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Apple takes aim at adtech hysteria over iOS app tracking change



Apple has used a speech to European lawmakers and privacy regulators today to come out jabbing at what SVP Craig Federighi described as dramatic, “outlandish” and “false” claims being made by the adtech industry over a forthcoming change to iOS that will give users the ability to decline app tracking. 

The iPhone maker had been due to introduce the major privacy enhancement to the App Store this fall but delayed until early 2021 after the plan drew fire from advertising giants.

Facebook, for example, warned the move could have a major impact on app makers which rely on its in-app advertising network to monetize on iOS, as well as some impact on its own bottom line.

Since then four online advertising lobby groups have filed an antitrust complaint against Apple in France — seeking to derail the privacy changes on competition grounds.

However Apple made it clear today that it’s not backing down.

Federighi described online tracking as privacy’s “biggest” challenge — saying its forthcoming App Tracking Transparency (ATT) feature represents “the front line of user privacy” as far as it’s concerned.

“Never before has the right to privacy — the right to keep personal data under your own control — been under assault like it is today. As external threats to privacy continue to evolve, our work to counter them must, too,” he said in the speech to the European Data Protection & Privacy Conference.

The aim of ATT is “to empower our users to decide when or if they want to allow an app to track them in a way that could be shared across other companies’ apps or websites”, according to Federighi.

Civic society’s objection to the adtech industry’s tracking ‘dark art’ is that it sums to hellishly opaque mass surveillance of the mainstream Internet.

While harms attached to the practice include the risk of discrimination; manipulation of vulnerable groups; and election interference, to name a few.

Federighi took clear aim in his own attack — returning to a descriptor that Apple’s CEO Tim Cook used in a speech to an earlier European privacy conference back in 2018.

“The mass centralization of data puts privacy at risk — no matter who’s collecting it and what their intentions might be,” he warned. “So we believe Apple should have as little data about our customers as possible. Now, others take the opposite approach.

“They gather, sell, and hoard as much of your personal information as they can. The result is a data-industrial complex, where shadowy actors work to infiltrate the most intimate parts of your life and exploit whatever they can find — whether to sell you something, to radicalize your views, or worse.”

Since Cook wooed EU lawmakers by denouncing the “data-industrial complex” — and simultaneously lauding Europe’s pro-privacy approach to digital regulation — scores of individual and collective complaints have been lodged against the adtech infrastructure that underpins behavioral advertising under the EU’s General Data Protection Regulation (GDPR).

Yet regional regulators still haven’t taken any enforcement action over these adtech complaints. Turning the cookie-tracking tanker clearly isn’t a cake walk.

And while the adtech lobby may have been heartened by remarks made yesterday by Commission EVP and competition chief, Margrethe Vestager — who told the OECD Global Competition Forum that antitrust enforcers should be “vigilant so that privacy is not used as a shield against competition” — there was a sting in the tail as she expressed support for a ‘superprofiling’ case against Facebook in Germany, which combines the streams of privacy and competition in new and interesting ways, with Vestager dubbing the piece of regulatory innovation “inspiring and interesting”.

Federighi urged Europe’s lawmakers to screw their courage to the sticking place where privacy is concerned.

“Through GDPR and other policies — many of which have been implemented by Commissioner Jourová, Commissioner Reynders, and others here with us today — Europe has shown the world what a privacy-friendly future could look like,” he said, lathering on the kind of ‘geopolitical influencer’ praise that’s particularly cherished in Brussels.

He also reiterated Apple’s support for a GDPR-style “omnibus privacy law in the U.S.” — something Cook called for two years ago — aka: a law that “empowers consumers to minimize collection of their data; to know when and why it is being collected; to access, correct, or delete that data; and to know that it is truly secure”.

“It’s already clear that some companies are going to do everything they can to stop [ATT] — or any innovation like it — and to maintain their unfettered access to people’s data. Some have already begun to make outlandish claims, like saying that ATT — which helps users control when they’re tracked — will somehow lead to greater privacy invasions,” he went on, taking further sideswipes at Apple’s adtech detractors.

“To say that we’re skeptical of those claims would be an understatement. But that won’t stop these companies from making false arguments to get what they want. We need the world to see those arguments for what they are: a brazen attempt to maintain the privacy-invasive status quo.”

In another direct appeal to EU lawmakers, Federighi suggested ATT “reflects both the spirit and the requirements of both the ePrivacy Directive, and the planned updates in the draft ePrivacy Regulation” — displaying a keen insight into the (oftentimes fraught) process of EU policymaking. (The ePrivacy update has in fact been stalled for years — so the subtle suggestion in Apple’s appeal is its technology levers being flipped to enable greater user privacy could help unblock the EU’s bunged up policy levers.)

