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From: Glenn Petersen6/21/2020 12:00:10 PM
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Google got rich from your data. DuckDuckGo is fighting back

In July 2018, Google was fined €4.34 billion for limiting search on Android phones. Almost two years later, its rivals claim little has changed and the company is as dominant as ever

By Matt Burgess
Monday 8 June 2020

From this summer, when you set up a new Android phone or tablet in Europe, you will be presented with an extra step: a choice screen to select your default search engine.

The screen is simple. Under a search icon and a short blurb are four options. One is always Google; the others vary depending on which country you’re in. Pick one of Google’s rivals, and its results – not Google’s – will appear in a home screen search widget and in the Chrome web browser. Its app will also be downloaded to the device.

The change is so subtle that many people may not notice it. But across the continent, it marks a fundamental shift. The choice screen appears in the wake of the European Commission fining Google €4.34 billion (£3.81bn) for breaching EU antitrust rules. On July 18, 2018, competition commissioner Margarethe Vestager hit Google with the fine – the largest of three she has issued against the company – for abusing the dominance of its Android operating system.

Being big isn’t illegal, but the European Commission says dominant companies have a "special responsibility" not to abuse their powerful market position by restricting competition. At the end of an investigation spanning more than three years, the Commission concluded that Google had acted illegally in using Android to ensure that traffic went to Google Search instead of its competitors. The Commission accused Google of three unfair tactics. Google, it said, had required manufacturers to pre-install the Google Search and Chrome apps if they wanted to license the Google Play app store; had paid mobile network operators and phone manufacturers to exclusively pre-install Google Search; and had prevented manufacturers from creating alternative versions of Android without its approval if they wanted to pre-install any Google apps.

Google’s actions, the Commission said, helped it to cement its dominance in the mobile search industry. In Europe, more than 95 per cent of all searches on mobile are made through Google. The market is mostly Android devices, but Google also pays billions to Apple to be the default search engine in the Safari browser on iOS. According to Vestager, its Android practices “denied rivals the chance to innovate and compete on the merits.” Google is appealing the decision.

The way many European antitrust fines work puts the onus of fixing a problem on the guilty party. Google has re-written the contracts it holds with phone makers and relaxed limits on how Android can be developed by others. On new phones and tablets shipped into the European Economic Area, it has introduced the search engine choice screen.

The choice screen gives Google’s rivals an unprecedented presence on Android devices. Smaller players have never had such an opportunity to directly reach users on the world’s biggest mobile operating system.

Chief among those set to benefit is DuckDuckGo, a US-based search engine founded in 2008 by CEO Gabriel Weinberg
. DuckDuckGo will appear on all 31 choice screens across Europe when it is first implemented, a number matched only by The company has been competing with Google for more than a decade, offering a search engine that emphasises privacy and doesn’t collect user data, but it is still tiny compared to Larry Page and Sergey Brin’s creation. “We're not trying to topple Google,” Weinberg, 40, says. “Our goal is for consumers who want to choose a private option, they should be able to do so easily.”

The idea for DuckDuckGo came partly from a stained glass class. In 2007, a couple of years after completing his masters in technology policy at MIT, and having already sold a social networking startup, Opobox, for $10 million, Weinberg decided to try his hand at a new hobby. The class teacher handed out a print-out of the best websites to learn more about creating stained glass. When Weinberg tried to search for information on Google, none of the recommended sites appeared in the top results.

The sheet of paper led to the creation of I’ve Got a Fang, a crowd-sourced site where people could contribute authoritative URLs on particular subjects. Weinberg, who lives in Philadelphia, believed the knowledge from people’s heads could be better than Google’s algorithms.

I’ve Got a Fang was a flop: few people added links to the site and it failed to get any traction. But the idea of human curation stuck, and Weinberg combined this notion with the remnants of another failed side gig – one that had already run into trouble with Google. Tldscan was a series of websites that crawled structured information and published it to the web – think sports statistics available in one place. In a now-archived 2010 blog post, “My history of (mostly failed) side projects and startups”, Weinberg wrote that he was getting 50,000 visitors and $500 revenue per day from Tldscan. “Then Google blacklisted all of my sites,” he wrote.

The combination of I’ve Got a Fang’s human expertise and Tldscan’s efforts to surface useful information became key pillars of DuckDuckGo, which launched a year later in September 2008. “My original spark was: could there be a better user experience in search?” says a bespectacled, clean-shaven Weinberg, speaking via a Zoom call in March. (While many companies had to radically adapt their way of working as the Covid-19 outbreak spread across the world, little changed for DuckDuckGo; its 89 staff work remotely all the time, and there is no main office.)

Initially, Weinberg started building the technology needed to crawl, index and rank the web himself, but he stopped when Yahoo! introduced a service called Build Your Own Search Service (BOSS). Using this, he focused on refining Yahoo!’s results and adding extra services on top. Today, DuckDuckGo combines data from more than 400 sources into its search results: Microsoft’s Bing is predominantly used to surface relevant pages, but Wikipedia, Apple Maps, TripAdvisor and DuckDuckGo’s own web crawler also contribute. There are more than 1,000 different sources for the “Instant Answer” snippets DuckDuckGo shows alongside its results.

It wasn’t until 2010 that the search company set out its unique selling point: it wasn’t going to track users. The company committed to throwing away IP address information and not storing details of what people searched for. “At the beginning, privacy wasn't the main draw,” Weinberg says. “It wasn't as known as an issue.”

Initial growth was slow; in April 2010 the site was getting around 30,000 to 40,000 search queries a day, barely appearing as a blip on the search radar. Weinberg didn’t hire his first full-time employee until 2011, and up until then he was primarily focused on being a stay-at-home dad for his first child, born the year after DuckDuckGo launched. During some early investor meetings, he says, he was rocking his second child out of his webcam’s field of vision. The company raised $3 million in a Series A round in 2011, led by Union Square Ventures.

DuckDuckGo’s real breakthrough came thanks to Edward Snowden. The former NSA contractor’s explosive government surveillance revelations in 2013 prominently included Google among the data sources used by British and US spy agencies. People were newly interested in seeking out privacy-first alternatives, and DuckDuckGo’s daily search queries swelled from 1.5 million a day to 4.1 million a day in the space of a year.

At the time, many people switching from Google wouldn’t have been happy with the experience their new search engine offered, and it’s likely that plenty quickly switched back. Weinberg says that it wasn’t until 2014 that DuckDuckGo could really compete with its Silicon Valley rival. It was a crucial year for the company: it hit its tenth employee; incorporated news, video and image verticals in a big site redesign; and was included as an alternative search engine option in Apple’s Safari browser on iOS. “Apple is effectively a mainstream endorsement,” Weinberg says.

