Aug 31, 2020

Axios Login

Tonight on "Axios on HBO": 

  • A data firm funded by Michael Bloomberg warns Trump seems likely to win — potentially in a landslide — on election night, but lose a week later, creating chaos in America (clip).
  • DoorDash CEO Tony Xu shares his views on the future of delivery and the gig economy amidst regulatory scrutiny.
  • In an emotional interview, Jaime Harrison, Lindsey Graham's Democratic challenger, opens up about the competitive race for South Carolina's Senate seat and his vision for a "New South."

Tune in tonight at 11pm ET/PT on all HBO platforms.

Today's Login is 1,387 words, a 5-minute read.

1 big thing: Frenemies Apple and Facebook square off

Illustration: Sarah Grillo/Axios

Facebook and Apple are fighting an increasingly high stakes battle over user privacy and access to the iOS App Store, deepening a rift between two of the most powerful companies in Silicon Valley, Axios' Scott Rosenberg and I report.

Why it matters: By trading accusations, Facebook and Apple could just be handing more ammo to critics and regulators — but at the same time, conflict between these giants could be read as a sign of competitive life and a rebuttal to antitrust charges.

Driving the news: A new version of Apple's iOS limits certain user-tracking tech that advertisers on Facebook use to target individuals, and last week Facebook warned that the change would reduce the ads' effectiveness and cut into revenue.

  • At a Thursday companywide meeting, per Buzzfeed, Facebook CEO Mark Zuckerberg said Apple has a "unique stranglehold as a gatekeeper on what gets on phones,” that it "blocks innovation, blocks competition" and "charge[s] monopoly rents."
  • Zuckerberg's charge follows a number of high-profile cases in which app developers — including the maker of the phenomenally popular game Fortnite — have challenged Apple's rules for controlling App Store revenue.

The big picture:

  • Facebook, as the owner of the world's largest social network, has also become a key source by which Americans get their news and entertainment. But Apple, with products like Apple News, Apple News+, and Apple TV+, is competing to be an information destination.
  • Apple has made the iPhone the most popular high-end phone brand in the U.S., though it splits the overall market with Android. That lets Apple wield a tight grip on software makers' access to the most lucrative customers. But some third-party developers have long complained that Apple throws its weight around, and Facebook has now joined them.

Between the lines: For years, Apple's biggest enemy in Silicon Valley was Google, which created the Android operating system that took off after the iPhone's debut and now controls three quarters of the global smartphone market.

Apple's argument: Apple has long proudly positioned the iPhone as a more secure and private alternative to the Android competition.

  • As Facebook and Google have faced mounting criticism for their user tracking, Apple CEO Tim Cook has frequently joined the chorus.
  • In 2018 Cook declared that privacy was "a fundamental human right" as he announced Apple would effectively ban Facebook's ubiquitous "like" button from working outside of Facebook's own pages and apps.

Yes, but: However hot the fight gets, Apple and Facebook need each other. Just as Apple risks losing business in China if it can't offer WeChat, it would lose a lot of customers in the U.S. and elsewhere if Facebook's services — including WhatsApp and Instagram — were not available for the iPhone.

  • By the same token, many of Facebook's most valuable customers access the service via Apple devices.

Our thought bubble: Historically, the big tech companies have maintained power by dominating a key market while competing with one another at the edges. The Apple-Facebook fight shows that they're now willing to take swings at each other's core businesses.

2. Exclusive: Facebook, Google hurt communities, group says

Facebook and Google are hollowing out local communities by serving as vectors for misinformation while hobbling local journalism and collecting taxpayer subsidies, a new paper from progressive think tank the American Economic Liberties Project charges, Axios' Kyle Daly reports.

The big picture: Both companies cite benefits their platforms offer small businesses as a key defense against critiques of their size and power. The paper, out today, is sure to presage further scrutiny of the impact they've had on local communities.

Details: The brief, by Pat Garofalo, the group's director of state and local policy, argues that...

  • Google doesn't do enough to protect against fraud, allowing scammers to get their own numbers and websites listed on Google to the detriment of legitimate businesses.
  • Facebook, by design, boosts shoddy and sensationalist content, crowding out legitimate local news and information, all as it and Google have come to dominate the local advertising market that was long the lifeblood of community journalism.
  • Both have sucked up potentially billions in local taxpayer dollars via tax breaks as well as subsidies and discounts on utilities they've gotten in exchange for building data centers.

