Facebook vs Apple

Last August, Facebook's was forced to remove the Onavo Protect app from the App Store for violating Apple's developer guidelines. Facebook was using this VPN app to collect data on its users and on competing applications.

This week TechCrunch published an article describing how Facebook and renamed the Onavo VPN app, and was distributing it to users using the Enterprise Development Certificate issued to them by Apple. This terms of use for this certificate clearly state that it can only be used to distributed applications to your employees. Facebook violated those terms, and Apple revoked the certificate, which immediately disabled all applications signed by that certificate. All of Facebook's internal apps stopped working. One day later, Facebook agreed to stop distributing the app, and Apple re-enabled the certificate.

I hope everyone realizes that Facebook is a morally bankrupt institution that will do anything to feed their data collection machine. They have repeatedly shown their willingness to bend, break, and surreptitiously work around laws and contracts that they don't like.

This incident has fomented much discussion about who has the upper hand in this relationship. Apple has the power to instantly disable all of Facebook's mobile apps, including FaceBook, Instagram, and WhatsApp. On the other hand, Facebook's apps add lots of value to the iOS ecosystem. Many articles have been written calling this spat nuclear war. It's an embarrassment to compare this little software spat with something as horrific as nuclear war, but these are the tactics the bloggers descend to in order to claim their precious clicks.

On this week's Accidental Tech Podcast, titled "Mutually Assured Destruction", the guys came to the conclusion that Facebook probably has the upper hand, because if they disabled Facebook's applications, the public perception would be that "Apple broke my favorite apps". I agree that most users would blame Apple, and it would be a real public relations black eye for both companies. However, I think Apple clearly has the upper hand. While Apple would look bad, FaceBook would face immediate loss of revenue.

In their Q4 2018 financial report, which Facebook also released this week, they had $16.640 billion of advertising revenue; 93% of that revenue was from mobile devices. Depending on who you believe, IOS has between 11 and 15% worldwide smart phone market share. I suspect FaceBook's usage skews higher on iOS than that because of Instagram, but we have no way to really know. Let's assume that 13% of Facebook's mobile ad revenue came from iOS devices. Given those assumptions, every day that Facebook can't generate ad revenue on iOS, they lose $22.1 million dollars. Even worse, they really have no way to make up that lost revenue.

There's no way to know how many fewer people would buy iPhone's each day because Facebook's apps were't available on the platform. People might delay purchasing an iPhone until the standoff was resolved, but I don't think it would cause very many people who were planning to buy an iPhone to instead buy an Android device. I think most people would just wait a few days and see if the situation got resolved. Meanwhile, FaceBook is losing money every day.

Similar disputes have played out between cable or satellite providers and content creators. For example, in 2012, AMC Networks and Dish Network had a dispute and Dish Network dropped AMC's channels. For more than 3 months, 14 million Dish subscribers missed out on "Breaking Bad", "Mad Men", and "The Walking Dead". If a Facebook dispute with Apple lasted that long, Facebook would have lost 2 billion dollars.