TMW #131 | The internet according to Apple

Jun 25, 2023

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The internet according to Apple

If I were to write a book about the past ten years of digital marketing in the year 2030, a lot of it would be about Apple. And it wouldn’t be pretty.

Despite Apple not being a marketing technology specifically, this company has one of the biggest influences on how online marketing and advertising works. And with the recent quiet privacy announcements at WWDC23, Apple continues to use its consumer influence to drive digital marketing into the ground and change the fundamental incentive balance that makes the internet work. Apple has been on a privacy crusade recently.

In 2017, Apple introduced Intelligent Tracking Prevention, one of the company’s first forays into privacy-enhancing technologies, which limits the effectiveness of third-party trackers in Safari. In 2021, they introduced Mail Privacy Protection on iPhone; Apple Tracking Transparency; data privacy labels in the iOS App Store; restricted using Apple’s IDFA (Identifier for Advertisers) for cross-app and website tracking, and brought in iCloud Private Relay, a way to mask your identity online.

In 2023, Apple continues its push to privacy by removing the widely used UTM parameters in links clicked on Safari, Mail, and iMessage. This is something Apple calls Private Click Measurement. It doesn’t stop there: Apple is also cracking down on fingerprinting – a commonly used methodology to identify users that move from the web to an app – by introducing an SDK transparency method called Privacy Manifests.

Over the past five years, it's almost as if Apple has been trying to send a message to digital marketers and advertisers everywhere:

Right now, the Adtech and Martech industries are going through a few things as Apple tightens the vice around some of the most common data practices marketers we have been using for more than a decade across the Web. But Apple’s most recent changes to link tracking and eliminating device fingerprinting could be a good thing. Apple’s Privacy Engineering lead Michael Hesse offers up an explanation as to why this needs to happen:

"To give people control over where they can be tracked, another new protection is the removal of tracking parameters as part of browser navigation, and when copying a link. When a tracking parameter is detected, Safari strips the identifying components of the URL, while leaving nonidentifiable parts intact. Remember that ad attribution can be done without identifying individuals across websites.

For example, Private Click Measurement is a privacy-preserving alternative to tracking parameters for advertising attribution. And it is now also available in Private Browsing mode for direct-response advertising, where no data is written to disk, and attribution is limited to a single browsing context, based on a single tab. This follows Safari's existing strict model of ephemeral browsing and separation of tabs in Private Browsing.”

Apple’s privacy shifts are causing a domino effect with other gatekeeping platforms. For example, Google’s Privacy Sandbox and the introduction of a more privacy-focused approach to the company’s Android mobile operating system are following in Apple’s footsteps, limiting what data can be collected and used on the open web, for much of the same reasons.

It’s clear that by now, Apple sees the digital marketing and web analytics industry as nothing more than collateral damage in the company’s quest to build its own “privacy safe” ad network and weaken competitors like Google and Meta.

But here’s the big problem: Left unchecked, Apple's attempts to enforce their privacy tools could destroy more value that the company creates on the open web.

Bricking the web

If your iPhone has been bricked, you’ll know about it – the thing ceases to work. I believe that what Apple is doing with its self-selecting privacy enforcement has the potential to change the fundamentals of the open web, so much so that it could break the delicate tension that makes the internet so valuable in the first place.

Apple has indirectly and directly benefitted from the Adtech industrial complex for as long as the internet has been around. One data point that signals this is how much Google pays Apple every year to allow Google Search to be the primary search engine on all iOS devices. For over 15 years, the cost has been steadily rising, with Matthew Ball expecting it to rise to $20 billion in 2023 – a full 25% of Google’s net income.

Google made the web searchable; social media made the internet place you not only accessed when you needed to but wanted to spend a lot of time on. And countless digital services and websites providing free services were able to with the ability to monetize attention with ads.

How Apple is thinking about privacy is not to remove support for existing tracking, analytics, and data-sharing technology used today on the web. Instead, Apple is working to replace existing web standards with their own, and in doing so, reshape Adtech into something that would both protect the privacy of users, but also into something that would put the company’s ad business at a long-term strategic advantage.

The replacement offered by Apple is what they call Private Click Tracking, which replaces the usual identifiers found in UTM codes, like user IDs, campaign codes, and even the source medium and channel tags that identify where traffic will come from. What will be used instead is a campaign code identifier using Apple’s framework, which strips out all identifying information about users, and inserts a unique code that can trace back to the original source of the conversion but cannot identify a user down to the individual level.