“ATT, like ePrivacy, is about giving people the power to make informed choices about what happens to their data. I hope that the lawmakers, regulators, and privacy advocates here today will continue to stand up for strong privacy protections like these,” he added.

Earlier in the speech Federighi also made some plainer points: Likening ATT to the Intelligent Tracking Prevention (ITP) feature Apple added to its Safari browser back in 2017 — pointing out that despite similar objections from adtech then the industry as a whole has posted revenue increases every year since.

“Just as with ITP, some in the ad industry are lobbying against these efforts — claiming that ATT will dramatically hurt ad-supported businesses. But we expect that the industry will adapt as it did before — providing effective advertising, but this time without invasive tracking,” he said.

“Of course, some advertisers and tech companies would prefer that ATT is never implemented at all. When invasive tracking is your business model, you tend not to welcome transparency and customer choice,” he added, taking another swipe at the industry’s motives for objecting to more choice and privacy for iOS users.

At the same time Federighi did acknowledge that the iOS switch to requiring user permission for app tracking “is a big change from the world we live in now”.

Of course it’s one that will likely bring transitionary pain to iOS developers, too.

But on this his messaging stood firm: He made it clear Apple may wield the stick at developers who don’t get with its user privacy upgrade program, warning: “Early next year, we’ll begin requiring all apps that want to do that to obtain their users’ explicit permission, and developers who fail to meet that standard can have their apps taken down from the App Store.”

It was interesting to note that the speech contained both specific appeals to regional lawmakers to stay the course in regulating to protect data and privacy; and more amorphous appeals to (unnamed) competitors — to follow Apple’s lead and innovate around privacy.

But if you’re a tech giant being accused of anti-competitive behaviour by a self-interested adtech clique, framing your desire for increased competition in the (lucrative) business of enhancing user privacy is a nice rebuttal.

“We don’t define success as standing alone. When it comes to privacy protections, we’re very happy to see our competitors copy our work, or develop innovative privacy features of their own that we can learn from,” said Federighi.

“At Apple, we are passionate advocates for privacy protections for all users. We love to see people buy our products. But we would also love to see robust competition among companies for the best, the strongest, and the most empowering privacy features.”

Of course if more iOS developers have to rely on in-app subscriptions to monetize their wares, because users refuse app tracking, it’ll mean more money passing through the pearly App Store gates and straight into Apple’s coffers. But that’s another story.

The Apple SVP also took gentle aim at any EU policymakers who may be imagining it’s a clever idea to crack open the pandora’s box of end-to-end encryption — urging them to strengthen the bloc’s commitment to robust security. Duh.

The backstory here is there’s been some recent chatter around the topic. Last monthdraft resolution made by the Council of the European Union triggered press coverage that suggested EU legislators are on the cusp of banning e2e encryption.

Although, to be fair, the only ‘b’ word the Commission has used so far is ‘balanced’ — when it said its new EU security strategy will “explore and support balanced technical, operational and legal solutions, and promote an approach which both maintains the effectiveness of encryption in protecting privacy and security of communications, while providing an effective response to serious crime and terrorism”.

“I also hope that you will strengthen Europe’s support for end-to-end encryption. Apple strongly supported the European Parliament when it EU parliament proposed a requirement that the ePrivacy Regulation support end-to-end encryption, and we will continue to do so,” Federighi added, tone set to ‘don’t disappoint’.

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EV rivals Tesla, Rivian unite to target direct sales legislation



Tesla, Rivian, Lordstown Motors and Lucid Motors — potential rivals in the burgeoning EV market — are working together to pass laws that would allow direct sales in at least eight states with another batch of proposed legislation likely being introduced this year.

Passage of such legislation would clear the way for EV giants like Tesla, along with newcomers Lucid and Rivian, which have yet to bring a vehicle to market, to sell directly to consumers. However, Tesla’s cooperation could also cost the company its monopoly on direct sales in some states.

Tesla and a growing number of new EV companies have a different business model than legacy automakers like GM, Ford and Stellantis. Tesla sells vehicles through their own branded stores — similar to how Apple sells its products — and do not have franchised dealerships. The direct sales model has attracted the ire of auto dealers, who benefit from long-established rules in all 50 states that prevent manufacturers with existing franchisees from opening their own dealerships to compete with them. Tesla and other allies argue that because they don’t have franchise dealers, they should be allowed to sell directly to consumers.

