The Privacy Arms Race Begins
The Arms Race for our privacy will provide us with a lot of insights on the digital landscape we live in, and in the end empower us to better articulate what we want, and don’t want, for ourselves with regards to our own privacy.
Right from the onset the protection of User Privacy has always been a core value for Apple, all the way back in a 2010 conference in an interview with WSJ Journalist Walt Mossbery Steve Jobs stated
“To ensure that people understand what these apps are doing, a lot of people in the valley think we’re really old fashion about this. Privacy means people know what they are signing up for, let them know in plain English, and repeatedly, that’s what it means. I’m an optimist, I believe that people are smart, and some people want to share more data then what other people want to, ask them, ask them every time, make them tell you to stop asking them if the get tired of you asking them, let them know precisely what you’re going to do with their data, that’s what we think.”
This was in reply to a request to comment on the then recent criticism of Facebook forcing users to share their data, along with Googles WiFi Sniffing scandal. 11 Years later these two things still hold; Silicon Valley’s philosophy on User Privacy has not changed much, in many cases it’s gotten much worse, and secondly that Tim Cook clearly holds the same views a Steve Jobs.
A Battle of Incentives
Unlike most Silicon Valley companies which are primarily software based and thus rely on what Tim Cook as now termed The Data Industrial Complex, Apple is primarily a hardware manufacture with 85% of their 2021 First Quarter revenue emanating from their hardware products(iPhone, Mac, iPad, Wearables, home and accessories), leaving the remaining 15% to services which include the infamous 30% Apple Tax which apple collect from all financial transactions on its devices.
From this contrast in business models emerges a natural divergence in incentives structures that drive the behavioural pattens these companies. This requires one to take a step back, and try to deconstruct the new Facebook Vs Apple debacle as a battle of incentives as apposed to the obvious moral manta’s with which each of these companies would prefer we reason with. Apple’s moral mantra is that the Data Industrial Complex is robbing users for their freedom to be themselves as Tim Cook states:
“I spoke in Brussels about the emergence of a data industrial complex, as I’ve said before if we accept as normal and unavoidable that everything in our lives can be aggregated and sold, then we loose so much more than data, we loose the freedom to be human, right now users may not know whether the apps they user to pass the time, to check in with their friends, may in fact be passing on information about the photos they’ve taken, the people in their contacts lists, or location data which reflects where they eat, sleep or pray, the end result of all of this is that you are no longer the customer, you are the product”.
Facebook’s moral mantra is that by keeping all their products and services free they allow more low income users to have access to services that they would not normally be able to afford if they were paid, and in doing so they empower a lot of small businesses to keep their products free and get monetised through advertising instead of charging users directly, something that would isolate low income users from using these apps. In a WSJ article Facebook stated that
“Were standing up to Apple for small business everywhere, At Facebook small businesses are at the core of our business. More than 10 million businesses use our advertising tools each month to find new customers, hire employees, and engage with their communities. Many in the small business community have shared concerns about Apples forced software updates, which will limit businesses ability to run personalised ads and reach their customers effectively“.
Facebook is incentivised to collect user data for advertising purposes which allows it, and a lot of small to medium scale businesses, to keep their products free for all. Apple is incentivised to sell more devices from which it also derives revenue from all the financial transactions that occur on all those devices, and is thus able to protect user data more effectively without impacting its bottomline. A key question one needs to ask is, with the introduction of more user privacy controls such as the App Tracking Transparency feature, what is Apple really trying to achieve, is this another move to increase its bottomline, could this be an indication of Apple choosing to distance itself from the rest, on the eve of a looming battle with Capitol Hill, or can we really just take them at face value, given their historic emphasis on user privacy.
App Transparency Tracking Breakdown
So we’ve all heard the saying if you not paying for the product, you are the product… But not many people know the mechanics of how this product, that is you, is being commercialised.
The first thing that Apple did in iOS 14 was to allow users to see more explicitly exactly what data each mobile app collects from them, prior to downloading it. These no better contrast than a comparison between the Signal messaging app and Facebook Messenger. Whats important to note is that, this data access catalog forms the basis of the type of data accessible to these apps, which when combined with your usage on the app, go on to also be sold to advertisers.
The second major feature Apple introduced is the ability to allow users to decide whether or not an app can access, track and use user data for advertising purposes. The introduction of this feature is being dubbed as some sort of Digital Advertising Nuclear Bomb, of which Facebook has chosen to run point in its opposition. One just needs to take a moment to acknowledge, that in 2021 giving users the choice to decide if they want to be tracked or not, has become a controversial talking point, a stark indicator of just where the moral compass sits with regards to user privacy today.
In order to see more clearly the impact that this new feature has on the current advertising model, let’s breakdown how digital advertising works today.
Every mobile device has a unique ID which is used universally by advertisers to track which apps they download and more importantly their usage on the apps. Unlike browser cookies which tracks users behaviour across websites, advertisers use mobile device identifiers to link app related data to a specific user. Android devices use what is called an Advertising Identifier which can be found in your Settings > Ads-> Advertising Identifiers. Whilst Apple devices use what is called an Identifier For Advertisers (IDFA), oddly there’s no native way for a user to see their IDFA on their device, if a user wants to see their IDFA they need to download 3rd party apps like My Device ID by AppsFlyer or My Tune from TUNE.
