The Losers in Apple's Privacy Battle - Small E-Commerce Businesses

Venture Capital

2 min read

The move by Apple to regulate third party data sharing and advertising cornered publishers like Facebook and Google and will accelerate the centralization of commerce within these platforms adversely impacting e-commerce businesses.

The Losers in Apple's Privacy Battle - Small E-Commerce Businesses

Apple’s upcoming iOS14 release (14.5) includes a new privacy feature, App Tracking Transparency (ATT), that will severely limit the ability to use third party user tracking within iOS applications. Major advertising publishers like Facebook and Google are up in arms over this new feature, as their ad businesses rely on this type of tracking for ad targeting and conversion attribution. With Apple staying firm on its decision to roll out this feature, these platforms will be forced to look to alternative solutions to make up for the anticipated loss in advertising revenue. The direction that I believe they will go in to make up for this shortfall is to internalize commerce and establish themselves as new gatekeepers for e-commerce, significantly impacting small businesses.

Accelerating the Timeline

Commerce isn’t a new avenue for these platforms as Google Shopping dominates the top half of e-commerce related search results and Instagram recently introduced a shopping feed, but both experiences currently drive users to brand websites to make a purchase. With third party tracking limitations, these publishers will be limited in their ability to target the right audiences and attribute a sale back to their ad. This will significantly impact the value of their data and result in publishers finding new ways to monetize on their platform in a manner where data capture is not limited, like that of having brands sell directly on their platforms. The centralization of commerce has always been a long term goal for both publishers as the lucrative multi-trillion dollar e-commerce market continues to grow annually. Both are currently not far along in becoming a true commerce platform like Amazon, but the focus and timeline to evolve could be accelerated in light of Apple’s change and pressure from Wall Street to continue to show their growth.

Social Commerce

If this were to happen, we could see the rise of social commerce like Chinese social media apps WeChat and Pinduoduo are today. A frictionless shopping experience that would benefit e-commerce brands by streamlining the customer's purchasing journey and increasing brand revenue, but will ultimately become a burden for brands when these platforms decide to monetize and take a cut of each transaction like Amazon does today. When this occurs, small business brands who already face low gross profit margins, will have to pay another gatekeeper in order to sell their products online. Beyond this fee, they will most likely end up spending more money in order to compete with other brands for the top feed position and face significant losses to traffic and evergreen sales on their website. It is a snowball effect that could collapse many small businesses and is an unfortunate side effect of the monopolistic control these companies have over the internet.

We Know the Losers

While Apple’s privacy feature is a win for the general public, the unfortunate bystanders will be the small businesses that are trying to make ends meet. It is the unfortunate element of capitalism where the pressure of public markets on large corporations force them to make decisions based on revenue over the customer. While I don’t believe my prediction will happen immediately, I would be shocked if we don’t see more commerce features being released on these platforms throughout 2021.

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