Internet infrastructure operators like Didi must now prove their political and legal legitimacy to the government, Ma Changbo, an online media start-up founder, wrote on his WeChat social media account.
“This is the second half of the U.S.-China decoupling,” he wrote. “In the capital market, the model of playing both sides of the fence is coming to an end.”
Didi, Ms. Liu and Mr. Liu didn’t immediately respond to requests for comment.
China’s internet companies have benefited from the best of two worlds since the 1990s. Many received foreign venture funding — Alibaba, the e-commerce giant, was funded by Yahoo and SoftBank, while Tencent, another internet titan, was backed by South Africa’s Naspers. They also copied their business models from Silicon Valley companies.
The Chinese companies gained further advantages when Beijing blocked almost all big American internet companies from its domestic market, giving its home players plenty of room to grow. Many Chinese internet firms later went public in New York, where investors have a bigger appetite for innovative and risky start-ups than in Shanghai or Hong Kong. So far this year, more than 35 Chinese companies have gone public in the United States.
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Now the Didi crackdown is changing the calculations for many in China’s tech industry. One entrepreneur who has set her sights on a listing in New York for her enterprise software start-up said it would be harder to go public in Hong Kong with a high valuation because what her company did — software as a service — was a relatively new idea in China.
A venture capitalist in Beijing added that because of China’s data security requirements, it was now unlikely that start-ups in artificial intelligence and software as a service would consider going public in New York. Few people were willing to speak on the record for fear of retaliation by Beijing.
At the same time, the United States has become more hostile to Chinese tech companies and investors. As Washington has ramped up its scrutiny of deals that involve sensitive technologies, it has become almost impossible for Chinese venture firms to invest in Silicon Valley start-ups, several investors said.
China’s government ordered the country’s leading ride-hailing platform, Didi, removed from app stores for “serious” problems related to the collection and use of customer data, the latest blow by Beijing to the company, which went public on the New York Stock Exchange just this past week.
In its brief late-evening announcement on Sunday, China’s internet regulator, the Cyberspace Administration of China, did not explain what problems it had found, only that its decision had been based on information that was reported to it, then tested and verified. The regulator ordered Didi to correct the problems and to “earnestly safeguard the security of all users’ personal information.”
On Friday, the same regulator had issued another surprise evening announcement, saying that new user sign-ups on Didi would be suspended while the authorities conducted a “cybersecurity review.” The agency did not say what had prompted the review.
That announcement, made just two days into Didi’s life as a publicly traded business on Wall Street, sent the company’s share price falling by 5 percent on Friday.
fined a record $2.8 billion in April for antimonopoly violations. Soon after, China’s antitrust authority began investigating the food-delivery giant Meituan on similar grounds. Other major internet companies, including Didi and TikTok’s parent, ByteDance, have been summoned before regulators and ordered to “put the nation’s interests first.”
China’s internet regulator has also named hundreds of apps that it says collect personal data to excess or use it in improper ways. Among them are apps created by some of China’s most prominent internet companies, including ByteDance, Tencent and Baidu. But in those cases, the regulator has required only that the app makers fix the problems within a certain amount of time. It did not order mobile stores to remove the apps.
Mr. Buser declined to comment on February’s changes.
Amazon also unveiled a cloud service, Luna, in September. It is so far available only to invitees, who pay $6 a month to play the 85 games on the platform. The games can be streamed from the cloud to phones, computers and Amazon’s Fire TV.
Like Google, Amazon has struggled to assemble a vast library of appealing games, though it does offer games from the French publisher Ubisoft for an added fee. Amazon has also had trouble developing its own games, which Mr. van Dreunen said showed that the creative artistry necessary to make enticing games was at odds with the more corporate style of the tech giants.
“They may have an interesting technological solution, but it totally lacks personality,” he said.
Amazon said it remained dedicated to game development: It opened a game studio in Montreal in March and, after a long delay, is releasing a game called New World this summer.
Even console makers have jumped into cloud gaming. Microsoft, which makes the Xbox console, released a cloud offering, xCloud or Xbox Cloud Gaming, last fall. For a $15 monthly subscription, users can play more than 200 games on various devices.
Sony also has a cloud gaming service, PlayStation Now, where games can be streamed to PlayStation consoles and computers.
Satya Nadella, Microsoft’s chief executive, said in an interview last month that he did not think it was possible to be a gaming company “with any level of big ambition” without cloud gaming. Sony declined to comment.
