Today, Explained - All your data for $20

Episode Date: January 30, 2019

Facebook has been paying 13- to 35-year-olds $20 in exchange for access to their phones and Apple isn't happy about it. The Verge’s Casey Newton explains what happens when your hardware gets mad at your software. Learn more about your ad choices. Visit podcastchoices.com/adchoices

Casey, how are you? I'm fantastic. How are you? I'm well. Thank you for making time for us on such short notice today. Well, I'm happy to. You know, we just have to explain today, and this feels like a pretty good thing to explain. It was this or the polar vortex. We're going with this, I think. You know, some people have likened Facebook to a polar vortex. Perfect.

Casey Newton, you're the Silicon Valley editor at The Verge. The last time we had you on the show, late last year, we were talking about this crazy Facebook scandal that involved Sheryl Sandberg and George Soros and this fake news PR firm. But of course, now there's a new Facebook scandal. There's just always a new Facebook scandal. Yeah, old man Facebook has really stepped in it again this time.

What happened? Well, Facebook had a marketing research division that was doing something really unusual. Facebook under fire once more, this time for secretly paying people. It's unbelievable. To install a smartphone app that lets the company monitor all the phone and web activity that's on your phone, guys. It created an app called Facebook Research, and then it would use various intermediaries to find people who were between the ages of 13 and 35. And what it would ask them to do is install what's called a root certificate on their phones that would then provide Facebook with access to really all of their most intimate data. Where they went on the web, what emails they sent, who they were texting,

how much they were using all of the various apps that are on their phones. And the reason that Facebook was doing it was for competitive research purposes. Back in 2013, Facebook bought an app called Onavo. It was an Israeli company that made a virtual private network. Onavo is a free security app that lets users access virtual private networks or VPNs to try and browse and download other apps with a greater degree of privacy. It was free, so anyone could download it, and it promised to save you data on your phone. But what Onavo was doing in the background, which it disclosed, was using that data for market research purposes.

So it would sell that to companies who wanted to know, hey, what are the up-and-coming apps? What's going to be the next big app? And you can imagine why that would be really valuable to a company like Facebook, which is forever paranoid that another social network is going to take its throne. So back in 2013, Facebook bought Onavo and ever since has used it

as kind of an early warning system to determine what threats might be on the horizon. Okay, so there's this app called Onavo that helps people protect and minimize their data usage. Facebook buys it because Facebook wants to know what apps you're using. What happens next? Last year, after some reporters had written about what a valuable tool this is for Facebook, Apple took an interest in it. And just last year, Apple said, you know what, we're not comfortable with how you're using this data that you're collecting, and so we're going to kick Onavo out of the App Store.

Apple said that the app no longer complies with its new privacy rules. Facebook releasing a statement saying, we've always been clear about the information that is collected and how it is used. As a developer on Apple's platform, we follow the rules that they've put in place. And so this left Facebook with a problem, which is how do you maintain that rich profile of your youngest, most valuable customers without having deep root level access to their phones. So Facebook's kind of cornered. What does it do next? So in 2016, Facebook started asking users to let them install these root certificates on their

phone, giving up their most sensitive data. And in exchange, Facebook gave them a $20 monthly gift card. To what? Well, I think it was just some kind of digital cash equivalent, like a prepaid visa on the web type of thing. Huh. So Facebook offers 13 to 35-year-olds $20 in exchange for basically all of the information on their phone, not just on Facebook, but anything they're doing with their devices. That's right.

Some people say this is a good bargain because they've been using Facebook forever and they haven't gotten paid a dollar. So viewed in one way, this is actually very generous. Finally, Facebook is acknowledging the value of the data that we upload to its servers. But a lot of other people are concerned about the kind of intrusive access that Facebook is requesting to, you know, in some cases, you know, vulnerable teenage populations who might really need the $20, but maybe don't have a complete sense of what they're giving up. They're required to get their parents' permission, although, you know, the way that you confirm that you have your parents' permission is just kind of like, you know, tapping twice on a screen. Like it's not your parents tapping twice on the screen. You just do it, you, the 13 year old. Yeah, exactly. You don't have to

like, you know, hold up the phone to your parents' face and do a retina scan to make sure that it's them. What the heck? Are my kids downloading this without me knowing it? So that's, that's the issue here. Why 13 to 35 year olds? Just because that's like a desire demographic. Exactly. That's where the money is. And that's the demographic that is typically hardest for advertisers to reach, right? It's why Snapchat was such a threat to Facebook when it started bubbling up, because all of a sudden these teenagers could be found in this strange new location and you could show them ads pretty easily, which was increasingly not becoming the case on Facebook. So that's why Facebook has been trying to develop these really rich profiles of what, you know, teenagers and young adults do on their phones. Is anything here illegal or is it just angering people because it's sort of dodgy to be asking teenagers for all their information with probably some, you know, only perfunctory parental consent?

