio this week, they already have so much data on consumers and are able to track so much behaviour on Facebook itself, “they could probably continue providing relevant targeted ads to their consumers even if they turn off that tracking”.
Like Apple, Facebook released stellar quarterly results this week, with revenue for the three months to March up 48% over the same period last year to $26.1bn. Of that, $25.4bn came from advertising.
Take app-tracking out of the equation and Facebook would still have more than a third of the world’s population to stalk. It reported daily active users up 8% over last year this time to 1.88-billion people. The number of monthly active users revealed its true reach: 2.85-billion people, or 10% up on last year, and close to half the world’s adult population.
Just as few were weeping for Apple last week when hackers stole the blueprints to many of its coming projects, no-one is crying for Facebook in its campaign against Apple’s clampdown on customer surveillance.
Having said that, however, Apple has no problem taking billions of dollars a year from Google to allow it to be the default search engine on the Safari browser. The Atlantic reported in 2019: “For this privilege, Google reportedly paid Apple $9bn in 2018 and as much as $12bn this year.
“All those searches help funnel out enormous volumes of data on Apple’s users, from which Google extracts huge profits.
“Apple might not be directly responsible for the questionable use of that data by Google but it facilitates the activity by making Google its default search engine, enriching itself substantially in the process.”
Talking of Google, the search giant’s parent company, Alphabet, on Tuesday also reported record revenues for the first three months of the year, with its $55.3bn gross profit up 34% from the same period last year — and well ahead of analysts’ expectations.
The core search business made up $31.9bn of these takings, providing a clue to why Google is also planning to block the “cookies” that advertisers use to track individuals across the inte rnet. Instead, it will allow consumers to be targeted based on their search activity on Google itself and its other properties, including YouTube, Maps and News. So, only half the internet.
And the consumer doesn’t have a choice in the matter, right? Wrong. A search engine called duckduckgo.com guarantees it will never track its users. Yet, it is able to generate revenue, as Turner put it, “just by giving ads targeted on the search itself and not by what you’ve done in the past”.