Former Facebook Employees Detail How iOS 14 Privacy Features Will Hurt Company

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Facebook and Apple have long been at odds. Facebook is one half of an advertising duopoly benefiting from collecting user data. Apple is part of an operating system duopoly, one that differentiates itself by protecting user data. The two are fundamentally pitched against each other. Facebook wants what Apple’s guarding. At one point, it was reportedly such a contentious relationship that Facebook’s CEO Mark Zuckerberg said he wanted to “inflict pain” on Apple. The company paid a political firm to badmouth Apple and Google. Facebook has even encouraged employees to ditch their iPhones for Android phones. Facebook’s executives are pissed at Apple, and they always will be. Facebook’s business model depends on Apple abandoning their focus on user privacy.

A new feature in iOS 14.5 (coming soon!) has Facebook seething. The feature protects users against cross-app tracking. It will require apps like Facebook ask permission to track users through other apps. This is useful so Facebook knows what ads to show you based on your Amazon search history. However, former employees have detailed why Facebook’s so worried about it. The new feature will eat away a large chunk of Facebook’s revenue. Facebook charges more for ads that users actually click. However, not all users click ads. Sometimes they leave Facebook and search for an item elsewhere. That’s the traffic Facebook needs to capture in order to make more money on their ads. Instead, their ads will hold less value and they’ll be able to collect less money from advertisers, even for successful campaigns.

As it turns out, losing the ability to spy on users in other apps could be a major blow to Facebook’s revenue stream. Not enough to destroy the company, but certainly enough to inflict pain. No wonder Facebook’s out for blood.

Former Employees Detail Revenue Flow

When someone clicks on an ad, the site hosting that ad makes more money than if they simply viewed it. Furthermore, if someone then goes through that flow and signs up or buys something as a result of seeing that ad, the site hosting it makes even more money. These are called “view-through conversions,” and they’re the most profitable ad for Facebook.

On the web, this can be done through referral URLs and cookies. On mobile, there’s a different problem. Once you say, see an ad in Facebook and leave the app to check it out in Firefox, Facebook loses all track of you. The business paying for that ad never is charged more if you end up buying a product as a result of seeing the Faceboook ad. Therefore, Facebook loses out on a lot of money. The difference can be substantial. Some websites may make a fraction of a penny for a view or “impression” on an ad, but will make over a dollar for a purchase. Dole that out over thousands of purchases, and you can see how an advertiser like Facebook can make a lot more money if they’re getting $1 for each ad that leads to a buy versus a fraction of a penny.

On iOS and Android, developers like Facebook, Amazon, and Google, have created systems to track users through unique IDs, the Identifier for Advertiser (IDFA) tag. This allows them to peep into the activity of a user, even as they leave an app. So if you do something in your Amazon app, Facebook will know because you logged into the Facebook app from the same device and they have your IDFA tag. This allows Facebook to log an ad impression that lead to a purchase as one that will get them more money from an advertiser.

iOS 14 will allow users to opt out of being tracked by this tag. In fact, tracking will be off by default. Facebook will have to ask users for permission to track. Most people won’t like that. Facebook could actually lose a lot of money from these ads that can be tracked along with product sales, especially on iOS.

Not So Small Business

If this only effects what businesses pay for ads, even successful ads, wouldn’t that just help small businesses? Facebook has been claiming that their tracking will “Support businesses that rely on ads to reach customers.” But do they? It seems they’ll actually benefit from Facebook not being able to track users across apps. If someone sees an ad for a small business on Facebook and then leaves the app to go buy that item, the small business won’t have more of their ad budget withdrawn from. They’ll have successfully used they ad for what they wanted, all while paying the lower impression price instead of the conversion price. Facebook’s mostly worried about making less money from their ads, not losing interest tracking through apps.

Facebook’s claiming that, without IDFA tracking, they won’t be able to accurately target users. But that’s not entirely true. Facebook has other methods for tracking users, and the additional tracking through IDFA won’t change a user’s profile by much. Not by enough to change how users are targeted by ads, and especially not by enough to change how small businesses target users. They don’t need all the cross-platform details. Most small businesses just need simple pieces of data, like location and interests, both things Facebook has a wealth of information on.

