Linked List: July 28, 2016

Thursday, 28 July 2016

The WSJ on Apple’s ‘Hard-Charging’ Negotiations With TV Networks ★

Shalini Ramachandran and Daisuke Wakabayashi, reporting for the WSJ:

Some people close to the talks say Apple was reluctant to share important details, including how subscribers would navigate the channel menu. Comcast’s Mr. Roberts didn’t see Apple’s proposed user interface.

“How about you sketch it on the back of this napkin?” Apple was asked at one meeting, say former Time Warner Cable executives. An Apple official replied that the software would be “better than anything you’ve ever had.”

Of course Apple wasn’t going to show Comcast the interface. They didn’t show the iPhone to AT&T (then Cingular) back in 2006, either. And the fact that these TV executives are now talking to the news media about it shows why. Entertainment industry executives have notoriously loose lips.

Mr. Cue is also known for a hard-nosed negotiating style. One cable-industry executive sums up Mr. Cue’s strategy as saying: “We’re Apple.”

In 2013, Mr. Cue met with Mr. Britt, Time Warner Inc. CEO Jeff Bewkes and other executives in Mr. Britt’s office overlooking Manhattan’s Central Park. Time Warner owns HBO, TNT, CNN and other channels. Apple’s Mr. Cue arrived 10 minutes late and was wearing jeans, tennis shoes with no socks, and a Hawaiian shirt, says a person familiar with the meeting. The other executives were wearing suits.

The thing is, they are Apple. Apple wants deals with these TV networks, but doesn’t need them. Matthew Panzarino:

Translation: Apple wasn’t budging and can afford to wait so content providers are playing this out in the press.

Josephine Wolff: ‘The DNC Should Never Have Been Running Its Own Email Server’ ★

Josephine Wolff:

The DNC is never going to be the equal of these companies employing thousands of engineers and managing millions of email accounts when it comes to security, so perhaps it should stop trying and let the experts take over.

That’s a suggestion bordering on sacrilege to many people who care about security, who believe real security and strong encryption are possible only when you manage your own data and encryption keys yourself. And it’s true that trusting a company to manage your email reduces your security in some ways. For one thing, it certainly means that company has access to all your email messages. For another, it may mean that law enforcement or intelligence officials can access those messages without your knowledge through court orders or mutual agreements with that company. So there are definitely trade-offs, and if those are the security threats you’re most worried about, and you’re equipped to configure your own server setup, then you probably should not entrust your email to a third-party provider.

If, however, you’re more concerned about your email being read by external attackers in, say, Russia, then the perceived security of handling all your own email may do more harm than good. And if your area of expertise is political strategizing and maneuvering, rather than encryption protocols and firewall configurations, you would almost certainly be better off delegating responsibility for your email to a company that knows what it’s doing.

I’ve been thinking about this ever since the DNC emails leaked — and in light of Hillary Clinton’s controversy over the use of a private email server. Should these organizations even be using email at all? Server-side storage makes searching and access to one’s account from multiple devices more convenient, but it exposes these organizations to huge risk. Mobile messaging with end-to-end encryption (Signal, iMessage, WhatsApp) is in many ways less capable than email, and eliminates certain decades old conventions like “forwarding”, but it’s inherently more secure.

Email might be too ingrained to walk away from. It’s universal. But the high-profile targets like the DNC (or the United States Secretary of State) running their own servers is certainly not the answer. What’s the best solution?

Update: Slack is an obvious and common choice. But the difference between Slack and email is that email allows for communication with the outside world, not merely internal communication with a team.

One More on the Quarterly Results Front: Twitter ★

Mike Isaac, reporting for the NYT:

On Tuesday, Twitter’s ailing position among its peers was underscored once more when the company reported its worst quarterly revenue growth ever and only a slight increase in users for the second quarter. The company also signaled that its prospects were unlikely to improve in the short term.

Twitter posted revenue of $602 million for the quarter, up 20 percent from a year ago and below Wall Street estimates of $607 million. Its net loss narrowed to $107 million, or 15 cents a share. Twitter’s users grew 3 percent from a year ago, to 313 million.

Twitter’s advertising strategy has never made sense to me. My gut feeling is that Twitter is not long for this world as an independent company.

