Economics

Axie Infinity (AXS) Crypto Game Promised NFT Riches, Gave Ruin – Bloomberg

Over the course of his life, Alejo Lopez de Armentia has played video games for a variety of reasons. There was the thrill of competition, the desire for companionship, and, at base, the need to pass the time. In his 20s, feeling isolated while working for a solar panel company in Florida, he spent his evenings using video games as a way to socialize with his friends back in Argentina, where he grew up.

But 10 months ago, Armentia, who’s 39, discovered a new game, and with it a new reason to play: to earn a living. Compared with the massively multiplayer games that he usually played, Axie Infinity was remarkably simple. Players control three-member teams of digital creatures that fight one another. The characters are cartoonish blobs distinguished by their unique mixture of interchangeable body parts, not unlike a Mr. Potato Head. During “combat” they cheerily bob in place, waiting to take turns casting spells against their opponents. When a character is defeated, it becomes a ghost; when all three squad members are gone, the team loses. A match takes less than five minutes.

relates to A Billion-Dollar Crypto Gaming Startup Promised Riches and Delivered Disaster
Armentia at home in Florida.
Photographer: Josh Aronson for Bloomberg Businessweek

Even many Axie regulars say it’s not much fun, but that hasn’t stopped people from dedicating hours to researching strategies, haunting Axie-themed Discord channels and Reddit forums, and paying for specialized software that helps them build stronger teams. Armentia, who’s poured about $40,000 into his habit since last August, professes to like the game, but he also makes it clear that recreation was never his goal. “I was actually hoping that it could become my full-time job,” he says.

The reason this is possible—or at least it seemed possible for a few weird months last year—is that Axie is tied to crypto markets. Players get a few Smooth Love Potion (SLP) tokens for each game they win and can earn another cryptocurrency, Axie Infinity Shards (AXS), in larger tournaments. The characters, themselves known as Axies, are nonfungible tokens, or NFTs, whose ownership is tracked on a blockchain, allowing them to be traded like a cryptocurrency as well.

There are various ways to make money from Axie. Armentia saw his main business as breeding, which doesn’t entail playing the game so much as preparing to play it in the future. Players who own Axies can create others by choosing two they already own to act as parents and paying a cost in SLP and AXS. Once they do this and wait through an obligatory gestation period, a new character appears with some combination of its parents’ traits.

Every new Axie player needs Axies to play, pushing up their price. Armentia started breeding last August, at a time when normal economics seemed not to apply. “You would be making 300%, 400% on your money in five days, guaranteed,” he says. “It was stupid.”

Axie’s creator, a startup called Sky Mavis Inc., heralded all this as a new kind of economic phenomenon: the “play-to-earn” video game. “We believe in a world future where work and play become one,” it said in a mission statement on its website. “We believe in empowering our players and giving them economic opportunities. Welcome to our revolution.” By last October the company, founded in Ho Chi Minh City, Vietnam, four years ago by a group of Asian, European, and American entrepreneurs, had raised more than $160 million from investors including the venture capital firm Andreessen Horowitz and the crypto-focused firm Paradigm, at a peak valuation of about $3 billion. That same month, Axie Infinity crossed 2 million daily users, according to Sky Mavis.

If you think the entire internet should be rebuilt around the blockchain—the vision now referred to as web3—Axie provided a useful example of what this looked like in practice. Alexis Ohanian, co-founder of Reddit and an Axie investor, predicted that 90% of the gaming market would be play-to-earn within five years. Gabby Dizon, head of crypto gaming startup Yield Guild Games, describes Axie as a way to create an “investor mindset” among new populations, who would go on to participate in the crypto economy in other ways. In a livestreamed discussion about play-to-earn gaming and crypto on March 2, former Democratic presidential contender Andrew Yang called web3 “an extraordinary opportunity to improve the human condition” and “the biggest weapon against poverty that we have.”

By the time Yang made his proclamations the Axie economy was deep in crisis. It had lost about 40% of its daily users, and SLP, which had traded as high as 40¢, was at 1.8¢, while AXS, which had once been worth $165, was at $56. To make matters worse, on March 23 hackers robbed Sky Mavis of what at the time was roughly $620 million in cryptocurrencies. Then in May the bottom fell out of the entire crypto market. AXS dropped below $20, and SLP settled in at just over half a penny. Instead of illustrating web3’s utopian potential, Axie looked like validation for crypto skeptics who believe web3 is a vision that investors and early adopters sell people to get them to pour money into sketchy financial instruments while hackers prey on everyone involved.

Axie’s Fall

Sources: Coinbase, Sky Mavis

As Sky Mavis’s revolutionary rhetoric began to look increasingly hollow, the company shifted its story. In December it quietly altered its mission statement, deleting the phrase “play-to-earn” and replacing it with the mushier “play-and-earn.” Days after the hack it launched Axie: Origin, a long-awaited new version with upgraded graphics and tweaks to the gameplay. Crucially, this iteration doesn’t involve cryptocurrencies at all, because Sky Mavis has acknowledged that many players are willing to engage with a new game only if the complications of crypto are removed. The plan is for Origin to supplant the original game, with the noncrypto version attracting a broad base of players. Of course, Sky Mavis would still also offer a full version with the original crypto economy.

Company executives are trying to give the impression that nothing is wrong, but a clear sense of tension has edged in since Axie token values began to plummet late last year. When I first spoke to Sky Mavis co-founder Jeffrey Zirlin in late January, he told me he was living somewhere in the US but paused when I asked where in the country he was. “I could live anywhere, I don’t usually leave my room,” he said. He did finally give me a more specific location, but asked me not to make it public, noting that his team has gotten death threats. “We have to be careful revealing our location, just like the president doesn’t always have to reveal his location,” he said. “We’re kind of like heads of state.”

Zirlin said he empathized with people who’d lost money—life-changing sums, in some instances. But he added that a crash that got rid of Axie profiteers could have its upside, too. “Sometimes having to flush out the people who are just in it for the money,” he said, “that’s just the system self-correcting.”

The history of video games has seen plenty of in-game economies with real-life stakes for its players. Axie’s entry to the marketplace can be traced most directly to a fad known as Cryptokitties. These tradable, breedable digital pets, which surfaced in the fall of 2017, during the first crypto boom, were a proof-of-concept for NFTs. As with many things in crypto, the simple fact that they could be bought and sold was enough to spark speculative fervor. Within a few months, Cryptokitties peaked, some selling for six-figure sums.

The Sky Mavis co-founders originally met in forums for Cryptokitties, according to Zirlin. He’d fallen hard for the digital collectibles while living on New York’s Lower East Side and working in finance. In 2018 he moved to Ho Chi Minh City, where another Sky Mavis co-founder, Trung Nguyen, had already begun working on a game that would place Cryptokitty-like characters at the center of a bigger gaming universe. Nguyen had previously founded a social network for food bloggers, then spent three years working for a financial software company co-founded by American venture capitalist Joe Lonsdale. Another co-founder, Chief Operating Officer Aleksander Leonard Larsen, worked as a community manager for a Norwegian gaming studio. Creating Axie Infinity started in earnest just as the 2017 crypto boom was giving way to the first crypto winter.

The resulting game was hardly a revelation; Sky Mavis’s initial success owed more to a clever innovation in its technical architecture. At that point, anyone building NFT games was relying on the Ethereum blockchain to handle transactions, leaving character trading and other in-game actions subject to its inconsistent speed and notoriously high transaction fees. Sky Mavis built its own blockchain, Ronin, which lowered costs and improved speed by centralizing the key function of verifying transactions. Purists might have taken issue with the decision to abandon the core blockchain precept of decentralization, but on the other hand, the game actually worked.

