Tech Brew Ride Home - Thu. 12/17 – The Apple-Facebook Cold War Is Getting Hot

Starting point is 00:00:00 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 Thursday, December 17th, 2020. I'm Brian McCullough. Today, Mommy and Daddy are fighting. This time it's Apple and Facebook, and it's getting pretty heated. The EU OKs Google's acquisition of Fitbit. Substack has resurrected Google Reader, in spirit at least,

Starting point is 00:00:52 and why the new antitrust lawsuit against Google is maybe the most serious yet because we're talking about actual felonies here, potentially, allegedly. Here's what you missed today in the world of tech. This is another one of those stories that I didn't do earlier because I thought it was just a little thing that was going to blow over, but now it has evolved into a big thing, so to catch you up. For the last few days, Facebook has been attacking Apple in full-page newspaper ads, claiming that upcoming iOS 14 changes that will limit data gathering and targeted ads are bad for small businesses. You might remember what this is all about because we've spoken about it before. Apple is taking a privacy setting that was buried deep in your phone and putting it front and center when you open an app.

Starting point is 00:01:42 This involves the IDFA, the identifier for advertisers, and it is what allows Facebook and Google and other advertisers to, well, to do the whole surveillance capitalism thing, to follow you around the web and from app to app to know who you are and where you live and what your age is and what your weight is and that you briefly did. a search for Airbnbs in Marietta, Georgia last week. Quoting CNBC, with the change, iPhone users will see a pop-up window in each app. The pop-up warns users that an app is tracking their data for advertising purposes and gives them the option to block the app from doing so. For Facebook, for example, it would read, Facebook would like permission to track you across apps and websites owned by other companies

Starting point is 00:02:23 with an option to allow tracking or ask the app not to track. App owners also have a bit of language they can tailor themselves, but they only have a limited area to do so. The fear among app makers is that many users will turn off the ad tracking capabilities of an app when they see the pop-up warning and blow up their business model of letting advertisers effectively target and measure ads and their effectiveness on the iPhone. Facebook already warned in August that the change could shave off 50% of audience network revenue for publishers, end quote.

Starting point is 00:02:56 So you can see why Facebook isn't happy. Apple already delayed its implementation of this, but it's still coming in a few months, and thus Facebook is claiming now to be the champion of mom-and-pop small business advertisers, quoting Bloomberg. While limiting how personalized ads can be used, does impact larger companies like us? These changes will be devastating to small businesses, Facebook said. Ads that disregard personalized targeting generate 60% fewer sales than ads that target consumers. Facebook added citing its own data. Apple's new feature at the heart of the issue, app tracking transparency won't forbid companies like Facebook from collecting targeted data,

Starting point is 00:03:37 but will ask them to disclose it and seek user opt-in, end quote. Facebook's most recent newspaper ads say the upcoming changes will, quote, change the internet as we know it, for the worse, end quote. This appeared in full-page ads in the Wall Street Journal, New York Times, and Washington Post. Apple has responded to Facebook's criticism of these changes in iOS 14, saying Facebook wouldn't be forced to change how it tracks users, but it must give users a choice. In a statement provided to Mac rumors, Apple said, quote, we believe that this is a simple matter of standing up for our users. Users should know when their data is being collected and shared across other apps and websites, and they should have the choice to allow that or not. App tracking transparency in iOS 14 does not require Facebook to change its approach to tracking users and creating targeted advertising.

Starting point is 00:04:30 It simply requires that they give users a choice, end quote. So, didn't we talk recently? I think it was one of the times Chris Messina was on a weekend bonus episode about the idea that the last decade or so has seen the big tech platforms largely playing nice, carving out their own territory and the market opportunity. were so big that people could largely avoid stepping on each other's toes. Now, however, the overall tech landscape is starting to look like a zero-sum game. You might only be able to grow by taking from someone else's share of the pie. So the fear was that this would lead to some rather sharp elbows being thrown, if not outright warfare between the tech giants going forward. Well, Facebook has announced that it will assist epic games in its legal battle against Apple including providing supporting documentation.

Starting point is 00:05:26 Quoting the Wall Street Journal. As part of a pledge to assist challenges to what it called Apple's anti-competitive behavior, Facebook plans to provide supporting materials and documents to Epic Games. The Fortnite parents sued Apple this year, claiming the tech giant's app store operates like a monopoly. Facebook said it isn't joining the lawsuit,

Starting point is 00:05:44 but helping with discovery as the case heads to trial next year, end quote. So I guess if you hobble our advertising juggernaut, we might just help crack open your app store juggernaut. And the current regulatory environment only provides tons of opportunities for asymmetrical warfare like this. Remember that new Digital Markets Act proposed by the EU just this week? Remember how Facebook was making sounds like they were welcoming their new regulatory overlords? Yeah, quoting CMBC. We hope the DMA will also set boundaries for Apple, a Facebook spokesperson.