Other companies have waded in, too. Nvidia, the chip maker that produces gaming hardware, has a $10-a-month cloud program, GeForce Now.
A few years ago, while on a work trip in Los Angeles, I hailed an Uber for a crosstown ride during rush hour. I knew it would be a long trip, and I steeled myself to fork over $60 or $70.
Instead, the app spit out a price that made my jaw drop: $16.
Experiences like these were common during the golden era of the Millennial Lifestyle Subsidy, which is what I like to call the period from roughly 2012 through early 2020, when many of the daily activities of big-city 20- and 30-somethings were being quietly underwritten by Silicon Valley venture capitalists.
For years, these subsidies allowed us to live Balenciaga lifestyles on Banana Republic budgets. Collectively, we took millions of cheap Uber and Lyft rides, shuttling ourselves around like bourgeois royalty while splitting the bill with those companies’ investors. We plunged MoviePass into bankruptcy by taking advantage of its $9.95-a-month, all-you-can-watch movie ticket deal, and took so many subsidized spin classes that ClassPass was forced to cancel its $99-a-month unlimited plan. We filled graveyards with the carcasses of food delivery start-ups — Maple, Sprig, SpoonRocket, Munchery — just by accepting their offers of underpriced gourmet meals.
tweeted, along with a screenshot of a receipt that showed he had spent nearly $250 on a ride to the airport.
“Airbnb got too much dip on they chip,” another Twitter user complained. “No one is gonna continue to pay $500 to stay in an apartment for two days when they can pay $300 for a hotel stay that has a pool, room service, free breakfast & cleaning everyday. Like get real lol.”
Some of these companies have been tightening their belts for years. But the pandemic seems to have emptied what was left of the bargain bin. The average Uber and Lyft ride costs 40 percent more than it did a year ago, according to Rakuten Intelligence, and food delivery apps like DoorDash and Grubhub have been steadily increasing their fees over the past year. The average daily rate of an Airbnb rental increased 35 percent in the first quarter of 2021, compared with the same quarter the year before, according to the company’s financial filings.
set up a $250 million “driver stimulus” fund — or doing away with them altogether.
I’ll confess that I gleefully took part in this subsidized economy for years. (My colleague Kara Swisher memorably called it “assisted living for millennials.”) I got my laundry delivered by Washio, my house cleaned by Homejoy and my car valet-parked by Luxe — all start-ups that promised cheap, revolutionary on-demand services but shut down after failing to turn a profit. I even bought a used car through a venture-backed start-up called Beepi, which offered white-glove service and mysteriously low prices, and which delivered the car to me wrapped in a giant bow, like you see in TV commercials. (Unsurprisingly, Beepi shut down in 2017, after burning through $150 million in venture capital.)
These subsidies don’t always end badly for investors. Some venture-backed companies, like Uber and DoorDash, have been able to grit it out until their I.P.O.s, making good on their promise that investors would eventually see a return on their money. Other companies have been acquired or been able to successfully raise their prices without scaring customers away.
Uber, which raised nearly $20 billion in venture capital before going public, may be the best-known example of an investor-subsidized service. During a stretch of 2015, the company was burning $1 million a week in driver and rider incentives in San Francisco alone, according to reporting by BuzzFeed News.
But the clearest example of a jarring pivot to profitability might be the electric scooter business.
Remember scooters? Before the pandemic, you couldn’t walk down the sidewalk of a major American city without seeing one. Part of the reason they took off so quickly is that they were ludicrously cheap. Bird, the largest scooter start-up, charged $1 to start a ride, and then 15 cents a minute. For short trips, renting a scooter was often cheaper than taking the bus.
But those fees didn’t represent anything close to the true cost of a Bird ride. The scooters broke frequently and needed constant replacing, and the company was shoveling money out the door just to keep its service going. As of 2019, Bird was losing $9.66 for every $10 it made on rides, according to a recent investor presentation. That is a shocking number, and the kind of sustained losses that are possible only for a Silicon Valley start-up with extremely patient investors. (Imagine a deli that charged $10 for a sandwich whose ingredients cost $19.66, and then imagine how long that deli would stay in business.)
Pandemic-related losses, coupled with the pressure to turn a profit, forced Bird to trim its sails. It raised its prices — a Bird now costs as much as $1 plus 42 cents a minute in some cities — built more durable scooters and revamped its fleet management system. During the second half of 2020, the company made $1.43 in profit for every $10 ride.
