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The new iPhone update allows users to opt out of having apps tracking their online habits. And it is a huge part of Facebook'

Apple users across the world are adapting to the latest iOS update, called iOS 14.5, featuring a new batch of emojis. However, there is also another change, which might be less fund but more crucial for several users – the introduction of app tracking privacy (1).

It promises to convoy in a new era of user-oriented privacy. And, people are annoyed about it, most notably Facebook, since it relies heavily on tracking internet users’ browsing habits to sell targeted ads. Some observers have called it the beginning of a new privacy dispute between the two tech giants (2).

How did Ad Tracking Work on iOS Previously?

Before the new update, developers could use tools to track user data from within an app. Then, advertisers use it in conjunction with similar data from the web to broadly find info concerning a user and target him with ads better or sell those data with other businesses and companies.

Until now, the primary tool available to developers was an Apple-controlled system, which has been around for almost a decade, IDFA, Identifier for Advertisers. However, developers could also utilize other third-party tools and data to gather user data.

Tracking Transparency

The app tracking transparency feature is a continuation of Apple’s push towards being known as the platform of privacy (3). It allows apps to display a pop-up notification explaining what data the applications want to collect and what it plans to do with the gathered data.

There is nothing else users require to do to gain access to the new feature apart from installing the latest iOS update, which happens automatically on most Apple devices. Once upgraded, applications that use tracking functions will display a request to opt-in or out of the function (4).

Technically, it alone doesn’t make any changes to how iOS handles ad tracking. Before also, users had the option to opt-out of IDFA-based tracking. However, the new update pouts the choice upfront. It also forces developers to give users a choice. Every app that wishes to track users and their data across different apps and websites now has to ask for permission.

Apple App Tracking Transparency

The Working

As Apple explained (5), the app tracking transparency feature is a new API, application programming interface, a suite of programming commands developers use to interact with the operating system.

It offers software developers a handful of pre-canned functions that let them do things such as requesting tracking authorization or checking the authorization status of individual apps via the tracking manager.

It offers app developers a uniform method of requesting these tracking permissions from the device users in simpler terms. It also means that the OS has a centralized location for checking and storing what permissions a user has granted to which apps.

The thing missing from the fine print is that there are no physical means to prevent user tracking. The app tracking transparency feature is merely a pop-up box. It is also worth highlighting the specific pop-up wording; ‘ask app not to track.’ If an app uses legitimate device advertising identifiers, answering no would result in the identifier being set to zero. It would reduce the app’s tracking capabilities, honoring Apple’s tracking policies.

But, if an application is determined to track a user, several techniques could let them make surreptitious user-specific identifiers, which may be challenging for Apple to prevent or detect (6).

For instance, while an application may not use Apple’s device advertising identifier, it would be easy for it to generate a little bit of ‘random data.’ It can then pass this data between sites under the disguise of normal operations like recovering a photo with the data embedded in the file name. While it would contravene the developer’s rules of Apple, it is pretty challenging to detect such type of private data.

Nonetheless, it seems like Apple is prepared to crack down hard on app developers who don’t play by the rules. The latest additions to Apple’s App Store guidelines explicitly state that developers must receive explicit permission from users through the App Tracking Transparency APIs to track their activities.

At the same time, it is also highly unlikely that major app developers would want to fall foul of the policy since a ban from the App Store is quite costly. It is also very hard to imagine Apple sanctioning big players such as TikTok or Facebook without some serious behind-the-scenes negotiations.

What About Apple’s Apps?

According to Apple, its apps will also abide by these new rules. As a policy matter, the company says that its first-party apps already don’t track users across other websites and apps. It is why users won’t see it appear on Apple’s apps.

With that said, Apple does track its users to serve personalized ads within the Apple News apps, Stocks, and App Store. Apple users’ information such as location, device type, keyboard language settings, mobile carrier, OS version, and so on to serve customers more relevant ads within its apps. It also users account information and past purchases to lump users into market segments to target ads within those applications better.

However, the difference is that Apple only uses the data within its own applications and doesn’t link it to additional profiles from third-party sources, and doesn’t sell it. Moreover, it also offers an additional toggle located in ‘Setting > Privacy > Apple > Advertising’ to disable that tracking.

Will Users Be Forever Spammed with These Pop-ups?

No. Apps can only ask once when users first open them after installation or update. Developers who do not want to track users won’t give them a prompt at all. There is also a global setting switch that allows users to opt-out of all apps by default in Setting > Privacy > Tracking and toggle off, ‘Allow Apps to Request to Track.’ The same menu also allows users to revoke or grant permission to apps after the initial prompt.

