Dec 17, 2018

Axios Login

By Ina Fried
Ina Fried

Situational awareness: The Senate Intelligence Committee released 2 reports this morning about Russia's attempts to sow discord on social media platforms. They predict more of the same for 2020, but they think tactics may evolve, Axios' David McCabe reports.

1 big thing: Facebook's foot-dragging deepens its trust crisis

Illustration: Rebecca Zisser/Axios

Facebook would have had a rough year no matter what, given all of the problems that came to light.

Over and over, it made its breaches and missteps worse by waiting to disclose privacy issues to the public, David writes. The company also frequently failed to get ahead of questions it inevitably faced after damaging stories broke.

Why it matters: Experts advise institutions facing public crises to respond fully and fast, to make potentially damaging revelations all at once, and to avoid drip-drip-drip scenarios that erode credibility. Facebook has often taken the opposite path, multiplying the damage its controversies have dealt to its reputation and its business.

1. The latest instance came Friday, when the company revealed a bug exposing unposted photos of millions of users — one that it had identified and fixed back in September.

2. The Cambridge Analytica data leak happened in 2015 but wasn't made public until March, when reporters at newspapers on both sides of the Atlantic found out about it. The company then went silent for days, allowing the crisis to fester.

3. The opposition research scandal broke out in November, when reporters learned that a right-leaning consulting firm employed by Facebook had pitched opposition research trying to tie Facebook's critics to the liberal billionaire George Soros — but it was another week before it disclosed key details.

  • This included the fact that COO Sheryl Sandberg had received emails that mentioned the consulting firm, despite initially saying she wasn't aware of the firm's hiring.

Be smart: A new sweeping privacy law in Europe has been forcing Facebook to be more forthcoming about privacy-related scandals.

  • Facebook reported the latest incident, made public on Friday, to the Irish Data Protection Commissioner (IDPC) on Nov. 22, once the company realized the breach met a reporting threshold in the European privacy law, called GDPR.

Yes, but: Facebook says it waited more than 3 weeks to tell the public, citing the work it took to notify users of the incident and translate notifications into different languages.

  • In the past, the company has cited work with law enforcement as a reason for delays in disclosing information surrounding breaches and leaks.
  • "We notified the IDPC as soon as we established it was considered a reportable breach under GDPR," said a spokesperson for Facebook. "We had to investigate in order to make that conclusion. And once we did, we let our regulator know within the 72-hour timeframe.”

The bottom line: Facebook's halting responses to crisis or controversy has been a defining quality of the company this year, and often made bad situations worse.

2. Google spending $1 billion to expand in NY

An existing Google office in New York. Photo: Bryan R. Smith/AFP/Getty Images

Google announced Monday it plans to spend $1 billion and lease 3 new properties as it expands its New York City presence.

The bottom line: With the new investment — and the $2.4 billion purchase of Chelsea Market earlier this year — Google says it will have the capacity to more than double its New York workforce, already at more than 7,000 workers.

The big picture: Google's straightforward move, like the Austin-area expansion Apple announced last week, contrasts with the reality-show contest Amazon held to decide where to locate its next major U.S. offices.

  • Google says its New York expansion is part of a broader effort to expand its U.S. operations.
  • It added that it's now growing faster outside the San Francisco Bay Area than it is within its home region, with new offices and data centers opened this year in places such as Detroit, Boulder, Los Angeles, Tennessee and Alabama.

By the numbers: Amazon is creating far more jobs in New York — 25,000 in the next decade versus around 7,000 for Google. But Amazon is also getting nearly $3 billion in subsidies.

  • Google did not get any tax benefits or economic incentives in conjunction with its New York expansion, a source with knowledge of the deal said.

What they're saying: Ruth Porat, CFO of Google parent Alphabet, says in a blog post...

