Ten-year war over internet business

Apple CEO Tim Cook (l) and Mark Zuckerberg, CEO and founder of Facebook.

Getty Images (L) | Reuters (R)

Apple CEO Tim Cook struck a chord with Big Business rivals’ business practices during a passionate speech at a privacy conference in Brussels in October 2018.

“Every day billions of dollars change hands and countless decisions are made based on our likes and dislikes, our friends and families, our relationships and conversations. Our desires and fears, our hopes and dreams,” Cook said. “These chunks of data, each and every one harmless alone, are carefully collected, synthesized, traded and sold.”

Although Cook did not proclaim Facebook by name, it was clear that Mark Zuckerberg’s company was one of the targets. Facebook built an empire by holding the mouse over users’ data to inform its targeted ad system. Its revenue peaked at $ 20 billion last quarter, and nearly 99% of it comes from advertising.

The speech was just one in a series of jabs that Cook and Zuckerberg have taken against each other for nearly a decade. The tensions between Facebook and Apple stem from the iPhone’s childhood and the search for control over the next wave of computing.

In a cover story from 2014 in Time, for example, Zuckerberg criticized Apple and Cook’s attitude to privacy:

“One frustration I have is that a lot of people increasingly seem to equate an advertising business model with somehow being out of line with your customers,” Zuckerberg said. “I think that’s the most ridiculous concept. What, do you think, because you pay Apple, that you somehow comply with them? If you complied with them, they would make their products much cheaper. “

The word war of the last decade highlights the fundamental difference in opinion between two giants about how business should be conducted on the Internet.

In Facebook’s view, the Internet is the Wild West with a host of competing platforms offering innovative services for free. You may not pay for them with your money, but you pay by letting your data be tracked and packaged so advertisers can pick things you want to buy right in front of your face when traveling between devices and services.

In Apple’s view, the Internet is only an extension of the personal computing revolution that the company helped launch in the 1980s, and your phone is the most personal device of all. You should know what companies will do with the information collected through that phone before sharing it.

A decadelong match

Facebook Director Mark Zuckerberg appears on a screen behind a stenographer, which he testifies externally during the hearing of the Senate Commerce, Science and Transport Committee ‘Activating Section 230’s sweeping immunity Big Tech Bad Behavior?’, At Capitol Hill, 28 October 2020 in Washington DC.

Michael Reynolds | Pool | Getty Images

The war of words culminated last week with Facebook’s two-day campaign against Apple. The ads are called discarded on an impending change to the iPhone’s operating system designed to alert you when an app tracks your personal data such as location and browser history, which companies like Facebook use to target their ads. The alarm allows you to block tracking before using the app.

Facebook claimed that Apple’s move is designed to crush small businesses that rely on targeted advertising to reach their customers online. It also warned – without proof – that Apple’s move would force app makers to stop offering free, ad-supported apps to their customers. Instead, they had to charge customers via digital subscriptions or other fees. Convenient for Apple, it takes a piece of transactions completed through its platform, including purchases or subscriptions that users make through apps they download in the App Store.

Facebook painted an unwise picture of Apple in the campaign: Here is a company with full control over the rules on its platform, making a change designed to pressure small businesses and force them into a paid model, of which Apple takes a cut. Facebook delivered this message in newspaper ads, blog posts, Instagram posts and an excellent website with small business owners using Facebook to advertise.

Apple pushed back on Facebook’s allegations. The company said the pop-up window you see in apps is only designed to tell you when and how an app plans to track you, not completely ban tracking. App makers like Facebook also have space in the pop-up window and other screens to make their case for you, which is why you should allow tracking. Apps are still free to collect all the data about you as they were before, but you will have to give them deliberate permission to do so. According to Apple, it’s just the latest in a number of privacy-centric features it’s added products over the years.

A mockup of the popup window iPhone users will see before using an app that tracks their data. This image was provided by Apple.


The roots of the quarrel stretch back more than a decade.

In the childhood of the iPhone, there was a big debate about what the mobile internet should look like. Would it see the Internet on a desktop PC, where people mostly used a mobile web browser to visit websites, with everything built on openly published standards? Or would users switch between a collection of Internet-connected software “apps”, giving more control to the companies that owned the mobile platforms?

