Facebook and Apple face off over privacy, ad tech issues

By L. Carol Christopher

INMA

Pleasant Hill, California, USA

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After all the Facebook news of yesterday, let’s turn to Apple, which is not particularly popular with its peers these days. Microsoft, Facebook, and Google all have opinions on how the company operates its business. 

Last week, we wrote about news publishers’ response to Apple’s plan to hijack their links in the coming operating system, and about the 30% Apple Tax that some app developers pay, and some do not. 

This week, things began to get complicated when Facebook joined news publishers and others in decrying the Apple 30% tax, publicly complained about App Store policies twice in August, Vox reported

Facebook joined news publishers and others in opposition to Apple's 30% fee, which isn't charged across the board.
Facebook joined news publishers and others in opposition to Apple's 30% fee, which isn't charged across the board.

Facebook is also unhappy about Apple’s plan to, with its next operating system, make ad-tracking an opt-in rather than an opt-out experience for consumers. (The move will also affect Google’s AdMob, which facilitates ad sales in apps.) 

“There’s self-interest in Apple doing this because as the advertising revenue stream becomes more difficult, then apps have to charge users and Apple … takes 30% of that,” John Nardone, CEO of ad serving software company Flashtalking, told Reuters. 

And to add insult to injury, Apple thwarted Facebook’s attempts to tell users about the 30% tax that would be applied to its new online events features by citing an App Store rule that bars developers from showing “irrelevant” information to users, according to Reuters.

“Now more than ever, we should have the option to help people understand where money they intend for small businesses actually goes,” Facebook said to Reuters. (Apple refused to comment in the same article.) The Verge reports that Netflix, Kindle, and Spotify have had similar experiences when trying to explain that users can pay on the Web without Apple taking a cut.

The rollout is set for this fall.

Facebook’s response: The Audience Network and the IDFA 

In response to Apple’s moves, Facebook is planning to withdraw its Facebook Audience Network app from the App Store. The app “helps developers and publishers monetise their mobile apps and Web sites through the use of ads …” according to the company’s Web site. In its response, Facebook said it will no longer use the unique identifier, or IDFA (Identifier for Advertisers), that Apple has assigned to each iPhone for years. The IDFA is used for “tracking and identifying a user (without revealing personal information). The data can then be used to discover information such as which in-app events a user triggers,” according to adjust.com. 

Under the new plan, developers who want to use the IDFA and its associated data will have to ask for user permission. According to The Wall Street Journal, “The pop-up prompt will state that the app owner ‘would like permission to track you across apps and Web sites owned by other companies. Your data will be used to deliver personalised ads to you.’ In a survey by Tap Research Inc., 85% of respondents said that if they saw this message in their favourite app, they would select ‘Ask App Not to Track.’” 

The advantage Facebook gains by not using the IDFA is that it will not have to show users the pop-up screen asking for permission to track, explained Vox, which went on to say that it is not clear what Apple’s reaction will be.

According to Tech Crunch, Facebook found in testing that “without targeting and personalisation, mobile app install campaigns brought in 50% less revenue for publishers.”

Who is caught in the middle 

“The impact of the coming changes won’t be felt uniformly by all publishers, but could be meaningful for companies that have ‘programmatic,’ or automated ad sales, and have large numbers of iPhone app users,” according an article in The Wall Street Journal. 

It is most likely to hurt small developers and gaming companies, Brian Wieser, global president of business intelligence at GroupM, a media investment company, told Reuters. “The Audience Network is … far from Facebook’s biggest business. It would surprise me if it was greater than US$1 billion on a net basis,” he said, although ad-tech consulting firm Jounce Media gave a pre-COVID-19 estimate that Facebook Audience Network would bring in US$3.4 billion in 2020. 

The Wall Street Journal noted the “Apple change could also affect Facebook’s sale of ads on its own properties, since apps that use Facebook code — from food-delivery apps to games — send data back to the company.” 

That creates yet another friction point between the two, since although Apple “isn’t a big player” in online advertising, according to The Wall Street Journal, “it does have its own small business that personalises ads shown in the App Store and on Apple News based on where users go and what users do in Apple’s apps.” The article further noted Apple is applying “separate rules for its own ad-personalisation; to opt out, users must find an option in the iPhone’s settings.” 

According to Vox Recode, most publishers expect they will know less about their users and ads will be worth less in the near term as a consequence of the privacy move. Sheri Bachstein, global head of consumer business at the Weather Co., estimated in 9to5 Mac that “the price advertisers are willing to pay to advertise within iPhone apps could decline by as much as 40% as a result of the change.” 

