A simmering battle between Apple and Facebook came to a head this week when Apple released new software that could put a major crimp in Mark Zuckerberg’s business. On the latest Pivot podcast, Kara Swisher and Scott Galloway discuss what’s on the line as the tech giants battle.
Kara Swisher: Apple is unveiling a new privacy feature that would require iPhone users to explicitly choose whether to let apps like Facebook track their information. This is a long time coming. It’s a long-brewing war between Apple’s CEO, Tim Cook, and Facebook’s CEO, Mark Zuckerberg. They’ve been at odds over privacy issues in recent years. The story in the New York Times was quite good. It began with Tim Cook telling Mark Zuckerberg not to be such an information thief, essentially. They met because Mark was getting Tim’s advice, and Mark was trying to be nice. And Tim wasn’t having any of it, didn’t want to be his friend.
Facebook’s $70 billion digital advertising business is built on the ability to follow people’s online habits as they click through other apps such as Spotify or Amazon, and then market directly to users. This pits the two men’s visions of the future of the internet at odds. Tim Cook wants safer, more private — but more likely expensive — internet, while Mark Zuckerberg believes in more free and open content. They’re saying, “Tim is trying to kill small businesses.” And Apple is saying, “No, we’re not.” And they’re both facing antitrust scrutiny at the federal level. So what do you think?
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Scott Galloway: I want you to run with this. You know them better than I do. And I think you know the situation.
Swisher: I think they don’t like each other personally. They say it’s not personal. I think it’s personal. I think that Tim — and Apple, going back to Steve Jobs — really disdains the way Mark conducts his business and he wants him to stop doing it. Mark neglected to get a phone. And we talked about this, Facebook buying LG or something like that. Mark neglected to get a phone, and so this is Apple’s way to control him. And I think the idea of putting it out there, pretty simply, that consumers should decide if they want to be tracked or not, is a real problem for Facebook. I think they’ll probably be okay because people have inertia, but there is a lot of anger between … Not anger on Apple’s part. Disdain. And the people at Facebook are mad and think Tim Cook is a scold and this and that, but he’s going right at their business plan. What do you think?
Galloway: Well, look, anything that hurts Facebook is kind of all right in my eyes, but it’s very interesting. You summarized it. Apple wants a world where you pay. Android and Facebook are the advertising-industrial complex meets sociopathy meets data tracking meets Google meets Facebook. It’s a really compelling value proposition, and that is you get the processing power of the space shuttle and just staggering utility for free.
There’s some wonderful things about the 20th century: morality. We care about animals, racial justice, some things we never would have talked about 100 years ago. And then in the same breath, people will say that the poorest citizen lives better than the wealthiest citizen 100 years ago, which I think is a bit of an exaggeration, but I think you can make a legitimate argument that a person who is solidly middle-class has a better life than very, very wealthy people just 100 years ago.
And a lot of it has to come down to the liberation of the incredible utility of technology. And the technology you get for free, or you can get for free with a combination of Google, Android, Facebook, and these apps is staggering, but there’s just no getting around it — it comes at other non-economic costs. It’s very easy for us to fall in love with a paid-app economy, because these payments — I think people are spending about 80 bucks a month on subscriptions or on apps, and then 150 on subscriptions — it’s easy for us to say. We can pretend that we care about our privacy. But there’s still going to be a big population of people who want it for free.
Swisher: I think Apple’s just saying to them — it doesn’t have to be paid, necessarily. It’s just … the CEO of NextDoor was like, “Great. We’ll do it. Come to us for advertising. We’re local. We can get you people, and we don’t have to invade your privacy. We don’t have to do it in these sneaky ways.” I think Tim Cook was like, “If you want to track people on your platform, that’s fine, but not all over the freaking internet. You can’t.” Which is what Facebook does. I think that’s really what’s going on.
Galloway: From a business perspective, in my opinion, this illuminates the power of controlling the end consumer interface. If you’re not vertical, if you don’t control the end hardware that delivers the content, you’re vulnerable. I think Netflix is vulnerable. Disney is vulnerable. And to a certain extent, Facebook is vulnerable. It really is content versus distribution. And Apple is flexing their distribution muscles. “We control the end to access, the piece of hardware and the software, for the billion wealthiest people on the planet.” And also, it’s easy for NextDoor to say that, because they haven’t made the staggering multibillion-dollar investment in tracking. And I can’t believe I’m defending Facebook — some people say they get creeped out by ads. I don’t mind Facebook creeping me out. More relevant ads — I kind of like it.
Swisher: Yeah. Well, that’s one argument that they can make.
Galloway: I like the ads I get on Instagram. I like the fact if I’m at a Beyoncé concert and they serve me an ad about that, I like it. What I don’t like is the fact that these individuals continually lie and delay and obfuscate and do things that damage our country and depress our teens. But the investment they’ve made in innovation around advertising, like delivering the right ad at the right time … NextDoor, they’re not in the same neighborhood. They’re not next door to the technology.
Swisher: No, of course. But here’s the deal. One of the things that I think Facebook is doing is trying to get all these small business owners to complain, like, “I now can’t afford it if I can’t afford Facebook.” People opt out. Facebook was quoting a figure that 60 percent of revenues will decline for these small businesses. And then Harvard is like, “That is a big lie.” Of course, Facebook immediately puts out a wrong statistic to make it seem incredibly dire and then they roll out these people. What I think it just shows is, wow, advertisers only have two choices, Google and Facebook, and mostly Facebook. So that sucks. It just points out to me how big and strong Facebook is. Why do they control the entire online ecosystem in advertising? I’m like, that’s the problem with small businesses. They have no choices.
Galloway: But Apple gets to make the technology decisions around their end users.
Swisher: Yes, but I think Facebook has more of a stranglehold on online advertising, and maybe they shouldn’t — maybe there should be more choices. Maybe other people should innovate. Because the problem these small businesses have isn’t that Apple’s suddenly opting to let people make a choice, which I think ultimately — I don’t really care what any happens at Facebook. If the consumers can just choose, let the consumers choose, and then that’s where we’ll end up.
Galloway: But to your point … Let’s talk a little bit about choice. Choice connotes that you would have a more healthy ecosystem and there’d be a number of players. Facebook and Google’s duopoly dominance of the digital ad dollar has gone from I think about 63 cents on the dollar pre-pandemic to around 80 cents now. And then there’s a third player that controls another 10 cents. Do you know who that is?
Swisher: What, Amazon?
Galloway: Amazon. So we have three players, Amazon, Google, and Facebook, that control 90 percent of the final frontier of branding, marketing, targeting programmatic media. That’s just not a healthy ecosystem.
Swisher: No, it’s not. So let people choose. They don’t get a choice. I think Facebook is underscoring this by trotting out all these small business people. They don’t have a choice to buy anywhere else. I think this is perfectly fine for Apple to do. People either decide or not, and probably Facebook will be fine because inertia is a very strong energy source on this planet.
Galloway: If they get to pick, I think we’re going to be shocked at how few people opt out. I think people talk a big game about their privacy and they don’t clear their cookies, they don’t … Young people decide every day to make the trade off between a lack of privacy and utility.
Pivot is produced by Rebecca Sananes.
This transcript has been edited for length and clarity.
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