A Short History of Apple and Facebook Digging in Their Heels ⇥ wsj.com

Salvador Rodriguez, Wall Street Journal:

In the years before the change, Apple suggested a series of possible arrangements that would earn the iPhone maker a slice of Facebook’s revenue, according to people who either participated in the meetings or were briefed about them. As one person recalled: Apple officials said they wanted to “build businesses together.”

One idea that was discussed: creating a subscription-based version of Facebook that would be free of ads, according to people familiar with the discussions. Because Apple collects a cut of subscription revenue for apps in its App Store, that product could have generated significant revenue for the Cupertino, Calif., giant.

[…]

Apple has discussed similar business models with many developers, according to a person familiar with the conversations.

If Apple was, indeed, planning a relentless and self-preferencing campaign against Facebook beginning in 2016, as Rodriguez reports, for a feature previewed in 2020, that would be pretty terrible. But 2016 is the time when Apple enabled subscriptions for all types of apps and launched its Search Ads initiative. Apple executives, including Phil Schiller, explained these changes in press briefings, and the company privately discussed them with developers, too.

Lauren Goode of the Verge in June 2016:

One popular app developer, who had been clued in to Apple’s App Store changes, says the new subscription offerings are “an earthquake in my world, in a good way.”

“It’s hard to emphasize how significantly this can change the viability of companies like mine and their growth trajectory,” says Itai Tsiddon, the co-founder of Lightricks, which makes top-selling apps like Facetune and Enlight.

If Apple discussed its changes with Tsiddon and, implicitly or explicitly, encouraged him to adopt subscriptions, why would it not do the same for big developers like Facebook?

Maybe this was a scheme five years in the making and explicitly targeted at Facebook. Its apps were a “persistent frustration for some Apple executives”, according to Rodriguez’s sources, because Apple did not get a cut of ad revenue. If that is the case, it confirms some of the harshest critiques of the App Store model and Apple’s entitlement to a cut of revenue. On the other hand, without context, it is unclear why Facebook’s apps so chafed Apple’s leadership. Maybe it is because they were popular, free, and huge, likely costing Apple huge amounts of money every time a new version of Instagram was released. That is partly Apple’s problem; the App Store is designed in a way that disincentivizes in-app transactions, incentivizes free apps, and does not care about file size or bandwidth use.

Here is the part of Rodriguez’s story that is not getting as much attention:

The Facebook executives who internally proposed ending the collection of third-party data argued that by ceasing its reliance on such data, the social-media giant could also reduce the company’s dependence on Apple and Google’s mobile operating systems.

Mr. Zuckerberg opted instead to leave the bulk of its data-collection practices in place. The company shut down an ad-targeting option that relied on information collected by data brokers shortly after the Cambridge Analytica scandal was reported in March 2018, but otherwise Facebook continued to rely on third-party data to target users with personalized ads.

Executives at Facebook knew, in 2018, that its reliance on third-party data was a risk, and that regulatory and platform changes could make its use very difficult. It could have switched to an entirely first-party model at the time. I assume its executives now regret that decision.