Tech Brew Ride Home - Fri. 10/22 – Is Apple’s ATT Bite As Bad As People Feared After All?

Episode Date: October 22, 2021

Snap’s earnings suggest Apple’s ATT bite is having an impact, and what might that mean for others like Facebook? Google lowers Play Store fees and piles pressure on Apple. Did law enforcement give REvil a taste of its own medicine? What the heck is Worldcoin, I still can’t figure it out. And, of course, the weekend longreads suggestions. Sponsors: Dataiku.com RealVision.com/techmeme Links: Snap plummets 22% after missing on revenue expectations (CNBC) Google lowers Play Store fees for subscriptions and music streaming apps (The Verge) Amazon launches in-store pickup option for items from local businesses (CNBC) Governments turn tables on ransomware gang REvil by pushing it offline (Reuters) Silicon Valley entrepreneur Sam Altman wants to scan your eyes in exchange for free cryptocurrency (CNBC) Weekend Longreads Suggestions The Metaverse Is Bad (The Atlantic) DeFi Is Like Nothing Regulators Have Seen Before. How Should They Tackle It? (CoinDesk) Inside Wheel of Time, Amazon’s Huge Gamble on the Next Game of Thrones (GQ) 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, October 22nd, 2021. I'm Brian McCullough. Today snaps earnings suggest Apple's ATT bite is having an impact and what that might mean for others like Facebook. Google lowers play store fees and piles pressure on Apple. Did law enforcement give our evil a taste of its own medicine?

What the heck is WorldCoin? I still can't figure it out. And of course, the weekend long read suggestions. Here's what you missed today in the world of tech. Maybe you notice that earning. season has kicked off once again, but I've been kind of ignoring it. That's because generally, we tend to want to focus on earnings when there's something different to talk about. But Netflix earnings earlier this week were fine. Tesla's earnings, well, another quarter of record profit. So those are basically unbroken narratives. But here's a screeching narrative violation that might have implications for a lot of companies we pay attention to. Snap, which had been the earnings turnaround story of late was down more than 20% in trading this morning, wiping out a lot of

their recent gains after reporting earnings yesterday. Why? Quoting CNBC, the company's revenue missed Wall Street expectations after its advertising business was disrupted by privacy changes Apple introduced earlier this year. Snap CEO Evan Spiegel praised Apple's consumer-friendly changes on CNBC in February, when he also warned they posed a risk to Q4 earnings. but said on Thursday, the iPhone's privacy settings impacted SNAP's advertising business more than anticipated. Quote, while we anticipated some degree of business disruption, the new Apple-provided measurement solution did not scale as we had expected, making it more difficult for our advertising partners to measure and manage their ad campaigns for iOS, Spiegel said in his prepared remarks.

Shares of social media rivals Facebook and Twitter were each down nearly 7% in after-hours trading following the release of SNAP's third quarter earnings, showing investors may fear similar impacts on their financial results, end quote. Yeah, if you can remember to last quarter's earnings, we talked about this. Everyone was worried at the time about the impact of Apple's ATT changes, but in that quarter, the executives at all of these companies said the impact was not as bad as they had feared. But in the meantime, we've been hearing anecdotally from the advertising industry generally that it has been at least as bad as a lot of people feared.

We talk about some of this on the weekend bonus episode tomorrow, so listen for that. But also, will this impact everybody? Is this perhaps an additional reason why Facebook, for example, seems so freaked out lately? Quoting Patrick McGee on Twitter. How ads were working and on which audiences used to be real-time and granular, but on iOS, it is now delayed up to 72 hours and only available in the aggregate. This has transformed much of the tailored ads industry into something more like a traditional. billboard. As a result, some advertisers are throwing money at safe havens where granular details are still available, namely on Android and Apple's search ads, end quote. And good old Gene Munster tweeted, quote, effectiveness of advertising measurement tools that have been used for a decade have been dramatically diminished first starting in the summer with Apple's opt-out of tracking

and second with the September release of iOS 15. This will take six months to a year for the industry to get their hands around the changes to Apple. On top of Apple, advertisers are cutting spending because of the lack of supply and labor shortage. This means auction-based ad pricing is declining, end quote. Meanwhile, crack. Google announced it is lowering Play Store subscription fees to 15% and fees for e-books and on-demand music streaming services to as low as 10%. The overall IAP or in-app payment cut seems to be unaffected, however. Quoting the Verde. Google's stated reason for the cheaper prices on e-books and music streaming apps is that, quote, content costs account for the majority of sales and that the rates, quote, recognize industry