The other key to Axie’s popularity was an economy based on a form of paid labor that has long existed in gaming: the for-profit player. People who owned Axies could rent them out to players, usually in lower-wage regions in Southeast Asia or Latin America, who treated the game as if it were a job. Players who don’t own their Axies are akin to digital sharecroppers, but they’re widely referred to as “scholars,” because they’re supposedly using their rental Axies to learn about the broader potential of investing in crypto. In Axie’s biggest market, the Philippines, the average daily earnings from May to October 2021 for all but the lowest-ranked players were above minimum wage, according to the gaming research and consulting firm Naavik. Of course, actually converting this income into usable form meant cashing out their cryptocurrencies, at a time when many people involved in Axie were saying cryptocurrencies were only going to get more valuable.

The rise of the scholar class made Axie look like a hit. Player-speculators wanting to get in early flooded the game, sending the prices of its digital assets skyrocketing. Many were open about their mercenary intentions. “I started playing because earning money playing video games seemed pretty unbelievable and amazing,” says Filip, a Slovakian in his 30s who asked to be identified only by his first name. While he doesn’t mind playing Axie, exactly, he acknowledges he’s in it 100% for the money and 0% for recreation. “When I want to play games for fun, I play real games,” he says.

That Axie was widely viewed primarily as a way to make money has proven a major problem for its virtual economy. The game is designed to offer ways to both earn and spend SLP within the game. Any tokens spent within the game just disappear. But play-to-earners instead cash out all SLP by selling them on crypto markets, meaning the total number of tokens increases over time. The additional supply depresses prices, in a crypto version of hyperinflation. Players are constantly hounding Sky Mavis to tweak how the game works in ways that would reduce the amount of SLP in circulation.

SLP prices peaked last July, but as they dropped, players began hoarding tokens in hopes of a market recovery. This strategy is self-defeating, according to Lars Doucet, co-author of a detailed—and overwhelmingly negative—analysis of Axie’s economy published by Naavik in November. Doucet says Axie is stuck with the “sleeping dragon” problem: Every time SLP value begins to rise, the dragons—the people who have been waiting to cash in their SLP—wake up and liquidate their stashes, pushing the price back down.

Even before the broader collapse of crypto, Sky Mavis struggled to address the issues with Axie’s internal economy. A financial system consisting of people all hoping to put in $1 and take out $2 can last only as long as someone else shows up believing others will come in after them with more fistfuls of cash. Once Axie began looking less profitable, its ability to draw new players decreased, making it even less profitable and setting off a vicious cycle. “Axie has just been this fascinating tale of people learning hard lessons of economics and monetary policy in microcosm,” says Doucet.

relates to A Billion-Dollar Crypto Gaming Startup Promised Riches and Delivered Disaster
A couple in suburban Manila on the Axie Infinity site.
Photographer: Jam Sta Rosa/Getty Images

Armentia first heard of Axie last summer from a childhood friend living in Argentina, where many people had started playing the game for money. He and his mother had emigrated to Florida during Argentina’s 2001 financial crisis, when he was a teenager. After the solar panel company he worked for in his 20s went out of business, he started buying luxury goods in bulk, then retailing them at marked-up prices, mostly on cruise ships. That business crashed when the pandemic hit, leaving him in need of a new venture.

Sitting at home with little to do but putter around the internet and take care of his young daughter, Armentia was well aware that people were making money in weird new investments while his savings sat in a bank account. He dabbled in meme stocks and began looking at crypto. By late last summer, he put his first $3,000 into Axie and was soon spending most of his time on the game.

In February he agreed to have me over to show me his typical workday. Axie was foundering, but he was pouring money into what he saw as a temporary market swoon. In the week before I showed up he’d bought more than $5,000 worth of SLP at less than 2¢, figuring the price was bottoming out.

When I arrived in Miami, Armentia told me that his wife, who was skeptical at best about his video game business, had forbidden him from letting some guy he’d met on Reddit into their house. So we met in the middle of the afternoon at a Starbucks in a strip mall. Armentia showed up wearing a baseball hat and a T-shirt with a palm tree on it. He has the stubble and tired eyes of a guy who’d spent the past two years working from a home that contains a toddler. We ordered coffee, found seats near an electrical outlet, and huddled around his laptop.

First we played a few quick games, netting about 25¢ worth of SLP. He then checked in on the dashboard he uses to track his 20 Argentine scholars, whom he pays his childhood friend to manage, before turning to breeding. Armentia started browsing a market on Sky Mavis’s website, scanning Axies that other people had put up for sale. When he found one he liked, he entered its traits into a software program that ran inside Discord, along with the traits of whatever Axie he planned on pairing it with. The program predicted what characteristics the offspring would have, allowing Armentia to assess its market potential. He clicked among many browser tabs at breakneck speed. Video games may now be a spectator sport, but character breeding definitely isn’t—I felt like I was watching someone do his taxes. There was work to do, though, and Armentia kept at it until it got dark outside.

When I asked if this was a strange way to make a living, he told me it wasn’t any less meaningful than his previous lines of work. “What’s the purpose of that bracelet?” he asked of the jewelry he’d been selling to cruise ship passengers. “It’s that someone can wear it and feel pretty, or whatever. Let’s say I create an Axie, and it costs me $30, and I sell it for $60 because I created something that someone else wants. That’s going to provide that same feeling as the people who buy those bracelets.”

Armentia didn’t try to sugarcoat his performance to date. Popping open a sprawling spreadsheet he used to track his Axie operations, he determined that he could theoretically cash out his cryptocurrencies for a $5,000 profit, without touching the 100 or so Axies he was holding. “I’ve been at it since August, so $5,000 in that many months is not something to be proud of, right?” he said. “I could’ve worked at McDonald’s and made more.” But then he gave me his projections for the crypto markets—AXS, he said, would rise to $150 by May. He changed a few cells to account for these predictions, and suddenly his venture did indeed seem more lucrative than flipping burgers.

When the end of May actually came, AXS was at about $23. Armentia estimated his Axie investment was down about $15,000 but said he didn’t know for sure because he’d stopped looking at the spreadsheet.

relates to A Billion-Dollar Crypto Gaming Startup Promised Riches and Delivered Disaster
Philip La, head of product, and Zirlin in Vietnam.
Photographer: Maika Elan for Bloomberg Businessweek

On May 18, Zirlin and Larsen held a pep talk for the Axie community on Twitch. In the days after the March hack, the company had announced that it had raised $150 million to reimburse victims and repair its infrastructure. But nearly two months later the systems compromised during the hack still weren’t up and running, and the executives were vague about when everything would be repaired. (A company spokesperson said on June 3 that this could happen by midmonth, pending the results of an external audit.)

The co-founders spent a good deal of time on Twitch commiserating with players about the pain the crash had caused. Larsen told the 2,500-person audience that the collective trauma of losing all that money was an opportunity to forge a stronger community. “This is when you can find true friends in the space,” he said. Zirlin, who spent the entire hourlong session grimacing in a manner suggestive of indigestion, noted that gloom was contagious. “Sometimes when you put negative opinions out there on the internet, that affects other people and hurts the project,” he said.

Sky Mavis had reason to be concerned about players losing hope. By late May even top-ranked players were making the equivalent of 68¢ a day, according to Naavik—a total that doesn’t account for the cut any scholars have to give to their managers. The company and other big players in the Axie economy were working to persuade everyone to hold on. Yield Guild Games head Dizon, whose company owns more than 150,000 Axies that it rents to scholars, says games like Axie were always intended to be a steppingstone to something else. “We’ve been trying to warn people, even when prices were high, don’t expect this to be a stable source of income,” he says. Dizon’s pitch now focuses on the value of owning NFT gaming assets over time, with the potential for some supplemental money along the way. “It’s a digital version of a gig economy job,” he says.

