Tech Brew Ride Home - Mon. 03/25 – The Wheels Of DMA Justice Move Fast

Episode Date: March 25, 2024

They said this law would be one that was capable of moving fast. The EU has already opened formal DMA investigations into Apple and Google. Stability AI seems to be circling the Deadpool. Checking in on the health of X. Greater homescreen control coming to iPhones? And what should we make of tech insiders selling massive amounts of shares? Sponsors: MackWeldon.com promocode RIDE Links: EU probes Apple, Meta and Alphabet under landmark new law (Financial Times) Stability AI Founder Emad Mostaque Plans To Resign As CEO, Sources Say (Forbes) Fewer people are using Elon Musk’s X as the platform struggles to attract and keep users, according to analysts (NBCNews) Spotify adds video learning courses in latest experiment (The Verge) Sources: iOS 18 Lets Apps Be Placed Anywhere on Home Screen Grid (MacRumors) Justice Department Risks Picking the Wrong Fight With Apple (Bloomberg) Thiel, Bezos and Zuckerberg join parade of insiders selling tech stocks (Financial Times) 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. me right home for Monday, March 25th, 2024. I'm Brian McCullough today. They said this law would be one that was capable of moving fast. The EU has already opened formal DMA investigations into Apple and Google.

Stability AI seems to be circling the Deadpool, checking in on the health of X, great new home screen controls coming to iPhones, and what should we make of tech insiders selling massive amounts of shares? Here's what you miss today in the world of tech. The European Union has opened formal DMA investigations into Apple and Google over letting developers, quote, steer users from their app stores. Meta is being investigated over using user data for ads, quoting the Financial Times. The probes fall under the Digital Markets Act, which is designed to tackle the dominance of so-called digital gatekeepers, the biggest online platforms, and came into effect earlier this month. If found guilty of noncompliance companies face hefty fines that could amount to up to 10% of their global turnover. These are serious cases, said Margreth Vestager, the EU's Executive Vice President in charge of digital policy.

And they are emblematic of what the DMA is supposed to deliver when it comes to choice for consumers. Had we been able to resolve that with a mere discussion, they would have been solved by now, she added. The legislation requires companies to allow app developers to steer users to products beyond their own platforms without charging them for doing so. It also states that platforms offering ranked search results must treat the listing of third-party services in a, quote, fair and non-discriminatory manner. The commission said it was concerned that Apple and Alphabet had imposed restrictions and limitations that constrained developers' ability to promote other services. It added it was looking at services, including Google Shopping and Google Flights, over whether the company was giving preference to these in its search results.

The commission said it was looking at whether Apple was meeting its obligations to allow users, quote, to easily uninstall any software applications on its iOS operating systems and change default settings, browsers, and search engines. It also opened proceedings against meta over whether the group's new pay or consent subscription model complied with the DMA requirement for gatekeepers to obtain user agreement to, quote, combine or cross-use their personal data such as for advertising purposes. Jerry Britton, the EU's commissioner for the internal market, said that despite the measures taken by the tech companies to adapt to the DMA, quote, not convinced that the solutions by Alphabet, Apple, and meta respect their obligations for a fairer

and more open digital space for European citizens and businesses, end quote. There are also investigatory steps apparently being taken over Amazon's e-commerce store. So, as Tom Warren pointed out on Twitter, Microsoft is the only big tech company the EU isn't currently investigating for DMA noncompliance. Late last week, sources were telling Forbes that stability and AI CEO Ahmad Mastaki had informed staff last week that Robin Rombach and his team of researchers who helped develop stable diffusion had resigned from the company. This followed a whole slew of executive departures from stability.

Then over the weekend, the company said Mastaki himself had resigned as CEO and from the board, quote, to pursue decentralized AI. C.O. Shan, Shen, Wong, and CTO Christian LaFort were named interim. CEOs. Quoting Forbes. Mustaki's decision to abdicate the CEO role at the company he founded follows a groundswell of employee discontent, which reached a new peak this month with the departures of the key researchers behind Stability's most popular offering, the text-to-image generator-stable diffusion. That same week, Tyler Saltzman, who headed strategic partnerships, also resigned.