It was in 2014 that DuckDuckGo also made its first profit; it’s been profitable ever since, and the company forecasts it will pass the $100 million revenue barrier for the first time in 2020 (thought this may be affected by the Covid-19 pandemic).

It makes its money in the same way as Google: through advertisements. Each time a user clicks on an ad that is shown alongside search results, the company takes home a small amount of money. But where the two differ is that DuckDuckGo uses contextual advertising over the data-heavy behavioural advertising that helps Google earn billions each quarter.

Contextual adverts
are shown to users based on the searches they make: if you DuckDuckGo “Mercedes”, you’ll be served adverts for cars on that page. Google “Mercedes”, however, and adverts for cars will follow you off the page and around the web, because Google adds that data to the other information it knows about you. Behavioural advertising is much more lucrative, as each time an ad is clicked on there’s a higher likelihood the person will buy. Google’s expertise in knowing what users will be most likely to click on is rivalled only by that of Facebook.

People’s increased awareness of privacy issues has continued to fuel DuckDuckGo’s growth. As with Snowden’s revelations, the 2018 Cambridge Analytica scandal propelled Weinberg and DuckDuckGo into the mainstream. Around the same time, the company launched desktop browser extensions that stop web tracking, as well as its own mobile web browser for Android and iOS.

The cumulative effect was significant. On March 17, 2018, the day The Observer first reported on Cambridge Analytica, 17 million DuckDuckGo searches were made; exactly two years later, 57 million searches were completed. Weinberg says DuckDuckGo’s key users are people who both care about their privacy and are willing to act upon it. “The caring really went up after Snowden,” he says. “After Cambridge Analytica the acting percentage has really skyrocketed.”

Google’s new Android choice screen could give another boost to DuckDuckGo, finally propelling it into the mainstream as millions of people replace their old phones over the coming years. “It's really a levelling, if it's done right, for competition,” Weinberg says. But he, and other search engines, have issues with Google’s implementation.

Multiple European search startups say they are in favour of a choice screen. They argue that users should be allowed to pick which search tool they use – even if they end up choosing Google (in most cases they will). But Google’s execution of the choice screen has angered its rivals.

To appear, companies have to pay Google, via an auction that is held every three months. Bid enough, and you win a coveted slot as one of three options alongside Google. A similar auction approach was introduced as a fix to a 2017 EU antitrust case around Google Shopping. In search, companies say they don't think an auction is a fair way of encouraging competition or innovation.

Google argues that an auction is a “fair and objective” way of smaller companies being able to compete, and that it allows them to decide “what value they place on appearing in the choice screen”. Every time an Android user picks a search engine to use – even if they switch back to Google minutes later – that search engine is charged. Google issues the companies an invoice each month, and the money goes back into the development of Android.

Ahead of the first round of bidding towards the end of 2019, Google set a minimum bid. Multiple sources, who are not able to speak publicly, say it set prices of above $20 per user for some European countries. This amount would be unrealistic for small companies, the sources say. “I actually think they saw this as a price we would easily be able to pay,” one person familiar with the bidding says, adding that it was “ridiculous”.

Ultimately, the minimum bid was scrapped in favour of a system where all the winners pay the price set by the first losing bidder. Google says it changed the format after receiving feedback and to make it easier for rivals to participate. One source says companies will now be paying the “lowest number to zero that you can do besides being zero.” Another company says the only reason it bid in the process was because it was cheaper than advertising on Facebook. “We will get our name out more than I think we will directly get users from the choice screen,” the company CEO says.

DuckDuckGo is one of the auction’s big winners, appearing as an option in all 31 countries. But it isn’t happy about it. “You're incentivised to bid your profit,” Weinberg says. He predicts the auction prices will keep rising until it’s harder for search engines to make any money. “Google is taking away all the profit of these search engines and profiting from it themselves,” he says. “They're effectively running other people's search and taking other people's profit.”

“It plays the competitors against each other,” says Christian Kroll, the CEO of Ecosia, a German search engine that plants trees when searches are made on its platform. “So instead of collaboration, we have now kind of a toxic environment between smaller search engines as well.” Ecosia decided to boycott the auction. Kroll says in the long term he doesn’t believe the company can win, because 80 per cent of its profits are spent on tree planting. “I think this was very well thought out by Google,” he says.

DuckDuckGo has loudly criticised Google’s efforts. Weinberg and DuckDuckGo general counsel Megan Gray, who previously worked at the US Federal Trade Commission in consumer protection, argue that Google’s process is flawed. They say there should be more than four options shown to users, and that people should be given more information about the choice they’re making. If there was one fix? “Getting rid of the damn auction,” Gray says. “It should be a genuine choice – it shouldn't be pay to play. That would be the best outcome here.”

Paul Gennai, a product management director at Google, says that Android has “created more choice for everyone, not less” and that the operating system's openness has meant “developers of apps that compete against Google have precisely the same ability to reach users”.

“From day one, Google developed Android to be open: both to the manufacturers who build devices, as well as to the people who buy them – we think both should have the flexibility to set them up just as they want,” Gennai says. “This has taken billions of dollars of investment over more than ten years.” He adds that Google also invests in its Play app store, which includes safety features such as scanning apps for malware. “With the changes required in Europe, we implemented an auction to ensure that it would continue to be viable for Google to continue its investments in the open Android ecosystem,” he says.

A spokesperson for the European Commission says it is closely monitoring how the choice screen is being introduced and the mechanisms behind it. "We have been discussing the choice screen mechanism with Google, following relevant feedback from the market, in particular in relation to the presentation and mechanics of the choice screen and to the selection mechanism of rival search providers," the spokesperson says. (Since this story went to press, the results of the second Android choice screen auction have been published. Fewer companies are included as winners and Microsoft's Bing has no presence. DuckDuckGo says prices have increased, too).

Aside from controversies around the auction, there are questions over how much difference the choice screen will make. A 2010 EU antitrust investigation saw Microsoft launch a choice screen for web browsers – the Commission had said that Microsoft used the dominance of the Windows operating system to direct people to its Internet Explorer browser, which was included as the default on Windows. Its choice screen ran for four years, but at the end of this time smaller browsers had not gained any significant market share. (The biggest market shift was the rise of Google's Chrome browser, which had only recently launched and was rising in popularity anyway.)

And in search, Google nearly always wins. One major exception – aside from in China, where Google search is banned – is in Russia. There, Yandex is king. Launched in 1997, a year before Google, Yandex acts as the country’s homegrown Uber, Spotify, Amazon and favoured search engine all rolled into one. At the start of 2015, Russians searching the web on their desktop machines were overwhelmingly likely to be using the company – 63 per cent of all searches were made using Yandex. But on mobile it was a different story. In an Android-dominant country, the tables were turned, with 62 per cent of all mobile searches being made via Google.

