The situation for Apple resembles a two-front war

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SvD Näringsliv

This analysis was first published in SvD Näringsliv, in Swedish, on December 18th, 2020.

“We’re standing up to Apple for small business everywhere.” That is what Facebook wrote in a series of full-page ads in American newspapers this week. The situation for Apple is now beginning to resemble a two-front war when both Silicon Valley and the media world attack from different directions.

In recent years, Apple has taken an increasingly clear stance on transparent data management. Their view is not to store data from users – unless they know about and accept it. But in order to gain acceptance, one must also ask the question. This is the issue for Facebook, which has had a long conflict with Apple regarding these matters.

In Apple’s new operating system iOS14, the company will ask if you want to allow data collection from each app. If the user says no, the accuracy of the ads will be worse for instance. This is a minor issue for Apple, which does not have ads as its business model, but for competitors such as Amazon, Google and Facebook, it could be devastating. The accuracy of the ads deteriorates radically. And especially for Facebook, this is bad and also the timing, as they are pressured by a new major political investigation.

So what do the small businesses mentioned in the ads have to do with this? Not much really. But as so often, tech giants use them as a front to protect their own interests. Apple recently did the same with smaller app developers. Now it is Facebook’s turn, when it claims that small businesses will have a 60 percent worse effect on their ads if the change is implemented. That could be true, but don’t think for a second that this is where Facebook’s real problem lies in this issue. It is that the company itself, as a direct consequence, risks selling fewer ads. Small and medium-sized companies today account for the majority of the company’s revenues.

This week, Apple also got other worries, albeit from elsewhere than Silicon Valley. A lobby group calling itself the Coalition for App Fairness (CAF) announced that a large number of media companies have joined as members, including the New York Times, the Washington Post and the Financial Times. CAF is pursuing the issue of “Apple Tax”, which is what the detractors call the 30 percent fee that Apple charges in the App Store for purchases made there. Among the members of CAF you will also find Epic Games (which makes the game “Fortnite”), Match Group (which owns Tinder), and Swedish Spotify.

The pressure is now increasing on Apple. While dealing with the high-profile lawsuit with Epic Games, where the game developer claims that Apple is abusing its dominant position in the mobile apps market, a long series of political processes are underway to examine whether the company has acted as a monopoly. The fact that more and more well-known companies are raising their voices shows that this is not an individual dispute between Apple and a game developer, but a major structural issue that probably will need to be resolved politically.

Among the smaller developers, criticism has been aimed at Apple for several years, but very few have been willing to speak about it in public. The risk of ending up in conflict with their most important – and perhaps only – marketplace has been too great. The importance of several large companies joining CAF is therefore great, as each individual developer is less exposed.

When it comes to advertising, Apple has undoubtedly chosen a smart strategy. By positioning itself as the user’s best friend regarding data, it has also set hooks for its competitors. It is difficult to sell ads without the data, and the iOS platform is incredibly important for all advertisers.

However, it should be remembered that this is a relatively new strategy for Apple. In 2010, they bought a company called Quattro Wireless for $275 million. It then laid the foundation for Apple’s own advertising system – iAd – which they had until the summer of 2016. In four years, they have gone from selling ads themselves, to making life difficult for all other advertising networks. That this matter is solely about the users’ best interests is therefore, to say the least, a beautification.

Apple and Facebook have – despite all the quarrels – one thing in common. They look after their own interests first, but prefer to talk about the users and small businesses that benefit from their success.

This analysis was first published in SvD Näringsliv, in Swedish, on December 18th, 2020.

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