Earlier this month, The Washington Post revealed that in 2016, Australian firm Azimuth Security unlocked the iPhone of the San Bernadino terrorist. The hack followed a public battle between Apple and the FBI over privacy versus national security interests, with Apple arguing that permitting the FBI to unlock the iPhone would be a breach of Apple’s privacy policy.
Increasingly, Apple’s position on customer privacy has become central to its brand.
“Privacy is a fundamental human right,” declares Apple on its website. “At Apple, it’s also one of our core values.”
Underscoring this stance, Apple has rolled out sweeping privacy measures for the iOS 14.5 update, which introduces a feature called App Tracking Transparency (ATT) that promises to change the way apps handle privacy. While Apple customers may appreciate these measures to protect personal data, tech giants whose business models depend on data-tracking advertisements find the features disruptive.
As described by Apple, “App Tracking Transparency will require apps to get the user’s permission before tracking their data across apps or websites owned by other companies. Under Settings, users will be able to see which apps have requested permission to track, and make changes as they see fit.”
In practical terms, this means that users will now have an opt-out choice to limit an app’s ability to track the user across other apps and websites. If the app would like to track a user, the user will receive a pop-up notification that reads, “X would like permission to track you across apps and websites owned by other companies. Your data will be used to deliver personalized ads to you.” A user will then be able to choose between “Allow Tracking” or “Ask App Not To Track.” As privacy is becoming more of a concern to customers, most privacy advocates expect the feature to be embraced by users, which could impact not only the advertising platforms but also the advertisers’ bottom lines.
This promised change by Apple has already led to pushback. Google announced that it will stop using tracking tools that trigger the pop-up. Mail Online stated it may have to delete its Apple app and force readers to access content via its website. Facebook has bickered with Apple publicly and framed the decision as an attempt to undercut the business model used by Facebook and other free, ad-supported apps.
While it’s easy to paint the complaints of pro-advertising companies as self-serving, it is certainly true that Apple’s privacy emphasis may help its bottom line as well. Apple is angling to be a one-stop tech company for everything. Whether it’s helping its users get in shape, collecting financial data, or mining other sensitive information, Apple wants its users to trust its hardware and ecosystem. Having such data requires strong privacy assurances to ensure customers are not creeped out. (Just ask the Amazon Halo what can happen if users don’t fully trust its privacy fundamentals.) In addition, this privacy move may increase Apple’s power over its app store and generate more money for Apple by funneling users to download applications through its app store, rather than through in-app ads.
In a larger context, this fight heightens the drastically different privacy principles among tech companies. On one hand, companies such as Apple have argued that users’ control over their data is a fundamental principle and that the more the user controls, the better the experience will be for the customer. Other companies such as Facebook have argued that their advertisement model allows companies to better target ads at customers, thus giving customers a better experience by offering ads they might want to see, as opposed to ads that are irrelevant to the user. They have also further argued that this model ensures that users will always be able to use the platform for free, whereas, without ad-supported products, Facebook users would have to pay to access the platform.
The effect of Apple’s new privacy features on the ad-supported platform model may be the most interesting outcome. If this update affects this model as much as Facebook or other SaaS providers expect it to, it may jeopardize the effectiveness of the model in general. If users are not “paying” with their data, the platforms may become less attractive to advertisers, who leverage this data to create more effectively targeted ads. In the absence of this advantage over traditional advertising, the utility of the platforms for advertisers may decline. This impact could force ad-supported providers to rethink their business models.
Then again, innovation is the bread and butter of tech. As Apple and other providers start to implement more stringent privacy measures, ad-supported platforms and advertisers may simply create new technology to evade privacy regulations in a never-ending arms race. To wit: Proctor & Gamble may have already found a way around Apple’s privacy changes.
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Alex Kimata joined Milgrom & Daskam in 2018 and specializes in general corporate, data security, and intellectual property law.
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