“DoorDash and Pizza Arbitrage,” about the time he realized that DoorDash was selling pizzas from his friend’s restaurant for $16 while paying the restaurant $24 per pizza, and proceeded to order dozens of pizzas from the restaurant while pocketing the $8 difference, stands as a classic of the genre.)
But it’s hard to fault these investors for wanting their companies to turn a profit. And, at a broader level, it’s probably good to find more efficient uses for capital than giving discounts to affluent urbanites.
Back in 2018, I wrote that the entire economy was starting to resemble MoviePass, the subscription service whose irresistible, deeply unprofitable offer of daily movie tickets for a flat $9.95 subscription fee paved the way for its decline. Companies like MoviePass, I thought, were trying to defy the laws of gravity with business models that assumed that if they achieved enormous scale, they’d be able to flip a switch and start making money at some point down the line. (This philosophy, which was more or less invented by Amazon, is now known in tech circles as “blitzscaling.”)
There is still plenty of irrationality in the market, and some start-ups still burn huge piles of money in search of growth. But as these companies mature, they seem to be discovering the benefits of financial discipline. Uber lost only $108 million in the first quarter of 2021 — a change partly attributable to the sale of its autonomous driving unit, and a vast improvement, believe it or not, over the same quarter last year, when it lost $3 billion. Both Uber and Lyft have pledged to become profitable on an adjusted basis this year. Lime, Bird’s main electric scooter competitor, turned its first quarterly profit last year, and Bird — which recently filed to go public through a SPAC at a $2.3 billion valuation — has projected better economics in the years ahead.
Profits are good for investors, of course. And while it’s painful to pay subsidy-free prices for our extravagances, there’s also a certain justice to it. Hiring a private driver to shuttle you across Los Angeles during rush hour should cost more than $16, if everyone in that transaction is being fairly compensated. Getting someone to clean your house, do your laundry or deliver your dinner should be a luxury, if there’s no exploitation involved. The fact that some high-end services are no longer easily affordable by the merely semi-affluent may seem like a worrying development, but maybe it’s a sign of progress.
SAN FRANCISCO — When India’s government ordered Facebook and other tech companies to take down posts critical of its handling of the coronavirus pandemic in April, the social network complied on some posts.
But once it did, its employees flocked to online chat rooms to ask why Facebook had helped Prime Minister Narendra Modi of India stifle dissent. In one internal post, which was reviewed by The New York Times, an employee with family in India accused Facebook of “being afraid” that Mr. Modi would ban the company from doing business in the country. “We can’t act or make decisions out of fear,” he wrote.
Weeks later, when clashes broke out in Israel between Israelis and Palestinians, Facebook removed posts from prominent Palestinian activists and briefly banned hashtags related to the violence. Facebook employees again took to the message boards to ask why their company now appeared to be censoring pro-Palestinian content.
“It just feels like, once again, we are erring on the side of a populist government and making decisions due to politics, not policies,” one worker wrote in an internal message that was reviewed by The Times.
inflammatory posts from former President Donald J. Trump. But since Mr. Trump left office in January, attention has shifted to Facebook’s global policies and what employees said was the company’s acquiescence to governments so that it could continue profiting in those countries.
“There’s a feeling among people at Facebook that this is a systematic approach, one which favors strong government leaders over the principles of doing what is right and correct,” said Ashraf Zeitoon, Facebook’s former head of policy for the Middle East and North Africa region, who left in 2017.
Facebook is increasingly caught in a vise. In India, Russia and elsewhere, governments are pressuring it to remove content as they try to corral the platform’s power over online speech. But when Facebook complies with the takedown orders, it has upset its own employees, who say the social network has helped authoritarian leaders and repressive regimes quash activists and silence marginalized communities.
BuzzFeed News and the Financial Times earlier reported on some of the employee dissatisfaction at Facebook over Israeli and Palestinian content.
A divide between Facebook’s employees and the global policy team, which is composed of roughly 1,000 employees, has existed for years, current and former workers said. The policy team reports to Sheryl Sandberg, the chief operating officer.
many tricky international situations over the years, including in Russia, Vietnam and Myanmar, where it has had to consider whether it would be shut down if it did not work with governments. That has led to the employee dissent, which has begun spilling into public view.
That became evident with India. In April, as Covid-19 cases soared in the country, Mr. Modi’s government called for roughly 100 social media posts on Facebook, Instagram and Twitter to be pulled down. Many of the posts included critiques of the government from opposition politicians and calls for Mr. Modi’s resignation.