“We support our other EV-only manufacturers and their desires to sell direct-to-consumers, to invest, to create jobs and to do that unfettered as we are allowed,” Thad Kurowski, senior policy manager at Tesla, said while testifying in the state of Washington during the House’s Consumer Protection and Business Committee. Washington is one of many states where such legislation is being considered. Tesla has six retail locations in the state.

Similar legislation is being considered in Connecticut, Nebraska, Georgia, New York, Wisconsin, Pennsylvania and Nevada. Some of these states ban all EV manufacturers from directly selling to customers; some only permit Tesla, at the exclusion of other companies, but cap the number of retail stores it can open.

It’s a rare moment of cooperation for EV manufacturers, companies that must contend not only with each other but with legacy automakers for market share. Relations between the companies have not always been so copacetic: Tesla last July filed a lawsuit against Rivian alleging theft of trade secrets and talent poaching. Rivian responded that two of the three claims in the case were nothing more than an attempt to smear its reputation.

Tesla is a veteran of battles with state legislatures over direct sales. At least a dozen states, including Arizona, Colorado and Utah have reversed bans that prevented Tesla from selling directly to consumers either through new legislation or via the courts.

Michigan, home to major automakers GM and Ford, has been a longtime battleground.

Former Gov. Rick Snyder signed a bill in 2014 that was initiated and backed by the Michigan Automobile Dealers Association, banning Tesla from selling directly to consumers in the state. Two years later, Tesla sued the state of Michigan when it denied Tesla a dealership license. The Michigan Legislature last December considered a bill that would have banned all direct sales except for Tesla, an arrangement that allowed the automaker to deliver cars to customers, so long as the vehicle sale and title transfer didn’t occur in the state. That special exception for Tesla was removed from the proposed legislation, a move that would have threatened what little progress it had in the state. At the end, though, the legislation died, leaving Tesla’s arrangement intact.

Lucid is leading the charge in some states where direct sales legislation is being considered, according to Daniel Witt, who worked at Tesla before joining the new EV entrant as a public policy lead. Witt emphasized the bills are the result of efforts from the coalition of EV companies, grassroots lobbying from EV owners and EV enthusiasts and consumer groups. The legislation has also found support from environmental and clean energy groups, which argue that consumer choice and ease of access are key to helping people transition away from internal combustion engine cars.

“Any situation where the door got closed behind Tesla was not a matter of trying to gain a market advantage so much as it was just a product of the negotiations in a given legislature,” Witt said. “By and large, whether it’s New York, or Washington or Connecticut, we’re all rowing in the same direction.”

In a statement to TechCrunch, the Washington State Auto Dealers Association said franchised dealers support the transition toward zero-emission vehicles and want to sell them at their locations. But it said the direct sale bill is a “battle of Main Street vs. Wall Street.”

“Electric vehicle manufacturers perpetuate [the] myth of the middleman when the reality is that they would bear the same costs if they built their own stores, but would ship their revenue to their billionaire investors out of state after the sale is made instead of reinvesting in the community,” the group said.

The organization pointed out that Rivian has garnered $500 million in funding from Ford.

“What would stop Ford from abandoning its dealer network, and shifting the profits dealers generate for the company out of Ford and into greater ownership of Rivian? Or GM from spinning off an EV subsidiary?” the group said in its statement.

EV manufacturers have a long legislative road ahead of them. Bills generally must clear legislative committees and receive majority votes from both the House and Senate before being sent to the governor’s desk to be signed into law.

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Netflix launches ‘Fast Laughs,’ a TikTok-like feed of funny videos



Late last year, Netflix began experimenting with a new TikTok-like feed of funny videos inside its mobile app, which it called “Fast Laughs.” Today, the company announced the new feature is now rolling out on iOS, allowing users to watch, react, or share the short clips as well as add the show or movie to your Netflix watchlist. You can also push a “Play” button to start watching the program immediately.

At launch, the feature will include short clips from Netflix’s comedy catalog, including films like “Murder Mystery,” series like “Big Mouth,” sitcoms like “The Crew,” as well as snippets from stand-up comedians like Kevin Hart and Ali Wong.

Netflix confirmed to TechCrunch the feature will tap into its full catalog, not just its own original programs. However, the company couldn’t says how many total shows or movies would be featured in the new experience.

Image Credits: Netflix

The new feature has been given prominent placement in the Netflix app, where it’s accessible from the bottom navigation menu on its own tab, next to “Coming Soon.” This is no small experiment, then — but rather an indication of how successful the early tests of the “Fast Laughs” feature must have been in terms of engaging users and connecting them to Netflix content.

