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September 17, 2021

It's a new year on the Jewish calendar and it's even supposed to rain in California this weekend! Ina will be back in your inbox on Monday.

Today's newsletter is 1,160 words, a 4.5-minute read.

1 big thing: Facebook's social balance is in the red

Illustration of the Facebook logo with a laughing emoji on one side and an angry emoji on the other.

Illustration: Megan Robinson/Axios

Facebook is essential to our lives. Facebook is ruining our lives. Holding both these truths at once will make your head hurt, Ina Fried writes in her Signal Boost column.

Ina writes: While covering the Olympics in Tokyo, I spent a ton of time on Facebook. Each day, during several hourlong bus rides, I would see who was online in Messenger and share photos and stories there with family and friends. I also posted frequently on my news feed.

  • I can't count how many people told me their favorite part of the Olympic experience was living vicariously through my posts, photos and messages on the social network.
  • The company is also doing a ton of intriguing work on the cutting edge of hardware, including Oculus headsets, Portal smart displays and the recent Ray-Ban Stories glasses.

Yes, but: For all Facebook's benefits, and there are many, revelatory reporting keeps piling up stronger evidence of its harms.

  • The same Facebook that makes it easy to share photos and stories from the Olympics also makes it all too easy to spread lies and half-truths that carry further and faster thanks to the company's powerful algorithms and vast reach.

Driving the news: Thanks to a multipart Wall Street Journal series this week, we have learned:

  • Changes Facebook instituted in 2018 to turn down the dial on contentious politics in people's feeds had the opposite effect, driving extreme views instead.
  • A system called XCheck, the subject of Monday's story in the Journal series, placed millions of prominent users in a VIP tier that allowed them to break Facebook's rules with few or no consequences, leaving the door wide open to the spread of harmful content.
  • The Journal also reported how harmful Instagram can be for young girls — a huge issue that comes as the company continues to weigh a separate version of the photo and video service aimed directly at the under-18 set.
  • Another Journal installment Thursday detailed inadequate responses to illegal content from drug trafficking gangs in Mexico, groups inciting ethnic violence in Ethiopia, and human traffickers providing domestic workers to Persian Gulf nations.
  • This morning's Journal brings another report on a flood of anti-vaccination misinformation last spring that swamped Facebook's own CEO-led effort to promote COVID vaccinations.

Of note: These stories were mostly based on internal reports and documents written by Facebook employees sounding alarms.

What's next: The Journal reports have already sparked letters from Congress, and the documents the stories revealed may give investigators at the Federal Trade Commission more ammunition for the cases they are pursuing.

Our thought bubble: Letters and committee hearings won't change Facebook. Laws and enforcement actions could, but only if they're bold — and if they can steer clear of the kind of unintended consequences that keep tripping up Facebook itself.

Keep reading.

2. FTC findings on how Big Tech eats little tech

Photo illustration of Lina Khan with the Capitol Building, a gavel, and binary code

Photo illustration: Sarah Grillo/Axios. Photo: An Rong Xu/Washington Post via Getty Images

Federal Trade Commission chair Lina Khan signaled that changes are on the way in how the agency scrutinizes acquisitions after a study found a decade's worth of Big Tech company deals that weren't reported to the agency, Margaret Harding McGill reports.

Why it matters: Tech's business ecosystem is built on giant companies buying up small startups, but the message from the antitrust agency this week could chill mergers and acquisitions in the sector.

What they found: The FTC reviewed 616 transactions valued at $1 million or more between 2010 and 2019 that were not reported to antitrust authorities by Amazon, Apple, Facebook, Google and Microsoft.

  • 94 of the transactions actually exceeded the dollar size threshold that would require companies to report a deal. The deals may have qualified for other regulatory exemptions.
  • 79% of transactions used deferred or contingent compensation to founders and key employees, and nearly 77% involved noncompete clauses.

What they're saying: In a statement, Khan said the report shows that loopholes may be "unjustifiably enabling deals to fly under the radar."

  • Matt Stoller, director of research at the American Economic Liberties Project, said the high percentage of noncompete clauses was especially troubling.
  • "If nothing else, it's a clear anticompetitive intent to just take talent and prevent them from competing with you," Stoller said.

The other side: Nothing in the report indicates that rules were broken or that the deals were anticompetitive, Neil Chilson, a former FTC adviser, pointed out.

3. Lyrics site Genius acquired for $80M

Genius, an online platform that began its life explaining rap lyrics and invited users to annotate everything, was acquired by MediaLab in an $80 million deal, Bloomberg reports.

Why it matters: Yesterday's hot startup is fodder for today's corporate roll-up.

Details: The $80 million price didn't cover Genius' outstanding obligations to its preferred shareholders, Bloomberg reported.

  • The new owner announced layoffs among content and production staff.
  • MediaLab's portfolio of properties also includes once-highflying messaging service Kik and Whisper, an app that rode a brief anonymous social-media bubble a decade ago.

Flashback: In its early days, Genius, then known as Rap Genius, inspired a community of devoted lyric analysts, and the site later expanded to other kinds of music and then every kind of text. Things got a little crazy, as happens with overambitious startups.

Our thought bubble: A lot of us share early investor Marc Andreessen's enthusiasm for Genius' mission to "annotate the world." There's so much to explain!

But it's increasingly difficult to sell users on the proposition that they should contribute their knowledge and labor to such companies out of love, while founders and investors try to get rich, and often succeed.

  • Annotation's future probably lies in shared protocols and nonprofit organizations, not startups.

4. TikTok's role in the Jan. 6 attack

Extremists used TikTok before the Jan. 6 attack on the Capitol to urge people to bring guns to the protest, according to a DHS document from April that Politico first reported.

Why it matters: Facebook, Twitter and YouTube were where law enforcement and journalists looked for evidence after the attack. But TikTok's rise to popularity has made it another important propaganda battleground.

Details: Transparency organization Property of the People obtained the DHS report under a Freedom of Information Act request.

  • The document says that one reason it chose to focus on TikTok was "some Homeland Security stakeholders’ limited awareness of its functionality."
  • TikTok says hate speech and violent extremism violate its rules.

5. Take note

Trading places

  • OpenSea head of product Nate Chastain has apparently left the NFT-focused company after being accused of purchasing NFTs right before the company was going to promote them.

ICYMI

  • RIP pocket-calculator inventor and personal computing pioneer Clive Sinclair, who specialized in affordable yet capable devices like the ZX series, versions of which sold in the U.S. as the Timex Sinclair. He was 81 years old. (The Guardian)
  • Alphabet's Project Taara used laser-beam tech known as Free Space Optical Communications, originally designed for its Project Loon, to transmit 700TB of data across the Congo River from Brazzaville to Kinshasa. (The Verge)

6. After you Login

Carli Lloyd scored five goals in a single game Thursday as the U.S. women's soccer team beat Paraguay 9-0 in a friendly match. (Doesn’t sound so friendly if you are Paraguay’s goalie.)