Jan 30, 2019

Axios Login

It was nice to hear from so many readers that Login still brings them joy. Especially since it turns out there are so many things that don't fit the bill.

1 big thing: Facebook's new cash-for-data debacle

Illustration: Rebecca Zisser/Axios

TechCrunch reported on Tuesday that Facebook had paid users, some of them teens, $20 a month to install software on their iPhones giving Facebook detailed access to everything taking place on the device.

Why it matters: We're all losing count of Facebook's privacy controversies, but this one is more sensitive because it involves teens.

  • The social network faces further backlash from users and regulators, and it's also in hot water with Apple.

Facebook described the program as research to analyze how people use its own services and those of competitors. Late Tuesday night, Facebook defended the program, which dates back to 2016, but said it was discontinuing it for iOS users.

“Despite early reports, there was nothing 'secret' about this; it was literally called the Facebook Research App. It wasn't 'spying' as all of the people who signed up to participate went through a clear on-boarding process asking for their permission and were paid to participate. Finally, less than 5 percent of the people who chose to participate in this market research program were teens. All of them with signed parental consent forms.”
— Facebook spokesperson, via a statement

The Apple conflict: Facebook's program, according to TechCrunch, used an apparently rewritten version of the Onavo software that Facebook pulled from the App Store last year after Apple said it violated its policies.

  • Facebook had the users install the software as an "enterprise profile," a setting typically reserved for letting big companies privately test and deploy their in-house software.
  • Apple responded this morning by revoking Facebook's enterprise license and said...
"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."

Facebook is likely to argue that its research project is little different from the kind of tracking Nielsen has done for decades of TV viewing patterns, or Comscore's tallying of web usage. But those services didn't end up with the kind of total access to people's lives that Facebook is getting via their phones.

The price of data: By offering $20 a month to users who installed the software, Facebook at least acknowledged that people's data has monetary value. Instead of one penny for a teen's thoughts, Facebook is offering 2,000. That sum is unlikely to be enough to stem the tide of renewed cries of protest and calls for regulation this incident will release.

What they're saying:

  • Bloomberg's Sarah Frier: "$20 a month doesn't seem like a lot to give up that much data, but I guess the rest of FB users give them a lot for free!"
  • The Verge's Casey Newton: "The Facebook Research story is a real 'ask forgiveness, not permission' moment for a company that has already been asking for a lot of forgiveness."
  • SoFi comms VP Jim Prosser: "Only way this looks worse is if they had compensated the teens with Juul pods."

What's next: Facebook reports earnings this afternoon, and executives are sure to be grilled over this and other privacy issues.

2. Parsing Apple's words (and numbers)

The big story in Apple's quarterly earnings report on Tuesday wasn't the numbers — they were disappointing, as Apple had warned they would be.

But the company's filing and earnings call did provide some new comments and statistics that hint toward the company's future.

Here are 3 big takeaways:

1. Apple's focus is shifting from unit sales to user base.

  • Apple has stopped saying how many iPhones it is selling per quarter and instead is making a big deal out of its overall active installed base of iPhone users — which is now 900 million.
  • Apple emphasizes this number since it represents the size of the market it now has for other services, accessories, subscriptions and more.
  • Over time, however, Apple still has to keep selling a lot of iPhones if it wants to maintain or grow that market — and it also wants to keep a disproportionate share of the high-end buyers who spend a lot on apps, accessories and services.

2. New Apple subscription services are imminent.

  • Apple didn't say much about its subscription plans, but it dropped a couple of clues. First, it said that it expects to have 500 million people subscribed to its services by sometime next year, up from 360 million today.
  • Also, CEO Tim Cook spoke on the earnings call about the changing TV market and Apple's ambitions in original content. While not announcing Apple's plans, Cook did say he sees the traditional cable bundle coming under increasing pressure over the next 12 months and said Apple is committed to going after that in a variety of ways.
  • Here, Apple's moves speak louder than its guarded words. It wouldn't be making deals with other TV makers or cutting big checks to Oprah if it didn't have significant plans.

3. iPhone prices took a hit from exchange rates.

  • Asked whether Apple priced its latest iPhones too high, Cook noted that the U.S. pricing of the iPhone XS was similar to that of the X, but because of currency fluctuations, prices for customers in other countries, especially emerging markets, were higher than those of a year ago.
  • Cook confirmed that Apple is making pricing moves in some countries aimed at lowering iPhone prices to closer to what they were a year ago in local currencies.
3. FTC and Qualcomm's final arguments

Qualcomm's booth at CES 2019. Photo: Ina Fried/Axios

Lawyers for the Federal Trade Commission and Qualcomm each made their final case Tuesday to the federal judge hearing the landmark antitrust case, which could reshape the smartphone business.

