Apple’s juice: How Apple bet on privacy and won

When Apple CEO Tim Cook met with publishers this spring, he made sure to get across one key message: We’re nothing like Facebook and Google.

“He couldn’t separate Apple from Google and Facebook quickly enough,” says one publishing executive, who met with Cook earlier this year to discuss Apple News and the company’s relationship with publishers more broadly. “They see it as a massive differentiator that Apple doesn’t need to track in the same way.”

As the duopoly continues to suck up vast amounts of behavioral data from customers to fuel booming online ad businesses, Apple has actively distanced itself from those companies’ practices, both publicly to consumers and behind closed doors to its partners and customers.

Cook, in particular, has capitalized on opportunities to point out the differences between Apple’s business model and those of companies that rely on the collection of consumer data. In an interview with CNBC on March 28, he proudly said, “We could make a ton of money if customers were our product. We have elected not to do that.”

The tech giant has been vocal about its privacy stance for the past few years, but recent triggers such as Facebook’s Cambridge Analytica scandal, the General Data Protection Regulation and renewed questions about online privacy in the mainstream media have led Apple to dial up its rhetoric further.

Apple’s influence is becoming increasingly important from a regulatory and political standpoint, too. With GDPR looming, Apple’s approach appears far more in line with the thinking of European regulators than that of Google, Facebook and others, for example. And in the U.S., Facebook CEO Mark Zuckerberg’s recent congressional hearings suggest tighter regulation of the social network is inevitable.

Apple is firmly in the hardware business. It generates the vast majority of its revenue from purchases of phones and laptops, not by collecting and monetizing the reams of data flowing through those devices. But as regulators, competitors and consumers themselves begin asking more detailed questions about their data, Apple’s position is becoming a headache for other tech giants.

“In their shoes, I would be outspoken about it,” says another publishing exec. “It’s Apple’s core a fluent and educated audience that will be bothered about privacy more than the mass market, which accepts it in order to keep costs down.”

Nowhere is that distinction more clear than between Apple’s iOS operating system — which has slowly ratcheted up privacy features in recent years — and Google’s Android operating system, which typically ships with cheaper devices and is significantly more advertising-friendly.

Jason Kint, CEO of online publishing trade body Digital Content Next, argues Apple’s stance has less to do with short-term leverage or opportunism than it does with a more long-term strategy to “build trust” with its customers. “Apple has very little risk here as it doesn’t sell advertising,” he says. “And they can own consumer trust and privacy as a core human right, which is where the world is going.”

But whether Apple intended for it to be or not, privacy is emerging as a key strategic asset for the company, and one that should worry any “downstream” companies whose businesses rely in any way on data collected from Apple devices. That includes Facebook, Google and other online ad specialists, plus internet service providers and network operators that are increasingly investing in online ad and tracking capabilities. Apple ultimately owns the “last mile” between advertisers, and consumers’ palms and screens.

As a result, online ad companies flinched in recent years when Apple made it easier to install ad blockers and introduced its Intelligent Tracking Protection feature to limit tracking via its Safari browser. In December, ad network Criteo said it expected the introduction of ITP alone to cut its 2018 revenue by more than 20 percent.

In September, six ad trade groups, including the Interactive Advertising Bureau, the Association of National Advertisers and the 4A’s, published an open letter stating Apple’s move would “sabotage” online advertising. Apple responded to the letter simply by saying ad-tracking technology has become “so pervasive that it is possible for ad-tracking companies to re-create the majority of a person’s web browsing history,” and argued that data is mostly collected without consumer permission.

In light of that, Pivotal Research analyst Brian Wieser says although he doesn’t see a looming direct threat from Apple to Facebook and Google, Apple may instead “choose to push the privacy points in public policy initiatives in an effort to harm” Google and Facebook.

One way or another, Apple has little incentive to change its tune on privacy anytime soon. And as long as it maintains its share of the device market, that’ll likely mean more headaches for any companies reliant on online ads.

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