Facebook removed some of the posts and briefly blocked a hashtag, #ResignModi. The company later said the hashtag had been banned by mistake and was not part of a government request.
But internally, the damage was done. In online chat rooms dedicated to human rights issues and global policy, employees described how disappointed they were with Facebook’s actions. Some shared stories of family members in India who were worried they were being censored.
Last month, when violence broke out between Israelis and Palestinians, reports surfaced that Facebook had erased content from Palestinian activists. Facebook’s Instagram app also briefly banned the #AlAqsa hashtag, a reference to Al Aqsa Mosque, one of Islam’s holiest sites. Facebook later explained that it had confused the #AlAqsa hashtag with a Palestinian militant group called Al Aqsa Martyrs Brigade.
Understand the Covid Crisis in India
Employees bristled. “We are responding to people’s protests about censoring with more censoring?” one wrote in an internal message, which was reviewed by The Times.
Nick Clegg, who leads public affairs, to explain the company’s role in removing content tied to the Israeli-Palestinian conflict, according to attendees. The employee called the situation in Israel “fraught” and asked how Facebook was going “to get it right” with content moderation.
Mr. Clegg ran through a list of policy rules and plans going forward, and assured staff that moderation would be treated with fairness and responsibility, two people familiar with the meeting said. The discussion was cordial, one of the people said, and comments in the chat box beside Mr. Clegg’s response were largely positive.
But some employees were dissatisfied, the people said. As Mr. Clegg spoke, they broke off into private chats and workplace groups, known as Tribes, to discuss what to do.
Dozens of employees later formed a group to flag the Palestinian content that they said had been suppressed to internal content moderation teams, said two employees. The goal was to have the posts reinstated online, they said.
Members of Facebook’s policy team have tried calming the tensions. In an internal memo in mid-May, which was reviewed by The Times, two policy team members wrote to other employees that they hoped “that Facebook’s internal community will resist succumbing to the division and demonization of the other side that is so brutally playing itself out offline and online.”
One of them was Muslim, and the other was Jewish, they said.
“We don’t always agree,” they wrote. “However, we do some of our best work when we assume good intent and recognize that we are on the same side trying to serve our community in the best possible way.”
Sarah Cavey, a real estate agent in Denver, was thrilled last fall when Colorado introduced an app to warn people of possible coronavirus exposures.
Based on software from Apple and Google, the state’s smartphone app uses Bluetooth signals to detect users who come into close contact. If a user later tests positive, the person can anonymously notify other app users whom the person may have crossed paths with in restaurants, on trains or elsewhere.
Ms. Cavey immediately downloaded the app. But after testing positive for the virus in February, she was unable to get the special verification code she needed from the state to warn others, she said, even after calling Colorado’s health department three times.
“They advertise this app to make people feel good,” Ms. Cavey said, adding that she had since deleted the app, called CO Exposure Notifications, in frustration. “But it’s not really doing anything.”
announced last year that they were working together to create a smartphone-based system to help stem the virus, their collaboration seemed like a game changer. Human contact tracers were struggling to keep up with spiking virus caseloads, and the trillion-dollar rival companies — whose systems run 99 percent of the world’s smartphones — had the potential to quickly and automatically alert far more people.
Soon Austria, Switzerland and other nations introduced virus apps based on the Apple-Google software, as did some two dozen American states, including Alabama and Virginia. To date, the apps have been downloaded more than 90 million times, according to an analysis by Sensor Tower, an app research firm.
But some researchers say the companies’ product and policy choices limited the system’s usefulness, raising questions about the power of Big Tech to set global standards for public health tools.
Stephen Farrell and Doug Leith, computer science researchers at Trinity College in Dublin, wrote in a report in April on Ireland’s virus alert app.
CA Notify in December, about 65,000 people have used the system to alert other app users, the state said.
“Exposure notification technology has shown success,” said Dr. Christopher Longhurst, the chief information officer of UC San Diego Health, which manages California’s app. “Whether it’s hundreds of lives saved or dozens or a handful, if we save lives, that’s a big deal.”
In a joint statement, Apple and Google said: “We’re proud to collaborate with public health authorities and provide a resource — which many millions of people around the world have enabled — that has helped protect public health.”
