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The fight between Apple, whose market cap has now crossed $2 trillion dollars, and Epic Games, maker of Fortnite which has been installed 133.2 million times on Apple devices, has elements of a rapid chess game. The moves came fast, almost as if they are spontaneous, but you knew that a lot of preparation went into making them.
- Fortnite added a feature into its app that allowed users to pay directly to Epic, bypassing Apple payments system. Users got a 20% discount. Epic didn’t have to pay a 30% commission to Apple.
- Apple immediately kicked Fortnite out of its App Store, saying it violated the rules it had agreed to.
- Fortnite, in turn, launched a campaign, FreeFortnite, released a video parodying Apple’s classic 1984 ad (“Join the fight to stop 2020 from becoming ‘1984.’), and filed a lawsuit accusing Apple of anti-competitive behaviour.
Epic was, in fact, playing simultaneous chess. Even as it made its moves against Apple, it also filed a case against Google. The moves were different. Google, like Apple, charges 30% commission, but unlike Apple, allows users to install apps from any source. But, Epic complained that it keeps warning that the app might be insecure.
Everyone is keen to know what the next moves will be—because it could not only dent Apple’s strategy, but it could impact other platforms, middlemen or gatekeepers such as Amazon, Uber and Swiggy.
Three things stand out in this battle:
- Epic is no pushover. It has 350 million users, many of them passionate. It is valued at $17.3 billion—and its backers include Walt Disney, Tencent and Sony. Jack Sweeney, its CEO, has been preparing for this battle for a long time. He has fought a similar battle previously against Steam, an online store, by launching a rival retail store. This time it’s not in the marketplace, but in courtrooms. And Epic has signed up some legal heavyweights—one of its lawyers ran the US Justice department’s antitrust division during President Barack Obama’s time—to take on Apple.
- The timing is crucial. Many believe that Apple CEO Tim Cook got away lightly during the recent congressional hearing. Customers might love its products, its investors might love its stock, but discontent against Apple has been piling up. Last year, Spotify filed an antitrust case against Apple with the European Commission. Netflix and Match Group, maker of Tinder, have fought with Apple before, and are backing Epic in this battle. Protonmail has criticized Apple for not allowing its iPhone apps to advertise the lower rate it charges on the web. Facebook, which is aggressively pushing paid events, has complained about Apple’s in-app fees. Similarly, Microsoft is miffed with Apple for not allowing its Xbox Game Pass service on iPhone and iPad.
- It’s not just about money. Money is a crucial part here. Apple started charging app developers 30% when it launched its App Store back in 2008 (iPhone initially didn’t have an App Store, it came later). Developers seemed fine with it partly because Apple had made digital transactions a lot easier, and partly because many were anchoring the number against the 35% that cable TV companies were charging for pay-per-view movies (which in turn was better than what retailers were charging to sell CDs in stores). But, now there are more options, and many see the distribution of apps and games as merely moving data (including money). A former senior App Store executive has said the charge should be closer to 3% that credit card companies charge to process payments. Apple might still bring its charges down. Already, it charges only 15% for some transactions.
However, the fight is bigger. Whatever discomfort one may have with walled gardens and sandboxes, a key value that Apple brings to the table is its promise to protect its users against the financial and data risks on the internet. Apple users have given up some of their freedom (to tinker with the device, sideload apps, choice of payment systems) in return for its promise. In a recent piece, Benedict Evans argued that “The sandboxed app store model is not some curious, incidental feature of modern smartphones—rather, this is an essential and hugely important part of why they have such a strong software ecosystem.”
The big question then is not whether 30% is high or low, but whether the value that Apple extracts from its platform, from its ecosystem, from its walled garden, is more or less than the value that developers and users derive from the platform.
What do you think?
The Beckn Protocol and the source of trust
In his latest column in Mint (and in an expanded version in his newsletter), Rahul Matthan quotes Tim Berners-Lee, the creator of the World Wide Web, to highlight the general discontent with Big Tech. “[F]or all the good we’ve achieved the web has evolved into an engine of inequity and division; swayed by powerful forces who use it for their own agendas.”
Matthan’s column focuses on a different approach to the solution. Those who have followed Founding Fuel or read The Aadhaar Effect, will be familiar with the approach—build digital public infrastructure, upon which innovations can be built. The idea has also evolved—from Aadhaar to UPI to Societal Platforms.
He has a fresh example. Beckn. It’s from some of the same people behind Aadhaar, UPI and Societal Platforms. Nandan Nilekani and Pramod Varma.
“At its core, Beckn is nothing more than a set of protocols that enable market participants in any commercial ecosystem to interact directly with each other without the need for a platform intermediary. These protocols offer a range of commercial functionality by laying down the specifications for a large number of interoperable microservices. Think of them as Lego bricks that can be assembled into different configurations to suit the specific needs of a wide variety of commercial enterprises.”
Here’s the tough part though:
“In order to become the foundational ecommerce architecture that it aspires to, it will have to convince existing businesses to make their services interoperable with other Beckn providers. This will not be easy and until it achieves critical mass, far more businesses will hold back than will agree to participate—preferring to take their chances with the more established digital commerce platforms than take a risk on a new idea.”
The big lesson from Apple is that trust is hard to build. The success of protocols (and platforms that come on the top of it, and the products and apps that are built on the top of the platforms) will depend not just on where the data flows, but also on what the source of trust is. It often comes from keeping the outcomes within bounds (in a way that’s the very definition of quality). But, technology tends to breach both upper and lower limits, it amplifies good and bad. One of the biggest challenges before our society is how to use tech to amplify the good, while keeping it from amplifying the bad. The source of trust is the ability and willingness to do that.
The trouble with algorithms
The UK recently pulled back two algorithmic tools underlining the dangers of pushing a technology too early.
- It’s suspending the use of a streaming algorithm to assess visa applications that it introduced in 2015. The tool tagged applicants into red, amber and green based on their risk profiles. It had a huge impact on determining the outcome of visa applications and was accused of being discriminatory.
- It also scrapped the exam results generated by an algorithm that turned out to be biased against students from poorer backgrounds.
There are two dangers in pushing technology too fast.
- The first danger is direct. Its flaws will hurt some people as visa applicants and several students found out.
- The second is indirect. It creates a negative perception about the technology—even when its flaws are fixed, there is huge resistance from people to try it out. In India, poor implementation of the metro line in Kolkata (the 17-km stretch took 22 years, overshooting the budget 14 times, and causing accidents during construction) stopped other cities from going for Metro for years. The experience made politicians across the country shy away from taking up another metro project for years. Eventually, Delhi Metro allayed those fears.
Another reason specific to concerns about technology is that we tend to mix up different layers—protocols, platforms and products. Problems with a bad implementation of a product on a platform or protocol tend to be seen as a problem with everything. For example, in India, a badly designed application using Aadhaar, India’s digital identity system, was seen as a problem with Aadhaar itself, and not merely as a problem with the specific application (or even factors that had nothing to do with technology.)
Solving technology problems is often tough because it can’t be solved by fixing the code. Because technology comes to life in society, the problems can be solved only when people get together with an intent to solve the problems.