Apple recently announced a new privacy feature that will ask iPhone and iPad users to sign up or opt out of in-app advertising tracking. While most people applaud Apple for its privacy position, there is much more to the story. As I will explain below, Apple’s moves will hurt publishers and consumers for their own financial gain. The truth is that Apple’s virtue signaling masks anti-competitive behavior that must be called out.
The first domino
Apple announced in June that iOS14 (expected later this month) will ask users to opt out of tracking advertisers in third-party apps on iPhones and iPads. It’s not hard to see why most people expect users to opt out a lot. How ominous is this warning?
When a user selects “Ask the app not to track”, it disables an anonymous identifier, known as IDFA for advertisers (IDFA). Once IDFA is disabled, app developers and publishers can no longer make this identifier available to advertisers who want to deliver relevant ads to users. Although it seems quite harmless, it will trigger a chain of events that will end badly for anyone other than Apple and Google.
Damages publishers and developers
Articles have covered how this will harm advertisers. While few are compassionate with advertisers, what about your favorite news, weather, music, fitness, games or meditation app? Disabling IDFA will destroy ad-supported apps because it is IDFA that makes their media valuable to advertisers. If you are a luxury clothing brand for women, you are targeting a very narrow set of users and you are willing to pay more to reach them. In this example, apps that display ads to wealthy women (anonymously identified by IDFA) may charge a 2-3 times premium for that ad. Without IDFAs to target ads to relevant audiences, prices will drop by 50-70%, making ad-supported models unsustainable.
Of the 2.2 million apps in the Apple Store, many will fail as advertising revenue. Apps that can migrate to subscription models will pay a high price. Aside from the costly development work and the inevitable loss of users, publishers have to pay Apple 30% tax on new subscription revenue. This is where Apple crosses the line of monopolistic behavior – more on that below.
Harm to consumers
When content that is not supported by ads is no longer viable, consumers have to pay for content. While very few say they like ads, most are aware that we need them. A recent NAI study found that 75% of consumers are aware that free content is enabled by advertising. Furthermore, 64% of consumers believe that online content should be free. So we expect free ad-supported content, but we do not want to share data that makes ad models work? The problem is actually not advertisers. The NAI study also found that concern # 1 about privacy is data collection by hackers, not publishers. Guess who else knows this and benefits from the death of the free content? Well … you know the answer.
So to sum up: Apple knows that disabling IDFA will kill ad models and force publishers to migrate to subscriptions that Apple will collect 30% on. Apple also knows that this will require us to pay for content (such as Apple News + at $ 9.99 / month) that we basically expect for free. Do you still get the picture?
When Steve Jobs introduced the iPhone in 2007, he announced that this was “the Internet in his pocket”, and a transformation step for the growth of online publishing. I do not remember that he wanted to be a 21st century railway baron. The demolition of IDFA threatens the viability of the open mobile network while destroying the ecosystem itself that made Apple’s devices so magical in the first place. Is this really the future Jobs envisioned in 2007?
I have been a long time fan, customer and shareholder in Apple. I admire Tim Cook and the company’s ethos. But we must call this what it is. If Apple just wants to offer more privacy, there are less subversive ways to do it. Consciously or not, Apple uses privacy as an excuse to stifle competition and harm consumers for its own benefit.
What more can we expect?
First, Google is likely to follow suit – soon. Once Apple has transitioned apps to fee-generating subscription models, Google will be right behind it, with 2.8 million apps in the Google Play Store.
We can also expect more lawsuits. Following Epic Games’ lawsuits against Apple, Google and Samsung, more and more apps will apply for anti-competitive practices.
In the end, the government will have to intervene. While the FTC and DOJ have been very accommodating to date, the domino effect will require a federal response. For reference, the FTC prohibits conduct by a single company that unreasonably restricts competition by creating or maintaining monopoly power. Specific examples may include:
- Exclusive delivery or purchase agreements: Distribution and / or download of iPhone / iPad apps can only take place via the App Store. Violate terms and find yourself persona non grata at 800 million units.
- Binding arrangements: Ban mobile commerce outside the App ecosystem where publishers must share revenue with Apple.
- Lack of alternatives: I.To access iPhones, go through the App Store. It’s the same for consumers looking for apps.
- Predatory price: Is 30% reasonable? Go and ask Fortnite.
Stay for execution
Last week, Apple announced that it will postpone the implementation of the anti-tracking feature until early 2021. It cited the fact that ad-supported developers and publishers were not yet prepared (quite an understatement). Although this stay is useful, it only delays the inevitable – unless we act.
Call for action
Now more than ever, the advertising, publishing and developer communities need to start collaborating on two critical fronts:
1. Communicate value exchange when we use free ad-supported content. Every time I visit a page or open an app, I should be informed that anonymous tracking enables the publisher to generate advertising revenue to provide free content. By letting the site track me, I support their business. If I choose not to select tracking within (select a date), I must subscribe to view the content. Then I will refer to a page that clearly and concisely indicates which data is tracked (eg anonymous or personal) and how they will and will not be used. Explain the trade-offs and let me make an informed decision. That’s common sense.
2. Lobby Apple for changing language in its opt-in / opt-out prompt. As currently written, users will opt out of tracking in large numbers. But what if it read something like this, instead?
This app relies on an anonymous identifier to provide relevant advertising that supports free content. You can opt out now or in the future. Learn more: visit PalAbout / Privacy.
I think Apple should prioritize helping users make informed decisions instead of scaring them down the path to paid content.
I hope Apple will act in good faith and work with the industry to balance privacy with the interests of consumers, publishers and advertisers. But it will not happen alone. As they say, talk now or forever. Because when this happens, the damage will be difficult to undo.
Steve Latham is the global head of Analytics at Flashtalking, a global data and advertising company.