The kings of the internet expand their dominance - Axios
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The kings of the internet expand their dominance

Lazaro Gamio / Axios

Earnings calls and industry reports this week show that Google and Facebook, the two largest advertising companies in the digital ecosystem, are thriving, despite controversies that have raised questioned about how safe their platforms are for advertisers.

  • Google's ad revenue grew 18.8% to $21.41 billion last quarter, mostly due to YouTube video ads and mobile search ads
  • Facebook revenue beat expectations for the first quarter, with, $7.86 billion in ad revenue, up 51% from the prior year, which is especially positive since the company has continually warned investors that ad revenue would "come down meaningfully" beginning in the middle of this year due to Newsfeed ad saturation.
  • Google and Facebook took 89% of all digital ad growth in 2016, according to the Interactive Advertising Bureau (IAB)

Why it matters: Despite controversial content on their platforms upsetting users, these numbers suggest marketers are willing to take a risk on using imperfect technologies to market their brands, because it's convenient and effective.

Here's why buyers say they aren't deterred: Axios spoke with several ad buyers and agency executives, most of which offered similar thoughts on how Google and Facebook can be useful and necessary, despite some of the risks.

  • Users aren't dropping, so ad potential is still there: "At the end of the day, if brand marketers choose to opt out, their competitors won't, and this creates an interesting dynamic," Unified CEO Jason Beckerman said. "As we just saw with Facebook earnings, the audience's attention on these platforms is only growing, so even if there is fake news, there are folks who are reading it who also have disposable income and make purchases. Brands cannot overlook that."
  • The platforms drive results: "Google captures individuals actively searching for keywords and phrases relevant to a specific topic or issue, which is handy for intercepting someone looking for the information, product or service a brand has to offer," says Christi Burnum, VP and Group Manager, Digital Paid Media at Ketchum. "Regarding Facebook, there is an expectation from consumers nowadays that they can have a relationship with their favorite brands, and social media is where this engagement is taking place."
  • Clients aren't as concerned as you'd think: "We tell our clients that Facebook in-stream advertising and YouTube pre-roll is at the top of the digital advertising pyramid," says Brian Donahue, CEO of CRAFT Digital in DC. "Despite recent controversies, there's been no decline in audiences and engagements. The era of advertisers having great concern over adjacent content is behind us."
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Trump retains private lawyer in Russia probe

Andrew Theodorakis, POOL via AP

President Trump has retained Marc Kasowitz, his long-time attorney, in the Russia probe, Axios has confirmed.

This comes at a pivotal moment for Trump, with special prosecutor Robert Mueller now leading the federal investigation into ties between his associates and Russia. A White House source says Trump feels comfortable with Kasowitz, who will be lead attorney, and that other names could be added to his legal team.

Key points about Kasowitz:

  • He has represented Trump in various instances over the past 15 years relating to everything from Trump's divorces to a threat to sue the New York Times.
  • The Russia connection: One of his clients is Russia's largest state-run bank, OJSC Sberbank of Russia.
  • The O'Reilly connection: Kasowitz was Bill O'Reilly's lead attorney during the former Fox host's sexual harassment scandal.
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Trump praised Duterte for "great job" on drugs, per transcript

Alex Brandon / AP

A transcript of a phone call between President Trump and President Rodrigo Duterte of the Philippines made by the Philippines government, obtained by the Washington Post and published in full by the Intercept includes praise from Trump for Duterte's bloody crackdown on drugs:

"I just wanted to congratulate you because I am hearing of the unbelievable job on the drug problem. Many countries have the problem, we have a problem, but what a great job you are doing and I wanted to tell you that."

Later in the May 2 conversation, according to the transcript, Trump said: "anytime if you are in D.C. or anywhere, come see me in the Oval Office."

The context: Duterte has urged citizens to kill suspected drug dealers and addicts, and since he took office there have been thousands of extrajudicial killings in the war on drugs. Trump's friendly call and invitation to Washington are controversial moves that show his willingness to interact with authoritarians on friendly terms.

