Hey all, it’s Kurt. Facebook Inc. and Apple Inc. don’t like one another—as you’ve read in this very newsletter—but Facebook turned up the heat on Wednesday when it placed a full-page ad in three of the country’s most prestigious newspapers, bashing Apple’s upcoming software update for the iPhone.

“We’re standing up to Apple for small businesses everywhere,” the ads say. Facebook followed up with a blog post and a press call similarly criticizing Apple, and is running more ads on Thursday. 

Facebook’s complaint focuses on a series of changes expected early next year in iOS 14. Apple will soon require app developers, like Facebook, to ask users for permission to track them and collect data about them for advertising purposes. For a company like Facebook that makes almost all of its money from targeted ads, including ads that “re-target” people with items they’ve seen on other apps and websites, asking people to opt in is a big change with potentially serious ramifications.

The social media giant, which has a checkered reputation on privacy, could soon have to ask millions of iPhone users if they’ll grant the company permission to “track you across apps and websites.” For many people, that will be a fast and easy "nope."

In its newspaper ads, Facebook argues that Apple's changes are not just bad for Facebook, they're bad for small businesses. Thousands of merchants rely on the social network's targeted advertising to drive sales—especially right now, when in-person shopping has been clobbered by the pandemic. And Facebook suggests that Apple’s moves are financially motivated: If businesses can’t drive sales through Facebook ads, they may turn to other methods that are more favorable to Apple, like in-app purchases.

“Apple is behaving anti-competitively by using their control of the App Store to benefit their bottom line at the expense of creators and small businesses,” said Facebook Vice President Dan Levy, who oversees the company’s small business efforts.

For a company currently being sued by state and federal regulators for alleged anticompetitive behavior, Facebook's claim is a bold one. The reality is that Apple is not actually blocking Facebook—or any other app for that matter—from showing targeted ads. It’s just asking those apps to get user permission in order to do so.

On Wednesday afternoon, Apple finally responded to Facebook’s ads. “iOS 14 does not require Facebook to change its approach to tracking users and creating targeted advertising,” the company said in a statement. “It simply requires they give users a choice."

Indeed, internet advertising has been confusing and opaque for years. Most people have no idea how they’re tracked online, or how that data is then used to target them with ads in other places. The industry is overdue for more transparency—though Apple’s proposed warning could wind up doing more to scare people away from advertising than educate them about how it works.

But Facebook is probably right, to an extent, about small businesses. Targeted ads are really important, especially when you have a small ad budget and a lesser-known brand. The more people opt-out of Facebook targeting, the harder it may be for companies to find the people they want to sell to.

It’s too early to say what the fallout will be from the change—if it does happen. But it’s significant that two of the country’s largest technology giants are in a no-holds barred reputational fight over privacy. As the U.S. steps up its antitrust scrutiny of tech giants, an arena where reputation matters, the most bruising blows could be yet to come. —Kurt Wagner

If you read one thing

Google's deal with Facebook to maintain control over the digital advertising market was illegal, according to a lawsuit filed by 10 states, and led by Texas. “If the free market were a baseball game, Google positioned itself as the pitcher, the batter and the umpire,” Texas's attorney general said. 

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