Apple Inc. (AAPL) has begun placing so-called "nutrition labels" in its App Store, summaries of an app's privacy practices that customers can review before deciding whether or not to download. App developers already have been required to post links to their privacy policies in the App Store, but the new feature summarizes this information in an easy-to-read format near reviews and details about in-app purchases. 

  • Apple is posting easy-to-read privacy statements from app developers in its App Store.
  • However, Apple is relying on self-reporting by app developers.
  • Facebook, Inc.'s (FB) extensive use of customer data is being exposed, and it is fighting back.

Key Details

The App Store privacy "nutrition labels" summarize an app's privacy policies under three headings:

  • "Data Used to Track You" includes, for example, information collected for the purpose of targeted advertising.
  • "Data Linked to You" includes data that can be tied to a user through that person's usage of the app or device.
  • "Data Not Linked to You" is data that is collected but not linked to a specific account.

App Store privacy "nutrition labels" can be viewed on devices that run the new iOS 14.3 operating system. A critical caveat is that Apple is relying on self-reported statements of privacy practices from the various app developers. It is unclear at this point to what extent, if any, Apple will attempt to verify or audit these statements.

Impact on App Developers

For the vast majority of app developers who collect little or no data about their users and who confine such data to enhancing the functionality of their apps, the new "nutrition labels" should be a positive, increasing trust among potential users.

On the other hand, app developers who collect vast amounts of data about their users for various commercial purposes including resale are bound to be unhappy. Also unhappy are app developers who require subsequent in-app purchases to unlock the full functionality of their apps.

Facebook is among those very unhappy app developers. In a move that may backfire, Facebook is taking out full-page newspaper ads that attack Apple's initiative.

The plain text of Facebook's privacy statement exceeds 650 words. Data used to track users include postal address, email address, name, and phone number. Data linked to users include purchase history, precise location information, photos and videos, contacts, health and fitness analytics, and more. This is just a small sample.

Impact on Enterprise Users of Apps

Computerworld observes, "Assuming your business isn't concerned with making money through the exploitation of user information gathered by apps, data harvesters, and data brokers, then a move to Privacy Nutrition Labels should be good for you, too."

The publication continues, "Privacy Labels will make it much easier for your business to approve applications your users can install on enterprise-related machines, which in itself may help protect your business against increasingly sophisticated hacks and cyberattacks."

Significance for Investors

The final impact on App Store sales from the new privacy "nutrition labels" is uncertain, given they create some winners and losers among app developers. While it should give a boost to Apple's reputation, a potential downside is that Apple may have some exposure from inaccurate representations made by app developers that it has been unable to verify.