The Daily - Apple vs. Facebook

Episode Date: May 11, 2021

Recently, Apple released a seemingly innocuous software update: a new privacy feature that would explicitly ask iPhone users whether an app should be allowed to track them across other apps and sites. For Facebook, however, this feature is anything but innocuous — it strikes at the heart of the company’s business model.The dispute represents a further deterioration in the frosty relations between the two companies. What’s at the heart of this conflict, and why have the stakes become so high for both sides? Guest: Mike Isaac, a technology correspondent for The New York Times. Sign up here to get The Daily in your inbox each morning. And for an exclusive look at how the biggest stories on our show come together, subscribe to our newsletter. Background reading: The chief executives of Facebook and Apple have opposing visions for the future of the internet. Their differences have recently escalated.With Apple’s latest mobile software update, we can decide whether apps monitor and share our activities with others. Here’s what to know.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday. 

From The New York Times, I'm Michael Barbaro. This is The Daily. Today, the story of how a seemingly routine software update became a major battle in the long-running war between Apple and Facebook. Astead Herndon spoke with our colleague, Mike Isaac, about what's at the heart of the conflict and why the stakes have become so high for both companies.

It's Tuesday, May 11th. So Mike, can you tell me about this thing that Apple premiered the other day? It seemed pretty small, but from what I'm gathering, it's not that small. Yeah, so the other day Apple rolls out this ad that seems pretty innocuous, I guess, at first glance. When you're using apps on your iPhone, you may start to see this. It's the new app tracking transparency prompt. There's this nice, nice sounding woman's voice sort of telling folks, hey, we're going to introduce this new software. And, you know, you might start noticing this prompt on the iPhone

when you open certain apps. A choice on how apps use and share your data. It'll say you can allow apps to track you or you can ask them not to track you. Data like your age, location, health information, spending habits, and your browsing history, to name a few. They basically walk folks through this idea that they collect

thousands of pieces of information about you to create a digital profile that they sell to others. Some apps on the iPhone are building entire profiles of information on you and tracking your behavior across different apps rather than when you're using the apps themselves. This has been happening without your knowledge or permission. Your information is for sale. You have become the product. And what Apple is doing is essentially very kindly pointing out. That's why iPhone users will now be asked a single, simple question.

Allow apps to track you or not? Here's a button that you can use that we'll put right in front of you when you open the app to turn all that off. And for the first time, you can find it without having to dig into your settings. And look how great it is that we're putting this in front of you. We believe that you should have a choice. App tracking transparency. A simple new feature that puts your data back in your control. And, you know, seems fine, whatever.

Okay. But over at Facebook, they start freaking out and losing their minds over this. Wait, so why is Facebook freaking out? I mean, because Apple is basically, for the first time, giving the millions of people that use iPhones a really easy choice to opt out of advertisers using their data to track them across the internet. And for Facebook, that's basically the entire business model of how Facebook operates. Facebook's whole business is tracking you across the internet to make the ads that are served to you like the most accurate as possible. You can think of Facebook's actual customers as ad companies and advertisers who pay to place ads in your feed and my feed when we use the app. I mean, targeted ads have become part of our lives. I think about how Instagram feeds me

advertisements for sneakers and plants and matching jumpsuits because they've been tracking me across those other apps. So you're saying if I click this button, would that be saying that I no longer wanted that? I didn't know you were a jumpsuit guy, but no, I think companies like Facebook, which owns Instagram, they say they track you in order to make

your personalized advertising experience even better. And so you see the ads you want to see in your feed. What I think Apple is getting at here is essentially making that exchange more in your face, basically saying, look, this is something that has been going on. If you want to opt out of it, that's fine, but you should at least have the choice to do so. So this sort of fundamental thing can now go away with this software update and with the click of a button that people sort of push when they open up the app. And that's existential. That's the whole ballgame for

Facebook's business. So that's how Facebook sees this move by Apple. But are they right? Should we think of this as Apple directly targeting Facebook? right? Should we think of this as Apple directly targeting Facebook? I mean, I think so. Basically, this is the biggest in a long line of long simmering sort of back and forth between the company as they've been in sort of a cold war for the past 10 years. A cold war? I didn't know that. What do you mean? So rewind back to 2010, 2011 era of Facebook and Apple coexisting with one another. At this point, they're far from enemies. They're actually pretty friendly.

