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App Store Wars

Why Proton is lobbying against Apple and Google’s app store monopolies

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Andy Yen flew into Washington DC on a sweltering day in mid-July. Yen is a former particle physicist who founded and runs Proton, a company aptly named considering his former profession. Proton, known for its encrypted email service ProtonMail, is based in Geneva, but Yen took the transatlantic flight to do some lobbying in the halls of Congress.

Yen, who is building a privacy-first suite of productivity and workplace tools, doesn’t see how his company can rival Apple or Google in the current competitive landscape given that Apple and Google’s app stores charge a 30% fee on app revenues.

Apple and Google have been fighting a global battle to maintain control over their app stores, as governments like the European Union and South Korea chip away at it. A new set of bills in the US Congress attempt to limit how tech companies can self-preference and, if passed, could force Apple and Google to allow apps to use their own payment systems and avoid the 30% fees.

Quartz met up with Yen at a Washington WeWork to discuss Proton’s business, the company’s lobbying efforts, and why he’s focused on antitrust reform instead of a federal privacy bill.

This conversation has been edited for clarity and length.

I know Proton as an encrypted email provider. How is the business pivoting?

I think it’s not so much a pivot but really a fulfillment of a long-term vision. From the beginning, the vision was always that the internet today is broken. Surveillance capitalism, which is the dominant way in which companies make money online, is simply not good for users, not good for society, and not good for freedom and democracy. The idea that to have an online existence, you have to sell your most intimate and sensitive and private information to tech giants, is fundamentally wrong and also morally incorrect.

We created Proton to provide an alternative to that and ProtonMail was the obvious place to start. When you look at Google’s business model, the whole thing is based upon the fact that you have a Google account—your Gmail—that links all the data and pulls the whole ecosystem together. If there’s a keystone to their entire ecosystem, it’s email.

But we know that the Internet today isn’t services and products, it’s ecosystems. Google has an ecosystem, Facebook has an ecosystem, everybody’s got their own ecosystem. And our vision is that privacy also needs to have its own ecosystem. So ProtonMail is the starting point—it’s also the keystone of our ecosystem. We have a VPN, a calendar, and we have a file storage product that’s in beta and launching this year. The idea is to build an entire ecosystem where your data is private and secure.

How does Proton make money?

The financial history of Proton is interesting. So it started off as a crowdfunding campaign and for the first two years. It was donation-based. And one of the key challenges that we had to try to uncover was how do you go from donation-based to something sustainable?So in 2016, we adopted a freemium business model to get some people to pay for the service. And what was interesting was that it was profitable.

Proton has now grown to 70 million accounts and 400 employees. And we’ve done this without having any venture capital investors. So not only is privacy profitable, it may be more scalable to alternative models because we’ve been able to do this without having to take the yearly fundraising that a lot of other companies do to scale.

The next thing for us is “Does this ecosystem approach work? Is this the correct way to approach this problem?” And this we don’t know because we’ve only launched the ecosystem a month and a half ago. So in six months or in a couple of years, we’ll see whether this changed the world.

You’re here in Washington talking to US lawmakers about antitrust. Why lobby for antitrust reform rather than a federal privacy bill?

The simple answer is because it’s actually the same thing. There’s no difference anymore between privacy and competition.

There’s a clear illustration of this in the FTC’s lawsuit against Facebook. The argument that’s made here is if you don’t like Facebook’s privacy practices, where are you going to go? Your alternative is TikTok, which is not any better. It’s just Chinese-controlled, so you probably don’t want that either. So, I think having a competitive digital marketplace is a key to having more privacy in the world.

We’re a freemium business, which means we pay 30% of our revenue to our biggest competitors on mobile platforms—Google and Apple. I think it’s impossible to compete if you’re paying your biggest competitor nearly 30% of your revenue. This is revenue, not profit.

But then there’s also the consequence of this. If subscription businesses—because a privacy business must be subscription-based—are forced to pay 30% fees, what you’re basically doing is creating an app ecosystem that is preferentially benefiting ad-based business models because ad-based business models don’t pay the 30% fee.

This lack of competition—which allows for anti-competitive and monopolistic app store practices—is steering the entire internet ecosystem toward surveillance capitalism as a way of financing and building businesses. If we solve the competition piece, we get privacy for free.

Do consumers care about encryption and privacy?

I think the best way to find the answer to that is to look at what Facebook and Google and Apple are doing today. The core of their messaging is trying to convince people that they’re private. So that is, in my mind, the clearest indication that consumers do care a lot about privacy and they probably have always cared about privacy.

Now, Big Tech is trying to move the goalposts. Google is not private but Google can come to be perceived as private if they redefine what privacy means. So if you look at what Apple, Facebook and Google are saying now, they’re defining privacy as “Nobody can abuse your data except for us.” Which is not correct. The correct definition—the Proton definition—is “No one can abuse your data, period.” We ensure that by having end-to-end encryption and zero-access encryption.