Staff at Yandex were aghast when they discovered Google had struck deals with phone makers that prohibited them from accepting payments to pre-install other search engines if they wanted to use the Android operating system.

As in the EU, regulators in Russia were scrutinising the power Android gives Google search. In March 2017, the Federal Antimonopoly Service (FAS) fined Google 438,067,400 roubles (£4.4 million) and then reached a settlement with the company that said Android would offer a choice screen for search engines, in this case on both new and existing devices (Google says technical changes mean the EU choice screen can only apply to new phones).

Smartphone users in Russia started to see choice screens from August 2017. That month, search on Android was 60 per cent Google. The gap closed and a year later it was split 50/50 with Yandex. At the start of March 2020, Yandex had 56 per cent of all Android searches, with Google’s share dropping to 42 per cent.

But while Yandex was also one of the bigger winners in the EU Android auction, appearing on device screens in 16 countries, Preston Carey, a senior vice president at Yandex, says he doesn’t expect to see any large market shifts. “Putting a choice screen up in the UK or Germany is not going to have the same result as putting one up in Russia,” he says. He argues that no other search company has the brand recognition that Yandex does in Russia in any other country – meaning people will be less likely to switch away from Google.

In its own tests, DuckDuckGo created a choice screen with 18 different options and placed Google at the end of the list. It found people still scrolled all the way to the bottom to find the one they were most familiar with.

While Android’s new choice screen is unlikely to end Google’s dominance in search, even a one per cent shift in market share over a period of several years would be colossal growth for firms such as DuckDuckGo. Weinberg predicts his firm could one day have a market share of ten per cent (it currently sits at 0.32 per cent of global market share). This would still pale in comparison to Google but be a big boost to the 1.5 billion monthly DuckDuckGos already taking place.

And to DuckDuckGo, the battle for search represents just a small part of a bigger struggle over how advertising on the web works, and what this means for personal data and privacy.

The vast ad networks of Facebook and Google are fed with personal data collected across the web. Trackers from both companies gather information about online activity from almost all of the web’s most popular sites. By collecting billions of data points, the companies are able to build revenues in excess of $20 billion every three months. The vast majority of this money comes from advertising – in particular behavioural advertising.

Trackers and cookies are present across almost all websites; they monitor and track people’s activities online and log them under unique identifiers connected to individuals ( uses trackers to collect and share reader data as part of business practices). But at the start of April this year, the data protection regulator for Ireland, which oversees all the big US tech companies headquartered in the country, released a report saying many websites fail to give “basic information” to people that visit them and that “most ordinary users will not be aware of the extent to which they may be tracked”.

This tracking allows companies to collect data on people’s interests and activities, which they can feed into advertising models and use to serve people behavioural adverts linked to their interests; Facebook’s Pixel, for example, is on more than eight million websites. “Strategically, Google and Facebook have all the user data,” Weinberg says. DuckDuckGo’s web browser, like its search engine, does not store personal data. In addition, it blocks the invisible trackers hidden on web pages. The company wants to see less tracking elsewhere, too.

In 2009, security researchers proposed a Do Not Track setting for browsers. In theory this is a checkbox, or an option in a browser’s settings menu, that allows a user to opt out of being tracked as they move around the web. Firefox, Internet Explorer, Opera and Chrome all use it, but it's largely ineffective. (Apple's Safari stopped using it in 2019). Websites across the web don’t have to honour the setting; Medium and Pinterest are two of the most prominent that do. Twitter originally supported it but doesn’t anymore, and efforts from web standards bodies have failed to make it more effective. Despite having the feature in Chrome, Google’s support pages say the company’s own websites “don't change their behavior” when Do Not Track is turned on.

In 2018, consulting firm Forrester found that around a quarter of Americans had the largely-ineffective setting switched on. A year later, lawyers for DuckDuckGo proposed “The Do-Not-Track Act of 2019”, a draft piece of legislation designed to make the Do Not Track setting be backed by law: websites would have to respect a user’s wishes to not have their behaviour online recorded.

The idea has not been put into practice anywhere in the US but a similar concept is marginally closer to reality in Europe. For the last three years, European legislators have been debating the ePrivacy Regulation, a complimentary law to GDPR which could include Do Not Track provisions. The regulation has been subject to intense lobbying and is currently in a state of stagnation. But it’s the closest anywhere has got to limiting how people are tracked online.

Weinberg believes its enactment would open up the online advertising market and thus potentially reduce the dominance of Facebook and Google in the space. If a quarter of the web was suddenly using a setting that meant it was harder to serve them adverts targeted at their interests, traditional contextual advertising would rise again. This would be good for privacy, but it could also help open up competition, Weinberg says; if Google and Facebook didn’t have such a data advantage, perhaps smaller companies could compete on a more even footing. “If everyone competes on contextual advertising, now all of a sudden they actually have to compete with a lot of other players,” he says. Google has already been experimenting further with contextual advertising, which one of its product managers wrote in a blog post was to help preserve user privacy.

Competition regulators are also shifting their focus to how data is used by big tech companies. On both sides of the Atlantic, examinations are underway into how Alphabet, Amazon, Apple, Facebook and Microsoft have acquired smaller companies. The EU is also looking more broadly at how Google and Facebook collect data and the implications for competition.

Ultimately, Weinberg wants people to understand that they don’t need to give away their personal information to make the most of technology. “We really want to combat people's learned helplessness in privacy,” he says. “Everyone's concerned, but a large percentage of people just think there's nothing you can really do about it. We want to prove that you can do something.”

Updated: This article first appeared in print. Prior to online publication Megan Gray's role at the FTC has been updated and Gabriel Weinberg was rocking his second child while talking to investors

Matt Burgess is WIRED's deputy digital editor. He tweets from @mattburgess1

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From: Glenn Petersen6/22/2020 9:40:43 AM
   of 15431
Google's U.S. Ad Revenue Is Expected to Decline in 2020, eMarketer Says

Research firm eMarketer says decline would be the first since it started tracking Google’s ad revenue in 2008

By Keach Hagey
Wall Street Journal
June 22, 2020 9:00 am ET

Google’s U.S. advertising revenue will decline this year for the first time since eMarketer began modeling it in 2008, the research firm said, largely because Google’s core search product is so reliant on the pandemic-battered travel industry.

As the world’s largest digital-advertising company, the Alphabet Inc. GOOG 0.02% unit has heretofore been a money-printing machine, expanding its overall advertising revenue at double-digit rates in nearly every year of its two-decade existence, save for the 2008-09 financial crisis, when it only grew 8%. The firm doesn’t break out its U.S. revenue, but eMarketer’s model found that even in that crisis, Google’s U.S. ad revenue grew.

