Apple's new ad terms: anti-competitive or competitive?

The word “anticompetitive” gets thrown around a lot in business. While it’s got a specific legal meaning, it’s often appropriated to mean any advantage of one company that’s perceived as “unfair.” But, of course, business is all about having advantages over your competition—and fairness is all in the eye of the beholder. Recent changes to Apple’s terms of service, forbidding certain types of companies (most obviously Google) from collecting analytical data via iPhone apps, have many waving the anticompetitive banner. But is this this change anticompetitive or just competitive?

The change in question resides in Section 3.3.9 of the iPhone developer agreement, which is the deal that must be accepted by anybody who wants to sell iPhone programs in the App Store. The new rules read as follows:

3.3.9 You and Your Applications may not collect, use, or disclose to any third party, user or device data without prior user consent, and then only under the following conditions:

The collection, use or disclosure is necessary in order to provide a service or function that is directly relevant to the use of the Application. For example, without Apple's prior written consent, You may not use third party analytics software in Your Application to collect and send device data to a third party for aggregation, processing, or analysis.

The collection, use or disclosure is for the purpose of serving advertising to Your Application; is provided to an independent advertising service provider whose primary business is serving mobile ads (for example, an advertising service provider owned by or affiliated with a developer or distributor of mobile devices, mobile operating systems or development environments other than Apple would not qualify as independent); and the disclosure is limited to UDID, user location data, and other data specifically designated by Apple as available for advertising purposes. [emphasis added]

First, it’s important to note that these terms hardly ban advertising, nor do they place a blanket moratorium on the collecting of analytics—they just require that developers collect only certain types of data, disclose the collection to users and pass that data on to ad networks that meet certain qualifications as a company.

There are a number of factors that play into why Apple may be reluctant to let that information out of its hands. App Cubby founder David Barnard nails a lot of them in an excellent blog post, especially in terms of Apple wanting to retain control over the data and why Apple is arguably a more trustworthy custodian of personal information than Google.

The new terms also jibe with what Steve Jobs said when he was asked about the issue at the D8 conference earlier this month. When questioned about a metrics firm called Flurry Analytics, which earlier this year had essentially outed the iPad via metrics collected from devices running on Apple’s campus, Jobs said:

So we said, we’re only going to allow these analytics that don’t give device information and that are solely for the purposes of advertising. […] In other words, if a developer needs to put some analytics in their app that sends some information out to an advertiser, so that they can make some money—because we’re not going to be the only advertiser; there’s others, and we’re not banning other advertisers from our platforms—they can do that. But they can’t send data out to an analytics firm who’s going to sell it to make money and publish it to tell everybody that we have devices on our campus that we don’t want people to know about.

Companies like Flurry aside, it’s also hard to ignore that there’s a pointy end to this stick, and it’s aimed directly at rival Google. Remember, the search giant is first and foremost an advertising platform—that’s where it makes its bread and butter. There’s a reason that Google’s bid to acquire mobile advertiser AdMob raised regulatory flags: the company holds a huge amount of sway in the advertising market. In fact, it was Apple’s acquisition of rival Quattro Wireless that paved the way for the goverment’s OK on the AdMob deal.

But Google and Apple have found themselves increasingly in competition, especially in the mobile arena, and Google’s competing Android operating system would seem to eliminate AdMob from qualifying as an “independent” ad network.

That got AdMob’s CEO, Omar Hamoui, to pen an irate blog post about the move:

Let’s be clear. This change is not in the best interests of users or developers. In the history of technology and innovation, it’s clear that competition delivers the best outcome. Artificial barriers to competition hurt users and developers and, in the long run, stall technological progress.

The reason that much of the concern here has been amplified is that this isn’t the first move Apple’s made to restrict who can play in its sandbox—earlier this year, the company changed its agreement terms to prohibit developers from creating iPhone apps using Flash. As antithetical as both of those moves might be from a purely technical perspective—if it can be done, why shouldn't it be done?—the business angle can’t be ignored.

I think Hamoui’s argument boils down to the fact that Apple has enforced the change via contractual changes as opposed to merely “letting the best platform win.” And if Apple is truly adding this sort of language just to knock out a tough competitor so that it can sell more iAds, that's unfortunate. But at the same time it’s hard to blame Apple for not wanting to provide a major competitor in the smartphone market with detailed information about Apple's own customers. Especially when the competitor in question has long been honing its skills in creating targeted advertising.

Consider the flipside perspective, too. What if it were Apple honing in on Google’s lucrative search advertising business, building up profiles on Web searchers via Safari and displaying targeted ads within the browser during Google searches? Or selling the search behavior of Safari users to Microsoft so that it could improve Bing at Google's expense? I can hardly imagine Google would be happy about Apple using Google search data to threaten its bread-and-butter business. In fact, whatever deal Google and Apple have struck for Safari’s search bar probably already prohibits that kind of behavior. Does that sound anticompetitive to you? Or is it just the sign of a company protecting its crown jewels from a fierce competitor?

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