Let Us Help You Protect Your Digital Life
Based in part on ideas developed by Singapore and by academics, Apple and Google’s system incorporated privacy protections that gave health agencies an alternative to more invasive apps. Unlike virus-tracing apps that continuously track users’ whereabouts, the Apple and Google software relies on Bluetooth signals, which can estimate the distance between smartphones without needing to know people’s locations. And it uses rotating ID codes — not real names — to log app users who come into close contact for 15 minutes or more.
said last year in a video promoting the country’s alert system, called Corona-Warn-App.
But the apps never received the large-scale efficacy testing typically done before governments introduce public health interventions like vaccines. And the software’s privacy features — which prevent government agencies from identifying app users — have made it difficult for researchers to determine whether the notifications helped hinder virus transmission, said Michael T. Osterholm, the director of the Center for Infectious Disease Research and Policy at the University of Minnesota.
“The apps played virtually no role at all in our being able to investigate outbreaks that occurred here,” Dr. Osterholm said.
Some limitations emerged even before the apps were released. For one thing, some researchers note, exposure notification software inherently excludes certain vulnerable populations, such as elderly people who cannot afford smartphones. For another thing, they say, the apps may send out false alarms because the system is not set up to incorporate mitigation factors like whether users are vaccinated, wearing masks or sitting outside.
Proximity detection in virus alert apps can also be inconsistent. Last year, a study on Google’s system for Android phones conducted on a light-rail tram in Dublin reported that the metal walls, flooring and ceilings distorted Bluetooth signal strength to such a degree that the chance of accurate proximity detection would be “similar to that of triggering notifications by randomly selecting” passengers.
Kimbley Craig, the mayor of Salinas, Calif. Last December, when virus rates there were spiking, she said, she downloaded the state’s exposure notification app on her Android phone and soon after tested positive for Covid-19. But after she entered the verification code, she said, the system failed to send an alert to her partner, whom she lives with and who had also downloaded the app.
“If it doesn’t pick up a person in the same household, I don’t know what to tell you,” Mayor Craig said.
In a statement, Steph Hannon, Google’s senior director of product management for exposure notifications, said that there were “known challenges with using Bluetooth technology to approximate the precise distance between devices” and that the company was continuously working to improve accuracy.
The companies’ policies have also influenced usage trends. In certain U.S. states, for instance, iPhone users can activate the exposure notifications with one click — by simply turning on a feature on their settings — but Android users must download a separate app. As a result, about 9.6 million iPhone users in California had turned on the notifications as of May 10, the state said, far outstripping the 900,000 app downloads on Android phones.
Google said it had built its system for states to work on the widest range of devices and be deployed as quickly as possible.
Some public health experts acknowledged that the exposure alert system was an experiment in which they, and the tech giants, were learning and incorporating improvements as they went along.
One issue they discovered early on: To hinder false alarms, states verify positive test results before a person can send out exposure notifications. But local labs can sometimes take days to send test results to health agencies, limiting the ability of app users to quickly alert others.
In Alabama, for instance, the state’s GuideSafe virus alert app has been downloaded about 250,000 times, according to Sensor Tower. But state health officials said they had been able to confirm the positive test results of only 1,300 app users. That is a much lower number than health officials would have expected, they said, given that more than 10 percent of Alabamians have tested positivefor the coronavirus.
“The app would be a lot more efficient if those processes were less manual and more automated,” said Dr. Scott Harris, who oversees the Alabama Department of Public Health.
Colorado, which automatically issues the verification codes to people who test positive, has reported higher usage rates. And in California, UC San Diego Health has set up a dedicated help line that app users can call if they did not receive their verification codes.
Dr. Longhurst, the medical center’s chief information officer, said the California app had proved useful as part of a larger statewide public health push that also involved mask-wearing and virus testing.
“It’s not a panacea,” he said. But “it can be an effective part of a pandemic response.”
Last month, Apple released an update to its operating system, iOS 14.5, which gives users more control of their personal data. But if you’re looking to gain more control over the iPhone itself, you also have options. Want to put your favorite apps within easy reach, tag friends in Messages or set your preferred browser to open links? You can do all that and more.
Here are a few quick tips for enhancing the iPhone experience. Next week’s Tech Tip column will round up a few helpful hints for the Android faithful.
1. Customize Your Control Center
The Control Center — that handy panel of often-used settings summoned with a finger swipe — first appeared back in 2013 and got more useful when Apple began to let users add their preferred buttons a few years later. If you haven’t tinkered with your Control Center to add the features and functions you use the most, just open the Settings icon on the home screen, scroll down to Control Center and give it a tap.
