Facebook’s 3in1 Messaging Strategy: More User Data!–Futurum Tech Podcast Episode 029

On this edition of The Future in Tech Podcast, is Facebook biting off more than it can chew with a WhatsApp, Instagram and Messenger strategy? ViVo introduces the jack-less, port-less, truly wireless phone that Apple should have released last year. The rise of so-called friendly fraud. The status report on the FTC’s very strange case against Qualcomm. Could Huawei become the most dominant mobile technology company? Those stories and more, coming up on this episode of FTP.

Our Main Dive

Facebook has three popular, and increasingly similar, messaging apps that all run different code. While Mark Zuckerberg plots to bring them together into a common platform to improve performance and simplify development, we suspect the real goal is more user data and better advertising models.

Our Fast Five

We dig into this week’s interesting and noteworthy news:

• The first jack-less, port-less, butt-less phone from Vivo
• The FCC’s strange case against Qualcomm
• Amazon’s questionable Rekognition recognition issue
• Is Apple’s answer to climate change an iPhone flashlight
• IBM’s financials are actually kinda impressive

Tech Bites

Facebook encourages kids to spend mom & dad’s money. What could go wrong with Facebook’s “friendly fraud” strategy?

Crystal Ball: Future-um Predictions and Guesses

Huawei claims it will soon be #1 in smartphone sales, but just how realistic is this in an environment mired in trade wars and corporate espionage?

Transcript: 

Fred McClimans: Welcome to this week’s edition of The Future in Tech podcast. I’m your host, Fred McClimans. Joined today by my colleagues Daniel Newman and Olivier Blanchard. Gentlemen, welcome to this week’s FTP.

Daniel Newman: Always good to be here.

Olivier Blanchard: Hi back.

Fred McClimans: Well good. Now that we have that settled out of the way. We’ve got a busy show today and I know you guys are eager to dive in. We’re going to talk a bit about Facebook’s three in one strategy for its messaging apps.

We’ll hit some of our key Fast Five you must know about items this week. We’ll talk again a little bit about Facebook as a Tech Bites winner, with its monetization strategy. And we’ll take a poke at Huawei and whether or not they can actually be the number one smart phone manufacturer in the world.

But before we begin, I do need to remind everybody. The Futurum Tech podcast is for information and entertainment purposes only. We are not providing any stock investment advice, nor should any be implied by anything that we say. So with that, gentleman, Facebook. I know we talk a lot about Facebook over the course of our podcast here, but that’s because they’re just doing so many interesting things. And by interesting, sometimes great, sometimes not so great.

What we’re hearing today is an interesting set of rumors coming out that Facebook, and in particular Mark Zuckerberg, may be trying to integrate its three messaging apps. That would be WhatsApp, Instagram and Facebook Messenger. Which is an interesting kind of note here for these guys. I mean, these are two apps that, aside from Messenger, WhatsApp and Instagram, they’ve been part of Facebook for quite a while now as stand-along apps in the ecosystem. WhatsApp was acquired back in 2014 for $16 billion. And Instagram was acquired back in 2012 for a mere $1 billion. That’s sort of an interesting just side point right there. I would think they got a much better deal at Instagram than perhaps WhatsApp, but putting all that aside, these three systems, they are independent applications. They have independent back ends, they don’t have any real integration. And now we’re looking at the possibility that they may all be brought together under one roof.

Now what we’re hearing is that they will still remain three different public facing apps. But all of the back end, all the engines, everything that makes it work could technically be brought together under one platform that would be used for each of the three applications. So with that, I know there are a number of monetization issues that come into play here. There’s a whole argument about how this is the type of strategy that a lot of enterprises and a lot of vendors should be taking. Have one basic core platform that you can drive multiple apps off. But there are also some privacy concerns. And maybe even some issues surrounding Facebook’s potential divestiture here.

So Dan, I’d love to get your thoughts on this. And, in fact, you and I were chatting earlier and you brought up the whole issue of how this might be a move to kind of insulate Facebook from divestiture. What do you think is going on here with this?

Daniel Newman: Well I think Facebook’s under a tremendous amount of scrutiny right now and the Facebook brand is the particular group within the company that’s seen the most negative publicity, the most sort of lost good will.