Facebook, which was born on the open Internet, favored the former option and pushed for too rich web apps written to new standards. But it largely lost the battle because of Apple pushing the app model as the default method of performing tasks on the iPhone, and then insisting that its own App Store would be the only legal and easy way to find and install these apps on. (Google played smart on both sides, investing in the Android mobile platform and its own Google Play app store, and building its Chrome web browser and influencing web standards.)

When the future became clear, Facebook made attempts to build its own smartphone so that it would not give as much control to Apple or Google. The device never saw the light of day, and Facebook instead developed a software “skin” for Android devices that included its own services. It was also a flop.

Today, Facebook is laying the foundation for owning the next big computer platform so it doesn’t have to play by another company’s rules again. Therefore, it is currently developing products such as digital glasses, which the company is expected to launch in 2021.

Meanwhile, Facebook has to deal with Apple.

Facebook’s endgame is unclear

It’s ironic that Facebook accused Apple of abusing its market power last week, just days after the FTC and a group of state attorneys generally sued Facebook alleging infringement of cartels and recommending a breach of the company.

In addition, Facebook’s argument revealed its own grip on the digital ads market. Small businesses should not rely so much on Facebook if Facebook had a viable competitor that these companies could advertise through.

Apple faces similar government control, although there have been no formal cartel cases. In October, the Judiciary Intelligence Committee released an epic report on “the monopoly power” held by the four biggest technology giants, claiming that Apple is using its control of the App Store to squash potential competitors.

Both companies have denied allegations that their companies are violating antitrust laws. But Facebook has now created an environment where two giants facing antitrust control in the US and around the world are trading barbs, as one is more guilty when it comes to abuse of market power.

It’s also hard to tell what Facebook’s endgame is here. Apple will not go back on an important privacy feature for the iPhone, and Facebook will not risk losing millions of users by removing its apps from the App Store.

Steve Satterfield, Facebook’s director of privacy and public policy, told CNBC this week that the company will still abide by Apple’s new rules and there’s no chance that Facebook will openly violate them in order to ignite a legal battle like the Apple and ” Fortnite “developer Epic Games is involved in now. (Facebook said last week that it would support Epic in its lawsuit against Apple.)

“Our goal is simple,” Satterfield said. “We want Apple to start listening. They dropped this policy back in June without meaningful consultation … Given the far-reaching effect, it’s important that companies can plan it.”

It’s also hard to buy Facebook’s stated argument against pop-up. For years, the company has been claiming that its users prefer the personalized and targeted ads that its data collection enables, as opposed to random ads served to a wide audience without targeting. If true, users should have no problem enabling tracking when Apple shows them the pop-up window.

In August, Facebook undercut the argument as it released data from a survey that showed enough people would disable tracking to cause a 50% drop in revenue through its third-party ad networks. The company also warned investors this year that its own revenue would hit a hit when Apple begins enforcing the tracking tool.

Facebook said it prefers to use its own privacy tools to help users restrict what data they need to share, rather than the message Apple shows you.

Apple said its customers want more privacy controls built into the iPhone. After years of criticism of Facebook’s business practices, the company has routinely added confidentiality features to break down the abuse seen on its devices.

“Look at what we’ve done with the controls we’ve built-in,” Cook said in an interview with Axios in 2018 when asked why companies like Google and Facebook are allowed to thrive on the iPhone despite his criticism of their practice. “We have private browsing on the Internet. We have intelligent tracker prevention. What we have been trying to do is come up with ways we can help our users throughout the day.”

It wasn’t just Apple pushing back against Facebook’s arguments. Groups of small business advertisers, the same ones Facebook said they were trying to protect, took over Facebook’s #SpeakUpForSmall hashtag on Twitter, filling it with complaints about the lack of attention they get compared to Facebook’s larger ad customers on the day the campaign was launched.

And Bloomberg released a report earlier this week full of similar complaints from advertisers about the company’s automated ad buying tools. BuzzFeed published a story Tuesday referring to Facebook employees who were just as confused about the crusade against Apple as the small business advertisers.

For her part, Facebook spokeswoman Ashley Zandy told CNBC that the company has heard from many supportive companies and that it allows its employees to speak freely and question corporate strategy.

“I think we’ve seen a very balanced and nuanced coverage of the message,” Satterfield said. “I think we’re happy.”