Tech Brew Ride Home - Fri. 02/05 – An Apple Ad-pocalypse For Everyone?

Episode Date: February 5, 2021

Are Apple’s coming IDFA changes going to have a bigger ripple effect across the entire tech industry than we’re even anticipating? Chinese users are flocking to Clubhouse which… probably means the end of Clubhouse in China. Why a shortage of silicon is causing automakers to cut vehicle production. And, of course, the weekend longreads suggestions. Sponsors: Audible.com/techmeme or text "techmeme" to 500-500 Metalab.com Links: Facebook’s not the only one worried about Apple’s privacy change — Snap and Unity both just warned investors about it (CNBC) An Interview with Eric Seufert about Apple, Facebook, and Mobile Advertising (Stratechery) Google taps your phone cameras to measure your heart rate (Engadget) Chinese flock to freewheeling US chat app Clubhouse (Nikkei Asia) Ford says ‘millions’ of its vehicles will run on Google’s Android starting in 2023 (The Verge) Car manufacturing hit by global semiconductor shortage (FT) Weekend Longreads Suggestions: Andy Jassy Twitter Thread (@ankithharathi) This Hedge Fund Made $700 Million on GameStop (WSJ) PFOF is the Ad Model for Brokerage (Justin Paterno) Superstar Cities Are in Trouble (The Atlantic) They’re Flocking to America to Make a Fortune Playing Video Games (NYTimes) Subscribe to RideHome+ at tech.supercast.tech Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech meme right home for Friday, February 5th, 2021. I'm Brian McCullough today. Are Apple's coming IDFA changes going to have a bigger ripple effect across the entire tech industry than we're even anticipating? Chinese users are flocking to Clubhouse, which probably means the end of Clubhouse in China,

why a shortage of silicon is causing automakers to cut vehicle production, and of course the weekend long-read suggestions. Here's what you miss today in the world of tech. You know about those changes to ad tracking that Apple is going to flip the switch on on iOS soon? You know how Facebook has said this will hurt small businesses and also them quite directly, they've also admitted. Well, as this adpocalypse creeps ever closer, there is increasing chatter about how big this move might actually be for basically everyone. Let me hit some of the most recent takes for you. First, what prompted me to lead with this today is that in their earnings last night, Snap had to warn that the coming changes by Apple to IDFA could have a materially adverse effect on their business.

And it wasn't just Snap either. Unity also came out and said IDFA changes will hit the pocketbooks of all mobile game developers, quoting CNBC. Unity Software said in its earnings report that the changes to IDFA will affect the way mobile game developers get new customers and quote, how they optimize lifetime customer value, end quote. Although it's difficult to estimate, our guidance assumes IDFA changes begin in the spring and will reduce our revenue by approximately $30 million or 3% of revenue in 2021, the company wrote. In prepared remarks for its Q4 earnings report, Snap, chief financial officer Derek Anderson said the Apple changes would present a risk of interruption to demand after

they're implemented, quote, it is not clear yet what the longer-term impact of those changes may be for the top-line momentum of our business, and this may not be clear until several months or more after the changes are implemented, he said, and quote. So coincident with that, I know that this is Longreed's day, but I encourage you to check out Ben Thompson's free article from Stratecary this week, because it is the most sober and eye-opening look at this situation that I've seen anywhere. Thompson did a Q&A with mobile marketing analyst Eric Sufert, and he had some interesting things to say about Apple's true motivations and all of this and how these changes could ripple out to affect not only game developers, but things like Shopify and the smaller businesses on that platform. I highly, highly recommend you read the whole thing, but I'm going to quote two parts for you. First up, this is Ben, quote, the thing that is always kind of weird to me, about this is I think people underestimate, and frankly, I think Apple underestimates the degree to which Apple's growth in services revenue and the growth in the app store is because of Facebook,

