How will FB-Apple feud, Apple’s new privacy update impact digital advertising?

Nandana James Mumbai | Updated on February 05, 2021

As advertisers look for hyper-targeted, contextualised advertising, the changes could hurt Facebook’s ad biz, with advertisers likely to move to competitor platforms

Apple CEO Tim Cook’s latest allusion to Facebook’s role in data exploitation — as well as the larger protracted tussle between the two companies — may not have a significant impact on digital advertising per se, but it has reinforced the image of Facebook as a company that doesn’t take user privacy seriously, say experts. This reputational damage may propel Facebook and other tech giants to take data protection seriously in the long run, whilst advertisers may also mull ways to distance themselves from Facebook’s sullied image.

In a recent speech in Brussels marking International Data Privacy Day, Tim Cook is understood to have alluded to Facebook when he said, “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.”

Also read: Facebook is testing a prompt asking Apple users to opt-in for ad tracking: Report

The two companies have been at odds for a long time over the way business is conducted on the internet, with privacy being at the forefront of their skirmishes. Facebook, which derives most of its revenue from online advertising, has taken a gung-ho approach in criticising Apple’s new privacy changes — for instance, it ran full-page ads on newspapers against the change.

Apple’s planned new privacy update to iOS (Apple Inc’s operating system) will inform users about the kind of tracking for ad targeting done by social media companies, and will take their permission to share their information for the same.

As advertisers are interested in hyper-targeted and contextualised advertising these days, the upcoming changes could hurt Facebook’s advertising business, with advertisers likely to move to competitor platforms, Anuj Kapoor, Assistant Professor of Marketing at IIM-Ahmedabad, tells BusinessLine. While these competitor platforms will also be subject to Apple’s new privacy changes, they will at least be free from the reputational damage that Facebook has suffered due to its ongoing tussle with Apple, he explains. “The ongoing public tussle between Tim Cook and Mark Zuckerberg has only presented Facebook in a bad light and has presented Facebook as a company that’s not serious about user privacy (it might be the case as well) but this has definitely done more serious reputational damage for Facebook.”

“Since digital platforms are still a cost-effective way to reach out to customers, advertisers are unlikely to lose out on leveraging digital platforms yet,” Kapoor adds.

The impact on digital advertising per se may not be significant in numbers in the absence of a viable alternative model, affirms Sanjay Sarma, Founder at SSARMA Consults, a boutique branding & communication advisory.

The impact of Apple’s new privacy changes — as well as its discord with Facebook — may not be felt in the short run also as the adoption of iOS is far behind Android globally, with its penetration remaining significantly low, says Sarma. “But it does create a more significant perception war with Apple and Facebook/Google on two opposite will certainly make Facebook and the likes work harder, in order to sustain revenues in the long run.”

Also read: Apple vs. Facebook: Privacy battle intensifies

This should also push for an environment of collaborative partnerships amongst top tech companies to find more ingenious ways to serve targeted ads without compromising user data, Sarma adds.

While an impact will be there in the first world markets in terms of advertising on Facebook, in India, the impact will be negligible as Indians haven’t “woken up” to the concept of data sharing yet, argues Naresh Gupta, co-founder and chief strategy officer, Bang in the Middle, an ad agency.

This issue can also be looked at as a clash of personalities — Tim Cook versus Mark Zuckerburg — and this tussle goes back to 2014, when Cook had criticised Facebook’s business model, followed by Zuckerburg’s criticism of Apple’s app monopoly, Kapoor points out. “Now, advertisers are looking for optimising two things: Reaching out to consumers in a cost-effective way and without any reputational damage — of data breach, privacy breach, etc (that Facebook is associated with),” Kapoor adds.

Even though Apple has taken a step towards giving users a choice on sharing their data and warning them against data tracking, its counterparts are unlikely to follow suit, say experts. Privacy being a pivotal part of Apple’s branding strategy and the lack of threat to Apple’s revenues by taking such a stance — which is in contrast to what it may be to other companies — are some of the reasons they point out.

“Apple has been speaking in favour of stricter privacy policies for several years now, and their actions are in sync with their voice. The vulnerability of other companies on the subject only works to strengthen Apple’s position amongst the big-tech industry, in taking a lead on enforcing stronger online privacy norms. For others who feed on track and serve ad revenues (Google, for example), taking a stronger pro-privacy stand may hit revenues hard,” Sarma explains.

The other OS is Google, and Google itself is complicit with Facebook in terms of leveraging user data and targeting them with hyper contextualised ads, Kapoor points out.

There is no other company which has made non-sharing of data its key proposition, like Apple has, reminds Gupta.

“Once more stringent industry-wide regulations and frameworks on digital data privacy come into force, advertisers might then start looking at the trade-off between targeting and privacy more seriously,” says Kapoor.

Apple and Facebook locking horns with each other over privacy and data protection might well be a first step towards such a development.

Published on February 05, 2021

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