Feb 18, 2020

Axios Login

By Ina Fried
Ina Fried

It turns out there's something worse than dumping bad news on the Friday before a holiday weekend: dumping the news on the actual holiday. More about that bad news just below.

Meanwhile, today's Login is 1,279 words, a 5-minute read.

1 big thing: Tech begins to take a coronavirus hit

Illustration: Aïda Amer/Axios

A warning from Apple on Monday that it would not meet its quarterly earnings forecast shows how quickly the coronavirus is creating real problems for the tech industry.

Why it matters: The virus is still in what could be the early stages and is already stressing supply chains and causing conference cancellations.

Driving the news:

  • Apple warned Monday that the virus is limiting iPhone production and hurting demand within China for all of its products. The company said revenue would be less than its prior forecast, but declined to offer a new prediction.
  • Nvidia cut its quarterly revenue forecast by $100 million, citing the impact of the virus.

Between the lines: Apple may be unique among U.S. tech companies in also counting on China for a large chunk of sales, but the slowdown in production is likely to be felt by a wide swath of the industry, which relies heavily on China for production.

Apple and other firms had already said this quarter would be hard to predict given uncertainties resulting from the virus.

Threat level: It's still too soon to forecast how large the impact will be, but there are lots of reasons to imagine it will be significant, even assuming the outbreak doesn't get worse. China has one of the biggest economies in the world and is responsible for even more of the world's tech production.

  • As Apple said in its statement and the Financial Times reported last week, even as Chinese manufacturers are returning to work, they are doing so in a phased manner.
  • Startups and smaller hardware makers could be hurt worse, as larger companies will get priority in a capacity crunch at contract manufacturers.

What they're saying: Lots of experts predicted more companies will be forced to lower short-term financial forecasts due to the virus.

  • "Apple is the first but won't be the last company to pre-announce they'll miss their quarterly numbers," tech industry veteran Dare Obasanjo said in a tweet. "Pure software companies may avoid impact via remote work but any manufacturing or retail dependent on China will take a hit."
  • However, longtime industry watchers also predicted that the virus may also become an easy scapegoat for companies with other business shortcomings.

Meanwhile: Concerns about the spread of the virus are having a big impact on industry gatherings around the globe.

Go deeper.

2. Europe nixes Facebook's plea for friendly rules

Facebook is doubling down on its big pitch to lawmakers across the globe: regulate us.

Yes, but: Key regulators aren't buying it, Axios' Sara Fischer reports. Hours after Facebook CEO Mark Zuckerberg met with lawmakers in Europe to discuss the company's new proposals for regulation, a French commissioner overseeing the EU's data strategy rejected the plan, saying "It's not enough. It's too slow, it's too low in terms of responsibility and regulation."

Why it matters: Facebook hopes that by embracing the push for regulation, it can build more trust with policymakers and better influence future regulation in its favor. But so far policymakers are wary of Facebook's attempts to help write its own rules.

Driving the news: In an op-ed in the Financial Times Monday, Zuckerberg called for more regulation in four key areas: transparency around content moderation, political ads, openness around data sharing, and oversight and accountability.

"I believe good regulation may hurt Facebook’s business in the near term but it will be better for everyone, including us, over the long term."
— Facebook CEO Mark Zuckerberg

Details: A separate white paper on the topic that Facebook released Monday lays out four questions that Facebook thinks policymakers should ask while crafting regulation for tech companies. The questions address topics that Facebook grapples with when trying to create its own policies.

  • How can content regulation best achieve the goal of reducing harmful speech while preserving free expression?
  • How can regulations enhance the accountability of internet platforms?
  • Should regulation require internet companies to meet certain performance targets?
  • Should regulation define which "harmful content" should be prohibited on the internet?

The catch: The white paper, as well as previous comments from the tech giant, make it clear that Facebook is making suggestions for regulation that support its current policies and practices, because that's what it thinks works best.

Our thought bubble: Facebook's bigger problem today lies in addressing the problematic content that its rules permit. If it can get its current policies baked into international regulations, critics will find it harder to fault Facebook's choices for where to set boundaries for acceptable content.

3. Bezos pledges $10 billion to fight climate change

Bezos at Amazon Smbhav in New Delhi on Jan. 15. Photo: Sajjad Hussain/AFP via Getty Images

Amazon founder Jeff Bezos took to Instagram to announce the launch of his "Earth Fund" to support climate change research and awareness, Axios' Orion Rummler reports.

What he's saying: Bezos says he's initially committing $10 billion to fund "scientists, activists, and NGOs" that are working on environmental preservation and protection efforts.

Details: That $10 billion comes from Bezos' personal money and none of the funds will be used in for-profit enterprises, investing in private companies or startups, a person familiar with the fund told Axios.

Our thought bubble, per Axios' Ben Geman: The new fund is the latest example of tech companies or their billionaire founders devoting more resources to climate change. 

  • Microsoft co-founder Bill Gates has worked on climate for years through the Bill & Melinda Gates Foundation, and via Breakthrough Energy Ventures, a fund Bezos also invests in that stakes clean energy startups.
  • And last month, when Microsoft rolled out its pledge to become "carbon negative" by 2030, it announced a new fund to invest $1 billion over four years to accelerate development and use of carbon reduction and removal technologies.

Go deeper: Amazon and Big Tech can't escape climate pressure

4. What to learn from HQ Trivia's demise

The death of the company behind HQ Trivia is a reminder of just how hard it is to win in the hit-driven games business.

Why it matters: Those seeking to invest in or value game startups would be wise to remember this the next time a company based upon a single premise turns briefly red-hot.

Driving the news:

  • HQ announced Friday it was shutting down, laying off its remaining 25 employees.

Flashback: HQ Trivia was once the talk of mobile games, drawing hundreds of thousands of people to its nightly contests, luring celebrity hosts and sponsors and raising $15 million in a funding round that valued the company at $100 million.

Yes, but: The premise of a live game show with cash prizes was initially alluring. But people found victory brought only small-change rewards, and the novelty playing live wore off before the company could come up with another big hit.

  • The company suffered another blow when CEO (and co-founder of both HQ and Vine) Colin Kroll died in December 2018, at age 35, of an apparent drug overdose.

My thought bubble: It's hard to turn a hit into a franchise, and harder still to turn a franchise into a sustainable company.

5. Take Note

Trading Places

  • WeWork's head of enterprise sales is leaving after three years, Business Insider reported.
  • Samsung's board chairman is stepping down after having been found guilty of union sabotage charges, The Verge reported.

ICYMI

6. After you Login

Good monsters.

Ina Fried