Meta under pressure – Part 4: the Apple Menace

«People who are really serious about software should make their own hardware.» Apple founder Steve Jobs (pictured above) quoted computer science pioneer Alan Kay this way when introducing the iPhone in Cupertino in 2007. Mark Zuckerberg was 22 years old at the time and seriously involved with software. Just a few months prior, he’d opened up his social network Facebook to non-students. User numbers exploded, and the mood at Facebook’s offices in Palo Alto was jubilant. Zuckerberg had no idea that just a few miles away, Jobs was planting the seeds for one of the biggest rivalries in tech history. The aforementioned quote would prove all too true.

[[pullquote:Today, Tim Cook’s Apple stands for data protection. Mark Zuckerberg’s Meta doesn’t.

Today marks the eleventh anniversary of Steve Jobs’ death. If he were still around, he’d probably be proud of his successor. CEO Tim Cook has made Apple one of the most valuable companies in the world over the past decade – and, in terms of public perception, the tech giant is most committed to customer privacy. Today, Tim Cook’s Apple stands for data protection. Mark Zuckerberg’s Meta doesn’t. Apple produces its own software and hardware; it rigorously controls third-party programs. Meta missed the hardware train in the smartphone era – a mistake Zuckerberg doesn’t want to repeat with the Metaverse.

Differences between the two companies have only grown over the years. And it’s all coming to a head in a war of ideals threatening Meta’s future. Welcome to the penultimate part of my series on Mark Zuckerberg’s problems: the Apple Menace. If you missed the last instalment, you can find it here:

A financial earthquake

On 2 February 2022, Meta’s stock price crashed. By 26 per cent. Mark Zuckerberg’s corporation lost $251 billion in value in a single day – more than any US company in history. Zuckerberg himself went to bed that night 29 billion dollars poorer than he was that morning.

At first glance, this monumental drop in share price seems exaggerated: yes, the number of daily active Facebook users fell for the first time compared to the previous quarter – but only from 1.93 to 1.929 billion. Meta as a corporation still reported nearly 40 billion in profits in 2021, up 35 per cent from the previous year. So why did investors withdraw their capital as if a bubble had just burst?

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The real reason for all this is Meta’s grim future. A relatively tiny drop in users nevertheless marked a turning point, as it was the first in Meta’s history. And finally, in July 2022, the first decline in advertising revenue was reported. Now, Meta stock is worth less than half of what it was a year ago. Zuckerberg is fighting on several fronts – Facebook is losing relevance, Instagram seems disoriented, and Chinese competitor TikTok is getting stronger. But in terms of scaring investors, one factor trumps all: Apple has declared war on Meta.

Small spark, roaring inferno

It all started with a minor update to the iPhone’s iOS operating system, released by Apple a little less than a year prior to all this – a new small feature called «App Tracking Transparency». It gives you as a user the option to reject cross-app tracking. Before the update, Apple granted app developers blanket access to your so-called IDFA – your «Identifier for Advertisers». Imagine a number assigned to your device. For example, if you looked at a hotel in the Tripadvisor app for your next vacation, Tripadvisor could associate that activity with your IDFA. If you didn’t book the hotel, Tripadvisor could go to an advertising provider such as Meta with that IDFA and target ads. Five minutes later, you might see ads on Instagram for the very hotel you were looking at.

This change was implemented with the iOS update for April 2021. The first time you open an app that wants to track your activity, a dialogue box appears. In it, the app developer needs to explain why they want to track you. In the end, though, you always have the same choice: «Ask App not to Track» or «Allow.» Over 80 per cent of users reject tracking. This makes targeted advertising significantly harder, a massive problem for Meta. After all, if a company is less likely to reach its target audience with advertising, it will earn less. As efficiency declines, so does the attractiveness of Meta’s advertising.

The result for Mark Zuckerberg: an estimated ten billion in lost revenue. That’s eight per cent of Meta’s total sales. A catastrophe.