You know, Steve Jobs and Mark Zuckerberg would go on these long walks in the apricot groves in Silicon Valley and this very sort of, yeah, this very sort of like mentor mentee sort of thing. I think Jobs was seen as like an elder statesman at the time to young founders, especially like Mark. You know, Facebook is this up-and-coming company used by hundreds of millions of people. Apple has created the most popular consumer device used by millions of people. And they essentially have a kind of complementary relationship or really a symbiotic relationship. You can't use the iPhone without apps like Facebook, and you can't access

apps like Facebook without a great smartphone to do it. And Apple was the one to provide it. And really, at this point, they seem far from any sort of antagonism towards one another. But over time, they started kind of playing in each other's spaces. If you remember like 2010, 2011, I mean, this is the time that I moved from my BlackBerry to like getting an actual smartphone then. Or I remember I bought an iPhone specifically to start using Instagram, which is kind of embarrassing. But this was when everyone was making that switch. And Mark Zuckerberg, he realized, I don't own the operating system. We will always be sort of subservient to Apple's rules or to Google's rules. And we need to change that. So he ends up developing their own smartphone, which, you know, Apple sort of is like, oh,

okay, now you're in our business now, right? Or another instance was basically messaging. You know, Apple's iMessage is used by hundreds of millions of people, and Facebook wants to be a sort of owner of messaging services too. And so they start like just competing in little areas that didn't seem as obvious before. So originally, these are two companies and two CEOs that think of themselves as very distinct, have a good relationship. But you're saying that change in the industry kind of pushed them closer and closer to one another, where they're now making services that they see as directly competitive to one another. Yeah, 100%. You know, another thing that happens around this time is that Steve Jobs, you know, the founder of Apple, passes away.

He dies of pancreatic cancer. And his successor, Tim Cook, his number two, comes in and takes over the business. And Tim Cook is a very different CEO. He doesn't feel that people's data and information should be combed through by advertising companies and data brokers who want to use that to serve you ads. And I think that these two companies that might have had a friendly relationship, that sort of becomes a little bit icier, I would say. But I really think the crux of the turning point for these two companies came in 2016, 2017. For months, Facebook has been under mounting pressure to be more transparent after revelations Russia used its platform to try to meddle

in the 2016 election. So Donald Trump was elected president at the end of 2016, and then slowly information starts coming out about what role Facebook played in that election. One of my greatest regrets in running the company is that we were slow in identifying the Russian information operations in 2016. People start discovering, oh, Facebook was used as a sort of conduit for misinformation around how Americans think about each other. They say a Russian group posted more than 80,000 times during and after the election campaign.

A group that claimed to be part of Texas, but was in fact paid for by Russians in rubles. Those ads with a price tag of $100,000 pushed divisive social issues from immigration to race and gay rights. And then there's the Cambridge Analytica situation. Cambridge Analytica drilled deep, looking for a trove of social media data on Americans to help Republican presidential campaigns fine-tune their messages and win votes. So, you know, back in 2018, the Times unearthed what is essentially a data leak in Facebook's business. Starting in 2014, Cambridge Analytica funded a personality test on Facebook

and paid people to take it. Once a user answered questions, the app captured their friends' information too. The New York Times has viewed a portion of the raw data involved in this breach. So we know it exists and we have every reason to believe it is still in the hands of Cambridge Analytica despite their denials. Cambridge Analytica was this crucial moment where Facebook was essentially pilloried by the entire world for being just totally reckless with user data. And I think that really had an effect on Cook and on folks at Apple. I think that really poisoned their idea of what Facebook was.

It's not this idyllic little company where they're just trying to sort of connect the world and make everything Pollyanna-ish. I think it became a sort of darker thing. And at that point, Apple kind of decided, not only is privacy important to us, we're going to make that a cornerstone of how we market ourselves compared to other companies like Facebook. Can you explain why specifically Apple would care that Facebook was in this contentious moment? I think there's the personal and then the professional. One, I think Tim Cook actually does have a distaste for Facebook's business model at his core. But I also think there's really a professional business reason for doing this. And I was talking to a Silicon Valley exec

a few months ago. And basically, they told me, look, if your competitor is on the ropes like Facebook is, you take a punch at them, you take a shot at them. And essentially, you hit them while they're down because you can sort of make your company look better at the same time. And I think there was part of Apple that recognized we have an opportunity here. And if we can use ourselves as a foil against, you know, quote unquote, the invasive data hungry company that is Facebook, we can end up looking much better here. And that's exactly what they did. So what does Apple actually do then to capitalize on Facebook's moment of weakness at this time? So basically, Apple has these events every year where they preview their software.