And let’s face it, we also have some demographics that are suggesting that the people specifically that use Facebook are older, and that it’s not necessarily being picked up quite as aggressively by younger generations. And I think all of us can speak to that to some extent through our own children’s and through their lens. I have two teenage daughters and neither of them have any interest whatsoever in using Facebook. However, both of them use Instagram.

And, on a global scale, Facebook has also had some growth challenges where it’s grown at a much higher rate in certain places and not in others. Where WhatsApp has filled in the gap as one of the most popular messaging platforms just about everywhere, with the exception of maybe China and a few specific places in Asia where they’ve developed their own WeChats and specific applications that have become more popular at a local level. So, Facebook obviously wants to engage more with the next audience and build a rapport with them.

The second thing you have is, I do think some of this scrutiny could become a larger issue for Facebook. We’re just in the infancy right now of seeing what all of this negative publicity could potentially do to this company. You have a whole bunch of violations right now of privacy. You have executives that are under the spotlight for doing some things that are in particularly of bad will. And we’ll even talk about yet another one of those when we get to our Tech Bites section today. And the behavior continues. And so if Facebook gets slapped really hard right now, they could possibly benefit from having these two other properties. But they could also be pushed, for instance, to divest them. They could be pushed because of litigation, they could be pushed because of some sort of separation. Again, we’ve seen, and Olivier you’ve talked endlessly. I hear about the FTC against Qualcomm. The government wants to go after a company for monopolistic behavior without even having a monopoly. They can do that. And they could decide to some extent that Facebook controls too much of the messaging platform. So you have that.

You also have encryption issues. WhatsApp’s been generally, and I’ll end here so that someone else can speak. But WhatsApp’s been generally known as a more secure platform. A platform where messages are encrypted. Where that data has, up to this point, not been necessarily utilized in any sort of machine learning, AI activities that have helped them target and market to the users of the product. Whereas Facebook Messenger and Instagram Messenger have sort of knowingly been utilized that way.

So you hear Zuckerberg saying that it would be end-to-end encrypted, but right now we all know Facebook Messenger has been one of the biggest catalysts towards the way they position and market products to Facebook users across the internet and follow them across the internet. So having that infrastructure tied together, even if they decide not immediately to utilize that, would give them the power to start using all the data within WhatsApp specifically and Instagram which they already do more so to market to everybody. So there’s a lot of advantages for Facebook in doing this. I just don’t really see a lot of benefits to the users. I see it as a protective move. And I see it as a beneficial move for them for revenue.

Fred McClimans: You know Dan, it’s interesting that you mentioned WhatsApp as being considered one of the more secure aspects of Facebook. And, to an extent there, I think you’re right. I think there’s an underlying level of security that needs to be present in all of Facebook’s apps. You know in fact interestingly, just today in the Special Council’s indictment of Roger Stone, which happened early this morning. During that, if you read through the document, there’s actually a point where Roger Stone and another individual are trying to set up a time to talk. And one of them says, oh not on this channel. I need a secure channel. Do you have WhatsApp?

So, the security concern’s certainly there. And I think you’re right. There’s potentially a bit of defensive move here in play. But at the same time, if they can bring these three apps together I think they could effectively increase monetization of features across all three much better than they have in the past. And certainly if Facebook’s usage is declining and revenue from Facebook advertising is starting to slide, it makes total sense for them to start investing in their next new platform here. And I would be surprised to even see something slightly different than a three-into-one. Maybe it’s a three-into-one-plus that comes out of the end result here. But there are a lot of security concerns about putting all of that user data, all that application into one platform here. Olivier, what’s your take on this? Is this something that is more beneficial to Facebook than users? Or is it something that users might actually benefit from?

Olivier Blanchard: I think it’s pretty clear that this is 99% beneficial to Facebook and maybe 1% beneficial to some Facebook and Instagram users. It’s absolutely not beneficial to any WhatsApp users whatsoever. I’ve used WhatsApp … There’s absolutely no reason for WhatsApp, which is supposed to be an end-to-end encrypted secure messaging platform, that is in some ways the antithesis of Facebook Messenger to be essentially coupled or merged into Facebook Messenger. They’re competing platforms. The point of WhatsApp is to be not like Facebook and not searchable by Facebook. And Facebook wants to increase its ability to essentially extract, or potentially extract, keyword information, data, from your communications with people. It makes absolutely no sense.