Sky Mavis, meanwhile, now consistently downplays the financial aspects of Axie. It has brought in a new head of product, Philip La, who spent the past four years as a product manager at the company behind Pokémon Go. Before being recruited, La had written a post on his personal blog entitled “Is Axie Infinity sustainable?” He concluded that the game’s economy would ultimately fail if all its players continued to think like investors. “Axie Infinity first and foremost needs to be a game,” he told me.

So La is going back to basics, hoping to make Axie more like Pokémon Go—a place where players can spend money within the game on things like decorations for their avatars. He says it’s still important that people own their Axies, even if it’s not just about the financial upside. “With that comes the ability to sell those things if you stop playing or whatnot,” says La.

Armentia has largely stopped playing Axie, as have about three-quarters of his scholars. Many have walked away with tokens now worth almost nothing. But at least one was sufficiently seduced by Axie’s potential to take a significant loan to buy AXS tokens, which he saw as a way to hedge against inflation of the Argentine peso. The local currency has indeed lost value since he took out the loan, but not nearly as much as AXS.

For his part, Armentia says he thinks Origin is shoddily designed, and he doesn’t have high hopes that it will bring the significant new user base the game needs. One thing I learned after talking to Armentia for several months, though, was the durability of his optimism. He continues to express confidence that Axie will pay off as an investment in the long term—that crypto gaming will inevitably take over a significant portion of the gaming world, with Sky Mavis leveraging its role as the early leader to take a key spot.

But Armentia’s mind has also been elsewhere. Earlier this year, he and a friend purchased a company that rents out bouncy houses. Instead of crypto prices, he’s been spending his days worrying about what to do when a driver calls in sick, or whether to send his crews out when there’s a chance of a tropical storm.

In early May, on one of the most brutal days in the crypto markets, I texted Armentia to see how he was doing. He replied with a video of a huge inflatable slide, complete with a cannon shooting foam. He had plenty of time to wait for the crypto markets to turn, he said. Then he described his new business in much the same way Sky Mavis now describes its own: “I’m selling fun now.”

Source: Axie Infinity (AXS) Crypto Game Promised NFT Riches, Gave Ruin – Bloomberg

Why You’re So Tempted by the Premium-Economy Upgrade – The Atlantic

Airlines’ Premium-Economy Trick

Carriers are banking on the psychological allure of marginal luxury.

Chairs on an aircraft
Airlines have once again wrung a new social class from flying. ( Alex Cochran )

Let’s say you receive an unexpected financial windfall. What’s the first thing you’re spending money on? If it’s a lavish vacation—how are you getting there? Americans top the list of consumers who say they’re interested in private travel, so there’s a clue. Many of us would prefer to opt out of the commercial-flight experience, but the odds of hailing a private jet are lottery-long for anyone not in the 1 percent. Still, that doesn’t mean that commercial flying is devoid of its own cutthroat class system.

As with life at ground level, social mobility in the sky is secured by money and a slew of secondary considerations, like “loyalty,” that also mean money. The majority of us find ourselves on the bottom rung—the main cabin, which accounts for roughly 70 percent of the seats on a Boeing 737. And airlines don’t let us forget it. Every boarding-zone call registers our lowly station, sorting passengers with all the sensitivity of industrial farm equipment. Every full overhead bin mocks our sad aftward shuffle past first or business class. On occasion, some of us get to ride the company card to relative comfort, but when you’re flying on your own dime, you’re more than likely facing the bald reality of economy seat 28F.

Or maybe, just maybe, you reach a little deeper into your pocket and cough up the bones to relocate to a slightly sexier neighborhood: premium economy. Though not as plush as a business-class berth, premium (which goes by different names depending on the airline) delivers various creature comforts—a few extra inches of legroom, or a toiletry kit with Malin+Goetz products, or a “chef-inspired” meal with craft beer, to name a few perks across carriers. In recent years, an emerging subset of fliers has signaled enthusiasm for premium economy’s marginally more refined service. “One of the trends that everyone in the airline industry is talking about nowadays, especially coming out of the pandemic, is a greater willingness on the part of leisure travelers to buy a premium economy seat,” Rob Britton, an adjunct professor at Georgetown University and a former managing director of American Airlines, told me. Business travel, airlines’ usual bread and butter, fell off a cliff in 2020, and these companies now see a lifeline in Millennial yuppies. “The 35-year-old couples going to Paris are filling the gap.”

In the mid-aughts, when a major aircraft manufacturer was designing a new model, it studied the cost per square-inch of real estate in the most expensive markets: New York, Paris, London. Then it looked at the cost per square-inch on airplanes. There was no comparison, Uzma Khan, a marketing professor at the University of Miami, told me. “From an airline’s perspective, what is the most expensive thing for them to give you? Real estate in the air.” In that regard, airlines operate as a kind of landlord, calculating the expense of hurtling a single passenger from one place to another and adding a healthy upcharge on top.

Historically the seats in the front of the plane subsidized operations, as besuited flyers from the likes of Bain and Deloitte and Baker McKenzie reliably bought more expensive business-class tickets. Still, carriers clung to thin margins. And in 2008, rising fuel costs and sagging demand prompted airlines to decouple standard amenities from economy tickets in order to keep their prices competitive. Over time, they made it up not just by selling credit-card miles, corporate contracts, and cargo, but also by using premium economy to sell the faint whiff of pampering to vacationers like Kelsey Masters, a project manager who lives in New York.

By her own admission, Masters is terrified of flying, but she makes frequent cross-country trips to see friends and family. She described her purchase habits to me with a weary acceptance that characterizes her overall feelings on pandemic air travel: “Screw it. Sixty bucks to upgrade? I get a little more legroom and a free drink, and I can just be a little more calm? That sounds like a really good thing right now.” Rather than splurge in the planning stage, she tries to buy the cheapest fare ahead of time and let the circumstances of the travel day guide her upgrade decisions. Compounding stressors from the airport, the trip itself, or even a few nights of fitful sleep on a friend’s living-room pullout “will make me start to reevaluate the opportunity cost of the dollar,” she said.

Premium economy has become a major revenue driver for the airlines, which, according to Counterpoint Market Intelligence, an aerospace market research company, are projected to triple their inventory of premium seats by 2025. But travelers like Masters weren’t the original target. Britton explained that premium economy wasn’t built to entice strivers across flight-class lines; carriers originally designed it to catch the bruised egos of former business-class members when the corporate world began to earnestly self-audit and downgrade employee travel budgets. A recent report by Jay Sorensen, an industry consultant, noted that “the apparent discovery of a new type of upscale leisure traveler” is a welcome surprise for these airlines. It connoted a small miracle: Airlines had once again wrung a new social class from flying, as they had done with first and business class. And they were able to do it, in part, because of a phenomenon called “pain of payment.”

According to Khan, people often experience “actual, physical pain” upon paying for something. But humans can have short memories. If airlines create enough distance between the initial ticket purchase and the option to upgrade, passengers are more likely to think of the latter as a standalone cost. “A lot of upgrades happen because now you’re either at the airport, or you’re checking in, and they give you an option. You don’t even remember exactly how much you paid for your flight when you were booking it, so that pain is gone,” Khan said. Basically, you don’t consider the total amount because you’ve already internalized the initial amount.

At the point of travel, an extra $45 or so to improve a short-haul flight—however modestly—doesn’t seem so decadent, especially when the threat of suffering through basic economy looms. Back in 2014, the antitrust scholar Tim Wu coined the phrase calculated misery to describe the conditions of basic economy, positing that airlines deliberately provide substandard service to coerce customers into paying for amenities that previously were free—seat selection, checked baggage, and itinerary changes, for instance. “It’s just a matter of physical discomfort translating into an emotional debt,” says Wesley Kang, a co-founder of Nimble Made, an e-commerce clothing brand, who flies frequently for leisure and family visits. “The less you move around, the less you have to adjust, the less inconsiderate you’re being to the person next to you.”

