Tuesday, 16 June 2020

Apple Pay and iOS App Store under formal antitrust probe in Europe

Apple is under formal investigation by antitrust regulators in European Union — following a number of complaints related to how it operates the iOS App Store and also its payment offering, Apple Pay.

The Commission said today that it has concerns that conditions and restrictions applied by the tech giant may be distorting competition in a number of areas, following a preliminary probe of the issues.

Back in March 2019, European music streaming service Spotify filed an antitrust complaint against Apple — railing very publicly against what it dubbed an “Apple tax”; aka the 30% tariff the tech giant applies on accepting payments in apps on its App Store. Spotify also accused Apple of impeding its business by applying arbitrary rules — such as making it harder to offer its own users discounts.

The Commission confirmed today that it’s looking formally into whether Apple’s rules for app developers on the distribution of apps via the App Store violate EU competition rules. It said the probe focuses on Apple’s mandatory requirement that app developers use its own proprietary in-app purchase system, as well as restrictions applied on the ability of developers to inform iPhone and iPad users of alternative cheaper purchasing possibilities outside of apps.

As well as the very public complaint from Spotify, the Commission has received a similar complaint from an unnamed e-book/audiobook distributor related to the impact of the App Store rules on competition.

Two specific restrictions imposed by Apple in its agreements with companies that wish to distribute apps to users of Apple devices will be investigated, per the Commission — namely [emphasis its]:

(i)   The mandatory use of Apple’s own proprietary in-app purchase system “IAP” for the distribution of paid digital content. Apple charges app developers a 30% commission on all subscription fees through IAP.

(ii)  Restrictions on the ability of developers to inform users of alternative purchasing possibilities outside of apps. While Apple allows users to consume content such as music, e-books and audiobooks purchased elsewhere (e.g. on the website of the app developer) also in the app, its rules prevent developers from informing users about such purchasing possibilities, which are usually cheaper.

“Following a preliminary investigation the Commission has concerns that Apple’s restrictions may distort competition for music streaming services on Apple’s devices,” it writes in a press release. “Apple’s competitors have either decided to disable the in-app subscription possibility altogether or have raised their subscription prices in the app and passed on Apple’s fee to consumers.

“In both cases, they were not allowed to inform users about alternative subscription possibilities outside of the app. The IAP obligation also appears to give Apple full control over the relationship with customers of its competitors subscribing in the app, thus dis-intermediating its competitors from important customer data while Apple may obtain valuable data about the activities and offers of its competitors.”

Commenting in a statement, Commission EVP Margrethe Vestager — who heads up competition policy for the bloc — added: Mobile applications have fundamentally changed the way we access content. Apple sets the rules for the distribution of apps to users of iPhones and iPads. It appears that Apple obtained a ‘gatekeeper’ role when it comes to the distribution of apps and content to users of Apple’s popular devices. We need to ensure that Apple’s rules do not distort competition in markets where Apple is competing with other app developers, for example with its music streaming service Apple Music or with Apple Books. I have therefore decided to take a close look at Apple’s App Store rules and their compliance with EU competition rules.”

Vestager’s reference to a “gatekeeper” role has specific significance as the Commission is currently consulting on updating regulations for digital platforms — including floating the possibility of ex ante regulation for platforms deemed to be gatekeepers vis-a-vis other suppliers.  (In parallel, the Commission is consulting on updates to competition law that may allow it to intervene more swiftly in future, in instances where it suspects digital markets have ‘tipped’.)

Spotify welcomed the Commission’s action, writing in a statement:

Today is a good day for consumers, Spotify and other app developers across Europe and around the world. Apple’s anticompetitive behavior has intentionally disadvantaged competitors, created an unlevel playing field, and deprived consumers of meaningful choice for far too long. We welcome the European Commission’s decision to formally investigate Apple, and hope they’ll act with urgency to ensure fair competition on the iOS platform for all participants in the digital economy.

On Apple Pay, the Commission said a formal investigation of how it operates the payment tech will look at the “terms, conditions and other measures” Apple applies for integrating the payment solution in merchant apps and websites on iPhones and iPads; Apple’s limitation of access to the NFC functionality on iPhones for payments in stores; and allegations of “refusals of access to Apple Pay”.

Following a preliminary probe, the Commission said it is concerned Apple’s processes “may distort competition and reduce choice and innovation”.

