The latest skirmish between Facebook and Apple is part of a fight that stretches back more than a decade

  • Facebook launched a campaign last week blasting Apple's decision to prompt iPhone users to disable apps from tracking their personal data.
  • Facebook claims Apple's move will cripple small businesses that rely on Facebook for targeted advertising informed by that personal data.
  • The latest battle is the culmination of simmering tensions between the two companies and their CEOs over the past decade.

In October 2018, Apple CEO Tim Cook criticized the business practices of Big Tech rivals in an impassioned speech at a privacy conference in Brussels.

"Every day, billions of dollars change hands, and countless decisions are made, on the basis of our likes and dislikes, our friends and families, our relationships and conversations. Our wishes and fears, our hopes and dreams," Cook said. "These scraps of data, each one harmless enough on its own, are carefully assembled, synthesized, traded and sold."

Although Cook didn't call out Facebook by name, it was clear Mark Zuckerberg's company was one of the targets. Facebook has built a tremendously successful business by hoovering up the data of its users to inform its targeted ad system. Its revenue topped $20 billion last quarter, and nearly 99% of it comes from advertising.

The speech was just one in a series of public jabs Cook and Zuckerberg have taken at each other over nearly a decade. The tensions between Facebook and Apple date back to the iPhone's infancy and the quest for control over the next wave of computing.

In a 2014 cover story in Time, for example, Zuckerberg criticized Apple and Cook's stance on privacy:

"A frustration I have is that a lot of people increasingly seem to equate an advertising business model with somehow being out of alignment with your customers," Zuckerberg told Time. "I think it's the most ridiculous concept. What, you think because you're paying Apple that you're somehow in alignment with them? If you were in alignment with them, then they'd make their products a lot cheaper."

The war of words over the last decade highlights the fundamental difference in opinion between two giants over how business should be done on the internet.

In Facebook's view, the internet is the Wild West, with a multitude of competing platforms offering innovative services for free. You may not pay for them with your money, but you pay by allowing your data to be tracked and packaged so advertisers can plop things you'd want to buy right in front of your face as you travel between devices and services.

In Apple's view, the internet is just an extension of the personal computing revolution the company helped start in the 1980s, and your phone is the most personal device of all. You should know what companies are going to do with the information collected through that phone before you share it.

A decadelong fight

The war of words culminated last week with Facebook's two-day campaign against Apple. The ads called foul on an impending change to the iPhone's operating system designed to alert you when an app will track your personal data like location and browsing history, which companies like Facebook use to target their ads. The alert gives you the option to block the tracking before using the app.

Facebook claimed that Apple's move is designed to crush small businesses that rely on that targeted advertising to reach their customers online. It also warned — without evidence — that Apple's move would force app makers to stop offering free, ad-supported apps to their customers. Instead, they'd have to charge customers through digital subscriptions or other fees. Conveniently for Apple, it takes a cut of transactions conducted through its platform, including purchases or subscriptions that users make through apps they download on its App Store.

Facebook painted a devious picture of Apple in the campaign: Here's a company with complete control over the rules of its platform, making a change designed to squeeze small businesses and force them into a paid model, of which Apple will take a cut. Facebook delivered that messaging in newspaper ads, blog posts, Instagram posts and a glitzy website featuring small business owners who use Facebook to advertise.

Apple pushed back on Facebook's accusations. The company said the pop-up you'll see in apps is only designed to let you know when and how an app plans to track you, not ban tracking altogether. App makers like Facebook also have room in the pop-up and other screens to make their case to you for why you should allow tracking. Apps are still free to collect all the data on you that they were before, but you'll have to give them deliberate permission to do so first. According to Apple, it's just the latest in a string of privacy-centric features it's added to products over the years.

The roots of the squabble stretch back more than a decade.

In the iPhone's infancy, there was a great debate over what the mobile internet should look like. Would it look the internet on a desktop PC, where people mostly used a mobile web browser to visit web sites, with everything built on openly published standards? Or would users switch between a collection of internet-connected software "apps," giving more control to the companies that owned the mobile platforms ?