Now Facebook and Instagram merging a little bit more, having a little bit more connective tissue, that to me makes sense. Especially for power social media users who go back and forth between the platforms and like to share their lives and share their photos of cheeseburgers. For WhatsApp, I don’t get it. Either WhatsApp kills Messenger or Messenger kills WhatsApp. But there’s no way both platforms survive this.

Fred McClimans: You know, it is interesting in that, from a revenue perspective and from a ecosystem perspective, Facebook Messenger actually has brought into the application realm a lot of partners that are using Messenger for everything from purchasing, to sharing money or lending money, to customer support service for a number of brands out there. And that’s something that we just haven’t seen in WhatsApp. And we really haven’t seen that in Instagram either. So there’s some potential there to kind of bring some of that aspect out that might make a lot more features available to consumers of these services. But I want to kind of step back a little bit here and just look at this overall strategy. The idea of an organization having three separate technology stacks, three separate applications. That means three times the number of developers that are out there. And potentially three times the number of security risks. So I know we deal in a lot of technology that’s targeted at the enterprise space.

So I’ll throw it back to you guys. Olivier, do you think there’s value here, and sort of a lesson that maybe enterprises should be watching? Hey can Facebook actually achieve this and pull it off? And is that something that we should look at internally in terms of minimizing the number of discreet apps that we have and having some type of platform that we can then leverage moving forward?

Olivier Blanchard: Yeah, so, that type of integration works for Google. Because they start from that standpoint.

That’s their design and ecosystem philosophy is to integrate everything and for everything to play well together. Or anything that matters anyway. Facebook has no philosophy, no integration physiology. Facebook just at one point decided to buy a bunch of real estate to get a foothold and gain control over all of these other avenues of revenue generation and data acquisition. And now they’re trying to cobble them together in a way that makes absolutely no sense.

I think the value in Facebook doing this, in the midst of the fact that Facebook is currently the poster boy for privacy breaches and zero public trust, is that whatever they do with this, whether it’s successful or not successful, and I expect that it will not be successful, this will be a teachable moment. A case study in what not to do for the rest of the industry.

Fred McClimans: Well, look at Cisco as sort of an example here. Cisco, like Facebook, they have acquired a ton of, hundreds of companies over their life. And to be honest, I don’t think that they’ve necessary in the past done a particularly good job of integrating those discreet platforms, whether it’s hardware or software, into a unified system. In this case here, I think it’s probably not a bad idea for Facebook from an integration perspective to actually bring the back office together for these apps. And the apps will still be considered stand alone, discreet apps. They’re supposedly going to still have the same look and feel. But of course we’ll see what happens with that.

Olivier Blanchard: Dan, your thought on this?

Daniel Newman: I got to jump in though because the thing is, is that the comparison to Cisco, while true, there’s a little bit of a problem. So Cisco, by and large, acquires brands that most people don’t know of. Like, yes, if you’re in the tech space you might know AppDynamics or you might know some of the strategic acquisitions. You may have been familiar with Flip Cam. But they had to kill that because that was, the phone had put that out of business already. WebEx, it took them a decade to integrate that into their brand. So sure, Cisco. IBM I think bought 100 companies in one year, and most people couldn’t name two of them. So I think it’s common place in high tech. Apple usually doesn’t even, other than Beats, they’ve almost never actually publicly made any comment on brands they acquire. Yet they constantly acquire companies to help them with their innovation or lack thereof, technology portfolios, et cetera, et cetera.

Fred McClimans: And usually once they’re acquired, you never hear about them again.

Daniel Newman: Right, because they bought them for a reason and the Apple brand is bigger in their mind than everyone else. But I got two thoughts to quickly summate this section, because I know, I know I’m the one holding us up from moving on. But the first is that Facebook has a different issue. Because WhatsApp and Instagram have a tremendous amount of brand equity that I would actually say at this point might be greater than Facebook’s brand equity. If it’s not greater than now, it has the propensity to be because of Facebook’s damage.

