Apple’s search engine is the next “Godfather.”
- For over a decade, Apple has been building the systems needed to take over the digital marketing industry
- They chose now to eliminate their rivals due to the distraction from the pandemic/election/anti-trust case
- Announced in Q1 2021 they will limit ad tracking for apps, hurting their rivals
- Recently patented more accurate geo-tracking and replacing IDFA
- Apple has built its own search engine to replace Google
- End goal is to not win at digital marketing, it’s to win at data collection
What if I told you that the next big digital advertising platform that your company needs to be on isn’t going to be owned by Google or Facebook. It isn’t Spotify. It isn’t Hulu or even TikTok. Now let’s up the ante. What if I told you that the next big digital advertising platform has the potential to be bigger than all those companies combined.
The recent Netflix-produced documentary “The Social Dilemma” details the problematic nature of how social media and Google use our digital footprints to manipulate our real-world behavior and decision making. While watching the documentary with my girlfriend, I would catch glimpses of her staring at the television, wide-eyed and stupefied, as if she was just told that Santa Claus wasn’t real. Being a digital marketer and spending my career in tech, I was less surprised. Those online platforms, with their proprietary algorithms and “nudging” tactics, are how I and millions of others make a living.
According to a July report published by Global Industry Analysts, the worldwide value of the digital advertising and marketing industry is $322.5 Billion, and it is estimated to grow to $640.2 Billion by 2027. Now couple that with the fact that the leaders in digital advertising are the same companies leading in the IT and Tech sectors, and you get a handful of companies that are responsible for one of the top industries in the world.
Now imagine that those “handful of companies” are about to get destroyed and replaced by one company in what could be one of the greatest business moves of all time. And who will we thank (or blame) for this? Ourselves.
Hey Siri, How Will Apple Take Over An Industry?
If you learned one thing from watching “The Social Dilemma,” it’s probably that “online privacy” is an oxymoron. Big tech companies have been using your geographic location, personal relationships, and shopping patterns to predict how, when, and where to best advertise to you. While the details of this surprised my girlfriend, she conceded that she had been warned one headline at a time about this erosion of privacy, for over a decade. So who is going to solve the privacy dilemma, and save humanity? Enter Apple.
If you currently turn on the TV (or better yet, the streaming service you use to watch TV,) you’ll see that Apple is going to fix that! Their recent ad, titled “Privacy. That’s iPhone” is the latest in a series of marketing moves that they have been taking to be the perceived privacy purveyor of the public. The title is well deserved, too. While Apple devices still have had their share of issues, their reputation for being notoriously difficult to hack, as well as their 2016 refusal to work with the FBI to unlock the San Bernardino shooting suspect’s iPhone has earned them a reputation for security.
Now, though, it seems that they are leaning into this reputation. While consumers are conditioned to expect an announcement of a major company getting hacked every few months, Apple is choosing now as the time to cash in their privacy chips because we are on the verge of another political election. One can’t look back on the 2016 election without thinking about “her emails,” “Russian hacking,” and “social media trolls.” Add in the popularity of “The Social Dilemma,” our justice department’s plans to file Antitrust charges against Google, and the Trump administration’s ban on TikTok for security purposes, and you have a recipe for Apple to swoop in and claim the privacy crown.
So what does this have to do with digital advertising? Apple recently unveiled its new iOS14 update on September 15th. Believe it or not, cool-looking home screen designs weren’t the only thing that changed. Apple made many changes in the name of “protecting customer privacy” that greatly affect how app designers monetize their work. You can read up on all the disputes they are currently involved with, however, you won’t find the biggest blow to the advertising industry and Silicon Valley. The coup-de-grace for their Silicon Valley competition was planned to be released with iOS14 but delayed until early next year. We will touch on this in a bit.
The Road to Digital Dominance
To understand how Apple is positioned (and likely) to go from having virtually zero presence to dominating some of the world’s most powerful companies, you’ll need to have a general idea of what “digital advertising” even is. Ask a hundred professors, CEOs, and agencies this question and you’ll get a hundred different answers. With the way tech has evolved over the last 20 years, there’s no shortage of new platforms being released that advertisers have utilized in their efforts to sell products. For complexity’s sake (as well as to see where the power is consolidated) we’re going to boil it down to three categories, called “digital channels.” They are Social Media, Display Advertising, and Search Engine Marketing.