There is, of course, another prevailing opinion about premium economy, which is that it’s simply a ham-fisted attempt to get passengers to pay more for a negligibly better experience. This attitude puts the pomp and puffery of premium economy into sharp relief. A seat upgrade, after all, does not get you to your destination any more quickly or safely. Research bears that line of thinking out to an extent. Khan mentioned several studies that were conducted to determine the extent to which space colored the overall experience for passengers. An aircraft manufacturer brought in focus groups to try different seat configurations on its prototype, sometimes offering more legroom, sometimes more elbow room. “It had zero impact on customer satisfaction,” Khan said. “Where people do feel the difference is if you give them four more inches at the eye level. Because the perception of space is what matters.”

One could posit that the rise of premium economy was culturally foretold. The coveted Millennial-yuppie flier laying their claim to “nicer” seats falls in line with the idea that they’re bold go-getters who seek experiences over things. Plus, the confluence of pandemic exhaustion, discretionary income, and the aforementioned “screw it” attitude toward purchasing small luxuries creates the perfect environment for low-stakes indulgence. Despite what travelers may know about seat-upgrade marketing tactics, many still think the extra spend is worth it. And perception is reality. Airlines, it turns out, have figured out how to bank on that fact.

 

Source: Why You’re So Tempted by the Premium-Economy Upgrade – The Atlantic

DuckDuckGo Wants to Stop Apps From Tracking You on Android | WIRED

At the end of April, Apple’s introduction of App Tracking Transparency tools shook the advertising industry to its core. iPhone and iPad owners could now stop apps from tracking their behavior and using their data for personalized advertising. Since the new privacy controls launched, almost $10 billion has been wiped from the revenues of Snap, Meta Platform’s Facebook, Twitter, and YouTube.

Now, a similar tool is coming to Google’s Android operating system—although not from Google itself. Privacy-focused tech company DuckDuckGo, which started life as a private search engine, is adding the ability to block hidden trackers to its Android app. The feature, dubbed “App Tracking Protection for Android,” is rolling out in beta from today and aims to mimic Apple’s iOS controls. “The idea is we block this data collection from happening from the apps the trackers don’t own,” says Peter Dolanjski, a director of product at DuckDuckGo. “You should see far fewer creepy ads following you around online.”

The vast majority of apps have third-party trackers tucked away in their code. These trackers monitor your behavior across different apps and help create profiles about you that can include what you buy, demographic data, and other information that can be used to serve you personalized ads. DuckDuckGo says its analysis of popular free Android apps shows more than 96 percent of them contain trackers. Blocking these trackers means Facebook and Google, whose trackers are some of the most prominent, can’t send data back to the mothership—neither will the dozens of advertising networks you’ve never heard of.

From a user perspective, blocking trackers with DuckDuckGo’s tool is straightforward. App Tracking Protection appears as an option in the settings menu of its Android app. For now, you’ll see the option to get on a waitlist to access it. But once turned on, the feature shows the total number of trackers blocked in the last week and gives a breakdown of what’s been blocked in each app recently. Open up the app of the Daily Mail, one of the world’s largest news websites, and DuckDuckGo will instantly register that it is blocking trackers from Google, Amazon, WarnerMedia, Adobe, and advertising company Taboola. An example from DuckDuckGo showed more than 60 apps had tracked a test phone thousands of times in the last seven days.

My own experience bore that out. Using a box-fresh Google Pixel 6 Pro, I installed 36 popular free apps—some estimates claim people install around 40 apps on their phones—and logged into around half of them. These included the McDonald’s app, LinkedIn, Facebook, Amazon, and BBC Sounds. Then, with a preview of DuckDuckGo’s Android tracker blocking turned on, I left the phone alone for four days and didn’t use it at all. In 96 hours, 23 of these apps had made more than 630 tracking attempts in the background.

Using your phone on a daily basis—opening and interacting with apps—sees a lot more attempted tracking. When I opened the McDonald’s app, trackers from Adobe, cloud software firm New Relic, Google, emotion-tracking firm Apptentive, and mobile analytics company Kochava tried to collect data about me. Opening the eBay and Uber apps—but not logging into them—was enough to trigger Google trackers.

At the moment, the tracker blocker doesn’t show what data each tracker is trying to send, but Dolanjski says a future version will show what broad categories of information each commonly tries to access. He adds that in testing the company has found some trackers collecting exact GPS coordinates and email addresses.

The beta of App Tracking Protection for Android is limited. It doesn’t block trackers in all apps, and browsers aren’t included, as they may consider the websites people visit to be trackers themselves. In addition, DuckDuckGo says it has found some apps require tracking to be turned on to function; for this reason, it gives mobile games a pass. While the tool blocks Facebook trackers across other apps, it doesn’t support tracker-blocking in the Facebook app itself. In DuckDuckGo’s settings, you can whitelist any other apps that don’t function properly with App Tracking Protection turned on.

The introduction of App Tracking Protection for Android comes at a time when ATT has pushed advertisers to Android, while also benefiting Apple. “ATT meaningfully changed how advertisers are able to target ads on some platforms,” says Andy Taylor, vice president of research at performance marketing company Tinuiti. The company’s own ads data shows Facebook advertising on Android grew 86 percent in September, while iOS growth lagged behind at 12 percent. At the same time, Apple’s ad business has tripled its market share, according to an analysis from the Financial Times. Around 54 percent of people have chosen not to be tracked using ATT, data from mobile marketing analytics firm AppsFlyer shows.

DuckDuckGo’s system is unlikely to have an impact anywhere near that scale and is more of a blunt tool. Unlike Apple, the company doesn’t own the infrastructure—the phones people use or the underlying operating systems—to enforce wholesale changes. Each time an app wants to track you, iOS presents you with a question: Do you want this app to track you? When you opt out, your device transmits the IDFA sent to advertisers as a series of zeros—essentially preventing them from tracking you. DuckDuckGo doesn’t have this luxury; its privacy browser app is installed on your phone like any other from the Google Play Store.

To make App Tracking Protection work, DuckDuckGo runs the same set of device permissions as a virtual private network (VPN). Dolanjski says that while Android phones will show the DuckDuckGo app as a VPN, it doesn’t work in this way: No data is transferred off your phone, and the network runs locally. In essence, the system blocks apps from making connections to the servers used for tracking. (When some trackers can’t communicate with their servers they will make repeated attempts to do so, Dolanjski says, which can cause certain tracker counts to swell within the app. He adds the company has seen no impact on battery life).

At the time of writing, Google had not responded to a request for comment on apps using VPN configurations to block trackers across Android. Other apps on the Google Play Store—including Jumbo Privacy, a VPN app by Samsung, and Blokada—already use similar methods to block trackers, although they also offer wider privacy-focused tools and don’t act as browsers.

Google itself has gradually added more privacy controls in Android, including some that apply to apps. The company allows users to reset their ad IDs and to opt out of personalized ads. Following the launch of iOS 14.5, Google said that Android owners who opt out of personalized advertising will see their unique identifiers stripped to a series of zeroes—as is the case for iPhone owners who turn off tracking. The change is already rolling out on phones using Android 12 and will be made more widely available on other Android devices early next year.

But for many people, the planned Android changes may not be enough. They don’t go as far as Apple’s alterations. DuckDuckGo’s Dolanjski argues that there’s very little transparency around the trackers currently employed in the apps people use every single day and that most people would be shocked at the amount they are tracked. For him, blocking trackers on Android is the next step in giving people more control over how companies handle their data. “It is going to dramatically reduce how much information these third-party companies get about you,” he says.

