An Interview with Eric Seufert about Apple, Facebook, and Mobile Advertising

Author: Ben Thompson (Stratechery), interviewing Eric Seufert URL: https://stratechery.com/2021/an-interview-with-eric-seufert-about-apple-facebook-and-mobile-advertising/ One-line: Eric Seufert on why Facebook’s ad value is behavioral history rather than sellable data, how Apple’s symbiotic-then-adversarial relationship with Facebook works, and how SKAdNetwork privileges Apple’s own ad network.

Key claims

• Being a truly great CEO is about more than riding a trillion-dollar opportunity — it means building a company that endures (what set Jobs and Bezos apart). #Thousand Year Planning
• Performance marketing is about getting cost below expected value, triangulating a targeted user segment, and running that at scale. #Unit Economics
• Facebook ingests a constant stream of events attached to user profiles, knows what you’ve spent money on in a backward-looking window, and shows you ads for more of the same. #Streaming Data
• Facebook needs no assumptions — it has behavioral history: it knows this person made purchases in an app or DTC shop like yours.
• Facebook doesn’t sell data — no one would buy it. The value is in the targeting/model coefficients, useless to anyone lacking Facebook’s ~100,000 targeting dimensions. Even handed to Snap/TikTok, the infrastructure doesn’t match. #Data Privacy
• Apple ($AAPL) underestimates how much its Services/App Store growth owes to Facebook — a symbiotic relationship where Facebook did Apple’s “dirty work” and Apple harvested 30% on the backend.
• SKAdNetwork (3rd-party app-conversion API) vs. Apple Ads Attribution API (Apple’s own ad network): Apple privileged its own ad network by giving creative-level postback data only to its own network, which you need to optimize which ads perform.
• Shopify is rarely raised here but is highly exposed — many of its merchants are heavily dependent on precision Facebook targeting. #Shopify ($SHOP)
• Apple’s “no app stores in the App Store” rule is selectively applied (its own content catalogs are “Netflixesque,” not app stores); meanwhile Google copies everything Apple does, justifying anti-competitive moves — the Apple-Google duopoly “ruling everything.”

Notable quotes

Being a truly great CEO is about more than capturing an opportunity and riding it, even if that opportunity is a trillion-dollar one; it also means thinking deeply about how to build a company that endures, and what was notable about both Jobs and Bezos was how much time they spent doing exactly that.

Facebook is ingesting this constant stream of events, and it’s attaching those events to the profiles of Facebook users. It basically is able to know what you spend money on in this backward looking time window, and then to show you ads for more things like that.

Facebook doesn’t sell data. No one would want to buy it. The valuable data are the model coefficients, the targeting coefficients that wouldn’t be useful for anybody else, because nobody else has the different dimensions that they target that Facebook has. I’ve heard that Facebook has 100,000 different dimensions that it qualifies users against… You couldn’t hand that to TikTok, they don’t have this exact same infrastructure, there’s nothing you could do with it.

Apple underestimates the degree to which Apple’s growth in services revenue and the growth in the App Store is because of Facebook and that Facebook and Apple have had this very symbiotic relationship where Facebook has done all of Apple’s dirty work, and Apple has harvested 30% on the backend just by virtue of owning the App Store.

They’ve blatantly privileged their own ad network by giving in their API that delivers reporting data for when you use their own ad network, you get actual creative level data with the post-back… You don’t get that at all with SKAdNetwork, that’s really important actually, because without that, you can’t optimize which ads perform better.

Well, the great thing from Google’s perspective is they get to copy everything Apple does, which completely benefits them because Apple wants to kill cookies, Google’s like, “That’s fine. We have the browser, we have the App Store and we’re justified in doing blatantly anti-competitive things, because we’re just copying Apple.” The Apple-Google duopoly is really ruling everything.

Notes

• Doing creative and campaign optimization to get the costs below what this expected value is in a way that kind of triangulate like some segment of targeted users and then just running that at scale and spending as much money there as you can. #Unit Economics
• Facebook doesn’t need to use assumptions, it has historical data. It knows that this person made purchases in an app like yours or in a DTC web shop like yours.
• SKAdNetwork is the API available for third parties to measure app conversions; the Apple Ads Attribution API measures conversions from Apple’s own advertisers (App Store, Apple News, Apple properties).
• Shopify exposure: a lot of Shopify’s customers are very heavily dependent on precision targeting from Facebook. #Shopify ($SHOP)
• Apple’s “no app stores in the App Store” rule: its own content catalogs are “Netflixesque” — a content catalog you explore, much of it published by third parties, “but not an app store.” #App Store

How it connects

• Eric Seufert — interviewee; mobile-advertising analyst (Mobile Dev Memo).
• Apple ($AAPL) — App Store economics, SKAdNetwork, self-privileging ad network, ATT.
• Facebook ($META) — behavioral-history targeting; the “dirty work” half of the symbiosis.
• App Store / Data Privacy — the 30% take and the privacy framing.
• Shopify ($SHOP) — the under-discussed party exposed to Facebook-targeting changes.
• Companion piece: Facebook’s Earnings, Zuckerberg vs. Cook, Apple and Facebook Parallels.
• Ben Thompson / Stratechery — interviewer and publication.