It also notes that Apple Pay is the only mobile payment solution that is allowed to access NFC technology on iOS devices for making payments in stores.

“The investigation will also focus on alleged restrictions of access to Apple Pay for specific products of rivals on iOS and iPadOS smart mobile devices,” it added.

The Commission said it will carry out the investigations “as a matter of priority”, but there’s no set timeframe for how long this process might take.

EU antitrust investigations have tended to take a number of years from an announcement of a formal probe to a decision being reached. (Although, in an ongoing investigation against Broadcom, Vestager recently dusted off a tool to accelerate regulatory intervention — but as yet there’s no formal ‘statement of objections’ against Apple so it remains to be seen how this case will proceed, and whether regulators may seek to speed up any intervention.)

Reached for comment on the Commission’s announcement of the two antitrust investigations, Apple dubbed the complaints “baseless” — choosing to throw shade on the complainants by claiming these companies are after “a free ride, and don’t want to play by the same rules as everyone else”.

Here’s Apple’s statement on the two investigations in full:

Throughout our history, Apple has created groundbreaking new products and services in some of the most fiercely competitive markets in the world. We follow the law in everything we do and we embrace competition at every stage because we believe it pushes us to deliver even better results.

We developed the App Store with two goals in mind: that it be a safe and trusted place for customers to discover and download apps, and a great business opportunity for entrepreneurs and developers. We’re deeply proud of the countless developers who’ve innovated and found success through our platform. And as we’ve grown together, we’ve continued to deliver innovative new services — like Apple Pay — that provide the very best customer experience while meeting industry-leading standards for privacy and security.

It’s disappointing the European Commission is advancing baseless complaints from a handful of companies who simply want a free ride, and don’t want to play by the same rules as everyone else. We don’t think that’s right — we want to maintain a level playing field where anyone with determination and a great idea can succeed.

At the end of the day, our goal is simple: for our customers to have access to the best app or service of their choice, in a safe and secure environment. We welcome the opportunity to show the European Commission all we’ve done to make that goal a reality.

Apple has had a number of run-ins with EU regulators over the years — including a probe of its acquisition of Shazam (which was later cleared); a major investigation of ebook pricing; and a probe of tax benefits in Ireland which saw it on the hook for $15BN.

French competition regulators also recently fined the tech giant $1.2BN for anti-competitive sales tactics. It’s also been fined $27M by French regulators this year for throttling old iPhones.

This report was updated with comment from Spotify



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Swappie bags $40.6M to sell more secondhand iPhones across Europe

Finland-based Swappie has closed a €35.8 million ($40.6M) Series B to expand into new markets in Europe. The ecommerce business refurbishes and resells used iPhones, taking care of the entire process from testing and repairing used handsets, to selling the refurbished devices via its own marketplace, with a 12-month warranty.

Local VC and private equity firm TESI is a new investor in the Series B, along with Lifeline Ventures, Reaktor Ventures and Inventure Investors, all of whom participated in Swappie’s 2019 Series A. The total raised to date since the business was founded in 2016 is $48M.

Right now Swappie operates in Finland, Sweden, Denmark and Italy. The new financing will be used to expand across Europe, beginning with launches in Germany, Ireland, Portugal and the Netherlands this summer.

It’s also eyeing expansion beyond Europe — so will be speccing out a broader roadmap for the future.

“The main focus of this round is to become the number one player in Europe. But also to explore opportunities outside Europe as well,” says CEO and co-founder Sami Marttinen. “That’s something we will be looking into but no concrete plans to announce at this point.

“There are still opportunities for our business model everywhere in the world. So it’s a matter of just building the roadmap — where to go next.”

Swappie’s Jiri Heinonen (CMO) and Sami Marttinen (CEO) (Photo credit: Swappie)

Swappie touts growing consumer demand in the region to buy refurbished phones, saying that from 2018 to 2019 revenues grew 4x, hitting $35M+ in net revenue in 2019. It’s also seeing demand continuing to grow this year — recording a 5x increase in net revenue growth in April and May 2020 vs the same period last year, despite the ongoing COVID-19 pandemic. Indeed, the trend of consumers shifting to buying more online looks to be a help for its online marketplace.

