Start Up No.1,178: inside the gangster smartphone company, the new digital divide, political ad meltdown, Prime ad slapped, and more

Even the threat of being eaten won’t make Twitter un-ban this ad. CC-licensed photo by runran on Flickr.

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A selection of 9 links for you. Happy un-Brexit day (again). I’m @charlesarthur on Twitter. Observations and links welcome.

Inside the phone company secretly run by drug traffickers • VICE

Joseph Cox:


Hughes and Kok spent the evening in Boccacio, a sex club on the outskirts of Amsterdam. After their session, and as the puffer-jacket wearing Kok stepped into a Volkswagen Polo, a hooded figure jumped from the dense shrubbery around the parking lot and fired into the Polo, killing Kok. Hughes walked away from the scene, according to CCTV footage previously published by the Dutch police.

MPC, it turned out, was not an ordinary phone company.

All over the world, in Dutch clubs like the one Kok frequented, or Australian biker hangouts and Mexican drug safe houses, there is an underground trade of custom-engineered phones. These phones typically run software for sending encrypted emails or messages, and use their own server infrastructure for routing communications.

Sometimes the devices have the microphone, camera, and GPS functionality removed. Some also have a dual-boot mode, where powering on the device as normal will show an innocuous menu screen with no sensitive information. But if certain buttons are held down when turning the phone on, it will reveal a secret file system containing the user’s encrypted text messages and other communications.

With these tweaks, the ordinary methods for law enforcement to intercept messages are cut off—police can’t simply get an ordinary phone tap or subpoena messages from a company; the texts are typically only available in a readable form on the users’ devices.

A handful of these so-called “encrypted phone” companies exist. Many of them cater and sell to criminals. As Kok, the murdered blogger, wrote on his website in 2015, “I see on various crime sites these things [encrypted phones] are offered for sale because many of their future clients are also criminals. Advertising on a site where bicycles are offered does not make sense for this type of company.”


Hell of a story.
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Apple working on new HomeKit devices after HomePod, Apple TV • Bloomberg

Mark Gurman:


Apple Inc. is ramping up hiring for a team that is working on new smart-home software and devices in an effort to catch up in a field where Google and Inc. have dominated, according to people with knowledge of the matter.

The company is seeking engineers to work in its Cupertino, California, headquarters and in San Diego as part of a group revamping Apple’s smart-home platform. The overhaul is designed to spur more outside accessory and appliance makers to connect smart-home products such as lights and garage doors with the iPhone and Apple’s voice-activated digital assistant, Siri. The team also is exploring the possibility of building new home devices beyond the HomePod speaker.

The effort is headed by Andreas Gal, the former Mozilla chief technology officer who joined Apple last year when his company Silk Labs was acquired by the iPhone maker. Gal is leading the software side of the team reporting to Arun Mathias, a lieutenant to software chief Craig Federighi, who oversees wireless software engineering. Silk Labs developed an artificial intelligence-based platform for linking together internet-connected devices.

Apple has posted 15 job listings on its website since last month for engineers to work on the company’s platform, called HomeKit, smart-home devices and related software…


They could always do routers. They used to be pretty good at that. Apple’s problem in the home is that unlike every other product category, it can’t decide which product(s) to focus on, nor which is the key. Is it the Apple TV? (But who really uses that for home control?) HomePod? (Too low a penetration.) Should they make their own? (Why not?)
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The failure of advertising is creating a greater digital divide • ZDNet

Tom Foremski:


Traditionally, more eyeballs mean more advertising revenues, and media companies have been getting larger and larger audiences. But there’s something wrong; their advertising revenues continue to fall. It’s because their audience is too slow to outpace the deflationary effects of the internet. 

Whenever something is abundant it has a lower value. The web created a huge abundance of formerly limited resources: Pages and places to advertise. A low-cost web page now competes for the same advertisers as a page on a news site that employees hundreds of professionals. 

