The great Silicon Valley divide: Apple vs. Facebook

Betwixt and between two mountains of revenue.

From Barron’s Facebook and Apple Embody New Tech Divide ($):

It’s not just personal sniping between rival CEOs. There are real differences between direct-to-consumer revenue models and ad-driven data models. Or, in a nutshell: Apple versus Facebook.

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The divide has been amplified by the Facebook controversy, but the fault lines have been widening for years, as tech firms turned to advertising revenue to scale their businesses. Silicon Valley never got fully comfortable with that deal.

“The odd thing to me—as someone who has worked on Madison Avenue—is that most of Silicon Valley has always brushed under the rug the fact that Madison Avenue is the center of its commercial activity,” says Brian Wieser, an analyst with Pivotal Research Group, who spent eight years forecasting the global advertising economy at Magna Global, and currently has one of the few Facebook Sell ratings on Wall Street.

But after the outcry over Cambridge Analytica’s harvesting of personal data, the reality can no longer be ignored. Facebook and Google are advertising companies that don’t sell to consumers, while Apple, Amazon, and Netflix have spent years building direct connections to customers. The free frontier of Silicon Valley is now vulnerable to regulation, while the subscription model may be more stable and attractive.

My take: Barron’s puts it pretty starkly, but as the piece points out, Steve Jobs was not adverse to selling iAds. The industry where I spent most of my career—magazines—had a foot in both business models. Myself, I’d rather live ad-free or die, but I wouldn’t bet against Madison Avenue.