The second thing, and I tweeted it out this morning and I’ll put this out there, is I’m pretty sure that the executive interviews as Facebook go something like this. Madam or sir, are you willing to take every crumb of trust that our customers and users give us and violate that trust to an excessive amount in order to make us another dollar? And if the person says yes, they go “You’re hired.” Because honestly, I don’t see any way you can be as stupid as Facebook has been, for as long as they’ve been, on accident. So I think it’s all intentional. I think everything they’re doing has the pure intent to violate the trust of people. And if I was a user of any of these channels and I am, I would be very wary to continue doing so knowing that all they’re doing is integrating one or two extraordinarily unsecure channels to work with one that may be, and is supposedly, more secure. But for them it’s all about data. It’s all about revenue. So those executives say, I’m willing to screw my customers, you’re hired. Moving on.

Fred McClimans: Well, with that. We’ll probably pick this up at a future point because I think there’s an interesting question here. Could Facebook become the next MySpace, which the new Messenger three-in-one becomes the new Facebook?

But we’re going to move on here to our Fast Five Section. This week we’ve got five interesting tidbits to toss out there. Dan, I’m going to start with you. And Amazon’s facial recognition technology. What’s taking place there? What caught your eye?

Daniel Newman: So there was some interesting reporting that went out about Amazon. So Rekognition has gotten a recognized brand somewhat for what they’re doing in law enforcement, in various machine vision technologies. One of the more interesting pieces of a data out there is while everyone thinks that Amazon is just nailing this, is there were some studies out there that did a little bit of a comparison about how Rekognition is doing in terms of its ability to classify what it’s looking at. And I’ll just read the quote, because I thought this was fascinating.

But there was a study published this Thursday. It said that Rekognition made no errors in recognizing the gender of light-skinned men but it misclassified women as men 19% of the time. And the researches said it mistook dark-skinned women for men 31% of the time. So there’s a serious bias issue going on within this recognition technology. And, interestingly enough, we don’t hear as much about Microsoft’s technology but in the same instance where Amazon got it wrong 31% of the time, Microsoft’s technology only got it wrong 1.5% of the time.

So it goes to show, interestingly enough, about how bias in these platforms can make a tremendous difference in how accurate the AI and the machine vision and the learning actually is. And it’s also interesting to see, we still are a really long way from this technology doing the job that it’s being sold to be able to do today. So, Rekognition and Amazon is on a track, on a start. But their competitors up in Redmond are kicking their butt right now. Right down the street. And it’s be interesting to watch how this technology plays out in the coming year.

Fred McClimans: You know what, that’s an interesting one there because other facial recognition tools and search tools on images have had issues in the past. You know, Google being one. And for everybody that’s listening that’s not familiar with Amazon’s Rekognition, it’s Rekognition with a K, if you want to search on that.

So Olivier, we’re going to move on here to Vivo who has begun introducing what you’re calling a butt-less phone?

Olivier Blanchard: Yes, it’s a butt-less, jack-less phone. So essentially it’s a concept phone. We don’t know if it’ll ever show up in stores and if anyone will ever see them, but it will be introduced, evidently, at Mobile World next month. A phone that has no jacks, no ports, smooth, smooth edges. So it’s wireless charging. It has wireless Bluetooth connectivity with listening devices and other peripherals. And it’s not necessarily something that people, that everybody wants, right? There’s a big movement to bring back the phone jack in smart phones. But I have to admit that if you want to push the concept of a completely wireless phone, and do it with pretty good specs. It’s a 5G phone. It has a full display fingerprint sensor. It has 12 gigabits of ram. And it’s completely jack-less.

I think Vivo, in this particular instance, is kind of at the tip of the spear. This is the phone that, in my opinion, Apple should have released this year at … Well, they never release anything at Mobile World. But this is the type of cutting edge kind of conceptual, let’s push the edge a little bit in the mobile worlds, that Apple used to be known for and that I wish it would pursue again. Whether it’s a winner or a loser, and whether people criticize it or not, at least it’s innovative and it’s moving in the right direction.

Fred McClimans: Interesting. With that, what do you think the risks are here? You mentioned this is something that Apple should have jumped on. But every time Apple tries to remove a jack or a port from the iPhone, people go ballistic. What do you do in that situation?