It’s called programmatic advertising, and it is problematic for the traditional media industry because it means its investments in high-quality media are not rewarded. 

This deflationary advertising trend affects everyone including Google. The more Google expands its reach and its audience – the less revenue it gets from each click. 

Every financial quarter for more than a decade, Google reports around 15 to 20% less revenue per click (cost-per-click) from the prior year. Every quarter, year after year, it makes less money per click. 

Google has been able to outrun this steep deflation in its advertising business because it manages to grow its paid clicks two to three times faster than what it loses per click.

It’s not realistic or sustainable for traditional media to grow at such rates. It’s not sustainable for Google either. How many more ads can it find places to show especially on tiny mobile screens?


Google’s search results now are essentially a slew of ads on many topics, especially on mobile; I long ago gave up on it, and I’m horrified by what it has become every time I go back.

Foremski argues that media outlets, which can’t do the same, are being driven to subscription solutions because ad revenue cannot cover the costs of quality journalism. Which means you shut out people who can’t pay for it. A different digital divide.
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Key election safeguards won’t be ready for December poll • Sky News

Rowland Manthorpe:


Six months after announcing a range of new measures to “safeguard elections” and “crack down on intimidation, influence and disinformation”, the government has failed to introduce any protections.

“Hostile states, foreign lobbyists, and shadowy third parties” could jeopardise the integrity of any election or referendum in the UK, according to the government statement when these safeguards were announced.

But a cabinet office spokesperson confirmed to Sky News that despite this risk, the safeguards will not be in place for the general election in December.

At the time the safeguards were announced the government said it would introduce new laws making it an offence to intimidate candidates or campaigners during the period before an election, both in person and online.

It was also set to clarify the offence of “undue influence of a voter” which has proved difficult for enforcement agencies to interpret, and it would have extended real-world laws about election material to material published online.

Currently, any candidate, political party or non-party campaigner is required to have an imprint on any of their printed election material to show that they have produced it.

A digital imprint regime would have introduced a similar requirement for Facebook, YouTube and similar social media platforms used by campaigners.


Of course the excuse is going to be that they were busy with Brexit. Except governments can do more than one thing at a time, if they’re competent.
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Twitter to ban all political ads in 2020 amid election uproar • The Washington Post

Tony Romm and Isaac Stanley-Becker:


Twitter on Wednesday said it would ban all advertisements about political candidates, elections and hot-button policy issues such as abortion and immigration, a significant shift that comes in response to growing concerns that politicians are seizing on the vast reach of social media to deceive voters ahead of the 2020 election.

Twitter CEO Jack Dorsey announced the move in a series of tweets, stressing that paying for political speech has the effect of “forcing highly optimized and targeted political messages on people.” The ban marks a break with Twitter’s social-media peers, Facebook and Google-owned YouTube, which have defended their policies around political ads in recent weeks.

“While internet advertising is incredibly powerful and very effective for commercial advertisers, that power brings significant risks to politics, where it can be used to influence votes to affect the lives of millions,” Dorsey said.

Twitter’s announcement covers ads intended to influence elections including ballot measures, as well as those that address “issues of national importance.” The new rules will be applied globally, published by mid-November and take effect later in the month, Dorsey said.

But the change drew a mixed reception, with some critics highlighting that it would not affect what users can tweet and share on their own. Teddy Goff, who served as President Obama’s digital director in 2012 and as senior adviser to Hillary Clinton in 2016, said any update by Twitter that does not address the “organic and algorithmic spread of hate speech and discrimination and dishonesty” is insufficient.


Bans “ads that refer to an election or a candidate; ads that advocate for or against legislative issues of national importance (such as: climate change, healthcare, immigration, national security, taxes).” Starts out good, quickly becomes a mess.
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He’s running for Governor so he can run false Facebook ads to stop false Facebook ads • CNN

Donie O’Sullivan:


Adriel Hampton, a political activist who runs his own marketing firm in San Francisco, registered at his local post office on Monday morning as a candidate for governor of California.