In effect, this is Apple saying that the future of online advertising and digital marketing must always be in the aggregate, and the ability to granularly collect data on specific users and share that information back to advertisers won’t be allowed. This is clearly a win for consumer privacy; no company should be able to access and share that level of sensitive information. Unless you’re Apple, of course.

Right now, this feature is being phased in slowly and will only work when Safari's private browsing feature is enabled, and on Apple Mail and iMessage. But I suspect this is for Apple to gauge the consumer and industry reaction. And perhaps give some companies time to pivot.

The internet exists in a difficult tension between privacy and access: dial-up privacy too much, and the value of the web decreases as consumers would be required to pay for what we use today. No people = no commerce, no ads, and no viable tech companies. Disregarding privacy completely and aggressively surveilling people to drive ad revenue will make the internet a more dangerous place for everyone. It’s the Catch-22 of our generation.  

If Apple goes too far with its privacy controls, it risks cutting off a large number of free services that no longer see it tenable to build ad businesses on its platforms. Think the millions of games in the app stores, or news media, or even other social networks like Meta and Spotify that have been lobbying against Apple’s privacy shifts on this point; if the incentives to build big internet businesses using ad revenue go away, it will create a vacuum that can only be filled by asking consumers to pay for services. Something Twitter is trying to do in real-time, and is failing badly.

Why now?

As Apple attempts to rebuild digital marketing infrastructure into something else, it does make me wonder where the value is. Given Apple has tolerated and actively motivated online tracking and targeted advertising for almost 20 years, you must ask yourself: What happened? Why now?

There’s a cultural answer, and there’s a commercial one.

The cultural answer is that like it or not, we’re still dealing with the fallout of Cambridge Analytica and all the privacy scrutiny it entails. In 2017, when the news broke of a massive social network that allowed the collection of a vast trove of data on American citizens – which was then used to sway the US elections that lead to Trump getting elected – it was data that was used by bad actors to drive specific messages for political purposes. Collecting data from that point onwards became a matter of national security and a grave risk to society. Since then, the landscape of data collection online has changed drastically.

We’re going through another public dialogue about this right now with TikTok, another company that collects vast troves of user data. But this time, it’s not an American company surveilling its own population; it’s a foreign and hostile country – China. With this recent development, the media, consumers, and government regulators feel as though the costs of an open, ad-monetized web are way too high.

The EU’s GDPR is the prime example of this cultural shift. An entire continent got together and decided early on that data collection must be regulated. Since then, it’s handed out more than $2 billion in fines.

GDPR started out of the need to revamp the existing 1995 privacy protection bills, and over time, it became a significant governmental body that changed data collection practices not only in Europe but across the world. When the GDPR bill was introduced, the European Parliament voted overwhelmingly in favor of the bill. Of more than 653 votes, only ten were against it.

Add to this the growing body of evidence that consumers are becoming more discerning with their data collection online and the risks it poses, and years of Adtech fraud losing marketers hundreds of millions of dollars, and you’d have to agree that reform is needed. And Apple might be the best-positioned company to deliver it.

I do honestly think that the Apple product teams responsible for the company’s privacy products are thinking deeply and rationally about this. After all, targeted advertising has turned from a positive to a negative in the mind of consumers and regulators. And it wasn’t too long ago that Apple added a human rights disclaimer on the iPhone when you set it up for the first time. Apple’s employees are trying to do something virtuous here by bricking the internet with its privacy changes.

Yet knowing that the most personal and sensitive data that humans create are not on desktop computers, but the personal devices we carry along with us and spend almost a third of our days on, the value proposition for Apple to invest in privacy goes way up.

If Apple doesn’t reign in Adtech, the regulators will soon come for Apple too, creating an unpredictable cascade of data constraints for the iPhone and the Apple ecosystem. This too is a hedging strategy so that the iPhone doesn’t become heavily regulated.

From this perspective, Apple is trying to create the first mover advantage as privacy becomes a central focus in how the internet operates. So far, they are winning it. After all, it’s Meta that can’t get a single acquisition through US antitrust watchdogs, and have to put extra controls on all of its data management techniques because of its fast and loose history of data management.

But there’s more here. Apple, of course, is trying to create its own ad stack to create high-margin revenue opportunities for itself. This is the commercial shift happening across the industry, and privacy is the weapon of leverage. Apple’s version of it is to build a premium ad product by gatekeeping data collected on Apple devices, used by the wealthiest people in the world – the United States – where Apple enjoys the largest smartphone market share.