economics of media content verticals, end quote. It's unstated, but also surely true that regulatory pressure and public pressure from companies like Spotify have factored into Google's decision. Currently, signing up for a Spotify subscription on Android redirects you to Spotify's website to enter your payment information. The lower fee structure for music streaming is still at Google's discretion, both for which apps are eligible and how low that fee will be. When asked how exactly developers can know if they qualify for the reduced fees, a Google spokesperson said, quote, developers can review program guidelines and express interest now, and will follow up with more information if they are eligible, end quote. As for subscriptions, Google's previous structure was

similar to Apple's. 30% the first year, 15% thereafter. The new change simplifies that by offering 15% right off the bat and is likely a strong incentive for developers to switch over from one-time payments to subscriptions. Google says that one reason for the change is that, quote, we've heard that customer churn makes it challenging for subscription businesses to benefit from that reduced rate, end quote. Google already has a program where in the first million dollars a developer earns through Google requires a 15% cut instituted in March 2021. And since so many apps are ad-based and therefore free, the company claims that 99% of developers, quote, qualify for a service fee of 15% or less, end quote.

So I've said before, a ruthless Google would use this opportunity this time to severely cut its app Vig to apply pressure to Apple. Not to promo the weekend bonus episode again, but we do talk about this at length. Zero-sum game. You can only grow by taking a bite out of your competitors' hide these days. And this certainly applies more pressure to Apple. Amazon has rolled out what it is calling local selling, an in-store pickup option for items from local businesses. in the U.S., quoting CNBC. Amazon is launching a new shipping option for shoppers who don't want to wait for their package

to arrive by mail. The company on Thursday rolled out local selling, a suite of services that allow small and medium-sized businesses who sell products on Amazon to offer in-store pickup and fast delivery to shoppers who live near their physical retail stores. The features could help Amazon keep shoppers on its site instead of going elsewhere, like retailers' own online stores or competitors' marketplaces, on, eligible items, shoppers will be able to select in-store pickup when placing their order, then retrieve their package the same day. Amazon said in-store pickup will not cost extra.

For local delivery, sellers will use their own trucks and vans to transport items to shoppers' doorsteps. Sellers can also choose to bundle other services on top of delivery like product assembly or installation. It's up to sellers to decide the delivery speed and shipping costs, but Amazon said many merchants are able to ensure one-to-two-day delivery at no extra cost. the local delivery option, Amazon is seeking to take advantage of its vast network of third-party seller's physical footprint to speed up the process of getting packages to customers' doorsteps. It's a similar tactic taken by the likes of Walmart and Target, which have tapped into their brick-and-mortar storefronts to offer same-day delivery for orders placed online,

and quote. Sources are telling Reuters that ransomware gang, Our Evil, was hacked and forced off line this week by an active multi-country operation that included U.S. law enforcement, quote, a leadership figure known as one day who had helped restart the group's operations after an earlier shutdown said, Our Evil's servers had been hacked by an unnamed party, quote, the server was compromised and they were looking for me, one day, wrote on a cybercrime forum last weekend, and first spotted by security firm recorded future. Good luck, everyone, I'm off, end quote. U.S. government attempts to stop Our Evil, one of the worst

of dozens of ransomware gangs that work with hackers to penetrate and paralyze companies around the world accelerated after the group compromised U.S. Software Management Company Kaysia in July. Following the attack on Kasia, the FBI obtained a universal decryption key that allowed those infected via Kasia to recover their files without paying a ransom. But law enforcement officials initially withheld the key for weeks as it quietly pursued our evil staff, the FBI later acknowledged. According to three people familiar with the matter, law enforcement and intelligence cyber specialists were able to hack R-Evil's computer network infrastructure, obtaining control of at least some of their servers. After websites that the hacker group used to

conduct business went offline in July, the main spokesman for the group, who calls himself unknown, vanished from the internet. When gang member one day and others restored those websites from a backup last month, he unknowingly restarted some internal systems that were already controlled by law enforcement. Quote, the R. Evil ransomware gang restored the infrastructure from the backups under the assumption that they had not been compromised, said Oleg Skulkin, deputy head of the forensics lab at the Russian-led security company Group IB. Ironically, the gang's own favorite tactic of compromising the backups was turned against them, he said, end quote. Also, um, Oleg Skulkin is that kind of the best name for an anti-ransomware

person ever? Sam Altman's World Coin yesterday officially launched its cryptocurrency. They're willing to give the cryptocurrency to anyone in the world for free in exchange for users scanning their eyeballs into an orb-like device. WorldCoin says it has 100,000 users globally and is valued at $1 billion. Quoting CNBC. Altman, CEO of Artificial Intelligence Group OpenAI and former president of Startup Accelerator Y Combinator, co-founded the company with theoretical physics student Alex Blanilla and Max Novenstern, a former investor. Associate at Bridgewater Associates. The idea seems outlandish at first. Free money? And all I need to do is have my eyes scanned? It sounds too good to be true. However, WorldCoin's founders say it's about