Five people familiar with the matter suggested to Forbes that his decision was driven by frustrations over stability's bungled commercialization efforts. They said he plans to start his own company, which is tentatively named Edge. Sultzman did not immediately respond to a request for comment. Since the fall, both executives and Stability's investors, including venture capital firms, Cotoo and Lightspeed venture partners, have called on Mastaki to relinquish his role as CEO, according to four people familiar with the matter. A number of executives have since left the company, including Chief People Officer Osden Onder, General Counsel Adam Avrunen and Joe Penna, the vice president of Applied Machine Learning. the executives could not be reached for comment.

Mustaki emerged as a key figure in the artificial intelligence sector, just as the space was building hype, thanks to the viral success of stable diffusion. But his image was marred by accusations of exaggeration and overstatement about his academic background, Stability AI's involvement in the development of stable diffusion and industry prowess, as Forbes first reported last year. Still, Mustaki was able to raise more than $100 million at a $1 billion valuation

for Stability AI. But within a year, stability was quickly running out of cash. As of October 2023, it was burning about $8 million a month, Bloomberg previously reported. Attempts to raise additional funds at a $4 billion valuation have largely been unsuccessful, sources told Forbes last year, end quote. So, stability was always sort of the problem child of this crop of AI startups, as you just heard. Not really very stable, really. But I also wonder, combine this with the news last week of Microsoft's acquisition of inflection in all but name, is this another sign that consumer-facing chatbot technology is

basically a commodity at this point? Both companies claimed not to have found a viable business in what they were doing. Quick check in on Twitter, as this was making the rounds on social media all weekend, according to Censor Tower in February, X had 27 million US daily active users of its mobile app, which would be down 18% year-on-year, and the U.S. user base has been flat or down every month since November 2022, quoting NBC News. The numbers were nearly as bad worldwide as daily active users on the mobile app fell to 174 million in February, down 15% from a year earlier, the firm said. The worldwide user base has been flat or down every month during Musk's tenure began, except one, when it grew slightly in October and then resumed falling,

according to Censor Tower. Other social media apps experienced modest increases in the worldwide user bases during the same period, according to the research with Snapchat growing 8.8%, Instagram 5.3%, Facebook 1.5% and TikTok, one half of a percent. Those apps all experience declines over that period in the U.S., but none was as steep as the decline on X. X had, quote, the most material decline in active users compared to its peers. Abe Yusef, a senior insights analyst at Censor Tower, wrote in a research report, this decline in ex-mobile app active users may have been driven by user frustration over flagrant content, general platform technical issues, and the growing threat of short-form video platforms, he wrote, end quote. Spotify has launched online courses from

BBC Maestro, Skillshare, and others covering music, business, and more, as an experiment in the UK on mobile and desktop, quoting the verge. Spotify's UK users are getting access to a fourth category of content to sit alongside its existing library of songs, podcasts, and audiobooks, online courses. The company is today launching a new experiment that will see video-based lessons from BBC Maestro, Skillshare, think-ific, and Play Virtuoso made available via Spotify's apps on mobile and desktop. The experiment is running in just the UK, and there are currently no guarantees that it'll get a wider, more permanent launch. Online courses, particularly video-based ones, might feel like an odd fit for a service best known as a source of music and other audio

content like podcasts and audiobooks, but product director Mohit Jitani tells me that people are already coming to Spotify for education thanks to some podcasts, so it makes sense to experiment with offering more educational content. Spotify's pitch to course providers is not just that it can help them reach a much wider audience, but also that it can more directly target potential customers based on their existing listening habits. It becomes much, much easier for us to find the right people for this course and just provide a much more efficient kind of distribution, Jitani says. The streaming services offering courses within four categories. Make music, get creative, learn business, and healthy living. In Spotify's mobile apps, courses are accessible from a new pill-shaped

icon on the top of the home screen, as well as via the services search and browse interfaces. I asked why the company has decided to build them into the same app that's already overflowing with music, podcasts, and audiobooks. And Jatani told me that it's partly to do with convenience. Users don't have to download another app and switch between them, and also so that people can be reminded to complete their courses when they open the main Spotify app. With the experiment, Spotify is offering courses via a freemium model similar to the one it used when it first launched audiobooks. Free and premium Spotify subscribers alike are able to access at least two video lessons per course for free, but will have to pay a fee to access the full

course. Courses consist of a series of videos, which Jutani points out, can be listened to with the screen off for an audio-only experience, and there might also be supplementary materials like PDFs. Although users will need to pay to access a full course, they can't do this in-app thanks to Apple and Google's transaction fees, or at least Spotify's reluctance to pay said fees. On Android purchases work via email, you tap a button in-app to buy a course, and Spotify responds by sending you an email with a purchase link. On iOS, Apple's anti-steering rules now outlawed in the EU means Spotify can't guide you to a purchase link. Instead, you just have to know to go to Spotify's web interface and purchase access to courses from there.

