Uber Secretly Tracked Users, Spied On Lyft Prompting Tim Cook To Threaten Apple Store Expulsion

Tyler Durden's picture

Almost two months after it was revealed by the NYT that Uber had used a deceptive tool called "greyball" to deceive and circumvent official authorities, CEO Travis Kalanick may be in trouble again following a new expose by the NYT's Mike Isaac (who may ot may not have a grudge against Kalanick) writes that in 2015 Uber was "on the verge brink of implosion" after Apple had learned that Uber was spying on its users.

Below is the key excerpt in the comprehensive profile which is a must read for anyone seeking more insight into the motivations of the CEO of the world's most valuable private company:

The idea of fooling Apple, the main distributor of Uber’s app, began in 2014. At the time, Uber was dealing with widespread account fraud in places like China, where tricksters bought stolen iPhones that were erased of their memory and resold. Some Uber drivers there would then create dozens of fake email addresses to sign up for new Uber rider accounts attached to each phone, and request rides from those phones, which they would then accept. Since Uber was handing out incentives to drivers to take more rides, the drivers could earn more money this way.

 

To halt the activity, Uber engineers assigned a persistent identity to iPhones with a small piece of code, a practice called “fingerprinting.” Uber could then identify an iPhone and prevent itself from being fooled even after the device was erased of its contents. There was one problem: Fingerprinting iPhones broke Apple’s rules. Mr. Cook believed that wiping an iPhone should ensure customers that no trace of the owner’s identity remained on the device.

 

So Mr. Kalanick told his engineers to “geofence” Apple’s headquarters in Cupertino, Calif., a way to digitally identify people reviewing Uber’s software in a specific location. Uber would then obfuscate its code from people within that geofenced area, essentially drawing a digital lasso around those it wanted to keep in the dark. Apple employees at its headquarters were unable to see Uber’s fingerprinting.

As Issac notes, "the ruse did not last. Apple engineers outside of Cupertino caught on to Uber’s methods, prompting Mr. Cook to call Mr. Kalanick to his office. Mr. Kalanick was shaken by Mr. Cook’s scolding, according to a person who saw him after the meeting."

... when Mr. Kalanick arrived at the midafternoon meeting sporting his favorite pair of bright red sneakers and hot-pink socks, Mr. Cook was prepared. “So, I’ve heard you’ve been breaking some of our rules,” Mr. Cook said in his calm, Southern tone. Stop the trickery, Mr. Cook then demanded, or Uber’s app would be kicked out of Apple’s App Store. For Mr. Kalanick, the moment was fraught with tension. If Uber’s app was yanked from the App Store, it would lose access to millions of iPhone customers — essentially destroying the ride-hailing company’s business. So Mr. Kalanick acceded.

Putting aside the topic that Apple could easily crush a $70 billion business by merely deciding to take it off the Apple store which deserves its own discussion, at its core, the NYT's profile reveals just just how willing the driven, pardon the pun, Uber CEO was to not only approach the thin line that breaks the rules, in some cases illegally - but on more than one occasions cross it altogether. As Isaac states, "in a quest to build Uber into the world’s dominant ride-hailing entity, Mr. Kalanick has openly disregarded many rules and norms, backing down only when caught or cornered. He has flouted transportation and safety regulations, bucked against entrenched competitors and capitalized on legal loopholes and gray areas to gain a business advantage. In the process, Mr. Kalanick has helped create a new transportation industry, with Uber spreading to more than 70 countries and gaining a valuation of nearly $70 billion, and its business continues to grow.

But the previously unreported encounter with Mr. Cook showed how Mr. Kalanick was also responsible for risk-taking that pushed Uber beyond the pale, sometimes to the very brink of implosion.

Some, such as Mark Cuban, were impressed by his relentless drive to win at all costs:

“Travis’s biggest strength is that he will run through a wall to accomplish his goals,” said Mark Cuban, the Dallas Mavericks owner and billionaire investor who has mentored Mr. Kalanick. “Travis’s biggest weakness is that he will run through a wall to accomplish his goals. That’s the best way to describe him.”

