Apple and Facebook’s Simmering Rivalry, Explained

Earnings Reports Crush Expectations

Facebook (FB) and Apple (AAPL) both exceeded expectations with their earnings reports earlier this week. Apple reported more than $100 billion in sales on Wednesday. Much of that is thanks to the iPhone, which made up almost 59% of Apple’s revenue over the holidays. Sales for Apple were up 17% to $65.6 billion for the quarter. Though Apple no longer provides unit sales data, research firms estimate Apple shipped a record 90.1 million iPhones during the quarter.

Facebook also beat earnings estimates on Wednesday. The world’s largest social media company has made it easier for retailers to market and sell their wares to users on the platform, and that effort paid off during the coronavirus pandemic.Facebook’s revenue has slowed in recent years, but the pandemic sparked a boom in online purchases and a buyer preference for goods over services. Facebook’s revenue rose 33% to just over $28 billion in the fourth quarter. Monthly active users on the platform also surged 12% to 2.8 billion, beating analyst expectations.

Despite their success, a rivalry has been quietly simmering between the two tech giants as privacy concerns impact them both. Apple has announced that over the next few months, it will help iPhone users limit app tracking on their phones. At its earnings announcement on Wednesday, Facebook cautioned investors that Apple’s new privacy policy could hamper revenues as it would make ad targeting more difficult.

Apple’s Updated Privacy Measures Could Impact Facebook

Apple announced it will launch new privacy measures in spite of Facebook’s objections. The new features could come as early as this spring. Once these features are implemented, iPhone and iPad users will be prompted with a dialogue box asking if they would like to opt in to ad tracking. If users opt out of ad tracking, apps like Facebook will no longer be able to track their internet activity across other apps.

Facebook claims that Apple’s new policy is anticompetitive. “Apple has every incentive to use their dominant platform position to interfere with how our apps and other apps work, which they regularly do to preference their own,” Facebook Chief Executive Mark Zuckerberg said. Apple has not yet responded to the statement.

The new privacy measures somewhat overshadowed Facebook’s strong earnings announcement. Facebook said it could face “significant ad targeting headwinds in 2021.” The Apple update could cut revenues as early as the first quarter of this year. After an immediate drop in share prices, Facebook stock was flat following the announcement.

Facebook’s Digital Advertising Position at Stake

Facebook has for years been positioning its apps as advertising hubs for large companies, as they provide access to billions of consumers around the world. It has also sought to be recognized as a site for interactions between smaller businesses and their customers. In the most recent quarter, revenues from Facebook Marketplace more than doubled compared to the year before, hitting $885 million.

Facebook’s platform allows advertisers to access users’ Apple ad identifiers. Those numbers are popular tools marketers use to track where individuals go when they are online and target ads to potentially interested customers. The digital ad industry could collapse under falling prices if users opt out of tracking. A survey by Tap Research found that 85% of participants would opt out of ad tracking if offered the choice.

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