And one year, they trot out these new features. One of them is for Safari, their web browser, and basically says, we're going to kill off tracking cookies in Safari. What that means is essentially, if you use the mobile web browsers on Apple's phones, we're not going to let companies like Facebook or Google track you around the internet using those web browsers. Thank you for explaining cookies. I've never understood that my whole life. Right on. I did my job for one. Yeah. And that was definitely a big move. That was Apple saying, look, we're cracking down on tracking in our web browsers. Safari is used by millions, if not billions of people who have iPhones around the world. The other thing that they do is,

I don't know if you remember when Screen Time came out, basically the thing that tells us how terrible we are for being on our phone all week. They specifically introduced this product saying, we have a way to keep you on your phone less. And in the demo, I believe they use Instagram as the example app saying, essentially, you've spent way too much time on Instagram this week. Maybe you need to chill out a little bit.

And inside Facebook, people are like, what? What are you doing? Why are you targeting us? Like, where is this coming from? So they have these kind of Easter eggs in their presentations and stuff and a side eye version of a tech fight for a little while. But then I think it gets more overt. From Chicago, this is Revolution, From Chicago, this is Revolution, Apple changing the world. Tim Cook goes on MSNBC. Tim, thank you for coming. I think they're all excited to get new iPhones from you. One of our colleagues, Kara Swisher, actually is interviewing him at this point and says,

Zuckerberg is getting hauled into Congress and they're getting essentially questioned for their role in the 2016 election and how they use data. And, you know, the host asks, you know, really responsible. What would you do? What would I do? And Cook, without missing a beat, says I wouldn't be in the situation. OK, I wouldn't be in this situation. Basically. Wow. Basically, just like that's not that's not us.

That's not what we do. We're not going to traffic in your personal life. I think it's an invasion of privacy. Privacy to us is a human right. It's a civil liberty. And it's something that is unique to America. We believe that privacy is a fundamental human right. And that's basically like saying, unlike Facebook, we actually care about your privacy. Right, that seems more explicit.

Right, right. I mean, at that point, Mark Zuckerberg responds. The reality here is that if you want to build a service that helps connect everyone in the world, then there are a lot of people who can't afford to pay. He goes on the Ezra Klein show and basically throws it back in Cook's face and says... I mean, look, if you want to build a service which is not just serving rich people, and you don't have to pay 1200 bucks or whatever exorbitant price to use our product, unlike some other companies in Cupertino, California. You know, basically making the case that Facebook is the commons man's social network, you know, free to use and everyone can sort of enjoy it. Just be willing to be targeted by

personalized advertising. I think it's important that we don't all get Stockholm syndrome and let the companies that work hard to charge you more convince you that they actually care more about you. Because that sounds ridiculous to me. So they trade some more shots in the press. And then in 2019, both sides think they need to have a talk. They need to like sort of come to terms and come to a peace between each other, you know. And every year there's this retreat called Sun Valley that basically all the billionaires go to to kind of commune with one another. And so Tim Cook and Mark Zuckerberg and their sort of respective teams decide this is where we're going to hash it out. So they sort of get together in this room with a small group of executives from both companies. sort of get together in this room with a small group of executives from both companies. And Mark basically says to Tim, you know, what would you do in this situation? You know, like the whole world's coming down on us, you know, what would you do? And Tim's response is essentially, you

know, I think you should delete every bit of information about people that you've collected outside of your main Facebook apps. Wow. Yeah, I mean, it's basically telling Mark in so many words, your entire business model is busted and you need to fix it by destroying at least half of it. You know, one person said that Mark seemed stunned. I mean, the CEO of Apple telling you that your whole business model is broken and wrong probably wasn't the best way to start out peace talks in this summit that they were supposed to have.

It doesn't seem like someone who's very interested in a peace talk to respond in such a fashion. Right. And so the next thing that Tim Cook does. Cook does. Together, we must send a universal humanistics response to those who claim a right to users' private information about what should not and will not be tolerated. Is announced this app tracking transparency feature. At its foundation, ATT is about returning control to users, about giving them a say over how their data is handled. That Facebook feels, rightly, is targeted directly at Facebook and its business. Some may well think that sharing this degree of information is worth it for more targeted ads.

Many others, I suspect, will not. If a business is built on misleading users, on data exploitation, on choices that are no choices at all. We'll be right back. All right, so Mike, Apple premieres this new privacy initiative that Facebook takes as a direct statement of competition. What happens next? Facebook starts really fighting back. You know, for the past few years at this point, Facebook has been on the ropes. Apple has been the one throwing all the real punches. And Facebook essentially says, look, if you're going after our business, if you're going to the jugular at this point,

we got to do something. Facebook just now publishing a blog post saying it's speaking up on behalf of small businesses, saying, quote, we believe Apple is behaving anti-competitively by using. This seems like a very perilous escalation that Facebook is pushing here. Maybe they have to because what Apple plans to do strikes at the core of Facebook's business model. What they're saying is that once you eliminate that kind of targeting, then the ads just don't become as valuable anymore. So Facebook starts talking to all its advertisers and a lot of the small businesses on the platform who buy ads on Facebook. Basically say, like, this is a huge deal. Like, bad things are coming for us.

