Facebook’s Earnings, Zuckerberg vs. Cook, Apple and Facebook Parallels

Author: Ben Thompson (Stratechery) URL: https://stratechery.com/2021/facebooks-earnings-zuckerberg-vs-cook-apple-and-facebook-parallels/ One-line: On the Apple–Facebook flashpoint over ATT: why advertisers always lag users, why rising ad prices are bearish not bullish, and how Apple’s privacy stance is a “Strategy Credit” made “free” by its business model.

Key claims

• Apple ($AAPL) and Facebook ($META) have tussled over data collection and app-store fees; the latest flashpoint is Apple’s plan to let users opt out of third-party data collection (ATT), which Facebook says could hamper ad targeting.
• Advertisers always lag users — millions used desktop/mobile before advertisers followed; analysts repeatedly wrongly assume advertising won’t catch up, and the same will be true for Stories. #Advertising
• Rising prices-per-ad are a bearish signal, not a bullish one; falling prices mean user growth/engagement is outpacing ad growth, laying groundwork for future outsized results. Facebook has pricing power from superior targeting. #Advertising
• Tim Cook: technology doesn’t need vast troves of personal data to succeed — advertising thrived for decades without it; “the path of least resistance is rarely the path of wisdom.”
• Cook ties engagement-maximizing algorithms to conspiracy theories, violent incitement, polarization, lost trust, and violence — “a social dilemma cannot be allowed to become a social catastrophe.”
• Eric Seufert: advertisers get more granular data about campaigns on Apple’s own ad network (Apple Ads Attribution API) than on any other network (e.g. Facebook via SKAdNetwork).
• Zuckerberg highlights China/supply-chain labor because it’s a Strategy Credit against Apple; Apple’s privacy stance is itself a Strategy Credit — being better on privacy is “free” by virtue of Apple’s business model.

Notable quotes

Apple ($AAPL) and Facebook ($META) have tussled in recent years on issues ranging from data collection to app-store fees, though the latest flashpoint is centered on the iPhone maker’s plan to enable users to opt out of third-party apps from collecting certain data—a move Facebook has said could hamper its ad-targeting capabilities…

The key thing to remember is that advertisers always lag users… In every case some analysts made the mistake of assuming that advertising would never catch up, but it eventually did, and it seems far more likely than not that the story will be the same for Stories.

I see increasing prices-per-ad as a bearish signal, not a bullish one; decreasing prices mean user growth and/or engagement is likely out-pacing advertising growth, which is laying the groundwork for outsized financial results in the future. … Facebook has pricing power relative to competitors because of its superior ad targeting, and thus we have arrived at Apple vs. Facebook.

“Technology does not need vast troves of personal data, stitched together across dozens of websites and apps, in order to succeed. Advertising existed and thrived for decades without it. And we’re here today because the path of least resistance is rarely the path of wisdom.” — Tim Cook

“What are the consequences of prioritizing conspiracy theories and violent incitement simply because of their high rates of engagement? What are the consequences of not just tolerating, but rewarding content that undermines public trust in life-saving vaccinations? … It is long past time to stop pretending that this approach doesn’t come with a cost — of polarization, of lost trust and, yes, of violence. A social dilemma cannot be allowed to become a social catastrophe.” — Tim Cook

“The distinction between the Apple Ads Attribution API payload and the SKAdNetwork postback means, in practical terms, that advertisers get more granular data about the campaigns they operate on Apple’s own ad network than they do for those run on any other network (eg. Facebook).” — Eric Seufert

Zuckerberg is highlighting the China issue because it is a Strategy Credit, and while of course Apple has zero tolerance for slave labor and works hard to stamp out abuses in its supply chain, it is impossible to ascertain every single one of the millions of workers in its supply chain.

Notes

• Strategy Credit: being better on privacy than Google (or Facebook) is “free” by virtue of business model; if that can be transformed into a powerful selling point for Apple’s products, it’s a bonus.
  • Facebook doesn’t have massive complex hardware supply chains like Apple does, so they’re happy to criticize labor practices.
  • Apple doesn’t have to monetize so heavily on ads and targeting, so they’re happy to criticize Facebook’s data policies.

How it connects

• Apple ($AAPL) / Facebook ($META) — the two protagonists of the ATT flashpoint and the dueling-strengths parallel.
• Tim Cook — the privacy/“path of wisdom” and engagement-cost arguments.
• Eric Seufert — the SKAdNetwork-vs-Apple-Ads-Attribution data-granularity point (see companion interview).
• Strategy Credit — the framework explaining why each side criticizes the other’s “free” weak spot.
• Advertising — advertisers-lag-users and price-as-signal claims.
• Companion piece: An Interview with Eric Seufert about Apple, Facebook, and Mobile Advertising.
• Ben Thompson / Stratechery — author and publication.