However, there are some businesses that might feel the sting of these lower conversion rates. Facebook isn’t the only place you’ll find Facebook ads. There’s the Facebook Audience Network as well. This allows non-Facebook ads to display ads that Facebook is serving. It’s similar to the way websites can display Google’s Adsense ads, even outside of Google’s services. Those websites also rely on making more money from the ads through conversions. They’ll see lower advertising revenue. Facebook, who does have reason to overstate the impact, says it could result in a 50% drop in Audience Network advertising business.

A Problematic Business Model

Don’t feel bad for Facebook. If their business was kidnapping kittens they’d try to tell you that they need you to support laws that make kitten kidnapping legal. They’d try to make you feel guilty for not supporting their capitalist kitten kidnapping venture. What Facebook is doing here is invasive. Furthermore, if they really wanted ad conversion data, they have other—less profitable—ways to get it. Facebook could purchase credit card data, as Google does, or buy data from major retailers. They could also require that those advertising on Facebook share customer records with them so they can see where ads were successful.

Does that sound creepy? You don’t like the idea of companies being able to buy and sell your data? Well, that’s because it is creepy. This is an incredibly invasive truth of modern advertising. Worst of all, due to no legislation making any meaningful protections for privacy, such practices aren’t only our new normal, they’re necessary for any service that exists for free on the web. That includes Twitter and Facebook, but also news websites.

Hello!

Even sites that don’t agree with the nature of modern advertising (again, hello!) have to put up with it because it’s the only functioning form of revenue. It doesn’t have to be this way. Besides users paying for more web content, there’s another answer: better advertising practices.

Honesty in Advertising

Anonymous advertising is possible, it’s been done before. Take, for example, billboards. It would actually be quite easy to install high resolution cameras on billboards to track each car that drives past it. You could, using their license plate, figure out who is the most likely person behind the wheel. The most basic of facial recognition could confirm that, as the number of potential drivers is limited to a household or those on the vehicle’s registration or insurance. Then you’d simply charge the advertiser more if the person behind the wheel purchases something after seeing that ad on the highway.

Sounds incredibly invasive, right? You’d likely support bills making that illegal. But that’s exactly what’s happening to you when you browse online. It doesn’t have to be that way. Facebook has its own data on users. They can make their own guesses as to what will be relevant to you. Post a lot of items about technology and liberal political policies? You’d likely enjoy a compostable cellphone case! Brag about that 8 point buck you shot last season? Facebook knows you’ll like hunting gear. Post a picture of your new car? Maybe you’ll like some new car accessories, like weatherproof floor mats.

Facebook doesn’t need to stalk you to provide relevant ads. They can, with their own data, serve up ads that you’ll likely engage with. Businesses looking to advertise with Facebook know that. Just like businesses buying up billboards know their ads will be seen by tens of thousands of people in a day. That’s because websites like Facebook, Twitter, or news websites can keep track of how many visitors they have, how many of them click ads, or how long they spend on the site without tracking them. Without violating their privacy.

We can start charging flat fees for advertising again. After all, companies pay more for advertising under this business model, because Facebook found it was more profitable. Facebook found a way to make advertising seem like a company could get a lower rate through fewer conversions, but they’re the casino in this scenario. You don’t beat the house. Facebook always makes a profit greater than one they’d get from a fair flat price for advertising.

Ditch the New Normal

Before Facebook and Google made advertising a game of who could violate your privacy to the finest degree (Google tracks and predicts your exact location!), advertisers simply looked into usage statistics. How many people will see this ad? That was enough. They’d buy ad space for a set amount of time and that would be enough to drive profits. Facebook and Google found new ways to make money by violating your privacy. It’s more profitable for them and costs businesses more in advertising. Furthermore, it’s draining journalists of revenue from ads through the duopoly formed by Facebook and Google’s advertising empire.

There’s a moral way to do ads. Facebook just doesn’t want to do it. Perhaps iOS 14 could push the change that legislators have failed to do.

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Sources:

• Mikey Campbell, AppleInsider
• Juli Clover, MacRumors
• Filipe Espósito, 9to5Mac
• K. Holt, Engadget
• Salvador Rodriguez, CNBC
• Todd Spangler, Variety