Tech Brew Ride Home - Mon. 11/15 – Why Apple Buying Google Ads Might Be Weird

Episode Date: November 15, 2021

Some app developers say Apple is buying Google ads to cut App Store work-arounds off at the pass. Huawei thinks it has an end run around US sanctions. The audacious hacker that managed to send fake emails from the FBI’s own servers. The story behind the big Taproot update to Bitcoin. And the DAO of crypto enthusiasts looking to buy a copy of the US Constitution. Sponsors: Betterhelp.com/ridehome HeyLaika.com/techmeme Links: Apple Quietly Buying Ads Via Google For High-Value Subscription Apps To Capture App Publisher Revenue (Fortune) Samsung releases Android 12-powered One UI 4 for Galaxy S21 phones (The Verge) Huawei Recruits Smartphone Partners to Sidestep U.S. Sanctions (Bloomberg) FBI system hacked to email 'urgent' warning about fake cyberattacks (Bleeping Computer) Hoax Email Blast Abused Poor Coding in FBI Website (KrebsOnSecurity) A major upgrade to bitcoin just activated — here’s what investors should know (CNBC Make It) A crypto group has raised nearly $3 million in Ether to bid on a rare copy of the U.S. Constitution (Fortune) 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 Monday, November 15th, 2021. I'm Brian McCullough today. Some app developers say Apple is buying Google ads to cut App Store workarounds off at the pass. Huawei thinks it has an end run around U.S. sanctions, the audacious hacker that managed to send fake emails from the FBI's own servers, the story behind the big taproot update to Bitcoin, and the Dow of crypto enthusiasts looking to buy a copy of the U.S. Constitution. Here's what you miss today in the world. of tech. Some subscription app developers suspect Apple is buying Google ads that send users to their apps in the app store in order to protect its cut by decreasing web-based sign-ups. Because remember,

the judge ruled that apps will be allowed going forward to link out to web pages so developers can offer sign-up options there. So if this is indeed happening, it suggests that that 30% cut of sales is such a sweet, fat, easy margin for Apple to make that even if it has to spend a little bit, costs of goods sold, to protect even a percentage of that percentage, it makes financial sense to Apple. And they've apparently already been doing this, allegedly, according to some developers, for years, even before the judge's ruling, quoting Forbes. Apple is secretly buying Google ads for high-value apps to collect potentially millions of dollars in subscription revenue. Multiple app publishers have told me. Apple is placing the ads without the app developers consent, and Google won't delete

them, they say. It's a form of ad arbitrage, they say, and it's been going on for at least two years. Impacted businesses include major brands such as dating apps like Tinder, plenty of fish and bumble, Media Giant HBO, Education and Learning Publisher Masterclass, and Language Learning Service Babel. The ads don't disclose that they are from Apple and Wood to most observers simply look like ads from the brands and app publishers themselves that happen to go right to the app store. They do, however, have similar tracking links with near identical parameters that indicate one agency is likely placing all of them. Apple is trying to maximize the money they're making by driving in-app purchases that people buy through the App Store. One source, who asked not to be named for fear of retaliation told me.

Apple has figured out that they can make more money off these developers if they push people to the app store to purchase their versus a web flow, end quote. The obvious question, of course, is, isn't Apple advertising your business a good thing? They are literally paying to find you more customers. Is it more customers something that you want? Wouldn't you want Apple to keep doing this and do even more of it? Perhaps surprisingly, according to multiple major mobile brands, the answer is no. It's hurting developers' businesses, one said. You're building your growth based on what you think a customer is worth,

and if a customer is worth 30% less, your margin is gone, end quote. Some subscriptions are worth hundreds of dollars a year. Those might be for training classes, education, fitness, or dating apps. Apple's costs to run an ad may be $5.5.5. to $10 for each successful sign-up, and the revenue can easily be $50 or more. The customer doesn't know, a source said. The user doesn't know that $54 is going to Apple, not the developer, end quote. In addition, when multiple parties bid on the same ad slots, prices rise. So if Apple is buying ads for HBO Max in order to get HBO customers to buy

