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However, the two sides have not always been at odds. In fact, they almost became business partners.
divided into disputes
In the years before Apple made the privacy tweak, the company proposed a series of potential arrangements to Facebook aimed at taking a cut of Facebook’s revenue, according to people familiar with the matter. Apple executives said at the time that they wanted to “build the business together,” according to a person familiar with the matter.
Among them, one idea they discussed: creating an ad-free subscription version of Facebook. Since Apple takes a cut of App Store app subscription revenue, the product could have generated significant revenue for Apple.
The companies also haggled over whether Apple would be entitled to a cut of so-called “promoted posts.” Promoted posts allow users to pay to increase the number of people who see a post on Facebook or Instagram. Facebook, which has considered promoting ads, has insisted that it is a form of advertising, in part because it is often used by small businesses to reach larger audiences, the people said.
Apple does not take a cut of developer ads, but the company believes Facebook promotions should be considered in-app purchases, the people said. Under Apple’s standard terms, it has the right to take a 30 percent cut of those sales.
As a result, Apple and Facebook have not reached an agreement on any proposals to strengthen cooperation. Meanwhile, Facebook is considering making privacy-related adjustments. Facebook Chief Executive Mark Zuckerberg has opted to delay a major overhaul of its data practices to keep its ad business thriving, a strategy known internally as a “guardian”, people familiar with the matter said.
Negotiations between the two companies mainly took place between 2016 and 2018. This suggests that the two companies struggled to find common ground for some time before their stance became tough.
turn against each other
Apple and Facebook have maintained a unique symbiotic relationship for years: Apple controls the App Store, the gateway through which hundreds of millions of users download Facebook’s flagship app and the company’s other popular services, including Instagram, Messenger and WhatsApp. However, while Facebook’s products are among the most popular apps on the iPhone, they don’t generate revenue for Apple. That has been frustrating some Apple executives, people familiar with the matter said.
Apple, the maker of the iPhone, also controls device identity tracking, which has been key to Facebook collecting user data and delivering personalized ads to them for more than a decade. Apple said its privacy commitment was a core company principle that existed long before the disagreement with Facebook. An Apple spokesman said there was no connection between any discussions about the partnership and ad-tracking tweaks that were implemented later. Apple has discussed a similar business model with a number of developers, the people said.
Apple CEO Tim Cook
The talks with Facebook come as Apple shifts its focus from hardware sales to software. In 2016, Apple’s iPhone revenue declined year-over-year for the first time, and CEO Tim Cook began to focus more on efforts to strengthen the digital services business, promising in 2017 to increase services revenue by 2020 double. As a result, the company achieved this goal six months ahead of schedule. According to Apple’s latest quarterly earnings report, revenue from its services business, which includes the App Store, cloud storage products and its own advertising business, was $19.6 billion, up 12 percent from a year earlier.
A significant part of Apple’s services revenue comes from its partnership with Google. The partnership wasn’t known until the U.S. Department of Justice filed an antitrust lawsuit against Google in 2020. Under the deal, Google pays Apple billions of dollars a year to be the default search engine in Safari. Apple has not been accused of wrongdoing. Google said it, like many businesses, spends money to promote its services.
Some Facebook executives are concerned about Apple’s impact on their business, in part because Cook has criticized businesses that rely on collecting user data. And Facebook’s use of user data is increasingly inconsistent with privacy concerns in Europe. Separately, public issues such as the Cambridge Analytica scandal in 2018 sparked a wave of scrutiny from U.S., European lawmakers and regulators. Cambridge Analytica, a consulting firm, improperly accessed the private data of 87 million Facebook users and used it for partisan politics research.
By the summer of 2018, Apple had made tweaks to its Safari desktop and mobile web browsers that hampered Facebook’s web business, preventing the company from tracking users without their permission as they visited different websites. Apple’s next big goal: preventing apps from doing similar tracking.
Meanwhile, at Facebook’s Menlo Park headquarters, Zuckerberg and his executives are already considering changes to the business, including ending the use of data collected by other companies to target users with ads. This was unimaginable before.
Zuckerberg
In June 2020, Apple announced privacy changes to iOS, a move that sent shockwaves through the advertising industry but was seen as a victory by data privacy advocates. In April of the following year, Apple officially implemented the adjustment.
Shortly thereafter, Facebook reconsidered the idea of launching a subscription version of its flagship app, the people said. But a subscription-based service will face a number of challenges, including whether a person using multiple social media accounts will have an ad-free experience on all of them. Ultimately, in order not to affect its advertising business, the company decided to drop the idea.
4 trillion market value evaporated
The impact of Apple’s privacy tweaks is significant. According to research firm Insider Intelligence, only 37 percent of iPhone and iPad users in the U.S. choose to allow businesses to track them on their devices. With so few users choosing to allow tracking, the impact of Apple’s iOS overhaul is being felt pervasively across the digital advertising ecosystem.
A joint June survey by mobile market analysis firm Tenjin and mobile advertiser tools developer Growth FullStack found that 59% of mobile advertisers in the US and UK have shifted their advertising budgets from iOS to Google Android. The shift in Apple’s privacy policy has cost Facebook, Twitter, Snap and YouTube $17.8 billion in lost revenue so far in 2022, according to estimates by data management firm Lotame.
Facebook, which has suffered the most, is scrambling to tinker with its own ad-tracking system. Apple’s privacy tweaks have been the main reason for the company’s sharp decline in performance. In less than a year, Facebook’s market value has evaporated by about $600 billion (about 4 trillion yuan). Last month, more than a year after those adjustments, Meta reported that its quarterly revenue fell year-over-year for the first time since going public in 2012.
For the dispute between the two sides, the two technology giants have stated their respective positions. Apple focuses on user privacy, while Meta emphasizes the benefits of personalized online advertising.
“Every day, we meet and work with developers large and small to make recommendations that address their concerns and help them continue to grow their businesses,” an Apple spokesman said. “The rules for app developers like Facebook apply to All developers, because we believe fair execution results in the best user experience.”
A Meta spokesman said the company had “made significant adjustments over the past five years to protect people’s data while allowing businesses of all sizes to grow”. “Our decision will not depend on another company, but on our commitment to those who use our products and our belief that privacy and personalization can coexist,” the spokesperson said. (Author/Xiao Yu)