Are there Any Alternatives or Exceptions?

There are few exceptions to the new policy. First, companies with multiple apps can track users across those different apps. For example, Facebook can use data it gathers from Instagram to target ads in its main app.

Apple is offering new and in-house tools for developers. One tool, SKAdNetwork, tells the company how many times users have installed its app after seeing an ad. Another, Private Click Measurement, tells them how many times users clicked on an ad for a product within an application. According to Apple, both methods prevent companies from getting info about a specific user.

Why is Facebook Fuming?

Ever since Apple rolled out privacy change with its new iOS update, there has been a war of words in Silicon Valley.

Facebook has been fuming about the new feature, most notably. After all, it threatens the social media giant’s 86 billion USD annual revenue source; targeted ads. The social media giant has waged a months-long campaign against Apple, running testing pop-ups inside the Facebook ads and full-page ads in newspapers to encourage users to accept its tracking.

It also claimed that Apple made those changes to help the iPhone maker’s business instead of protecting consumer privacy.

Mark Zuckerberg, the CEO of Facebook, said in January, during the company’s fourth-quarter earnings calls (7), Apple may state that it introduced the new feature to help people, but the moves track their competitive interests. On the other hand, Tim Cook, the CEO of Apple, says that the change is rooted in the iPhone maker’s belief that users should decide when it comes to their data collection and its use (8).

The dispute highlights a core difference between the tech behemoths: how they make money. Apple sells laptops and smartphones and takes a cut of fees charged to app developers. Facebook collects data of its 2.8 billion monthly users and sells targeted ads based on the collected data. Those business models underscore their privacy approach.

Yes, it is complicated, and it has been a slow boil. At its annual developers’ conference in June last year, Apple had stated that it would introduce a feature to its new iOS update that needs users to give app permissions to track them across several apps and web portals. While it is a common practice (9), users are often unaware of it since they are buried in service or privacy policies. Who reads those?

iPhone users will see a pop-up that will explicitly state that an app wants to track them with the new update. Developers can use the pop-up to explain how they will use the user data. For example, Facebook uses collected data to show personalized ads to people.

Like we have said, the pop-up will also give users an option to opt-out of tracking, and many probably will.

In a blog post about the latest updates (10), Apple explained to developers that tracking refers to the back of linking device or user data collected from your app with device or user data collected from other apps, offline properties, or websites for advertising measurement purposes or targeted advertising. It is also referred to as sharing device or user data with data brokers.

How Could it Affect Users?

It would depend on how often users look at ads. If one doesn’t deal with them often, he probably won’t notice a huge change by opting out of tracking.

Whereas, if one relies on Facebook’s ads to direct his products and service he buys, expect the ads he sees to be less relevant if he decides to opt out.

The prompt will also give users a sense of which applications track them across other websites and apps to serve them ads.

Facebook’s Response

It is crystal clear that Facebook is unhappy with Apple since it has made that known publicly. The social media giant ran full-page newspaper ads (11) in The New York Times, The Wall Street Journal, and The Washington Post with an argument that Apple’s update will harm consumers and small businesses. Notably, academics have challenged the social media giant’s claims.

Facebook has also launched an online portal (12) where small businesses can share their stories. It includes videos from small business owners supporting personalized ads and encouraging others to share their stories with #SpeakUpforSmall. Several of these small businesses say that they rely on social media ads to lure more customers.

The social media giant’s argument also reflects its personal interest in the effects of the change, which would surely weigh its revenue. In the fourth-quarter earnings calls, Zuckerberg had repeatedly talked about the topic and complained about Apple.

He stated that they have a lot of competitors who make misleading claims about privacy. Zuckerberg further added that Facebook, which also offers a messaging service via Messenger and WhatsApp, sees Apple as a competitor as its iMessage is also quite popular.

Dan Levy, who runs the ad business of Facebook, stated in a blog post that Apple’s new policy is about profit and not privacy (13). He added that the iOS change would force apps to turn to subscription fees and in-app purchases, from which the tech giant can take a cut of up to 30%. (Notably, earlier this year, Apple rolled out a new program this year to drop the share to 15% for small businesses with revenues of up to 1 million USD per year (14).

There is no denying that the Mark Zuckerberg-led social media giant has a skint history with user privacy, and it is unlikely that users will allow it to track them. The scandal involving Cambridge Analytica tarnished the social media giant’s reputation for protecting users’ privacy in 2018. This UK political consulting company harvested more than 87 million users’ data without their permission.