…Hampton is the treasurer of “The Really Online Lefty League” PAC, which last Thursday began running a false ad on Facebook claiming that Senator Lindsey Graham backed the Green New Deal.
The ad spliced together different audio of Graham speaking to make it sound like he said, “Simply put, we believe in the Green New Deal.” Graham never said that.

The ad was eventually flagged by Facebook’s fact-checkers and was removed. While Facebook allows politicians to lie in ads, it does not allow PACs or other political groups to do so.

Hampton hopes that by being a candidate he will be able to run false ads without Facebook stopping him.

“The genesis of this campaign is social media regulation and to ensure there is not an exemption in fact-checking specifically for politicians like Donald Trump who like to lie online,” he told CNN Business.

Hampton unsuccessfully ran for Congress in 2009, but was credited at the time as being the first congressional candidate to announce his campaign on Twitter.

“I think social media is incredibly powerful,” he said Monday. “I believe that Facebook has the power to shift elections.”


Facebook said on Tuesday night that it won’t allow Hampton’s ads. “This person has made clear he registered as a candidate to get around our policies so his content, including ads, will continue to be eligible for third-party fact-checking.” Facebook’s policy is about to collapse in a black hole of ridiculousness: all the next Hampton needs to do is not declare that’s their intent.
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Amazon Europe Core Sarl ‘Prime’ signup • UK Advertising Standards Authority


Ad description: A page on, seen in May and June 2019, which formed part of the checkout process. Text stated, “… we’re giving you a 30-day free trial of Amazon Prime! Starting with this order …”. A gold box included text which stated, “Order Now with Prime”. That box was contained within a larger grey box. Text underneath the gold box, but within the grey one, stated, “Continue with FREE One-Day Delivery Pay later”. An option to the left in blue text stated, “Continue and don’t gain Amazon Prime benefits”. Small print at the bottom of the page stated, “By signing up you acknowledge that you have read and agree to the Amazon Prime Terms and Conditions and authorise us to charge your credit card … after your 30-day free trial …”.

Issue: Ten complainants, who believed the presentation of the options was unclear, challenged whether the ad was misleading…

The option to sign up for the trial of Amazon Prime was a grey box with a gold box inside. Text in the gold box stated “Order Now with Prime”, and we considered that the average consumer was likely to understand that to be one discrete option. Directly beneath that, and still within the larger grey box, text stated, “Continue with FREE One-Day Delivery Pay later”. We considered that the presentation and wording of that text meant it was likely to be seen by the average consumer as a separate option. However, we understood that, in fact, both boxes were part of the same option. The option to continue without signing up for the trial was presented as text stating “Continue and don’t gain Amazon Prime benefits”, which was small and placed in a position which could easily be missed by consumers. It was also in a faint colour, and compared to the option presented in the grey and gold boxes it was significantly less prominent.


Conclusion: breaches the UK advertising code. OK, now let’s get them onto Facebook. (Pity this had to take nearly six months.)
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China handset market undergoes structural changes • Digitimes

Max Wang and Steve Shen:


The rising penetration rate of handsets, slow market demand and looming commercial operations of 5G networks has ushered in a structural change in China’s handset market where sales are moving to focus more on branded products and fewer new models are being launched.

Data from China Academy of Information and Communications Technology (CAICT) showed that handset shipments totaled 251m units in China in the first eight months of 2019, down 5.5% from a year earlier. Among them, 4G models accounted for 240m units and 5G ones 291,000 units.

It also showed that the number of new handsets launched during the eight-month period declined 37% on year to 343 models. Excluding new ones released by Samsung Electronics and Apple, Chinese vendors launched only 304 new models in that period, decreasing 39% from a year ago.

The tallies also indicated that some Chinese second-tier handset makers are withdrawing from the market due to keen competition, while first-tier brands are funneling their resources to focus on fewer premium models.