Others, however, were less impressed:

Mr. Kalanick’s leadership is at a precarious point. While Uber is financed by a who’s who of investors including Goldman Sachs and Saudi Arabia’s Public Investment Fund, Mr. Kalanick controls the majority of the company’s voting shares with a small handful of other close friends, and has stacked Uber’s board of directors with many who are invested in his success. Yet board members have concluded that he must change his management style, and are pressuring him to do so.

 

He has publicly apologized for some of his behavior, and for the first time has said he needs management help. He is interviewing candidates for a chief operating officer, even as some employees question whether a new addition will make any difference. He has also been working with senior managers to reset some of the company’s stated values. Results of an internal investigation into Uber’s workplace culture are expected next month.

In addition to "fingerprinting" users, Uber appears to have been actively involved in some - apparently legal - corporate espionage against its biggest competitor Lyft. The NYT reports that Uber "devoted teams to so-called competitive intelligence, purchasing data from an analytics service called Slice Intelligence. Using an email digest service it owns named Unroll.me, Slice collected its customers’ emailed Lyft receipts from their inboxes and sold the anonymized data to Uber. Uber used the data as a proxy for the health of Lyft’s business. (Lyft, too, operates a competitive intelligence team.)"

Slice confirmed it sells anonymized data (meaning that customers’ names are not attached) based on ride receipts from Uber and Lyft, but declined to disclose who buys the information.

In other words, Uber was using legitimate means to track the revenue of its competitor. That's not all: it appears that there is trouble in paradise, and as the NYT notes, "Uber’s “driver satisfaction rating,” an internal metric, has dropped since February 2016, and roughly a quarter of its drivers turn over on average every three months. According to an internal slide deck on driver income levels viewed by The New York Times, Uber considered Lyft and McDonald’s its main competition for attracting new drivers."

As a result, Uber tried to either win over Lyft's drivers, or simply frustrate them.

To frustrate Lyft drivers, Uber dispatched some employees to order and cancel Lyft rides en masse. Others hailed Lyfts and spent the rides persuading drivers to switch to Uber full time.

 

After Mr. Kalanick heard that Lyft was working on a car-pooling feature, Uber also created and started its own car-pooling option, UberPool, in 2014, two days before Lyft unveiled its project.

 

That same year, Uber came close to buying Lyft. At a meeting at Mr. Kalanick’s house, and over cartons of Chinese food, he and Mr. Michael hosted Lyft’s president, John Zimmer, who asked for 15 percent of Uber in exchange for selling Lyft. Over the next hour, Mr. Kalanick and Mr. Michael repeatedly laughed at Mr. Zimmer’s audacious request. No deal was reached. Lyft declined to comment.

Isaac writes that the rivalry between the two car hailing companies remains in force. In 2016, Uber held a summit meeting in Mexico City for some top managers, where it distributed a playbook of how to cut into Lyft’s business and had sessions on how to damage its competitor.

This is also roughly the time Uber starting using the previously noted Grayball feature. After The Times reported on Greyball in March, Uber said it would prohibit employees from using the tool against law enforcement.

* * *

What is the take home message for Uber, its aggressive CEO and investors in the company which most recently was valued at $70 billion? Perhaps that as long as Uber keeps growing and gaining market share from legacy businesses, its investors and perhaps authorities, will ignore Kalanick's transgressions much to the chagrin of its competitors, and of course taxi cabs. However, with Uber continuing to burn through massive amounts of cash even as its revenue keeps growing. This is what Bloomgberg reported recently:

The good news is that the ride-hailing giant more than doubled gross bookings in 2016 to $20 billion, according to financial information Uber shared with Bloomberg, and net revenue was $6.5 billion. Uber’s business is indeed massive and getting bigger. In the last three months of 2016, gross bookings increased 28 percent from the previous quarter to $6.9 billion. The company generated $2.9 billion in revenue, a 74 percent increase from the third quarter.

 

However, adjusted net losses were $2.8 billion, excluding the China business, which it sold last summer. Losses in the last three months of 2016 rose 5 percent over the same period to $991 million.

Visually:

Furthermore, Uber declined to report first-quarter numbers, saying they were in line with expectations but that the company hasn’t yet presented them to investors. While the rate of sales growth compared with losses is encouraging, Uber is still losing a significant sum, said Evan Rawley, a business professor at Columbia University. “That’s a lot of cash to burn in a quarter." Jeff Jones, the company’s president of ridesharing who resigned last month, previously joked to staff that he joined Uber expecting P&L, meaning a profit and loss statement, but only found an L.

