Can Apple Beat Back the Competition with Privacy?
Your privacy is only as protected as Apple shareholders’ lack of interest in monetizing it.
Can privacy stick?
PHOTO CREDIT: Getty Images
"What happens on your iPhone stays on your iPhone." That was the message Apple emblazoned in huge letters on the flank of Springhill Suites Marriot in Las Vegas. The gigantic billboard loomed large over the "what happens here, stays here" cityscape a stone's throw from the Strip and the 2019 Consumer Electronics Show.
The ad was clearly a taunt aimed at the likes of Google, Samsung and Amazon for their "relaxed" attitude toward customer privacy. With Apple's stock tightly yoked to the fact that fewer people want to buy $1000 phones every two or three years, it's worth wondering aloud if privacy really is a selling point for consumers.
I think it is. And if I am right, Apple may be a safe bet, marketwise, and a safe-ish harbor when it comes to smartphone-based privacy--at least for the time being.
The Market and the Message Are Mixed
While market share in the United States still belongs to Apple, worldwide the stats tell a different story, where sales of phones on the Android platform dominate.
"Globally, there were 3.6 billion active smartphones in use in June 2018," according to Forbes. "The world's most popular smartphone brand was Samsung, boasting 893 million active devices and a market share of 27%. Apple was a close second, with a market share of 24%. Samsung's lead is mostly due to the company's selection of budget devices, which fare well in developing markets such as India. Globally, Chinese manufacturers Oppo, Xiaomi, Huawei, and Vivo came in at #3, #4, #5, and #6, respectively. Together, the four Chinese companies make up a third of the world's active smartphones."
With China leading the way, many of the countries where non-Apple devices are selling better than iPhones are not known for their overarching concern about consumer privacy, much less laws protecting it. Consumers worldwide do not enjoy the same protections as citizens of the EU, or even the somewhat privacy-unfriendly environment in the United States.
While that may change some day, this is where we are today. That said, the global market for smartphones of all stripe declined 6 percent in Q3 of 2018. It's shrinking for a number of reasons, privacy not among them, but privacy may become more valuable as a result.
Is Apple Better?
Optics-wise, Apple has always been--and continues to be--on point. At a glance, Apple appears to respect consumer privacy more than its competitors. The company's public-facing stands against law enforcement privacy issues and Tim Cook's public statements last year about the need for privacy laws are unmistakably pro-consumer. Those moves seem to be based on the belief that a tipping point is coming, and when it does, consumers will reject the surveillance economy, much of which is derived from data generated on smartphone-based software.
And yes, Apple iPhones are just as much to blame here. MacWorld made the point well with an acute observation in a photo caption nestled in an article about the Apple CES ad. "The only time your iPhone is truly private," it said, "is when it's still in the box."
Apple's privacy push has an inner logic: They charge more for hardware and software, and so they don't need to monetize data to the same extent as Google or Amazon, both of which sell much more affordable surveillance devices, i.e., the Amazon Echo, FireStick, Kindle, Google Home, Android-based smartphones, et al.
Let's say all this is true. The moment a third party app is used on an iPhone the privacy selling point disappears because while the app offerings in the Apple store are generally vetted more, you can still download the Facebook app, and a thousand other data traps--and for that reason the privacy pitch is limited.
What if Stockholders Rebel?
Investors are not generally known for their patience. What happens if Apple shareholders decide it's time for the company to re-strategize and opt for the easier conversion of customer data into greater profits? There's a proven market for all the data it has siloed in the cloud. Companies change their tack and strategy all the time. So, the question may arise, why not take some profits from data during this stretch when smartphones are no longer so quickly obsolete and predictably profitable?
The data Apple has in its possession is similar to kinds controlled by Google, which Google rides like a rented mule. Google famously retired "Don't Be Evil" from its corporate code of conduct last year. It's not beyond the realm of possibility for Apple to do something similar and turn on a dime when it comes to the whole "privacy as marketing collateral" thing.
Apple's walled-garden approach has the elements of a privacy nightmare. It has fitness stats, texts, locations, phone calls, contacts, calendars, photos, travel information, iTunes purchases, browser history, etc. It's worth a lot of money, but, for the time being at least, Apple feels that it's not worth as much as its long term sales of devices.
While Apple's privacy-centric focus is laudable, it is as permanent as the company's growth trajectory. Strategies change, and if sales keep declining, short of new privacy laws like the ones Tim Cook called for last year, Apple's strategy for growth may change too.