expanding the reach of cryptocurrencies and financial services more broadly to the masses. Less than 3% of the global population are crypto users, according to virtual currency exchange crypto.com. Worldcoin has already shipped its orb-shaped devices to people in 12 countries. Testers get users to sign up by having their iris scanned. The image is then encrypted and becomes a unique code, while the original data is deleted to protect users' privacy. Following that, users are given a free share of WorldCoyne's cryptocurrency. We designed the whole system to be fundamentally privacy preserving, Glania said. The iris code itself is the only thing leaving the orb. There's no big database of biometric data, end quote. The company has so far amassed over 100,000 users globally and is onboarding 700,000. more each week. Worldcoin aims to hit 1 billion users by 2023, which raises a big question, how exactly is World Coin meant to be used? Well, one early feature of the project will be a digital wallet that lets users store their crypto and make payments. But more broadly, Blania hopes to attract developers who can build apps on top of its system, apps that, quote, we don't see today

and that are really hard to build today because very few people hold crypto, end quote. Yeah. But still, the big question remains, and no one has been able to sufficiently explain this to me yet. Why the iris scanning? Like, why is that important? There would be easier ways to do it, one would think? This is real underpants gnome stuff to me, and no one's been able to make it any less confusing. Time for the weekend long read suggestions. We've been talking about the metaverse, and when we do, people keep joking, or maybe not joking, that, you know, when Neil Stevenson coined the term Metaverse, he was using it to describe a dystopian hellscape, right? So while all of Silicon Valley races to define this new,

amorphous buzzword from the Atlantic, a quick devil's advocate piece that takes the other side and argues, a Metaverse coming to fruition would actually be bad. Quote, you can see why Zuckerberg plagued by months and years of criticism of his decidedly low-fidelity these social networks and apps might find an escape hatch appealing. The Metaverse offers a way to leave behind worldly irritants and relocate to greener pastures. This is the rationale of a strip miner or a private equity partner. Take what you can, move on, and don't look back. No wonder fictional worlds with Metaverses are always trashed. The fantasy is bigger, though. CEOs and tech know that billions of people still live much of their life beyond computer screens. Those people

buy automobiles and grow herb gardens. They copulate and blow autumn leaves. Real life still seeps through the seams of computers. The executives know that no company, however big, can capture all the world. But there is an alternative. If only the public could be persuaded to abandon atoms for bits, the material for the symbolic, then people would have to lease virtualized renditions of all the things that haven't been put online. Slowly, eventually, the uncontrollable material world falls away, leaving it instead only the pristine but monetizable virtual one, end quote. Next, CoinDest takes a deep look at how regulators are attempting to wrap their regulatory minds around DeFi, decentralized finance, and how that ain't so easy as DeFi isn't like anything regulators have seen before.

Quote, traditionally, regulators rely immensely on the people running trading services to control those risks by monitoring their customers and suspicious activity on their platforms. the leaders of traditional finance services themselves sometimes become the linchpin of enforcement, the responsible arm, the SEC twists to get what it wants. Without those pressure points, things will get tricky. Quote, it's going to be very difficult to regulate Defi, much harder than crypto, says Catherine Kirkpatrick, co-chair of the financial services practice at King and Spalding. The ultimate question, beyond how to regulate, is how do you enforce the rules? How do you make someone accountable for breaking the rules? It doesn't make sense to regulate if you have no enforcement mechanism, end quote. In other words, trying to regulate defy is a bit like trying to

parent a superpowered 14-year-old who can fly, teleport, and turn invisible at will, end quote. And finally, I haven't read all of this yet, but I've already heard raves about it on some TV and Hollywood Focus podcast that I listen to. So this is first on my to-do list for this weekend. From GQ, quote, as legend has it, a few years back, Jeff Bezos, demanded that his team at Amazon Studios create a fantasy epic that would put Game of Thrones to shame. Turns out that kind of thing is even harder to do than it sounds and more expensive than you can imagine. Inside the epic quest to bring wheel of time to life and maybe change the face of global television forever, end quote. So yes, as I mentioned several times in this episode,

look forward to a great weekend bonus episode conversation with Chris Messina and Alex Cantorwitz. We get deep on the Facebook name change, the Metaverse, and the Royal Rumble of the Tech Behemists, all going at each other like a circular firing squad. That's coming at you tomorrow. Talk to you on Monday.