For years, internet giants that have provided “free” services, had their business models hinged on collecting user data and monetising it in the form of advertisements. Recent global incidents that have put the spotlight on data privacy issues have also forced internet companies to make amends to their methods in order to give their users a better handle on their online data. At the same time, these big-tech firms such as Facebook, Apple, Google and Amazon have also come under antitrust scrutiny for their attempts at monopolising their businesses.
The recent developments at Apple and Google of giving users a better choice at controlling how the data they generate online is used, is also reflective of the two-sided nature of the issues at hand. On the one hand, the decisions by the iPhone maker and the search engine company to allow users to control their data may be seen as a move to enhance user privacy, on the other hand it further consolidates the position of these companies.
What have Apple and Google done?
Last year, Apple introduced the App Tracking Transparency (ATT) feature to iPhones and iPads. The feature requires applications to seek permissions from users to track their activity across other apps and websites. This impacted companies depending on advertising as a revenue model given that the new feature virtually closed the doors for these companies to harvest data of iPhone users and use it for targeted advertising. Facebook parent company Meta said that the impact of Apple’s move could be “in the order of $10 billion” for 2022
Google announced a similar move earlier this month when it said it will bring the Privacy Sandbox to Android. This means that it would extend the privacy solution that it has been building for the web, to Android devices. The new solution will “limit” sharing of user data with third parties and operate without cross-app identifiers, including advertising ID. The advertising ID is a unique, user-resettable ID for advertising, provided by Google Play services.
What is Google’s Privacy Sandbox?
While the Privacy Sandbox on Android could take another two years to go live, Google is already developing a version of it for the web. According to the company, Privacy Sandbox for the web will phase out third-party cookies and limit covert tracking. A “cookie” is a small piece of data stored in the browser when a user visits a website. Third-party cookies are stored by a service that operates across multiple sites. For example, an ad platform might store a cookie when you visit a news site. First-party cookies are stored by a website itself.
Why has it hurt Meta?
According to a report by The New York Times, with users being given the choice to opt out of app tracking, many have done so for apps such as Facebook stymieing the social media app’s main modus operandi of supporting its online advertising business. With lesser amount of user data gathered from their online activity such as e-commerce and search engine queries, and other social media surfing activity, it has become more difficult for Facebook to target specific ads, thereby causing advertisers to potentially run fewer promotions on the platform. Additionally, the fact that it is iPhone users that are able to opt out of app tracking makes it worse for platforms dependent on online ads like Facebook given that these users typically have higher conversion rates than Android users and end up spending more money through targeted online ads.
Furthermore, even as Privacy Sandbox on Android could have a deeper impact on Meta given the larger global market share of Android devices, the implementation of the solutions on the web could also hurt Meta. These developments are particularly bad news for Facebook because unlike Google and Amazon, Facebook has to depend on tracking third-party activity of users to generate data. In the case of services like Google and Amazon, users help the companies generate first-hand data through running search queries on the search engine or the e-commerce platform.
How do these developments further the concentration of data?
Solutions such as the Privacy Sandbox means phasing out of “cookies” — the go-to tech for tracking user activity by online advertisers. Google had proposed replacing cookies with FLoC (Federated Learning of Cohorts). This meant that instead of interest-based advertising that was enabled by cookies, users would be bunched into groups with comparable interests. Privacy experts had argued that rather than completely stopping tracking of users’ online activity, FLoC put the tracking directly into Google’s hands. The decision also attracted antitrust investigations from the UK and the European Union.
Google ultimately pulled the plug on the FLoC project and replaced it with “Topics”. Through Topics, Google’s Chrome browser would curate a user’s top interests in a week based on browsing history. A key difference between FLoC and Topics is that the latter will exclude categorisation based on sensitive categories such as race, religion, sexual orientation, etc.
While Google’s move would mean that users have a greater choice to limit gathering and use of their data by third-party apps, it would still continue to track these users through its bouquet of apps such as search, Gmail, Google Maps, GPay, YouTube, etc.
Additionally, Apple’s move to limit tracking by apps has also tipped the scales in favour of Google as far as online advertising is concerned. Notably, online advertising is Google’s core business unlike Apple.
A Wall Street Journal report pointed out that since Apple introduced its privacy feature last year, the cost for small businesses — advertising on Meta’s platforms Facebook and Instagram went up — to acquire customers went up, and such small businesses have shifted their “whole ad budget” to search ads on Google.
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