the service-in app, that means HBO has to spend more than Apple to get the top spot and high visibility. That increases customer acquisition costs. A significant problem for high-growth companies that rely on sophisticated marketing models that balance cost of customer acquisition with funds available for advertising. It hurts the advertiser, one source said. LTVs, which stands for lifetime value of a customer, are lower. So it doesn't just cost more to advertise, but you can't spend as much. Apple is not just making more money off developers, it's hurting their business, end quote. So let me point out a couple of things. First, this has not been proven. This is just alleged at this point. Apple has not commented as of the time of this writing and recording. And the buying ads without the

developer's approval is also an interesting angle here. Google does allow advertising using another company's trademarks if they think it's a competitive thing. Like, you know, Pepsi can do a text ad saying, we're better than Coke. But I'm not sure I've ever heard about this. Someone advertising on behalf of a brand or product because they get a cut of the sale of that brand or product. They're essentially a partner of the thing being advertised. There's another angle that's interesting to me, though. The argument that a lot of folks have made vis-a-vis the app stores is that the 30% cut that is traditional on app stores is simply too big. It's too big a vig.

If it really was cost-effective for Apple to effectively front-run their own app store partners and still make money, wouldn't that prove 30% is too fat a cut? They're effectively themselves proving that competition, if it were allowed, would lower that fee by, well, by being the competition themselves in proving it. Also, think of all of the money that apps and developers have themselves spent on Google ads all these years. Haven't they essentially been advertising on behalf of Apple's fat 30% cut all this time for free themselves? If Apple is doing this, I don't know. This might have been a big mistake. Samsung has released the Android 12-based one UI4 for the Galaxy S-21, S-21 Plus, and S-21 Ultra with new theming options, keyboard tweaks, and privacy settings.

Quoting the verge. The new features coming with the latest version of Samsung's software should look familiar to anyone who's been keeping up with Android 12's upgrades. First up is a material use-style overhaul, including the ability to change the operating system's color scheme based on your chosen wallpaper. and there are also redesigned widgets. New privacy focus features include a privacy dashboard that keeps track of how often apps are requesting sensitive information from your phone, and there are also new indicators that show when the phone's camera or microphone are in use. Other new features include a tweaked keyboard that offers more animated emoji and

stickers. Although the OneUI update is currently limited to Samsung's S21 series, the company says it'll be available soon on a range of its other devices, including older Galaxy S-GalxyS, Galaxy Note and Galaxy A devices as well as Samsung's foldables and tablets, end quote. Sources are telling Bloomberg that Huawei is planning to license its smartphone designs to third parties in order to bypass U.S. sanctions and gain access to critical components. Quote, the Shenzhen-based tech giant is considering licensing its designs to a unit of state-owned China Postal and Telecommunications Appliances, or P-TAC, which will then seek to buy parts barred under

the Trump-era blacklisting, said one of the people asking not to be identified discussing internal matters. The unit known as X-Nova is already selling Huawei branded Nova phones on its e-commerce site, and the partnership will see it offer self-branded devices based on the larger company's designs. Chinese Telecom Equipment Maker TD Tech Limited will also sell some phones featuring Huawei's designs under its own brand, another person said. The partnerships are subject to change as negotiations are still ongoing. The move may be Huawei's best chance at salvaging its smartphone business after U.S. sanctions cut off its access to key chipmaker, Taiwan semiconductor manufacturing, Google's Android apps, and Qualcomm's 5G wireless modems. Since Huawei first came under fire from the Trump

administration, its shrinking consumer business has seen sales fall for four straight quarters. Engineers at Huawei have already begun redesigning the circuits of some marquee smartphones previously powered by the company's in-house high silicon ships so they can adapt to Qualcomm or media tech processors, said one of the people. Huawei expects the partnerships could bring smartphones shipments, including in-house models and those sold by partners, to more than 30 million units next year the person added, end quote. Over the weekend, news broke that FBI email servers were hacked to send a spam warning from the servers of a, quote, sophisticated chain attack.

