In the last quarter of 2020, it was reported that Facebook generated a revenue figure of US$28.1 billion – up 33 percent year on year. That winning streak could be impacted this week ahead of the social media giant’s release of its first-quarter 2021 earnings, which has investors worried. The impact comes from a new pop-up privacy notification rolled out on Apple’s latest iOS update.
While Android users have been used to the pop-up for a while now, it will be the first time Apple iPhone users will be subjected to a full-screen notification. The prompt screen will begin appearing on iPhone apps from Monday, asking users if they consent to being tracked "across apps and websites owned by other companies" for the purpose of advertising.
This will naturally act as another obstacle for Facebook’s digital ad business if users decide not to opt in. Early projections from mobile ad analyst Eric Seufert predict that Facebook could see a seven per cent decline in second-quarter revenue if 80 per cent of its users decide to block the company from tracking them via their iPhones, he told Yahoo Finance. This equates to almost US$2 billion based on the social media giant’s Q4 earnings.
The move hasn’t sat well with Facebook and just last year, the company rebuked Apple’s plans by ordering full-page ads in The New York Times and The Wall Street Journal. The ads accused Apple of damaging small businesses that relied on targeted personalised ads while compromising the integrity of internet freedom.
Even Facebook CEO Mark Zuckerberg has come out swinging by accusing the tech giant of anti-competitive behaviour while handicapping other developers in favour of its own app ecosystem.
"Apple may say that they're doing this to help people, but the moves clearly track their competitive interests," he said earlier this year in an earnings call with analysts. Lately though, Zuckerberg has been focusing his attention internally. In March he noted that Facebook could potentially benefit from the iOS changes if merchants faced difficulties targeting their ads at new customers. This would essentially drive these businesses to take the easier route of selling their products directly on Facebook’s database of 2.8 billion monthly active users.
It would make sense to take this road, given that Facebook launched its Shops platform last May when businesses couldn’t open due to the pandemic. The feature gave users access to select merchants across Facebook and Instagram (which Facebook also owns).
If the strategy follows through, Facebook will essentially be able to track the ecommerce transaction from the moment a user sees the ad to the moment they click Buy and check out – a hugely valuable data set for the tech company.
As Facebook prepares itself to see another ad revenue growth this Wednesday for the latest quarter, its relationship with Apple and its CEO, Tim Cook, continues to fray. Returning fire against Facebook’s anti-competitive behaviour accusations, Apple said that "we believe that this is a simple matter of standing up for our users" while adding that users should have a choice of whether they want their data to be stored and shared externally.
9to5Mac reported that while the two companies have benefited from years of a fruitful relationship, things started to change when Facebook grew and began pushing the moral lines of collecting data from users. Cook has been emphasising privacy as a "fundamental human right" since 2018 and has been calling out Facebook’s practices in interviews since. When asked about the Facebook privacy scandal and what he would do if he were in Zuckerberg’s position, he replied, "I wouldn’t be in this situation" to rapturous audience laughter and applause.
At the EU data protection conference CPDP this year, Cook presented the opening keynote with a talk entitled, "A path to empowering user choice and boosting user trust in advertising". The privacy and security talk didn’t formally single out Facebook, but Cook did pass judgement on its business model.
"If a business is built on misleading users, on data exploitation, on choices that are no choices at all, it does not deserve our praise, it deserves reform."
In a more recent interview with The New York Times journalist Kara Swisher, Cook was asked for his thoughts on Facebook calling Apple’s App Tracking Transparency changes an "existential crisis" for the social media company.
"All we’re doing, Kara, is giving the user the choice whether to be tracked or not. And I think it’s hard to argue against that. I’ve been shocked that there’s been pushback on this to this degree," he said.