Commenting on Swappie’s Series B in a statement, Tony Nysten, Investment Manager at TESI, said: “We believe there is a huge growth opportunity for Swappie. The smartphone market in Europe is worth over €100BN but used or refurbished phones currently make up just over 10% of that and only one in four pre-owned phones are currently re-sold. Through its rapid growth to date, Swappie has proven its ability to not just grow market share within the refurbished market, but to expand the size of the category overall. The business has enormous potential.”

Swappie’s early choice of market focus included not only familiar turf in the Nordics — but Italy, in Southern Europe. The latter was chosen deliberately on account of it being a tough market for ecommerce, per Marttinen.

“In the really early days the reason why we went to Italy was because it was one of the toughest ecommerce markets in Europe — they have a really low ecommerce maturity index. It’s very different in terms of shopping behavior. You need to build another level of trust in that market. There are lots of unique traits like cash on delivery, things like that. So we knew that in order to really conquer the market globally — and to be able to deliver on our global ambitions we would need to enter as difficult markets as early in our journey as possible.

“These days we have a much more advanced playbook and market studies across Europe.”

Swappie describes itself as a ‘scale-up’ tech business on account of addressing the whole value chain, per Marttinen.

“We’ve done a lot there on the hardware side — when it comes to actually refurbishing the devices we can make them even stronger then the original devices in many cases. So that means we can go as deep as onto the motherboard level in the repairs. Then on the software side, of course, we’re making selling and distribution and everything else scalable. Making sure that the checking processes and all the processes in the factory are according to the latest standards,” he says.

“Because of being so focused in also building the processes and focusing on the quality so much, so actually we have been able to truly change the way people consume electronics,” he adds. “If you think about it from a local player perspective they are typically mostly competing for the people who are already buying used devices — whereas we are able to deliver on this market by having full control of the entire value chain, from buying to refurbishing, to selling the phones to consumers.

“Most of our customers are buying used or refurbished devices for the first time — so actually our biggest competitors are new smartphone retailers.”

The most popular iPhone model sold on Swappie’s marketplace last year was the iPhone 8, per Marttinen.

He won’t disclosed the exact number of iPhones Swappie has refurbished and sold at this point but he says it’s a six-figure number — aka ‘hundreds of thousands’. 

The team chose to focus on iPhones to ensure they can deliver the highest quality device refurbishment, he says, while also benefiting from the relatively higher cost of Apple’s smartphone hardware vs Android devices. Though he doesn’t rule out expanding to offer another type of refurbished smartphone in future.  

“The business is now growing really rapidly but what we noticed in the early days is that the new device prices had started to rise before we started this business so we have been very lucky with the timing,” he tells TechCrunch, noting that Swappie also benefitted from the plateauing into advancements between handset models in recent years, as the technology matured.

“If you can build trust into this business, and make sure that the phones function as well as new devices — and that you’re actually making the buying process as well as safe as buying a new phone — that way you can actually accelerate the growth of the market. So that’s what we have been really successful in. It’s kind of the key to being able to grow so quickly.”

“One main point there has been that because we refurbish every device ourselves in our own factory in Finland we can deliver to customers the highest quality devices under warranty for much less than the cost of a new phone and also be more environmentally friendly,” he adds.

While, in years past, there have been instances of iPhone users’ devices bricked after a repair by an unauthorized repair shop Marttinen says Swappie is using only original iPhone parts so has avoided such problems.

He also points to recent European Commission proposals for a pan-EU ‘right to repair’ for electronics which suggests device makers selling in the region will be required to respect repairability, rather than using software updates as a way to penalize consumers who seek to extend the lifespan of their current device.

Photo credit: Swappie

Swappie’s business also slots into a wider Commission mission to transition the EU to a circular economy, as part of the green deal announced by current president, Ursula von der Leyen — so it’s skating to where the puck is headed, if you like.

“It’s really good for the environment that the right to repair legislation has come forward in the past few years. That’s one very important point for us as well which was one of the reasons why we wanted to built microscope level repairs in our factories — so we wouldn’t have to scrap as many phones as you normally would,” Marttinen adds.

What can’t it repair? The proportion of iPhones which turn out to be truly unsalvageable via its processes is “extremely small“, he says. “We can actually do any repairs that are possible to do the phones so, basically, water damaged phones which have been at the bottom of the ocean — those are of course unrepairable. Or if the phone is bent too much or if the motherboard is completely ruined. But basically all the other faults we can repair.”