We need to push back on this. So, like, you know, it becomes corralling the advertisers and essentially creating this sort of public PR campaign against Apple. My name is Monique Wilson-DeBriano. My husband and I are the founders and owners of Charleston Gourmet Burger Company. And today I want to talk to you about the update from Apple and the impact that it is going to have on small businesses. So Facebook is basically saying we're standing up for small businesses. We're all frustrated. We're all dealing with COVID. Unfortunately, there's this other thing that's coming up, which is an update to Apple's iOS.

You know, using our ad targeting platform on Facebook is good for the economy and it's good for these small businesses that are on the ropes. There is no possible way that our company could have reached the level of success that it is today without personalized ads. We should all be pushing back against the big bad apple at this point. The idea that this multi-billion dollar corporation in Facebook is painting itself as a champion for small business seems kind of odd to me. It seems like it would raise some eyebrows. What are they doing here? Yeah, you're not alone there. But I mean, Facebook does kind of have an actual point. You know, small businesses make up the majority of sellers on their platform. Small businesses on Facebook do rely on ad targeting tools to basically sell themselves

and market themselves across the internet, especially during the pandemic when some retail shops might not have otherwise been able to reach people. So, you know, to some degree, there's a point there, even if it's a kind of very self-serving way of posturing themselves like Facebook is using. But I think the other thing that Facebook is trying to point out here is that this really isn't about privacy for Apple. This is really them just making a big power move. What do you mean there? Yeah. Well, they position themselves as privacy sort of advocates and warriors. But folks at Facebook are really frustrated because, for instance, Apple has an enormous business in China. Like, vast amounts of iPhones are sold in China, which

arguably one of the most privacy-invasive governments and regimes on earth, where the contract is that they monitor the behaviors of their citizens. They're able to control what types of speech is being said online. They of censor certain types of speech against the Chinese government. And one of the things that Apple even had to do to operate in China was concede to a rule the Chinese government made where iCloud data must be stored in mainland China rather than servers in the US or abroad, as well as the keys to that data stored in mainland China. or abroad, as well as the keys to that data stored in mainland China. So rather than perhaps pull out of China entirely, which is one way they could have gone, they essentially had to concede and say, this is how we operate. This is how we have to do it in order to stay here. So just in operating

in China, Apple is being hypocritical in and of itself, some Facebook execs would say. Another point is Apple has this humongous search deal with Google that has lasted for years. Basically, if you open up your iPhone, Google search actually powers a lot of the things underlying in Apple software. So Siri is powered by Google search. So it can give you answers instantly because Apple just doesn't have the search prowess as some of these companies like Google and Google's just as privacy invasive as Facebook, Facebook folks would say, like you're fine with getting in bed with Google, but for some reason, Facebook is the big bad guy here.

It seems as if they're saying Apple is situationally looking the other way when it's an advantage to them. Yeah, absolutely. And on top of that, you have Apple basically deciding to slowly beef up its existing small advertising business. Not many people know that Apple have an actual advertising business, but it's significant. It's inside of the App Store. You can essentially advertise against searches for apps inside of Apple's App Store. So it's not a huge business for Apple, but it's still, it's this thing where companies like Facebook see Apple

sort of cracking down on the types of tracking and advertising capabilities of other companies while simultaneously improving their own, Apple's own advertising business. And they sort of scratch their head. They say, you know, what's up with that? If Apple has these deals with Google and with China, if it's making this ad technology that is similar to what Facebook has, what then was the upside for them portraying themselves as a champion of privacy? Why did they make that choice if Facebook was going to come back and say, hey, but you're doing the same thing, too? I think at the end of the day, Apple's argument is stronger. It is easier for people to sort of identify with, oh, hey, privacy is a good thing.