On the web, courses are available via the URLcourses.spotify.com forward slash home. Spotify is taking a commission on courses sold through its platform, but Jitani declined to comment on the percentage its charging course providers, end quote. Sources are saying that iOS 18 will give iPhone users greater control over the home screen app arrangement, including the ability to create blank spaces, rows, and columns. And yes, this is one of those headlines where people will inevitably tweet at me, welcome to Android years ago. Quoting Mac rumors. While app icons will likely remain locked to an invisible grid system on the home screen to ensure there is some uniformity, our sources say that

users will be able to arrange icons more freely on iOS 18. For example, we expect that the update will introduce the ability to create blank spaces, rows, and columns between app icons. Bloomberg's Mark German was the first to report that the iPhone would get a, quote, more customizable home screen starting with iOS 18. It is already possible to customize the home screen and create blank app icons with apps such as shortcuts and widget Smith, but Apple's own personalization options will be more convenient and official. iPhone users have already been able to customize the lock screen since iOS 16, and we expect the home screen will receive similar treatment with iOS 18. The update will introduce additional customization options

for the home screen, according to our sources, and this could result in the biggest home screen revamp in several years, end quote. Remember those rumors of Apple going to Google and even Chinese companies to sign partnerships for AI stuff? I wanted real quick to read you Mark German's reasons for why he thinks this is happening from his newsletter this weekend, quote. Number one, Apple could probably get Google or someone else to pay it ungodly amounts of money for premium status in the operating system. If it's Google, the search giant could become the preferred generative AI service on both Apple and Android phones. Number two, Apple doesn't feel strongly about AI chatbots but knows that consumers will yearn for one

anyway. The partnership would provide that, all while Apple potentially makes some extra money. Number three, there are tons of ethical and privacy issues in the generative AI world. By handing that technology off to a third party, Apple can blame them for everything and have far less liability. Number four, here's another money-related reason. Running cloud-based generative AI is extraordinarily expensive and computing intensive. By using a partner, someone else is paying those huge bills. And number five, it could help Apple integrate AI more quickly. For instance, it could tap local providers in China like Baidu rather than deal with regulators and localize its own technology, end quote. Finally, today, this is T-leaf reading for sure, but putting it on your

radar nonetheless, quoting the Financial Times. Peter Teal, Jeff Bezos, and Mark Zuckerberg are leading a parade of corporate insiders who have sold hundreds of millions of dollars of their companies shares this quarter in a signal that recent stock market exuberance could be peaking. As markets hit record highs, the ratio of corporate insider selling to insider buying is at the highest level since the first quarter of 2021, according to Verity LLC, which tracks insider trading disclosures. Stock sales at the beginning of a calendar year are normal, with pent-up demand in early 2024 being exacerbated by shareholders avoiding sales last year because of depressed company valuations. But analysts still said this season spree,

has been surprising and an indicator that a recent tech bull run, fueled by excitement over the rise of generative artificial intelligence, is about to wane. If they think that we're at the top, and so they're getting out, that's a rather stark signal to everyone else, said Charles Elson, a legal veteran and chair of corporate governments at the University of Delaware. Many of the biggest sales this quarter have come from technology executives. Teal, co-founder of Data Analytics Group Palantir, sold $175 million this month, according to regulatory Disclosures, his biggest sales since offloading 504.4.8 million of the company's stock in February 2021. Amazon founder Bezos sold 50 million shares worth $8.5 billion in the e-commerce group in February.

Andy Jassy, Amazon's chief executive, sold 21.1 million of stock this year compared to $23.6 million in 2020 and 2022 combined. Zuckerberg, Meta's chief executive, has sold millions of dollars of the company's shares for years, but he has increased selling this year as its stock hit all highs. In early February, he sold 291,000 shares for $135 million, his first sale of that size since November 2021. He still has 13 and a half percent of the company's outstanding shares, which makes him its largest shareholder. We do view corporate insider share sales as a negative data point that investors should be aware of, said Ben Silverman, Verity's vice president of research. He added that within the technology sector specifically, quote, we are also seeing a number of the big

company names in the space with insider selling. That is not typical, end quote. Nothing for you today. Talk to you tomorrow.