On the competitive front, he says Swappie’s main rival are retailers selling new iPhones — given it’s trying to woo iOS users away from buying a brand new iPhone. On the secondhand marketplace front Marttinen mentions reBuy as one of the main rival players in refurbishing and reselling electronics, though it does not focus on iPhones — offering a full range of devices, from wearables to smartphones and tablets, laptops, consoles and cameras.



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Monday, 15 June 2020

US Commerce Dept. amends Huawei ban to allow for development of 5G standards

The United States Department of Commerce today issued a change to its sweeping Huawei ban. Proponents of the move note that the change in policy ought not be regarded as a softening on the government’s stance toward the embattled hardware maker, but instead is an attempt to develop more streamlined standards for 5G, along with the company, which has been one of the primary forces in its development 

According to the Department:

This action is meant to ensure Huawei’s placement on the Entity List in May 2019 does not prevent American companies from contributing to important standards-developing activities despite Huawei’s pervasive participation in standards-development organizations.

The change is designed to allow Huawei and U.S. to both play a role in hashing out the parameters for the next-generation wireless technology. “The United States will not cede leadership in global innovation. This action recognizes the importance of harnessing American ingenuity to advance and protect our economic and national security,” Commerce Secretary Wilbur Ross said in a statement. “The Department is committed to protecting U.S. national security and foreign policy interests by encouraging U.S. industry to fully engage and advocate for U.S. technologies to become international standards.”

The new  Bureau of Industry and Security (BIS) rule essentially allows companies to share information about technologies in order to develop a joint standard without requiring an export license. Beyond that, however, the DOC has no stated plans to ease up after placing Huawei on its entities list last year.

The Chinese smartphone maker was included in the blacklist over a litany of ongoing complaints, including its ties to national government, concerns over spying and alleged sanction violations with Iran. The move has had a profound impact on the company, including a severing of its ties to Google, which formed the software backbone of its mobile line through Android and a suit of included apps. Subsequent handsets, including the recently released P40 Pro+, have been shipped without the software on board.



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Apple says its App Store facilitated $519B in commerce in 2019

Amid increasing antitrust scrutiny by U.S. regulators, Apple announced an update on its App Store ecosystem. While the company normally shares some App Store metrics during its WWDC keynote, it’s today detailing the results of a new study that claims the App Store ecosystem facilitated half a trillion ($519 billion) in billings and sales globally in 2019. This is a new and broader figure than has been previously reported, as it includes all transactions the App Store facilitates, not just those on which Apple takes a commission.

The study, which was conducted by economists at the Analysis Group, is the first to attempt to comprehensively analyze the App Store ecosystem, which is now home to nearly 2 million apps. First launched in 2008, the App Store is visited by half a billion people every week across 175 countries. Collectively, users have download apps hundreds of billions of times to their devices. The Apple Developer ecosystem, meanwhile, supports 23 million developers.

The new study examines the wider world of transactions on the App Store. While Apple earlier announced it has made $155 billion in direct payments to developers to date, the study attempts to position those payments as a “small fraction” of the total when sales from other sources — like physical goods and services — are also included.

In other words, the study is taking into consideration the number of retail sales flowing through the App Store, like when you shop the Target or Best Buy iOS app, for example. Or when you book an Uber or order food from DoorDash or Grubhub.

The study notes that because Apple only receives commissions from the billings associated with digital goods and services, “more than 85% of the $519 billion total accrues solely to third-party developers and businesses of all sizes,” it says.

Here’s how the $519 billion breaks down, specifically.

The study estimates sales from Physical Goods and Services accounted for the largest share, at $413 billion. Within this category, M-commerce apps generated the vast majority of sales, and Retail was the largest at $268 billion. This Retail category includes brick-and-mortar stores like Target as well as virtual marketplaces like Etsy, but excludes grocery delivery services.

Other top M-commerce apps included Travel apps like Expedia and United, coming in at $57 billion. Ride-hailing apps like Uber and Lyft comprised $40 billion in sales. And Food Delivery apps, like Grubhub and DoorDash, made up $31 billion. Grocery Delivery accounted for just $4 billion — but remember that this study is focused on pre-COVID-era data from 2019.

