Why This Change to Apple’s iPhone Is Triggering Nerves

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Apple pulled in a record-busting $111.4 billion in revenue with $1.68 in earnings per share during the final months of 2020, thanks to iPhone sales. But the company thinks it could have done better, if not for the coronavirus pandemic.

“Taking the stores out of the equation, particularly for iPhones and wearables, there’s a drag on sales,” Apple chief executive officer Tim Cook told a reporter. Online sales apparently buoyed the bottom line, a scenario that should feel familiar to much of the retail sector.

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While e-commerce has been a lifeline for brands during the coronavirus pandemic, many relate to the “drag on sales” due to lockdowns that gripped many parts of the U.S. Some stores stayed afloat, while others were dragged into the ground and buried.

Between March and September, almost 35,000 retail stores suspended operations, as many as 60 percent of them permanently, according to merchant review site Yelp. Coresight Research estimated that U.S. sales of clothing and accessories suffered a drop of 30 percent between January and October.

It’s part of a larger and concerning economic picture coming out of 2020, which is widely regarded as the U.S. economy’s worst year since World War II. The pandemic fed into huge job losses and a slow recovery that, even now, is still trying to find its legs under a new presidential administration.

That at least some consumers had $799 to $1,099 to spend on an iPhone 12 may seem astonishing, but a year after COVID-19 burst onto the scene, it’s become quite evident that the pandemic has not hit everyone the same way. Especially Apple.

As of December, the company reported, there are more than 1.65 billion iPhones in use across the world, and growth in this part of the business jumped by 17 percent year-over-year.

With all those devices in the hands of consumers, changes to the hardware or software can have dramatic effects on the state of mobile advertising and commerce. One of the biggest looming right now lives inside an iOS 14 beta due to drop any day, with the full release expected this spring. Normally, Apple would have already issued the software update, but it held off to give developers more time to adjust.

The feature is called App Tracking Transparency and it’s set to thwart the sort of user tracking necessary for things like ad targeting. The change mandates an opt-in model for developers, requiring that apps ask for user permission in a clear and obvious way before they can track iPhone owners.

For Apple, the feature is about protecting user privacy, plain and simple. Cook has been hitting the media and speaker circuit to tout Apple’s commitment to privacy, and he doubled down on that aspect on Wednesday in a fortuitously, or perhaps intentionally, timed earnings call.

“Tomorrow is international privacy day, and we continue to set new standards to protect users’ right to privacy, not just for our own products, but to be the ripple in the pond that moves the whole industry forward,” he said. Apple is in the process of deploying the new requirements “across the App Store ecosystem,” which has become an immense industry unto itself, with gross sales hitting some $64 billion in 2020.

According to Cook, the goal is “to ensure people have more knowledge about and new tools to control the ways that apps gather and share their personal data.”

While privacy advocates have lauded the move, others are bracing for ripple effects that could upend how mobile advertisements are delivered and how effective they can be. And that explains why Facebook, whose bread and butter lies in ads, now sees Apple as its biggest threat.

Others are preparing for the inevitable change.

“Inspiring brand loyalty starts with personalization that is driven by consumer data, with the customer experience serving as a major differentiator for innovative brands,” John Nash, chief marketing and strategy officer at Redpoint Global, told WWD.

“When Apple, or other third parties, eliminate the availability of automated consumer data, it is increasingly important for brands to further build their own repository of first-party data,” he continued. “If a brand can help demonstrate a data value exchange, consumers will be more willing to offer access to the data needed to personalize the customer experience.”