Tech Brew Ride Home - Wed. 01/30 - Facebook "Slaps Apple In The Face"

Episode Date: January 30, 2019

Facebook decides to mix it up a bit: what if we had a scandal that pissed off our business partners? Apple’s earnings are mixed but you can see where they’re going with this. Why Americans no longer answer the phone and are you ready for 1TB smartphones? Sponsors: DataDogHQ.com/ridehome Tiny.website Links: Facebook pays teens to install VPN that spies on them (TechCrunch) Apple blocks Facebook from running its internal iOS apps (The Verge) Apple Reports First Quarter Results (Apple Newsroom) Report: Americans got 26.3 billion robocalls last year, up 46 percent from 2017 (Washington Post) 1TB phones are coming and I’m so f***ing ready (TNW) Flipboards: https://flipboard.com/@thomasgalla1pp6/techmeme-ride-home-daily-podcast-tc2a63l7y https://flipboard.com/@thomasgalla1pp6/techmeme-ride-home-weekend-long-reads-m64k8fj9y 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 ride home for Wednesday, January 30th, 2019. I'm Brian McCullough. Today, Facebook decides to mix it up a bit.

What if they had a scandal that pissed off their business partners? Apple's earnings are mixed, but you can see where they're going with this. Why Americans no longer answer the phone and are you ready for one terabyte smartphones? Here's what you missed today in the world of tech. You know how some people are always like, hey, Facebook should be paying us for all the data they've collected about us. Well, it turns out, Facebook will pay you for your data, but you have to turn over all of your data.

This story was broken late yesterday by Josh Constine and TechCrunch, who I'm going to quote from quite liberally in this segment, beginning now. Desperate for data on its competitors, Facebook has been secretly paying people to install. a Facebook research VPN that allows the company to suck in all of a user's phone and web activity, similar to Facebook's OnoProtect app that Apple banned in June, and that was removed in August. Facebook sidesteps the app store and rewards teenagers and adults who download the research app and give it root access to network traffic in what may be a violation of Apple policy. so the social network can decrypt and analyze their phone activity,

a TechCrunch investigation confirms. Facebook admitted to TechCrunch. It was running the research program to gather data on usage habits. Since 2016, Facebook has been paying users ages 13 to 35, up to $20 per month, plus referral fees to sell their privacy by installing the iOS or Android Facebook research app. Facebook even asked users to screenshot their Amazon Order History page. The program is administered through beta testing services applause, beta-bound and U-test to cloak Facebook's involvement

and is referred to in some documentation as Project Atlas, a fitting name for Facebook's effort to map new trends and rivals around the globe, end quote. So this Facebook research app did an end run around the app store by making use of Apple's enterprise program by which developers can install more powerful apps on select phones using special certificates. In theory, these apps are used by company employees only. So imagine special internal enterprise versions of apps,

but in this case, Facebook was giving the special access and these special apps to run-of-the-mill customers. Well, guess what? Apple is not too happy about that. first, it blocked Facebook's research app. Facebook said it was shutting down the iOS version of the app voluntarily, but Apple says, no, we blocked it first because you violated our policies. And not only that, and a sign that Apple is pretty pissed, quote, Apple has shut down Facebook's ability to distribute internal iOS apps from early releases of the Facebook app to basic tools like a lunch menu. A person familiar with the situation tells the verge that early versions, of Facebook, Instagram, Messenger, and other pre-release dog food, read beta apps, have stopped working,

as have other employee apps like one for transportation. Facebook is treating this as a critical problem internally, we're told, as the affected apps simply don't launch on employees' phones anymore, end quote. Yeah, blocking Facebook's ability to have its own employee's dog food beta versions of apps, that's going to be pretty serious for development. timelines. Apple gave the following statement to recode, quote, we designed our enterprise developer program solely for the internal distribution of apps within an organization. Facebook has been using their membership to distribute a data collecting

app to consumers, which is a clear breach of their agreement with Apple. Any developer using their enterprise certificates to distribute apps to consumers will have their certificates revoked, which is what we did in this case to protect our users and their data, end quote. Okay, let's come back to that angle in a second. But first, let's take a look at what the app was doing. Quoting again from TechCrunch and Josh Constine, quote, Facebook's research app requires users to trust it with extensive access to their data. We asked Guardian Mobile Firewall's security expert Will Strafetch to dig into the Facebook research app,

and he told us that, quote, if Facebook makes full use of the level of access they are given by asking users to install their certificate, it, they will have the ability to continuously collect the following types of data. Private messages in social media apps, chats from in instant messaging apps, including photos, videos sent to others, emails, web searches, web browsing activity, and even ongoing location information by tapping into the feeds of any location tracking apps you may have installed, end quote. It's unclear exactly what data Facebook is concerned with, but it gets nearly limitless access to a user's device once they install the app. Also, end quote. All right, so the app essentially

grants Facebook root access to all activity on a user's phone in real time. What is the value in that? Constine, among others, speculates that it's all about seeing what people are doing in other competing apps and platforms. What you're sending, what you're sharing, what you're doing, how long you're doing it, how often you're doing it. It's as if you could put a surveillance camera on the activity, on every activity on the phone. That's what Constine is saying Facebook's motivation here is. Competitive intelligence gathering. Now, Facebook does have a history of doing just that.