Source: DuckDuckGo Wants to Stop Apps From Tracking You on Android | WIRED

Inside the Industry That Unmasks People At Scale

Screen Shot 2021-02-24 at 3

Hacking. Disinformation. Surveillance. CYBER is Motherboard’s podcast and reporting on the dark underbelly of the internet.

 

Tech companies have repeatedly reassured the public that trackers used to follow smartphone users through apps are anonymous or at least pseudonymous, not directly identifying the person using the phone. But what they don’t mention is that an entire overlooked industry exists to purposefully and explicitly shatter that anonymity.

 

They do this by linking mobile advertising IDs (MAIDs) collected by apps to a person’s full name, physical address, and other personal identifiable information (PII). Motherboard confirmed this by posing as a potential customer to a company that offers linking MAIDs to PII.

 

“If shady data brokers are selling this information, it makes a mockery of advertisers’ claims that the truckloads of data about Americans that they collect and sell is anonymous,” Senator Ron Wyden told Motherboard in a statement.

 

Do you work at a company selling this kind of data? Do you otherwise have access to the data itself or documents related to it? We’d love to hear from you. Using a non-work phone or computer, you can contact Joseph Cox securely on Signal on +44 20 8133 5190, Wickr on josephcox, OTR chat on [email protected], or email [email protected].

 

“We have one of the largest repositories of current, fresh MAIDS<>PII in the USA,” Brad Mack, CEO of data broker BIGDBM told us when we asked about the capabilities of the product while posing as a customer. “All BIGDBM USA data assets are connected to each other,” Mack added, explaining that MAIDs are linked to full name, physical address, and their phone, email address, and IP address if available. The dataset also includes other information, “too numerous to list here,” Mack wrote.

 

A MAID is a unique identifier a phone’s operating system gives to its users’ individual device. For Apple, that is the IDFA, which Apple has recently moved to largely phase out. For Google, that is the AAID, or Android Advertising ID. Apps often grab a user’s MAID and provide that to a host of third parties. In one leaked dataset from a location tracking firm called Predicio previously obtained by Motherboard, the data included users of a Muslim prayer app’s precise locations. That data was somewhat pseudonymized, because it didn’t contain the specific users’ name, but it did contain their MAID. Because of firms like BIGDBM, another company that buys the sort of data Predicio had could take that or similar data and attempt to unmask the people in the dataset simply by paying a fee.

 

fullcontact-pii.png

A screenshot of FullContact’s website offering the linking of mobile ad ids and other information.

 

“Anyone and everyone who has a phone and has installed an app that has ads, currently is at risk of being de-anonymized via unscrupulous companies,” Zach Edwards, a researcher who has closely followed the supply chain of various sources of data, told Motherboard in an online chat. “There are significant risks for members of law enforcement, elected officials, members of the military and other high-risk individuals from foreign surveillance when data brokers are able to ingest data from the advertising bidstream,” he added, referring to the process where some third parties obtain data on smartphone users via the placement of adverts.

 

This de-anonymization industry uses various terms to describe their product, including “identity resolution” and “identity graph.” Other companies claiming to offer a similar service as BIGDBM include FullContact, which says it has 223 billion data points for the U.S., as well as profiles on over 275 million adults in the U.S.

 

“Our whole-person Identity Graph provides both personal and professional attributes of an individual, as well as online and offline identifiers,” marketing material from FullContact available online reads, adding that can include names, addresses, social IDs, and MAIDs.

 

“MAIDs were built for the marketing and advertising community, and are tied to an individual mobile device, which makes them precise in identifying specific people,” the material adds.

 

On a listing advertising its capability to link MAIDs to personal information, BIGDBM says “The BIGDBM Mobile file was developed from online providers, publishers and a variety of data feeds we currently obtain from a multitude of sources.” That listing did not list the specific types of PII that BIGDBM offers, so Motherboard posed as a potential customer interested in sourcing such data for a stealth startup.

 

BIGDBM did not respond to multiple requests for comment. FullContact did not respond to a list of questions, including whether its MAIDs and PII is collected with consent, and what sort of protections FullContact has in place to stop abuse of its capability to unmask the person behind a MAID.

 

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A screenshot of the emailed response from Brad Mack.

 

Edwards said that the existence of companies that explicitly link MAIDs to personal information may provide issues under privacy legislation.

 

“This real-world research proves that the current ad tech bid stream, which reveals mobile IDs within them, is a pseudonymous data flow, and therefore not-compliant with GDPR,” Edwards told Motherboard in an online chat.

 

“It’s an anonymous identifier, but has been used extensively to report on user behaviour and enable marketing techniques like remarketing,” a post on the website of the Internet Advertising Bureau (IAB), a trade group for the ad tech industry, reads, referring to MAIDs. The IAB acknowledged but ultimately did not respond to multiple requests for comment asking if it still believes that MAIDs are anonymous.

 

In April Apple launched iOS 14.5, which introduced sweeping changes to how apps can track phone users by making each app explicitly ask for permission to track them. That move has resulted in a dramatic dip in the amount of data available to third parties, with just 4 percent of U.S. users opting-in. Google said it plans to implement a similar opt-in measure broadly across the Android ecosystem in early 2022.

 

Apple and Google acknowledged requests for comment but did not provide a statement on whether they have a policy against companies unmasking the real people behind MAIDs.

 

Senator Wyden’s statement added “I have serious concerns that Americans’ personal data is available to foreign governments that could use it to harm U.S. national security. That’s why I’ve proposed strong consumer privacy legislation, and a bill to prevent companies based in unfriendly foreign nations from purchasing Americans’ personal data.”

 

Subscribe to our cybersecurity podcast, CYBER.

 

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Source: Inside the Industry That Unmasks People At Scale

The Android “Choice” Screen Is A Privacy Problem

About a year and a half ago, Google began the chance to be one of the search engines that European users as their default on Android devices. And for the past year and a half, we’ve seen some familiar ad-targeting giants continue to take those expensive slots.

This auction was the result of a spearheaded by European authorities back in 2018. Aside from slamming the company with a $5 billion penalty, regulators also demanded that Google begin offering users a choice upon booting up their Android phones regarding the browser or search app they’d prefer to use, rather than requiring them to use Google’s own. Google , but in the most Google way possible: by requiring that competitors financially duke it out for the chance to be featured in one of four search slots on the coveted Android choice screen.

The for the latest auction are less than promising. When it comes to the choices, the truth is that of Android users are largely going to be choosing between one of four non-Google options when it comes to search: Microsoft-owned Bing, GMX—which is owned by the German digital behemoth , or the ironically named PrivacyWall, which is owned by a major adtech outfit named .

As TechCrunch , the one thing that all of these players have in common is reaping immense profits from tracking and targeting users across search, in a way that’s strikingly similar to Google. Meanwhile, it’s worth noting that in spite of these other options, the search giant is still, well, a search giant in the region. Aside from swallowing of the search engine market internationally, Google pretty much takes of the market share in European Union member countries.

When asked about the European Union’s failure to curb Google’s cutthroat behavior in the region, some of Google’s search competitors previously the Washington Post that this was the natural result of letting Google fix its own problems. In other words, EU authorities literally let Google charge its rivals for the privilege of appearing on the Android selection menu—and challenge the company’s dominant position in the process. Who did they think would win?

 

Source: The Android “Choice” Screen Is A Privacy Problem

Facebook Knowingly Profited Off Junk Ad Efficacy Estimates, Lawsuit Claims

Facebook, which along with Google accounts for around 60% of advertiser spending online, has knowingly built some of its astonishing success on incorrect data, newly unsealed court documents allege. Incidentally, this may pose a problem for a business which generates of its revenue from selling ads.