Facebook Reports Huge Increase in Profit, Almost All of It Mobile ★

Over $2 billion in profit for the quarter, up from just $719 million a year ago. That’s amazing growth. Among their highlights:

Daily active users (DAUs) — DAUs were 1.13 billion on average for June 2016, an increase of 17 percent year-over-year.

Mobile DAUs — Mobile DAUs were 1.03 billion on average for June 2016, an increase of 22 percent year-over-year.

Mobile advertising revenue — Mobile advertising revenue represented approximately 84 percent of advertising revenue for the second quarter of 2016, up from approximately 76 percent of advertising revenue in the second quarter of 2015.

They’ve completely pivoted from a website meant for PC browsers to a mobile company with a slew of popular apps.

The New York Times puts this in context:

The rise was driven by strong mobile ad sales, as well as a steady ascent in its number of users. Facebook now counts 1.71 billion monthly active users, up 15 percent from a year ago. And in a sign of how indispensable the social network is to people, the amount of money the company can squeeze from each user globally jumped to $3.82, up from $2.76 a year earlier. In the United States and Canada, Facebook’s most valuable markets, the company makes an average of $14.34 per user.

Alphabet’s ‘Moonshot Projects’ Lost $859 Million Last Quarter ★

Seth Fiegerman, reporting for CNN Money:

Alphabet, the parent company of Google, saw sales from its so-called moonshot projects hit $185 million in the quarter ending in June, more than doubling sales from the same quarter a year ago. But the company is losing far more money from those efforts. Losses for “other bets,” as Alphabet characterizes the segment, rose to $859 million for the quarter from $660 million a year earlier.

Those bets include risky, capital intensive projects like self-driving cars and Google Fiber, which delivers high-speed Internet. Most of Google’s sales in this group are said to come from Fiber as well as Nest, and Verily, a life sciences division. Those mounting losses may put a dent in Alphabet’s pitch to Wall Street that it can be more responsible with its spending.

Alphabet as a whole reported $4.88 billion in profit for the quarter, so these moonshots are well within the company’s means, but you can see why investors might want to see the company shut these things down.

They’re obviously worried about it. Last week they granted Conor Dougherty of The New York Times behind-the-scenes access, which included this observation:

What all these efforts have in common, besides imaginative power, is that they do not make any money. X’s budget and head count are a secret, but shareholders’ perceptions about the division were aptly summed up by a poster board in its Mountain View, Calif., offices. It had a picture of a burning $100 bill followed by, “Investors think we do this.”

And:

The combination of big ideas, lofty rhetoric and a strict code of secrecy has made X a source of endless speculation and conspiracy theories. The one you hear most frequently, usually from competitors and venture capitalists, is that X is a giant public relations plan to distract regulators from Google’s search business, which is under scrutiny around the world.

Cynical though that sounds, it points to something that seems fundamentally true: Many of history’s great corporate research efforts, like Bell Labs and Xerox PARC, have come from companies that were monopolies or close to it.

WSJ: ‘Google Profits Surge on Strong Ad Demand’ ★

Jack Nicas, reporting for the WSJ:

Alphabet’s growth continued in the second quarter as companies bought more ads on its search engine and other products, while users increasingly clicked on those ads. Alphabet revenue, fueled almost entirely by Google’s advertising business, rose 21 percent to $21.5 billion in the second quarter from a year ago, or 25 percent on a constant currency basis. Excluding payments to advertising partners, revenue was $17.5 billion, beating analysts’ estimate of $16.86 billion.

Net profit for Alphabet rose to $4.88 billion, or $7 a share, from $3.93 billion, or $4.93 a share, a year prior. Excluding certain items, Alphabet earned $8.42 a share, beating analysts’ estimates of $8.04 a share.

Another interesting point of comparison: Samsung’s handset business alone generated about the same results as Alphabet as a whole last quarter.

The iPod Classic and Obsolescence ★

Lindsay Zoladz, writing for The Ringer:

“Wow,” a man said to me recently on the subway, “I haven’t seen one of those things in years.” He gestured toward the scuffed-yet-still-sleek, aluminum-colored rectangle in my hand — a 160GB sixth generation iPod Classic. I blinked for a moment. We were not talking about, say, a quill pen, a monocle, or a bottle of Crystal Pepsi, but an electronic device I had purchased in 2010.