Remember that OnoVPN app that Facebook acquired, which Charlie Wurzel and Ryan Mac of BuzzFeed posited, allowed Facebook to learn that WhatsApp was. becoming a serious competitive threat a few years ago and thus precipitated Facebook buying WhatsApp for $19 billion. Apple was so concerned about snooping in the Anavo app that, as we said, they had Facebook remove the app from the App Store. Constine says that a tipster alerted him that just because Anava was gone, that didn't mean that Facebook had stopped its alleged competitive snooping. We investigated and learned Facebook was working with three app beta testing services to, to distribute the Facebook research app, beta bound, U-Test, and Aplause. Ads for the program run by U-Test on Instagram and Snapchat sought teens,

13 to 17 years old for a, quote, paid social media research study. The sign-up page for the Facebook research program administered by Aplaus doesn't mention Facebook, but seeks users ages 13 to 35, parental consent required for ages 13 to 17. Later on in Constine's blockbuster piece, Facebook seems to have purposefully avoided test flight, Apple's official beta testing system, which requires apps to be reviewed by Apple and is limited to 10,000 participants.

Instead, the instruction manual reveals that users download the app from R. facebook dash program.com and are told to install in an enterprise developer certificate and VPN and trust Facebook with route access to the data their phone transmit. Apple requires that developers agree to only use this certificate system for distributing internal corporate apps to their own employees, end quote. And so that brings us back to the bottom line on all of this.

If I'm reading this right, Facebook is so hungry for data, so willing to play fast and loose that getting a reputation for playing fast and loose with users is not enough. They're also willing to risk pissing off Apple, a platform they need to be. beyond to be successful. It's unclear if Facebook's current inability to sideload internal dog fooding apps is just an accidental side effect of Apple revoking their certificates, but it could also be punishment, and it's not a small punishment either. But again, even if it is just a side effect, just an accident, the jaw-dropping thing here is that Apple could be pissed, could decide to punish Facebook for doing this. As Marco Arment tweeted, this is blatantly against the end. This is blatantly against Apple's rules for enterprise app distribution.

It's not arguable. It's not even close. Facebook is slapping Apple in the face in broad daylight for the world to see because they know they're invincible. Wonder if anyone at Apple will ever hit back, end quote. And Ed Bot snarked, quote, Facebook really testing the limits of it's better to ask forgiveness than permission, end quote. And let me add my own hot take here. Hat tip to listener James for reminding me of this. in the afternoon.

If this is really all about Facebook just needing to gather competitive intelligence about how people are using other apps, about what other apps might be a threat to its business, remember the Facebook phone, that HTC phone that would have been all Facebook, a full Android skin that would be a true Facebook platform to compete with iOS, compete with Android. Facebook as a full, full-bodied mobile platform. But none of y'all wanted to buy it. In a way, I wonder if we're just paying for the fact that y'all refuse to give Zuck the platform he truly desired,

if we're still paying for that to this day. Wouldn't have to do an end run around Apple to find out what everyone is really up to if you just bought that damn Facebook phone. There was other news today, of course. Apple late last night reported Q1 results. It's the first time that they've reported revenue and quarterly earnings since their revenue restatement. Let me just throw the headlines at you and we'll go from there.

Apple announced Q1 2019 profit of $19.97 billion and revenue of $84.3 billion following its revision down from its original estimate of $89 to $93 billion. and Apple is projecting $55 billion to $59 billion in revenue over the next quarter. Apple booked $13.17 billion in revenue from China in Q1, which was down 27% year over year from $17.96 billion. So yeah, that is definitely something Apple couldn't have helped but notice. So I guess the China slowdown was real, y'all. But, of course, all analysts wanted to hear was about iPhone revenue overall, and iPhone revenue declined 15% year over year. But of course, Apple wanted you not to focus on that, but to focus on this. Total revenue from all other products and services grew 19%.

In fact, services revenue hit an all-time high of $10.9 billion. So, bottom line, Apple's revenue overall beat analysts estimates, but iPhone revenue missed. analyst's estimates. Where does that leave us? It kind of depends on what you want to focus on. As Mark Gurman noted, quote, unless Apple discovered an extra $5 billion since January 2nd, this will be the first holiday sales decline for Apple since 2001.

And Shira Ovita tweeted, even with the growing profit contribution from services, Apple's operating profit in the last 12 months was 26%. It's the lowest in 10 years, end quote. But Apple does want you to know that services are growing. In fact, Apple touted that it now has 360 million paying subscribers to various subscription services. And for the first time, we all found out Apple's margins on its services, which stands at 62.8%. Let me say that again, 62.8%.

