The tech faceplant of the week goes to Mark Zuckerberg, the Facebook chief executive, who recently released a video in which he and his wife said they were “deeply shaken and disgusted by President Trump’s divisive and incendiary rhetoric at a time when our nation so desperately needs unity.” It was a case study in how not to read the room, especially when you are in charge of a huge service that has been one of the main digital tools that has helped the president divide and set fire to the body politic.
Mr. Zuckerberg is an easy go-to when it comes to pointing out the hypocrisy of the powerful playacting as the aggrieved. It’s irksome, and it’s also easy to mock, but in truth most of the battles between the digital Davids and Goliaths are much more complex.
Consider, for example, the fight this week between Apple and a small tech company — a quarrel that you might want to pay attention to since the outcome could have a lasting impact on the power dynamic between Big Tech and the rest of us.
The kerfuffle between the trillion-dollar tech giant and the founders of Basecamp, a nifty project management tool, centers on an innovative new email service that Basecamp created called Hey.com. As part of the Hey.com rollout, the company submitted the mobile app to Apple’s App Store. A spot there is critical for its success.
And how — given that access to the mobile universe is controlled by just two companies: Apple and Google. As one person intimately familiar with the mobile ecosystem noted to me, Apple and Google are the “two tollbooths” for us all.
Tollbooth is just the right metaphor. While you can use various services like Hey.com on the web through browsers, when it comes to mobile, app developers are subject to whatever guidelines Apple and Google impose and the fees they charge.
Apple has asserted its curatorial might most strongly, by far, often in the interests of taming the sprawling and enormous app deluge. Their oversight includes efforts to protect privacy and eliminate dangerous developers who attempt to foist spam and malware on consumers. Mistakes slip through, but Apple runs a tidy ship.
Yet Apple has also changed rules in ways that many developers find capricious and unfair and, more to the point, scary. While complaints have been raised for a long time about what Ben Thompson of Stratechery calls Apple’s “rent-seeking” practices, many developers do not want to speak out for fear of falling afoul of Apple and, worse, getting banned from its store.
But not Basecamp’s iconoclastic and outspoken founders, Jason Fried and David Heinemeier Hansson, who took to Twitter and other media to complain loudly after the Hey.com app had been accepted by Apple and then flagged for being in violation of its rules last week. In practice, that means Hey.com cannot make crucial bug updates. The company was awaiting an appeal decision by Apple that came down Thursday and that demands that Basecamp make changes in order to keep its Hey.com app on the platform.
Apple executives had told me and others earlier this week that it erred in its original approval of Hey.com, since the email service, which costs $99 per year, did not include the Apple-friendly in-app payment system as required by its rules.
The payment system, the only one available to developers when using Apple’s App Store, means Apple gets a huge cut when a customer buys digital goods like an app subscription (30 percent for the first year and 15 percent thereafter). Apple does not get a fee when customers sign up through the app’s company website, and it’s worth noting that 84 percent of apps are free, and developers pay nothing to Apple.
There is no doubt that Apple’s payment system is convenient for some developers. And Apple correctly touts that it has created a lucrative business platform for many companies ($519 billion in overall revenue in 2019). But because of Apple’s cut, some companies try to minimize in-app transactions, either by avoiding offering in-app subscriptions at all (Netflix) or charging more for that particular sign-up (Spotify). Hey.com did not include Apple’s payment tech in its app.
Apple has made exceptions for some services that fall into what it calls a “reader” category and has given other services a pass for a variety of reasons; it has even struck individual deals to bypass grabbing a cut. Still, Apple has decided thus far that Hey.com does not merit special treatment, even though there are also some subscription email apps that don’t offer in-app purchase technology and are allowed to operate on Apple’s platform (for now).
Apple’s approach can be confusing — and definitely irritating. It hasn’t sat well with Basecamp, as evidenced in a tweetstorm by Mr. Heinemeier Hansson. While he has a reputation for speaking out, this time Mr. Heinemeier Hansson has ended up in one of the more epic App Store controversies (best boiled down to his accusation that Apple was acting like “gangsters”). He likened Apple’s actions to smashing windows and burning down stores.
“They count on developers to stay quiet,” he said in an agitated interview this week, referring to Apple executives. “We thought we were fighting an email market dominated by Google, but these were the real heavies.”
Apple obviously does not agree with this assessment.
“These rules have been around the App Store since the day we started,” said Phil Schiller, who is in charge of the App Store and noted that the company reviews over 100,000 apps every week. “There is no perfection here. We will admit it when we make a mistake and acknowledge that we also need to learn and grow,” he said. “But this was rejected for a good reason.”
This dispute comes just as the European Union said this week that it had opened an investigation into whether Apple unfairly shakes down developers vying to distribute their wares on the App Store.
The longtime Silicon Valley thorn Margrethe Vestager, the European Union’s antitrust head, said the company had now “obtained a ‘gatekeeper’ role,” and, because of that, “we need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers.”
She was referring to problems first raised by Spotify, the popular music service, which is now in direct competition with Apple Music. Spotify’s complaints of Apple’s anticompetitive behavior, filed more than a year ago, led to the European Union move. Spotify’s top lawyer, Horacio Gutierrez, said in an interview with me that the situation with Hey.com is strikingly familiar.
“I have to say a lot of Hey’s experience is reminiscent of what we have been living,” he said. “The reality is Apple continues to move the goal posts and change the rules to its advantage and the detriment of developers.”
At a press event last week about the European Union investigation, Mr. Gutierrez used a sports metaphor, too, saying that “Apple acts as stadium owner, referee and player and tilts the playing field to favor its own services.” He added that “their selective and capricious enforcement is designed to put companies like ours at an untenable competitive disadvantage.”
“We don’t want special treatment or a free ride,” Mr. Gutierrez said. “We want fair treatment and the opportunity to compete without artificial obstacles put in our way,” a point also made by the Basecamp team.
Spotify has thus pushed for a choice of payment systems within the App Store rather than having to use Apple’s proprietary system, along with more ability to communicate with its own users.
Unhappy developers are not new for Apple or to any tech company. But Apple is not just facing regulatory issues in Europe.
The Justice Department has an open and active investigation specifically looking into Apple monopolization and self-preferencing in the App Store, said sources. The agency has already revealed that it is officially looking at Google over a range of practices around market power. And Congress is also prepping a big antitrust hearing soon, which Apple and other tech giants will likely attend.
Mr. Heinemeier Hansson testified before Congress last year, excoriating Apple, as well as Facebook and Google, before the House antitrust subcommittee. He ended his jeremiad with a plea, “Help us, Congress. You’re our only hope.”
He sounded more hopeless this week, calling dealing with Apple’s app approval process a “wheel of misfortune.” And, referring to the now defunct browser that ran right into another tech giant’s cross hairs, Mr. Heinemeier Hansson sent a text to me later: “The wheels of legislative justice turn slow. It didn’t help Netscape any that Microsoft got some penalties years after its air supply had been cut off.”
It goes without saying that this is not how Apple sees itself, having spent years brandishing its image as the breaker and not maker of chains — see the famous 1984 Apple Macintosh commercial.
The question is whether anyone throwing a hammer at power these days can throw it hard enough to make a difference.