This is not the first time Netflix has borrowed concepts from social media to help users discover new shows or movies to watch in its app. A few years ago, Netflix introduced its own short-form video “Stories” feature, called Previews, for example. But times have changed. Now users are drawn to short-form vertical video feeds, like those popularized by TikTok.

Image Credits: Netflix

“Fast Laughs” heavily borrows from the TikTok format, as its feed also features full-screen videos that you can swipe through vertically, and places the engagement buttons on the right side of the screen. These buttons let you react with an “LOL” (crying/laughing) emoji to the clip or share it via iMessage or social media apps, like WhatsApp, Instagram, Snapchat or Twitter. You can also start watch the show immediately or save it for later viewing by adding it to “My List.”

During tests, “Fast Laughs” clips ranged in length anywhere from 15 to 45 seconds. Today, Netflix says there’s no exact clip length for these video snippets.

Image Credits: Netflix

The company is positioning the feature as a discovery tool.

“We wanted to give members a fun, fast, and intuitive way to discover our catalog by letting these comedic moments across genres speak for themselves in a mobile-native, full screen experience,” said Product Designer Kim Ho, previously worked on product design at both Facebook, Instacart, and Coin. “We worked hard to cut to just what was necessary in an intentional and minimalist UI design, from the transparent tab bar to ways to react in the moment (‘LOL’) and plan their next laugh by adding to their list,” she added.

But though “Fast Laughs” is focused on finding new things to watch, the feature could, in fact, help Netflix compete with TikTok in terms of time spent on mobile devices, as it caters to the growing demand for shorter, more “snackable” video content.

Netflix says the feature is rolling out now to iOS and will begin testing on Android in the months to come.



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First impressions of AppLovin’s IPO filing



AppLovin released its S-1 filing yesterday, bringing the Palo Alto-based mobile app-focused software company a step closer to joining the public markets.

The business results detailed in the document are generally impressive. While some companies going public in recent months have detailed pandemic-fueled growth to lean against or membership in a sector hotter than individual results, AppLovin’s filing tells the story of a rapidly growing company that has managed to scale adjusted profit as it has grown.

And now, with annual revenue north of $1 billion, AppLovin is also a very large company, meaning that its IPO will be widely watched.

The Exchange explores startups, markets and money. Read it every morning on Extra Crunch, or get The Exchange newsletter every Saturday.

So this morning we’re rifling through its IPO filing and yanking out what matters as we add one more name to our IPO lists.

The Exchange has a lengthy list of non-IPO topics that we’d like to get to. If everyone could stop going public for a few days, we’d love to write about something else! OK, let’s get into it!

Most of the news is good

As a short introduction, the company’s products are designed to help developers find users and monetize their apps. And AppLovin has its own in-house suite of mobile apps, what its S-1 calls a “globally diversified portfolio of over 200 free-to-play mobile games run by 12 studios.” Those apps have 32 million global daily actives, the document added.

It’s a pretty neat company to dig into if you’re into mobile apps at all. Regardless, what we care about today are its numbers. So let’s talk growth, revenue quality, profits, cash consumption and capital structure. Most of the news is good, even if there are some downsides to AppLovin’s capital structure.

Recall that KKR bought a chunk of AppLovin back in mid-2018 at a valuation of around $2 billion. That number appears comically low, given that the company posted $483.4 million in revenue that year, a figure that it roughly doubled in 2019 to $994.1 million. Growth slowed in percentage terms in 2020, when AppLovin saw total revenues of $1.45 billion, though the company managed similar growth in gross-dollar terms.

In percentage terms, AppLovin grew 106% from 2018 to 2019, and 46% from 2019 to 2020. How KKR got to buy into the company at 4x revenues when it was growing at 100% is not clear.

The company is growing well, but is AppLovin accreting revenue of high quality? Yes, but we need to scrape some grime off the numbers to understand them. Turning to the company’s yearly results, AppLovin’s cost of revenue rose steadily as a percentage of revenue from 2018 to 2020. Indeed, the numbers went from 11% in 2018 to 24% in 2019 and 38% in 2020. That’s an awful progression, and if we lacked more information we’d posit that the company’s overall revenue quality was sharply declining.

It’s not that bad. There’s about $1 million in share-based compensation inside the 2020 cost of revenue figure and $228.3 million of “amortization expense related to acquired intangibles.” If we yank out those from the cost-of-revenue line item, AppLovin’s gross margin for 2020 grows from 62% to 77.5%. That’s much better.

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