and that Facebook and Apple have had this very symbiotic relationship, where Facebook has done all of Apple's dirty work, and Apple has harvested 30% on the back end just by virtue of owning the app store. The question I have is, is it possible that Apple is shooting themselves in the foot here, and their services revenue actually takes a meaningful hit because they've destroyed the engine driving it, and they didn't even realize it because they actually didn't understand Facebook's role in this. And then this is Eric's answer, quote, I don't think so. I think Apple very much recognizes the role that it plays in the app ecosystem, which is the distribution engine for apps, and I think that's what Apple doesn't like. I think Apple sees that the App Store has basically

become irrelevant as a point of content discovery. It's basically this kind of frictional, annoying moment between clicking an ad and installing an app. Almost all discovery happens via ads or word of mouth, and I think what Apple is doing in this, in recognizing the power that Facebook has in terms of influencing which apps become big, which apps are popular, how people are using their iPhones essentially. In recognizing that, Apple is trying to regain control of that because if Apple cripples advertising, which it basically is doing, mobile advertising, this is all happening within the context of all this stuff that's happening on the browser, which we don't need to go down that rabbit hole, but Apple has been the instigator of all of that, too. If Apple cripples mobile

advertising, then the App Store becomes the primary discovery point for apps again, and Apple decides how people use our iPhones. Apple decides which apps are the most popular, and by the way, that's a position that Apple used to occupy. 2012, 2013, Apple was Kingmaker. If you got featured, your company valuation might increase by $100 million. It was really important to make it. It was really important to that pilgrimage to Apple. Go to Cupertino and beg for featuring. Please feature us. Please give us the headline featuring because that would make such a big difference to our company. Then in that way, Apple got to influence what kind of apps got made and how you made them. So my sense here is that Apple wants to regain that control, end quote. And then from further down in the piece, this has been

again. The great thing from Google's perspective is they get to copy everything Apple does, which completely benefits them because Apple wants to kill cookies. Google's like, that's fun. That's fine. We have the browser. We have the app store and we're justified in doing blatantly anti-competitive things because we're just copying Apple. The Apple Google Google duopoly is really ruling everything. And this is Eric's response. Yeah. Google's silence on this issue has been really intriguing because I think they've got to feel like a little bit stuck. It's like, well, okay, we're going to slow copy Apple on any privacy initiative it does because we don't want to allow Apple to create a competitive advantage around being seen as the privacy-centric mobile platform.

But at the same time, they run an ad network. So they can't come out and demonize targeted advertising because, well, that's how they make some substantial portion of their money. Ben interjects here. They're being sued for antitrust, and this is so blatantly anti-competitive. And Eric responds, right. Exactly. They've got a fine line to walk, and I think they've hewed to a very shrewd approach, which is just like you said, kind of copy what Apple is doing, but do it in a way that is not a full manifestation of that, end quote. Again, read the whole thing.

Cannot recommend it highly enough. Are we all of us in the tech ecosystem facing an adpocalypse from Apple later this spring? This has the potential to be interesting. Apparently, users in mainland China are flocking to the Clubhouse app, because Clubhouse is that rare space that mainland Chinese users can still access without running a fallible. China's vaunted great firewall and thereby allowing them the opportunity to speak freely with people from Hong Kong or Taiwan, say, quoting Niki Asia. The app's popularity took off across Asia this past week after Tesla founder Elon Musk made his debut on the platform. On Thursday, Clubhouse ranked

first in Apple's App Store in Japan and Taiwan, and it was second in Hong Kong, according to App Analytics company's Censor Tower. Even though the app, which still is in beta mode is not available in mainland China, users can change the location setting of their Apple App Store to foreign countries in order to use the service. In a sign of how desperate some Chinese netizens are to have a voice on Clubhouse, invitation codes for the app are now sold at 150 yuan to 400 yuan, which is $23 to $62 on Taubo, a online marketplace owned by Alibaba Group holding. On Weibo, a Twitter-like app in China, the hashtag, hashtag Clubhouse, invite code in the past week topped the trending chart. So far, China's censors have yet to come