Olivier Blanchard: Yeah, they go ballistic, but it doesn’t actually hurt Apple. This is one of the few things that doesn’t hurt iPhone sales, I don’t think. So typically when Apple introduces a new feature like this, it informs the rest of the industry and you see other major handset makers follow suit. They try to copy them in some way. And we’ve seen the steady demise of the phone jack in phones. Primarily because we have technology now that allows really solid Bluetooth connectivity and very high quality sounds that doesn’t require a wire. And on top of that, the phone jack requires quite a bit of real estate that could be used for other things. Other silicon, other devices, other capabilities. Even more room for a battery. So removing the jack actually makes sense from an engineering standpoint if you have a more elegant to utilize that space.

Fred McClimans: Interesting.

Olivier Blanchard: So I think that, you know, the issues with iPhone are the price, the performance, whether its battery or the slow modems. There’s a lot to complain about when it comes to iPhones. But in spite of people complaining about the phone jack disappearing or some features being taken away, which is common of all Apple devices by the way. There’s always some port, you always need a dongle, there’s always something, some interface being taken away by the evolution of Apple’s device designs. In spite of the complaining, people usually adopt those new designs and after using them for six months they’re fine with them. So yeah, I think that Apple should have gone this route.

Fred McClimans: Interesting. So speaking of Apple, I’ve got a quick hit Fast Five here on Apple. There’s an organization out there in Britain, a non-profit, called the Carbon Disclosure Project. And what they do is they go about investigating the risks and opportunities that climate change is posing. One of the things that they took a look at was Apple. They looked at all the major technology companies. What happens to these companies as the climate change issue continues to move ahead, or behind, however you want to look at that.

In this report, they spoke with Apple and Apple apparently sees one potential bright side here in climate change in that, quoting here from their report, “as people begin to experience severe weather events with greater frequency, we expect an increasing need for confidence and preparedness in the area of personal safety and the well-being of loved ones. Specifically, the use of an iPhone as a flashlight. Or the iPhone’s ability to be charged off of a car battery or a hand-crank.” And with that I’ve got nothing else to say on this particular issue.

We’re going to move back to Dan for our fourth Fast Five here. So Dan, what’s going on … What’s going on here with IBM?

Daniel Newman: Yeah, you know, earnings day. And there’s, were a handful of earnings days. Intel had a tough day yesterday although I thought the Street was unnecessarily hard on Intel because the revenue just wasn’t that far off and there were some growth areas. But the Street’s volatile. When it comes to chips it can be … IBM’s another one of those bellwethers when it comes to the tech industry. And people will watch it really closely. You remember they had those several years of continuous declines in revenue and everybody was really beating them up. Well, they beat the Street this last quarter. They saw a six percent jump in their stock. They saw some serious growth in and probably the most exciting area of growth was in their cognitive solution. So they beat the Street by a 5.45 billion versus the expected 5.27. Which is 200 million over estimates for the quarter. But anyone that knows anything about IBM knows that Watson has been there, what they’ve been touting as a brand for years. And they’ve been really, really kind of chastised by analysts, by the media, by the press, by experts. Because that product wasn’t really performing for them. So the fact that they’re starting to not only meet the revenue expectations but beat them, is a strong note.

The only downside was their systems business which is IBM Z, and their mainframe business which has been a profit center for the company for years and years, saw a bit of a decline. And so people were kind of pondering, is this an issue with systems? Is this going to be an issue for the company long term knowing that so much of the profit is generated by Z. Now the only thing I can say is having done research on that particular product line, that is a very long sales cycle. You’re talking about, from what I’ve learned, up to eight quarters. So it’s very easy that some of that revenue missing the mark could be anything from soft sales to demand slipping by a quarter or two.

So I wouldn’t really get too worried about that until we see two or three continued quarters of decline for their systems business. But overall when you beat the Street, that always deserves a pat on the back. And with Red Hat on the way in and really helping them move into their cloud native, this is a strong turn of events for IBM and I’d say this is the reason why I’m pretty bullish on the company as a whole as having a good opportunity to have some success in 2019.

Fred McClimans: Yeah, you know I agree. IBM has continued to strengthen their position and their competitive capabilities in the marketplace fairly impressively over the last few years here. So for our final Fast Five today, it would not be a Futurum Tech podcast if we did not mention Qualcomm or the FTC. So Olivier, it’s all yours.

Olivier Blanchard: Or Apple.

Fred McClimans: Or Apple.