In a nutshell, this class action suit, which was first filed back , alleges that Facebook massaged figures for “Potential Reach”—an estimate that Facebook gives its advertisers for the number of people that might see their ad—to goad advertisers into spending more money on the platform, all in the hopes of reaching the people that Facebook had promised. These filings detail that some of Facebook’s top brass, including Chief Operating Officer Sheryl Sandberg, were fully aware that the company spent years exaggerating the number of eyeballs its advertisers could reach.

As by the Financial Times, the suit claims that when Facebook’s rank-and-file proposed internal fixes for these inflated figures, senior executives repeatedly brushed them off on the grounds that their solutions would cut into the company’s all-important ad revenue.

Thanks to these unsealed filings, we know just how inflated some of those figures were. Here’s an example: in 2018, Facebook its advertisers that it had a Potential Reach of 230 million adults across the U.S., out of the 250 million adults that were counted by U.S. census data that year. But according to a 2018 , only about 68% (or 170 million adults) actually use the platform at all. Sandberg acknowledged in an internal email that “she’d known about problems with Potential Reach for years.” But she repeatedly shot down employee’s attempts to rectify those figures, according to the filing.

Internally, employees acknowledged that while the product bills
itself as an estimate for how many “” your ad might reach, it is, at best, an estimate for the number of accounts—including the untold numbers of and . Some employees even ran the numbers in 2018, just to see what would happen if known duplicate accounts were cut out of Potential Reach, and saw a 10% drop in the numbers advertisers were given. Facebook chose not to cut them. When one of the product managers on the Potential Reach team later suggested tweaking the way they talked about these figures—like, say, replacing the word “people” with the word “accounts”—his suggestion was shot down over worries about the “significant” impact it might have on Facebook’s ad revenue. Per the suit, the manager responded that “it’s revenue we should have never made given the fact it’s based on wrong data.”

In a lot of ways, this case mirrors another high-profile advertiser suit that hit the company in 2016 alleging Facebook some serious problems with the metrics for its video ads for the sake of pulling down more money from those video ad partners. In 2019, Facebook settled the claim for a $40 million dollar sum that, as others have pointed out, is pretty much to a company that earns of dollars in ad revenue per year.

And apparently, Facebook didn’t learn much from that slap on the wrist. When it comes to the ongoing problems with Potential Reach, the suit points out that numbers Facebook continues to give its advertisers make even less sense, like telling them it can reach “100 million” 18-to-34 year old’s across the country. Census data shows there’s in fact of them—and not all of them use Facebook.

Both and on , the company’s argued that these metrics are meant to be interpreted as estimates, not gospel. But internally, per the new filings, the company admitted that Potential Reach was “arguably the single most important number” that advertisers relied on when deciding whether to put their ad bucks down onto Facebook’s platform in the first place.

We’ve reached out to Facebook for comment, and will update here when we hear back.

 

Source: Facebook Knowingly Profited Off Junk Ad Efficacy Estimates, Lawsuit Claims

Google Continues to Promise Its Bid to End Cookies Isn’t an Enormous Power Grab

On Monday, Google released a few more details on its proposed tracking alternative to third-party cookies, a “privacy-first” technology that, from any angle, seems like just another way for the company to maintain its stranglehold on digital ad sales.

Google’s calls its new creation “Federated Learning of Cohorts” (FLoC, for short), and promises that it’s not only a less-creepy alternative to the third-party cookies and trackers that we’ve come to know and loathe over the years, but one that won’t hurt cut into its advertisers profits. Like most things in adtech, the full proposal is both complicated and technical as hell, but in a nutshell, while cookies allow advertisers to target people based on their individual web-browsing behavior, FLoC would essentially plop people into specific groups (called “flocks”) based on their inferred interests. Any data generated on an individual basis would be kept in-browser, and the only thing advertisers could track and target would be a “flock” containing an aggregated group of semi-anonymized people.

As an example, I can tell you that I recently became the proud owner of an Instant Pot, and have spent the past few days visiting countless sites with Instant Pot recipes, hacks, and how-to’s that invariably drop third-party cookies on my Chrome browser labeling me as a potential Instant Pot fanatic. The way digital ads work right now, these sort of cookies can be used to target me with Instant Pot-adjacent ads across the web, even if it kinda skeeves me out. Because these cookies are held within the browser I’m using to surf the web—Chrome, in this case—the only way I’d be able to flush out that data is through Chrome’s specific settings.

With FLoC, what would happen instead is that my Chrome browser would keep watch over the websites I visit, and, overtime, lump me into a so-called “flock” along with thousands of other Chrome users. In this particular case, my browser might catch onto the myriad slow-cooking sites I’m visiting every day, and assign me to a specific slow-cooking flock. Google’s advertisers could target these groups the same way they targeted their cookie-based groups beforehand—a tactic that, as Google’s latest blog puts it, “effectively hides individuals ‘in the crowd’.”

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In and of itself, FloC doesn’t kill off third-party browser cookies—though Google has threatened to make that a reality for Chrome users before the end of the year—but the company hopes this new paradigm will supplant them. (Don’t worry, the useful kind of cookies, like tokens that remember your logins for frequently-visited sites, aren’t being sent to the great beyond just yet.)

FLoC is just one of the proposals that comprise the Privacy Sandbox project Google kicked off towards the end of 2019. Much like those other proposals, they’re ideas that sound decent until you start asking questions. As the EFF pointed out in its own breakdown of the Privacy Sandbox, being a part of a flock isn’t unlike being branded with a “behavioral credit score”: one that remembers your interests, your purchase history, and a lot of what makes you you, and puts it in the hands of one extremely powerful, largely unaccountable corporation.

Plus, as Google’s own technical documentation points out, it’s impossible to promise that that the machine learning algorithm that creates these groups won’t inadvertently end up creating flocks based on seriously sensitive information. As we’ve written before, different types of data are considered “sensitive” to different people, which means even if FLoC tries to mitigate some of these issues, there’s still going to be users left at risk. As the documentation states:

A cohort might reveal sensitive information. As a first mitigation, the browser should remove sensitive categories from its data collection. But this does not mean sensitive information can’t be leaked […] It should be clear that FLoC will never be able to prevent all misuse.

Aside from that huge honking issue, it’s also worth remembering that FLoC only works if Google can still keep its unfettered access to all of our juicy user data. This wrinkle has led advocates and academics in the digital privacy sphere to call bullshit on the company again and again, pointing out Google’s privacy ploy is actually a shittily veiled attempt to kill off part of the digital ad market while controlling everything built upon its ashes. At the start of this year, the UK’s Competition and Markets Authority opened a formal investigation to probe some of these claims for themselves.

But this ongoing investigation in the UK (or any of the many other cases currently building against the company in the U.S.) hasn’t stopped Google from experimenting with FLoC. In the new blog, Google Product Manager Chetna Bindra claimed that, by the company’s estimation, an audience targeted by their “flock” tends to offer advertisers virtually the same bang for their buck. Based Google’s internal testing, Bindra claimed that ad targeting via flocks generated 95% of the same “conversions”—digital ad lingo describing clicks on an ad or purchases on a site among other actions—that cookie-based targeting did.

In other words, as Bindra told CNBC, using FLoC for advertising “ is literally nearly as effective as third-party cookies.” The only difference is that Google goes from controlling a giant chunk of the ad-targeting ecosystem to controlling virtually all of it.

