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Big Tech's new Wall Street problem

Photo courtesy of Barron's

Just as Big Tech has begun to seriously worry about Washington, now Wall Street is waking up to possible government threats to the market dominance of the Silicon Valley giants.

While the "biggest companies don't face an immediate threat of being broken up ... just the possibility creates a risk factor in the stocks," Barron'sreports in its new cover story:

  • "More than antitrust issues are in play. The huge amounts of personal data that Google, Facebook, and Amazon are amassing is just as troubling to some."
  • Why it matters: "Taken together, these challenges threaten the stock valuations of the group. To get an idea of the worst-case scenario, take a look at two of tech's dominant players from previous eras: IBM [1969] and Microsoft [1998]."
  • "If these giants get sideswiped, it could be because of the fatal flaw in large tech companies that's often drawn social ire and regulation — the will to exploit their dominance."

Possible hits to the platforms' business models are blossoming in Europe, and the contagion could spread across the Atlantic. An AP takeoutfrom London points out that the giants "are increasingly facing an uncomfortable truth":

  • "[I]t is Europe's culture of tougher oversight of companies, not America's laissez-faire attitude, which could soon rule their industry as governments seek to combat fake news and prevent extremists from using the internet to fan the flames of hatred."

Be smart: My conversations with tech execs show they're skeptical that Congress will figure out the mechanics of inhibiting the platforms in a way that would do serious damage to the bottom line.

  • It's true that potential D.C. action is in the early stage. And there are huge impediments to doing anything radical. But the companies are now such tempting targets, this is a rising passion in both parties.
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Cellular internet service in Puerto Rico now available via Project Loon

A Project Loon balloon being readied for deployment to Puerto Rico. Photo: Alphabet

AT&T and Alphabet said late Friday that they have begun to offer limited mobile Internet service using the Google parent company's Project Loon balloons.

Apple is issuing a cellular settings update that will allow iPhones to activate the currently unused Band 8 to access the Loon-based service. It's the second time Project Loon has been activated to assist with an emergency (the first was in Peru) and the first time Loon has been used in the U.S. The FCC earlier granted temporary approval for Loon to operate in Puerto Rico.

Why it matters: Connectivity and power remain major challenges for Puerto Rico and communications are seen as a necessary starting point for other parts of recovery and rebuilding to move forward. Without cellular service, even first responders and humanitarian groups are forced to use pricey satellite phones.

"We've never deployed Project Loon connectivity from scratch at such a rapid pace, and we're grateful for the support of AT&T and the many other partners and organizations that have made this possible," the Loon team said in a blog post.

In general, Loon is designed to bring Interest service to remote and rural areas not easily served with cell service, though aid groups say they are excited to have more options for disaster relief efforts.

What's covered: Project Loon supports basic internet communications including text messaging, basic web access and e-mail. AT&T said there is no added cost to its customers for the service.

The downside: Because they are solar powered, the Loon balloons only offer service during the daytime.

Separately, AT&T said Friday that more than 60% of the population in Puerto Rico and 90% of the population in the U.S. Virgin Islands has cell service.

Featured

Tech CEO arrested for child rape

Former Vungle CEO Zain Jaffer. Screengrab via vungle.com

Zain Jaffer is currently in a Silicon Valley jail cell, after being arrested for sexual assault of a child and attempted murder. He also has been put on indefinite leave as CEO of Vungle, the mobile video ad company that he founded in 2011.

The San Mateo County Sheriff's website shows that 29 year-old Jaffer was initially booked with felony charges for attempted murder, a lewd act on a child, oral copulation of a person under 14, child abuse, assault with a deadly weapon and a misdemeanor charge for battery upon an officer and emergency personnel. The attempted murder charge has since been dropped due to a lack of evidence.