Olivier Blanchard: Yeah, we already Facebook. We already mentioned Apple. Actually Apple does play a part in this case. But we’ve been following a case pretty closely over the last, really, two years when it was first filed. And then over the course of the last few weeks that the trial actually started. And it’s a strange case involving the FTC in which the FTC, using information or tips or complaints by Apple, decided to inexplicably sue Qualcomm for anti-trust, or alleged anti-trust violations. Which, by the way, they have not been so far able to prove in court.

But the short of it is Apple, through the FTC, is accusing Qualcomm of charging unreasonable fees for access to, or licenses rather, to its something like 130,000 patents. And especially its SEP, its Standard Essential Patents which are kind of like the basic patents required to build a smart phone today. And it turns out, and this is something that used to be kind of behind the curtain, nobody really knew what these patents actually cost. But it turns out, thanks in part to the testimony and evidence presented in court over the last few weeks, that all Qualcomm was charging Apple per iPhone for access to all of its SEPs was something like $7.50. Seven dollars and fifty cents. For $1,000, $1,000 plus iPhone.

It just comes to show that on the one hand Apple suing Qualcomm over all of these nonsensical issues, the arguments they make don’t stand up in court. Two, the FTC somehow appears to have been suckered by Apple into being, to becoming an agent of Apple’s litigation against Qualcomm. And is paying the price for it. Two of their main expert witnesses were completely, I wouldn’t say discredited themselves, but their testimony, the evidence and the arguments they presented, was strongly refuted and shot down and debunked by Qualcomm attorneys. And right now the FTC’s case against Qualcomm seems like a debacle.

And it’s interesting to watch the press kind of run with both sides of this depending on who they root for. Whether they root for Apple and by default the FTC. Or if they root for Qualcomm. But looking objectively at the facts, this has been, the last two weeks have been pretty disastrous for the FTC’s case against Qualcomm. We’re finding out that Qualcomm is actually not the bad guy at all in this. And that it’s being kind of unfairly accused of doing all sorts of things that cannot be proven in court and defy reason. And if you want to read more about it, because we’ve invested quite a bit of time in following this case, because it could have massive dire repercussions on IP rights. And especially patent holders and their ability to monetize their innovation and drive innovation and technology research that benefits all industries. You should definitely read the series that we’re already two articles in on the Futurum Insights Blog.

Fred McClimans: And that is at www.futurumresearch.com. Very good. So gentlemen, it’s time now for our Tech Bites segment of the week, where we choose one lucky somebody out there that we feel has done something in the tech space that literally bites. And this case we are … This week we are back again to Facebook. And I’m going to introduce a new term here that I had not run across until this article came out talking about Facebook and how they were essentially encouraging kids to spend mom and dad’s money on Facebook games. The term here is called friendly fraud, which has been abbreviated to FF-Minor. And that would be friendly fraud involving a minor.

So what we have here is a situation where, as we all know, those of us that have children, children love to buy things online. They love to upgrade their games. They love to buy gold. They love to buy diamonds and credits and so forth.

And Facebook wants to encourage that to the point where they encouraged application providers, application vendors, to find ways to allow this friendly fraud as a way to maximize revenue. And at the same time, holding a fairly strict policy against refunds for egregious abuse of the system here. Which in one case, a 15 year old kid racked up $6500 in charges in two weeks playing games on Facebook. Charges that the company refused to refund here.

As a parent, I’ve got to say yep, I’ve had my kids accidentally order stuff. Well not accidentally, but intentionally order things off an online game or off Amazon. And when you discover that you go, hey look, we’re going to ship this one back or we’re going to decline this. And most providers are very willing to work with you. But in this case here I think Facebook is just … Dan, to your point earlier in this segment, you know have continued to follow somewhat of a policy that says, if you have morals go work somewhere else.

Daniel Newman: I’m just blown away as I read this. And I didn’t have to get very far into the story. You mentioned $6500. You mentioned that they have a term for it. So this was circulating the halls of Facebook as-

Fred McClimans: Yes.

Daniel Newman: It’s so obtuse. And then you have Facebook employees referred to these children as whales. So now this is like Hollywood. Or not Hollywood, I’m sorry, like Vegas.

Fred McClimans: Hey big spender.

