Sep 17, 2020

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Ina Fried

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Today's Login is 1,586 words, a 6-minute read.

1 big thing: Behind Facebook's giant bet on hardware

Photos: Facebook

Facebook's foray into virtual and augmented reality, which it doubled down on this week, is a bet on where the future of online social interaction is heading. But even more important to Facebook, it's also a plan to make sure the company owns a big piece of whatever platform ultimately supplants the smartphone.

Why it matters: In the smartphone era, Facebook has found itself at the mercy of Apple and — to a lesser degree — Google and Android phone makers. The company doesn't want to see history repeat itself.

Driving the news:

  • Facebook on Wednesday unveiled its latest VR headset, Oculus Quest 2. The company has released a slew of different headsets since buying Oculus for $2 billion back in 2014.
  • The company also announced Project Aria, an early test of some of the sensors that the company expects will ultimately find their way into consumer augmented reality glasses some years down the road.
  • Last month, Facebook said it would add video conferencing support to its Portal smart displays, adding a compelling new use to an already versatile and inexpensive family of devices.

Between the lines: Facebook is iterating fast and selling its hardware at prices designed to entice buyers, not generate profits.

  • And with Quest 2, the company is replacing a still-popular headset with one that is lighter, more powerful and cheaper in an effort to stay ahead of all competitors.

The big picture: Phones aren't going anywhere, but eventually they will give way to another dominant hardware platform.

  • One likely scenario is that we'll do our media consumption and communication through some combination of glasses, earbuds and perhaps another device networked together.
  • Facebook, like some of its competitors, wants to own that next tech generation.

Flashback: Facebook tried, albeit belatedly, to get into smartphones. At one point it contemplated making its own phone, before ultimately shifting to a strategy of trying to put a Facebook skin on top of the Android operating system, an approach that flopped.

Failing in phones forced Facebook to play by others' rules.

  • That's been especially complicated with Apple, which sets strict limits on what types of applications can run on its platform, what information can be collected and how that information can be used.

Our thought bubble: Facebook isn't taking chances this time around, investing early and heavily in some of the most promising hardware categories, especially around AR and VR.

What they're saying: Facebook hardware chief Andrew Bosworth said he doesn't necessarily disagree with that assessment, but puts it another way, saying that other hardware makers don't share Facebook's vision of people at the center of computing.

  • "We’re trying to figure out how to ensure these new platforms are not just useful to people but useful to connect people," Bosworth said.

Yes, but: Facebook's hardware moves have met significant skepticism given the company's track record on privacy and security.

Bosworth acknowledges the privacy concerns and says he wants to address them head-on.

  • With augmented reality, Bosworth said, the company sees plenty of potential privacy pitfalls.
  • That, he said, is part of why the company is publicly testing the kinds of cameras, microphones and other sensors that will accompany the eventual release of augmented reality glasses, even though a consumer release remains years off.
  • "The time is now to start having a pretty public conversation around how augmented reality is going to work," he said.
2. A banner day for tech IPOs

Photo: JFrog

Snowflake shares more than doubled on Wednesday, after having the biggest software IPO in history, while JFrog also posted strong first-day gains.

Why it matters: The moves show that Wall Street's appetite for new tech stocks remains significant, with concerns about both the pandemic and high valuations taking a back seat.

Driving the news:

  • Snowflake, a Silicon Valley cloud data warehousing company, on Tuesday night raised $3.4 billion, making it the largest software IPO ever. Its shares more than doubled, closing regular trading at $253.93, up $133.93, or more than 111%.
  • JFrog, which helps companies manage their software updates, saw its shares rise 47% during its first day of trading, to nearly $65 per share, after raising around $500 million in its IPO.

"When you come with the right business and technology that addresses real pain in the market, the market is welcoming," JFrog CEO Shlomi Ben Haim told Axios.

Yes, but: Snowflake and JFrog are still trading at eye-popping valuations.

  • Ben Haim said he focused on working with the company's bankers to find the right IPO pricing. "From that point, the market will decide where the price per share goes," he said.

Between the lines: While JFrog was planning to go public before COVID-19 arrived, the pandemic forced the company to do its roadshow entirely virtually. The company's founders and executives did enjoy an in-person, masked, socially distanced outdoor celebration in the parking lot of its Sunnyvale, Calif. headquarters.

