The Battle for Consumer Data Continues

Feb 18, 2011 - Tom Chavez, co-founder and CEO - 0
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This post was originally published in AdExchanger

The battle for consumer data just reached a new, much more feverish pitch.

The day before yesterday, Apple announced what a lot of people in our industry have feared and mostly known for some time: they want use the iPad to further disintermediate publishers from their audiences. In addition to claiming a 30% share of any publisher app sales, Apple’s new rules of play (WSJ) would:

  • Prevent linking of content delivered on apps to the publisher’s own website, effectively keeping iPad users behind an iron curtain of Apple’s construction;
  • Prevent movement of customer data outside Apple’s iTunes environment under the auspices of protecting consumer privacy, except in the unlikely “yes, share my email” opt-in of the end user.

Google immediately countered by announcing One Pass, which dominates Apple’s offer along every dimension. Barring any lurking gotchas, Google is claiming a 10% revshare relative to Apple’s 30% and allowing customer data to flow freely from Android to third-parties at the direction of the publisher, presumably without any of Apple’s strange restrictions on linking.

Before I read Google’s announcement, my reaction to Apple’s news was mixed. Jobs sounds reasonable when he writes, “Our philosophy is simple—when Apple brings a new subscriber to the app, Apple earns a 30 percent share; when the publisher brings an existing or new subscriber to the app, the publisher keeps 100 percent and Apple earns nothing.” For the publisher, iPad revenue feels like found money. Before the iPad, tablet-based revenue for publishers was exactly zero; after the iPad, it’s something greater, possibly much larger. It reminds me of Google’s 70/30 AdSense arrangement with publishers: before it existed, publishers saw basically nothing with contextual search; after AdSense, publishers had a new, previously untapped source of revenue. Who knows if Apple’s 70/30 split is the ‘right’ going-in price, but it has the twin benefits of catalyzing revenue from a new modality that hardly existed before and snapping to a well-understood industry norm.

My larger concerns with Apple’s offer centered on linking and customer data. Hyperlinking is, after all, the essence of internet experience. Telling a publisher he can post content on the iPad but not link it back to his website is like is like the owner of a shopping mall telling its tenant, Williams-Sonoma, that they can’t also hand out their catalogue in the store. It’s kooky, tone-deaf, and reminds me of Facebook’s Beacon. I wager that Apple rescinds it within weeks.

Apple’s approach to customer data is more worrisome. Section 3.3.9 of the iOS developer Ts & Cs tells the app developer that:

“You and Your Applications may not collect user or device data without prior user consent, and then only to provide a service or function that is directly relevant to the use of the Application, or to serve advertising. You may not use analytics software in Your Application to collect and send device data to a third party.”

Does tracking code provided by a third-party at the behest of the publisher run afoul of these T’s and C’s? Does ‘device data’ only include stuff on the device that is happening outside the App environment, e.g., other apps, PII, credentials, or could it extend to more basic usage and usability data that a publisher might have a real need to access? Presumably, all of these items are to be interpreted according to Apple’s own discretion.

Beyond the definitional issues, there’s a more fundamental problem with Apple’s approach, one with profound strategic significance for publishers: Customer data is the lifeblood of ad-supported media, particularly in an increasingly real-time, interactive context. Consumers want more relevant ads, more engaging content, more actionable offers, and they want it all now. None of that happens without intelligent, real-time synthesis of consumer data. If Apple becomes the only aggregator and analyzer of consumer data for its current and future iDevices, or if it decides on a whim which third parties publishers get to work with to deliver and enrich their apps, digital publishers forfeit their most important means of generating cool consumer experiences.

Apple’s attempt to present their position on third-party data as a commitment to consumer privacy is, at best, a red herring. Publishers have the means to demonstrate responsible stewardship of consumer data on their own. They don’t need Papa Bear to do it for them. Closed systems drive increasing returns and unbreakable monopolies, and that’s why Apple is pushing iAds – not because they’re worked up about privacy.

But the increasing returns argument doesn’t work in any event. If Apple executives thought this all the way through, they’d recognize that their current posture undercuts their own long-term advantage. They need a vibrant ecosystem of third party developers, enablers, and analysts helping publishers make sense of the torrent of data their iDevices are throwing off. More insight means more publishers, which means more apps, which brings in more consumers, more ads, more offers – and ultimately much more value from Apple’s 30% cut.

At the end of the day, I find myself in the odd position of praising Google’s… openness. Its 90/10 offer is quite an attention-grabber. Its commitment to third-party data participation constitutes an even more potent possibility for publishers. I’m lighting candles and praying that publishers think things through before lurching into commitments with Apple bearing drastic long-term effects, and nudging everyone I know to give Google Android a serious look.

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