Apple pulled off the gangster move in corporate positioning last week. It cast a deathly shadow not only over rival Facebook/Meta but also Snap, Pinterest and Twitter, all of which have seen big declines in their stock price since the start of this year.
And it is likely to change digital advertising forever. It could even be the end for programmatic advertising.
Here in the West, if you want to buy a smartphone, for instance, there are many to choose from. And, whisper it, they are all the same.
But Apple’s iPhone has managed to enjoy stratospheric success by positioning itself as a luxury product. Apple is the only smartphone firm to command luxury profit margins—as high as 40%—for what is a mass-market product. Apple is the most valuable company in the world, worth $3 trillion.
Alongside its luxury status, Apple has positioned itself on values. And the chosen value is privacy. And it’s that decision which has dished not only Facebook/Meta but any other entity that relies on digital advertising to make a buck.
The impact has been profound. Last week Facebook lost 26% of the value of its stock. It’s not all because of Apple, but a big part of it is.
Meta admitted as much in an earnings report published last week. Privacy features introduced by Apple on the iPhone cost the company $10 billion in sales in 2021, Zuckerberg said. That news sent Meta’s stock price tumbling.
Apple has been offering iPhone users the opportunity to opt out of allowing advertisers to track them round the internet. Given the chance, users have voted with their thumbs: 26% of worldwide iPhone users have agreed to being tracked by advertisers, the rest have not. Apple reported iPhone sales are up 9% on last year.
IPhone users are a small percentage of smartphone users. They are the ones happy to pay a premium to own an iPhone. Or put another way, they are the ones who have the money to pay for one. And they are the ones who have the money to buy products advertised to them online.
But Apple is one company – albeit the most valuable in the world. Trouble is, last month Google announced that Chrome, the world’s most widely used web browser, is soon to eliminate traditional tracking mechanisms for serving ads.
The model for big tech is in the process of being broken.
Twitter, Pinterest, Snap and Meta and anyone who tracks users and sells that data to advertisers – will need to rebuild the foundations of their business model.
Mark Zuckerberg admitted last week that Apple’s changes—and new privacy regulations in Europe=—represented “a clear trend where less data is available to deliver personalised ads”.
Zuckerberg has no choice. He must develop a new business. That's why he has set to work creating “the metaverse”. But that move is starting to look less like a bold new vision of the future and more a desperate bid to survive.
The big four tech firms have driven 30% gains in the S&P 500 over the last two years of the pandemic. But nothing lasts forever. Are we soon to lose one of the big beasts of big tech?
If so, they might be able to blame the strategic genius of Apple.
Andy Pemberton is the director of Furthr