242: ‘The Butts Incident’ With John Moltz

Episode Summary

Executive Summary: The episode centers on two major Apple-era privacy/security stories: Facebook’s covert data-collection programs (VPN Research and enterprise-signed beta apps) and a severe FaceTime group-call bug that could expose audio/video before a call was answered. The hosts argue both reveal platform governance gaps, corporate incentives to gather user data, and Apple’s uneven enforcement of rules, while also touching on Apple’s quarterly results, services growth, iPad resilience, and future product rumors around Apple TV and gaming.

Main Topics: Facebook's hidden data collection and App Store violations (Priority: 5/5): The hosts detail how Facebook used the Onavo VPN app and later enterprise-signed beta apps to collect extensive device and app-usage data, paying users and teenagers to install software that violated Apple’s rules and promised privacy while enabling surveillance. Apple's response and enterprise certificate crackdown (Priority: 5/5): Apple revoked Facebook’s enterprise certificates, disabling internal Facebook apps and disrupting workflows. The discussion emphasizes that Apple enforced a clear policy limiting enterprise distribution to employees and internal testing, even if the action was triggered only after public exposure. The FaceTime group-call bug and Apple’s security process (Priority: 5/5): A major FaceTime flaw allowed a caller to hear (and sometimes see) someone before they answered. The hosts debate whether this was negligence or process failure, noting Apple had reportedly been alerted about the bug days earlier and that the issue exposed weaknesses in Apple’s internal reporting and escalation systems. Apple’s quarterly results and business mix (Priority: 4/5): Apple’s quarter was framed as unsurprising after Tim Cook’s warning, but the numbers reinforced that non-iPhone businesses are growing while iPhone revenue declines. The hosts discuss installed-base growth, services margins, and whether Apple’s service revenue accounting may blur hardware and software lines. Platform economics, privacy, and predatory business practices (Priority: 4/5): The conversation broadens into the ethics of data monetization, payday lending, overdraft fees, and app-based consumer exploitation. The hosts argue that 'consent' is often meaningless when users don’t understand what they’re giving up, especially children. Future Apple products: Apple TV, dongles, and gaming subscriptions (Priority: 3/5): They speculate about cheaper Apple TV hardware, a possible dongle-style device, and a game subscription service. The hosts think gaming could be a strong subscription opportunity for Apple if it leverages its iOS install base and offers developer-friendly payouts.

Key Arguments: Facebook’s VPN and enterprise-app programs were not benign beta tests; they were deliberate mechanisms to collect sensitive behavioral data at scale. Apple’s enterprise certificate rules were explicit, and Facebook’s use of them for external users was clearly against policy. The FaceTime bug was a serious process failure, but unlike Facebook’s conduct it appears to have been an unintended software defect rather than a deliberate abuse. Users often cannot reasonably consent to data collection because they don’t understand the scope of what they are revealing. Children are especially vulnerable to exploitative app and in-app purchase schemes, so platform owners should impose stronger protections. Apple’s financial results show a healthier, more diversified company as services and non-iPhone revenue grow while iPhone revenue becomes less dominant. Apple’s ecosystem could support new hardware and subscription offerings, especially in gaming, but its past product decisions (Ping, Apple TV app store limitations) make success uncertain.

Data Points: Facebook VPN app payment: $20/month - Facebook reportedly paid participants to install its research app/VPN and collect usage data. Eligible age range for Facebook research program: 13-35 - Participants were reportedly targeted from teens to young adults. Whale refund case spend: $6,545 - Internal Facebook chat discussed refusing a refund for a likely underage user with large lifetime spend. Facebook users' age requirement: 13-17 with parental permission - The research program reportedly claimed to require parental consent for minors, though enforcement was unclear. Apple revenue warning gap: $7 billion - Tim Cook had warned investors that quarterly guidance was off by $7B before results were reported. Apple quarterly revenue: $84.3 billion - The quarter ultimately reported around $84.3B in revenue despite the earlier warning. iPhone revenue change: -15% year over year - Apple said iPhone revenue declined compared with the prior year. Non-iPhone revenue growth: +19% year over year - Apple said total revenue from all other products and services grew 19%. Installed base: 1.4 billion iOS devices - Cook cited the overall active installed base during the earnings call. iPhone installed base: 900 million - Cook also cited iPhone devices separately. Facebook enterprise impact: Internal apps stopped working - Apple’s revocation of enterprise certificates caused Facebook’s internally distributed apps to stop functioning. Services margin: ~65% - The hosts discussed Apple’s services margin as very high, in the mid-60s. Overdraft fees in U.S. banking: $3.5 billion - Used as an analogy for exploitative but technically consented financial practices. Facebook games dispute example: $6,545 disputed; user age 13-ish - An internal message described a suspected underage spender whose parent/guardian disputes were denied. Apple TV price: $150-$200+ - The hosts criticized Apple TV pricing as out of line with competitors, especially for streaming-only use. HomePod price concerns: Potentially sold at a loss - They speculated HomePod may be priced below cost or near cost, with low sales volume masking the economics.

Pivotal Quotes: "there is no good way to articulate just how much power is handed to facebook when you do this" — Will Strafach (quoted by the hosts): Expert commentary on Facebook’s VPN/enterprise-app data collection program. "users are unable to reasonably consent" — Will Strafach (quoted by the hosts): The hosts used this line to argue that average users cannot fully understand the implications of the data collection. "I wouldn’t refund" — Facebook employee in internal chat (quoted by the hosts): Internal Facebook discussion about denying a refund to an underage heavy spender, illustrating the company’s attitude.

Implications: Listeners are left with a warning that major platforms can exploit technical loopholes to gather data or monetize children, and that even Apple’s ecosystem is only as safe as its enforcement and internal processes. Expect more scrutiny of app distribution, privacy, and platform accountability.