The IT Nerd

Meta/Facebook has been whining to anyone who will listen about Apple’s App Transparency as it is going to cost them $10 Billion this year. Now in a Bloomberg report, it seems that they’re starting to whine about Google as well:

The Facebook owner is alleging Alphabet Inc.’s Google, which also sells personalized ads on iPhones, has an unfair advantage under Apple’s new policies. Apps including Facebook have to ask users if they consent to being tracked, but Google’s search results and browser don’t — causing some advertisers’ budgets to shift to Google for more effective targeting.

You know, they kind of have a point if that’s true. Though I question if that is true based on this:

Last year, Google said it wouldn’t prompt consumers about data collection because, after Apple’s change, it decided not to use any of the data on iPhones that would require permission.

Google also doesn’t need the kind of data Facebook does from third parties in order to make its ads work. It runs its own mobile operating system, Android, and its own ad exchanges. When users make a search, their intention provides enough data to advertise to them effectively across Google-owned properties, which may incentivize marketers to move their ad budgets to Google as opposed to Facebook.

Regardless of what the truth actually is, Meta/Facebook is sure ticked off over the loss of revenue. Because that’s what this is really about. I for one will be interested to see this catches the interest of regulators, or are Meta/Facebook the angry old man screaming at clouds in the sky as their revenue plummets.

A couple of days ago, news surfaced that if Meta/Facebook didn’t get its way in terms of processing EU data in the US, they would pull out of Europe. And when European politicians heard that, they were fine with that. Now it seems that Meta/Facebook has changed its tune via this blog post which is written by Markus Reinisch, Vice President of Public Policy Europe at Meta/Facebook:

There has been reporting in the press that we are “threatening” to leave Europe because of the uncertainty over EU-US data transfers mechanisms. This is not true. Like all publicly-traded companies, we are legally required to disclose material risks to our investors. Last week, as we have done in our previous four financial quarters, we disclosed that continuing uncertainty over EU-US data transfers mechanisms poses a threat to our ability to serve European consumers and operate our business in Europe. We have absolutely no desire to withdraw from Europe; of course we don’t. But the simple reality is that Meta, like many other businesses, organisations and services, relies on data transfers between the EU and the US in order to operate our global services.

The way I read this is that Meta/Facebook tried to bluff the EU by saying “We’ll take our ball and leave if we don’t get what we want, and your businesses who rely on our advertising and exposure will all wither and die and you’ll lose tax revenue.” The EU in response called their bluff by saying “Great. The door is over there. Don’t let it hit you on the way out.” Now Meta/Facebook is trying to gracefully walk this back.

Busted!

Yesterday Meta/Facebook made a threat to pull out of Europe if they don’t get the right to process data belonging to Europeans on US based servers. It was a curious threat and I wondered what the EU would say to that.

I now have my answer:

“After being hacked I’ve lived without Facebook and Twitter for four years and life has been fantastic,” German Economy Minister Robert Habeck told reporters at an event alongside French Finance Minister Bruno Le Maire in Paris on Monday. 

“I can confirm that life is very good without Facebook and that we would live very well without Facebook,” Le Maire added. “Digital giants must understand that the European continent will resist and affirm its sovereignty.” 

The pair were responding to comments in Meta’s annual report published Thursday, warning that if it couldn’t rely on new or existing agreements to shift data, then it would “likely be unable to offer a number of our most significant products and services, including Facebook and Instagram, in Europe.”

The European Union “is such a big internal market with so much economic power that if we act in unity we won’t be intimidated by something like this,” Habeck said.

Well, if Meta/Facebook were thinking that the EU would bow to its will, this suggests that they might have played that wrong. And that maybe they might have to play nice with the EU, or at least rethink it’s strategy as clearly, threats aren’t going to work.

Meta/Facebook is doing the baby throwing a tantrum and throwing its toys out of the stroller routine because they may not be able to shuffle data back and forth between their US servers and European customers. Thus they would have to pull out of Europe. Here’s the details:

If Meta is not given the option to transfer, store and process data from its European users on US-based servers, Facebook and Instagram may be shut down across Europe, the social media giants’ owner reportedly warned in its annual report. The key issue for Meta is transatlantic data transfers, regulated via the so-called Privacy Shield and other model agreements that Meta uses or used to store data from European users on American servers. The current agreements to enable data transfers are currently under heavy scrutiny in the EU. In its annual report to the U.S. Securities and Exchange Commission, Meta warns that if a new framework is not adopted and the company is no longer allowed to use the current model agreements “or alternatives,” the company will “probably” no longer be able to offer many of its “most significant products and services,” including Facebook and Instagram, in the EU, according to various media reports, including in iTWire, The Guardian newspaper and Side Line Magazine.

Sharing data between countries and regions is crucial for the provision of its services and targeted advertising, Meta stressed. Therefore, it previously used the transatlantic data transfer framework called Privacy Shield as the legal basis to carry out those data transfers. However, this treaty was annulled by the European Court of Justice in July 2020, because of data protection violations. Since then, the EU and the US did stress they are working on a new or updated version of the treaty.

