More from Epic v. Google: everything we learned in Fortnite court
It allegedly hit 39 percent in 2015, 43 percent in 2016, 49 percent in 2017, 59 percent in 2018, 63 percent in 2019, 66 percent in 2020, and finally, 71 percent in 2021 — generating over $12 billion in operating profit that year.
Barnes continues to say he looked through documents to try to find any missing costs Google would have incurred to operate Google Play but didn’t find them.
“Is there some missing bucket of costs that could be added to Play to reduce its margins?” asked Epic’s lawyer.
“It would surprise me if in fact that were the case,” Barnes said.
It’s Google’s turn with Barnes. Google is beginning by attacking his credibility.
Everything I just told you about Google Play’s P&Ls was pretty opaque in the courtroom — but Epic’s first expert witness of the day is here to argue they clearly show Google knows full well that Google Play is a profit center.
Ned Barnes is a CPA with Berkeley Research Center, and he says that the costs of Google Play were already accounted for in Google’s various internal financial statements.
“How did you know they were not under the direct control of Google Play management?” Epic’s lawyer asked.
“My group found they were under the direct control of Ruth Porat, CFO of Google,” Barnes replied.
We just saw Google’s platform and ecosystems planning P&L for the Google Play app store in 2020 with forecasts for 2021. It showed revenue of $14.66 billion in 2020 and gross profit of $11.44 billion that year.
Headcount for Google Play was 1,256 in 2020 and was projected to go up to 1,278 employees in 2021.
In a separate 2018 document, we saw revenue of $6.85 billion.
We also saw a financial document for the Android business, not Google Play, that showed Google did at one time at least account for its costs of building Android (including employees, infrastructure, marketing, and the “Google Play service”) separately.
Okay, now we’re getting into it — apparently Google Play’s P&L explicitly doesn’t include Google’s costs of developing Android, and Epic’s pushing Cramer to explain why. He basically says it’s because Play is part of Google’s broader Android ecosystem, not its own business — despite having its own P&L.
“If Play Store was an independent company you would incur other costs that are not reflected on the Play P&L today and don’t need to because Play is not a standalone company,” he says.
But “Android development costs don’t just benefit Google Play, right?” asks a lawyer.
“I don’t want to speculate...” Cramer begins, “I think it’s fair to say the Android investments, are, yeah, connected to broader ecosystem.”
We’re watching a taped video deposition from January 13th, 2022, and lawyers are asking Cramer about Google’s P&Ls — the profit and loss accounting used by businesspeople to help make decisions about how to run a company.
Cramer is testifying that Android had a separate P&L from Google Play, which relates to a point Epic has been trying to subtly make for a while. Google has argued that its Google Play app store isn’t as much of a “profit center” as it seems because it doesn’t account for all of Google’s costs — the money it had to invest bring you Google Play and Android.
But maybe Google’s costs were considered a separate business? We’ll find out.
We’re back in the courtroom in San Francisco, and we’re going to be hearing from more experts today — we’ve been told accountants and economists will arrive to (presumably) argue why Google does or doesn’t deserve its full app store fee.
We’ll start with accountants, and Judge Donato says he wants things to run smoothly and quickly. “This is the week to wrap up the facts,” says the judge. “We’re going to drive the wagon over the pass and reach the promised land.”
Judge Donato believes we may be able to finish by next Friday, December 1st — and he’s calling us all in that day. (Usually court here is Monday through Thursday.)
He’s also telling both sides we don’t need to go through sideloading screens or redefine what MADA is or go through anything we’ve already heard three times before. “We’re going to start losing people,” he says.
“Everything new and fresh next week, otherwise I may have to ask you to stop.”
Next week, we’ll hear from both side’s economists. Then Google plans to call six witnesses (including three Google employees) to help bring its counterclaim against Epic (for breach of contract, etc.).
Both sides are supposed to file their final proposed jury instructions tomorrow — the questions the jury may actually have to decide (pending approval by the judge).
“Let’s not talk about a party that none of us were invited to but you two,” Judge Donato chided Epic’s lawyer, who keeps showing Dr. Qian things he said previously.
Earlier, the judge said we needed to finish the cross-examination of Google’s expert today no matter what. “You’ve got 15 minutes,” he said five minutes ago. “Remember this is an antitrust case.”
I wonder what he meant by the last part.
Epic’s lawyer just asked about the frosting (is this it?), and Google’s security expert says he’s heard of it. The point seems to be that Google does already have a mechanism for signing some apps outside the Play Store, reportedly for peer-to-peer distribution. Epic pointed out a while ago that some countries, including India, tend to distribute apps peer to peer rather than solely over the internet.
Epic’s attorney is trying to get Dr. Qian to admit that Google has the capability to block bad apps, period. But apparently he already, did in an old deposition, so he didn’t need to say it again in court today.
I’m fascinated with how many questions in this courtroom have been a lawyer asking something they already asked months ago — partly so the jury can see if they’re being consistent and partly so the lawyer can get to a new question that builds on top of the previous answer.
We’re looking at a spreadsheet of Android devices by country that Google’s expert used to come to the conclusion that 53 percent of Android users outside China have successfully enabled the sideloading flow.
