Platform Wars ⚔️
Last Tuesday Mark Zuckerberg posted this on his Facebook profile:
To help more creators make a living on our platforms, we’re going to keep paid online events, fan subscriptions, badges, and our upcoming independent news products free for creators until 2023. And when we do introduce a revenue share, it will be less than the 30% that Apple and others take.
Sounds great, right? What struck me was that last reference to Apple. Why firing this shot?
This is just another episode at the new platform war between Zuck and Tim. Let’s go through the recent history to understand why Zuck doesn’t want to be friends with him anymore. We’ll start with an explanation of how FB uses cookies to collect data, uses this data to train AI algorithms and target ads. Feel free to skip this if you know this already.
Facebook’s entire business model is based on selling ads. If you’re a business, you have a lot of different ways to buy ads: you could buy billboards on the highway, TV commercials, Google ads, etc.
Facebook ads are one of the ways you can advertise, and there’s a series of valid reasons why companies should prioritize giving their money to Mark rather than other ad networks. One reason is that ads on Facebook are very effective.
What makes them effective is that when you want to sell something, let’s say a new shampoo for curly hair, you can give 10.000€ to Zuck and ask him “show this ad to as many people as possible that are likely to buy this product”. Other methods like billboard adds will show your ad to anyone, even bald people.
You don’t want to show your ad to anyone, but just to the people who can buy your product. How does Facebook help you with this? One part is pretty well known: Facebook knows your interest from the content you consume on the platform. The other part is even more important, a lot of people don’t know about it, and it’s what Apple is attacking.
If your friend Carl sees the curl hair shampoo ad and he’s interested, he’ll click on that ad and go to the shampoo company website. That website is going to have cookies installed, little pieces of code that will check whether Carl will buy the product. If he does, it’ll tell Facebook “hey, Carl bought the shampoo!”. Facebook then can feed this information to their AI algorithms, that will look for other people similar to Carl who are likely to perform his same action.
The entire castle crumbles if Facebook can’t know whether Carl bought that product after clicking on the ad or not. If FB doesn’t know this, their AI has no way to learn which people are likely to buy that product. What happens then is that FB ads become less effective, companies don’t want to prioritize spending money on FB ads, FB makes less money and Zuck gets angry.
This is the castle that Apple is attacking. Since iOS14, Apple is asking users whether they want apps like Facebook to track what they do outside of Facebook. If a user says no, Facebook won’t be able to track Carl outside of the FB app, when he’s on the shampoo website buying (or not buying) the shampoo.
If you zoom out, this teach us that Facebook’s business model is really not in their hands. If also Google decides to enforce a cookie policy on Android similar to the new one proposed by Apple, Facebook’s entire business may crumble.
The problem is that Facebook doesn’t own the platforms where it reaches users and does business. If Facebook wants to be used by people, these people need to have a mobile phone to install the FB app, or a laptop with a browser to visit facebook.com.
Facebook doesn’t any of the devices, operative systems or browsers people use to access the platform. The companies that do are Apple (with iPhones, Mac, iPads), Google (with Android and Chrome), and Microsoft (Windows). Facebook’s biggest threat has always been to depending on other platforms’ permission to exist.
This same problem was the reason why Google made Android and Chrome — to have a way to keep doing whatever they want with users’ data while Apple was closing the iPhone ecosystem to 3rd parties and Microsoft was developing their own search engine for internet explorer.
Amazon also had the same problem, and tried to fix it first with their kindle fire product lineup that failed miserably. They then made Alexa, started dominating the voice platform and gained their bit of independence from other platforms.
Facebook’s strategy was to bet on what they thought was going to be the big next platform: Virtual Reality. Zuck thought that at some point people were going to start using VR headsets instead of laptops or mobile phones to consume content. Turns out, his bet didn’t pay off — at least, yet.
It sounds like Facebook wants to turn its own app into a platform on its own. By luring developers to build games and apps for Facebook, people will increasingly start doing more and more stuff on Facebook, without needing to leave the app. If these developers are taken away from Apple, it means that a more and more value that users gain from owning an iPhone will come from the services that they can use through the Facebook app. Basically, Facebook wants to run its own App Store, using its app like a Throjan horse for 1.000 more applications.
If this doesn’t look like a war already, think that Apple is working on their own ad network, and will start competing directly with Google and Facebook. And all of this mess is to gain undisturbed access to users’ data, and show them ads to make them buy stuff.
Data is the new oil said someone some time ago. It turns out that, just like oil, people are ready to go to war for it.
Originally published at https://blog.gianlucamauro.com on June 18, 2021.