I would prefer to be tracked less on my phone and in my activities than more. And Facebook's argument is just frankly more nebulous. We're standing up for small businesses, therefore we have to track you or you shouldn't be provided the option to opt out of being tracked. That doesn't really track, so to speak, I guess. So I think at the end of the day, Apple basically can wield this larger club of, we advocate for privacy. We care about sort of not monitoring your data for the most part. And the average consumer probably doesn't know or care about a Google search deal or the search ads in Apple's App Store that are pretty in the weeds and mostly

cared about by sort of businesses and ad tech people. Okay. So this is just a calculated marketing thing from Apple. And it seems, and then the way that you're describing, that they might be pulling this off, that they are both appealing to a customer that on the surface cares about privacy with things like this new tool that they've introduced, while at the same time, they are expanding their businesses in ways that compete with Facebook, compete with Instagram, and help them make money on the other side, even if it goes against those privacy goals. I absolutely agree. And I think this is something I've asked myself for a long time, this paradox of do people care about privacy? privacy. Do normal folks who are using their computers or their smartphones, who aren't steeped in tech jargon all day like I might be, is this something that they actually are concerned with? My guess is that they don't like the idea of something tracking them across the internet.

Just the idea that someone's watching you at all times is uncomfortable, right? I don't like that. At the same time, people are using Facebook and Instagram in record numbers. Facebook did 27, I want to say $27 billion of revenue in the last quarter alone. They're shattering records for user growth and revenue numbers every quarter. So there's this tension, I think, in consumers where we want privacy, we gravitate towards this idea that we shouldn't be tracked, but we also want the convenience and the entertainment that a lot of these apps bring. So I do think there's a tension in it, and I think Apple is capitalizing on that tension

to some degree. So it seems like the public will go as far as to click on that button and block these apps from tracking them in many cases, but not as far as to throw their whole iPhone away or get off the Internet or the apps that are tracking them all together. So Apple still wins and their competitors still lose because of a single button. I mean, I think that's right. The app tracking transparency prompt just rolled out very recently. Facebook is still in a sort of watch and wait period, as are these other advertising companies. They want to see how people behave. The way that the prompt is framed, it's pretty probably likely that people are going to opt out of it.

It's like one of those leading poll questions that says, would you like this good thing to happen to you? Yeah, sure. Exactly. Of course I do. And I think that's what Facebook is expecting everyone to sort of be like, all right, of course I don't want to be tracked. And that's kind of what we're seeing already. You know, there's a survey or two floating around that says most users on iOS are opting out of this tracking option. Most users on iOS are opting out of this tracking option. So I think Apple wins this round. What I'm curious about are the fights to come, right?

What are some of those? Yeah, I mean, look, these companies fight each other in a lot of different grounds. Messaging is one of them, gaming, podcasting. I think one big one that is a real question mark is VR and AR, virtual reality and augmented reality. Both Apple and Facebook have like secret sort of wings in which they do all this high tech development. And I think that's going to be the battle of the next five to 10 years for both of them.

And that's still very much up in the air. All of the tech companies are essentially converging into this one area in which they compete with one another. The days of 2010, 2011, where they kind of happily coexisted as friendly companies, where the CEO of Google might sit on Apple's board and they all sort of were friendly rather than frenemies or even outright enemies, those are long over. Why did that have to change? Everyone was making a ton of money. Everyone was growing their business. Why was that not satisfactory? I think about this a lot. I feel like it's really fundamental to how Silicon Valley operates. I

think everyone loves to compete. If you are not expanding into a new territory, that means your competitor is and you're ceding territory. All of the companies in Silicon Valley basically see a sort of space and go after it. And if you're not doing it, that means someone else is. It says something about Silicon Valley. It says something about capitalism. It says something about how these CEOs think and act. But competition is really the only code I think these CEOs out here really live and abide by. And there's no real rules around it except for you compete to win. And they all just sort of respect that as that's how it is out here. Right. I'm asking why was it unsatisfactory to each maintain a slice of the pie?

And you're saying that Silicon Valley is structured, that our economy is structured in a way where these folks want the whole pie. Yeah, go big or go home. I don't want a slice of the pie. I want a whole pie. That's exactly what they're saying. Thank you, Mike. I appreciate your time. Yeah, thanks for having me. We'll be right back. Here's what else you need to know today. Weeks of unrest in Jerusalem turned into a wider conflict on Monday when militants in Gaza fired rockets toward the city and the Israeli military responded with airstrikes.

Officials in Gaza said that at least 20 people were killed by the Israeli counterattack. The violence is tied to an attempt by Israelis to evict Palestinian families from their homes in East Jerusalem to make room for Jewish settlers. For many, those evictions have become a symbol of the broader historical battle between Israelis and the Palestinians and, since April, has prompted angry clashes

between Palestinians and Israeli police in the streets of East Jerusalem. Today's episode was produced by Stella Tan, Michael Simon-Johnson, Diana Nguyen, and Eric Krupke. It was edited by Paige Cowett and engineered by Chris Wood. That's it for The Daily. I'm Michael Barbaro. See you tomorrow.