after Clubhouse, which has become an enclave for tech enthusiasts, entrepreneurs, scholars, and media workers to take part in real-time conversations on a wide variety of topics. Most non-Chinese social media apps, including Facebook, Instagram, Twitter, and Tinder are blocked in the mainland. Quote, it's fascinating for me to see how people from different sides of an issue are so drawn into having interactions with others and perhaps curious about other's viewpoints, said a Taiwanese businessman working in mainland China, who has been captivated by politics-focused chat rooms that include journalists, students, and even activists in exile, some with more than 2,000 participants. I hope such precious time can last a few more days, the businessman said,

and quote, yeah, not to be a Debbie Downer, but as the piece does point out, Everyone's basically expecting a Chinese clubhouse ban in about three, two, one. Late yesterday, Google announced something really wild. If you have a pixel phone, you will soon be able to use your phone's cameras to measure your pulse and your breathing rate through the Google Fit app. But that doesn't mean you need to buy any sort of wearable or anything like that. No, you can use your existing phone cameras to do this. quoting and gadget. When the feature becomes available on your phone, you can open the Fit app to take your measurements

by tapping the new cards on the homepage. Google is guessing your rate of breath by looking at the movement of your chest, so it'll need to see your torso. Meanwhile, it uses tiny changes in color under your skin to calculate your heart rate, and you'll have to place your finger on the rear camera for this. The Fit app will guide you through how to frame yourself using the front camera for respiratory rates, and it's not yet clear how well this will work. If you're wearing baggy clothes, will the system still be able to tell if you're breathing?

You'll also have to hold your phone up for about 30 seconds for it to capture your respiratory rate, which is longer than it sounds. Plus, this implementation also means you won't be relying on this feature to keep tabs on your pulse while you're working out unless you plan to keep holding your phone and looking at the screen while you run or dance. Still, it's nice for people without fitness trackers to have a way to get these metrics when they want, end quote. Quick Automotive Tech catch-all segment here. Ford has announced that it will be increasing its investment in autonomous vehicle development to over $7 billion over 10 years, with the majority of that money, $5 billion coming from this year going forward. That followed the news that

starting in 2023, Ford's vehicles will be running Android after Ford signed a six-year deal for Google Cloud to provide connected vehicle services. So, A win for Google Cloud, which, as we've discussed this week, maybe it needs. Ford had better hope, I guess, that Google Cloud sticks around for six years. But then again, maybe this is a big enough business for Google to stay interested in it. Quoting the Verge. The deep integration of Android will allow users and passengers to use Google Assistant to change things like climate settings, and it will also enable over-the-air updates that can add new features or address some maintenance issues according to Ford.

But iPhone people, don't despair. Ford's system will still be compatible with Apple Carlin. CarPlay, and Ford will continue to offer Amazon's Alexa as an option as well, end quote. And also, have you heard about this? Carmakers including Volkswagen, Daimler, GM, and Renault are all facing a crippling shortage of semiconductors. Volkswagen, for example, said it'll produce 100,000 fewer cars in Q1 as a result, quoting the Financial Times. The rapid growth of the electric car market has increased the motor industry. industry's demand for semiconductors, which power everything from battery management to driver

assistance systems and in-car entertainment. According to industry insiders, some carmakers could see production reduced by 10 to 20 percent a week from February if fears over shortages are realized. The problem is that we are lowered down the chain than companies like Apple and HP, said one executive. The auto sector doesn't pay as much for its semiconductors, end quote. Well, wouldn't you say maybe it's time to start changing that? Something, something. Every company is a tech company now. Time for the weekend long read suggestions.

First up, a Twitter thread, outlining how Andy Jassy came to run AWS and how AWS came to be so successful. It's a story that's been told many times in many places, but if you want a succinct summation, this is it. And then GameStop story, I just can't quit you. If you missed the denouement of this, TLDR, hedge funds apparently largely swooped in this week and wrestled the trade down to earth. So if you want to hear a story of a hedge fund that made $700 million on GameStop, check the piece from the Wall Street Journal.