On Kim Jong-un

Trump: "Are we dealing with someone that's stable or not stable?"

Duterte: "He is not stable Mr President...."

Trump asked Duterte if China had leverage over Kim Jong-un and then said, "if China won't do it, we will do it."

"We can't let a madman with nuclear weapons let on the loose like that," Trump said.
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Mnuchin to Freedom Caucus: Trump opposes border adjustment tax

Cliff Owen / AP

Treasury Secretary Steven Mnuchin met Tuesday with Freedom Caucus members and other House conservatives in the basement of the Capitol, and told them he opposes Paul Ryan's proposed border adjustment tax — and so does President Trump.

Two sources with direct knowledge say Mnuchin was definitive in opposing the tax, which the Freedom Caucus overwhelmingly opposes, and more pointed in his opposition than he'd been in public statements. One source said Mnuchin encouraged members to talk to Ryan about the tax. When asked about the conversation, a Treasury official said Mnuchin's private position on the border adjustment tax reflected his public stance.

A third source, Freedom Caucus chairman Mark Meadows, told me this a few hours after the meeting: "Secretary Mnuchin gave great insight into the thinking of the administration on tax reform. We are well served by his leadership. It became apparent that there is a growing consensus in the administration that we must act soon to advance tax reform and BAT [the border adjustment tax] is seen as a major impediment."

Why it matters: The tax on imports was a core facet of the Republican tax plan pushed by Ryan, designed to offset revenue lost through tax cuts. Many Congressional Republicans are already deeply skeptical, and without support from the administration it's dead on arrival.

Behind-the-scenes: Some administration officials are unhappy House GOP leadership continues to push for a policy that neither Mnuchin nor Trump will support.

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Senate Intel issues two new Flynn subpoenas

Carolyn Kaster / AP

The Senate Intelligence Committee is issuing two new subpoenas for Michael Flynn's businesses to compel him to hand over documents about his contacts with Russian officials. The subpoenas are targeted at businesses Flynn ran, which can't invoke the Fifth Amendment to avoid self-incrimination, as Flynn did.

The committee also sent a letter to Flynn's lawyers asking why the ousted national security advisor invoked the Fifth with regard to documents and not testimony, per NBC.

The committee is leaving open the possibility of contempt charges against Flynn if he doesn't acquiesce, and Senator Marco Rubio tweeted that if Flynn refuses, "all options should be on table."

The context: Flynn's lawyers cite the appointment of a special prosecutor and an "escalating public frenzy against him" as the reasons he has not complied with the committee to date.

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U.K. raises threat level to 'critical'

Matt Dunham / AP

British Prime Minister Theresa May announced that, for the first time in almost a decade, the United Kingdom's terrorism threat level would be raised from severe to critical, which means that "an attack is expected imminently."

  • The reasoning: May said it's possible that "a wider group of individuals" was behind the Manchester attack.
  • What will happen: Military units will be deployed alongside armed police in "key areas" and at "certain events" across the U.K. under police command.
  • Her closing: "We stand defiant. The spirit of Manchester and the spirit of Britain is far mightier than the sick plots of depraved terrorists."
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Duterte declares martial law

Pavel Golovkin / AP

Philippines President Rodrigo Duterte has declared martial law on the island of Mindanao following a violent clash between government security forces and the Maute rebel group that, according to the military, left three security personnel dead and 12 wounded.

The government says the Maute group, an militant Islamist faction, has aligned itself with ISIS and is responsible for a bombing in Duterte's hometown of Davao. Duterte cut short a visit to Moscow after the clashes.