Read Also: Facebook: The King of Social Media or Unchecked Hedonism?

Defending Facebook’s business model, Zuckerberg stated that ads enable the platform to offer users free access. In The Wall Street Journal’s op-ed in 2019 (15), he stated that we require a service that everyone can afford if we are committed to serving everyone.

Apple’s Argument

The iPhone maker says that the new changes allow users to have more control over their data and give them more transparency about how much and why the data is collected.

During a speech last month, while taking a thinly veiled jab at Facebook (16), Tim Cook stated that if a business is created on data exploitation, on misleading users, on choices that are no choices at all, it doesn’t deserve our admiration. It warrants reform.

There is no surprise as the view is not new. In the light of the Cambridge Analytica scandal, Tim Cook told Kara Swisher, a tech journalist, and Chris Hayes of MSNBC that if Apple’s customers were its product, it could make a ton of money. The company has decided no to do that (17).

Is Facebook Overreacting?

Facebook stated that small businesses would see a cut of more than 60% of website sales from ads without data-powered personalized ads in their blog post.

The Harvard Business Review (18) states that Facebook’s findings are misleading. It suggested that the impact will be modest. Its review found that these customers have anyway generated high revenues. That is why they were targeted in the first place. Hence, it would be a mistake to conclude that these customers spent more because of the personalized ads.

While HBR doesn’t dismiss the concerns that several small businesses have about Apple’s policy changes. They are real since, under the new plan, companies will have to elaborate their data-collection practices when submitting new applications or make updates. Several users will not give permissions to track their online behavior.

Facebook says it wishes to stand up for small business in light of these changes, which it is entitled to do, but disinformation about ads effectiveness is not the way to do that, states HBR. In their view, Facebook cherry-picked the data, a Deloitte study (19), they believed best supported its case, but the cherry was not even good.

Tim Cook also pointed out that Facebook would still be able to track users. It only needs to get their permission first.

Nonetheless, Facebook is not alone in cautioning that the new policy can harm their ad sales. While Snapchat expressed support for Apple’s changes, Derek Andersen, the CEO of Snapchat, stated that the change represents an interruption risk to demand ads during its earning calls.

Twitter also suggested that the changes could have a model impact on its performance but did not elaborate in its fourth-quarter shareholder letter (20).

Is Facebook overreacting? Well, that would depend on whom you are asking.

Notably, Facebook is fueled by web users’ data. It would inevitably see anything that gets in the way of its huge revenue-generating network. In 2020, Facebook’s advertising revenue exceeded 84 billion USD, a 21% rise in 2019 (21).

While such ads that Apple’s new rule impacts are not a huge part of Facebook’s revenue, less than 5% of its annual ad revenue, it is still a noticeable chunk. It is especially true considering that Facebook’s internal estimate expects more than 80% of iOS users to opt-out.

The problems are deep-rooted and highlight the two tech behemoth’s very different business models. Apple’s business model is the sale of smartphones, laptops, computers, watches, and other devices, with a significant part of its income from the vast ecosystem of apps and in-app purchases used on these products. Apple’s app revenue, reported in 2020, was at 64 billion USD (22).

With a vested interest in ensuring that its customers are happy and loyal to its products, Apple is well-positioned to deliver privacy without harming its profits.

Antitrust Concerns

Since it is among major tech stories in 2021, of course, there would be antitrust concerns. A group of advertisers based in Germany filed a complaint about the new system. French regulators have shot down an initial complaint in March (23), remarking that the system does not appear abusive on the iPhone maker’s part.

What Should Users Do?

Ultimately, it is a decision that users have to make. Users get several apps and services for free. App developers often cover their costs via in-app purchases, subscription models, or in-app ads. If enough users opt to embrace privacy controls, developers would either change their funding model, such as moving to paid apps or find other ways to track users to keep ads-delivered revenue.

If you don’t want developers to collect your data and potentially sell it to unnamed third parties, it offers one way to restrict your data trafficking.

However, it is also worth noting that user and device tracking is a valuable tool for ad optimization by creating a comprehensive layout of individuals. It increases the relevancy of each ad while also reducing advertising costs since they would only target interested users. Arguably, there is also a benefit for users as they will see more relevant ads that are contextualized for their interests.

While it may slow down the rate at which users receive personalized advertisements in websites and apps, it will not be an end to intrusive digital ads. In essence, it is the price we pay for free access to these services.