Starting point is 00:06:22 said in a statement, Apple controls an entire ecosystem from device to app store and apps and uses this power to harm developers and consumers as well as large platforms like Facebook, end quote. Meanwhile, the European Commission has approved Google's $2.1 billion acquisition of Fitbit on condition of compliance with a set of commitments related to privacy and user consent. So with one hand, the EU is bringing the hammer down on a whole new set of proposed regulation, and with the other hand, they're letting big acquisitions still continue to happen. Quoting CNBC, the commission on Thursday set out a number of commitments that Google must follow over the next 10 years. It said Google must not be able to use the health data of Fitbit users in the European economic area for advertising and enforced a technical separation of Fitbit's data from Googles.

Starting point is 00:07:19 Quote, we can approve the proposed acquisition of Fitbit by Google because the commitments will ensure that the market for wearables and the nascently. digital health space will remain open and competitive. European Commission Executive Vice President Marguith Vestager said in a statement on Thursday, end quote. Real quick, Christmas has come early. You, Roku, and HBO Max stands because Roku and WarnerMex have reached an agreement to distribute HBO Max on the Roku platform starting today, Thursday, quoting variety. Terms of the deal were not disclosed, but both sides claimed they were pleased with finally resolving their differences.

Starting point is 00:08:00 WarnerMedia was looking to nail down in HBO Max packed with Roku as the service's last major distribution partner ahead of the December 25th day and date premiere of Wonder Woman 1984, starring Gal Godot on both HBO Max and in theaters. Meanwhile, as previously announced, all films in Warner Brothers' 2021 slate will debut on HBO in the U.S. concurrently with its theatrical release and will be available to stream exclusively for one month. Under the deal, Roku users who have already subscribed to HBO through Roku will have the existing HBO app on their devices automatically updated to the HBO Max app, and they will be able to log in using their existing HBO credentials. It appears that going forward,

Starting point is 00:08:40 Roku will no longer be able to sell HBO as a channel subscription in the Roku channel store, similar to the concessions both Amazon and Apple made in their agreements for HBO Max. Roku will sell subscriptions to HBO Max using Roku Pay, the payment service for its streaming devices, end quote. And meanwhile, in the midst of everything we've been talking about today, we expect a bipartisan group of more than 30 state attorneys general to announce an antitrust lawsuit against Google later today, accusing them of favoring their own products in their search results. I'm not going to hold the show this afternoon just to report the news because we know it's coming. We can read the quotes and get some smart analysis of the details of the case tomorrow.

Starting point is 00:09:33 But in the meantime, I did want to flag this, because we've actually had a look at this antitrust suit, which is being led by the Texas Attorney General. And interestingly, it makes a specific accusation that Google gave Facebook special privileges in exchange for not supporting a competing ad system. This is potentially very, very meaningful. A lot of these other antitrust cases have been kind of arguing theory, like, what is a monopoly and what isn't? What is the definition of the market a given company is operating in? What constitutes anti-competitive behavior, even? But this, this is potentially something more tangible because this alleges actual cut and dry collusion, the actual divvying up of a market by two powerful players in that market.

Starting point is 00:10:26 This would be an actual illegal conspiracy. We're talking felonies here, allegedly, quoting Wired. As described in the complaint, the scheme between Google and Facebook has its roots in 2017, when Facebook announced it would start supporting something called header bidding. The details are too wonky to get into here. Basically, Google, which runs the biggest online ad exchange, likes to make publishers give it first dibs on bidding to place an ad. Publisher just means any website or app that runs ads.

Starting point is 00:10:57 header bidding was a technical hack that allowed publishers to earn higher prices by soliciting bids from multiple exchanges at once. Google hated this because it created more competition. When Facebook declared that it would work with publishers that used header bidding, it was seen as a provocation. The millions of businesses that advertise with Facebook don't just advertise on Facebook. Through the Facebook audience network, the company also places ads across the web, making it one of the biggest ad buyers on the internet. If it began supporting header bidding, that could cause Google's ad platform to lose a lot of business. Drawing on internal documents uncovered during its investigation, however, the Texas Attorney

Starting point is 00:11:37 General claims that Facebook's leaders didn't actually want to compete with Google. They wanted Google to buy them off. This seems to have worked. In September 2018, the companies cut a deal. Facebook, the complaint says, agreed to, quote, curtail its header bidding initiatives and send the millions of advertisers in its Facebook audience network to bid on Google's platform. In return, Google would give the Facebook audience network special advantages in ad auctions, including setting aside a quota of ad placements to Facebook, even when the company didn't make