Bloomberg also calculated that Uber has burned through at least $8 billion in its lifetime. The company said it has $7 billion of cash on hand, along with an untapped $2.3 billion credit facility.

Aswath Damodaran summarized it best: "Uber is a one-of-a-kind company, in good ways and bad ways. It’s going to be a case study... This is a cash-burning machine."

Our sense is that as long as Uber remains a "growth story" if only on the top line, investors will forgive Kalanick virtually any transgression. However, if and when the top-line plateaus and the company continues to burn billions, all that will change. Then, and only then, will Kalanick's future be in jeopardy, because once the spectre of revenue decline, or even worse, a down round assuming no IPO emerges, a scapegoat will have to be found.

Meanwhile, the list of transgressions building against Uber's CEO keeps growing, and now we can add both customer and corporate espionage to a list which includes...

  1. Another tale of sexism and unacceptable workplace behavior in Silicon Valley company has emerged. This time it's at Uber, according to an explosive blog post published on Sunday by a former company engineer named Susan Fowler Riggetti.
  2. Uber's newly-hired VP of engineering Amit Singhal was asked to, and did, resign recently after the company learned from Recode that he was accused of sexual harassment shortly before leaving Google a year ago. Here's more on the difficult position of former employers in this case.
  3. A video showing Uber CEO Travis Kalanick rudely arguing with a long-time driver at the end of his ride was published by Bloomberg. "I need leadership help," Kalanick said in an apology he issued shortly after.
  4. Susan Fowler Rigetti, the former Uber engineer who wrote of discrimination, said she's hired attorneys after a new law firm began to investigate her claims. Uber confirmed it has hired Perkins Coie, which reports to former A.G. Eric Holder, who's leading the investigation.
  5. Uber said recently that it will finally apply for a DMV permit to test self-driving cars in California after its cars' registrations were revoked in December because it refused to get the permit.
  6. Charlie Miller, one of the two famous car hackers who joined Uber's Advanced Technology Center in August 2015, announced he's leaving the company.
  7. The New York Times uncovered a secret Uber program called Greyball, through which the company uses software and data to evade law enforcement in cities.
  8. Keala Lusk, a former Uber engineer, published a blog post detailing how her female manager mistreated her, signaling that the company's problematic culture isn't limited to the men who work there.
  9. Ed Baker, Uber's head of product and growth, resigned. Though the reason is unclear, he was allegedly seen kissing another employee three years ago, which was anonymously communicated to board member Arianna Huffington, according to Recode.
  10. A report outlines a trip by a group of Uber employees to a Seoul karaoke-escort bar in 2014, which included company CEO Travis Kalanick and his girlfriend, Gabi Holzwarth. After arriving, several male employees picked escorts to sit with, and went to sing karaoke. Uncomfortable, a female marketing manager, who was part of the group, left after a couple of minutes, while Holzwarth and Kalanick left after an hour.
  11. California regulators have recommended that Uber be fined $1.13 million for failing to investigate and/or suspend drivers who are reported by a passenger to be intoxicated. The state requires ride-hailing companies to have a zero-tolerance policy for driving under the influence of alcohol or drugs.
  12. A new report says Uber used a secret program dubbed "Hell' to track Lyft drivers to see if they were driving for both ride-hailing services and otherwise stifle competition. Only a small group of Uber employees, including CEO Travis Kalanick, knew about the program, according to a story in The Information, which was based on an anonymous source who was not authorized to speak publicly.

Finally, in light of Kalanick's recent sexual harassment accusations, the following reminder from the NYT will hardly make for a favorable impact: "Mr. Kalanick discussed how Uber had boosted his desirability with women in an interview with GQ, calling the company “boob-er." 

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knukles's picture

Uberser Daisy!

takeaction's picture

Whoa...WHat just happened to the dollar and Metals????

ACP's picture

Nice try with the fake outrage Tim Cook. You know full well your guys look at the code BEFORE an app is released on your platform.

 

Never One Roach's picture

"Fooled me once shame on me...... wait, how does that go?"