Meta condemned Apple’s move, saying App Tracking Transparency would hurt small businesses that would now have a harder time reaching their customers. «We’re standing up to Apple for small businesses everywhere,» Meta proclaimed in full-page ads in the «Wall Street Journal» and «New York Times». To get around the new restrictions, Facebook and Instagram have also adapted their in-app browser: when you visit websites within the app, each of your clicks is recorded. However, Facebook users recently filed a class action lawsuit against this backdoor tracking.

Data protection as a business model

So for Meta, App Tracking Transparency is a disaster. For Apple, it’s a building block for a new pillar on which Tim Cook is basing the future of his company: data protection. Apple wants to be perceived as a company that handles your data carefully. The paid service «iCloud Private Relay», for example, offers a trimmed-down VPN and the option to anonymise email addresses. The digital assistant Siri processes data directly on your device instead of sending it to a server, according to Apple. Health data would also be stored in encrypted form and synchronised between devices. With Passkeys, the Californians are trying to replace passwords with a more secure alternative.

Whether this focus on data protection is out of conviction, for strategic reasons, or a mix of both remains an open question. What is certain is that it sets Apple apart from the competition in terms of marketing. In numerous commercials and product keynotes, the company repeats the same message over and over again: Apple will protect your data. «We believe that privacy is a fundamental human right,» as Tim Cook said on Twitter.

However, this reputation as a trustworthy guardian of data is fragile. This became apparent quickly, such as when Apple announced that it would scan images in iCloud for child sexual abuse in future. The media outcry from privacy organisations was so loud that Apple put the project on hold. Additionally, reports that Apple is storing data from Chinese nationals on Chinese servers are also tarnishing the image – a compromise Tim Cook probably had to make in order to be able to produce iPhones in China in the future.

But this background noise is nothing compared to the devastating privacy scandals of Mark Zuckerberg’s Meta – from the controversial Beacon feature through user data leaks to the Cambridge Analytica fiasco. Zuckerberg regularly found himself forced into making public apologies, always trying to justify his actions at the same time. Whether intentional or negligent: the repeated careless handling of user information created and solidified Meta’s image as an untrustworthy, data-munching monster. With Zuckerberg at the centre, hypocrisy personified.

The Clash of the Titans has only just begun

Despite the losses and scandals, business is still going well. Meta is one of the largest tech companies in the world and still highly profitable. Almost half the world’s population uses one of its platforms. But dark clouds are brewing on the horizon, as Apple threatens Zuckerberg’s vision for the future: unlike smartphones, he doesn’t just want to control virtual reality (VR) as a platform, but also in terms of the operating system and hardware – «People who are really serious about software should make their own hardware.» This way, Meta would no longer be at the mercy of annoying data protection restrictions imposed by other companies – a clear path for personalised advertising in virtual worlds.

VR headsets

Meta Quest 2

128 GB

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VR headsets

Meta Quest 2

128 GB

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So far, Zuckerberg’s desire for total control in the Metaverse seems to be coming together: Meta’s Quest 2 VR headset has a market share of over 80 per cent. Just one thing: compared to smartphones, that market is absolutely minute – other manufacturers such as Sony are debuting their first headsets, but they can’t hold a candle to Meta. Zuckerberg’s first real competition is likely to be none other than Apple: rumour has it they’re planning a rival product for 2023 – and Tim Cook’s focus on data privacy has clearly positioned his company better than Meta in the era of virtual and augmented reality (AR). I mean, who would you rather grant access to what you see, hear and feel? Exactly. In addition, Apple is bringing along decades of experience in designing hardware and operating systems. Meta’s previous attempts in these areas, such as the Facebook phone, on the other hand, have failed miserably.

Seems the battle between the two tech titans will come to a head. Mark Zuckerberg himself is quoted in an internal meeting saying that his company and Apple are in a competition of philosophies. It will be a challenge for the Meta CEO. He’s investing $10 billion a year into VR and AR right now – the exact amount Meta is losing to Apple’s App Tracking Transparency. Zuckerberg is betting nothing less than the future of his corporation on the Metaverse. More on this in the next and final instalment of my series: All or nothing.