From the list on the next screen, choose the icons for the apps and settings you want to live in your Control Center. While tools like the Flashlight are typically there by default, you can remove those you never use and add icons for apps you want, like the Magnifier, the QR Code scanner or even the Shazam music recognition feature. To rearrange the order of the icons on the screen, drag them up and down the list before you close the Settings app.
Back Tap feature to have your iPhone perform a specific action when you give it quick taps on the back.
To set it up, open the Settings, select Accessibility and then Touch, and scroll down to Back Tap. Once you select Back Tap, select either Double or Triple Tap and choose an action on the next screen, like opening the Spotlight search app or the Control Center or running a Shortcut you’ve set up with Apple’s Shortcuts app. You can assign two separate tasks to the Double Tap and Triple Tap functions — and Back Tap should work even if your iPhone is in a case.
3. Choose Your Mail and Browser Apps
Tired of the iPhone always opening the Safari browser instead of your favored DuckDuckGo when you tap a link, or firing up Apple’s Mail program instead of the Gmail app when you select an email address from your Contacts list? If your iPhone is running iOS 14 or later, you can choose the apps you want as your default programs.
Messages chat or get someone’s attention in a group conversation, just as you can on some social media platforms? You can do both.
To reply to a certain message in either a one-on-one or group chat where everyone is using the Messages app, press your finger on that message until a menu appears. Select Reply, enter your response and tap the blue Send arrow. To tag someone in a conversation so he or she gets a notification, put the @ symbol in front of the name or just type the name and select it when it pops up onscreen from your Contacts.
5. Get the Siri You Want
Apple’s Siri voice assistant, celebrating a decade on the iPhone this October, has been losing ground in knowledge and usefulness to Amazon’s Alexa and the Google Assistant in recent years. To boost Siri’s powers, Apple added more skills in iOS 14. And with iOS 14.5, it now includes a more diverse set of voices.
To change how and when Siri sounds, open the Settings icon on the home screen, select Siri & Search and make your selections. You can also opt to display your conversations on the screen by tapping Siri Responses and turning on “Always Show Siri Captions” and “Always Show Speech” to make sure you see the last word, too.
Tim Cook took the stand for the first time as Apple’s chief executive. The billionaire creator of one of the world’s most popular video games walked a federal judge through a tour of the so-called metaverse. And lawyers in masks debated whether an anthropomorphic banana without pants was appropriate to show in federal court.
For the past three weeks, Apple has defended itself in a federal courtroom in Oakland, Calif., against claims that it abused its power over the iPhone App Store, in one of the biggest antitrust trials in Silicon Valley’s history. Epic Games, the maker of the popular game Fortnite, sued Apple last year seeking to allow apps to avoid the 30 percent commission that the iPhone maker takes on many app sales.
On Monday, the trial — which covered esoteric definitions of markets as well as oddball video game characters — concluded with Judge Yvonne Gonzalez Rogers of the U.S. District Court for the Northern District of California pressing the companies on what should change in Apple’s business, if anything. The decision over the case, as well as the future of the $100 billion market for iPhone apps, now rests in her hands. Judge Gonzalez Rogers has said she hopes to issue a verdict by mid-August.
Yet even in an era of antitrust scrutiny of the world’s biggest tech companies, the trial showed how difficult it was to take on a $2.1 trillion corporate titan like Apple.
more than $1 billion in sales — from the App Store. Epic also spent millions of dollars on lawyers, economists and expert witnesses. Yet it still began the trial at a disadvantage because antitrust laws tend to favor defendants, according to legal experts who tracked the case.
While Judge Gonzalez Rogers signaled openness to Epic’s arguments during the trial, a ruling in favor of the video game maker might not lead to momentous changes in the market for mobile apps. Any verdict is also likely to be tied up in appeals for years, at which point rapid change in the technology industry could leave its effects obsolete.
“To mount a credible antitrust campaign, you need to have a significant war chest,” said David Kesselman, an antitrust lawyer in Los Angeles who has followed the case. “And the problem for many smaller companies and smaller businesses is that they don’t have the wherewithal to mount that type of a fight.”
The case focused on how Apple wields control over the iPhone App Store to charge its commission on app sales. Companies big and small have argued that the fee shows Apple is abusing its dominance, while Apple has responded that its cut of sales helps fund efforts to keep iPhones safe. Regulators and lawmakers have homed in on the issue, making it the center of antitrust complaints against the company.
Tim Sweeney, Epic’s chief executive and a longtime antagonist to big tech companies, has said he is “fighting for open platforms and policy changes equally benefiting all developers.”