 

~ GW Bush

JRobby's picture

"Well of course they do"

Expelled from "The Apple Store" shudder to think it!

Oh regional Indian's picture

What a horrendous company but, if I can extrapolate from my time in the valley, this is the ugly spawn of what was birthed in the late 90's and early 2000's.

Male hormonal overdrive, joo dick-sucking, massive amounts of drugs, lot's of coke fiends and lot's of plain, outright criminality....

That was the seed, what could the tree/fruit be but this....

insanelysane's picture

Don't know who down arrowed this but every app on the app store must go through review at Apple before being put on the app store.  Most likely the fact that Apple has manufactured in this ability to track wiped phones is a violation of laws in Europe and at least Apple had plausible deniability until Uber started exploiting it.

GatorMcClusky's picture

Über über alles unless they go broke first.
Yeah. Just a little disturbing though that Apple is the gateway that could shut thim down if timmah exercised his authoritah

SloMoe's picture

Please do nothing to disturb Uber's market-cap. That could put other unicorns at risk. And, probably rainbows. Maybe kittens.

red1chief's picture

Uber will keep at it. Partly owned by Rahm Emmanuel's brother and other well-connected political folks. These are the same peoplewho trot around the world breaking international law, what do they care about any "restrictions" on their Uber? 

Normalcy Bias's picture

Uber must be using 'Hollywood' Accounting principles, or HAAP, to show massive losses.

Most of their drivers aren't making any money either, which begs the question, where is all of that money going?

Never One Roach's picture

I'll wait for meryl Streep or Martin Sheen to tell me what to hink...before I htink.

JRobby's picture

Accounting Principles? 

(Laugh Track Deafening.! !!)

Normalcy Bias's picture

Like 'Ethical Standards,' there should be a mandatory *rimshot* every time the phrase is uttered...

HRH Feant's picture
HRH Feant (not verified) Apr 23, 2017 4:59 PM

What an arrogant dick. I have never used Uber and never will. There is nothing magical or special about a fucking app that connects people.

BlindMonkey's picture

You know you are a full on sleezeball to make the taxis look like a sympathetic business.

Midas's picture

Way off topic, but I have noticed many employer sexual harassment claims in the news.  Could a hot stud like Bill OReilly post a job opening that states women are not allowed to apply and when the discrimination suits start to fly excuse himself by saying he has put himself on restriction.  Like a sex offender can't go around playgrounds.  Just spit-balling here...

"Spit-balling" is not a Tim Cook reference.  Sorry.

Anonymous IX's picture

Of course this kind of behavior runs rampant in technology and finance.  These CEOs simply reflect the Big Boys at the top.  Long video but worth it from SOTT.

https://www.sott.net/article/348681-Revelations-from-a-former-internatio...

You may not be able to buy into the child sacrifice angle...but everything else should ring true.  Nothing succeeds like ruthlessness and complete lack of boundaries!

 

 

Never One Roach's picture

I used to ski ALOT in Aspen when it was cheaper and my uncle had a tiny condo there. Let me tell you, there are ALOT of kinky Hollywood people there.

They are too bored by normal behavior plus they have tons of money. Add to that all th every hot and willing ski bunnies there and some of those parties were so "kinky" for me I actually had to leave.

People with lots of  money and time look for some strange diversions esp Cali people. The East Coast people I know who cam einto alot of money usually retired to the country and did farming, duck hunting or stuff like that.

JRobby's picture

With no worry of prosecution or sanctions 

sinbad2's picture

The spies are now fighting amongst themselves, but the one spy that rules them all(CIA) will judge them harshly.

sinbad2's picture

I thought Apple owned the patent on spying on its customers?

Uber just needs to grease the palm of Apple, and all will be well.

Wulfkind's picture

I think the grease on Tim Cook's finger which he threatened to place a "fingerprint" up the Uber prez's nether region trumped any greasing of Apple's palm.

JRobby's picture

They share with Google 

TheSilentMajority's picture

Desperate times for money losing Uber, calls for desperate measures.

Entourage's picture

A scolding by Tim Cook would be a life-changing experience.

Wulfkind's picture

Tim Cook's gay lover, wife/husband/it/thing just LOVES it when Tim scolds him at night.....with the obligatory spanking of course.