In particular, Epic has found that 880 million devices were listed as from unknown countries. Epic also found that smart TVs and Chromecasts were included in his data.
Dr. Qian is saying these findings don’t change his conclusion.
We’ve never seen this spreadsheet or his chart before in the courtroom — we’ve only heard the billion user figure stated as fact.
Told ya. He’s Epic’s witness again, and it was the very first line of questioning.
Dr. Qian is asserting that Android would be less, not more safe if it notarized apps because they could become compromised over time — requiring Google to follow up.
He also suggests users could be desensitized to the new warning screens and just click through. (But doesn’t that apply to any warning screen? What’s the point of mass warning screens at all if we assume desensitization by default?)
And, he suggests, a bad actor could steal the key to sign bad apps, making them look like good ones. He says that’s not just a theoretical risk.
(I’ll point out that a Microsoft signing key got stolen and led to the theft of US government emails.)
“There are profound ramifications on the entire Android ecosystem, all the stakeholders.” says Dr. Qian, who suggests Android OEMs would need to agree and would want to negotiate.
I’m not necessarily buying that argument: haven’t we seen in this trial that Google mandates quite a few things with regards to its partners? Maybe a Samsung has the bargaining power, though.
Google’s own head of security explained this to us a few days ago, but Qian is taking another stab — he says that because Google Play doesn’t have a “relationship” with off-Play apps, has less information, it isn’t as effective.
He says bad apps can use polymorphism to avoid detection by scan, making “every single version look different.”
Dr. Qian is explaining the security concept of “defense in depth,” using a castle with a moat, drawbridge, walls, and guards as an analogy.
You want to introduce multiple layers of defense in case one layer is bypassed by the attacker.”
“We want to grant that [app install] permission only when it is necessary.”
He says the sideloading friction screens follow another principle, “securing the weakest link,” because the weakest link is often the human being who doesn’t think it through.
That’s Google’s security expert. He told Google’s lawyer that sideloaded apps inherently have a higher risk of being malware (because they haven’t been reviewed, which seems obvious), that the research is consistent that sideloaded apps are riskier, and that entities like Samsung and Verizon warn their users about the risks of sideloaded apps.
Now that Epic’s expert Professor Mickens is no longer on the stand, his Google counterpart is taking advantage — twice suggesting to the jury that Mickens would agree that some of Google’s existing screens make sense, at least in terms of ensuring user consent to an app install.
Mickens is still technically here — now, he’s in the courtroom galley like me, taking notes with pen and paper.
Google’s security expert Dr. Qian is describing various types of annoying and scary malware that have hit Android devices, including adware, ransomware, and spyware. One example was a fake Cyberpunk 2077 game that wasn’t a game at all.
Like his Epic counterpart, Qian has three basic arguments that we’re now seeing on-screen:
Android devices face a significant threat of malware that can harm users
Android sideloading screens are prudent and consistent with best practices
Prof. Mickens’ proposals are less flexible, would introduce new security risks, and impose significant burdens on Google.
He’s a professor at UC Riverside who spent two years working on Android anti-malware solutions, and Google is taking care of a question about his financial conflict of interests right away: his lab received a grant from Google for a couple hundred thousand dollars, but he says it was less than 5 percent of the lab’s funding and received none personally.
He didn’t say if Google paid him to consult on this case though, yet.
Mickens, prompted by Epic’s attorney, says the Switch, PlayStation and Xbox gaming devices — not general purpose computers like an Android phone — and that game consoles are often sold at a loss, making their money back on software, so there’s an economic reason to lock them down.
Mickens says his notarization proposals would keep that optional.
In other words, Epic Games could make Fortnite a trusted, non-scare-screen app by getting it notarized, but other developers wouldn’t have to if they’re fine with more warnings.
Google also tried to draw him into some questions to promote its “we compete with the iPhone” narrative, asking if Android was much less restrictive than iOS (he agreed) and if Apple hammers Android on security in its marketing.
Google asked if Apple would have a field day if it dropped its sideloading warnings — setting up a straw man, since Mickens doesn’t propose dropping them entirely.
I think I got one word wrong in this quote, but this is almost entirely what he said:
“I think if Google did not replace those sideloading warnings with something that protects users, then Apple would make some hay out of that.”
He’s Epic’s witness again, just to go over some fine points of what he told Google.
We’re seeing that after we eliminate steps in the modern install flow that are out of the Android operating system’s direct control, there are few that Mickens takes issue with — mostly just the scare screens.
“You agree with the concept of asking users for consent before you allow one app to be an installer on the phone, right?” Yes.
In a March video deposition, Mickens suggested that the discriminatory nature of the scare screens (that is to say, they don’t pop up when you install via Google Play, only third-party stores and sideloaded apps) was his primary remaining concern with them.
“All APK/XAPK files on APKFab.com are original and 100% safe with fast download,” reads the listing at APKFab, which also has a fancy “Trusted App” badge with a green checkmark.
Professor Mickens admits he doesn’t know if APKFab reviewed this app at all, and that the “com.tveemobilee.nitflix” file hosted there is likely not a legitimate app.
The point, I assume, is that decentralized notarization would lead to confusion about which websites have legitimate apps? We didn’t quite get to that.