The easiest digital channel to understand is Social Media because whether you are a marketer or not, you are familiar with it. The landscape has been ever-changing. Platforms like Vine and MySpace have come and gone. But the most dominant player in social media during the age of the internet has undoubtedly been Facebook. You know the story; Mark Zuckerberg created Facebook in his dorm at Harvard in 2004, and it spread like a wildfire. Since then, it has waned in popularity with younger generations. But in 2020 it is still quite a feat to find a person in America not on Facebook, or at least one of its many subsidiaries like Instagram.
As explained in The Social Dilemma by the man that created it, the monetization model has always centered around advertising. Facebook quickly realized that they could charge more while boosting advertiser retention if instead of promising that a user will see an ad, they can promise a user will purchase from an ad.
To accomplish that, they had to collect enough data to make a human-behavior-predicting algorithm. Modern algorithms use a process called “machine learning,” which requires a constant influx of data to stay accurate. Algorithms are like machines where data is the fuel. If you took away their source of data today, their algorithm would still be accurate tomorrow, but less so the next day, and so on until the fuel runs out.
Facebook’s data collection started out as just the things you do while on Facebook platforms, but it quickly became more about the things you do while off the Facebook platforms. To accomplish this, they utilized “cookies” and tracking pixels, which have been around since the dawn of the internet. There’s a common misconception that by placing a cookie on a person’s browser, you can see everything a person is doing on the internet, however, only websites that contain the corresponding “pixel” can be tracked. It’s almost as if the pixels are skeleton keys, and the cookies are the locks they open, which in this case, contains your unique Facebook profile.
If that sounds creepy, it’s because it is. And virtually every company, website, and online program you frequently use them. As an advertiser, I couldn’t imagine doing the job without them. But soon, I am going to have to. The privacy update that I referred to as a “coup-de-grace to Silicon Valley” earlier could render pixels virtually useless within iPhone apps unless the users opt-in on a case-by-case basis. For social platforms that make money off machine learning, they’ll be losing their fuel. For advertisers, this means brands will have to ditch social media for other channels that provide stronger returns.
Over this last Summer, I witnessed clients’ returns on Facebook and Instagram advertising plummet. This cost my agency our largest account, as they were heavily invested in social media advertising. Upon reviewing the data- it was obvious to see. Apple had been Beta testing the functionality of this pixel-blocking update as far back as June. Where there were once increasing and decreasing lines indicating that customers were taking action on our clients’ websites, there were now horrific, flat lines that lasted for days.
(Image 2 – Internal Data: Graph showing the number of iPhone users on a client’s site by day, as Apple secretly beta-tested their pixel blocking.)
One of the most complex landscapes within the digital advertising ecosystem has evolved from one of the oldest forms- banner ads. When you’re reading a news article and you see an advertisement, you’re looking at a banner ad. In the 1990s, when a banner ad appeared it was placed there by an advertiser who worked out a deal directly with the website. These days, any banner ad you see, YouTube ad you watch, or Spotify ad you hear, is almost certain to be placed there “programmatically” by algorithms that run on – you guessed it – machine learning. Where do they get their data from? This is where it gets crazy.
It’s estimated that 60% of internet traffic comes from mobile devices. One huge benefit advertisers get from mobile data is that every time the page loads, your device sends them your global latitude and longitude, which is usually accurate within 20 feet. From there, they can develop profiles on you based not only on your online behavior but on your real-world behavior. But how accurate is this technology? Accurate enough to find and kill Osama Bin Laden.
Your “identifier for advertisers” (or IDFA) is a unique number that Apple assigns to your phone to mask your personal data. Programmatic vendors don’t have the luxury of having a pre-built social profile on you, so any data tied to you is actually tied to your IDFA. This number resets periodically, so programmatic vendors can’t develop profiles based on your entire life the way Facebook can. Without this IDFA, the geography and internet history data these programmatic vendors receive would be useless.
Apple has slowly tried to kill off the IDFA. In 2012, they introduced “Limit Ad Tracking” deep in the settings of the phones, allowing users to opt-out of sending advertisers their IDFAs. John Koetsier of singular.net performed a study and found that in 2016, only about one in ten devices had this setting on. Flash forward one election hacking and dozens of corporate data breaches, only three in ten have this setting turned on. Apple is about to change all of that.
