App economy – App tracking issues.

The end result should be greater transparency for users.

• While Apple’s position on app tracking serves to perpetuate the myth that the internet is free, the inevitable response from developers should increase visibility on how apps and services are paid for.
• Apple’s position on privacy is fundamentally correct but it tends to distort the economic reality of the app economy.
• This issue has come to a head with the advent of iOS14 where Apple is mandating a feature called AppTrackingTransparency.
• This forces developers to seek the user’s permission to track them in order to be able to gather the data they need to monetise their apps through advertising.
• While it is clear that every user should have the ability to determine how and where their data is used, this feature perpetuates the myth that the internet is free as users will expect to be able to block tracking but still have access to the services.
• A large part of the money that is earned by the app economy is done so through the use of targeted advertising which requires app tracking in order to work properly.
• Given a simple choice, every user is going to opt not to be tracked and it is this has the potential to massively disrupt the advertising monetisation mechanism.
• The problem has been made much worse by the likes of Google, Facebook, Twitter and so on who for years have not been upfront with users about how the services that they enjoy are paid for.
• In order to drive usage, they have been quite happy to allow the myth that the internet is free to perpetuate when in reality, this is very far from the truth.
• Every internet service or app has to be paid for and all users of smartphones pay cash for their services or they pay with data.
• The problem is that by being deliberately vague on this point, many users think that their services are free and that they are the customers of Google and Facebook.
• In fact, users are not customers, they are the product.
• These users have been paying for their services for many years with their data without really realising it.
• That is why this new feature will cause so much disruption as the user’s expectation will be to turn off the tracking and still get the service.
• However, there is an easy fix which is for developers of free apps to require users to accept tracking in order to gain access to the service.
• This was worked well on the fixed internet where many websites require the adblocker to be disabled before it will allow access to the content.
• Hence, I see no reason why this should not also work well on smartphone apps.
• Following the fuss led by Facebook, Apple has agreed to delay the implementation of this requirement until 2021 in order to give developers more time to adjust their apps to this new requirement.
• At the end of the day, I think that apps will simply go the same way as the web where tracking will be required for some apps to work.
• I think that many users care less about their privacy than Apple would have us believe and that most will allow the tracking to continue in order to get access to the app.
• I think that this will also increase awareness of how apps and services are paid for when there is no cash transaction.
• There may be a few revenue ripples at first but once this reality is released by everyone, this method of monetisation is likely to continue as before.
• This could create a short-term trading opportunity in Facebook, but I would wait for it to fall a bit from current levels before even considering this.