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The app that’s bigger than the iPhone

Image: Protocol
The app that’s bigger than the iPhone

Good morning! This Tuesday, an SF court deals a blow to the ride-hailers, the risks of Apple losing WeChat, and a new idea about search engines.

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The Big Story

Uber wants regulation … just not that kind

Uber and the State of California have at least one thing in common: They want more regulation on Uber drivers. That's what Dara Khosrowshahi argued in a New York Times op-ed yesterday, anyway. "America needs to change the status quo to protect all workers, not just one type of work," he wrote. But when you get into the how's and the why's of it all, the agreement starts to collapse.

As Protocol's Biz Carson writes, a San Francisco judge ruled yesterday that Uber and Lyft must immediately classify their drivers as employees and not contractors. Well, not immediately: Judge Ethan Schulman gave the companies 10 days, which they'll use to appeal, meaning nothing of significance is likely to change in the near future.

  • The biggest test may be coming in November, when voters can decide through Proposition 22 whether Uber and Lyft drivers can be exempt from the AB 5 law that's causing them so much trouble right now.
  • Both Uber and Lyft indicated yesterday that they're going to appeal, that they think they'll win, and that at the very least they want to punt until after the election.

If you want to get super practical about it, all that changed yesterday was that both sides got a little more entrenched. And everybody's continuing to play offense:

  • A legal victory for California Attorney General Xavier Becerra is a big deal, especially such a forceful one. Schulman said that "It's this simple: Defendants' drivers do not perform work that is 'outside the usual course' of their business," and are thus squarely in the realm of AB 5 regulation.
  • Khosrowshahi, meanwhile, set out a new plan. "I'm proposing that gig economy companies be required to establish benefits funds which give workers cash that they can use for the benefits they want, like health insurance or paid time off," he wrote. He said drivers should be able to pay for what they need, not what their corporate overlords deign to give them.

Schulman argued in his ruling that now, in the midst of a pandemic that has cratered their core businesses, is the perfect time for Uber and Lyft to rethink their business model. Uber and Lyft's responses seem to be: no thanks, see you back here soon.

Apps

When the apps matter more than the phone

As far as I can remember, Apple has held all the cards in disputes with developers for one simple reason: apps need the iPhone more than the iPhone needs apps. Nobody's going to ditch their iPhone because they can't get a recipe app or a new take on email.

WeChat is different. WeChat is an operating system inside your phone, a place where people live their digital — and increasingly offline — lives. For many millions of people, "does it run WeChat" is the single most important question they ask about their phone. If Apple answers no, the iPhone's going to be in trouble.

  • That's why Ming-Chi Kuo, the Apple analyst who Knows The Most Things, predicted that Apple's iPhone shipments in China could go down 25-30% if Apple has to remove WeChat from the App Store.
  • Remember, Trump's executive order doesn't say "no WeChat in the U.S." It forbids U.S. companies — like Apple — from doing any business with WeChat anywhere. At least, that's what it seems to say. There's enough leeway in the text that things could change.
  • Google would also be prevented from working with WeChat, but since it's easy to sideload apps on Android, that might not hurt so much.

As many have noted, the Trump-China stakes are higher for Apple than most other tech companies for trade reasons, supply-chain reasons, and political reasons. But the idea that a single app may be more important to users than the rest of Apple's ecosystem is surely concerning to Tim Cook and Co.

Apple's dispute with Facebook, Microsoft and Google over game-streaming services brings up a similar tension. Going forward, there's a subset of phone buyers likely to buy the phone that's best suited to playing games, or at least avoid the phones that won't let them. The game-streaming business may be small for now, but it won't be for long. And Apple's policy of locking out those services, because Apple can't review each game individually, might drive users away.

  • In both cases, the trend is that more computing is happening in the cloud, and less on your device. Apple wants to push the industry the other way, both for security reasons and because when devices are more important, Apple's much-more-advanced devices tend to look better. If all your devices are just internet-connected screens, who needs a $1,000 iPhone?

Search

The price — and costs — of search defaults

It doesn't get as much attention as some other antitrust questions, but the debate over search-box defaults is one of the most important issues on the table. Basically: Should regulators force browsers to make it easier to switch search engines? And should search companies be able to pay billions to make themselves the default?

  • DuckDuckGo ran a study that found that up to a quarter of users would choose a search engine other than Google, if they were given a clear choice and chance to do so. That would mean about a 20% market share decrease for Google.
  • One interesting note: DuckDuckGo's study included 14 search engines — including a bunch I've never heard of, like Dogpile and Ecosia — and found that no matter how it ordered the choices, the vast majority of people still picked Google. But fewer people picked Google when they actually got to choose, which was the point.

Not only is the search-engine market an important antitrust question, it's also a billion-dollar business. Google pays Apple billions a year to be the default browser in Safari — $1.2 billion in the U.K. alone — and hundreds of millions to Mozilla for the same privilege in Firefox. Companies like DuckDuckGo just don't have the funds to keep up, which is precisely the point.