Now to be clear, this is all about Meta/Facebook being able to do targeted advertising. After all, that’s how they make most of their money. And the fact that they are willing to go nuclear if they don’t get their way is perhaps a sign that all is not well with Meta/Facebook as evidenced by their earnings flop that they reported last week. I for one will be interested to see if the EU tells them where to go and how to get there, and if Meta/Facebook follows through on this threat.

Facebook reported their Q4 and full year results yesterday. And the numbers were stunning. Here’s the highlights. Or low lights if you are Mark Zuckerberg:

• They made money as their profit came in at $10.3 billion in the fourth quarter. That was under what the street was expecting.
• Their daily active users fell to 1.93 billion, the first quarterly decline on record. That’s not a good sign going forward.
• The company offered lower guidance for the first quarter of 2022, saying it would be expecting around $27 to $29 billion in revenue, short of the $30 billion that the street was expecting.
• Apple’s privacy moves apparently will cost the company a staggering $10 billion in 2020.

And you can predict what happened next. The stock went into free fall after hours and was down 21.55% in premarket trading at $253.40 as of 4.02 a.m. ET, having closed on Wednesday at $323. This in turn shaved roughly $24 billion off of Mark Zuckerberg’s net worth. Not that I feel sorry for him or anything of the sort.

So, why did this happen. According to Zuckerberg during the earnings call, it’s Apple’s fault.

First, ads. Like others in our industry, we’ve faced headwinds as a result of Apple’s iOS changes. As we described last quarter, Apple created two challenges for advertisers. One is that the accuracy of our ads targeting decreased, which increased the cost of driving outcomes. The other is that measuring those outcomes became more difficult.

Then Facebook’s chief financial officer, David Wehner piled on by saying that Apple favours Google when it comes to ads:

And if you look at it, we believe those restrictions from Apple are designed in a way that carves out browsers from the tracking prompts Apple requires for apps. And so what that means is that search ads could have access to far more third-party data for measurement and optimization purposes than app-based ad platforms like ours.

So when it comes to using data, you can think of it — that it’s not really apples-to apples for us. And as a result, we believe Google’s search ads business could have benefited relative to services like ours that face a different set of restrictions from Apple. And given that Apple continues to take billions of dollars a year from Google Search ads, the incentive clearly exists for this policy discrepancy to continue.

Seeing as Google does pay Apple the GDP of a medium sized country to be the default search engine on Apple products, Wehner might have a point. Or at least Wehner might have created an optics issue for Apple. But even with that, let’s call this for what it is. Zuckerberg is in a business where data mining the daylights out of their users to make a buck is Facebook’s business model. Thus he then can’t be surprised when someone makes an effort to stop that from happening and it costs him money. Maybe he needs a better or different business model? Just a thought.

I wonder if this is the beginning of the end of Facebook? Tune in next quarter to find out.

You might recall that the FTC tried and failed to break up Facebook. Then in the middle of last year they gave it another go. Well a judge has given this latest attempt the green light:

This should be interesting to watch. Facebook has been facing all sorts of scrutiny from all directions recently. And one wonders how many battles they can fight at the same time before it becomes too much for them.

Two leading U.S. Senators “are urging federal regulators to investigate Facebook over allegations the company misled advertisers, investors and the public about public safety and ad reach on its platform,”:

On Thursday, Warren urged the heads of the Department of Justice and Securities and Exchange Commission to open criminal and civil investigations into Facebook or its executives to determine if they violated U.S. wire fraud and securities laws. 

A day earlier, [Senator Maria] Cantwell, chair of the Senate Commerce Committee, encouraged the Federal Trade Commission to investigate whether Facebook, now called Meta, violated the agency’s law against unfair or deceptive business practices. Cantwell’s letter was made public on Thursday.

Facebook hasn’t responded to this, but this can’t be going over well with Zuckerberg and company. The last thing that they want is even more scrutiny above and beyond what they are already under. And seeing that 2022 is an election year in the US, I fully expect more calls for investigations into Facebook will be made. And one of those is sure to stick.

You might recall that Facebook announced that it will no longer use facial recognition technologies on its platform.

That’s good right? Well, as always the devil is in the detail. And the detail is that the social network’s parent company, Meta, said that the commitment does not apply to its metaverse products:

While Meta says that facial recognition isn’t a feature on Instagram and its Portal devices, the company’s new commitment doesn’t apply to its metaverse products, Meta spokesperson Jason Grosse told Recode. In fact, Meta is already exploring ways to incorporate biometrics into its emerging metaverse business, which aims to build a virtual, internet-based simulation where people can interact as avatars. Meta is also keeping DeepFace, the sophisticated algorithm that powers its photo-tagging facial recognition feature. 

“We believe this technology has the potential to enable positive use cases in the future that maintain privacy, control, and transparency, and it’s an approach we’ll continue to explore as we consider how our future computing platforms and devices can best serve people’s needs,” Grosse told Recode. “For any potential future applications of technologies like this, we’ll continue to be public about intended use, how people can have control over these systems and their personal data, and how we’re living up to our responsible innovation framework.”

This smells like a bait and switch to me. As in stop using facial recognition in one part of the company, but use it someplace else and hope that nobody notices. This underlines the fact that Facebook cannot be trusted and should be deleted from the metaverse, and anywhere else it operates.