Apple made a similar move — eliminating third-party cookies — with Safari in 2017 that left ad rates plummeting, the article reported. Google plans to do the same thing with its Chrome browser by 2022, which INMA covered extensively in its recent report “The Third-Party Cookie Trigger.” 

Facebook is taking concrete steps to support its business model, reports Axios:

  1. It plans to release an updated version of the Facebook software developer kit to support the changes.
  2. It will ask its advertising partners that run app-install ad campaigns on Facebook and Instagram to create a new ad account dedicated to iOS 14 users.
  3. It says advertisers can continue using their original account to target users of older versions of iOS, as well as Android, which supports a user-tracking feature similar to IDFA.

News publishers have mixed response to Facebook’s warning

Vox Recode reports the U.K.’s Mail Online is threatening to delete its iPhone app because it believes Apple’s new privacy policy threatens up to 75% of its advertising revenue. “It makes it much harder for us to monetise our Apple app users, who are an incredibly loyal readership. And quite frankly, it puts at risk our ability to provide an Apple app,” Martin Clarke, publisher of DMG Media, which owns the Daily Mail and other publications, told Recode. “Untargeted ads are basically worthless.” 

On the other hand, Jason Kint, CEO of Digital Content Next, suggested some news businesses may actually benefit from the changes. Tech Crunch said Kint “scoffed,” saying Facebook is “pretending to be the messenger of what’s good for publishers,” and that it is “using Audience Network publishers to deflect from its broader data collection practices … . ‘A majority of Facebook’s data collection happens across other companies’ services and feeds the mothership.’”

In a Tweet, Kint wrote

“Premium publishers are happy to see adtech, Facebook, and Google lose access to tracking their users through their ‘tools’ as long as they can keep serving their own users which they can.” Kint added: “If you know of any publisher besides Mail Online screaming about this, have them call me as I want to know of any arguments possibly missed. Crickets so far. Modest short-term risk with proof of upside long-term by stopping tracking by dominant third parties [especially Google and Facebook].” 

David Chavern, CEO of the U.S. trade organisation News Media Alliance, said: “The potential impact certainly varies from publisher to publisher — but I would describe the general view of U.S. publishers as being that Apple’s change is likely more annoying than material. News publishers aren’t huge beneficiaries of cross-app tracking and, more broadly, we see the broader ecosystem moving against highly targeted programmatic ads. 

“Tracking and targeting aren’t the future and that might actually end up benefitting publishers, such as some move back to contextual advertising,” he continued. “The annoying part comes from the short-term loss of revenue at a time when all revenue is important and the unilateral nature of Apple’s decision. They decide and the rest of the world just has to adapt.” 

Bloomberg Media’s Julia Beizer, who heads up digital there, told Vox: “The instinct’s in the right place. We all want to make a better, privacy-safe Web. But rolling it out without consulting the industry means you’re asking publishers to bear the brunt of the sins of ad tech. Which isn’t fair.” 

The New York Times’ Rebecca Grossman-Cohen, who heads up strategic partnerships there, told Vox that the move will create “some loss” of advertising revenue, but that it will be “minimal,” adding that “We could fairly say we would have gotten to a similar place in any event.” 

Facebook News: Cozying up to news publishers. Again. 

Facebook isn’t only showing solidarity with news publishers’ stance against the inequity of Apple’s current fee structure. It has been trying to cozy up to news publishers in other ways as well. 

For example, it is starting a new pilot programme linking its users’ Facebook accounts to their news subscriptions, The Verge reports. “The goal, according to Facebook, is to ‘provide a better news consumption experience on Facebook,’ and allow publishers to ‘deepen their relationships with subscribers.’” Could there be sweeter music? Facebook, according to the report, has been testing the feature with a small group of publishers, including the Atlanta Journal-Constitution and the Winnipeg Free Press. In June, subscribers in the test group who linked their subscription accounts on Facebook clicked on 111% more articles, Verge reported.

Facebook is rolling out a pilot programme to link user accounts to their news subscriptions.
Facebook is rolling out a pilot programme to link user accounts to their news subscriptions.

Christian Panson, vice president of digital at Winnipeg Free Press, told INMA he believes it is still early to tell what impact the new programme will have on readers: “We will be tracking successful reader logins through the programme over the next few months.”