Daniel Newman: Where, you know, next thing they’re going to do they’re going to start sending phones and building apps and … Just like Vegas does when they fly you out and get you off the plane to get you to lose your two million dollars because …

Fred McClimans: Yeah, hey, let’s comp you an extra game here for that.

Daniel Newman: We’re going to comp you some free games. But I mean to me it’s just absurd because they make the app widely available. They make the app free. They plug into the games. They create very little supervision. There’s no notifications, no alarm bells to go off. I mean, look, we’re tough on Apple but if you spend money on Apple guess what happens? There is a very, very clear alert via email, the person with the iCloud account receives, that says hey, you just bought this app. And it gives you like the … Did you mean to buy it? Is there … If you didn’t here’s a way to undo what you did. There’s nothing here. This was extortion. I mean this is … The company deserves … Like they should give orange suits to everybody on the twelfth floor, whatever floor it is, and just come to work because you basically, you’re con artists.

Because, and like I said, the thing here is that there’s a lot of companies with bad behavior. And that have made decisions based upon how to quickly monetize things. That’s not that uncommon, right? But this sure does have a feeling to me a little bit like some of the lobbying in D.C. for cigarettes and promoting cigarettes to kids. I mean it’s one of those kinds of things. Where in the back rooms, in the boardrooms of these company there’s executives consciously arming children to become funnels of cash into the business and guess who they’re bleeding out? It’s the average family. Because every kid these days, especially here in America, has a phone. So they’re literally stealing money from families knowingly under the guise of play these games, accidentally spend money, and then we’re going to stick it to the families and give them very little way out.

I’m sorry. I’ve punched Facebook to start this segment in the left eye, and now I’m punching you in the right eye. You’ve got two black eyes. And you know what? You have to go to school with those two black eyes because you’ve earned them. You bite, Facebook.

Fred McClimans: So, turning this into FTP, the Futurum Tech People’s Court, Olivier, how do you pronounce judgment on Facebook here and what’s, more importantly, what’s the penalty that they should face for something like this?

Olivier Blanchard: We don’t …Drawing and quartering people no longer works, right? We don’t do that anymore?

Fred McClimans: But we could do it digitally, I suppose.

Olivier Blanchard: We could do it digitally. I don’t know. At this point, I mean, you raise a good point. Like I don’t know what the penalty should be. I guess you can fine them. You can … When you have more money than you know what to do with, do financial penalties really work? It’s … I don’t know, at this point, aside from actually charging people with criminal acts and dragging them into court and making them face real prison time, I don’t think that there’s really a solution to this. Regulation can only take things so far and you don’t want to overstep either and create rules that are too draconian and that end up being an impediment rather than a solution.

So I think it’s, the issue is being clear about who is countable, about how to hold people accountable and making sure that we do. Whether it’s a business units manager, somebody who’s in charge of making those decisions at the business unit level. Or all the way up the food chain if it can be shown that they were aware of it and that they signed off on it.

Fred McClimans: It’s a sad day all around. And the numbers here that we’re talking about, and understand that this goes back to the very beginnings here. 2010, 2011. Where according to this report here, Facebook over a three month period found that kids were spending $3.6 million on games. And when you start looking at the issue of parental consent, Dan to your point, there has to be some type of a notification system built in. At this point it’s kind of, I say, water under the bridge. It’s a past event. But there has to be something that takes place with this. And I think Facebook definitely needs to be continually put under the microscope of scrutiny here because I’ve lost all faith in their ability to be an honest up-front organization.

So with that, let’s wrap up our Tech Bites. We know Facebook bites sometimes. And it happens more often than not. And let’s move on to our Crystal Ball segment of the week. Now, earlier this week, Huawei, one of the companies that we’ve spoken about here primarily because of their involvement in trade disputes and alleged theft of intellectual property or potential spying or being banned from selling into the United States or Australia. Has come up with an interesting statement from their CEO. He has proclaimed that the company will become the biggest smartphone manufacturer as early as 2019.

Daniel Newman: No.

Fred McClimans: Now given that they surpassed Apple this year, is this a possibility? Dan, I know you just said no but tell me in 30 seconds or less, why not?

Daniel Newman: Samsung. I just don’t believe that with their global trust issues that they can surpass Samsung. Samsung has strong grips. They have a very, very high quality top end of their product mix. They have products down the line. They have complete portfolios of patents, intellectual property, chips. They can do basically most of what Huawei can do, and they have broader trust in the markets than Huawei. And they’re not dealing with the number of major global economies that want nothing to with them. So I think it’s as simple as that.