It wasn't illegal, but it did violate an Apple policy. And this is where I think the story gets really wild. Apple enables developers to test any apps they want among their own employees. And there's a specific rule in the requirements that Apple laid out that says, you are not allowed to use this to test apps with customers, right? You can imagine, you know, what if Apple let every developer

install root-level access on their customers' phones? It could be a major privacy issue if unscrupulous developers obtained that data and then used it for ill purposes. So it's strictly forbidden. And Facebook enacted this program using the employer root certificate program. So in other words, they took a program that was supposed to be used for helping employers test apps with their own employees and they deployed it to an unknown number of customers in the real world.

And so as soon as Apple found this out last night, they yanked the certificates and that's causing havoc at Facebook this morning. Like what kind of havoc? So you think about Facebook has something like 30,000 employees. All of them have the certificate installed on their phones and all of them use the developer app. So they're using the version of Facebook that hasn't yet been released to the public.

Every single employee at Facebook who is working on some new feature in the app, some app that hasn't been released yet, or even just internal apps that help them navigate campus like the shuttle app. If you tap those on your phone, those just don't work anymore. So if you have an iOS device at Facebook today, it's going to be very difficult for you to get any work done. And so to me, it just seems wildly reckless that this is how Facebook went about collecting this kind of data.

Is this going to create bad blood between Facebook and Apple, or is that already there? It's there, but it's a major escalation of the tension between the two companies. Coming up, Apple versus Facebook. Infinity War. No, no, Dawn of Justice. I don't know.

They're mad at each other. I told a friend of mine about Josie and Johnny are having a baby with you, the podcast where two comedians talk about getting ready to have a baby themselves. And he was like, man, that's a little too soon for me. I just had a baby. I'm not ready to listen to a podcast about having babies. But if you are ready to listen to a podcast about having babies, whether or not you've already had one or planning on having one or are currently expecting one,

Josie and Johnny are having a baby with you is probably exactly what you're looking for. The latest episode is called The Ticking Clock with Rachel Sklar. That's episode two. Episode one, all about fatherhood. Episode two, all about motherhood and single motherhood at that. Rachel Sklar talks about the importance of self-care

and working hard while not feeling guilty. You can find Josie and Johnny are having a baby with you wherever you find your podcasts. They talk about the funny stuff. They talk about the serious stuff. They talk about the baby stuff. The tension between Apple and Facebook has been building for a while.

Tim Cook, a couple years ago, started talking about privacy, I think sincerely, as a human right. You are not our product. We're not going to traffic in your personal life. I think it's an invasion of privacy. I think privacy to us is a human right. It is also true that that's an easy thing for Tim Cook to say because he makes all of his money selling thousand dollar phones. So for his customers, he doesn't have to do anything untoward with their data because he's able to profit off them in another way.

But it has backed Facebook into a corner in some ways because Facebook then has to constantly defend its business model while Tim Cook gets to trot around the world playing the conquering hero who found the good, non-exploitative business model. And so there have been a lot of sort of not quite angry words, but sharp words traded back and forth between Tim Cook and Mark Zuckerberg over the past couple of years. We have a straightforward business model that's based on selling the best products and services in the world, not on selling your personal data. I think it's important that we don't all get Stockholm syndrome and let the companies that work hard to charge you more convince you that they actually care more about you. Because that sounds ridiculous to me.

And frankly, I think Apple sometimes lays it on a little thick, right? Like, I think part of the value of a $1,000 iPhone is that it gets Facebook and Instagram and WhatsApp on it. And if Apple were really so concerned with privacy on these apps, they could always just ban them from the app store. But of course, they'll never do that. At the same time, if you're Apple

and you find out that Facebook has been, you know, installing root level access on the phones of 13 year olds in flagrant violation of all your developer policies, it's a really easy decision to just drop the ban hammer and get rid of their whole developer program. How codependent are Facebook and Apple? Obviously, a lot of people are on their iPhones looking at Facebook for a decent chunk of time, right? I think that's a great point. These companies are absolutely codependent. They work hand in hand. It's very difficult to imagine modern life and the modern internet.

