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Apple vs. Facebook on ad tracking: Harvard joins Apple



We’ve seen an increasingly heated Apple vs. Facebook battle over the upcoming App Tracking Transparency feature, which will require apps to seek permission to capture data that can be used to deliver personalized ads.

Facebook has claimed that the change will hurt small businesses by making their ads much less effective. But a piece in Harvard Business Review says this is misleading …

Background

In order for advertisers to show you personalized ads, they must be able to track you in a unique way, and Apple has long provided a privacy-respecting method of doing so: Identifier for Advertisingers (IDFA). This assigns a unique ID to each device across apps and websites without revealing the actual identity of the person.

iOS 1

4 will take this privacy protection a step further by letting Apple users choose whether to choose to track app-by-app basis. Each app must display a permission window that seeks permission.

Apple originally planned to introduce the new system with the launch of iOS 14, but delayed it until “early spring” to give the advertising industry more time to prepare.

Advertisers fear that most users will refuse permission, and Facebook said this would hurt advertising. Since then, there has been an increase in claims that the move will also hurt small businesses, including app developers, who rely on highly targeted Facebook advertising campaigns. The social network even went so far as to take out full-page newspaper ads that attacked Apple.

Apple vs. Facebook: Harvard takes

We have previously described Facebook’s false concern for small businesses as unconvincing, and an analysis in Harvard Business Review goes further: It says that Facebook’s specific allegations are misleading.

The piece opens by summarizing Facebook’s claim.

Facebook’s key requirement is that small businesses will lose revenue if they can not use personal ads. “Without personalized ads,” the company says in its ads and on its website, “Facebook data shows that the average small business advertiser can see a cut of over 60% in sales for every dollar they spend.” It’s an eye-catching figure, and one that suggests that Apple’s privacy policy is poised to wreak havoc on small businesses.

It says that the requirement depends on collecting two very different things: income associated with advertising and revenue caused by advertising. It gives an example of how the two things can be very different.

Imagine a company that knows its customers very well. It can predict with a high degree of accuracy how much a customer will spend in the coming month. If the company targets its ads to the customers who are expected to spend a lot, every dollar spent on advertising will be associated with high revenue. That’s great – the company has achieved a high return on advertising expenses. But here’s the thing: These customers would have generated high revenue anyway. That’s why they were targeted in the first place. So it would be a mistake to conclude that these customers spent more because of the personal ads.

It says that Facebook was unable to retrieve its data, which made it impossible to conduct external review. Not only that, but another claim that the social network do the source is incorrect.

According to Facebook, Apple’s decision is particularly damaging during this pandemic because, as Facebook ads and websites state, “Forty-four percent of small and medium-sized businesses started or increased the use of personal ads on social media during the pandemic, according to a new Deloitte study. ”

This number worked for us, so we took a closer look at the Deloitte study – and discovered that Facebook reported the number incorrectly.

In the study, Deloitte asked companies from nine industries about the increased use of targeted advertising on social media during the pandemic. The industry with the largest increase was Telecom & Technology, but the increase was only 34%. Other industries had much smaller increases. Professional service companies, for example, had an increase of only 17%. Facebook seems to have cherry-picked the data that best supported the case – and then increased the size of the cherries it chose by a third.

Snapchat also warns, but in more measured tones

CNET reports that Snapchat owner Snap also warned of a potential hit for the advertising business, but did not make any claims that small businesses were harmed, and also adopted a completely different tone.

CFO Derek Andersen said that upcoming changes to Apple’s iOS 14 will “pose another risk of disruption to demand”, although he also noted that the long-term effect is unclear. […]

“When it comes to some of the policy changes that Apple is making you aware of, we really think of them as people with high integrity, and we’re excited to see them make the right decision for their customers,” said Snap CEO Evan Spiegel in a call analysts on Thursday.

Facebook is currently testing the wording they hope will encourage app users to sign up when they are forced to start viewing instructions.

Photo by Chenyu Guan on Unsplash

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