It’s not hard to see that when Apple reveals more privacy features, what they are really showing is their anti-competitive roadmap. This has already created a lucrative opportunity for Apple; ad revenue continues to grow exponentially:

“These are all deliberate movements towards a platform play consisting of a walled garden of customer data that can be sold to the highest bidder for ads. And it's working. Over the last five years, Apple has grown its advertising business from $300 million to over $4 billion.”

It’s easy to single Apple out here and say that they have clear incentives for limiting the flow of data. But this is not only a shift Apple is making. Amazon is building its Marketing Platform on the premise that it has huge volumes of high-value data to use in its own sprawling ad network. It’s not only big tech making strides in the ad business. Walmart’s retail media product is growing faster than all major advertising platforms.

This is a groupthink trend, and it just so happens that Apple has the most to win out of the digital marketing industry while destroying it, because it’s the only company that controls the device and the OS.

Another internet

The consequence of stripping out UTMs, eliminating fingerprinting, shutting down IDFAs, and giving consumers easier access to identity masking tools are all heading to the same destination: An Apple internet, and internet for everyone else.

You could argue that this is already a reality. The App Store is an internet microcosm in its own right. With more than 600 million weekly visitors to the App Store, and more than 700 million downloads, that’s a very large segment of all internet users. The way Apple is shifting towards privacy, we’ll increasingly see the open web continue to become just one big app store for Apple to monetize.

This is perhaps one of the most interesting second-order effects that could happen in the wake of the broader privacy winter: the internet starts to fracture on the fault lines of device and OS. In many parts of the third world consumers currently think like this: for countless people, there are no terminology differences between Facebook and the internet. To them, the internet is Facebook.

So what will this internet look like? Advertising will be more focused on on-device targeting – eliminating the need to collect and permanently store data on devices. Apple has already announced its intentions to bring a lot of targeting and advertising capabilities to edge devices. And its Private Click Measurement framework has been proposed to W3C to become an open internet standard.

Yet Apple is not the only voice in the debate for a more private and open framework for online data collection for advertising. Google and Mozilla have similar frameworks under review, and the situation could change from Apple’s vision of a private web.

Expect a lot more AI-powered contextual advertising and the removal of web analytics platforms under Apple’s rules. In their world, the only company that should be able to access this data is Apple itself – because everyone else has proven untrustworthy.

But Apple’s privacy shifts will influence online marketing in different ways. There are four broad impact zones that Apple is working on in concert to fundamentally change how we do personalization, attribution, tracking, and identification on Apple’s platform.

What we could also see is antitrust action taken against Apple for using its monopoly power to sway an entire industry towards its vision of privacy. We’re seeing this now with Google as the company is facing multiple lawsuits in the EU and the US for its monopoly power over the internet. If Apple is left to itself, a similar fate awaits the company: mired in countless antitrust lawsuits and blocked from making new acquisitions, or other fundamental technology platform shifts.

The parallel trend in online ad spending is that it’s increasingly shifting to walled gardens – massive platforms that control the lion’s share of highly valuable and enriched first-party data. If the existing trajectory stays true, open formats of advertising such as programmatic might disappear. There’s a reason the tech giants are all moving into content in some shape or form: online content holds the majority of our attention online – the premium real estate in a turf war for who gets to control the largest data sources on Earth.

One thing that’s for sure is that digital marketing as we all know it today is set to be fundamentally changed. Perhaps it’s the best thing to happen to the industry, as consumers and brands grow increasingly distrustful of a corrupt Adtech ecosystem designed to benefit the monopolistic owners of it.

But let’s not forget: Apple has a choice to make here. Do they enable a free and open internet economy, or create its own version of the web where everyone will have to live under its rules? I don’t think Apple has made that choice just yet, but judging by its latest releases at WWDC, the forecast looks a lot more like the latter and not the former.

One commenter on Hacker News, in response to Apple’s latest privacy release, puts it well - “I still think Apple is doing the best in the marketplace with respect to security and privacy, but if we're being honest they're playing the role of benevolent dictator.”

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Juan Mendoza

Juan Mendoza is an expert in researching global media, marketing, data, and technology trends. He is the CEO of The Martech Weekly, a media and research brand with subscribers in over 65 countries.

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