Apple has done a lot of marketing around privacy. In what ways is Apple helping consumer privacy and in what ways is that a mirage?

Apple’s definition of privacy is really no different than Google’s definition of privacy. Apple, of course, also has an ad business and they’re essentially trying to block out potential competitors from accessing user information so it can be the one to monetize it.

It’s a bit cynical to take that view of privacy. So when they say, “We’re going to block third-party cookies,” that’s basically saying, “We want only first-party cookies.” I would say that users probably don’t want third-party cookies or first-party cookies. They want no cookies at all. It’s great for advertising, but I don’t think it’s actually serving the user or delivering to users what they actually want—which is true privacy and not being tracked.

Proton’s logic is that you can’t access user data even if you tried, right?

Yes. We don’t have the ability to read, and access, and use it in the first place. In fact, that’s the only way to be sure of these things. Your data is just one merger or acquisition away from going somewhere else. The benefit of having end-to-end encryption is that it doesn’t matter what happens. Google could buy us and the data wouldn’t be accessible to them.

The mechanical guarantees of encryption is a much stronger guarantee of privacy for the average consumer.

Tell me about the bills you’re lobbying for.

There’s two bills: The Open App Markets Act, which targets app stores’ 30% fees. And then the American Innovation and Choice Online Act. And these are the two that are sort of proceeding in parallel and are very likely to be combined.

This is the first federal attempt to do new competition legislation in maybe 100 years. The last time it did it was the Clayton Act in the early 20th century. So it’s been a century of trying to get competition reform at the federal level—and now applying it to digital markets.

This is also one issue where there is bipartisan support. That almost never happens unless it’s some act condemning North Korea. We’re optimistic that the votes are there. We’re hearing from both the bill sponsors and their staffers that they have more than 60 votes in the Senate. So if it goes up for a vote, this will pass.

I usually think of Spotify, Yelp, and Epic Games when I think about the companies pushing antitrust action against Apple and Google. What does Proton add to this conversation?

We’re a privacy company. As a privacy company, we have the moral high ground to push back on Apple’s arguments that competition is bad for privacy, because it’s not. In fact, what we clearly show is more competition leads to better privacy by letting companies like Proton have a chance to compete.

The other element also is we’re also a security and encryption company. I think this is very beneficial because we can show that, when you do competition, you’re not weakening national security, you’re not weakening democracy. In fact, what this does is strengthen America’s ability to compete globally and to strengthen security.

We can push back against a lot of those, frankly, bullshit security and encryption arguments that keep coming up. If we’re a competitor that is even more secure and this helps us bring more security to the marketplace. Google also argues that if you have antitrust regulation against us, you’re going to hurt national security by hurting America’s competitive edge against Chinese tech giants. And that is obviously a B.S. argument because America can’t compete if America doesn’t innovate.

Apple claims they can ensure there’s privacy in their system because they controlling their own app store. Is that bullshit as well?

That is premised on the assumption that Apple is the only company in the world that can do security right. Proton demonstrates—by having products in the app store that are more private and secure than Apple’s—is that there are competitors out there: startups that can do security and privacy better than Apple.

If you open up the marketplace, you let other innovators into the space, you give companies like Proton a chance to succeed, you’ll get solutions that are more private and more secure for consumers—better than what Apple can provide. That’s the nature of innovation and competition, having other players in there pushing each other to do better.

What would this legislation passing mean for Proton?

Let’s talk about what it would mean for our customers. The day that this act is passed, our customers will see a 30% reduction in prices because we will no longer have to pay Apple and Google’s tax on the internet. And these savings will be passed on to consumers.

It’s not just Proton that will do that. A lot of other companies will do that too. Epic and Spotify, as you mentioned, will also reduce prices. In an era when people are struggling with inflation, I think what you see is everybody will pay 30% less on the apps and services that they use. That’s a huge win for consumers. It’s like a tax cut. Except you get corporate America to pay for it.

The other thing is that if you put Proton on a level playing field: Let’s say you’re setting up your Android device and instead of having to crawl through five menus in a very difficult-to-use interface to change your default email, you are prompted by a screen to pick which email service you want to use by default.

I’m willing to bet that a lot of people would want to take a more private option. I’m willing to bet that they wouldn’t all go with Google like they do today because they have no other choice. And what this means is a lot more people will have privacy, we’ll have a lot more users, and this will also compel Google, I believe, to become more private because they will face competitive pressure for the first time on privacy.

This is also a long-term win for consumers. It’s a win for small businesses, it’s a win for employment, it’s a win for the economy, and it’s a win for consumers. The only people that lose are Big Tech. If we pass this, what might happen is four tech companies [Apple, Amazon, Google, and Facebook] will have slightly lower profits. That’s the downside. If that’s what we’re risking as a society, I think passage is a no brainer.

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