This analysis was first published in SvD Näringsliv, in Swedish, on October 28th, 2022. This piece was translated from Swedish by Claude. Some phrasing may differ from a human translation.
Apple’s privacy strategy is a masterstroke that is systematically crushing rival tech giants. But behind the scenes, the motives are less noble.
Rarely has an aggressive business strategy been framed so elegantly as Apple’s “privacy is a fundamental human right.”
It sounds consumer-friendly and principled. But the practical consequence of that sentence is currently erasing billions in revenue at Apple’s competitors.
The abbreviation ATT — App Tracking Transparency — is what it all comes down to. Through a change to Apple’s operating system earlier this year, the company made it effectively impossible for other businesses to track which of their ads actually work.
This was all done, so the story goes, to protect users’ privacy from being tracked in inappropriate ways.
Many iPhone users have by now grown accustomed to saying yes or no when a newly downloaded app asks whether it can track them.
Fair enough. But among the motivations there were also less noble considerations. It was an indirect attack — on Meta (Facebook), Snap, and YouTube (owned by Alphabet).
The mobile gaming industry and e-commerce companies saw an immediate effect. They scaled back and redirected their ad spending to other platforms, hitting the companies mentioned above, who are the ones selling the ads.
Last week, Alphabet (Google), Meta (Facebook), Microsoft, Apple and Amazon all reported their quarterly results. These companies are often referred to collectively in this column — and elsewhere — as “tech giants.”
Scale is one thing they share, but their businesses and revenue models have always been quite different. And it is the companies with a particular kind of advertising at the core of their model that Apple’s strategy has hit hardest.
YouTube, for example, reported falling revenue for the first time ever — something several analysts attribute directly to Apple’s ATT.
For Meta, it was even worse. The stock fell almost 25 percent — to its lowest level since 2016 — after reporting results that fell short of market expectations.
CEO Mark Zuckerberg tried to explain the situation: “There are macroeconomic headwinds. There’s a lot of competition. There are advertising challenges — especially those coming from Apple.”
Back in February, Zuckerberg had said that Apple’s change would cost Meta $10 billion (around 108 billion kronor) in lost revenue during 2022.
What do these companies’ ads have to do with Apple? They are displayed on Apple’s hardware. And iPhone users are, in general, more sought-after in the advertising market — they spend more money on average than Android users. Billions are spent every month to reach precisely these users. A challenge that has now become significantly harder and more expensive.
Given the heightened tension, you might assume Apple has some principled objection to advertising. Not so.
Apple’s own advertising revenues are already estimated at around 44 billion kronor annually — a figure that, according to Bloomberg, is set to grow to over 110 billion.
On top of that, Apple expanded its own ad network this week. The App Store now carries more ads than ever before, and under headings like “our favourites for children” you could find direct ads for casinos.
Apple was forced to pause some of those ads the very next day, after developers complained. Targeted digital advertising is harder to get right than most people realise.
One might assume it is the global macroeconomic environment — war in Ukraine, rising interest rates, inflation — that is causing ad-dependent companies to lose revenue. The picture is more complicated.
Amazon — a far larger player in the advertising market than most people realise — posted advertising revenues of over 100 billion kronor in its third quarter. That is more than Twitter, Snapchat and Pinterest generate from advertising combined. And more importantly, that figure grew 25 percent compared to the previous year.
The same trend can be seen at advertising conglomerate WPP, one of the world’s largest buyers of ad space. They reported growth in advertising and raised their growth targets for the year. The overall advertising market appears to be doing quite well. Apple’s own ad revenues are growing.
But those who have been subjected to Apple’s rule change are going through a baptism of fire.
Apple introduced itself to the world with an ad called “1984” — a reference to George Orwell’s novel. Looking at how the company is behaving now, they seem to have drawn more inspiration from his other book, Animal Farm. All advertising is equal, but some advertising is more equal than others.