That new tracking opt-in feature that appears the first time you download any app doesn’t just apply to tracking pixels- it applies to IDFA’s as well. While Apple already installed this feature with the arrival of iOS14, the effects of the tracking opt-outs will not take place until “early next year.” They feel this gives advertisers, app publishers, and the entire Programmatic industry enough time to figure out how they intend on fueling their machines going forward.
Oh, and I forgot to mention; while there are hundreds of companies out there providing the infrastructure for Programmatic advertising, there’s one company that leads them all- Google.
Search Engine Marketing
The term “Search Engine Marketing” is as much as a catch-all word that encompasses both SEO and pay-per-click, as the company that dominates nearly 90% of this global market- Google. True, in recent years, it has been losing ground to newer ones like Bing, DuckDuckGo, and Yandex. But when you’re a company who has political rivals on the Right, the Left, AND you’re about to go to get slapped by the US Justice Department for breaching antitrust laws, you’re a pretty big deal.
While the Google algorithm is the most advanced in the world, they realize that algorithms don’t make money- what you do with algorithms make money. So they did a lot. Automotive, life sciences, entertainment- it’s easier to name the industries that Google doesn’t have a stake in than the ones it does. But the most impressive thing about their over 200 portfolio acquisitions isn’t the diversification- it’s the data. Nearly all of the acquired companies provide a different source of fuel for the search engine’s machine learning. Want to know how people speak? There’s Google Home listening to you. Want to know what they buy? There’s Google Wallet assisting your purchase. Want to know if they are reckless drivers? There’s Google Maps monitoring your location.
Google could survive losing an antitrust case by falling back on its side ventures, but it wouldn’t be the same company we have today. According to statista.com, advertising brought in nearly 70% of Google’s revenue last year, and since the start of the pandemic, it’s grown. Enter Apple.
It’s well known that Google pays Apple billions of dollars every year to be the default search engine that powers the world’s second-largest internet browser (behind Google Chrome,) Safari. There’s a good reason for that- about 75% of Google’s search revenue comes from Apple devices. Sure, users can switch their default search engine, but as we covered before, “Settings” is where Apple places options to die.
The Steve Jobs/Don Corleone Connection
Spoiler alert: I am about to ruin the ending of The Godfather. If you haven’t seen it by now, go ahead and skip to the next section of the article. Still with me? OK.
One of the greatest scenes in cinematography history occurs at the end of The Godfather. The patriarch leader of the Corleone crime family (played by Marlon Brando) passes away, leaving the “family business” to his innocent, reluctant-to-get-involved son, Michael (Al Pacino.) After taking power, Michael does get involved in a big way. While Michael attended the christening of his nephew, the Corleone family goons carry out his plot to execute not one, not two, but all five of the other New York crime families, at the same exact moment. If that wasn’t enough, he then has two of his closest allies and family, Tessio (Abe Vigoda) and Carlo (Gianni Russo), whacked for their betrayal. Michael, who throughout the movie had been viewed as an even-tempered do-gooder, had a thirst for domination inside of him so strong that he had all his competitors taken out while he was quite literally renouncing the evil of the devil.
When “The Godfather” gets a reboot for the modern era it will look a little different. Don Corleone will become “Steve Jobs.” Michael Corleone will become “Tim Cook.” The other New York crime families will be replaced by Silicon Valley titans, with Google/Alphabet CEO Sundar Pichai cast as Corleone arch-rival, Emilio Barzini. Instead of a Christening ceremony in a beautiful, baroque church, the backdrop of the final scene will take place in a Congressional anti-trust hearing against those companies who have collected our personal data.
But who will be cast as the longtime Corleone supporters and members of the family who get whacked, Tessio and Carlo? Why, dear reader, that will be you and I!
As our nation continues to sit front row to the spectacle that is the 2020 Election, Apple is alone at the altar of consumer privacy, renouncing the devil. Sure, they might get a government slap on the wrist for exploiting app developers by demanding 30% of every in-app good. But nobody is perfect!
They will gladly take the high road and concede that measly $18 Billion in revenue it made them in 2019, as long as they can eliminate their largest Silicon Valley rivals across various industries, and become the focal point of the nearly half-trillion-dollar industry. Digital advertising.
The easiest competition for Apple to whack will be social media companies. Over a highly-polarized last half-decade, the court of public approval has slowly come to a verdict on what is dividing us. Social media platforms have been manipulated around the clock by foreign entities to highlight collective groups’ worst qualities and bring them to the forefront. Aided by troll farms in St. Petersburg and elsewhere, my liberal Brooklyn friends now get to see what my conservative, Appalachian grandparents think about abortion, and vice-versa. In no universe other than social media would these two factions square off in a battle of moral supremacy.