And so sometimes I feel like these debates are kind of a distraction because Apple is never going to stop selling hardware for a lot of money. And Facebook is probably never going to charge most of its users for its services. But what's interesting today is that Apple dramatically ratcheted up the pressure on Facebook in a way that Facebook doesn't really have a good counter-tort. We in the media were always complaining about all of the power that Facebook has over us.

And it does have a lot of power over the way that our articles get distributed and how we make money. But Facebook has a similar situation with Apple, where Apple is the single point of distribution to something like a billion active devices. And if Facebook doesn't play by Apple's rules, it gets booted out of the app store and something like half or more of its business disappears overnight. So even though we think of Facebook as this conquering giant, and it is, it is still very vulnerable to the whims of a company like Apple. Is there something to be said for Apple being too big of a gatekeeper, too powerful of a gatekeeper in this world and just having sort of this

monopoly on what goes and what doesn't? I mean, I remember Apple cracking down on Tumblr, like being something that people were really scared would just basically kill Tumblr. Right. You know, this is a very real feeling inside of Facebook. And inside of Facebook, there is a thought that Apple doesn't get nearly the scrutiny it deserves for the kind of power it has. Other critics have mentioned the fact that Apple, which is the sole way of reaching a huge number of customers, particularly in the U.S., it takes a 30% cut of all revenue that customers spend within its walls, right? So any digital good that you

buy on an Apple device, you are giving 30% to Apple. That's a really steep tax, particularly when you really don't have more than maybe one alternative. And of course, if you want to reach people who have iPhones, then you have zero alternatives. So I think we will see the turning of that screw. And I think Apple will be under more pressure in the next few years to account for the vast power that it has over companies, including Facebook. But we're not there quite yet. And meanwhile, what does this mean for Facebook? Are they just going to have to apologize again? Or are they going to put another ad saying, we're changing, we're getting back to being friends? What are they going to have to apologize again? Or are they going to put another ad saying like, we're changing, we're getting back to being friends?

What are they going to do? Well, I'll tell you their first statement about this was not very apologetic. You know, I emailed them on Tuesday afternoon and they didn't get back to me until about 2 a.m. Eastern time with their statement. And the statement was very punchy. And it disputed aspects of the original report, which we should say was broken by TechCrunch and its reporter Josh Constein

in a really sharp piece of reporting. But TechCrunch had described it as a secret spy program. And Facebook said, this is absolutely not a secret program. The name of the app is Facebook Research. If we were trying to hide, we were doing a pretty terrible job. And they notably did not apologize. And they very much presented this as a kind of garden variety market research program. It feels like,

you know, Silicon Valley is on the forefront of so much in our culture. And yet, when it comes to navigating public opinion, they seem to keep falling on their faces. Like even this whole FaceTime thing with Apple, they didn't acknowledge this complaint from this mother until everyone else had picked up the story. Why is it that they're so bad at transparency? Is it because of all the competition? I'll answer that question particularly to Facebook. At Facebook, there is this unshakable belief that eventually everyone is always basically okay with almost everything they do. Every time they have made a move in the past that some people have complained

violates privacy, over a long enough time period, most people just shrugged. The newsfeed, which makes more money for them than any other product that they have, was the subject of a huge privacy outcry when it was launched. But they stood fast and they weathered the storm. And so it just kind of got baked into the culture that there were always going to be people yelling at them over privacy issues. And if they just stood fast, eventually it would all blow over. It takes something really, really enormous like a Cambridge Analytica to get them to say that they're going to change their ways. Most companies have what PR people like to call the headline test, right?

Which is, if the whole world knew about this, if it were on the front page of the New York Times, what would be the consequences for you? Abusing the Apple developer system in a way that would jeopardize the internal testing of every single program at Facebook just to know what a 13-year-old is doing on their iPhone? That doesn't pass the headline test. Casey Newton writes about social media and democracy for The Verge. He's got a killer newsletter. It's called The Interface. I'm Sean Ramos for him. This is Today Explained. Blank.