"When we came to New York City almost two decades ago, it was our first office outside of California. ... It’s now home to more than 7,000 employees, speaking 50 languages, working on a broad range of teams including Search, Ads, Maps, YouTube, Cloud, Technical Infrastructure, Sales, Partnerships and Research."
3. iPhone manufacturers lash out at Qualcomm

Illustration: Rebecca Zisser/Axios

The lawyer representing Apple’s contract manufacturers in their legal battle with Qualcomm spoke out Sunday night, criticizing the company both for its business tactics and for implying settlement talks were underway when there were none.

The big picture: Apple made similar complaints earlier this month, but these comments are the first from the contract manufacturers since Qualcomm sued them last year.

The contract manufacturers, which include Foxconn, Pegatron, Wistron and Compel, are caught in the crossfire of the Apple-Qualcomm legal battle.

  • They have their own royalty agreements with Qualcomm, but have been withholding payments at Apple's direction for the iPhones they make.
  • Qualcomm, meanwhile, has sued the manufacturers for their non-payments.
  • Apple and Qualcomm also have plenty of direct lawsuits against one another in courts around the globe.

Between the lines: Apple and the contract manufacturers are turning up the heat on Qualcomm before the company faces the Federal Trade Commission's claims it violated antitrust law in a trial starting in January.

  • The move also comes after Qualcomm got a Chinese court to issue an injunction barring some iPhone sales there.
  • Apple says a software update removes the allegedly infringing feature and there should be no disruption to iPhone sales in China.

What they’re saying: Ted Boutrous, the lawyer representing contract manufacturers, took issue with Qualcomm CEO Steve Mollenkopf’s comments that his company was close to resolving its issues with Apple.

  • “Certainly, those are the kind of false statements the SEC looks at,” he said.
  • Asked if the securities regulator should indeed look at the statements, Boutrous didn't answer directly, but added they were “misleading” and could have an effect on investors.

Qualcomm told Axios last week that Mollenkopf's remarks referred both to the possibility of a settlement as well as to the fact that the cases are making their way through the courts.

Boutrous painted Qualcomm as isolated in the wide-ranging legal battles over its chip business.

  • “This is Qualcomm basically against the world," he said.
  • He said that Qualcomm had continued to make unreasonable demands of the manufacturers since their legal battle had begun.
4. HQ Trivia's Kroll dies of suspected overdose

Colin Kroll. Photo: Bryan Steffy/Getty Images for Variety

Colin Kroll, co-founder of Vine and the trivia app HQ, died over the weekend of a suspected drug overdose.

On Sunday night, those who opened the app for the usual 6pm PT show found HQ host Scott Rogowski delivering a tribute to Kroll instead of the usual slate of questions. The $25,000 prize money that would have gone to Sunday's winner was donated to the Humane Society in Kroll's honor.

The context: Kroll was elevated to become CEO of HQ Trivia in September. There were reports earlier this year that some venture capital firms had passed on investing in HQ because of alleged "bad behavior" by Kroll when he worked at Twitter that included allegations of sexual harassment. He later apologized for what he called "poor management."

5. Take Note

On Tap

Trading Places

  • WeWork president and CFO Artie Minson has been elected to the board of directors for Rent the Runway, the fashion-rental startup.


  • Amazon is trying to boost profits by cutting back on direct sale of some items, like beverages and snacks, that have lower margins. (WSJ)
  • Cydia, the longtime app store for jailbroken iPhones, is shutting down. (9to5Mac)
  • A creditor of Osterhout Design Group is seeking to sell off assets of the augmented reality firm. (UploadVR)
  • 3D printed masks were able to fool face unlock mechanisms on a number of recent Android phones — but not the iPhone. (Forbes)
  • The prominent environmental policy veteran Carol Browner is joining Lime as an adviser as the dockless bike and scooter company ramps up its focus on sustainability and climate change. (Axios)
6. After you Login

I had many delicious options for today, but none more so than chocolate literally pouring through the streets of a small German town.

Ina Fried