May 25, 2018

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1 big thing: Andy Rubin's Essential problem

Andy Rubin. Photo: Essential

How hard is it to crack into the smartphone market? Even the father of Android can't seem to do it.

  • Bloomberg reported Thursday that Andy Rubin's Essential has scrapped plans for a second smartphone and is exploring a sale of the company. Essential didn't confirm the sale talks but did say it has canceled some planned products.
  • Essential debuted its phone almost exactly a year ago after raising nearly $300 million from investors including Foxconn, Redpoint and Tencent, in addition to Rubin's Playground incubator.

The bottom line: Rubin's plan was to start with a smartphone and then quickly expand into smart home and other consumer electronics products. But as I cautioned at the time, the smartphone market is brutally competitive. By starting with a phone, Essential was risking not being able to get to the next part of the plan.

Flashback: Here's what I wrote in August of last year:

Starting with a smartphone, Rubin says, lets Essential kickstart the business by starting with a well understood and huge category.
But, in starting there, Essential is diving into a brutally competitive and demanding market, meaning that a lot of energy is going to be going in that direction.

Why it's so tough: Even the most innovative of smartphone startups these days is building on Android, putting a realistic limit on how different it can really be than competitors.

Nearly all the industry's profits go to Apple and Samsung with the remaining market share being divvied up in a brutal battle that includes a number of Chinese vendors Huawei, ZTE, Xiaomi, Vivo and Lenovo as well as Korea's LG Japan's Sony and others.

What's next: Bloomberg reported that Essential has engaged Credit Suisse to look at financial options. The Information reported Rubin e-mailed staff after the report to say that the company was in the process of trying to raise more money, and that the leak wasn't helping matters.

  • Meanwhile, a source says the company is putting its energy behind non-smartphone products where it feels it can better stand out from rivals.

My thought bubble: For an upstart to really crack the smartphone market, they'll probably need to have something as different from today's iPhone and Android as the iPhone was from the BlackBerry over a decade ago.

2. Alexa proves why lots of people don't want her

The big fear around Alexa has been that an always-listening device might record stuff that its owners didn't want. That concern has become a reality, as Alexa appears to have not only recorded a user's conversation, but then sent that recording to one of their contacts, Seattle's KIRO reported.

What they're saying: Amazon is saying a series of unlikely happenings combined to allow this to happen. First, Alexa heard something that sounded like her name and activated. Then, she somehow heard the command to send a message as well as a contact in the address book and then heard what she believed to be confirmation.

Amazon said it will look into how it can make this already rare combination of events less likely to occur.

The bottom line: For many people, this is reason enough to avoid such devices.

  • As Axios' Scott Rosenberg puts it: Everyone jokes about smart speakers as surveillance devices, but when that actually happens, even by accident, it's chilling. "Rare" isn't so comforting when what you want is "never."
3. A new era in global data privacy begins today

Illustration: Sarah Grillo/Axios

As you probably know from the 3,000 privacy policy updates flooding your inbox, there are some new rules kicking in today.

The big picture: American companies are bracing for the market impact of the new privacy standards, while Europeans are celebrating them as a part of a years-long push to better protect citizen's privacy.

The bottom line: Officially, the General Data Protection Regulation (GDPR) protections cover consumers in Europe. But, as I noted earlier this week, most large tech companies (and many smaller ones, too) are extending similar tools and policies to users around the globe — creating something close to a global privacy standard.

Sara Fischer and Kim Hart have a detailed look at how Europeans' views of privacy — which favor individual privacy over government or corporate powers— led to the rules, as well as its likely impact on U.S. businesses.

You can read the full story here in the Axios stream.

4. China keeps stealing U.S. tech

Illustration: Sarah Grillo/Axios

Washington is waking up to the reality that the cost of doing business in China's massive market is risking precious tech secrets, but it may be too late, Axios' Erica Pandey reports.

The big picture: Rogue practices like intellectual property theft are built into Beijing's industrial policy, and China has used these policies to innovate so rapidly that it may soon be able to cut its reliance on the West.

  • Major U.S. companies like Facebook, Google, Amazon and Uber have all been relatively successful in foreign markets, but none have been able to crack China.
  • That's no coincidence — because China sets up barriers to entry, like giving its state-run companies exclusive access to capital and forcing foreign companies to transfer their technology to local partners.

Read the full story here.

5. Tech gets really into "Throwback Thursday"

Hearing about a bendy iPhone 6 and the Apple-Samsung patent battle made me think I had entered a time machine. But, a quick check of Google Calendar reveals that it's still 2018.

That said, it was a day to revisit some tech issues of old.

Meanwhile: For those who really want to travel back in time (at least on Twitter), you can now easily do so. Andy Baio tweeted out a link that lets you see what the people you follow now on Twitter were saying 10 years ago.

6. Take Note

On Tap

Trading Places

  • AT&T has hired Best Buy chief digital officer Bala Subramanian to serve in the same capacity, according to Seattle-based tech site GeekWire.


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