I do think Huawei makes great stuff. The more I read about the stuff they make. But the problem is, is when no one trusts you, you’re screwed. And unfortunately right now, that’s what they’re up against.

Fred McClimans: So, you know it’s interesting. I agree. They face some huge hurdles here. Probably the most formidable being they don’t have access to global markets at this point here. But Olivier, I will point out that Huawei is planning on releasing their foldable phone this year. Something that I know you’re intently interested in. So what’s your take? Do you agree with Dan? Do you think that they have no chance because Samsung will step in? Or do you think Huawei actually has a chance here?

Daniel Newman: You know, it’s a question time frame. And there’s also kind of … This goes back to my Fast Five earlier about the FTC’s case against Qualcomm and patent holders in general. On the one hand, no. In a short time frame, 2019, 2020, even 2022, there is absolutely no way that Huawei can pull that off.

Olivier Blanchard: Samsung.

Daniel Newman: They just … They don’t have the market penetration. They don’t have the trust. They don’t have a way to expand that quickly and make that happen.

However, should the FTC prevail against Qualcomm in their anti-trust case, the effect of that ruling would effectively be that a company like Qualcomm, which is really the only chip maker and IP shop that serves the entire mobile industry, outside of Huawei that has the capability of standing up to Huawei. And Qualcomm chips and their IP goes in pretty much every single Android phone that’s Huawei. Without them, Samsung would probably have a hard time competing against Huawei in the long run. And so if the FTC were to pull the rug out from under Qualcomm and limit the amount of revenue that it can generate from its intellectual property, and therefore not be able to fund as much research and participate in as many standards, mobile standards, as it has in the last few decades, Huawei is poised to take over for them.

And that would give them, or hand them rather, a dominant position in the global market in terms of generating intellectual property and contributing to international standards. Which would open the door to Huawei dominance and basically the United States technology infrastructure receding. So I know this is kind of meta and really kind of behind the curtain and complicated, but if the FTC prevails the effect would be that Huawei would be able to become the dominant mobile technology company by 2025. Or around 2025. But not sooner.

Fred McClimans: Interesting. You know, in terms of growth, even without access to all markets, they grew 35% last year in terms of shipments. In 2018 they shipped 208 million smartphones. And if you look at the challenges that companies like Apple are having, especially moving into the Chinese market, moving into India, I certainly think on the one hand it would be a stretch for Huawei in 2019 to surpass Samsung. Clearly it would be a stretch. But I think the idea that anybody may have in the back of their mind that Apple regains that second slot, I just don’t see it happening this year or next.

And with that, we’re going to call this edition of the Futurum Tech Podcast a wrap. We’d like to thank everybody for listening and for sharing online in social. And please, if you haven’t yet, give us a like, subscribe to the podcast. It’s available on SoundCloud. It’s available on iTunes. It’s available on Libsyn. It’s available on Spotify. And if you have a topic you’d us to address or simply have a question, you can always reach us @FuturumPodcast on Twitter.

Disclaimer: The Futurum Tech Podcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Author Information

Fred McClimans

Fred is an experienced analyst and advisor, bringing over 30 years of knowledge and expertise in the digital and technology markets.

Prior to joining The Futurum Group, Fred worked with Samadhi Partners, launching the Digital Trust practice at HfS Research, Current Analysis, Decisys, and the Aurelian Group. He has also worked at both Gartner, E&Y, Newbridge Networks’ Advanced Technology Group (now Alcatel) and DTECH LABS (now part of Cubic Corporation).

Fred studied engineering and music at Syracuse University. A frequent author and speaker, Fred has served as a guest lecturer at the George Mason University School of Business (Porter: Information Systems and Operations Management), keynoted the Colombian Associación Nacional De Empressarios Sourcing Summit, served as an executive committee member of the Intellifest International Conference on Reasoning (AI) Technologies, and has spoken at #SxSW on trust in the digital economy.

His analysis and commentary have appeared through venues such as Cheddar TV, Adotas, CNN, Social Media Today, Seeking Alpha, Talk Markets, and Network World (IDG).