This sounds like a repeat of what happened with Android tablets: Chinese companies piled in to make them, sold them by the cartload, and then got the hell out when the market turned down. Though 304 new models is a lot (down from 422).

Samsung decided in 2014 that its own trajectory of 56 models per year was too many, though I can’t find a count for what it is now.
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Russia tests new disinformation tactics in Africa to expand influence • NY Times

Davey Alba and Sheera Frenkel:


Russia has been testing new disinformation tactics in an enormous Facebook campaign in parts of Africa, as part of an evolution of its manipulation techniques ahead of the 2020 American presidential election.

Facebook said on Wednesday that it removed three Russian-backed influence networks on its site that were aimed at African countries including Mozambique, Cameroon, Sudan and Libya. The company said the online networks were linked to Yevgeny Prigozhin, the Russian oligarch who was indicted by the United States and accused of interfering in the 2016 presidential election.

Unlike past influence campaigns from Russia, the networks targeted several countries through Arabic-language posts, according to the Stanford Internet Observatory, which collaborated with Facebook to unravel the effort. Some of the posts promoted Russian policies, while others criticized French and American policies in Africa. Russians also worked with locals in the African countries to set up Facebook accounts that were disguised as authentic to avoid detection.

The effort was at times larger in volume than what the Russians deployed in the United States in 2016. While the Kremlin-backed Internet Research Agency posted on Facebook 2,442 times a month on average in 2016, one of the networks in northern and central Africa posted 8,900 times in October alone, according to the Stanford researchers.


So now we, or at least Russia, move on to the next stage of the global disinformation war.
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Errata, corrigenda and ai no corrida: none notified

5 thoughts on “Start Up No.1,178: inside the gangster smartphone company, the new digital divide, political ad meltdown, Prime ad slapped, and more

  1. Re Homekit. I’ve been surprised (for over a decade, I’ve got a capacity for sustained surprise ^^) that nobody is seriously doing home cloud. By that I mean
    – automatic transparent backups w/ journalling
    – NAS
    – cloud drive, either the whole NAS or parts of it
    – offline folders

    Most people do online backups and think that’s enough (nope: ransomware or a vengeful ex can get at it). A lot of people are hitting the “free account” limits; and at $10-$20 / month paying for premium makes no sense. A 100€ 4TB drive +$50 Raspberry Pi (which can do all that and more, but isn’t noob-friendly) pays for itself in less than a year. Price x2 or x3 for margin and a nice front-end, and it still pays for itself quickly enough. Make it a subscription and you can still beat the monthly on-line stuff *and* advertise distinct advantages (control, privacy, a VPN, resilience to service outages…)

    The closest things for non-nerds are a NAS or hooking stuff up to the cable box, and that’s fairly nerdy already. Plus the cable box is very limited, and NAS such as Synology are specialty items with quite a premium and an admin-, not user-level setup.

    I was hoping MS would do it back when they were missing the cloud boat, they used to have a home server edition, and a media player+server edition.
    I don’t think combining that home cloud functionality with anything else (TV box, router, console, Homekit control center) makes sense because you need the thing to be ultra-reliable and the design goals are orthogonal (reliability and I/O vs video codecs/VPU vs graphics power vs new stuff all the time)

    • Microsoft discovered that nobody wanted to do it. Apple (with the Time Capsule) discovered that few people wanted to do it, and that reliability of storage inside peoples’ homes was hard to guarantee and if it goes wrong then everything just went down the drain, and they get the blame.
      “Home cloud” sounds really good until you consider the reality – needs simple yet powerful software which can disambiguate conflicts, and which never goes wrong, and works across multiple file systems.
      Much, much simpler to do it off-premise, where you control the hardware and redundancy. You could call it something like “Dropbox” or “OneDrive” or “Google Drive” or “iCloud Drive”. Also, increasing bandwidth and broadband speed means home cloud eventually becomes indistinguishable from off-premise cloud.