So, we will applaud Apple when they institute “advanced privacy measures” that cripple the main user-data source behind all of these social media companies’ machine learning algorithms. Because the companies have virtually no hardware to rely on for other sources of data, their algorithms will fail. At first, the algorithms become inaccurate at predicting which users respond well to advertising, then they will become so awful that advertisers leave. At this point, they will suffer the same fate as MySpace- banished to irrelevance.
Hurting social media companies may win Apple some good karma with consumers, but that doesn’t make them money, so why bother? Well, there is an alternate reality to the scenario above that seems more likely. One which makes Apple money. Aside from virtually destroying social media’s ad tracking, the iOS14 update instituted one addition that you may have seen- Sign in with Apple.
You use these sign-in options because they allow you to create accounts with the click of a button by using the information stored already on you in. But Google, Facebook, Twitter, and now Apple, are not simply providing these options simply because they are great people. They want you to choose their sign-in because it passes back all the data you accumulate within those apps. Why bother creating new apps to collect different data points on users, when you can leach the data through a sign-in button?
This is the feature that was heavily exploited by the 2016 Trump presidential campaign’s information firm, Cambridge Analytica, which caused Facebook to reevaluate how much personal data they would share with advertisers. It’s powerful enough for presidential campaigns to utilize, so clearly, it’s a source of sought-after data that Apple is now fighting for. You know, for your privacy.
Rather than kill off the social media companies, Apple most likely realizes that they can profit more with their victims alive. Like it or not, Social Media is highly influential, so Apple is better off allowing users to access it on their hardware so long as they get a cut of the profits.
By playing gatekeeper to these social media companies’ data sources, they can effectively hold the largest Social Media companies in the world hostage by becoming the main source of those companies’ data. Rather than Facebook tracking your data across the web, Apple will keep you private from Facebook’s prying, but it will most likely work out a deal where they will pass back bits of data to them at a hefty price. In other words, “Sorry Facebook, the data on your app is mine now, but I’ll sell it back to you.” If that sounds familiar, you should go back and watch the 1983 classic, Risky Business.
Similar to how Apple will hold the Social Media industry’s data ransom, the most likely scenario is for Apple to disrupt the Display, Programmatic, and Streaming industries by not passing back in-app consumer data to the publishers like Google, Spotify, and YouTube. Instead, they will offer consumers a secure “Sign in With Apple,” only to turn around and somehow pass this same in-app data back to publishers but packaged differently.
With data encryption getting more advanced over the last decade, the IDFA was on its last legs. Having clearly lost favorability with Apple since it’s creation, the IDFA, if you recall, was Apple’s original solution for sharing your device’s uniqueness with vendors so that they could develop interest-based profiles off of the data. If history repeats itself, I expect Apple will want to replace this with technology adopted from another product they already have- Apple Pay.
Experiment: take out your iPhone. Go to Settings, then click “General,” then “About, and scroll to the bottom. You’ll see a 14-digit “MEID” number, which is your IDFA until it resets. Now click “SEID.” You’ll see a much longer code, containing both numbers and letters. This is your “Secure Element Identifier” which is used for the most secure transactions, such as Apple Pay. As a consumer, if you had to choose a password to keep your phone safe from hackers, would you choose the MEID number or your SEID code?
This is the logic Apple will most likely implement when they explain to advertisers and consumers alike why they are selling back advertisers the data from their in-app ads. Yes, that ID is significantly harder to hack- that’s why it’s used for your credit card transactions. Do I as a consumer, want that same number to be used for my secure purchases AND the storage of all my online data? Probably not. It doesn’t reset nearly as often as the IDFA code, and one breach would result in not just my credit information being taken, but my online persona as well!
As with Social Media, there is an alternative reality to the scenario I just posed to you, however, this one really scares me. Currently, depending on where you’re reading this, your cell phone is traceable to your location within 20 feet. That 20 feet could make the difference between whether you’re inside of a 7/11, or you’re just filling your tires up with air outside the store. According to an August 8, 2019 patent filed by Apple, they just fixed that problem. Relying on satellite data paired with machine learning, it seems that iPhones will soon have the most advanced geotracking in the world.