What is different this time is the way the coronavirus pandemic obliterated marketing spending in some of Google search’s biggest advertisers, and the way some of these advertisers have been public about rethinking their plans to return to the platform even after the pandemic passes.

“The biggest single culprit here is the travel industry, which has been both hardest hit by the pandemic generally, and has concentrated spending on Google in the past,” said Nicole Perrin, principal analyst at eMarketer. “We have already heard statements from major travel companies, like Expedia, that normally spend billions of dollars on Google, mostly on search, that they are pulling back spending on Google and search, and that will continue for the rest of this year.”

Travel represented about 11% of search ad revenue in 2019, Needham analyst Laura Martin estimated.

Expedia Group Inc., which owns brands such as Travelocity, Orbitz and Vrbo, has historically been one of Google search’s biggest advertisers, according to data from the advertising-research company Kantar.

Big SpendersLargest ad spenders on Google search in 2019:

  • Amazon
  • Walmart
  • Home Depot
  • Wayfair
  • Expedia
  • Best Buy
  • eBay
  • Progressive
  • Source: Kantar

    On an earnings call in May, Expedia CEO Peter Kern said the pandemic offered the company an “opportunity of an entire reset” on its traditionally search-heavy advertising spending. Expedia has warned its investors that a risk for the company is the way Google has launched travel products in recent years that compete directly with its largest advertising partners, and then uses its search function to drive users to its own products.

    “As we wade back in, we’re able to be more precise, be more constrained, watch and learn and grow into it, and not just dive back in head first and spend back to the levels we were at,” he said.

    EMarketer also pointed to Amazon, another big search spender, pulling back its search spending sharply as the pandemic hit as it struggled to fulfill orders.

    EMarketer estimates that Google’s gross U.S. advertising revenue will decline 4%, while its net U.S. revenue—accounting for the payments it makes to website owners to acquire traffic—will drop by 5% this year.

    Google declined to comment.

    That is still less of a drop than for the advertising market overall, which eMarketer estimates will shrink by about 7% this year.

    Despite the pandemic, digital advertising continues to steadily take share from traditional media. And the “triopoly” of Google, Facebook and Amazon is sucking up an ever-greater share of digital spending.

    EMarketer estimates that digital advertising will increase its share of the overall advertising market by about 5 percentage points this year, to 60% from 55%. But in absolute terms, the pie is shrinking. The firm expects digital to grow by nearly 2%, television ad spending to decline by 15% and print to drop by 25%.

    The triopoly’s share will also inch up this year, albeit at a much slower rate than before, from 62% to 62.2%. Most notable, though, is the changing face of this triopoly: Google, long the biggest player, is shrinking, while both Facebook and Amazon are growing.

    While the pandemic hurt all advertising players, and eMarketer had to revise its estimates of Facebook’s performance downward like everyone else, it still expects net U.S. revenue at Facebook to grow by 5% this year to $31 billion.

    “The factors that have propelled Facebook to be a digital advertising superpower in the first place are the same ones keeping advertisers spending during the pandemic: huge reach, effective targeting at scale and performance ad products that tie spending to results,” the report said.

    It also helped that Facebook has less exposure to travel, and more exposure to categories that have thrived under lockdown, such as direct-to-consumer retail and gaming, eMarketer noted.

    “They were pretty resilient,” Ms. Perrin said.

    In recent days, civil-rights groups including the Anti-Defamation League and NAACP have called on advertisers to pull spending from Facebook for the month of July to protest the platform’s approach to policing hate speech and misinformation. Densu Group Inc.’s digital firm 360i advised clients to support the boycott. On Friday, outdoor-gear maker the North Face said it would join.

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    From: Glenn Petersen6/26/2020 10:26:21 PM
    1 Recommendation   of 15431
    Justice Department expected to file antitrust suit against Google

    The suit, expected to be filed in the coming months, would involve allegations that the search giant has monopolized the advertising technology market.

    06/26/2020 07:31 PM EDT

    Justice Department prosecutors expect to file an antitrust lawsuit against Google in the coming months focused on the company’s dominance in online advertising and search, two individuals familiar with the discussions said Friday.

    DOJ lawyers and state antitrust officials met online Friday and discussed contours of the expected complaint, according to the people, who weren’t authorized to speak on the record because the investigation is ongoing. People knowledgeable about the case had previously described litigation as likely.

    The suit is expected to involve allegations that the search giant has monopolized the advertising technology market. It is also expected to include allegations that Google has taken steps to extend its monopoly over search, such as through contracts with Apple and cellphone makers who use the Android operating system that require it be the default search engine.

    The people cautioned that Attorney General William Barr, who did not attend the meeting, has yet to make a final decision on whether to sue, a judgment he could make in the coming weeks. The department would also need to decide what remedy it would seek, such as trying to break up the company or placing limits on its behavior. Whether the state attorneys general would also sign on to the DOJ complaint isn't yet determined.

    Prosecutors are still discussing whether to include other aspects of Google’s conduct related to search, the people said.

    A DOJ spokesperson declined to comment.

    "While we continue to engage with ongoing investigations, our focus is on creating free products that lower costs for small businesses and help Americans every day,” Google spokesperson Julie Tarallo McAlister said.

    The department has shown signs in recent months of seriously pushing forward with litigation based on the antitrust probe it launched a year ago. DOJ and the states have separately recently retained economic experts to help with a potential suit and testify at trial if needed, according to three individuals familiar with the probes. DOJ has also been seeking a litigator to help with its case, they said.

    The suit would mark the agency’s first significant monopolization case against a major U.S. company in decades. In the late 1990s, DOJ sued Microsoft over what it called the company’s efforts to use its Windows operating system to stifle the Netscape internet browser. DOJ and states won at trial, a decision that was largely upheld on appeal, but Microsoft later reached a settlement with the government.

    Europe’s primary competition authority has brought three cases against Google and imposed fines totaling about $9 billion over the search giant’s conduct. Google has filed appeals in all three cases. The U.S. Federal Trade Commission previously investigated Google over allegations that it biases search results to favor its own products. The agency closed the probe in 2013 without taking action after Google agreed to "voluntary commitments" to alter some of its practices.

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    From: Sr K7/2/2020 5:46:52 PM
       of 15431


    With $122 billion net of debt, Alphabet raises YouTube TV 30%.

    YouTube, the video-streaming outlet owned by Google parent Alphabet Inc., announced Wednesday the latest price increase for its TV service that competes with traditional cable packages. YouTube TV will now cost $64.99 a month, up from $49.99 previously. The company has raised the price every year since launching the service in 2017, though the latest 30% rise is the biggest so far.