      • I get that, but it still feels they stopped too early.
        – My Syno hasn’t got anything terribly wrong yet, so that’s doable. Ditto the HomeCloud app and Bittorrent Sync apps, though those are headaches to set up.
        – One part of that setup is a rotation of vital-stuff external drives + cloud sync.
        – I don’t feel broadband (fixed or mobile) availability and reliability has kept up with our dependence on it. Plus Canadian ex-i-Bro is still on a metered connection (in 2019 !). Automatic offlining of docs I’m currently working on and media I’m currently watching would be niiiiice.

        I think the main issue is that HW has marginal costs and a “buy” model, so OEMs would rather sell service on a “rent forever” model. Again, good for them, but bad for us.

        It’s weird that Apple stopped making the Time Machine and routers. I understand they needed teams for Homekit, the loudspeaker… but they probably can afford new teams, it kills the “full Apple” ethos, and I think there was an “hardware as a service” opportunity. But you’re right and I’m probably wildly wrong. Gonna buy that Pi 4 now ^^

  2. In Android news:
    – nVidia updated its semi-successful line of TV box cum console. fine at the high end ($150 and $200), but competing vs $20-$40 TV boxes and $100 consoles and vs Chromecast, so will probably remain mostly loved from afar.
    – Xiaomi is launching an Android Wear smartwatch (their first) that looks a lot like the iWatch (not their first). I dislike rectangles, but it seems small which is rare on the Android side. To me, that’s opening a hole new category of users, a couple even: females, and guys who don’t want to wear a tank on their wrist. Plus iPretenders. On the downside, it seems to want to do a lot, most want something minimalist.
    – Google +20% sales -XX% profit. Not sure where all that extra money is going. At some point, moonshots are going to feel the pinch ? And loss-leaders such as probably most devices ?
    – Huawei is still growing strongly, mostly at home. A bit unexpected, but they’re still running on Google-Android devices in the rest of the world. Those are getting long in the tooth and won’t be replaced for now.

  3. Re. Android tablets, again. “This sounds like a repeat of what happened with Android tablets: Chinese companies piled in to make them, sold them by the cartload, and then got the hell out when the market turned down.”

    Fact check on tablets:
    1- Can you name a single Chinese company that got out ? Huawei, Lenovo, Xiaomi still make them (and AFAIK as many different models as they used to), BBK (Oppo, Vivo, OnePlus, Realme) never did. On the second and third tier, Teclast, Alldocube and Chuwi still have way too many. Ainol did stop (crappy stuff, but interesting MIPS-based tablet that mostly worked). And Acer. I can’t think of any other OEMs with any kind of market presence/name recognition. ODMs are still overly plentiful.
    2- Outside China, Asus LG HTC Moto and Sony stopped making them. Then again, they stopped making 50-90% of their phones, so tablets are probably not the issue ;-p And that’s outside China, so not what you’re talking about.
    3- In the US, HP and Dell moved to Chromebooks/Chrometabs w/ Android now built in. Not sure those show up in any stats and Android is already at 60% market share. Actually, Acer has an interesting one too.

    So, I don’t get your assertion. Please explain.

    Also, consolidation when a market matures is the norm. Happened to pre-PC microcomputers, to PCs, to brown goods, to white goods, to cars… Doesn’t even say anything about the health of the underlying market, just that small-and-different is getting steamrolled by logistics and marketing. 2nd and 3rd-tier OEMs can no longer compete: there’s no reason to buy from them (a good Xiaomi phone starts at $80), and they can’t get good parts or supply good R&D let alone good service. The only segment I still see them in is specialty phones (mostly, rugged).
    Remember when the issue with Android was that there were so many crappy devices ? That issue solved itself. I’m not a fan of consolidation, and we’re down to 4 players (BBK, Huawei, Xiaomi, Samsung). Good for them, but bad for us. It’s still a mystery to me how PC makers managed to fail so hard.

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