And with Robin Hood gradually becoming the story of the GameStop story, you might have heard a lot about payment for order flow. That's how Robin Hood makes a lot of its money. Remember, you're not Robin Hood's customer. Wall Street is. The product that Robin Hood is peddling is you and your trading data. Robin Hood sells your trading data to Wall Street, thus la Facebook. Their business model is optimizing for engagement, which in this case means you trading your heart out. Justin Paterno has a piece explaining how payment for order flow works with a handy analogy. Quote, PFOF is the ad model for brokerages. People are right to be suspicious of it, as most people don't like this model for media.

but I would say it's more like Amazon or Google ads than traditional display ads or even super well-targeted Facebook or Instagram ads. The more troublesome thing to worry about is that for most of these companies, it isn't enough alone to pay the bills, and increasing supply of commission-free trades could bring down rates like ever-increasing supply of page views brought down ad rates. The practices brokers may engage in in order to cover such a gap or their long-term inability to find something viable to do so should be more concerning than pay for order flow itself, end quote. I told you earlier this week that I keep going back and forth on the Silicon Valley is

dead slash remote work is the future debate. And the most recent piece that flip-flopped me was this one from the Atlantic, quote. The best argument against the remote work experiment having a durable impact on our lives beyond the pandemic is an appeal to human inertia. For decades, the internet was a thing and remote work wasn't. And after the pandemic, it'll feel just like 2019 again, right? But the impediment to widespread remote work in 2019 and before wasn't technological. It was social.

According to the economist David Autor, remote work suffered from a telephone problem. Seven decades after the first telephone was patented in the 1860s, fewer than half of Americans owned one. Behavior dragged behind technology because most families had no use for a telephone machine, as long as none of their friends. also owned one. In network theory, this is known as Metcalf's Law. The value of a communications network rises exponentially with the number of its users. The same has been true of remote work. In 2018, it was weird and rude to ask a boss to move a meeting to Skype or to tell a business partner to fire up a Zoom link because you can't make lunch. The teleconference tech existed, but it was considered an Ertzatz's substitute for the normal course of business.

The most important outcome of the pandemic wasn't that it taught you how to use Zoom, but rather that it forced everybody else to use Zoom, Otter told me. We all leapfrogged over the coordination problem at the exact same time, end quote. Meetings, business lunches, work trips, all these things will still happen in the afterworld, but nobody will forget the lesson we all were just forced to learn. Telecommunications doesn't have to be the perfect solution for in-person meetings, as long as it's mostly good enough. the most part, remote work just works, end quote. And finally, I tried to find a way to segue

that into this by saying something like the ultimate remote work is, I don't know, gaming, but that didn't work out because this is all about top Asian gamers actually being recruited to relocate and come and play in the U.S. Anyway, from the New York Times, quote, America is accustomed to dominance in global sports, but in League of Legends, the highest profile video game played by professionals, U.S. teams lag far behind their counterparts in Asia, where e-sports are a way of life. In countries like China and South Korea, gamers start competing as children, and professionals train up to 18 hours a day. To keep up, U.S. teams have dangled increasingly large salaries in front of these superstars, akin to Major League Soccer's

luring famous European footballer stateside. Aided by an influx of cash and big-name sponsors, these teams have recruited at least 40 players from Asia since 2016, according to a New York Times analysis, and a similar number from Europe. Many professional gamers are simply looking for a big paycheck, fueling the perception that the United States serves as a retirement community for players who are past their prime. Others are drawn to a comfortable lifestyle in places like Los Angeles. And some want to claim to be the player who will finally put America on the map by winning the first world championship for the continent, end quote. this weekend. Actually, just a few short hours after this episode is released, Ride Home Plus subscribers will be getting the second office hours episode, a half-hour conversation with Gary Tan, one of the most respected VCs of the last decade.

I will put the first 10 minutes or so out on the ad-supported feed on Saturday, just to give you a taste again. But if you want to hear the whole thing, you'll need to subscribe at tech.supercast.tech. Link at the bottom of the show notes today. You know, remember, you can cancel your subscription at any time after you sign up. So if ever you hear a Ride Home Plus episode, that's just so darn good, you can't miss it. And you just sign up and pay the $5 and then immediately unsubscribe.

I ain't mad at you. Anyway, check out this episode and check out the Ride Home Plus feed if you haven't yet. I'll talk to you on Monday.