Facebook, which was born on the open internet, favored the former option and pushed for rich web apps written to emerging standards. But it lost the fight in large part because of Apple, which pushed the app model as the default way of accomplishing tasks on the iPhone, then insisted that its own App Store would be the only legal and easy way to find and install those apps. (Google smartly played both sides, investing in the Android mobile platform and its own Google Play app store, as well as building out its Chrome web browser and exercising influence over web standards.)

As the future became clear, Facebook made attempts to build its own smartphone so it wouldn't have to concede so much control to Apple or Google. The device never saw the light of day, and Facebook instead developed a software "skin" for Android devices that featured its own services. That was also a flop.

Today, Facebook is laying the groundwork to own the next major computing platform so it doesn't have to play by another company's rules again. That's why it's currently developing products like digital glasses, which the company is expected to launch in 2021.

But in the meantime, Facebook has to deal with Apple.

Facebook's endgame is unclear

It's ironic that Facebook accused Apple of abusing its market power last week, just days after the FTC and a group of state attorneys general sued Facebook, alleging antitrust violations and recommending a breakup of the company.

On top of that, Facebook's argument exposed its own hold on the digital ads market. Small businesses wouldn't have to rely so much on Facebook if Facebook had a viable competitor for these companies to advertise through.

Apple faces similar government scrutiny, although there have been no formal antitrust lawsuits yet. In October, the House Judiciary subcommittee on antitrust released an epic report on the "monopoly power" of the four biggest tech giants, alleging Apple uses its control of the App Store to squash potential competitors.

Both companies have rejected claims that their businesses violate antitrust laws. But Facebook has now created an environment where two giants facing antitrust scrutiny in the U.S. and around the world are trading barbs over which one is more guilty when it comes to abuse of market power.

It's also hard to tell what Facebook's end game is here. Apple is not going to backtrack on a key privacy feature for the iPhone, and Facebook is not going to risk losing millions of users by yanking its apps off the App Store.

Steve Satterfield, Facebook's director of privacy and public policy, told CNBC in an interview this week that the company will still comply with Apple's new rules, and there's no chance Facebook would flagrantly violate them to ignite a legal battle like the one Apple and "Fortnite" developer Epic Games are embroiled in now. (Facebook said last week it would support Epic in its lawsuit against Apple.)

"Our goal is simple," Satterfield said. "We want Apple to start listening. They dropped this policy back in June with no meaningful consultation… Considering the far-reaching impact, it's important businesses can plan for it."

It's also difficult to buy Facebook's stated argument against the pop-up. For years the company has argued that its users prefer the personalized and targeted ads that its data collection enables, as opposed to random ads served to a broad audience with no targeting. If that's true, then users should have no problem enabling the tracking when Apple shows them the popup.

In August, Facebook undercut that argument when it released data from a study showing enough people would disable tracking to cause a 50% drop in revenue through its third-party ad networks. The company also warned investors this year that its own revenue would take a hit when Apple starts enforcing the tracking tool.

Facebook said it would prefer to use its own privacy checkup tools to help users limit what data to share, instead of the notification Apple will show you.

Apple said its customers want more privacy controls built into the iPhone. After years of criticizing the business practices of Facebook, the company has routinely added privacy features to tamp down on the abuses it's seen on its devices.

"Look at what we've done with the controls we've built in," Cook said in a 2018 interview with Axios when asked why companies like Google and Facebook are allowed to thrive on the iPhone despite his criticism of their practices. "We have private web browsing. We have an intelligent tracker prevention. What we've tried to do is come up with ways to help our users through their course of the day."

It wasn't just Apple pushing back against Facebook's arguments. Groups of small business advertisers, the same ones Facebook said it was trying to protect, took over Facebook's #SpeakUpForSmall hashtag on Twitter and filled it with complaints about the lack of attention they get compared to Facebook's larger ad clients the day the campaign launched.

And Bloomberg published a report earlier this week full of similar complaints from advertisers over the company's automated ad buying tools. BuzzFeed published a story Tuesday citing Facebook employees who were just as confused over the anti-Apple crusade as the small business advertisers.

For its part, Facebook spokeswoman Ashley Zandy told CNBC the company has heard from many supportive companies and that it allows its employees to speak freely and question company strategy.

"I think we've seen a lot of balanced and nuanced coverage of the announcement," Satterfield said. "I think we're pleased."

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