Source: Google Continues to Promise Its Bid to End Cookies Isn’t an Enormous Power Grab

The One Thing to Know About the Texas–Google Antitrust Lawsuit

Among all of the antitrust probes facing Google right now, the case dropped on Wednesday by Texas Attorney General Ken Paxton stands out for a few reasons. First, it focuses on the tech giant’s dominance in digital ads, rather than focusing on search the way that the Justice Department and more than 30 states have in their own recent cases. Second, it’s coming from an attorney general facing his own string of scandals. And third, despite said scandals, it does a really, really good job of breaking down exactly how Google became the digital ad behemoth that put it on regulators’ radars.

There are plenty of juicy details in the 130-page lawsuit—Google and Facebook did what with WhatsApp users’ data?—but we’re going to focus on just a few of the shadiest ways that Google secured its dominance over the years.

So what’s the tl;dr of the Texas case against Google?

The short version is that, according to the lawsuit, Google spent the past decade systematically dominating both sides of the ad market: it made deals that neither advertisers nor web publishers could refuse, and when that didn’t work, it forced their hand. The company then used its outsized role in both of these markets to milk the players involved for billions of dollars, building the Google ad empire we know today at the expense of the rest of the internet.

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The suit does a really good job of laying out exactly how we got here—but explaining that means explaining exactly how ads get served online. So if you’ll indulge me for a few minutes…

Ugh, fine, go ahead.

Thanks. Personally, I’m a visual learner, so I’ve always found it useful to follow along with a chart like this one. (Yes, I know it looks like maniacal nonsense, but stay with me.)

What you need to know is that large web publishers—the technical name for any site across the web with ad space to sell, from CNN to the New York Times, to Gizmodo dot com—rely on a specific intermediary called an “ad server” to help them get the biggest (ad dollar) bang for their (ad real estate) buck. The specifics behind the way this pricing happens are way too boring to explain, but what you need to know is that publishers typically stick with one ad server to manage their specific ad real estate—and they stick with that server for the long haul since switching over to a new one can disrupt the flow of ad dollars that publishers desperately need.

One of the primary jobs of an ad server is scooping up relevant intel about a particular web visitor so an ad can be targeted their way. So as an example, when I’m visiting a website about, say, cats on leashes, trackers on that page scoop up certain identifiers that are unique to my computer or phone. That dataset typically gets combined with other data from third-party vendors to give advertisers a better picture of who I am and the ads I “want” to be targeted with. That resulting data-glob gets broadcast onto what’s known as an “ad exchange.” Basically, these exchanges operate like auction clearing houses where advertisers can literally put down bids on a particular chunk of ad space, like the ones you may be seeing embedded in this article right here. And just like in real life auctions, whoever bids the highest wins the prize—in this case, the ability to show their ad in that given chunk of website space.

Oh, and all of this is happening within a fraction of a fraction of a second.

Christ.

Yeah, nobody said digital advertising was fun. The important thing here is that, in general, publishers turn to Google to do this dirty work for them. One recent survey found that about 90% of most major publishers use Google’s native ad server, called Google Ad Manager (or GAM for short). Meanwhile, analysis from the technographic firm Datanyze show Google-owned ad exchange DoubleClick takes up more than 55% of the ad exchange market. To put that into context, most of its competitors have a market share in the single digits. And therein lies the problem.

How did we get here?

When Google first entered the ad exchange market back in 2009 after acquiring DoubleClick, the company was facing pretty stiff competition from the likes of Microsoft and, believe it or not, Yahoo.

Google had to wrest itself from its underdog position, and fast—so the company leveraged its biggest advantage at the time, which was its ad-buying tool aimed at small businesses, called Google Adwords. The suit points out that the company’s own numbers at the time estimated that close to 250,000 small businesses—think restaurants, doctors, plumbers, electricians—across the U.S. were paying Google a chunk of change to bid on ad space that appeared alongside results in the company’s burgeoning search engine, which, depending on who you ask, has arguably been a monopoly in and of itself since 2005.

In the decade since, that name’s changed from Adwords to simply “Google Ads,” and the number of customers exploded: In 2013, the suit states, there were close to 2 million advertisers using the service. Today, well, the numbers speak for themselves.

Not long after the rollout of Google’s ad exchange and server duo, the company changed its policies so that these countless small advertisers looking to bid on Google’s ad space were also required to use that exchange and server to do so. And today, the millions upon millions of businesses that depend on Google ads are still stuck trading in Google’s exchange without any alternative tools to use.

As the suit puts it:

Google Ads […] had market power over its small advertisers because those advertisers almost always use one tool at a time when bidding for ad space. When deciding which ad buying tool to use, most advertisers chose Google’s because it was the only way to purchase search ads and display ads on Google’s leading display network.

But what about… just using more than one exchange?

Good question! Generally, ad-buying tools are routed through multiple exchanges that let advertisers bid on the largest supply of ad space for the best possible price—you know, the way a competitive market is supposed to behave. But as the suit points out, Google’s tools for advertisers mandate that any people trying to buy ad space across the vast Google Display Network exclusively use Google’s exchange to do so—even if third-party exchanges were offering access to identical ad space for a lower premium.

Though the specifics are maddeningly redacted in the suit, it claims that Google published internal documents as far back as 2012 showing that the company imposed these routing restrictions “for the purpose of foreclosing competition.”

“As internal Google documents show, by coupling its ad server with its market power on the buy side, Google prevented customers from switching to competing ad servers and quickly cornered the rest of the market,” the suit says. Over the coming years, it adds, the company “effectively foreclosed” the ad servers it competed with prior. Even when Google did offer access to other exchanges through its products, like it did in 2016, the company “significantly and intentionally restrained” the way these bids were routed, per the suit.

That sounds deeply scummy.

It gets even scummier when you consider how publishers were forced to respond. If a large news outlet (like, say, CNN) wanted a piece of this super lucrative ad dollar pie, then Google cleverly mandated that those publishers use that same proprietary adtech. One of the core ways the company swung this was programming its exchange so that any bids placed would only pop up on publishers licensing the company’s shiny new server, according to the lawsuit.

Because publishers generally only use a single server at a time, and because Google had access to an enormous advertiser pool, you can probably figure out why it became a popular choice. As the Wall Street Journal reported in 2019, Google had access to a “fire hose” of ad dollars, and the company’s exchange was the only way to get full access to it.

And as the suit claims, when these publishers were strong-armed into using Google’s server, they were then “blocked from accessing and sharing information” about their ad inventory (the spots on their websites where they show ads) on any non-Google exchanges. So even if they wanted to sell their ad space through another service, the suit alleges, Google effectively told them that wasn’t an option.

So, where does Facebook come into this?

In order to understand that, you need to understand yet another adtech buzz-phrase: “header bidding.” The nitty-gritty of how this operates doesn’t really matter here—in a nutshell, it was a technique adopted around 2014 by third-party adtech vendors, in part, to get on an even keel with Google. By putting a nugget of code on a given webpage, publishers were able to direct a person’s browser to tap into multiple exchanges directly, bypassing Google’s ad-server walled garden. This meant publishers got more access to exchanges, those exchanges had more access to ad space inventory, and nobody needed to pay Google to get that access.

“With header bidding, publishers saw their ad revenue jump overnight simply because exchanges could compete,” the suit states. Naturally, Google was (allegedly) pissed. And Google was even more (allegedly) pissed back in 2017 when fellow tech giant Facebook announced that it would start working with publishers using this header bidding system.

This is where the whole “collusion” scandal comes in. According to the AG’s investigations, Facebook didn’t move into header bidding to compete with Google, but instead to “draw Google in” and force a deal. And it apparently worked: The following year, the two companies allegedly came to an agreement that Facebook would “curtail” its header bidding biz and instead route that ad business through Google’s ad platform instead. In return, Google promised that the Facebook Audience Network (FAN)—its third-party ad serving product you can read all about here—would get certain advantages that other platforms didn’t, according to the lawsuit.

