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Apple recently announced a new privacy feature that will ask iPhone and iPad users to choose whether or not to participate in in-app advertising tracking. While most applaud Apple for its privacy stance, there is much more to the story. As I’ll explain below, Apple’s move will hurt publishers and consumers for their own financial gain. The truth is that the signaling of Apple’s virtues is masking anti-competitive behavior that should be denounced.
The first domino
Apple announced in June that iOS14 (available later this month) would urge users to opt out of tracking advertisers in third-party apps on their iPhones and iPads. It is not hard to see why most expect users to opt out en masse. How ominous is this warning?
When a user selects “Ask app not to track,” they turn off an anonymous identifier known as ID for Advertisers (IDFA). Once IDFA is disabled, app developers and publishers can no longer make that identifier available to advertisers looking to deliver relevant ads to users. While it seems innocuous enough, it will set off a chain of events that ends badly for everyone but Apple and Google.
Damage to publishers and developers
Articles have covered how this will affect advertisers. While few will sympathize with advertisers, what about your favorite app for news, weather, music, fitness, games, or meditation? Disabling IDFA will devastate ad-supported applications because it is IDFA that makes your media valuable to advertisers. If you are a luxury clothing brand for women, you are targeting a very small group of users and are willing to pay more to reach them. In this example, apps that show ads to wealthy women (identified anonymously by their IDFA) may charge a 2-3x premium for that ad. Without IDFA to target relevant audiences, prices will plummet by 50-70%, making ad-supported models unsustainable.
Of the 2.2 million apps in the Apple store, many will fail as ad revenue plummets. Applications that can migrate to subscription models will pay a high price. Aside from costly development work and the inevitable loss of users, publishers will have to pay Apple a 30% tax on new subscription income. This is where Apple crosses the line into monopoly behavior; more on that below.
Harm to consumers
When ad-supported content is no longer viable, consumers will have to pay for the content. While very few say they like ads, most realize we need them. A recent NAI study found that 75% of consumers know that advertising enables free content. Furthermore, 64% of consumers believe that online content should be free. So we expect ad-supported free content, but we don’t want to share data that makes ad models work. In reality, the problem is not the advertisers. The NAI study also found that the primary privacy concern is data collection by hackers, not publishers. Guess who else knows this and will profit from the death of free content? Well … you know the answer.
So, to recap: Apple knows that disabling IDFAs will remove ad templates and force publishers to migrate to subscriptions for which Apple will charge 30%. Apple also knows that this will require us to pay for content (like Apple News + at $ 9.99 / month) which we basically expect for free. Do you have the image yet?
When Steve Jobs introduced the iPhone in 2007, he proclaimed that it was “the Internet in your pocket” and a transformative step in the growth of online publishing. I don’t remember his desire to be a 21st century railroad mogul. The beheading of IDFA threatens the viability of the open mobile web while endangering the ecosystem that made Apple devices so magical in the first place. Is this really the future that Jobs envisioned in 2007?
I’m a longtime Apple fan, customer, and shareholder. I admire Tim Cook and the spirit of the company. But we have to call this for what it is. If Apple simply wants to offer more privacy protection, there are less subversive ways to do it. Intentionally or not, Apple is using privacy as an excuse to stifle competition and harm consumers for its own benefit.
What else can we expect?
For starters, Google is likely to do the same, quickly. Once Apple has transitioned from apps to fee-generating subscription models, Google will be behind, with 2.8 million apps on the Google Play store.
We can also expect more demands. Following Epic Games’ lawsuit against Apple, Google, and Samsung, more and more apps will file lawsuits for anti-competitive practices.
Finally, the government will have to intervene. While the FTC and DOJ have been very accommodating to date, the ripple effect will require a federal response. For reference, the FTC prohibits single-company conduct that unreasonably restricts competition by creating or maintaining monopoly power. Specific examples may include:
- Exclusive supply or purchase agreements: The distribution and / or download of applications for iPhone / iPad can only be done through the application store. Violate the terms and find a persona non grata on 800 million devices.
- Tying arrangements: Ban mobile commerce outside of the app ecosystem where publishers must share the revenue with Apple.
- Lack of alternatives: meIf you want to access iPhones, you have to go through the app store. The same goes for consumers searching for apps.
- Predatory pricing: Is 30% reasonable? Go ask Fortnite.
Stay of execution
Last week, Apple announced that it will postpone the rollout of the anti-tracking feature until early 2021. It cited the fact that ad-supported developers and publishers weren’t quite ready yet (quite an understatement). While this stay is helpful, it only delays the inevitable, unless we act.
Call to action
Now more than ever, the advertising, publishing, and developer communities must start working together on two critical fronts:
1. Communicate the exchange of value when we consume free content with advertising. Every time I visit a page or open an application, I should be informed that anonymous tracking allows the publisher to generate advertising revenue to provide free content. By allowing the site to track me, I am supporting their business. If I choose not to opt out of follow-up before (choose a date), I will have to subscribe to view the content. You should then be directed to a page that clearly and succinctly indicates what data is being tracked (eg anonymous or personal) and how it will and will not be used. Explain the tradeoffs and let me make an informed decision. It’s common sense.
2. Pressure Apple to change the language in its opt-in / opt-out message. As currently written, users will opt out of mass tracking. But what if you read something like this instead?
This application relies on an anonymous identifier to provide relevant advertising that supports free content. You can choose not to participate now or in the future. More information: visit PalAbout / Privacy.
I think Apple should prioritize helping users make informed decisions rather than scaring them down the path to paid content.
I hope that 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 by itself. As they say, speak now or be silent forever. Because once this happens, the damage will be difficult to undo.
Steve Latham is Global Director of Analytics for Flashtalking, a global advertising and data company.