I knew what he meant, though. Technology moves at hyperspeed. Apple has created and helped universalize a particular kind of planned obsolescence — its products have to go out of fashion and/or break every few years, to ensure you’ll buy a newer one — and as a result, in the eyes of the general public, Last Year’s Model has never looked like more of an antique.

It strikes me as odd to state as fact that Apple’s products are designed to “break every few years” one paragraph after saying she still uses a six-year-old iPod.

Michael Heilemann, in a comment:

Eh… Isn’t it more that technology, and especially Apple, has a tendency to move so fast that obsolescence naturally occurs?

Exactly. The idea is even more absurd when you consider that Apple products hold their value on the resale market far longer than competing products. As I wrote three years ago:

If your car breaks down after just a few years, are you not more likely to replace it with a different brand? To posit that Apple customers are somehow different, that when they feel screwed by Apple their response is to go back for more, is “Cult of Mac” logic — the supposition that most Apple customers are irrational zealots or trend followers who just mindlessly buy anything with an Apple logo on it. The truth is the opposite: Apple’s business is making customers happy, and keeping them happy. They make products for discriminating people who have higher standards and less tolerance for design flaws or problems.

DigiTimes Hints at Updated MacBook Air With USB‑C ★

Cage Chao and Joseph Tsai, reporting for the notoriously unreliable DigiTimes on the industry’s slow uptake of USB-C:

Currently, Apple has decided to adopt the USB Type-C interface for its MacBook Air, while Asustek Computer and Hewlett-Packard (HP) are upgrading one of their notebooks’ regular USB port to the Type-C. Lenovo, Acer and Dell are still evaluating the option.

It is possible that Apple has a significant update to the MacBook Air in the works. But my hunch remains that they do not. If there’s any truth to the above, I’m guessing the above is actually the new MacBook Pro.

Samsung Posts Highest Profits in Over Two Years Thanks to the Galaxy S7 and S7 Edge ★

Harish Jonnalagadda, reporting for Android Central:

Strong sales of the Galaxy S7 and S7 edge have led to Samsung posting an operating profit of $7.22 billion (8.14 trillion won) in Q2 2016, up 18% from the same period a year ago. Overall revenue was $45.1 billion (50.94 trillion won), a 5% increase from Q2 2015.

The handset business accounted for half of Samsung’s bottom line, with the division netting $3.83 billion (4.32 trillion won) in profit on a revenue of $23.5 billion (26.56 trillion won). Samsung noted that the larger and more expensive S7 edge model made up over half of the sales of its flagship series, with the Galaxy A series and J series also seeing an uptick in sales in the mid-range and low-end segments.

Those numbers for revenue and profit are remarkably similar to Apple’s for the same quarter ($42.4 billion in revenue, $7.8 billion in profit). Android isn’t making money for handset makers in general, but it is for Samsung.

Update: I took the numbers from Android Central at face value, but should not have. “Operating profit” is not the value to compare, net profit is. Samsung’s net profit for the quarter was $5.2 billion.

Apple Celebrates One Billion iPhones Sold ★

Not bad for nine years, but even more impressive when you consider they reached 500 million just two years ago.

Update: Engadget, shockingly, filed the news under “finally”.

Apple Hires QNX Founder Dan Dodge to Work on Car Project ★

Mark Gurman and Alex Webb, reporting for Bloomberg:

Apple Inc. has hired the former head of BlackBerry Ltd.’s automotive software division as new leadership at the iPhone-maker’s car team places increased emphasis on developing self-driving technology, according to people familiar with the project.

Dan Dodge, the founder and former chief executive officer of QNX, the operating system developer that BlackBerry acquired in 2010, joined Apple earlier this year, the people said. He is part of a team headed by Bob Mansfield, who, since taking over leadership of the cars initiative — dubbed Project Titan — has heralded a shift in strategy, according to a person familiar with the plan.

The initiative is now prioritizing the development of an autonomous driving system, though it’s not abandoning efforts to design its own vehicle. That leaves options open should the company eventually decide to partner with or acquire an established car maker, rather than build a car itself.

Self-driving capabilities have always been part of Apple’s car project. It’s obviously the future. Hiring Dodge seems like a big deal, though. QNX is one of the preeminent real-time operating systems. As Apple creates its own real-time OS, it’s surely helpful to have an executive with industry-leading experience in the field.

(This is Gurman’s first story for Bloomberg after leaving 9to5Mac.)