Apple vs. Google – Private investigations

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Apple can afford privacy where Google & Co. cannot.

•  At its recent developer conference Apple gave more details about its intentions when it comes to privacy, highlighting a technology called differential privacy.
• Differential privacy is nothing new as it has been around since the 1960s and it works by injecting meaningless data in between real user generated data blocks when it is sent to the server.
• User profiles are not created but the data is analysed using machine learning to draw global insights that can then be used to improve the ecosystem for users.
• In this way the service can be improved without using the personal data of the user.
• This all sounds great but it only works with two of the three ecosystem monetisation strategies, meaning that for many ecosystems, this is not an option.
• RFM’s ecosystem monetisation model sees three methods of monetisation for any digital ecosystem:
  • First: Own the hardware and keep the ecosystem or the service exclusive to that hardware and charge a premium for it.
  • This is what Apple does so effectively and where the Android makers are really struggling.
  • This works nicely with differential privacy as the user has already paid for the ecosystem through the price of the device and so no data is needed to generate revenues.
  • Second: Make the ecosystem or service available on as many devices as possible and sell advertising based on usage.
  • The experience is “free” but money is earned by using users’ personal data to generate advertising or relevant marketing.
  • This is Google, Facebook, Baidu, Twitter and so on.
  • This monetisation method will not work with differential privacy as user profiles are at the heart of its efficacy.
  • Third: Charge the user a per month fee to get access to the service and keep it free of annoying advertising.
  • This is just beginning to emerge for ecosystems but individual services like Netflix, Spotify, Amazon Prime and Xbox Live are already well established.
  • This will also work with differential privacy as the user is paying to use the service.
• This is a major problem for Google and Facebook because most users think that they are customers of these companies when in reality they are product.
• It is this lack of understanding that has led to the backlash against using advertising which Apple is more than happy to fuel.
• Hence, users do not realise that they are in fact paying for Google and Facebook services and are doing so with their data rather than cash.
• This is how Apple can afford to take the high ground on privacy where Google, Facebook, Baidu and so on cannot.
• I suspect that if this were to come to a head like it has for Wired (see here) and Axel Springer (see here), Google could offer its users the option to pay cash as a subscription for its services rather than receive advertising.
• In this instance, I suspect that the vast majority of users would opt to receive advertising pretty much putting an end to this problem.
• This is why I remain unconcerned that privacy will cause revenues to dip at Google.
• It still has the last resort of subscription to make its living and the vast majority of its users like and value its services.
• I continue to prefer Baidu, Microsoft and Samsung over Google and I still see plenty of long term upside in Apple for income investors who can be patient.