Everything's great at Apple (if you ignore iPhone)

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We knew it was coming, but now we know the extent of the iPhone's contraction in 2018: it sold 15 percent fewer iPhones than the previous year, at $51.9 billion. 

That's still¬†a lot¬†of cash, but it's a big departure from where the company used to be¬†‚ÄĒ blockbuster growth every year. It's a sign that the market has become saturated, but even more clear is that Apple has completely topped out the price consumers are willing to pay.

What was surprising in Apple's earnings is an admission from Tim Cook that the company had failed to price the iPhone correctly global, or even bother to adapt its prices to local markets, only pricing it in U.S. dollars and not adjusting it for each country it's in. 

Apple has to be one of the largest companies in the world that doesn't adjust its products to local prices, and it's long been considered to be a profit maximization strategy in the most expensive markets. In New Zealand, for example, the iPhone XS Max was priced at $2,099 on launch day, on par with laptop pricing there.

So, what to do? Well, as something of an admission that the market has said that the iPhone is overpriced, Cook said that the company will lower prices globally in the coming months to 'help sales' in those markets. In other words, we know where the pricing ceiling is now, and so it'll lower prices as a result.

Beyond iPhone, Apple's earnings were positive. The company grew services to $10.9 billion, a 19 percent growth over the year before, as well as revenue in Mac, Wearables and other categories growing as well. It's worth noting that we no longer have a way to judge if that revenue rise is because Apple sold more iPads, or if it simply charged more for them, because the company stopped reporting those numbers last quarter.

So, the real news in all of this is: the iPhone is slowing down as Apple has reached the pricing ceiling, but the business is great still. The company has a powerful moat, going "deep and wide" in a number of business areas to keep the business growing despite a segment slowing down.

You might read wild headlines that the iPhone is dead or Apple is over, but that's simply not true. It is slowing down, but it's not receding yet, and the company has wisely pivoted its business before it could really hurt. That isn't to say it didn't make a mistake with the iPhone Xs and Xr, but even the most valuable companies make these types of mistakes.

What will be telling is beyond here: how does Apple's business move in the future? Will it boost that services revenue significantly with the very-near streaming service? Or, will the receding iPhone cause issues beyond just hardware? We won't really know until a few quarters from now, because this is a stumble in a series of incredible strides.


A devastating FaceTime flaw found by teen

It's been hard to avoid stories about this over the last day, but just hours before Apple's big earnings call came in, the company faced a new problem: a critical bug in FaceTime allowed anyone in the world to tap into an iPhone's microphone, even if they didn't answer the call.

Here's how it went down: if you called someone on FaceTime, then added yourself to the call again, it would trick the service into thinking the call had begun and would transmit audio from the remote end. 

In essence, it was a remote wire tap... rolled out to every iPhone on the planet.

How this happened: FaceTime, unlike many alternative services, actually optimistically establishes the call in the background while it's still ringing, but muted on both ends until there's an answer. When the second user is added with the new Group FaceTime functionality, the 'answered' message was accidentally broadcast to all endpoints, even if the other party never picked up.

That's a fairly incredible flaw to have in an operating system at scale, let alone the fact that Apple had planned a fix but didn't say anything publicly, then when the flaw was discovered, responded by saying it would be fixed later in the week. A few hours later, as the extent of the attack became clear, Apple pulled the plug server-side, disabling group calls entirely. 

Even more embarrassing, the flaw was found by a teenager, who tried to report it to Apple but was ignored for weeks because they didn't know the right channels to use. So, it went undetected for months, leaving the door wide open for attackers. Oh, and this news broke on world privacy day, which took the cake.

Why didn't this get caught before it hit real phones? It appears Apple still has a serious problem with automated testing, which should have caught a flaw like this while it was still being developed. It's unclear how Apple actually tests its software, or whether it's largely performed by hand, despite recent similar issues demonstrating that it needs to improve the practice.

The takeaway: Maybe it's time for a change in how Apple distributes software. 

If iOS allowed updating individual apps and frameworks like in Android and other operating systems, it might have been able to patch out the flaw much faster by firing out an incremental FaceTime update. Instead, iOS is distributed as a monolith, so it holds back important patches for 'big' updates, which require reboots.

After big security issues last year, including gaining root access with a blank password and another flaw that allowed root access by typing any password into the box, one would assume that this had been addressed. As we've just seen, however, there's serious problems that keep slipping through the cracks continually, with little being shared as to why it's happening.


Facebook pays teens, grabs data

Despite one of the worst security breaches of all time happening today, somehow Facebook, yet again, has taken the cake: it secretly paid teens to let them spy on them by monitoring everything they do on their devices.

Here's Techcrunch on what it discovered:

Facebook has been paying users ages 13 to 35 up to $20 per month plus referral fees to sell their privacy by installing the iOS or Android ‚ÄúFacebook Research‚ÄĚ app. Facebook even asked users to screenshot their Amazon order history page. The program is administered through beta testing services Applause, BetaBound and uTest to cloak Facebook‚Äôs involvement.

I actually found myself at a loss of words to describe how ludicrous this really is. Not only is this a reskinned version of Facebook's "VPN" that was banned by Apple for spying, it's actually paying teenagers to hand over everything about themselves. 

By installing the app, Facebook is able to monitor everything that happens on their connection from private chats in other apps, like Telegram, to emails, web searches and so on. It's clear that Facebook is using the data for competitor research, but it's wild how far this company has been willing to go.

It smells like desperation, and it looks like it too: the strategy of monitoring users like this can only explain how Facebook is so freely able to clone features from competing apps and launch copies of them in blistering speed. Instagram became Snap faster than Snap got better, and perhaps we now know why.

What does Facebook have to say about this, then? So far, despite the report being up for hours and Techcrunch asking about it repeatedly, nothing. I assume this will end up being caressed out by a PR team overnight, but it's astounding that this is going on, especially given how flagrantly it breaks Apple's rules, too.


Tab Dump

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