Vungle did not initially issue a comment on Jaffer's arrest, except to say he has been suspended for personal reasons not having to do with the company. It has since issued the following statement:

"While we do not have any information that is not in the public record at this point, these are extremely serious allegations, and we are shocked beyond words. While these are only preliminary charges, they are obviously so serious that it led to the immediate removal of Mr. Jaffer from any operational responsibility at the company. The company stressed that this matter has nothing to do with Mr. Jaffer's former role at the company."

New CEO Rick Tallman later added in a statement that the company learned of the allegations late Monday night and convened a board meeting to remove Jaffer as CEO within 24 hours.

Record: Jaffer was arrested on Sunday and arraigned on Tuesday, according to Forbes, and his next court date is November 1. He is currently being held on bail at the Maple Street Correctional Center in Redwood City, California.

"Mr. Jaffer had pleaded not guilty and had no public comment at this time," Jaffer's attorney, Daniel Olmos, told Axios via email.

Investors: The San Francisco-based company has raised over $25 million in VC funding from firms like Google Ventures, Thomvest Ventures, Crosslink Capital, SoftTech VC and 500 Startups. Investors not represented on the board were informed yesterday of the CEO switch, but not of Jaffer's arrest. Google Ventures CEO David Krane provided the following statement:

"We are horrified by the news about Zain Jaffer and unequivocally condemn such behavior. Our hearts go out to the many people affected, particularly Zain Jaffer's family and the Vungle team."

The story has been updated with an updated timeline of events, and additional details and statements from Vungle and Jaffer's attorney. The headline has also been updated to reflect that the charge for attempted murder has since been dropped.

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Snap reduces headcount, plans slower hiring for 2018

Evan Spiegel speaks at the Vanity Fair New Establishment Summit in Beverly Hills. Photo: Matt Winkelmeyer / Getty Images

Snapchat parent company Snap has laid off employees as it slows its growth heading into 2018, Business Insider reports. The company has grown fast over the past two years: it had 600 employees at the end of 2015 and ended last quarter with 2,600.

Why it matters: Snap believes the company has reached a size that is functioning well, so it is reducing its rate of hiring and therefore cutting some staff recruiter roles. The company said it will continue to hire aggressively in engineering and sales roles, but the overall pace of those hires will also slow next year.

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M.B.A. programs consider closing as students lose interest

Students walk on the University of Vermont campus. Photo: Toby Talbot / AP

Business schools are reevaluating their programs, some even considering closing their doors, because students are losing interest in applying, according to the Wall Street Journal.

Why it matters: While M.B.A. programs were once vital for careers in fields like finance, fewer employers are able to cover the cost of the degree, making it less alluring to employees. A second-year M.B.A. student at the University of Wisconsin, Diego Hahn, asked the WSJ, "Are we just going to get rid of all top public M.B.A. programs...and only let those who can afford to go to private school earn this type of education?"

The University of Wisconsin's business school, one of the oldest in the country, is voting to close in November, the WSJ reports. They follow University of Iowa and Wake Forest University announcing business school closures.

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TPG to launch infrastructure investing effort

Construction workers in the Chennai Metro Rail

Arun Sankar/AFP/Getty Images

TPG Capital is dipping its foot into infrastructure investing, with a new emerging markets-focused strategy that would launch as a pledge fund, Axios has learned from multiple sources.

Staffed up: The infrastructure effort would be partially led by recent hire Jin-Yong Cai, who previously was CEO of The World Bank's International Finance Corp.

Prologue: TPG has employed the pledge fund model before when launching new business lines, including both credit and real estate.

What's a pledge fund? A deal-by-deal structure, rather than a pool of committed capital.

Flagship: TPG told investors that it could begin raising its eighth flagship buyout fund by the end of Q1 2018, although it did not provide a target.

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CoinList spins out of AngelList

Illustration: Rebecca Zisser / Axios

CoinList, a provider of financial services for staging and managing initial coin offerings (ICOs), is spinning out of AngelList as a standalone company that will be led by former Sidewire CEO Andy Bromberg, it tells Axios.