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    From: J.F. Sebastian7/12/2020 7:47:17 PM
       of 15431
    The game is rigged: A former marketer shows you how Big Tech’s advertising practices harm us all

    by Lisa Macpherson
    July 10, 2020

    As of this writing, it appears the U.S. Justice Department and a group of state attorneys general likely will file antitrust lawsuits against Alphabet Inc.’s Google for an array of anti-competitive practices in its search and ad technologybusinesses. At the same time, the Federal Trade Commission, Justice Department and a group of 47 state attorneys general have opened inquiries into Facebook, looking at antitrust behavior as well as possible privacy law violations.

    It’s about time.

    For 23 years, I held a front-row seat to the advent and evolution of digital marketing, witnessing its inevitable rise and twisted consequences. I specialized in helping companies adapt to the digital revolution but abandoned the field when I realized that the capabilities we marketers supported, like harvesting data, profiling consumers and personalizing content, were damaging society and our democracy. This is why I no longer help brands, including several who made their mark bringing people together, tear our communities apart.

    I also left because I realized the game is rigged. The field is tilted, in favor of the two dominant players — Google and Facebook — who set the rules. This is the story of how we got here and what we can do about it.

    Advertising abandons context for eyeballs: In the 1990s, advertisers negotiated directly with online publishers to place ads on websites in context that was relevant to their products, just as they had with traditional publishers. This was generally a real negotiation on an even playing field. But as we gained more data about our customers’ behavior, we started placing ads wherever we could reach their eyeballs — regardless of the content or location.

    As the number of websites exploded, including thousands of small sites reaching niche audiences, we had to automate the process. By the early 2010s, a “negotiation” had transformed into a blind bidding war facilitated by layers of software programs — and every software provider levied a fee. These layers of advertising technology often meant advertisers did not even know where their ads were running or who was actually seeing them.

    Ad costs rise while ad value and consumer benefits plummet: In 2017, a scathing book about digital advertising called “ Bad Men” explained how “the amazing world of ‘ad tech’ magically turns a dollar of online advertising into three cents of value.” Fraud provided one explanation for this value loss. Ads could end up on any of thousands upon thousands of small, unknown sites. We were told we were gaining “reach” and finding new audiences. Then we discovered that many of these sites were gaining traffic from bots — software programs designed to repeatedly load webpages — and not actually people. To combat this, we added “verification services” to our ad-tech stack — for another fee.

    We also learned that these unknown sites could be toxic. We coined a new phrase, “brand safety,” to refer to managing the risk of advertising on sites that spread conspiracy theories, hate speech and propaganda. Now we needed “white lists” and “black lists” of content and sites where our advertising could or couldn’t appear. And thanks to the opacity and complexity of the supply chain of ad inventory, these lists didn’t always work.

    They still don’t. Recently, we’ve seen reports of how Google’s ad tech continues to place advertisements of major, unwitting consumer brands on websites with content pushing coronavirus (and other) conspiracy theories. Advertising also lost value as consumers embraced ad blockers to prevent websites from loading advertisements. Ironically, Google launched its own ad blocker for its Chrome browser, essentially enabling the tech giant to set advertising standards, charge advertisers to place ads in content that may violate those standards and then block those same ads from view.

    These issues in the supply chain became so egregious that some of the most prominent marketing executives in the world began calling them out. In 2017, Marc Pritchard, chief brand officer of Procter & Gamble, the world’s largest advertiser with a $7.5 billion annual advertising budget, described the digital display advertising supply chain as “ murky at best, fraudulent at worst.” A year later, Keith Weed, the chief marketing officer of Unilever, at the time the world’s second largest advertiser, referred to the digital media supply chain as the “ digital swamp.”

    Advertising technology had become so complex and fragmented that Luma Partners, a consulting firm, invented the LumaScape chart to help marketers figure out all the companies that sold trading services, social media monitoring, verification services and more. This iconic chart was used by other clients to determine which service markets had the greatest opportunities for profitable acquisition or consolidation.

    And that happened: Google went on a buying spree, and today their share of the key services in a marketer’s ad tech stack ranges from 40% to 90%. The company also holds a significant portion of the supply of all display ad space (20% is held by their YouTube unit alone). Despite the consolidation — or maybe because of it — things haven’t changed much since “Bad Men.” A recent report from the U.K. found that publishers receive only 51% of the money spent by advertisers to reach readers — leaving ad tech fees to swallow up most of the rest (and about 15% seems to just … disappear). Additionally, each of the 15 advertisers in the study appeared on an average of 40,524 websites, most of them classified as being “non-premium” ad inventory.

    In other words, now Google is doing what it used to take thousands of ad tech companies to do: take premium ad dollars and somehow magically drain them of most of their value.

    Facebook forces marketers to play its game while invading your privacy: That brings me to Facebook, another advertising-fueled business model and one unrivaled in its ability to target consumers at scale. Combined with its holdings Instagram and WhatsApp, Facebook has a 75% share of the social network market, and mostly thanks to Facebook’s 2 billion users, a 50% share of the total display ad supply. For any marketer that needs scale in social media, Facebook is the only game that matters. And since it has 100% control of access and pricing, marketers have to play by Facebook’s rules.

    Some of the ways Facebook plays are deeply troubling. For example, due to its reliance on advertising for its business model, the company has perfected user experience design intended to increase “engagement” — that is, keep people scrolling because Facebook’s “inventory” consists of users’ time and attention. People are more likely to “engage” — like, comment on and share — information that creates a visceral emotional response. So highly partisan content, hate speech and conspiracy theories get upranked by Facebook’s algorithms, spreading far more quickly than dry but authoritative information. Ultimately, the ability to microtarget content — including ads — to more precise slices of the user base means the most inflammatory ideas — some designed to foment divisions in society — are virtually invisible to those who might counter them with the usual antidote to false or inflammatory speech: more speech.

    Over time, Facebook even took on the creation of our ads: We would provide their ad sales team with hundreds of individual images, headlines and lines of copy, and the algorithm would optimize combinations that made consumers share, click or buy. Since advertisers pay more when a user takes some sort of action, Facebook has strong incentives to predict and then control users’ behavior. Frustratingly, we often had no idea what our “ads” even looked like or who saw them until a campaign was over.

    In fact, advertisers have little visibility into or understanding of any of Facebook’s algorithms. We could communicate with our own customers (a “custom audience”), find customers like them (a “look-alike audience”) or describe what kind of customers we wanted to show our ads. Then the algorithm took over, compounding what we had described. Sometimes, the algorithm predicted what kind of customer you were from your activities on (or off) Facebook, even things about you that you might have thought were private.

