Apple (AAPL 4.01%) recently announced that, as part of an iOS 14 update, it will allow users to block the Identifier for Advertisers (IDFA), effectively short-circuiting targeted advertising on iPhones and other mobile devices. On the heels of that decision, stories emerged that Alphabet's (GOOGL 2.37%) (GOOG 2.15%) Google is considering similar requirements for its Android devices, though the measures may not be as severe.
On this clip from Motley Fool Live, recorded on Feb. 5, "The Wrap" host Jason Hall and Fool.com contributors Danny Vena and Brian Withers discussed the implications of this move for Facebook (FB 1.39%).
Jason Hall: Apple has clearly prioritized user security and privacy. The newest version of iOS is going to raise the stakes and apps are going to have to physically ask you if you want to share data. You have to opt-in to data sharing versus the old way that it worked is you had to physically go in and opt-out and find the opt-out thing to do. Huge implications across the board.
Android's been pretty wide open and apparently, this newest version of Android is going to start having some of those Apple-esque data privacy features.
Here's the question that I wanted to ask. Facebook just said, Mark Zuckerberg just said, "Apple is increasingly one of their biggest competitors." What are the implications for Facebook coming out of this? Danny, I want to have you answer this one first, give Brian, a little time to marinate on it.
Danny Vena: A couple of things come to mind. First of all, anything that increases user privacy and decreases the amount of tracking that they do of users across apps, across websites. Anything that increases that is a bad thing for Facebook to some degree or another.
As we've seen with Apple, Facebook said now that they expect somewhere between 10% and 15% of people to opt-in to data tracking versus only 30% percent that opted out. Now, it's going to go from 70% percent down to 10% to 15%. Which means that their digital advertising is going to be much less targeted, which means they're going to make less money on.
One of the things that I saw on something that I read about this move by Google gave me a little bit of insight and it said, instead of forcing the opt-in requirements on app developers, that Apple is planning to do, the Android alternative may resemble some of the upcoming privacy controls that were already planned for Google's Chrome browser, in which the company is seeking to end some of its more insidious tracking technologies. [laughs]
Their wording, not mine. By developing less invasive alternatives and giving users more opt-out mechanisms. It doesn't sound like the Google measure is going to go nearly as far as what Apple did, so I don't think it's going to be as big of a problem for Facebook. But like I said, anything that increases user privacy and decreases tracking across apps and websites is bad for Facebook. Period. Full stop.
Jason Hall: Brian Withers, what do you think here?
Brian Withers: I think it's just another hurdle for Facebook to overcome. They're not stupid, they have a lot of software developers, they didn't get to be the biggest social network platform in the world without having a really smart system to capture data.
If you separate what you're getting from your phone. Think about what they're getting from the phone, your location, what apps you use, where you go, maybe people you text, things like that. That goes away, but all of the data that, I don't want to say the users, the guinea pigs, the people who use the platform to communicate with friends and relatives and loved ones, there's a ton of data in there. You put in your BFFs, when you got married, where you live. There's a ton of information that people have volunteered, how old they are usually.
Jason Hall: So you're not starting at zero if you're Facebook, right? That's the point.
Brian Withers: Absolutely not. There's the ton of data and that may be incomplete. But I'm pretty sure that you can still target 53-year-old guys who live in Chapel Hill who are interested in Peloton or whatever.
Jason Hall: There you go. Good point. I think to me, if anything, is it just really levels the playing field for everybody that's in social, in a way. I think for as much as this could be a hindrance for Facebook, I think it's good for like Pinterest (PINS -1.40%). [laughs] I really do because I think in a way maybe that's one thing you look at like, what's that metric? It's got a great acronym that I'm drawing a blank on. Like the revenue per user, ARPU? That's it, average revenue per user.
Facebook's average revenue per user is like almost $40, and I think it's $5 or something for Pinterest. I think if anything, it's going to make Pinterest a more interesting, compelling place to advertise, so we'll see how it works.
I don't think it kills Facebook by any means, they certainly have the resources to throw at it. I think it levels the playing field and it's probably less bad and could actually end up being good for somebody like Pinterest. We'll see how it goes.