and the likely goal of this hacking was to discredit security researcher Vinnie Troia, quoting Bleeping Computer. Troya is the head of security research of the dark web intelligence company's Night Lion and Shadowbite. The spam tracking nonprofit Spam House noticed that tens of thousands of these messages were delivered in two waves early this morning. They believe this is just a small part of the campaign. Spam House Project told Bleeping Computer that the fake emails reached at least 100,000 mailboxes. The number is a very conservative estimate, though, as the researchers believe, quote, the campaign was potentially much, much larger. While this looks like a prank, there is no doubt that the emails

originate from FBI's servers, as the headers of the message show that its origin is verified by the domain keys identification mail mechanism. The FBI confirmed that the content of the emails is fake and that they were working on solving the issue as their help desk is flooded with calls from worried administrators, end quote. Yeah, that's a pretty aggressive hack, if true. How is this even possible? Well, according to Brian Krebs, the person claiming responsibility for the FBI email server hack says to him they were able to send spam messages by abusing insecure code in the FBI's leap portal, quote, late in the evening on November 12, tens of thousands of emails began flooding out from the FBI address, EIMS at IC.fbi.gov, warning about fake cyber attacks. Around that time,

Krebs on Security received a message from the same email address. Hi, it's Pompuran, read the missive. Check headers of this email, it's actually coming from FBI server. I am contacting you today because we located a botnet being hosted on your forehead. Please take immediate action, thanks, end quote. In an interview with Krebs on security, Pom Pomperin said the hack was done to point out a glaring vulnerability in the FBI system. Quote, I could have 1,000 percent used this to send more legit-looking emails, trick companies into handing over data, etc., Pompum Puran said, and this would have never been found by anyone who would responsibly disclose due to their

notice the feds have on their website, end quote. Pompon Puran says the illicit access to the FBI's email system began with an exploration of its law enforcement enterprise portal known as Leap, which the Bureau describes as, quote, a gateway providing law enforcement agencies, intelligence groups, and criminal justice entities, access to beneficial resources. These resources will strengthen case development for investigators, enhance information sharing between agencies, and be accessible in one centralized location. The FBI's site enthuses. Until sometime this morning, the Leap Portal allowed anyone to apply for an account. Helpfully, step-by-step instructions for registering a new account on the Leap

portal, also are available from the GAOJ's website. It should be noted that, step one, and those instructions is to visit the site in Microsoft's Internet Explorer, an outdated web browser that even Microsoft no longer encourages people to use for security reasons. Much of that process involves filling out forms with the applicant's personal and contact information and that of their organization. A critical step in that process says applicants will receive an email confirmation from EIMS at ic.fbi.gov with a one-time passcode, ostensibly to validate that the applicant can receive email at the domain in question. But according to Pompum Pyrin, the FBI's own website leaked that one-time passcode in the HTML code of the web page.

Needless to say, this is a horrible thing to be seeing on any website, Pompon Pyrin said, I've seen it a few times before, but never on a government website, let alone one managed by the FBI, and quote. One more thing from the weekend, over the weekend, Taproot, the first major upgrade to Bitcoin's code since the introduction of segregated witness in 2017. went live. What is Taproot? Well, among other improvements, Taproot makes transactions more private on the Bitcoin blockchain less expensive and will let Bitcoin users execute more complex smart contracts, quoting CNBC. The Taproot upgrade is a collection of three separate upgrade proposals. Catherine Dowling, General Counsel and Chief Compliance Officer at Bitwise Asset Management, tells CMBC make it. Taproot will introduce what's called Schnor signatures,

