Facebook and Apple’s CEOs are exchanging barbs, but they’re clearly dependent on each other

By Anita Balakrishnan

Facebook CEO Mark Zuckerberg hit back at Apple in a podcast — implying that Apple charges exorbitant prices for its products — just days after CEO Tim Cook assailed the social network’s monetising of its users’ data.

But while both executives make compelling criticisms about the other company’s business models (Facebook’s privacy snafus and Apple’s high prices ), they fail to acknowledge a crucial detail: Each has benefited from the other’s success.

In fact, the transition to mobile platforms was critical to Facebook’s financial success, and Apple’s App Store — alongside Google and Amazon — became one of the primary platforms through which Facebook attracts users. And free apps like Facebook can make Apple’s platform more attractive and competitive for users.

What Tim Cook and Mark Zuckerberg are fighting about

Here’s the beef. Media reports revealed that personal Facebook user data had been misused by a firm that also worked with President Donald Trump’s campaign. When asked about the data scandal, Cook said that Apple has “elected” not to make “a tonne” of money by including customer data part of its product, according to an interview last week with Recode’s Kara Swisher and MSNBC’s Chris Hayes. 

On Monday, Zuckerberg responded in an “Ezra Klein Show” podcast, saying that “if you want to build a service that helps connect everyone in the world, then there are a lot of people who can’t afford to pay.”

“I think it’s important that 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. Because that sounds ridiculous to me,” Zuckerberg said, months after Apple launched its priciest iPhone yet.

Facebook and Apple need each other 

But while Cook and Zuckerberg have some valid disagreements, each does benefit from the other’s success. Nearly all Facebook users are on mobile, and nearly 70 per cent of all smartphone users use Facebook, according to January data from eMarketer.

To be sure, Apple doesn’t supply the majority of phones, as other platforms like Google, Amazon, and Chinese alternatives have grown. Still, many of the cheaper phones that will be used to access Facebook this year appear to be modelled after iPhones. And the allure of cheap messaging on Facebook is boosting the popularity of mobile phones, which in turn benefits Apple.

“Additionally, smartphones are becoming more widespread due to cheaper handsets and increasingly affordable data plans,” another eMarketer’s report said. “The number of smartphone users will grow by double digits in every market except North America this year...A strong demand for messaging services and social media platforms like WhatsApp, WeChat and Facebook Messenger is driving the expansion of mobile internet access in these regions.”

So if “connecting” everyone is Zuckerberg’s primary concern, then Apple — which popularised the app-based smartphone interface — has most certainly played a role.

How Cambridge Analytica exploited Facebook users’ data and why it’s a big deal

And in turn, while Apple certainly didn’t condone any of Facebook’s data woes — and may disagree with how Facebook makes money — Apple still helps facilitate that business model. There haven’t been any reports indicating that Facebook broke any of Apple’s privacy rules for the App Store during the recent scandal (unlike, say, Uber).

Facebook’s apps may be free, but Apple has a reason for hosting free apps: They increase the attraction of iOS. If Apple were to nix Facebook, it would affect any Apple user that falls within the nearly 70 per cent of smartphone users on Facebook.

App Annie estimates that consumer spending on apps doubled in the past two years, and Facebook properties have been far and away the most popular apps by monthly active users. Last weekend, Facebook was the 12th-most popular app in the Apple App Store, compared to the 24th most popular app on Google Play.

Yes, Facebook is making a “tonne of money” and Apple charges a lot for its devices

It’s been an unusually biting exchange between two CEOs that tend to come off as particularly well-rehearsed in public. Still, the two still call out the flaws in each business model, even if they both gloss over their synergies.

As Zuckerberg implies, Apple is the most highly valued public company in the world, at about US$850 billion, and holds enough cash to buy General Electric and Ford combined (and still have money left over). 

Opinion: Remember, services like Facebook are free because you’re the product being sold

Apple’s average product selling price is about US$778, and most of its sales are concentrated in a few regions. But that cost is spread across two years or more (ageing batteries and tempting upgrades aside).

And Apple certainly could make a tonne of money by monetising its users, as Cook points out: Apple has 1.3 billion customers — not much different than Facebook’s 1.4 billion daily active users.

Meanwhile, though Facebook is free for users, don’t think it’s against raising its own prices for its paying customers — advertisers. Ad prices will have more impact on future ad revenue than the number of ads Facebook sells, the company’s chief financial officer said less than six months ago. Even if Facebook only makes a few dollars off each user every quarter, it has more than doubled how much revenue it makes off each user in the past three years. 

Read the original article at CNBC