Has Apple changed everything again, again?

Last week Apple fired the opening salvo in what might well come to be seen as the beginning of the end of Internet search and network companies. Unable to beat Google for sheer speed of innovation and hampered by Facebook’s ability to acquire customers from an early age, Apple has aimed a potential deathblow at the soft underbelly of not just these companies, but a whole section of the tech industry.

Tim Cook, Apple’s CEO loosed the first tracer bullet in his speech at the Electronic Privacy Information Centre two weeks ago. “You might like these so-called free services, but we don’t think they’re worth having your email, your search history and now even your family photos data-mined and sold off for God knows what advertising purpose. And we think that someday customers will see this for what it is.” He cautioned.

This was quickly followed up by large caliber shots across the data farmers’ bows at last Monday’s Apple World Wide Developers Conference in San Francisco where, during the keynote address, speakers mentioned on no less than 3 separate occasions Apple’s distaste for the exploitation of personal data.

Why the sudden interest in the subject? Perhaps the clue lies in the sheer size of Apple. Now the largest company on the planet, and with signs of saturation in both of the markets that it helped to define: tablets and smartphones, Apple needs to look elsewhere for further exponential growth. One of these is ApplePay, the other is, of course, music. Both were centre stage at the WWDC, and while the former relies to a large extent on trust, the latter with its 800 million registered credit card accounts represents a ready-made land grab.

To corner the payment market requires a significant benefit of the doubt by consumers and the issue of trust is one that Apple can win on. According to a recent survey carried out by BI Intelligence only 5% of UK consumers plan to make use of Apple Pay. Additionally the Silicon Valley model of attracting eyeballs to collect users’ data, habits, preferences and personal networks to then sell on to third parties, and even, via advertisers, back to the individual is beginning to look increasingly threadbare. The crucial point here is that whilst Apple builds and sells the high quality, high margin kit that ties customers into its prized eco-system Facebook, Google, Twitter, Linkedin and the rest of the search and network companies rely, in the main, on ad revenues for their survival. Whilst they frantically try to diversify away from this core income stream by designing driverless cars and virtual reality headsets or gravity-defying robots at the end of the day these projects are financed through the sales of data to advertisers, insurance companies and other third parties.

Since the Snowden revelations the publics’ awareness of the vulnerability of their personal details has taken centre stage and the value of that information is beginning to sink in. Currently the large network companies are paying us nothing for this information but to put it in perspective Facebook users currently watch an incredible 4 billion video clips each day. If Facebook were to pay each poster of a video just 1/64 of a cent each time it was viewed it would cost them $22.8bn a year, by contrast that with Facebook’s entire revenue for 2014 which amounted to just under $12.5bn.

This skirmish won’t be the last in a lengthy battle for what is effectively the soul of the web. Ever since Sir Tim Berners-Lee made the selfless decision to open up his original web protocols to the world for free, the web has stood for low barriers to entry, unfettered innovation and a democratic use of information. By unleashing its formidable artillery at these other companies with ever greater accuracy Apple could bring the web back to its original ideals and in the process destroy the business models that have seen the most rapid accumulation of fortunes in history.

In so doing they also stand to win a war in which they have been slowly ceding ground over the past few years: In search they failed to make inroads against Google’s monopoly; Ping, their failed attempt at building a social network around musicians and their fans was quietly shelved in 2012 to be re-booted as Apple Music only last week. Their own brand Maps was a much pulicised slip-up and required a huge investment not to mention top-down personnel change to bring it back up to the standards that Apple’s customers have come to expect. By highlighting the voracious appetite that Silicon Valley has for personal information, and the cut-throat and often haphazard way with which it is treated, Apple is appealing to our most basic of instincts. Positioning itself as the champion of the small man Apple has everything to gain and little to lose. Google and friends are, however, in a fight for their very existence with the tide of legislation against them and more and more newsprint, both old style and online explaining how vulnerable the public is to being exploited by these “free” services that are on offer.

As with any war the aftermath could create huge opportunities for others to capitalise on and to an extent we are already seeing businesses start to carve out a new way of doing things. Companies that are built on models that reward users for their content are beginning to flourish: Download the Nectar toolbar and receive points every time you search online or use the feedback app Letyano and receive a direct reward such as a discount off your bill for giving restaurants and other places the benefit of your feedback. The amount of compensation that these businesses can pay for tracking people’s behaviour and opinions varies widely but with time it will stabilize, it is the businesses built on exploiting individuals’ data for free that will begin to suffer. What price Trip Advisor or Yelp! stock when they are required to pay their reviewers for copy?

© Guy Winterflood 2015