Apple robbed the mob’s bank

Last week, Apple introduced a new ad unit to the App Store: a paid placement on its Search page. Rumors of this new unit had circulated previously, although the notion that Apple would increase the density of ad placements in the App Store was wholly predictable, as I assert in this piece and this piece. Apple is expanding its mobile advertising platform in parallel with the rollout of the App Tracking Transparency (ATT) privacy policy, which presents meaningful commercial challenges to other mobile ad platforms and will likely diminish their operational efficiency.

With ATT, Apple has robbed the mob’s bank. In bolstering its ads business while severely handicapping other advertising platforms — but especially Facebook — with the introduction of a privacy policy that effectively breaks the mechanic that those platforms use to target ads, Apple has taken money from a party that is so unsympathetic that it can’t appeal to a greater authority for redress. Apple has brazenly, in broad daylight, stormed into the Bank of Facebook, looted its most precious resource, and, camouflaged under the noble cause of giving privacy controls to the consumer, fled the scene.

And Facebook is left with little recourse. The company attempted to sway consumer sentiment to its side through an enormously wide-reaching PR campaign, but its efforts there were hobbled by the narrow messaging that was available to it. Facebook couldn’t explain in detail why ATT will harm consumers because, in doing so, it would need to reveal just how it personalizes ads — through observing conversions on third-party websites and apps. So Facebook was restricted to a fairly weak PR strategy, which was to highlight that small businesses would be harmed by ATT. This is true, of course, but it doesn’t invigorate a deep well of compassion from consumers. Does anyone want to acknowledge that their local florist or butcher is personalizing ads to them? Meanwhile, Apple simply had to mention “privacy” whenever objections to ATT were raised and mainstream media outlets rushed to defend it.

Apple’s exploitation of leverage in this situation has been breathtaking. It’s important to note here that ATT allows users to opt out of tracking, which is a peculiar term that is defined in a very specific way. When a user opts out of tracking through the ATT prompt, that user prevents the app from co-mingling any data it collects with data owned by other parties for the purposes of ad targeting. I explain why this particular privacy protection is, charitably, exaggerated, and, cynically, deceptive in The privacy mirage:

This is exactly the same strategy that Apple is deploying with ATT, as I describe in the presentation embedded above: by artificially defining “privacy” as the distinction between first- and third-party data usage, the largest platforms simply entrench their market positions. Google owns search and Chrome, and Apple owns the App Store. If first-party data is the commodity of empire for digital advertising, then Google and Apple and various other large platforms fortify their empires through the “first-party mandate”: the decree that the use of first-party data in ad targeting is privacy compliant but that the co-mingling of first- and third-party data for ad targeting is not.

Note here that Apple is very public about the fact that it utilizes users’ app transaction data for the purposes of ads targeting. In the privacy documentation for its Apple Search Ads network, Apple details exactly what data is used to target ads to users, which it describes as “connect[ing] customers and advertisers”:

Apple uses data about in-app purchases that users have made and apps that they have downloaded to personalize ads. This data was previously available to other advertising platforms through the event streams they ingested from apps and websites via SDKs and pixels, but ATT will sever that access. Apple is using the particular definition of “tracking” — and a very generous definition of all transactions facilitated through the App Store as being first-party data — to capture advertising market share.

For the sake of intellectual honesty, it’s important to flag three facts here:

  1. Apple has used the data identified above to target ads with Apple Search Ads since it was launched, so this isn’t new;
  2. Apple isn’t alone in defining tracking in the way I describe above: so does the W3C, for instance;
  3. Apple does not build user profiles for use in ad targeting. As Apple’s privacy documentation states, Apple puts users into segments on the basis of their behavior, in an application of differential privacy. Each segment must be comprised of at least 5,000 users before that segment can be targeted.

As I outline in my Content Fortresses thesis, when only first-party data is permissible for use in advertising targeting, then the largest consumer tech companies will simply grow their first-party datasets. Apple is claiming that the entirety of the App Store exists in its first-party data environment and so every interaction that takes place in any app is fodder for its ads optimization algorithm.

But under these conditions, the exact quality and quantity of consumer data continues to be harvested and utilized for ads targeting under ATT as was utilized before ATT. Nothing has changed with ATT: a “big tech” company continues to monitor app usage and monetization for the purposes of targeting ads, except that with ATT, the company is Apple instead of Facebook. To a true privacy zealot — someone for whom any ads targeting is an ethical disaster — would this new privacy configuration of “First Party = Good, Third Party = Bad” be acceptable?

This is the odious specter of ATT: it’s an obvious commercial land grab dressed up as a moral crusade, and it will ultimately subvert the open web and the freemium business model. ATT doesn’t provide real consumer choice, and Apple has clearly privileged its own ad network with this new privacy policy in very obvious ways. And Apple has engineered all of this while being cheered on by parties that ape Apple’s commercial slogan regarding the righteousness of first-party data for ads targeting. Case studies will be written in decades to come about Apple’s astute attack on Facebook via an esoteric advertising identifier. If anything is clear from the (protracted) rollout of ATT, it is that Apple’s PR department deserves a pay raise.