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30 Days of Blog

How Apple will make money from services[30 days of blog 20]

This post is part of my 30 blogs in 30 days series. More details here.

Apple will make money the only way it knows how; by exploiting its monopoly position. It will be couched in high-minded pretense of privacy, but it will be dirty.

Competing

Apple does not like competing. Competition is a fools game, according to Apple’s leadership. All era of Apple’s leadership(see Neal Stephenson’s classic ‘In the beginning there the was command line’ essay for context). They didn’t like it when Microsoft was eating their lunch, when Google created a competing mobile platform, and when Amazon beat them to the punch on ebooks. To the point where they engaged in criminal conspiracy to stop all competition in the space. Now that they want to generate services(features) revenue, they are at it again.

The Privacy Gambit

In the Data Hungry world of BigTech, Apple has found differentiation through Privacy. “Privacy is a Universal Right”, Apple says(unless you are Chinese). Apple could get away with it because most of their revenue came from iPhone sales and App Store licensing. Things are different now. Apple is selling subscription services at dirt cheap in a highly-competitive environment. They also have App-install ad business in the App Store.

Now how do you make money from original content worth billions and ad tech without creepy tracking? You can’t. This gambit has backfired. Kind of. Apple can’t start engaging in Facebook and Google like tracking tech because that would destroy their brand equity, while they can’t compete with Google and Facebook without resorting to targeted ads.

The solution: Instead of ‘lowering’ yourself to the competition’s level, you make things incredible difficult for them. Apple is doing just that.

The Great Stifling

At WWDC 2020, Apple announced new privacy focused features around App permissions. Apps will now have to ask you permission to track you across Apps. This sort of cross-site/cross-app tracking on iOS is done through Identifier for Advertising(IDFA), a unique device ID. The biggest benefactor of this was Facebook, which used it to derive App-Install ads. They already limited App Install ads to people who opt-out of the IDFA.

While stifling Facebook’s business, Apple is preparing to expand its own App-Install Ads program outside of App Store. Restricting IDFA also affects other businesses; Google can’t use it target Youtube ads, Netflix can’t use it to create a better recommendations profile, same for Amazon, and Spotify. All of these businesses compete with Apple in at least one sector. Instead of competing with them on the market’s terms, Apple is wielding its monopoly power to change the market conditions

Every time Apple’s monopoly power is mentioned, like during the recent Hey.com debacle, ‘analysts’ a quick to jump in and point out Android and Google as competition. This is a strawman. Nobody claims Apple has monopoly over the cellphone market. Apple has a monopoly over the iOS app market; you can’t go anywhere else if you want to sell iOS apps. While the US Supreme Court has decided that monopoly matters only if it affects consumer pricing(banananana and all that), the rest of the world is taking notice. While focusing on Privacy is great, Apple can do that simply by disabling advertiser ID altogether. This will put them in hot-water for anti-trust violations, but that too can be resolved by closing their App-install ad business. Why they don’t is quite clear.

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