30 percent number has been there since the inception. And if there was real competition, that number would move. And it hasn’t,” she said of Apple’s commission on app sales. She also said that it was anticompetitive for Apple to ban companies from telling customers that they could buy items outside of iPhone apps.
At other times on Monday, she appeared reluctant to force Apple to change its business. “Courts do not run businesses,” she said.
Judge Gonzalez Rogers also suggested that Epic’s requested outcome in the case would require a significant change in Apple’s business and questioned whether there was legal precedent for that. “Give me some example that survived appellate review where the court has engaged in such a way to limit or fundamentally change the economic model of a monopolistic company?” she asked Epic’s lawyers.
ripe for a legislative fix. Apple also faces two other federal lawsuits over its app fees — one from consumers and one from developers — which are both seeking class-action status. Judge Gonzalez Rogers is also set to hear those cases.
Similarly, a victory for Apple could deflate those challenges. Regulators might be wary to pursue a case against Apple that has already been rejected by a federal judge.
Judge Gonzalez Rogers may also deliver a ruling that makes neither company happy. While Epic wants to be able to host its own app store on iPhones, and Apple wants to continue to operate as it has for years, she might order smaller changes.
Former President Barack Obama nominated Judge Gonzalez Rogers, 56, to the federal court in 2011. Given her base in Oakland, her cases have often related to the technology industry, and she has overseen at least two past cases involving Apple. In both cases, Apple won.
She concluded Monday’s trial by thanking the lawyers and court staff, who mostly used masks and face shields during the proceedings. Months ago in the throes of the coronavirus pandemic, it was unclear if the trial could be held in person, but Judge Gonzalez Rogers decided that it was an important enough case and ordered special rules to minimize the health risks, including limits on the number of people in court.
Epic opted to include its chief executive over an extra lawyer, and Mr. Sweeney spent the trial inside the courtroom, watching from his lawyers’ table. Mr. Sweeney, who is typically prolific on Twitter, didn’t comment publicly over the last three weeks. On Monday, he broke his silence by thanking the Popeyes fried-chicken restaurant next to the courthouse.
This article is part of Owning the Future, a series on how small businesses across the country have been effected by the pandemic.
The Covid pandemic hit California hard. It has seen well over 3.5 million cases and over 60,000 deaths. Scores of businesses have closed. But for Ana Jimenez the owner of Tacos El Jerry, a small fleet of food trucks in Santa Cruz County, it provided an opportunity to bring her business into the 21st century.
Ms. Jimenez’s four trucks began taking orders through an app and a website, delivering directly to customers, and cultivating a customer base through a new social media presence. All of that added up to a significant increase in sales.
Facebook and Instagram pages for the food trucks, a social media advertising campaign and began accepting credit card purchases. “Each truck is now serving around 300 people per day, which translates to roughly $5,000 in sales daily,” Ms. Jimenez said.
Food trucks — kitchens on wheels, essentially — are flexible by design and quickly became a substitute during the pandemic for customers who couldn’t dine indoors and coveted something different than their mainstream carryout options. That, in turn, has delivered a new client base to add on to an existing cadre of loyal followers. In a very real sense, food trucks are vehicles for equality in the post-pandemic world.
“While the pandemic has certainly hurt the majority of small businesses, it has also pushed many to be more innovative by looking for new revenue streams and ways to reach customers,” said Kimberly A. Eddleston, a professor of entrepreneurship and innovation at Northeastern University.
Like Ms. Jimenez, some businesses have “focused on ways to maintain their customer base by, for example, delivering products directly to customers,” Prof. Eddleston said. “While others have created products and services that attract new customers.”
Blue Sparrow food trucks in Pittsburgh, adding pizza, four-packs of local beer, gift cards and five-ounce bottles of housemade hot sauce.
Mr. Cypher’s main fare since he hit the streets in 2016 has been global street food. His menu carries a heavy Asian inspiration. There’s made-from-scratch kimchi on the menu daily. Dishes can include rice bowls, Vietnamese banh mi, falafel burritos, and a burger made with a ramen bun.
During the pandemic, Mr. Cypher’s business took a hit when 24 festivals and over a dozen weddings where he was booked were canceled. “I switched gears to keep things as lean as possible,” Mr. Cypher said.
He temporarily shut down a second food truck — a retrofitted 35-foot, 1956 Greyhound bus that he used for the big parties — and introduced a website to interact with his customers and an online ordering system for his smaller truck, which he usually parked at a neighborhood brewery.