Meanwhile, the billings from the Digital Goods and Services section reached $61 billion in 2019. This includes music and video streaming services, fitness, education, e-books, audiobooks, news, magazines, and dating apps. The Games category was the largest within digital goods and services, but the study didn’t detail how much of the $61 billion was attributed to games versus the other apps. The lack of sub-category data is an interesting omission given that Apple sells games, a music streaming service, a video streaming service, audiobooks and e-books, and a subscription news service.

In-app Advertising Sales accounted for another $45 billion and 44% of that figure ($20 billion) was from advertising in games. Non-game apps that generated substantial in-app advertising sales are often free, like Twitter and Pinterest, while some offer subscriptions, like MLB.com or The New York Times, the study said.

The timing of the study’s release is not coincidental.

Along with Amazon, Google parent Alphabet and Facebook, U.S. House antitrust investigators have been pressing Apple to testify as part of the Judiciary Committee’s tech competition probe, Axios recently reported. Amazon is the only one of the four to have publicly confirmed its plans to participate.

For its part, Apple has been accused of running an anti-competitive app marketplace — one where its own services compete against rivals. Those competitors then have to pay Apple commissions for transactions the App Store facilitates. Apple also doesn’t allow other apps that sell apps, like the Epic Games Store. And it uses its favored status to wipe out competitors by launching similar products that can more deeply integrate with its OS — as it plans to do with its upcoming lost item finder, AirTags which will work better than the current market leader, Tile, due to its first-party status.

In that light, it’s easy to see how this study is attempting to shift the narrative from one about how much Apple profits off developers — developers who are often now also competitors — to one that characterizes the App Store as one where business transactions flow freely. It paints a picture of industries that generate billions without Apple’s hand in the pot, so to speak.

But this ignores all the workarounds businesses have had to take to avoid Apple’s cut.

For example, Amazon, for years, has directed users to the web to purchase e-books, audiobooks and, until recently, videos. (The latter is only now allowing in-app transactions due to a special deal that was cut.) A number of top developers, including Netflix and Spotify, dropped in-app sign-ups from their apps in order to avoid the so-called “Apple tax.” Those that do the same will sometimes see a decline in subscribers, as a result.

The study characterizes these workarounds as developers’ “choice.”

The full report is also notable for its examination of the geographic makeup of that $519 billion figure. It says the U.S. accounts for $138 billion compared with China’s $246 billion, for example. That’s followed by Europe ($51 billion), Japan ($37 billion) and then the rest of the world ($47 billion).

Of course, this study on the 2019 App Store arrives in the middle of the coronavirus pandemic, which will lead to a wildly different set of numbers for 2020 and beyond.

“The App Store…is the world’s safest and most vibrant app marketplace,” touted Apple in a release. “It helps creators, dreamers, and learners of all ages and backgrounds connect with the tools and information they need to build a brighter future and a better world,” it said.



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Ahead of WWDC, Apple’s Developer app adds Mac support, new features, iMessage stickers

Ahead of Apple’s Worldwide Developer Conference starting next week, the company has today launched a new version of its Apple Developer App to better support its plans for the virtual event. Notably, the app has been made available for Mac for the first time, in addition to a redesign and other minor feature updates.

With the needs of an entirely virtual audience in mind, Apple has redesigned the app’s Discover section to make it easier for developers to catch up on the latest stories, news, videos, and more, the company says. This section will be regularly updated with “actionable” content, Apple notes, including the latest news, recommendations on implementing new features, and information about inspiring engineers and designers, alongside new videos.

It has also updated its Browse tab where users search for existing sessions, videos, articles, and news, including the over 100 technical and design-focused videos found in the WWDC tab. The WWDC tab has also been updated in preparation for the live event starting on Monday, June 22.

The redesign has added a way to favorite individual articles, in addition to session content and videos. Plus it includes new iMessage stickers along with other enhancements and bug fixes.

The app, which was previously available on iPhone, iPad, and Apple TV, is also now offered on Mac.

“Over the last 30 years, developers around the world have been creating amazing apps that entertain, influence culture, and change lives,” said Apple in announcing the updated app. “The Apple Developer app helps everyone stay current and learn about the newest technologies and techniques to make their apps even better.”

Apple had first introduced its Apple Developer app in November 2019, as an update for its existing WWDC app. The company explained at the time the app would make it easier for Apple’s third-party developer community to access key resources, like design articles, developer news, videos and more, instead of just its WWDC-related content. The new app was also aimed at helping connect developers in growing international markets — like India, Brazil and Indonesia — to Apple’s resources.