Starting point is 00:12:09 the highest bid. The agreement the complaint says, quote, fixes prices and allocates markets between Google and Facebook, end quote. Here's why that matters. The other antitrust cases filed against Google and Facebook this year by the Justice Department for Google and the Federal Trade Commission and State Attorneys General for Facebook are based on Section 2 of the Sherman Act, which is about building a monopoly. In a Section 2 case, it isn't enough to show that a company dominates a market. The government must also prove that it got to the top by using anti-competitive tactics rather than by just being the best. The alleged conspiracy between Google and Facebook is different. It falls under Section 1 of the Sherman.

Starting point is 00:12:51 Act, which makes it illegal for two or more companies to make any contract or agreement, quote, in restraint of trade, end quote. While the Texas case is a civil suit, the claims in it could conceivably serve as the basis of federal criminal charges. A Section 1 case is much simpler. If there's proof that the companies did agree to fix prices, rig bids, or just not compete with each other, that's the end of the inquiry. Quote, if you can prove an agreement between two firms, once you have proof of that agreement, it is called per se illegal, said Sally Hubbard, director of enforcement strategy at the Open Markets Institute and anti-monopoly think tank. Quote, this is why antitrust enforcers love to bring Section 1 cases, because if you can find

Starting point is 00:13:35 evidence of more than one firm agreeing to fix prices, agreeing not to compete, agreeing to allocate a market, once you prove that agreement, it's automatically illegal. It ends there, end quote. Unlike last week's Facebook antitrust filing or the... the House report on big tech from over the summer, most of the juicy details and internal documents, including a screenshot of the contract terms between Facebook and Google, are blacked out. The heavy redactions are not the only strange thing about the case. The Texas Attorney General's office fresh off a losing effort to overturn the presidential election announced the suit in a weird

Starting point is 00:14:10 amateurish video posted to Twitter before the case had been filed. Still, there are some tantalizing clues. The document alludes to an email about the arrangement from Dan Rose, Facebook's vice president of partnerships, to CEO Mark Zuckerberg. That suggests that whatever deal the two companies had was signed off on at the highest levels. Another heavily redacted section alleges Google violated users' privacy in, quote, egregious ways after signing an agreement with Facebook in 2015, that gave the company access to, quote, millions of Americans end-to-end encrypted WhatsApp messages, photos, videos, and audio files, end quote. So, you know, dun dun dun as roger macnamy tweeted quote the filing asserts that google conspired with facebook in the digital

Starting point is 00:14:58 ads market if they can prove it and they appear to have evidence google and facebook are in huge trouble and quote remember on a recent weekend bonus episode when peter kofka and i talked about substack we got into the admittedly very basic idea that you know how many newsletters can anyone reasonably subscribe to before your inbox just becomes overloaded. Yeah, well, Substack has, of course, thought of that too. So they've launched Substack Reader, an RSS reader for tracking newsletter subscriptions, quoting The Verge. The goal was to create a distraction-free space for people whose email inbox isn't their ideal reading experience. Substack CEO Chris Best told the verge. Substack Reader is launching as a beta, and it feels very much like a version one product.

Starting point is 00:15:52 presents a chronological list of every newsletter you're subscribed to, and you can click on those entries to open them in a new window and read them. Right now, there's no way to read stories inside of Substack Reader like you can in a traditional RSS reader, and stories stay in your queue even after you've read them. In-line reading is, quote, something we are strongly considering for the future, Substack co-founder Hamish McKenzie wrote in an email to The Verge. The reader also separates out podcasts published through Substack, and it shows a lock icon next to subscriber-only newsletters, which could help to highlight just how much non-paying readers are missing out on. Anyone will be able to sign up for the beta starting today. At launch,

Starting point is 00:16:33 it's only available on the web. Mobile apps are, quote, something will look at, best said, end quote. So I bet you all can imagine the obvious snark everybody went for on Twitter, something, something Google Reader. I'll give Lori Voss the honors, though, quote, after the death of Google Reader, the turn to email, we have turned all the way back to an RSS reader, except this time you pay, end quote. All right, getting this out the door as soon as I can, because we have hills to sled and snowmen to make. Check my Twitter feed at Brian MCC. If I get some decent video of a sled descent, I'll share it there. Talk to you tomorrow.

Tech Brew Ride Home - Thu. 12/17 – The Apple-Facebook Cold War Is Getting Hot

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