Apple Inc. was mildly embarrassed on September 2nd that private celebrity nude photographs and videos, including those with Jennifer Lawrance and Kate Upton, were allegedly hacked from iCloud accounts and then went viral after being posted online. But Apple, Inc. stock plunged 4.2% on September 3 when concerns started to grow that Apple’s new mobile payment system that will operate on the iCloud might be undermined by security risks, just as it is about to be introduced at the September 9 launch of Apple’s iPhone 6.
Apple’s business model is to operate a “walled garden.” When you buy an Apple device, you agree to a bunch of restrictions. You don’t have as much control over your phone, third-party apps don’t have access to all the features that Apple’s software does, and they ban tons of other apps from their store. But if you follow the rules, you supposedly have the benefits of faster, super-integrated apps.
Litigation recently disclosed Steve Jobs’ technology road map for iCloud in 2011. The memo was 10 months old before he resigned and then died of cancer two months later. In the e-mail, Jobs highlighted that Apple had “invented the “Digital Hub concept” and that “Apple was in danger of hanging on to the old paradigm too long (innovator’s dilemma).” He emphasized that “Google and Microsoft are further along on the technology, but haven’t figured it out yet.” His goal was to “tie all their products together, so we further lock our customers into our ecosphere.”
After Jobs died, the management of Apple did not try to match the synchronization capabilities of Google and others companies across today’s mass numbers of devices. Critics have complained that Apple oversimplified the technical challenge by always keeping local and cloud-based copies of data on Apple devices.
This explains why iMessage often jumbles the timing for receipt of Google Chrome e-mail threads, why cheaper third-party music options like Google Play Music are unavailable,and why Apple iCloud allows FaceTime video chat service is only available to Apple users. Yet Apple’s approach also is aimed at inflicting pain for wandering out of the garden.
The press conference on September 9 for the launch of the iPhone 6 is also the launch date for an Apple mobile payment system, referred to as Apple Wallet. With 800 million iTunes accounts, compared to Amazon’s 400 million accounts, Apple wants to add shopping in the walled garden.
The Google Wallet mobile payment system was not very successful, but a similar new mobile payment system from Apple is projected by Gartner Research to achieve 35% annual growth as Apple shoppers use their smartphones at the cash register.
“Apple has done a remarkable job through its marketing and product development to make many similar innovations mainstream. Speech recognition wasn’t invented by Apple, but with Siri, and how the feature was marketed, you definitely saw how the technology’s association with Apple contributed to its acceptance the world over,” noted Kevin Nabipour, senior vice president of content strategies at Allison+Partners, speaking to CNBC.
Apple, of course, claimed in a statement that “certain celebrity accounts were compromised by a very targeted attack on user names, passwords, and security questions, a practice that has become all too common on the Internet.” It added: “None of the cases we have investigated has resulted from any breach in any of Apple’s systems including iCloud or Find my iPhone.”
But a number of sites noted that a bug within Find My iPhone was revealed just one day before the nude photos and videos leak. Apparently, Find My iPhone did not use industry standard “bruteforce protection.” The weakness would have allowed hackers to guess different passwords without being locked out after a certain number of tries. The so-called iBrute bug was supposedly patched shortly before the leak.
The launch of Apple’s iPhone 6 and its mobile payment system has been injured by the publicity surrounding the security hack. In addition, tens of thousands of copycat hackers are undoubtedly now trying to find Apple security weaknesses to achieve an even more devastating cyber-hack. For at least the next six months, life is going to be very uncomfortable in Apple’s walled garden.