    We came to realize that the optimization combined with the predictive capability created the potential — and the reality — of bias, discrimination and exploitation. (Recently, a list of more than 500 advertisers, including Unilever, Coca-Cola, Levi’s, Starbucks and Ford, announced they would withdraw their advertising from Facebook — some included other social media platforms — for the month of July or longer, responding to a boycott campaign organized by civil rights groups. I see this is a welcome sign that advertisers are finally beginning to apply their leverage. And a series of civil rights audits — the final one published this past week — showed that the company still has a long way to go to address discrimination.)

    Facebook’s voracious data collection practices — not only on its own platform but across many platforms and devices — and how it analyzed, packaged and sold access to that data earned them billions of dollars in government penaltiesfor violating users’ privacy rights. Eventually, thanks to Cambridge Analytica and other scandals, consumers came to understand how their privacy was being violated, and how they were losing autonomy and freedom. It took a while, because Facebook’s terms of service — which theoretically spelled all this out — were so hard to find, to read and to understand that it wasn’t really clear. They certainly weren’t clear enough to make you leave Facebook for another big social network that might have treated your privacy with more respect. And soon, there really weren’t any other big social networks.

    To compete, advertisers must play by Google and Facebook’s rules: Today, Google and Facebook combined get just over 60% of every U.S. digital marketing dollar. As you might imagine, that kind of power and dominance in a market makes it difficult for advertisers of any size to negotiate.

    To be fair, the ad community was complicit in some of this. We chased our customers in their inexorable migration to the internet for information, entertainment and socializing. We loved and needed the cost efficiency of highly targeted digital media and craved more reach. We wanted to influence our customers at every step of their “purchase journey” (a framework we invented to feel good about tracking consumers across devices and platforms).

    So it’s been painful to realize that the very same capabilities we helped create — extracting information about users and their online behaviors; segmenting and profiling users for precision targeting; using algorithms to customize content to individual users; and designing user interfaces to increase time and engagement — are being used to distribute and amplify hate speech and propaganda, negate privacy and autonomy, manipulate and exploit behavior, and contribute to social isolation and addiction. No wonder consumers are losing trust in brands.

    Regardless of how antitrust law deals with Google and Facebook, there’s one thing that’s crystal clear. Both companies have accrued so much power that they’ve had a lasting negative impact on advertisers, their relationships with their customers and consumers themselves.

    We need a strong referee to change the advertising game and protect consumers: How do we solve the problems perpetuated by the dominance of Facebook and Google in the advertising market? It will probably take a system of solutions. The answer to many market problems is more competition and more choice, and I’m hopeful that antitrust enforcement will bring that about. A dedicated U.S. regulatory agency with specialized expertise and the agility it requires could also set and enforce new rules as a referee. Consumers also seem to be waking up to the harms of the digital platforms and may change some of their social behaviors. And given that 98% or more of these companies’ revenues come from advertising, I hope more of my advertising colleagues wake up to their power, too.

    Lisa Macpherson is a senior policy fellow at the Washington, D.C.-based nonprofit Public Knowledge. She is a former consumer marketing executive.

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    From: Sr K7/13/2020 2:08:39 PM
       of 15431
    There're new ATHs for all F A A N Alphabet (G).

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    From: Glenn Petersen7/30/2020 6:52:54 PM
    2 Recommendations   of 15431
    Alphabet reports first revenue decline in company history

    PUBLISHED THU, JUL 30 20203:31 PM EDT
    Jennifer Elias @JENN_ELIAS


    -- Google parent-company Alphabet reported its first revenue decline in history. The company beat most expectations with the exception of its Cloud division.

    -- Investors were non-plussed, and the stock barely moved after the report.

    Google parent-company Alphabet beat expectations for its second quarter earnings Thursday, but marked its first revenue decline in company history as the coronavirus pandemic slowed economic growth and advertisers pulled back spending during the quarter. The company’s stock barely moved after hours.

    Here’s how it did against Refinitiv consensus estimates:

    EPS: $10.13 (non-GAAP), vs. $8.21 estimated.
    Revenue: $38.30 billion vs. $37.37 billion estimated.
    YouTube advertising revenue: $3.81 billion vs. $3.78 billion, according to StreetAccount estimates
    Google Cloud revenue: $3.01 billion vs. $3.06 billion, as per StreetAccount
    Traffic acquisition costs (TAC): $6.69 billion vs. $6.67 billion, as per StreetAccount

    The company’s board also authorized the company to repurchase up to $28 billion of its Class C shares.

    CFO Ruth Porat said on an earnings call that consumers returned to more “commercial” search queries toward the end of the quarter, and advertisers began increasing their search spending, so search revenue ended the quarter about even from last year.

    However, she cautioned that it’s hard to gauge whether those trends will continue. “We believe it is premature to gauge the durability of recent trends, given the obvious uncertainty of the global macro environment,” she said.

    As a result of the customer pullbacks amid the Covid-19 pandemic and the general maturing ad market, Alphabet itself cut marketing spending by half and instituted hiring freezes for the second half of the year in anticipation of a slowdown, CNBC reported. Around that time, Alphabet CEO Sundar Pichai said Google would be pulling back on some of its investments for the rest of the year amid the Covid-19 crisis, starting with hiring.

    Analysts also peppered execs with question about future growth opportunities, given the slowdown in advertising growth. Pichai briefly pointed to newer businesses he sees longterm growth in such as cloud computing and artificial intelligence, as well as YouTube and shopping.

    Google’s “other revenue,” which includes hardware like its Pixel phones, came in at $5.12 billion, compared to $4.08 billion in the same quarter a year ago.

    Revenue from “Other Bets,” which includes Alphabet’s self-driving car business Waymo as well as life sciences company Verily, fell to $148 million compared to $162 million in the same quarter the year prior. The Other Bets showed an operating loss of $1.11 billion during the quarter.

    Alphabet added approximately 4,000 new employees, making the full-time workforce consist of 127,498 during the second quarter. That doesn’t include contractors. Porat said that the company will continue to decelerate year-over-year headcount growth.

    Google is also facing antitrust probes along the same lines by the Department of Justice and 50 attorneys general investigating Google company’s search and Android businesses. That is expected to result in legal action that could span issues ranging from its search product to digital advertising marketplace, according to a recent report from The Wall Street Journal.

    When analysts asked about this on the call, CEO Sundar Pichai said “I think the scrutiny is going to be here for a while.” He added that the company will “adapt.”

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    From: Glenn Petersen7/31/2020 2:33:08 PM
       of 15431
    The full hearing:

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    From: Glenn Petersen8/4/2020 8:32:55 AM
    2 Recommendations   of 15431
    Google owner Alphabet issues record $10 billion bond at lowest-ever price

    PUBLISHED TUE, AUG 4 20205:51 AM EDT
    Reuters via


    -- Alphabet borrowed $10 billion in the investment-grade corporate debt market on Monday, the Google parent’s largest-ever bond issue, which it secured at its lowest-ever cost of financing.