That's an absolutely insane number. as a comparison AWS, the cash cow that investors love to love about Amazon, it only has margins of 25%. So if Apple is right about this, if services are growing at the

20% or so clip that they seem to be growing at, and they're growing from a base of currently $10.9 billion this quarter, it wouldn't take that long before services could quickly make up for some of the shortfall in iPhone growth. And if

there are new services coming to help boost things, video streaming, gaming streaming, everything streaming, rescue revenue could be coming even faster. Of course, that's exactly what Apple hopes will happen. That's exactly what Apple hopes investors believe will happen. And it kind of needs that to happen because iPhone margins are going to take a hit. In the earnings call and later interviews with Reuters and other places, there was a lot of talk about iPhone pricing. In essence, Tim Cook flat out acknowledged that in certain markets, Apple was just pricing things too high. It's found its price ceiling for the iPhone, and it needs to retreat a bit.

Quoting Cook, as we've gotten into January and assessed the macroeconomic conditions in some of these markets, we've decided to go back to more commensurate with what our local prices were a year ago in hopes of helping the sales in those areas, end quote. In other words, Apple is going to be cutting iPhone prices. Owen Williams summed it all up this way, quote, the real news in all of this is the iPhone is slowing down as Apple has reached the pricing ceiling. But the business is great still. The company has a powerful moat going deep and wide in a number of business areas to keep

the business growing despite a segment slowing down. You might read wild headlines that the iPhone, is dead or Apple is over, but that's simply not true. It is slowing down, but it's not receding yet. And the company has wisely pivoted its business before it could really hurt. That isn't to say it didn't make a mistake with the iPhone 10S and 10R, but even the most valuable companies make these types of mistakes, end quote. At the time of this recording, Apple shares were up 5%, and they were up more than that earlier in the day. Real quick, let's try to squeeze in some other news that doesn't involve either Apple or Facebook.

The information is reporting that payments slash fintech company Stripe has raised an additional $100 million from Tiger Global, bringing Stripe's valuation above $22 billion. Stripe was valued at $20 billion just this past September when Stripe last raised a round. Who did that round? Tiger Global, which invested $245 million. million dollars back then. Spam monitoring service, Haye, says Americans received 26.3 billion robocalls in 2018, which was up 46% year over year. Well, we knew that spam and robocalls have been increasing, but what's the other big trend? Caller ID spoofing. And the reason why is logical, because

people are so fed up with robocalls that they just don't answer the phone anymore if they they don't recognize the number. In fact, Hayas says only about half of all cell phone calls are being answered at all at this point. So, the spammers have had to take to spoofing caller ID numbers you'd recognize to get you to pick up the phone,

numbers like your bank or your doctor. And to combat this, quote, this month T-Mobile said it would soon begin activating a technical protocol known as shaken-stirr, a type of caller authentication that follows the same principles as website encryption. Other carriers, including AT&T, Verizon, and Sprint, have also committed to implementing the feature. Endorsed by the FCC, the new protocol is part of an industry-wide push to limit the effects of caller ID spoofing, which is when a spammer poses as a caller from a nearby area code in an effort to trick recipients into picking up the phone, end quote.

Finally today, over at the next web, Callum Booth noted that Samsung recently announced, it was beginning mass production of one-terabyte flash storage chips for mobile devices. So another thing we might see this year, the first one-terabyte smartphones. Do we need one-terabyte smartphones? Well, Callum weighs the pros and cons. True, we can store a lot of things in the cloud now. No need to keep all your photos locally on your phone anymore. But Callum does point out one growth area.

gaming. Fortnite alone takes up two gigabytes of space on your phone. And if, as we've been talking about, everyone wants to do serious gaming on any device you have at hand, the dream of streaming gaming, then yeah, even then to do serious gaming, you would still need serious onboard storage on any device at hand. But, Callum says, there's one key reason

he would happily embrace one-terabyte smartphones. Does anyone remember iPods? Quote, I've been vocal about my disappointment regarding the disappearance of personal music players, RIP the iPod. I do get it. Carrying around one device with music on it is far easier than juggling a couple.

Unfortunately, I'd need a 512 gigabyte device to get all of my MP3s on there. But if I was using the flak or lossless collection of my portable dreams, a one-terabyte phone would be incredible and totally worth the cost. bump, end quote. As any of my friends and family will confirm because I push this on them for years, I have this maxim that I live by. No matter what device you're considering buying, computer, phone, what have you, never skimp on storage. Maybe you don't need the extra RAM or the faster processor that is $300 more, but I have never, never, not once, regretted paying extra for extra storage. I have, on many occasions regretted not paying up for the extra storage.

Always pay for storage, Uncle Brian's Maxim. And that is all for today. But hey, you know how Flipboard bought a bunch of Enroll ads this month? I'm sure you've heard them. You're about to hear another one in just a few seconds. Well, listener Thomas Gallagher was inspired by those ads to create Flipboard magazines specifically for the Daily Show. links and a separate one just for the weekend long reeds links check out the final links in the show notes

where you'll find the specific daily show and weekend long read flipboards thank you thomas talk to you tomorrow