In short: According to the AG investigation, Facebook promised to tank its header bidding efforts, and in return, Google let Facebook bid on (and win) more auctions.

This all sounds slimy, but I hate digital ads and use an ad blocker. Why should I care about this case at all?

Because when a company controls the bulk of the ad market online, it can have pretty big ramifications offline. According to the suit, Google uses its grip on the market to extract a “very high tax of percent of the ad dollars” that flow through the web. And while the exact percentage is redacted, apparently the fees that were charged were high enough “that even Google” couldn’t internally justify charging them.

Even if we don’t have the exact Google “tax,” we do know about the so-called “adtech tax”: Analysts estimated in 2019 that about 30 cents of every ad dollar spent online goes to intermediary adtech players like Google—and that number, which translates to billions of dollars per year, isn’t on course to get smaller anytime soon.

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When those costs ratchet up, the advertisers might feel the brunt of it first, but digital blogs and news outlets—including the one you’re reading right now—end up feeling it, too. We get forced to load up on ads in order to recoup lost profits. When that doesn’t work, publishers just load up on low-quality clickbait and pray for the best. All the while, the web slowly morphs into something that sucks to look at, is obnoxious to use, and is built to benefit one specific company at the expense of everyone else.

Source: The One Thing to Know About the Texas–Google Antitrust Lawsuit

80,000 Kaiser Permanente Employees Will Strike in October

More than 80,000 unionized Kaiser Permanente employees plan to strike in October, marking the biggest labor action in the country in over two decades.

According to the Los Angeles Times, the strike comprises a coalition of about 300 Kaiser Permanente unions, and will largely exclude doctors, registered nurses, and mental health workers, though it will include technicians, optometrists, housekeepers, receptionists, clinical laboratory scientists, and hundreds of other workers.

The unions say the healthcare company’s been outsourcing union jobs, raising patient premiums, and screwing with benefits, among other things, all while enjoying an estimated tax break of over $2.3 billion that enriches management, but not workers or patients. Union contracts expired in September 2018.

Salon spoke to some Kaiser employees, who said that though they hoped to avoid a strike (in order to do that, the coalition needs to get a National Agreement with Kaiser before October 14), the company’s focus on profits over patients and good labor practices has become untenable:

“My patients are suffering. They can’t see a doctor due to long wait times. They stopped taking in many Medicaid patients, they’ve been outsourcing our jobs, breaking down our partnership. It seems like they care more about profits than their patients,” Jeffrey Taylor, a medical assistant who has been working at Kaiser Permanente Sacramento Medical Center for 15 years, told Salon.

“When I started with Kaiser, we had good staffing. The partnership (between management and employees) was there. They came to labor management meetings prepared and we discussed our concerns. Right now, they’re making all of the decisions at up and it’s really affecting the patients and workers,” he added. “I want to make sure Kaiser comes back to the way they used to be. They lost their way. They need to come back and care about the community, care about the patients and care about their workers.”

The weeklong strike, which will affect employees in California as well as in five other states and Washington, D.C., will be the biggest in the country since 185,000 UPS workers went on strike in 1997.

Source: 80,000 Kaiser Permanente Employees Will Strike in October

The Big Fight, Not the Little Fight

NEW YORK—In April of 2016, I went to a huge Bernie Sanders speech in Washington Square park, which spilled out into the surrounding streets around NYU. Last night, I went to a (not quite as huge, but still big) speech by Elizabeth Warren, in the same park, under the same noble white arch. What’s the difference?

It is true that Warren’s crowd is, perhaps, a bit wonkier, a bit more buttoned-up—a crowd too respectful of norms to talk during the national anthem, but also not aggressive enough to yell at me when I did. Warren had come to roll out her plan to end government corruption just a block away from the location of the notorious Triangle Shirtwaist fire, where 146 workers died gruesomely due to greed and nonexistent workplace safety. Warren paid lengthy tribute to Frances Perkins, who was inspired by the fire to redouble her efforts as a social crusader, and who went on to become Franklin Roosevelt’s labor secretary and a key backer of the New Deal. Workers haven’t had as good a friend in the Labor Department, or in the White House, since. In 2020, we have a legitimate chance to have a true friend to the working class as president once again. The two true friends in the race are Bernie Sanders and Elizabeth Warren, who are running more or less even for a close second behind Joe Biden. For anyone with a meaningful grasp of what the problems are facing America—for anyone who might be inspired by the story of Frances Perkins, or anyone who might regularly read Splinter—the Democratic primary is an audition of these two candidates. They each have their partisans already, but for the first time in my life, I keep returning to the question: What is the difference, in substance, in what they would do if they were elected president?

In substance. In style, you can see the differences. Many people cite the fact that Bernie is a “movement guy” and Warren is a “wonk,” but that is more a matter of presentation. Both are strong supporters of organized labor; both want to attack climate change; both want to end mass incarceration and close the racial wealth gap and support abortion rights; both want to do as much as can be done to lessen the influence of money in politics, and make voting more meaningful. Bernie may have a better plan for health care; Warren may have a better plan for affordable housing; both of them, I believe, are existentially committed to turning around the growth of economic inequality, which is the biggest underlying issue that fuels many of the other issues that we talk about.

The primacy of inequality, its role as the fountainhead of so many other problems, makes many of the political arguments we have about stylistic details of these candidates unimportant. Warren’s annual wealth tax on the very rich is, to me, the single most radical policy proposal of any candidate in the race, and would do more than any other single policy to alter the imbalance of economic and political power in this country. It strikes me as absurd, then, to knock Warren for being wonky. Inequality can only be solved by growing the power of organized labor and, even more importantly, via the tax code. The tax code is wonky. Tax policy is wonky. It is also the most powerful tool for fixing what ails us. One wonky change to the tax code, accompanied by another wonky change to labor law, can reverse the trends in this chart—a chart that goes a long way towards encapsulating everything that has been wrong with America for the past half century. As Warren spoke about her wealth tax last night, you could see a handful of people standing out on the balconies of the graceful Fifth Avenue apartments overlooking the square, watching. I like to imagine that they were contemplating their own demise.

There is an unimaginable amount of money at stake in this election. The implementation of the sort of changes that Warren and Bernie want to implement in the tax code would cost the very richest people in the country many hundreds of billions of dollars. The same is true of multinational corporations, which can be thought of as algorithms that operate to maximize their own profits, which are unfortunately treated as humans for the purpose of campaign finance. Accumulating political power is a rational choice for such an algorithm, and to the extent that Bernie and Warren want to limit the opportunities for such corporate political power, corporations will oppose them. This is all to say, simply, that there will be a staggering amount of financial resources directly and indirectly arrayed against the success of these two candidates. Both, or either. Think about the collective power of the group that encompasses “Wall Street, major corporations, and the rich,” and you can start to imagine the sort of opposition that will rise up against either of these people if they are the Democratic nominee. When you keep this in perspective, the fact that we on the left are engaged in harsh and bitter battles over the relative merits of these two similar candidates seems rather petty and unwise. If Bernie crushes the rich in a “movement” style and Warren crushes the rich in a “wonky” style they have still both crushed the rich. I just can’t find it in myself to get particularly worked up about who does it, so long as it gets done. Nor do I trust my own powers of prediction enough to tell you with real confidence who would be more likely to get it done. They both want to get it done. And, not to be too cutesy, getting it done is going to require a whole fucking lot of People Power, because the power that comes from money will be acting to stop it. If the portion of the American electorate that can accurately identify both the problems with and the best solutions to our nation’s problems proceeds to divide itself in half and then consume itself with rivalry over personalities while the upper class marches on to win another class war, I am going to fucking scream. Let’s not do that.

Eat the rich in 2020. Don’t worry too much about which fork you use.

Source: The Big Fight, Not the Little Fight