    -- Investor appetite was fierce for the tech giant’s six-part bond, as low interest rates and corporate bond buying from the Federal Reserve continues to support issuance.

    -- The deal garnered more than $31 billion in demand, according to Refinitiv IFR.

    Alphabet borrowed $10 billion in the investment-grade corporate debt market on Monday, the Google parent’s largest-ever bond issue, which it secured at its lowest-ever cost of financing.

    Of the $10 billion on offer, the $1 billion five-year tranche was issued at a coupon of 0.45%, the lowest coupon seen at that maturity since Apple Inc issued a $1.5 billion five-year note at 0.45% in 2013.

    Investor appetite was fierce for the tech giant’s six-part bond, as low interest rates and corporate bond buying from the Federal Reserve continues to support issuance. The deal garnered more than $31 billion in demand, according to Refinitiv IFR. Previously, Alphabet’s lowest coupon was 1.25% on a $1 billion May 2014 note.

    “We’re at a stage where these extremely high-quality issuers - of which Alphabet is one — are going to price very very tight. That’s because there are a lot of buyers who need short-term, don’t-need-to-think-about-it money. You’re getting two times the yield on the five-year Treasury,” said Tom Graff, head of fixed income at Brown Advisory.

    Last week Alphabet reported its first quarterly sales drop in its 16 years as a public company. Its share price was largely unmoved however, as the loss in sales was offset by a recovery in Google’s ads business.

    “There is a very narrow set of companies that were already super high quality, that are not impacted by this recession we’re going through right now. And Google is one of them,” said Graff.

    Alphabet’s five-year tranche priced just higher than’s 0.40% three-year note issued in June, among the lowest corporate coupons ever recorded. Alphabet’s 0.45% five-year tranche was however cheaper than Amazon’s June 2020 offering at the same maturity, which priced at 0.80%.

    Of the $10 billion offered, $4.5 billion from the seven-, 20- and 40-year tranches will be used for general corporate purposes, including acquisitions. The remaining $5.5 billion will be used for green initiatives, the company said, the largest-ever issue of corporate debt for environment, social and governance endeavors.

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    From: Glenn Petersen8/14/2020 5:03:05 PM
    2 Recommendations   of 15431
    Applicable to both AAPL and GOOGL:


    Apple’s walled garden gets an epic test

    By Tom Warren @tomwarren
    The Verge
    Aug 14, 2020, 10:12am EDT

    Epic Games executed its most ambitious Fortnite live event yesterday, leading both Apple and Google to remove one of the world’s most popular games from their app stores. It was a well choreographed sequence of events designed to highlight the power Apple and Google hold over app stores, especially Apple’s walled garden. Epic Games has now filed lawsuits against both Apple and Google in a battle that’s likely to last months. Epic Games is uniquely positioned to pull off a stunt like this, and now poses a serious threat to how Apple, in particular, operates its App Store and iOS operating system.

    Apple originally launched the App Store as a way to add value to the iPhone and sell more of its handsets. “It costs money to run it,” explained Steve Jobs in a Wall Street Journal interview at the launch of the App Store in 2008. “Those free apps cost money to store and to deliver wirelessly. The paid apps cost money, too. They have to pay for some of the free apps. We don’t expect this to be a big profit generator. We expect it to add value to the iPhone. We’ll sell more iPhones because of it.” Apple’s App Store is now a massive $519 billion developer ecosystem. It’s also a key part of Apple’s growing services business, which is the second biggest revenue driver for the company, behind the iPhone.

    Yet Apple has maintained a lucrative 30 percent cut of in-app purchases for digital goods for more than a decade now. It’s a policy that continues to annoy developers and the basis for a fresh and very visible challenge from Epic Games.

    The latest controversy kicked off when Epic implemented a “permanent discount” yesterday on the V-Bucks digital currency used within Fortnite to purchase skins and other virtual goods. The roughly 20 percent discount was made possible this week because Epic Games now offers its own in-app payment scheme within Fortnite on iOS and Android, blatantly bypassing Google and Apple app store guidelines. Both Apple and Google have, for years, forced developers to use their own in-app payment schemes that require developers to hand over a 30 percent cut of in-app purchases on digital goods, which is only lowered to 15 percent for long-term subscriptions after someone subscribes for at least a year.

    Apple and Google both argue this huge 30 percent fee is necessary for them to maintain their app stores and the security and simplicity they provide, but developers don’t agree. Others have tried to fight Apple’s 30 percent tax in the past by encouraging customers to sign up to services or purchase digital goods outside of Apple’s App Store. Some have compromised by jacking up their iOS prices to help recoup the lost 30 percent.

    While this policy is central to the battle between Epic Games and Apple and Google, the fight is ultimately about power, control, and Apple’s approach to games and the App Store. Epic Games is uniquely positioned to fight Apple and Google with a game that’s played around the world by more than 350 million people. The game maker demonstrated its own power yesterday.

    While most iOS and Android apps have to be approved and updated through Apple’s App Store or the Google Play Store, both companies make exceptions for games to allow developers to regularly update them within a shell app. You download a smaller container app, and then this app downloads the larger game files. Epic used this exception to its advantage, implementing its in-app purchase system without Apple or Google having to approve or deny it.

    This blatant disregard for the rules left Apple and Google no choice but to remove Fortnite from their app stores. Epic’s quick, calculated response shows that the real target of its attention (and attention seeking) is Apple.

    To start with, the company immediately launched a protest video inside the game designed to mock Apple’s iconic “1984” Macintosh commercial.

    Apple originally used this Super Bowl commercial to highlight IBM’s dominance back in 1984, comparing the corporation to the dystopian novel by George Orwell that focuses on totalitarian political systems. “Apple has become what it once railed against: the behemoth seeking to control markets, block competition, and stifle innovation,” says Epic Games. “Apple is bigger, more powerful, more entrenched, and more pernicious than the monopolists of yesteryear.”

    Epic’s also encouraging Fortnite players affected by the ban to tweet at Apple with the #FreeFortnite hashtag. Epic is using all of its own power to execute a marketing campaign designed to highlight Apple’s control and power.

    Epic made no such viral video or campaign targeting Google.

    Given that Google has largely followed in the footsteps of Apple’s App Store, it makes sense that Epic’s attention seeking would mainly target Apple. You can also still play Fortnite on Android by sideloading the app, avoiding the Google Play Store. There’s also a lot more controversy surrounding Apple’s policy decisions and the inability for consumers to install iOS apps from outside the App Store.

    Apple’s power and control over the App Store has come under increased scrutiny this year. Developers have typically avoided publicly calling out Apple for fear of retribution, but things are starting to change. Spotify was the first to file a formal antitrust complaint with the European Union last year, arguing that Apple harms consumer choice and stifles innovation through the rules it enforces on the App Store.