Garofalo recommends remedies including more antitrust enforcement at the federal and state level and an end to preferential treatment by states and localities, either voluntarily or under force of law.

The other side: Facebook and Google both say their platforms help local communities thrive, making that a central plank in their CEOs' testimony before Congress last month.

  • Google on Friday stood up a website detailing ways it says its free services and advertising platforms have helped small businesses and delivered "thousands of dollars a year in value to the average American."
  • Facebook is positioning itself as a friend to small businesses in a new feud with Apple.

What's next: The American Economic Liberties Project, which receives funding from eBay founder Pierre Omidyar, is one of several dozen advocacy groups holding an online event Tuesday in which panelists, including early Facebook investor-turned-critic Roger McNamee, will discuss curbing the power of Big Tech.

3. Beijing further complicates TikTok deal

Photo: Mario Tama/Getty Images

New export controls on technologies that Beijing deems sensitive are threatening to derail efforts by American companies to acquire TikTok's U.S. operations from its Chinese parent company ByteDance, the Wall Street Journal reports.

Driving the news: The regulations were unveiled on Friday and prevent "technology based on data analysis for personalized information recommendation services" — which would likely apply to TikTok's AI content-recommendation engine — from being exported without a license, according to the New York Times.

  • Chinese state-owned press outlets over the weekend published commentary and coverage suggesting the regulation could halt ByteDance from selling off TikTok.

The state of play: Microsoft and Walmart have teamed up on a bid to buy TikTok ahead of a Sept. 15 deadline that the Trump administration has imposed before the Chinese-owned app is banned on national-security grounds. Oracle is also reported to be in negotiations with ByteDance.

Between the lines: "If Beijing blocks the sale of TikTok, it would effectively be calling the Trump administration’s bluff, forcing the U.S. government to actually go through with restricting the app and potentially incurring the wrath of its legions of influencers and fans," the New York Times notes.

My thought bubble: Splitting TikTok into pieces was already a complicated task: ByteDance could end up owning the app in some places, an American company in others, and maybe even a third firm in other locales. If China and the U.S. dig in their heels, a deal could easily become totally unworkable.

What's next: We could get a sense this week as to whether the new Chinese rule has scared off any would-be buyers.

4. AT&T wants FCC to narrow Section 230 protections

AT&T will tell the Federal Communications Commission that the agency should craft rules to shrink tech's longstanding legal shield, Axios' Ashley Gold reports.

Why it matters: AT&T is a telecom giant and, since buying Time Warner, a major force in media and entertainment — both industries that have butted heads with Silicon Valley. The company is now launching this fresh attack as tech is under attack in Washington.

Driving the news: On Monday, AT&T is previewing comments it will make to the FCC Wednesday on reinterpreting Section 230 of the Communications Decency Act, which shields tech companies from liability over content their users post.

  • The company will ask the FCC to modify Section 230 so that tech platforms don't get such broad immunity.
  • It will also argue that Facebook, Amazon, Apple, Microsoft and Google should be forced to be more transparent about the decisions they "make on a daily basis," like how they rank search results and feature news stories.

What they're saying: Congress could not have known "this provision ... would ultimately be wielded by the largest and most powerful companies in the world as a shield not just from unfair and frivolous lawsuits, but from what many consider to be everyday responsibilities," writes AT&T policy executive Joan Marsh.

Context: The FCC is taking comments on potential modifications to Section 230 following a request from the Commerce Department, per an executive order from President Trump.

  • Section 230 has never fallen under the FCC's jurisdiction before. Trump recently pulled GOP commissioner Mike O'Rielly's nomination to a second term after he objected to the FCC claiming the authority to tinker with Section 230.
5. Take Note

On Tap

Trading Places

  • Dee Anna McPherson is joining AI-powered call tracking and conversational analytics company Invoca as CMO. McPherson was previously senior VP of marketing at Moveable Ink and also served as a marketing executive at Hootsuite and Yammer before that.


6. After you Login

Check out Bill Gates' birthday present to longtime pal Warren Buffett, who turned 90 on Sunday.