Could Apple Seriously Hurt Facebook’s Business Model With This One Update?
By: Bruce Ironhardt
Tags: Privacy, Apple, Technology, Advertising, Facebook

Could Apple Seriously Hurt Facebook’s Business Model With This One Update?

And what’ll happen to developers?

Photo by Youssef Sarhan on Unsplash

Earlier this week in a story I wrote about Epic’s lawsuit against Apple I mentioned briefly how Apple and Facebook had a little fight. You can read it here,

but the TLDR is, Facebook released an update that told users that Apple would take a 30% cut from transactions made on Facebook’s IOS app.

Facebook currently supports a recent feature that allows for paid online events (think birthday’s all the way to small businesses).

Due to the recent pandemic, Facebook said that it would support small businesses and events by not collecting fees for at least the next year, meaning small businesses could keep 100% of their earnings.

The issue is on iOS is Apple takes 30% under almost all circumstances of any in-app purchases. Including the ones on Facebook.

Facebook did try and petition Apple to make an exception given the current pandemic but Apple declined and blocked the update informing users of Apple’s 30% cut.

Now, this is clearly a bad look for Apple but the giants ended up going toe to toe yet again, and maybe in Apple’s favor this time.

Privacy. Privacy Privacy.

It all revolves around iOS 14 and something called IDFA.

IDFA or Identifier for Advertisers is a random string assigned by Apple to a user’s specific device. This identifier can be used to discover, and track information on a user such as in-app events or triggers. You can read more about it here.

Photo by Morning Brew on Unsplash

This is really important to understand because it's the primary way companies like Facebook track you outside their own app on iOS. And it’s what drives the majority of target ads on the platform, which is Facebook’s main business.

The biggest change in iOS 14 however is that Apple will let users opt-in to the service. Previously, they could opt-out but it wasn’t really a feature that was advertised all that much meaning Facebook has all these users already on board.

With the current public discussion about data privacy and how more and more people want control over their data, it’s a good guess to suggest not many people would opt-in to the service.

It is important to know that IDFA doesn't collect information that’s personally-identifying like your name. This does make it partially anonymous while giving the ability for advertisers to still track you.

Facebook uses what's called its Audience Network. The Audience Network is essentially a plugin for developers, developed by Facebook, to use when they want to add advertisements to their apps.

Now, Audience Network relies on IDFA to collect data and provide results on the best ads to push to certain devices.

It might be easy to think that this change will only affect Facebook really and Apple will help make data privacy even more important on the next version of iOS.

But ads are a huge reason many apps can be free and still support developers and publishers through non-direct payments. With this move according to Facebook,

“We know this may severely impact publishers’ ability to monetize through Audience Network on iOS 14, and, despite our best efforts, may render Audience Network so ineffective on iOS 14 that it may not make sense to offer it on iOS 14 in the future.” — Facebook

This basically means that developers will need to look at other ad programs from possibly Google or maybe in the future Apple themselves to generate profits.

Facebook said that it expects ‘less impact’ on its own advertising business since it doesn't need device-level information but losing Audience Network on an entire platform, will be a huge loss for them and a huge source of income that’ll disappear.

The other side of all of this is the users themselves.

Data privacy is important and these new changes in my opinion are welcome in an environment where it's currently hard to tell how my own data is being collected by all these large companies. It also finally gives users direct control over which apps I trust to track me (the answer is none, I really don't mind irrelevant ads).

More than that for Apple it may serve to be a huge differentiator between iOS and Android. Where if you want to keep your privacy and data secure, iOS (and more importantly Apple) is the way to go.

I’d love to know what the community thinks.

Do you want more privacy and control? Do you think Facebook will be hit quite hard or do they have a strong model already in place? And what about the publishers and developers who really seem to be getting the short end of the stick?

I'll leave you all with this last quote,

“Our view is that Facebook and targeted ads are a lifeline for small businesses, especially in the time of Covid, and we are concerned that aggressive platform policies will cut at that lifeline at a time when it is so essential to small business growth and recovery,” — Wehner