Readers frequently complain, however, that they have to login more frequently than they feel they should, he said — whether its because of clearing their cache, using private browsing, or even changing their default browser. So he feels it is a win to find “anything that can streamline and reduce friction will improve a readers experience.”

To him, that is the main payoff and “is enough to justify the project,” adding, “we hope that Facebook will also consider linked subscriptions within its newsfeed algorithms. If our paying linked readers are served more of our content when on Facebook, that is a very attractive benefit to them and us.” 

The project took a few months to implement, Panson said, but only 30-40 hours of actual effort for his team. “So it was not what I would call an onerous project to tackle.” It required developing a feed and the reading of a login token, he explained. 

“We started by building an interface, which sends hashed details for new and/or changed subscriber records through to Facebook. Facebook uses this list to compare our hashed records to users on its platform, and when it finds a match, can then present that user the option to link their Winnipeg Free Press subscription to Facebook,” he said. 

When the reader links the subscription, any time she follows one of the Free Press story links from Facebook, the digital platform sends along a login token that can be used to log her in dynamically. “Reading this token was the second element that needed to be implemented on our end,” which was relatively simple, he said.

And Mike Lupo, The AJC’s senior director for emerging products and experimentation, said in official Facebook marketing about the programme: “The number of Atlanta Journal-Constitution subscribers who have linked their accounts has grown significantly since we launched this, as is their engagement with AJC content from Facebook. Through this partnership we are providing easy access to Facebook users to our content — with the ability to maintain customer relationship remaining with us, and the consumption of the content on our Web site, ajc.com. 

Facebook is also expanding its News Tab feature to a number of countries outside the United States — U.K., Germany, France, India, and Brazil — within the next six months to a year. As in the United States, Facebook plans to pay these publishers for their content, although Tech Crunch reports the “experience” may not be the same.

Tech Crunch also noted that Australia, where Google will be paying for content, is not on the list. That is because Facebook announced Monday morning that it is considering banning news sharing and distribution on Facebook and Instagram in Australia because of the recently mandated Draft News Media Bargaining Code. In a blog post, Facebook wrote: “Assuming this draft code becomes law, we will reluctantly stop allowing publishers and people in Australia from sharing local and international news on Facebook and Instagram … . The ACCC presumes that Facebook benefits most in its relationship with publishers, when in fact the reverse is true.”

Media Post’s Publishers Daily reported Facebook was understood to be offering publications, including The Wall Street Journal, BuzzFeed, and USA Today, up to US$3 million in annual licensing fees in exchange for content.

Conclusion

According to Tech Crunch, Facebook News has “a big battle ahead,” saying that this latest effort to “woo” news publishers could also serve the company’s efforts to combat its “growing misinformation problem.” At launch, the article reported, Facebook News had more than 200 general news publishers as well as thousands of local and regional publications in the United States.

Recode described this “fascinating battle” as being without clear-cut winners and losers, with players often having “more than one motivation.” The article points out: 

  • “Apple is in a position to attack intrusive advertising tech because it has consistently argued that it values privacy — and because the company doesn’t have much of an ad business of its own.”
  • “Facebook and other big ad players make billions of dollars tracing the detailed digital footprints their users leave — but they can also argue that ad money they generate allows people to consume news, entertainment, and the rest of the Internet for free.”
  • “Meanwhile, ordinary Internet users may say they value privacy, but it’s unlikely they have any idea how much personal data they give up when the skim a story or click on a link.” 

So what does it all mean? 

First, suggested James Currier of venture capital firm NFX in a statement reported in Tech Crunch, it’s history repeating itself:

“In 2009 at the beginning of the Facebook platform, you could build an app on Facebook, go viral, and gain millions of followers. But Facebook slowly shut down all the viral channels and put an ad server in the way, meaning app creators had to pay to get traffic. Facebook extracted what money they could from the app developers. Similarly, at the beginning of the OS platform, Facebook could be an app on the iOS and get millions of users. Now Apple is going to slowly cut off the oxygen in order to take the value for themselves. This is the law of the jungle and the network effect makes it pretty clear who has the power. iOS.” 

Second, news publishers would do well to be wary of Facebook’s newest overtures, of being used or of being caught in the middle of this high-stakes war. The industry’s recent history is replete with examples of disappointment and money that has disappeared down the Facebook rabbit hole. 

Third, this is pitching user privacy against consumer convenience, with each company trying to outdo the other in crafting a virtuous face as antitrust forces gather and confront abuses around the world — but particularly in the United States, in the E.U., and in Australia.

About L. Carol Christopher

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