  • Google also owns Android, where Google is the default search engine (of course). You can change it in any browser, but it's always buried deep in settings.
  • DuckDuckGo's research proposed adding a screen to the Android setup process, where users would choose their search engine. Axios reported that DuckDuckGo has met with the DoJ this summer to make the case for this change.

A MESSAGE FROM ITI

ITI

As we focus on the upcoming 2020 national political conventions, Protocol will lead a two-event series on the tech and policy needed to enable a diverse future workforce and a strong economy. For our first event on August 19, featured policy participants include TechEquity co-founder and former Obama campaign organizer Catherine Bracy, Incite.org managing partner and former Pete for America investment chair Swati Mylavarapu and tech C-suite leaders from Dropbox, Cognizant, IBM, Adobe and more. This event series is hosted in partnership with ITI.

Register here.

People Are Talking

On Protocol: One challenge in the AI-powered future of farming? Not enough qualified people to train the data, said Blue River's Chris Padwick:

  • "Humans are really good at telling cats from dogs — you don't need a specialized workforce. You could spin up a Mechanical Turk job and get some reasonable labels. With weeds though, it's a lot different. Often weeds and crops look the same."

Reddit is planning to allow pro-Trump ads on the platform, and Steve Huffman said that's as it should be:

  • "We debated having no political ads at all on Reddit and I certainly think there's a compelling argument for that, but I think that Reddit has the opportunity to elevate the discussion around political ads and a duty to play in the political process."

WarnerMedia's Jason Kilar had some pointed words for Jeff Bezos about their streaming spat:

  • "If Amazon were truly focused just on the consumers with Fire devices, HBO Max would be on Fire devices. The consumer wants it."

Lots of tech workers are joining the Biden campaign, but campaign spokesman Matt Hill said Biden's not easing up on Big Tech:

  • "Anyone who thinks that campaign volunteers or advisers will change Joe Biden's fundamental commitment to stopping the abuse of power and stepping up for the middle class doesn't know Joe Biden."

On a call about the White House's 5G plan, a reporter asked if Trump and Ajit Pai have coordinated efforts, and this was the answer:

  • "[25 seconds of silence] The next question comes from ... "

Making Moves

David Marcus is the new head of Facebook Financial, the group within Facebook that will oversee all of its payments and finance products. That includes Novi, Libra, Facebook Pay, WhatsApp's payment projects and more. Stephane Kasriel, the former CEO of Upwork, will be Marcus's deputy.

Manish Gupta is Coinbase's new EVP of engineering. He comes from Lyft, where he was the VP of engineering, and before that was at Google for many years.

In Other News

  • On Protocol: TheBoardList, after helping companies find female board members, is now opening its platform to people of color as well. The company said that in the last two months, 90% of TheBoardList searches have been for women of color.
  • Amazon rebranded Twitch Prime as Prime Gaming as it continues to push into the gaming world. Amazon made the change because it believes its brand has more weight with gamers than Twitch's, and I'm not sure that's the case. But Amazon's certainly betting on it.
  • Looking for a new job? How about National Cyber Director? The Wall Street Journal reported that lawmakers all over the country are looking for someone to oversee all of the government's cybersecurity efforts and want to pass legislation creating a White House-level position for it.
  • The QAnon conspiracy is spreading, and Facebook's having a hard time keeping hold of it. An internal investigation reportedly found thousands of groups and pages, with millions of members between them, all tracking and spreading the QAnon gospel. And this is after Facebook said it was taking stronger action against the groups.
  • Joe Biden's going to pick a running mate any day now, and his veep pick might matter to the tech industry. Our friends at Politico have a good rundown of Biden's top choices and their relationships within Silicon Valley.
  • Gogo is looking to sell its in-flight Wi-Fi business, Skift reported. Here's hoping that whoever buys it decides that "make it faster" would be a good business decision.
  • Don't miss this story from Wired about how Belarus managed to essentially shut down the internet in the middle of a controversial election. It happened fast, and the implications are pretty scary.

One More Thing

Happy Birthday, Woz!

Today is Steve Wozniak's 70th birthday. To celebrate, he's throwing a huge virtual party to benefit Jewel's Inspiring Children Foundation, and the guest list includes everyone from Jay Leno to Mark Cuban to Kristi Yamaguchi. And after the party, there's 11 days of events, challenges, and prizes to be won. Leave it to Woz to figure out how to throw the coolest pandemic birthday party ever.

A MESSAGE FROM ITI

ITI

As we focus on the upcoming 2020 national political conventions, Protocol will lead a two-event series on the tech and policy needed to enable a diverse future workforce and a strong economy. For our first event on August 19, featured policy participants include TechEquity co-founder and former Obama campaign organizer Catherine Bracy, Incite.org managing partner and former Pete for America investment chair Swati Mylavarapu and tech C-suite leaders from Dropbox, Cognizant, IBM, Adobe and more. This event series is hosted in partnership with ITI.

Register here.

Today's Source Code was written by David Pierce. Thoughts, questions, tips? Send them to david@protocol.com, or our tips line, tips@protocol.com. Enjoy your day, see you tomorrow.

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