    The EU is investigating Apple’s App Store policies. Illustration by Alex Castro / The Verge`
    The EU opened a formal investigation into Apple’s App Store and Apple Pay practices earlier this year, and Epic Games, Match Group, and Rakuten all joined Spotify in protesting Apple’s App Store fees.

    At around the same time, Apple got caught up in a bitter dispute over Hey — a new subscription email app — just days before its annual developers conference. Apple initially approved the Hey app in the App Store before rejecting a bug-fix update because it claimed Hey violated the rules by not offering in-app subscriptions. This led to a public back-and-forth that highlighted the inconsistent way Apple applies its rules, and it revealed just how much developers are terrified of Apple.

    The Hey incident also led the chairman of the House antitrust subcommittee to label Apple a bully and say that Apple’s App Store fees are “highway robbery.” Separately, Apple CEO Tim Cook then appeared at a House Judiciary Committee hearing, alongside the CEOs of Google, Facebook, and Amazon a month later. The Big Tech antitrust hearing saw all four companies try to convince Congress that their business practices aren’t anti-competitive monopolies.

    Cook’s testimony was particularly interesting, as he tried to argue that Apple’s rules are applied fairly and evenly to all developers. “We treat every developer the same,” said Cook. “We have open and transparent rules. Those rules apply evenly to everyone.” We know this can’t be true. Apple created a special program for “premium subscription video entertainment providers” that allows apps like Amazon Prime Video to let existing subscribers avoid Apple’s in-app purchases and 30 percent cut.

    It’s a deal we still don’t really know enough about, although documents show that Apple brokered a special deal with Amazon that involved a 15 percent cut instead of the typical 30 percent for in-app purchases. Either way, it’s certainly not part of what Cook calls Apple’s “open and transparent rules.” This is just one, albeit significant, example of Apple not applying its rules consistently. Apple also tried to argue that “client apps” are allowed for business apps but not consumer ones in its justification for rejecting the Hey email app, even though this distinction never appears in Apple’s App Store guidelines.

    These inconsistencies and rules have irked developers for years, but many have simply been too scared to call Apple out. The iPhone maker is the judge and jury when it comes to approving apps, and if you’re rejected, then there’s often no appeals process unless you can generate the press and attention to force Apple to change its mind. Hey eventually returned to the App Store on a wave of publicity (and a minor functionality tweak to its app). It’s a playbook that Epic is now looking to reuse.

    Photo by Vjeran Pavic / The Verge
    Epic Games is aligning itself to lead the fight for the entire industry, and the company has prior form. A mysterious “configuration issue” saw Xbox and PS4 owners playing against each other for the first time in Fortnite back in 2017, just months after Sony had refused to enable cross-platform play for both Rocket League and Minecraft. It put the focus squarely on Sony blocking cross-play, and eventually led to a public outcry when it was revealed Sony was blocking Fortnite cross-play between PS4 and Nintendo Switch players. Sony eventually backed down, after Epic Games laid the blame squarely on the PlayStation maker. Cross-play has since become an increasingly common feature in everything from Call of Duty to No Man’s Sky.

    Epic Games’ rebellion against Apple and Google also comes just weeks after both Microsoft and Facebook spoke out against Apple. Microsoft condemned Apple for blocking its new xCloud game streaming service on iPhones and iPads. “Apple stands alone as the only general purpose platform to deny consumers from cloud gaming and game subscription services like Xbox Game Pass,” said Microsoft. Google is allowing Microsoft to launch xCloud on the Google Play Store, although in-app purchases on Android will only be available through Samsung’s Galaxy Store. Samsung also demands 30 percent of in-app purchases, but it also makes it clear that developers can negotiate an “alternative revenue share rate” during the certification phase for apps.

    Facebook’s criticism of Apple’s App Store policies went a step further than Microsoft’s, describing Apple’s move to block its mini-games inside a Facebook Gaming app as a “shared pain across the games industry, which ultimately hurts players and devs and severely hamstrings innovation on mobile for other types of formats, like cloud gaming.”

    Epic Games CEO Tim Sweeney is determined to fight Apple and Google. Photo by Rachel Luna/Getty Images
    It’s clear that Epic Games wants things to change for both its own benefit and the broader benefit of the gaming community. Most smaller developers can’t afford to take on Apple or Google, but Epic Games is now valued at $17.3 billion and can certainly put up a fight. Games are also a key part of any mobile app store and a big part of how Apple generates revenue through its own App Store. Developers want a fairer cut of that revenue, but Epic also wants to shift Apple’s control here.

    “We’re fighting for open platforms and policy changes equally benefiting all developers,” says Epic Games CEO Tim Sweeney. “And it’ll be a hell of a fight!” It’s a fight that Epic has prepared for, and its lawsuit specifically alleges that Apple has a monopoly in the form of the iPhone, its iOS ecosystem, and the App Store that binds them all together.

    Epic has enlisted the counsel of Cravath, Swaine & Moore, which includes Christine Varney, a former US assistant attorney general of the antitrust division for the Obama administration. Varney also served as the Federal Trade commissioner for the Clinton administration. Katherine Forrest, a partner at Cravath, is also part of Epic’s lawsuit. Forrest is a former judge and antitrust litigator, and the Cravath law firm was also part of Qualcomm’s lawsuit against Apple.

    It’s easy to dismiss this as giant companies squabbling with each other, filing lawsuits, and ruining Fortnite on mobile devices, but the resolution will have far-reaching consequences for Epic Games and the many other developers that rely on mobile app stores. Apple has met a defiant competitor that’s been able to bypass App Store rules and put two prices side by side to demonstrate the “Apple tax” that so many developers are upset about. Epic Games might not win its lawsuit in the US, but this isn’t about a single lawsuit. Epic is weaponizing Fortnite as a means to highlight Apple’s App Store policies and rally hundreds of millions of players to demand change.

    Epic Games demonstrates the “Apple tax.

    It’s a risky move that Epic might be forced to reverse, especially as mobile players could miss Fortnite’s next season. Epic has gambled that most people already have Fortnite installed on their phones and tablets, so it’s unlikely to immediately anger its community, which can now see how much cheaper V-Bucks could be. More importantly, it has put the App Store, Apple, and Google directly in the spotlight for a showdown that will involve lawsuits, regulators, and the fate of mobile app stores.

    Epic doesn’t want Apple to pay its way out of a lawsuit or reach a special deal with the company. It wants regulators in Europe and the US to stand up and pay attention. Epic isn’t your typical Fortnite player that hides in a bush until they’re the last person standing, it’s trying to be the loud and colorful llama standing strong as the circle shrinks around Apple and Google.

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