AAPL Apple Inc

By Tripp Mickle 

Apple Inc. this week took more jabs at Facebook Inc. over its privacy practices. But this time the iPhone maker went one step further, signaling it plans to encroach on the social-media company's turf.

As it touted its newest operating software for the mobile devices on Monday, Apple unveiled forthcoming features that collectively bear the hallmarks of a social-media business. There are tools to make it easier to share photos with friends, a group video-chat service for up to 32 people and the capability to play augmented-reality games among friends.

At the same time, Apple introduced new privacy tools in its Safari browser that will limit the personal data that apps like Facebook can collect. The target was clear: Several images in Apple's presentation or marketing material used Facebook or its app Instagram as examples of what to limit.

The combination of social media and privacy offerings amounted to "shots across the bow" at Facebook, said Daniel Ives, head of technology research for research firm GBH Insights. As iPhone growth slows, he said Apple is clearly looking to make the device more attractive with software features that wed people to the device. "Facebook should have one eye open."

A Facebook spokesman declined to comment.

Facebook has been embroiled in a privacy controversy for months related to how outside developers obtained and potentially mishandled user data. In response, Facebook has more tightly restricted the data that outside apps can access and has suspended at least 200 apps it suspects of having misused user data shared on or through Facebook, and it is reviewing thousands more apps. Apple, meanwhile, has seized on the privacy scandal by contrasting its business, which derives two-thirds of sales from the iPhone, with Facebook's ad-based model that sells marketers detailed profiles of users.

Apple added to the public heat in March when Chief Executive Tim Cook told MSNBC that his company would never be in the same situation as Facebook. "We care about the user experience, and we're not going to traffic in your personal life," Mr. Cook said. "I think it's an invasion of privacy."

Facebook Chief Executive Mark Zuckerberg called those comments "extremely glib," and Chief Operating Officer Sheryl Sandberg at a conference last week said she "respectfully disagrees" with Mr. Cook's critique.

Behind Apple's barbs is an expanding digital-ad business that aims to distribute advertising across various apps. Apple delivered nearly $1 billion in revenue last year by selling promotional ads for search terms in its App Store, The Wall Street Journal has reported.

Apple's efforts to protect consumers' privacy mean its ad business collects far less data on users than peers, analysts say. Now it is seeking to limit the way Facebook and other apps track and collect that data across Apple devices.

"We've all seen these 'like' buttons and 'share' buttons," Apple's software chief Craig Federighi told the audience at its annual developers' conference in San Jose on Monday. "Well it turns out, these can be used to track you, whether you click on them or not. And so this year, we are shutting that down."

As Mr. Federighi demonstrated the software, an image blown up in back of him displayed the web-browser prompt, "Do you want to allow 'facebook.com' to use cookies and website data while browsing" a website?

Apple targeted Facebook in other ways. Earlier in the presentation, Mr. Federighi showed how the software will let users limit their time on apps, using Instagram as the example to restrict usage. And Apple's new iOS marketing page prominently displays the Facebook app as part of a new tool to reduce notifications.

Apple's new social features reflect how the iPhone maker is indirectly elbowing into an arena long dominated by a tech peer. The company previously launched a music-oriented, social-networking feature called Ping on iTunes that lasted two years before shutting down in 2012 because it failed to gain users.

A new tool in Apple's Photo app will automatically suggest which photos and who to share them with, say, after a dinner with friends. The friends will then be encouraged to share the photos back with iPhone users. Mr. Federighi said the process, which relies on machine learning, is "private" because it uses end-to-end encryption.

The company also said it was adding filters to its camera inside its messaging service and expanding its FaceTime video chat service so that multiple people can talk at once. Facebook has long offered filters and group video chats.

The social features coming this fall in Apple's next software release, known as iOS 12, show how the company is looking to bring more exclusive social experiences to its devices as it tries to boost iPhone retention, said Gene Munster, managing partner with research-focused venture-capital firm Loup Ventures.

"Apple has been nibbling at the social angle for a while and haven't had a ton of obvious progress, but now they have a window because an avenue has been opened around privacy," Mr. Munster said.

Roger Kay, an analyst with Endpoint Technologies Associates, said Facebook shouldn't feel too threatened because Apple's push to add social features faces a huge obstacle: The iPhone only has a 15% share of the global smartphone market.

As a result, many people at a group dinner like the one Mr. Federighi described are likely to run into a situation where at least one person at the gathering has a phone powered by Google's Android system.

"If even one of those people couldn't do it, it wouldn't work," Mr. Kay said. "You can get a Facebook client on any device."

Write to Tripp Mickle at Tripp.Mickle@wsj.com

(END) Dow Jones Newswires

June 05, 2018 09:48 ET (13:48 GMT)

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