So as an Apple user If you’ve ever wondered how ads are so specific and deeply co-related to your digital activities, your IDFA is responsible. Let’s say it’s a new year, and you’ve decided to focus on exercising again as a new years resolution. So you download a fitness app that can help you achieve your desired fitness goals. From the moment you download the app and start using it, all your health and fitness data is being harvested ie. how often you workout, where you workout, the types of workouts you enjoy most, the contacts you work out with etc. All of this data is capture by the fitness app and stored against your IDFA. At some point you decide you need to get some more workout gear, so you jump onto your favourite shopping app, and you start searching and browsing for specific products which match your fitness needs. All your search words and browsing pattern are harvested by the shopping app against your IDFA. An interesting thing now begins to occur, both your fitness app and your shopping app will sell your usage data to a Data Broker. This data broker will hold all the data collected against your IDFA from all the apps on your device. Data brokers will then sell your data to Social Media applications, who are also able to once again identify which data belongs to which of its users using their IDFA. So between your fitness app, and your shopping app and the data that your social media app already collects about you, a very detailed and specific picture can be drawn about the type of individual your are, as represented by your IDFA.
It’s no surprise that suddenly after starting your new fitness journey, your social media feed is showing fitness improvement courses you can attend, along with amazing sales of the best gear that will suit the workouts you most enjoy, and special offers begin to appear from fitness experts in your area, all of which allow you to connect with products that you might not have come across with on your own.
The result of such data harvesting can vary from person to person as we’ve already seen in the case of Signal vs Facebook Messenger, the amount of data collected by different apps will vary. What is key to take note of, is that behind your daily app usage, exists an invisible market place where all the apps you are using are constantly selling and buying your data from each other, and that all of them rely on your IDFA as a primary means of identifying you.
Apples new App Tracking Transparency feature blocks this whole process by preventing apps from accessing your IDFA by default, and only if you decide to opt in, does it allow an app to access your IDFA number. That means that an app can still extract all your usage data, but without your IDFA this data becomes worthless, as there’s no universal mechanism by which other apps or websites can consolidate all the data they’ve collected from you. It’s this last element that has hit the core of Facebook’s business model as its revenues relies heavily on marketing and sales, which is all powered by this invisible market place of data being bought and sold between the apps you use.
Back to Incentives
To give you the impact scale of this Facebook states that:
“Forty four percent of small to medium business started or increased their usage of personalised ads on social media during the pandemic, according to a Deloitte study. Without personalised ads Facebook data shows that the average small business advertiser stands to see a cut of over 60% in their sales for every dollar they spend.”
A key element worth noting is that Facebook went on to state that:
“while limiting how personalised ads can be used does impact larger companies like us, these changes will be devastating to small business, adding to the many challenges they face right now“.
This last point reminds me of the all too familiar “too big to fail” argument that banks use when they go bankrupt, as nasty as it sounds one can learn a lesson or two here in that, you haven’t made it, until the consequences of your downfall are so detrimental to society, that its in the best interest of society to ensure that you never fail for their own good, I digress.
Apple’s reply to Facebook was that the feature does not disable personalised ads but merely gives users a choice to opt in or out, so users who enjoy the convenience of getting personalised ads will still opt in for it. Facebook’s CFO Dave Wehner has already indicated that:
“ we do expect there to be high opt out rates related to that, and that’s factored into our outlook”
speaking on Facebook’s 2021 first quarter revenue expectations, already anticipating the negative financial impact of iOS 14.5. A sad by true reality to ponder on, in that Facebook is showing in they protest, that today’s advertising industry or as Tim Cook likes to call it the Data Industrial Complex, can only work if users are denied the right to opt out.
Bringing it back to Apple and their incentives. By cutting off revenues from ads for mobile apps, Apple is forcing app developers to start charging users for their products. This in turn will also mean that they’ll have to pay Apple’s 30% tax on all user payments made for their apps. So one can question whether Apples fundamental motivation for challenging the Data Industrial Complex are purely altruistic. Apple could just be trying to increase their own services revenues, something they’ve taken a keen focus on recently given the decline in their iPhone sales. Apple has also had a history of hiding its profit seeking motives behind noble causes, such as the removal of a new battery charger when you purchase a new iPhone, being pitched to consumers as a way of saving the environment. And let’s not forgot in the aftermath of its feud with Fortnight over its 30% Tax requirement, Apple also pulled it own version of the “Im for the little guy” stunt by reducing its 30% down to 15% for small business with revenues below $1M dollars. That being said there’s a lot more to admire about Apples stance regarding the protection of User Privacy, its not hard to see that the incentives for them to join the Data Industrial Complex also exist, and given the current control they have over their devices, one can only imagine how much more potential revenue they could be extracting if they chose to adopt Facebook and Google business models.
Conclusion
So in conclusion we had a look at Apple’s new App Tracking Transparency feature and broke down in detail why this new feature is worth keeping an eye on. The natural response from Facebook or other major data driven companies such as Google will be to invent a work around that will still allow them to universally track users across apps. This in turn will trigger further actions from Apple to circumvent them, hence giving us a data Privacy Arms Race, where we will see these Digital Supers Powers investing heavily on new features to protect their business models. This Arms Race might actually be quite good from a tech evolution perspective, as their competition will drive more innovation with regards to user data management. Lastly for the rest of us, paying attention to these battles could provide us with a lot of insights on the digital landscape we live in, and in the end empower us to better articulate what we want, and don’t want, for ourselves with regards to our own privacy.