Background: CoinList debuted earlier this year as a joint project between AngelList (whose founder, Naval Ravikant, is a huge proponent of cryptocurrencies), and Protocol Labs, builder of a distributed computer memory storage project that went on to have a large ICO. AngelList will continue to have a major ownership stake in CoinList and provide certain legal and compliance resources, although the latter will be a fully independent entity. CoinList plans to eventually offer services beyond ICO management and compliance. It has no current plans to raise outside capital, according to Bromberg.

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Retailers can't find qualified workers

A now hiring sign is shown in the widow of an Express in NYC. Photo: Mark Lenihan / AP

Staffing companies that work with some of America's biggest retailers say that the industry is struggling to attract quality workers at both the store associate and management levels, Reuters reports.

Why it matters: It's good news for workers that a historically good labor market is generally enabling folks to eschew jobs that don't pay well or offer competitive pay. But it couldn't come at a worse time for the traditional retail industry, which will struggle to differentiate itself from cheap e-commerce if it can't afford to hire quality salespeople.

  • Melissa Hassett of ManpowerGroup Solutions, whose clients include Lowe's, Pep Boys, and Staples, says that where retailers are having particular difficulty "hiring is the lower level, the seasonal or entry-level employees," because applicants are balking at the low pay and unpredictable schedules typically offered by the industry.
  • The struggles of traditional retailers of late have also limited their ability to pay competitive bonuses for retaining " talented regional managers or heads of business lines."
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Chicago considers ride-hailing tax to fund public transit

A car with both Uber and Lyft signs. Photo: Richard Vogel / AP

Chicago Mayor Rahm Emanuel proposed on Wednesday a tax on ride-hailing companies, the revenue from which would be exclusively invested into the city's public transit. The proposal is for a a $0.15 fee in 2018, increasing to $0.20 in 2019, added on top of an existing fee of $0.52. If it passes, this will be the first ride-hailing fee in a U.S. city dedicated to a city's public transit.

Why it matters: Questions over ride-hailing's impact on public transit have persisted over the years. Last week, researchers published a study that showed that services like Uber and Lyft have led to a 6% decline in public transit use by respondents. Still, the companies have continued to say that they want to be a partner to public transit systems in cities.

From Lyft:

We appreciate the Mayor working to build a sustainable future for ridesharing drivers and passengers in Chicago and look forward to continue collaborating on providing safe, convenient and affordable transportation options for the city.

From Uber:

When safe and affordable rides are available across every neighborhood -- whether it's by train, bus, or rideshare -- Chicagoans can get to their jobs or family obligations without having to own a car. At Uber we believe that the future of urban transportation will be a mix of public transit and ridesharing, and that by encouraging residents to use a variety of options, we can all ride together to build a better Chicago.
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Helping the places globalization forgot

A truck travels on an overpass towards the World Trade Bridge, in Laredo, Texas. Photo: Eric Gay / AP

"The right way to help declining places: Time for fresh thinking about the changing economics of geography" — The Economist's lead editorial:

  • "Populism's wave has yet to crest. That is the sobering lesson of recent elections in Germany and Austria, where the success of anti-immigrant, anti-globalisation parties showed that a message of hostility to elites and outsiders resonates as strongly as ever among those fed up with the status quo."
  • "It is also the lesson from America, where Donald Trump is doubling down on gestures to his angry base, most recently by adopting a negotiating position on NAFTA that is more likely to wreck than remake the trade agreement."
  • Be smart: "The demise of NAFTA will disproportionately hurt the blue-collar workers who back Mr Trump."
  • "Welcome to the place age. ... Mainstream parties must offer voters who feel left behind a better vision of the future, one that takes greater account of the geographical reality behind the politics of anger."
  • Politicians need "to focus on speeding up the diffusion of technology and business practices from high-performing places. ... Bolder still would be to expand the mission of local colleges."