Mindanao is home to 22 million people, including multiple Muslim rebel groups that want more independence from Manila.
Why it matters: Duterte has launched a brutal crackdown on crime and drugs since taking office last year, but never before declared martial law. It is unclear what tactics the government will employ in the 60 days in which the measures will be in place.
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Fox News pulls baseless Seth Rich story

Richard Drew / AP

Fox News has retracted from its website a debunked report concerning Seth Rich, a DNC staffer who was murdered last year.
In a statement, the network said the story "was not initially subjected to the high degree of editorial scrutiny we require for all of our reporting."
As CNN's Oliver Darcy has reported, conspiracy theories about Rich's murder have swirled on conservative media all week, with Fox host Sean Hannity leading the charge, including on the radio after Fox pulled the story.
The bottom line: Hannity's coverage has reportedly "disgusted" many at Fox, (though the Murdochs have notably been silent) and Rich's brother sent a letter to Hannity's executive producer pleading with him not to go ahead with a segment about Rich on Tuesday's show. As Axios' Sara Fischer points out, Fox's audience has been fleeing amid the turmoil at the station, and the internal disputes over coverage won't make things easier.
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The human skeleton may have emerged 3.3 million years ago

Zeray Alemseged / University of Chicago

A 3.3 million-year-old fossil of a two-and-a-half-year-old toddler found in Dikika, Ethiopia, reveals that the general structure of the modern human skeleton was already emerging millions of years ago, much earlier than previously thought, according to a new study published Tuesday in the Proceedings of the National Academy of Science.

The findings, by Carol Ward from the University of Missouri:

  • The fossil, which scientists have named Selam, was discovered in 2000 and belongs to the early human species Australopithecus afarensis.
  • Selam possessed "the most complete spinal column of any early fossil human relative" with 12 rib-bearing vertebrae, the same number humans have now and one fewer than most apes.
  • The study said Salem represents the only known fossil with 12 rib-bearing vertebrae in early humans prior to 60,000 years ago.
  • Researchers also found that Selam's joint transition from the rib cage to the lower back region followed the same distinctive pattern only seen in our early ancestors.

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Trump's budget has a huge math mistake

AP Carolyn Kaster

The White House budget released on Tuesday appears to have double-counted more than $2 trillion in estimated tax revenue. As such, the budget would not balance over 10-years (as promised), even if the U.S. economy were to hit sustained 3% growth (as projected by the White House, but by very few others).

Bottom line: Budget projections are a specious business by their nature, as no one can accurately predict the nation's next decade of economic fortunes. Let alone all of the legislative assumptions required, such as the future of healthcare, the specifics of tax reform, etc. Moreover, White House budget requests have a habit of being ignored by Congress (see: last month). But this double-count is a big unforced error.

The problem: Trump's budget anticipates around $2.06 trillion in extra federal revenue over the next decade, based on the aforementioned increase in economic growth. That new money then would be used to offset Trump's proposed tax cuts, as the Administration previously said that the tax cuts would be revenue-neutral. Unfortunately, that same $2 trillion also is earmarked for closing budget gap. I tried to come up with a household analogy here, but they were all just too ridiculous. Only in D.C. can someone present this sort of math with a straight face.

Straight face: Trump budget director Mick Mulvaney was asked about the double-count today during a press briefing, and didn't directly address the issue. First he blamed the Obama Administration for its own faulty economic projections ― namely because former Obama Treasury Sec. Larry Summers raised the double-count in the Washington Post ― and then said that the budget numbers also did not assume any shrinkage the so-called "tax gap," or the number of people who should pay taxes but don't (something he expects personal tax simplification to help achieve).

More Mulvaney:

"We did [the double count] on purpose... I'm aware of the criticisms and would simply come back and say there's other places where we were probably overly conservative in our accounting. We stand by the numbers."

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Apple shifts HR chief to new post heading diversity and inclusion

Apple

Apple confirmed on Tuesday that HR chief Denise Young Smith is moving to a new role as VP of diversity and inclusion. In the newly created post she will continue to report to CEO Tim Cook. The company's HR efforts, for now, will report to CFO Luca Maestri though it is widely understood that is temporary and that the company will hire a new HR chief.

What it means: The move gives more prominence to Apple's diversity effort, which Cook has already made a priority. Like other tech firms, Apple's workforce remains largely male and white, even with concerted efforts to boost inclusion.

"Denise's years of experience, expertise and passion will help us make an even greater impact in this area," Apple said in a statement to Axios.