Our thought bubble: These IPOs are soaring during a bizarre and unprecedented economic moment: The real economy is on the rails and unemployment is stratospheric, but the Fed's cash spigot is locked open, and because software is eating the world, investors see it as a good place for their money.

What's next: Sumo Logic priced its IPO Wednesday night at $22 per share, raising upwards of $325 million. Its stock is slated to begin trading today.

Go deeper: Early Snowflake investors talk about the beginning of the business

3. Exclusive: New group aims to make inventing more diverse

Illustration: Aïda Amer/Axios

A new coalition will work to change the status quo among U.S. patent holders, who are largely white males, and introduce more diversity in inventing and patenting, according to an announcement shared exclusively with Axios' Ashley Gold.

Why it matters: The patent diversity gap limits opportunities for the majority of Americans and leaves the U.S. with less innovation serving a narrower population, advocates say.

The big picture: Invent Together, the new campaign launched this week, argues that increasing the number of women, people of color and low-income individuals who patent would "help close wage gaps, increase the GDP and lead to new and different inventions."

What's happening: Invent Together says it will promote diversity in patents through social media campaigns, congressional briefings and lobbying.

  • Group members are the Institute for Women's Policy Research, AnitaB.org, the Association of American Universities, Qualcomm and other organizations.

What they're saying: "People are more focused on issues of diversity because of coronavirus, and its impact has laid bare some of the existing problems we face as a country related to race and gender," Holly Fechner, a partner at Covington & Burling and executive director of the coalition, told Axios.

By the numbers:

  • A July 2020 study from the U.S. Patent and Trademark Office concluded that while the rate of women inventors and patenting has grown slightly since 2016, only 22% of U.S. patents list a woman as an inventor.
  • Black and Hispanic college graduates in the U.S. have half as many patents as white college graduates, and higher-income Americans are likelier to patent inventions than those in lower-income brackets.

Meanwhile, on Monday, the USPTO kicked off its own new effort, the National Council for Expanding American Innovation, with a goal of understanding the diversity gap in American patenting and innovation.

4. Facebook launches Business Suite to link messaging apps

Turning back to Facebook, the social network on Thursday launched a new app named Facebook Business Suite that lets small businesses manage their pages and profiles across Facebook, Instagram and Facebook Messenger from a single interface, as Sara Fischer reports.

Why it matters: The suite is the first product Facebook has launched that combines the backend infrastructure for three of its messaging apps. The company has teased this move for over a year.

Driving the news: Facebook COO Sheryl Sandberg told Axios in an interview that the company is trying to research the challenges facing small businesses so it can serve them better.

  • "Of course not every business can migrate online, but a lot can, and businesses that never thought they could have been doing it."

Details: The Business Suite allows small businesses to manage their presence on all three of the messaging platforms in one place. The company plans to extend this function to its fourth major messaging app, WhatsApp, in the coming year.

  • These tools aim to alleviate time and resources for small businesses that don't always have teams to manage their social media presence.

The big picture: Amid the pandemic, Facebook has pushed hard to show support for small businesses, which make up the majority of its advertising revenue.

  • In May it launched Facebook Shop, an online marketplace that's free to use for businesses across Facebook and Instagram.
  • Graham Mudd, VP of ads product marketing for Facebook, says the plan is to integrate the Business Suite with Facebook Shop more closely in the future.

Be smart: Facebook's plan to integrate the back-end infrastructure for all its services has been a target for antitrust critics, who worry that Facebook's real aim is to make it harder for regulators to try to break up the company.

What's next: The tools are designed for small businesses, but the company eventually plans to make them available for bigger advertisers.

5. Take Note

On Tap

Trading Places

  • Anduril Industries added two women to its executive team. Megan Milam is joining from the Department of Energy to serve as head of government relations, while Meagan Murray will serve as head of people, having previously served in a similar role at Karat.
  • Slack hired former Live Nation HR head Nadia Rawlinson as its new chief people officer. Robby Kwok, who had been senior VP of people, will shift roles, becoming chief of staff to CEO Stewart Butterfield.

ICYMI

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Ina Fried