What the press is calling a “war” between Apple Inc. (NASDAQ:AAPL) and Facebook, Inc. (NASDAQ:FB) is a proxy for a growing dispute over how Silicon Valley wants to be paid. Whether it helps Apple stock remains to be seen.
Apple believes you should pay for technology directly, Facebook indirectly. Apple charges high prices for its hardware and services and gives as little away as possible. Facebook gives everything away, in exchange for data it uses to drive its advertising engine.
Apple believes the ad engine has become a threat to democracy, making the internet itself a tool for manipulating people. Facebook sees Apple as old school Silicon Valley elitism, and itself as on a mission to spread technology to everyone regardless of wealth.
Both sides are right, and both sides are wrong. Neither side is being entirely honest.
Paid Products and Apple Stock
“Privacy is a human right,” thundered Apple CEO Tim Cook at the company’s WorldWide Developer Conference on June 4. Apple said it rejects Facebook’s data collection and announced tools to prevent it from tracking people across the Web using “like” and “share” buttons.
Positioning its own Safari browser and iOS operating system as “safer” from a privacy violation, while supposedly aimed at Facebook, is really an attack on Alphabet Inc (NASDAQ:GOOGL), whose Chrome browser has 61% of the market , or 66% depending on who is counting, and whose phones have nearly 90% of the market.
Staying relevant in both the phone and browser market will be critical to Apple stock as it tries to stay on the cutting edge.
The next version of iOS, which runs Apple iPhones, will prevent “like” and “share” buttons, as well as comment widgets, from tracking users without specific permission.
Apple also introduced App Limits, designed to let users measure and cut back on the time they waste on apps like Facebook and Instagram.
While Cook’s rhetoric was aimed at Facebook, an easy target because of the Cambridge Analytica scandal, the announcements were more an attack on Google, which has made Chrome and Android the Microsoft Corporation (NASDAQ:MSFT) Windows to Apple’s Macintosh of this decade.
Free Products and Facebook Stock
Facebook, for its part, says it represents “the free Web” and that Apple would make the Internet a gated community where only those who pay can participate.
So far it has only engaged in rhetoric on this point, with Zuckerberg saying, “We don’t all get Stockholm syndrome and let the companies that work hard to charge you more convince you that they actually care more about you.”
Facebook is uniquely vulnerable, as I wrote in March, because it is completely dependent on the goodwill of users for its very existence. Google has been rushing as fast as it can toward products, even putting itself in direct competition with Amazon.com, Inc. (NASDAQ:AMZN) as it does so.
Despite its efforts, Google still gets 86% of its revenue from ads. Zuckerberg argues Apple isn’t just attacking Facebook, but all free services on the Internet, like Zillow Group Inc (NASDAQ:Z), Twitter Inc (NASDAQ:TWTR), and Yelp Inc (NASDAQ:YELP).
If the only Internet services were those you explicitly paid for, Facebook argues, there wouldn’t be much to the Internet at all.
The Bottom Line on Apple Stock, Facebook Stock and the War
The fact is that both the Apple and Facebook business models work. The scandal over the 2016 election allows Apple to position itself as righteous against Facebook, but it isn’t going to be enough to regain the market share lost to Google Chrome and Android during this last decade.
Just as Apple brought the point-and-click interface to the mass market but lost that market to Microsoft by insisting on getting paid for it, so it has lost the phone and Internet markets to Google.
That’s not changing, but it also is the inherent value proposition when considering Apple stock.
Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN and MSFT.