which will help Bitcoin transactions become more private, efficient, and less expensive. Most importantly, the upgrade will better enable Bitcoin to execute smart contracts on the blockchain. Schnor signatures can be leveraged to let Bitcoin users execute more complex smart contracts than Bitcoin can currently accomplish today, Dalling says. That's big because one of the key differences between Bitcoin and newer blockchains like Ethereum is their suitability for smart contracts, end quote. Smart contracts are digital agreements written in code and stored on the blockchain. They're essential empowering decentralized finance or defy applications and non-fundable tokens or NFTs, for example. Ethereum's smart contract capabilities have in part allowed it to become the most used blockchain. Compared to Ethereum, quote, Bitcoin has historically been much more limited in accommodating smart contracts, she says.

But while Bitcoin likely won't ever be as flexible as Ethereum from a smart contract standpoint, with Taproot, that gap will now narrow, end quote. This will likely lead to an increase in day-to-day applications for Bitcoin. The Taproot upgrade also aims to increase privacy for certain transactions. To do this, Schnor signatures will ultimately allow for multi-signature transactions or those that involve multiple addresses to appear as a standard single transaction. Multi-signature transactions are often used to enable smart contracts, among other things. As a result, multi-signature transactions will be indistinguishable from simple transactions, meaning greater anonymity and privacy for addresses involved in multi-signature transactions.

Schnorr signatures would also reduce the amount of data needed for multi-signature transactions, which are more complicated to process than standard ones. With less data involved, transactions will become more energy and time efficient, says Tyrone Ross, CEO of OnRamp Invest, a firm that helps advisors with digital asset management. As a result, transactions will be cheaper to process, leading to lower costs of transaction fees. Taproot will, quote, set the foundation for the next phase of innovation in the Bitcoin Protocol, Dowling says, we expect this upgrade to unleash a new wave, of innovation in Bitcoin, focus mainly on smart contracts, end quote.

And finally today, a crypto group has raised nearly $3 million in ether to bid on a rare copy of the U.S. Constitution, quoting Fortune. On Thursday, Auction House Sotheby's will host an auction for a historic first printing of the U.S. Constitution. A crypto group called Constitution Dow claims it wants to be the highest bidder. Constitution Dow has raised nearly $3 million or $609 Ethercoin. according to its wallet, since launching a crowdfunding platform on Sunday night, to purchase the document, which is one of 13 first-run copies of the Constitution that has survived from an original circulation of 500.

The document was distributed to delegates at the Constitutional Convention in 1787, where the Constitution was ratified and is one of two copies that is not held by an institutional collection, like a museum, according to Sotheby's. The Constitution Dow pledges that if it wins the auction, it will share ownership of the Constitution among everyone who contributed funds to the project and make collective decisions about what to do with it. Potential plans include making NFT artwork from the document and donating it to the Smithsonian Historical Society. After raising nearly $3 million hours after it launched on Sunday night, the group seems on pace to raise the $15 to $20 million that Sotheby's estimates the document will cost at auction. The copy of the Constitution is currently owned by Dorothy Goldman,

the widow of New York real estate developer Howard Goldman, who bought the copy for $165,000, in 1988. Goldman says the proceeds from the auction will go to the Dorothy Tapper Goldman Foundation, which builds educational programs for students with a focus on advancing the principles laid out in America's founding documents, end quote. So funny enough, I knew about this Constitution sale a whole month ago, not that I knew a Dow would be set up to buy it, but at least my wife knew about this Constitution sale. As I've said before, my wife is an architect. She apparently met Ms. Goldman last month at some big fundraiser when she was seated next to her at the dinner hour, and Ms. Goldman told her about the Constitution sale. She seemed like a very nice lady, Ms. Goldman, according to my wife, but my comment to my wife when she told me this story was that's about the biggest humble brag that only the very richest people can drop over a cocktail hour.

You know, what do you do? Oh, I'm an architect. My husband is a podcaster. What do you do? Oh, I'm selling a copy of the Constitution to benefit my charitable foundation. That's one hell of a flex. Talk to you tomorrow.