Steve Sees Everything: Apple Under Fire over Privacy in Germany

• Print
• E-Mail
• Feedback

But how much of an impact can such concerns have when it comes to the large sums of money at stake in the global advertising industry?

Apple intends to attack Google where the giant company, which began as an online search engine, is most vulnerable: in its high-stakes advertising business. In early July, Apple plans to launch its own distribution platform for mobile advertising, called iAd.

It was inevitable that Apple would not be able to avoid providing location data on its users to its advertising customers. "Advertising in the mobile Internet is almost unimaginable without such location data," says Karsten Weide of the market research firm IDC. "There is now enormous pressure from companies to make advertising more targeted and efficient."

Kais Makhlouf believes that Jobs' previous protestations were mainly hypocrisy. Makhlouf, an executive with the Canadian-American online advertising agency Nurun, which includes brands like L'Oréal, Louis Vuitton and Maserati among its clients, would have liked to use location data in the past to make his clients' ads on the iPhone more local. "Apple made this impossible. They wanted to wait until they were ready to control the business themselves and pull the strings," says Makhlouf.

Growing Animosity

Even Jobs says that competition between the two giants is getting "more and more serious." Since Google attacked Apple's iPhone with its own mobile phone, the Nexus, which includes a free operating system, and recently positioned its own music store to compete with iTunes, the two companies, previously on friendly terms, are now practically enemies.

All this aggressive activity isn't just the reflection of a struggle between two Internet ideologies, with Apple's control mania and its closed iCosmos on the one side, and Google's creed of the openness of the Web on the other.

Much of the rivalry between the two companies has to do with divvying up a business of the future: the online advertising market on mobile phones. Depending on the estimate, the market is currently worth between a few hundred million and $2 billion, but the prospects are seductive. Experts hope the market will eventually yield sales in the double-digit billions. According to market researcher IDC, Google currently sets the tone in the business, with its share of about 20 percent of the market.

The fact that Facebook and Google are making money with the data they gather on their users is already a sensitive issue. Mobile wireless providers in Europe like Vodafone and T-Mobile also gather plenty of data. But it raises new concerns that Apple, the device manufacturer, seller of content and marketer of apps, is now becoming a player in the business.

These concerns are underscored by the notion that Steve Jobs now knows just about everything about his customers. It starts with the purchase of Apple's devices. A customer who registers his iPhone provides Apple with his name and address. Anyone who wishes to use the iTunes Store to buy as little as a single song usually provides a credit card number. In addition, Apple can derive a wealth of other data based on user behavior, and on the answers to questions like: Who downloads which apps for his iPad, or films, songs and books through iTunes? Where and when does he do these things?

German Official: Data Traced to a Device Not Anonymous

When the first wave of outrage over the risks and side effects of Jobs' strategy erupted in the past few days, Apple didn't exactly try to downplay the privacy concerns. On the contrary, it didn't even respond to the critical question of whether and for how long the company stores the location data, and whether it might even have plans to derive mobility profiles from the linked information. "We don't provide any information about that," says Apple's spokesman for Germany.

Although customers have the option to decline personalized advertising and switch off the location services on their iPhones, this also means that they can no longer use them after that. Apple also points out that the data are collected anonymously. But German experts are skeptical.

Peter Schaar, Germany's federal commissioner for data protection, holds that data cannot be seen as having been collected anonymously if they can be traced to a specific device, especially when the company obtains the data from a phone and is familiar with the user's identity.

"In that case, (German) data privacy laws apply. Then the customer must be informed in advance as to which specific data are being collected and for what purpose, and whether and how the data are stored," says Schaar. This requirement, Schaar argues, is not changed by the fact that the information is subsequently made anonymous for further processing.

• Back
• 1
• | 2

• Part 1: Apple Under Fire over Privacy in Germany
• Part 2: Apple Takes on Google Where It Is Most Vulnerable