However, Apple didn’t at the time realize its Developer app would play as large a role as it now will, due to the coronavirus pandemic.

In March, Apple announced the cancellation of its in-person developer event in favor of an online version where all the session content would be shared as videos. Last week, it revealed the WWDC agenda, which includes virtual versions of its labs and an updated version of its Apple Developer forums, in addition to its Special Event and Platforms State of the Union keynotes. Much of this content will be housed in the Apple Developer app. But now it’s not supplementing the real-world event — it is the event. That means the app will have to remain stable and be ready for a large influx of developer use in the weeks ahead.



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Apple adds new MacBook Pro graphics option and Mac Pro SSD upgrade kit

A week before kicking off WWDC, Apple introduced a pair of upgrades to its pro-level hardware lines. Both the 16-inch MacBook Pro and the Mac Pro desktop are getting select internal upgrades, starting today.

One the notebook front, the 16-inch model gets an additional graphics configuration. The addition of the AMD Radeon Pro 5600M GPU marks the best graphics performance yet for the notebook line, marking up a 75-percent speed increase over the the next-highest configuration, the Radeon Pro 5500M.

And it’s priced to match. The 5500M with 8GB of memory is a $100 premium over the system’s $2,799 base. The 5600 with 8GB of HBM2 memory, on the other hand, will run an extra $700. But if you’re going to go for the top of the line, you might as well really go for the top of the line, right?

A full specked out model (without tossing in an extra software) will run $6,699. Obviously that’s a super-high-end professional configuration, which is going to be crazy overkill for most of us. If you run a studio that does video production, 3D design or special effects, and want to really future-proof the thing, on the other hand, it might be worth a look.

Speaking of future-proofing, Apple also just rolled out a new feature designed to make it easier for users to upgrade the Mac Pro. A new SSD kit is designed for user-installation, featuring 1, 2, 4 and 8TB storage modules. Instructions for upgrading the high-end tower can be found here.

The MacBook update is currently available through Apple’s site. The SSD upgrade, meanwhile, should be arriving later today. 



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Saturday, 13 June 2020

This Week in Apps: Android 11 beta, Snapchat’s makeover, Apple’s WWDC20 plans

Welcome back to This Week in Apps, the Extra Crunch series that recaps the latest OS news, the applications they support and the money that flows through it all.

The app industry is as hot as ever, with a record 204 billion downloads and $120 billion in consumer spending in 2019. People are now spending three hours and 40 minutes per day using apps, rivaling TV. Apps aren’t just a way to pass idle hours — they’re a big business. In 2019, mobile-first companies had a combined $544 billion valuation, 6.5x higher than those without a mobile focus.

In this Extra Crunch series, we help you keep up with the latest news from the world of apps, delivered on a weekly basis.

This week, we’re looking at the mobile news from the events that didn’t happen this year because of the coronavirus pandemic. That includes the launch of Android 11 beta, which would have normally arrived during Google I/O, along with all the new Android developer tools. Snap also held its partner summit this week, where it announced a number of new Snapchat features, new partner relationships, and its plans for its AR ecosystem.

Not to be left out, Apple stole a little attention this week with its reveal of the WWDC20 schedule. Like many others, Apple’s conference is going virtual for the first time. It’s even redesigning its forums to aid with Apple engineer-developer interactions.

This week in app trends, we examine data from new reports on COVID’s impact on home improvement apps and hypercasual gaming.

Headlines

Android 11 beta launches along with new developer tools

After a series of delays and the cancellation of Google I/O, the Android 11 beta finally launched this week. This next major version of the Android OS is focused around three themes, says Google: People, Controls and Privacy.

On the People side, Android 11 gives conversation notifications a dedicated section at the top of the shade, offers a Bubbles API for messaging apps, improves Voice Access, adds new emoji and more. New consolidated keyboard suggestions allow Autofill apps and Input Method Editors (e.g., password managers and third-party keyboards), to now securely offer context-specific entries in the suggestion strip.

 

New device controls make it easier for users to access and control connected/smart home devices with a long press of the power button or access payment options. New media controls in an upcoming beta release will make it easier to switch the output device for audio or video content.



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