“I switched the menu to focus on soups, noodles, burritos and pressed sandwiches, so that the things that we were handing our customers would make it home and still be a good experience after they opened up the bag and took it out,” he said.
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And he began to make and sell pizza one day a week at the kitchen where he used to do his prep work for the trucks before the pandemic. (The pizza, too, has an international flair: a banh mi pie, for example, made with pork or tofu, miso garlic sauce, mozzarella, pickled carrots, cucumbers, and cilantro.)
Accion Opportunity Fund, a nonprofit organization providing small-business owners with access to capital, networks and coaching. “Many food truck owners stepped forward to seize opportunity during a time of great uncertainty,” she said.
As Pittsburgh emerges from the pandemic, Mr. Cypher is adding a twist at his kitchen location. “We have licensing to offer beer on draft from our local breweries, so we’re going to have a small beer garden,” he said. “And that’s a revenue stream that we’re going to kind of lean into that we probably never would have done if not for Covid.”
In 2020, Mr. Cypher’s food trucks had $200,000 in gross sales, down about 40 percent from the previous year, he said. “But with the new offerings, more efficiency and only running one rig, we were actually able to net enough to keep the business moving forward,” he said. “This year we’re already up about 30 percent from where we were at last year at this time.”
Shiso Crispy, timing was much tricker: she opened her first truck in November 2019, just a few months before the pandemic. And yet Ms. Whaley, 35, who offers handmade gyozas, bao buns and their signature dish, dirty rice, now has two trucks because of a strategy of regularly parking in certain neighborhoods and offering discounted and free meals outside a nearby Ronald McDonald House. (She added the second truck in January.)
One challenge: “The internet here is shoddy. And cellphone service in different areas out here just doesn’t work,” she said. “During the height of the pandemic, I was consistently losing two or more transactions at my point of sale every shift.”
Clover Flex point of sale program for touchless transactions. “It has digitally transformed my business,” Ms. Whaley said.
She also signed on to an app, called Best Food Trucks, that allows customers near her to pre-order once they know her location for the day.
“The inextricably connected stories of food trucks and Covid are a perfect microcosm of the undeniable reality that women, immigrants and people of color, historically relegated to the edges of the economy, are actually the foundation upon which the next economy must be built,” said Nathalie Molina Niño, author of “Leapfrog: The New Revolution for Women Entrepreneurs.”
But the silver lining from the pandemic for some operators is more personal — including bringing families together. “I have a ton of wisdom about how to operate food trucks and cooking,” Ms. Jimenez said. “It’s the coming together of the generations that made the business stronger now and for the future.”
At another point, the Apple lawyer questioned Mr. Cook on Apple’s competition in the app market. Mr. Cook said he believed digital marketplaces that distributed games, including Epic’s and those of the gaming-console makers like Sony and Microsoft, were direct competitors to the App Store. Though, he admitted, “I’m not a gamer.”
Throughout the trial, Judge Gonzalez Rogers frequently sought clarification on technical jargon and pressed witnesses further on their answers. She asked about the difference in business models for Fortnite, Epic’s most popular game, and games like Roblox and Minecraft from other companies, and asked how Apple’s security compared with that of third-party companies.
Earlier this week, she said she had not seen much evidence for one of Epic’s nine claims that accuses Apple of violating the essential facilities doctrine, which bans business from denying other businesses access to certain markets. Apple quickly filed a motion to have the essential facilities claim dismissed.
The biggest challenge in deciding the case may be defining the market that Epic and Apple are fighting over. Apple argued that Epic has many options for game distribution including web browsers, gaming consoles and personal computers. Many of those platforms charge a commission similar to that of the App Store. If gaming is the market, Apple argued, then there are many competitors — like Microsoft, Sony and Nintendo — and Apple cannot have a monopoly.
Epic responded that Fortnite is more than a game. It is something the company calls the metaverse — an infinite digital universe with activities, social media and even concerts. The argument led to a lengthy and detailed debate over what a game actually is. The point? This case, Epic’s lawyers argued, is about all mobile apps, which can only reach the iPhone’s one billion users through Apple’s App Store.
Judge Gonzalez Rogers expressed frustration over the market semantics. “One side will say it’s black, the other says it’s white — typically it’s somewhere in the gray,” she said last week.
Apple argued that its fees were necessary to maintain security for its customers. The company’s lawyers said the App Store’s restrictions protected against malware and data breaches for iPhone users.