What they're saying:

  • In its closing argument, the FTC said that Qualcomm "acquired monopoly power in the modem chip market" and put up "roadblocks" that hurt rivals, according to CNET.
  • Qualcomm, meanwhile, says its licensing rates are fair and reflect its contributions to the industry. "The FTC hasn’t come close to meeting its burden of proof in this case," Qualcomm general counsel Don Rosenberg said in a statement. "All real-world evidence presented at trial showed how Qualcomm’s years of R&D and innovation fostered competition, and growth for the entire mobile economy to the benefit of consumers around the world."

Why it matters: Qualcomm's current business depends on a mix of significant royalties on each phone sold along with revenue from processors and modem chips used in some smartphones.

  • In addition to its royalty structure that gives it a percentage of the value of phones sold (up to a certain cap), Qualcomm also has a policy that it won't sell chips to companies that don't take a license for its patents.

What's next: It's now up to Judge Lucy Koh to decide if Qualcomm's business practices violate federal law. She has said a ruling could take some time given the complexity of the case.

4. From Canada, an electric bike-car

One of VeloMetro's Veemo vehicles. Photo: VeloMetro

According to Canadian startup VeloMetro, the future of personal transportation looks like a 3-wheeled bike with a car-like cover. You pedal it and, as with an electric bike, the motor helps.

The big picture: The boom in bicycle and scooter rental companies highlights the growing interest in alternatives to cars — not only for ecological reasons, but also to alleviate traffic and get around more easily.

Details: Axios' Kia Kokalitcheva talked with VeloMetro founder and CEO Kody Baker and VP Erik Bue and took a brief ride in one of its Veemos.

  • Business model: The Vancouver-based company recently completed a pilot on the University of British Columbia campus and is working to roll out a vehicle rental service in Vancouver likely in the second half of 2019, Baker said. It plans to roll out to more cities after that.
  • Rental plan: While VeloMetro has had some partnership talks, it doesn’t envision selling its vehicles to other operators (as Segway-Ninebot, for example, supplies scooters to companies like Bird). And according to Bue, operating a rental service will enable the company to fully understand how to improve its vehicles.
  • Price: Baker and Bue said renting its Veemo vehicles would cost somewhere between renting a bike and car.
  • City reception: City and campus officials have been welcoming, according to the executives. In part, they say, it’s because the company’s vehicles have more in common with car-sharing than with scooters: They are parked in car spaces, don’t litter the streets, and can’t be easily ridden on sidewalks.
  • Funding: To date, the company has raised $2.4 million Canadian dollars in equity financing, and recently secured funding from Canadian investor and entrepreneur Arlene Dickinson after an appearance on Dragons’ Den, a version of Shark Tank. The company is also now raising CA$9.5 million to fund its vehicle manufacturing, according to its website.

Kia took a short ride in a Veemo. "Aside from my short height making it difficult to comfortably pedal — I was assured this would be improved — it felt relatively stable," she reports.

  • Some riders will likely require a bit of an adjustment: It’s much larger than a regular bicycle.
  • But the company says that a 2-minute instructional video is usually enough to get riders up to speed.
5. Take Note

On Tap

  • Earnings reports today include Facebook, Tesla, Microsoft and Qualcomm.
  • Upfront Summit takes place in Malibu, California, through Thursday. Axios' Kia Kokalitcheva and Dan Primack will be there.
  • The FCC will have an open meeting, but because of the shutdown it will consist of announcements only and it will also be delayed to 12:30pm.

Trading Places

  • Tim Baxter, the head of Samsung Electronics' US business, will leave the company in June after a dozen years. He'll be replaced by YH Eom.
  • Facebook has hired longtime Electronic Frontier Foundation lawyer Nate Cordozo as privacy policy manager for WhatsApp. Here's what he has to say about the new gig.
  • Stripe added former Google Cloud executive Diane Greene to its board of directors and, separately, confirmed a report by The Information that it has received $100 million in follow-on funding from Tiger Global.


6. After you Login

In "the lighter side of deepfakes," here's a mashup of Jennifer Lawrence and Steve Buscemi.

If you are interested in the broader topic, though, continue reading the thread for some good insight into the many issues posed by such capabilities, from fake news to falsified revenge porn.