Why would Apple care to fix this 20-foot discrepancy? Is it for their Maps? Is it to sell this data back to advertisers? Or is it to replace the entire geotargeting industry lead by Google with their (supposedly) more private, and more accurate data? Keep reading.
Search Engine Marketing
If Apple had a nemesis, it would be Google. No other American company is as much of a threat to their overall quest for data supremacy as Google, with their diversified portfolio. While Samsung is the closest to Apple in terms of smartphone market share at 25%, it’s clear that the two are fighting different battles. Samsung wants to win at phones, whereas Apple wants to win at data.
It sure seems to me that Michael Corleone is using this anti-trust case as the moment where he takes out Barzini. Where they attempt to place Google in checkmate by acting on a plan most likely put in place a decade ago. Where they attempt to replace Google’s core business. The search engine.
Exactly nine years ago from when this was written, Apple launched Siri on their iPhones which sparked a new way to collect user data. Rather than learning users’ thoughts by method of them typing, you could collect and make sense of their speech patterns, dialects, and unfiltered thoughts. Since then, various other products have entered our households, such as the Google Assistant, Amazon Alexa, and Google Home. If you asked any half-decent Search Engine Optimization expert where the realm of SEO was headed, 10 out of 10 would have told you “speech recognition.”
The major Silicon Valley companies clearly see this data as extremely valuable, even enough to sometimes “accidently” record us when we do not prompt them. Ever have a conversation about a very peculiar, specific topic within earshot of your phone, only to later have an ad served to you about that very same topic. As an industry insider, even I cannot confirm that spying on users is a source of data for these phone providers. They vehemently deny it. However, given what I know about my own search history and my knowledge of how data gets collected, I too find the coincidence to be more than just the Baader-Meinhof effect, that these companies claim.
Despite Amazon edging out Google for smart home supremacy, no company has as much of a commanding lead of the phone assistant market as Apple. Who needs a smart home when you have your phone on you at all times?
Perhaps this decade of data paired with the recent anti-trust cases facing Google’s search engine practices was enough to make Apple want to create their own search engine. While not officially announced, more than a decade of pieces have been put in place. Apple has recently been pouring money into hiring search engineers with backgrounds in artificial intelligence and machine learning. As of iOS14, Siri now skips Google results by providing “Spotlight Search” results. But most tellingly, Apple’s web crawler began crawling (reading all the content) websites at a much more rapid rate, which is the driving force on how Google keeps its search results relevant and up to date.
To put it into perspective, it’s as if Apple has built a car manufacturing plant, bought all the parts needed, hired the workers, started test driving cars, but has not yet announced that they were building cars. Look out, Ford.
The Godfather Part II
In the 1974 sequel to The Godfather, Michael Corleone draws upon his inner Sun Tzu when he says “Keep your friends close but your enemies closer.” For over a decade, the iPhone has been the contributing factor behind the success of companies like Facebook, Spotify, Instagram, TikTok, and yes, Google. With these most recent power moves currently being orchestrated with the backdrop of international anti-trust lawsuits, it seems like Apple has always taken this quote seriously.
The iPhone has always been the main conduit to which the Facebooks and Googles of the world were able to capture your data and build advanced algorithms to predict your interests. The iPhone has always been the gatekeeper of your most personal information. From credit cards to nude photos, the iPhone has seen it all. Does it surprise us that Apple was aware of their sleeping giant the whole time? Does it surprise us that the nearly trillion-dollar corporation that created the canvas for smaller corporations to sell us back our data will soon be selling them back their data? Like a junkie looking for a fix, these smaller billion-dollar corporations relied on Apple’s devices to pass them back our data, in order to prevent algorithmic withdrawal.
Dear reader, there is no good outcome here. From my perspective, “The Social Dilemma” is just as dangerous when our data is placed in the hands of one seemingly benevolent, capitalist organization, as it is spread out amongst five or ten smaller organizations.
Make no mistake about it- the end goal of Apple or any Silicon Valley company for possessing such data is not to sell you stuff. That is just a means to the end, like how Elon Musk sells electric vehicles to fund his dreams of going to Mars. The end goal, whether it’s a capitalist business, or a socialist organization, or a government entity, is to control the way the world will be shaped.
In 2017, Russian President Vladimir Putin said the quiet part out loud. The part that Apple knows. The part that Google knows. “Artificial intelligence is the future, not only for Russia, but for all humankind. Whoever becomes the leader in this sphere will become the ruler of the world.”