Facebook Attacks Apple's iOS 14 Anti-Tracking Changes (Updated)

• Facebook has taken out full-page newspaper ads in the U.S. to criticise Apple's upcoming privacy feature called App Tracking Transparency (ATT) that requires users' explicit consent to track them across mobile apps and websites to deliver targeted ads. It claimed the change "[threatens] the personalised ads that millions of small businesses rely on to find and reach customers."
• First, a small primer on how ad conversions work: Imagine scrolling through your Instagram feed and you see an ad for a nice pair of jeans. You don't tap the ad, but a few days later, you go on Google, search for the same jeans you saw on Instagram and buy them. Once this online purchase is made, the retailer records the device identifier (IDFA) of the user who bought the jeans and shares it with Facebook, which can then determine whether the ID matches with the user who saw an ad for the jeans. This shows the retailer that their Facebook ads were effective.
• When ATT is in full effect, users will have a say over this kind of tracking. With the upcoming changes, all iPhone, iPad, and Apple TV app developers will need to receive a user's permission to track their activity across other apps and websites and access their device's random advertising identifier, known as the Identifier for Advertisers (IDFA), for targeted advertising purposes. It's easy to see why restricting the flow of this data could be a blow for Facebook, whose competitive advantage in the advertising space (its primary revenue source) is built on such tracking techniques, as well as for other advertisers who would be now unable to accurately measure the effectiveness of their Facebook and Instagram ads.
• In other words, Apple's planned privacy change will mean that apps can't pass along the IDFA identifier without users' permission, thereby limiting what Facebook and other ad companies can glean. It's also worth noting that when a user opts out of tracking, developers (including Apple) are expected to stop using other identifiers (such as hashed email addresses) to fingerprint users for ad targeting purposes, and not to share that information with data brokers. This does not, however, stop developers from tracking users across multiple apps if all those apps are operated by a single company.
• Apple said in a statement, "We believe that this is a simple matter of standing up for our users. Users should know when their data is being collected and shared across other apps and websites—and they should have the choice to allow that or not. App Tracking Transparency in iOS 14 does not require Facebook to change its approach to tracking users and creating targeted advertising, it simply requires they give users a choice."
• Stratechery's Ben Thompson has an interesting take on the matter, who said Apple's pursuit of privacy is systematically destroying the ability of platform-driven small businesses to compete with the Internet giants." Apple is "less protecting customers from Facebook than it is protecting Google and Amazon and other centralised consumer services from independent competition," he added.

• In a related development, Facebook has also said it will assist popular video game maker Epic Games in its legal battle against Apple (and Google) after both the companies pulled the survival game from their respective app stores for adding an unauthorised direct payment option that skirted a 30% fee they collect on in-app purchases.
• By aiding Epic, Facebook is wading further into a battle over Apple's App Store commission (aka the Apple tax) that is being waged by several companies, including Spotify, Tile, Basecamp, Tinder owner Match Group, and a consortium of publishers and other entities, dubbed Coalition for App Fairness (CAF), which has called for increased regulation over app stores and a level playing field for all developers.
• While Apple's move is part of a broader tightening of privacy rules in the digital advertising ecosystem, Facebook, in recent months, has ramped up its counterattacks against Apple, calling its move to block cross-app tracking without express user consent a self-serving measure cloaked in the interest of privacy. It's worth noting that Apple last week rolled out new App Store privacy labels that spell out how iOS apps collect and process user data.
• "This is not really about privacy for them," said Dan Levy, Facebook's head of ad products. "This is about an attack on personalised ads and the consequences it's going to have on small-business owners."
• Where it gets more interesting is the fact that Apple's own personalised ad platform is exempt from the new iOS 14 policy requirement, potentially raising concerns that the change could be an attempt to boost its own advertising business, lending it a "platform-level advantage over competitors." Apple uses the data it collects — including in-app purchase data that Apple collects from within apps owned by other companies — to serve personalised ads in the App Store and on Apple News.
• "Apple controls an entire ecosystem from device to app store and apps, and uses this power to harm developers and consumers, as well as large platforms like Facebook," Facebook said in a statement to CNBC.
• In some ways, Apple's "privacy" push can be viewed as a thinly veiled attempt to leverage its monopoly position to grow its services revenue — more apps switching to a paid model could mean more transactions in the App Store, and more commissions for Apple — and expand its advertising business at the expense of companies like Google and the large ecosystem of app developers.
• The tightening of its privacy regime will not only serve to strengthen its walled garden, but doing so will invite greater scrutiny of its market power by regulators. Apple uses a narrow definition of privacy that benefits Apple more than it benefits users, enabling increased power over its App Store and more control over the kinds of apps that get popular, not to mention boost Apple's own Search Ads.
• There's no doubt that Apple has an incredible amount of control over every aspect of its platform. Apple mobile devices are only manufactured by Apple and can only use Apple's operating system. Apple hardware must also use apps obtained through Apple's App Store, and those apps are expected to meet Apple's guidelines, use Apple's in-app purchasing features, pay Apple a 30% commission, and compete against Apple's own apps. This also means that Apple can make privacy part of its selling point for its customers, and it can mandate it from any app that potentially wants to reach iOS users. Even when those apps are made by companies as big and powerful as Facebook and Google.
• Last year, Democrat senator and presidential candidate Elizabeth Warren, in an interview with The Verge called for a break up of Apple from its App Store: "Either they run the platform or they play in the store. They don't get to do both at the same time."

• Update on Dec. 17: Facebook is stepping up its campaign against Apple's privacy changes with a second full-page newspaper ad that calls the anti-traching feature a "a forced software update that will change the internet as we know it — for the worse," adding businesses will have to "start charging you subscription fees or adding more in-app purchases, making the internet much more expensive and reducing high-quality free content."
• The Electronic Frontier Foundation, in a new post, criticised Facebook's campaign, calling it "laughable" and a direct attack against privacy. "This is really about who benefits from the normalization of surveillance-powered advertising (hint: it's not users or small businesses), and what Facebook stands to lose if its users learn more about exactly what it and other data brokers are up to behind the scenes," the EFF said.
• While there is no doubt Apple is leveraging privacy as a powerful marketing tool, it doesn't take a genius to figure out that a move like app tracking transparency works against Facebook's interests and directly impacts its ability to make money off targeted ads.