But on the issue of Uber.  Just don't use it.  You kill Unicorns by NOT feeding them.  Of course....millenials don't care.  They like the "cool" factor.  Of course....they are the leading force in enabling the complete and total control of every human being on the planet.  These Silicon Valley unicorns are the R&D for the NSA, CIA, DOD, Big Gov., Big Business, Big Fascism.

I hope all them get downsized by a robot and/or A.I.

Never One Roach's picture

Isn't Cook th eone who revitalized JC Penneys?

 

lol

Wulfkind's picture

No...that was Ron Johnson who was Apple's Chief of Apple Retail stores.  He lasted less than 2 years.

Yet another SiliCON unicorn who thought he could take that millenial shopping model and place it over a dying retail firm whose customers are mostly like my 70 year old mom.

 

JRobby's picture

Owning a car not high on the priority list for many millennials

Wulfkind's picture

That's because the little bitches are too stuck up to buy a 15 year old beater Honda and deal with it.

They all think they deserve a BMW or something.  Fuck em.

Masterhit's picture

When Steve Jobs and Tim Cook were doing MDMA therapy in 1985 Steve told Tim "You make a good hole Tim."

TuPhat's picture

Everyone should break Apple's rules whenever they can and then break all the other elitist rules as well.

KimAsa's picture

Wtf is Kalanick doing with all that Uber cash? I guess one can't own too many pairs of hot pink socks and red shoes./-:

Masterhit's picture

In the NYT article it mentions management "conferences" in Mexico. I bet that cost $20-30k a person

besnook's picture

unlike lyft uber thinks the customer is the person paying for the ride. uber's customer is the driver. with no drivers it doesn't matter how many calls for rides they receive.

Youri Carma's picture

Google must hand over user data to U.S. from foreign data centers
https://regmedia.co.uk/2017/04/20/googlewarrantorder.pdf

Stored Communications Act
https://www.wikiwand.com/en/Stored_Communications_Act

Pirate Bay Founder comes with anonymous domain registration service
https://njal.la/blog/opening/

Curiously_Crazy's picture

Apple won't do a damn thing.

This is a parallel to "If you owe the bank 10,000 you're in trouble, but if you owe the bank 10,000,000 the banks in trouble".

Way to many people are usng Uber and will crack the shits should their precious app be denied - tracking or no tracking most morons don't care.. a majority of people still use Windows or OSX without any concern and both use far more intrusive forms of tracking. Apple won't risk losing any market share.

Sudden Debt's picture

Well, Apple could ban the app

let Uber crash

and buy the skeleton and revive it as their own product on the cheap.

sure... Apple ethics and crap... sure they'll never do that...

 

Masterhit's picture

Better yet buy the technology and license it to major city cab companies

moorewasthebestbond's picture

Cyber creeps.

 

It's not as bad as diddling children like the politicians though.

Chippewa Partners's picture

Night out on the town. Glass of 12 year or two. I am all over Uber versus even thinking of getting behind the wheel.

gregga777's picture

Gangster CONporations own the USA Feral Gangster Government lock, stock and barrel, and, consequentyly they can literally get away with murder.  

 

newworldorder's picture

It must be very good to be a Corporate Gangster with the US Govt in your pocket.  

Al Capone did not have the imagination to succed beyond bribing the city of Chicago Democrat Party politicians.

gregga777's picture

If the Gangster Government refuses to bring Gangster CONporations to heel then the American People will have to kill them in a revolution.

 

 

mary mary's picture

Isn't Uber CEO Travis Kalanick pretty?

Insearch's picture

Yesterday woman Uber driver picks up 2 drunk riders around 3:30 pm, husband/wife ...
Wife passes out in back seat and the husband rides up front, while driving in middle of nowhere, husband puts his hand on the woman drivers leg and thigh, he is warned 3x, but woman Uber driver feels Uber will not ban or support driver so takes them to destination.

No emergency button or contact number avail, only Mon-Fri 9-5 Philippines customer service.
Took 45 mins to get a call back and only through email....
Ridiculous

Wulfkind's picture

yet she will still drive for Uber...I guess for the Lulz or Yolo....or whatever stupid millenials think.  Fuck her.   Go drive a real taxi.