Aug 23, 2018

Axios Login

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1 big thing: Developers rebel against Apple/Google tax

Illustration: Rebecca Zisser/Axios

After years of grudgingly handing over as much as 30% of their mobile revenue to Apple or Google, some app makers and digital service providers are exploring ways to cut out the middlemen.

Among the recent examples:

  • Epic Games is distributing Fortnite for Android outside Google's Play Store.
  • Netflix is testing the removal of the ability to subscribe from within its iOS apps.
  • Spotify, which once offered a discount to iPhone customers who subscribe outside of the app, has discontinued the ability for new subscribers to pay via the app.

The bottom line: Apple and Google make big bucks off their cut of subscriptions.

  • Sensor Tower estimates that Apple, for example, made $85 million in the first half of 2018 from those subscribing to Netflix, $26 million from Pandora subscribers and $15 million from those purchasing Hulu.
  • Google, it estimates, made $17 million off Pandora subscriptions and $14 million from those subscribing to Netflix, over the same period.

Be smart: While selling virtual goods doesn't carry the same expenses as operating a brick-and-mortar store, there are still some costs to Apple and Google. Credit card fees are the most notable hard cost, along with the costs associated with hosting the app stores and delivering digital content.

And, while there are savings to be had, there are other costs associated with cutting out the app store.

  • With Apple, it's a simple dollars and cents equation. Does the increase in sales you get offering subscriptions or content sales in the app offset the cut you have to give to Apple? And if what you are selling is the app itself, there really is no choice — there isn't any way to get around Apple's App Store if you're distributing iPhone apps.
  • On Android, it's more complicated. There are plenty of options to go around Google, but doing so requires missing out on the most widely used method for getting apps — and it also requires users to turn off a security setting that helps stop malware.

History lesson: It's not like anyone likes handing over 30% of sales to Apple or Google. Still, most of the industry has just adjusted to this as the cost of doing business. But not everyone: Amazon, for example, pulled the ability to buy books from its Kindle and Audible audiobook iOS apps in order to avoid having to give a cut to Apple.

What they're saying:

  • Startup investor/adviser Steven Sinofsky tells Axios that Apple and Google don't just distribute apps, they created the ecosystems, curate the stores and help spur demand. And the option to go around those stores, he noted, is rather limited. "Just because Fortnite or Amazon do it does not mean the newest game has, or should have, the same leverage."
  • "It feels like something bubbling up here. The dollars are just getting so big. They just don’t want to be paying Apple and Google billions," Macquarie analyst Ben Schachter told Bloomberg, which raised the issue in a story Wednesday.
2. Facebook pulls mobile VPN app after Apple complaint

Speaking of App Store goings-on, Facebook is pulling its Onavo Protect virtual private network (VPN) mobile app after Apple said it violated its data collection policies.

The context: Onavo offers customers a free VPN, which encrypts all communications between two devices, while giving Facebook insight into what apps and services customers use on their device. Bloomberg had warned in June that changes in Apple's policies could be aimed at Onavo.

What they're saying:

  • Apple: "We work hard to protect user privacy and data security throughout the Apple ecosystem. With the latest update to our guidelines, we made it explicitly clear that apps should not collect information about which other apps are installed on a user’s device for the purposes of analytics or advertising/marketing and must make it clear what user data will be collected and how it will be used."
  • Facebook: “We've always been clear when people download Onavo about the information that is collected and how it is used. As a developer on Apple's platform we follow the rules they've put in place.”
  • Tech and media consultant Martin Bryant: "Onavo is an important part of Facebook's M&A strategy. Cutting it off from iOS stops Facebook from knowing as much about what apps are emerging as hot trends that need buying or copying."

The bottom line: This move is yet another schism in a widening divide between the two companies. Apple paints itself as a privacy champion that doesn't depend on user data for its revenue, while Facebook sees itself as bringing positive connections to billions of people around the world.

3. Why someone can't just hack the electric grid

Illustration: Sarah Grillo/Axios

In news stories, TV shows and at least one bestselling non-fiction book, you'll see warnings that hackers are coming to take out the U.S. electric grid, plunging the nation into democracy-ending darkness. However, Axios' Joe Uchill says that's just not the case.

Reality check: The people tasked with protecting U.S. electrical infrastructure say the scenario where hackers take down the entire grid — the one that's also the plot of the "Die Hard" movie where Bruce Willis blows up a helicopter by launching a car at it — is not a realistic threat. And focusing on the wrong problem means we’re not focusing on the right ones.

So, why can't you hack the grid? Here's one big reason: "The thing called the grid does not exist," said a Department of Homeland Security official involved in securing the U.S. power structure.

Think of the grid like the internet. We refer to the collective mess of servers, software, users and equipment that routes internet traffic as "the internet." The internet is a singular noun, but it’s not a singular thing.

Go deeper: Joe has more here and sign up for his Codebook newsletter here.

4. NewsGuard launches first product

NewsGuard Technologies, a new service that uses trained journalists to rate thousands of news and information sites, is launching its first product today: web extensions that let users view vetted, non-partisan trust ratings for news and information websites.

Why it matters: It's the first product from NewsGuard, co-founded by journalist Steven Brill and former Wall Street Journal publisher Gordon Crovitz. The labels, which have been researched and assigned by journalists, are being placed on the most trafficked news and information websites in the U.S.

Go deeper: Axios' Sara Fischer has more here.

5. Take Note

On Tap

Trading Places

  • Dan Rose, one of Facebook's top business executives, is leaving the company.
  • Tim Kentley-Klay, co-founder and CEO of self-driving car startup Zoox has been ousted, with former Autodesk CEO Carl Bass becoming executive chairman.


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