Ina is out today, so this is Axios technology editor Scott Rosenberg, temporarily at your Login helm.
1 big thing: How the Big Tech colossus is splitting
For several years it has made sense, in some quarters, to lump together the tech giants — chiefly Google, Facebook, Apple and Amazon, sometimes also including Netflix or Microsoft. But talking about "big tech" is beginning to offer diminishing returns, David McCabe and I write.
Why? Industry insiders have always known that differences among these companies are as pronounced as their shared traits, of course. But, the rest of the world is catching on.
Investors fell in love with a basket of stocks they called FAANG (for Facebook, Apple, Amazon, Netflix and Google) and rode those investments up a tall curve for years.
- But last year's volatile market put an end to the group's collective ascent.
Policymakers and regulators found it convenient to paint a single target on "the big tech platforms" as the spate of privacy- and election-related controversies since 2016 raised calls for government action.
- But the closer government looks at the companies' problems, the harder it gets to settle on any one-size-fits-all solution.
Many of these companies have long shared a set of common interests in managing their platforms and services with little government oversight.
- But as privacy regulation of some kind looks more inevitable, their interests are likely to diverge.
Apple greeted Las Vegas's CES multitudes with a billboard that read, "What happens on your iPhone stays on your iPhone."
- The message — "We won't exploit your data like our competitors" — highlighted the fault line between those companies that depend on advertising businesses, like Google and Facebook, and those that sell products, like Apple. (Amazon falls into both camps.)
Facebook has become the singular object of Washington's and users’ scorn, pressures that caused it to fall out with Google in a fight over an anti-trafficking bill.
- Recently, Facebook has indicated that it views new U.S. privacy rules as inevitable and welcomes them, though it hopes to avoid a law as stringent as the EU's GDPR.
Google has avoided the brunt of the scrutiny in Washington but faces major fines and continuing investigations overseas.
- Facing employee unrest over the company's collaboration with the Defense Department on an AI project, Google has distanced itself from Pentagon work.
- That separates it from competitors (like Amazon and Microsoft) who have not shown the same reluctance.
Amazon has problems at the grassroots, as it fights with local activists in New York over its plan to move into Long Island City and takes on a wave of newly empowered progressives in Congress critical of its labor policies.
The bottom line: As different pressures come to bear on these companies, they are likely to end up taking roads that differentiate them from their competitors — and make "big tech" less useful as an idea or a category.
2. Free streaming challenges for-pay video
Over-the-top digital streaming TV companies that don't charge people for access are rising as consumers face saturated budgets for subscription content, Axios' Sara Fischer reports.
While data shows consumers today are less tolerant of ads generally, the rise of these services shows that there's still an appetite for advertising if it's relevant — and if it means consumers can access their favorite content without having to pay a subscription fee.
Driving the news: On Thursday, Amazon-owned IMDB launched Freedive, a free, ad-supported streaming video channel featuring hit movies and TV shows. The Freedive app can be viewed on mobile, desktop or on Amazon Fire TV devices.
Other free, ad-supported streaming services are growing, too, as subscription streaming services face stiff competition for consumers' budgets.
- Roku's free ad-supported channel, The Roku Channel, is the No. 3 ad-supported channel on the company's platform. It has about half the advertising per programming hour of traditional linear TV.
- Roku’s ad revenue increased 57% from 2017 to 2018. At this point, its advertising business is growing faster than its hardware business, a sign of investment in the company’s free ad-supported channels.
- Hulu's ad-supported business continues to grow, with the company announcing over $1.5 billion in yearly ad sales this week.
- Even telecom companies, like Dish and AT&T, are beginning to offer free tiers or products for streaming, like AT&T's "Watch" streaming service, which launched last year.
- Free TV services like Xumo and Pluto TV also continue to grow their subscriber bases, as Digiday's Sahil Patel noted last year.
Between the lines: Some of these ad-supported streaming companies, which rely on new-age addressable (digitally automated) TV ads instead of traditional TV ads, could build lucrative businesses.
- Both Roku and Hulu have increased their ad revenues by over 50% years over year.
- While both are still relatively small in their share of the total digital advertising pie, they are expected to grow quickly over the next two years, per eMarketer.
Be smart: One reason these free services are growing is that they have become a win-win for manufacturers who need to add apps to new smart TV lineups and for programmers who need wider distribution for their content.
3. Wireless providers vow to end sharing location data
Multiple major wireless providers have said they won't continue to engage in the sort of location data sharing portrayed in a Motherboard investigation earlier this week that saw reporter Joseph Cox pay a bounty hunter to track a cellphone, Axios' David McCabe reports.
Why it matters: Privacy scandals aren't limited to the major web companies.
The telco dominoes fell in the 48 hours after the story dropped:
- "T-Mobile IS completely ending location aggregator work," T-Mobile CEO John Legere told Sen. Ron Wyden (D-Ore.). "We’re doing it the right way to avoid impacting consumers who use these types of services for things like emergency assistance. It will end in March, as planned and promised."
- AT&T told CNET in a statement that in "light of recent reports about the misuse of location services, we have decided to eliminate all location aggregation services — even those with clear consumer benefits" but noted it had previously stopped some data sharing.
- Verizon told the Washington Post's Brian Fung that it is phasing out data sharing agreements with companies that do roadside assistance.
Yes, but: "I’ll believe it when I see it," said Wyden, one of several Democratic officials to push for action on the issue.
- Democratic FCC Commissioner Jessica Rosenworcel has also called for the agency to investigate.
4. Live-streaming politicians in authenticity competition
Instagram Live is a way for politicians to answer questions while trying to appear authentic and down-to-earth.
What we're seeing: They invite you into their kitchens, like Rep. Alexandria Ocasio-Cortez (AOC) and Sen. Kirsten Gillibrand. They're drinking beer, like Sen. Elizabeth Warren. They're getting a dental exam, like Beto O'Rourke.
Why it matters: Instagram is the new hotness for politicians trying to communicate with younger voters in an authentic way — but the more they use it, the lamer the content is going to get, Axios' Alexi McCammond writes.
- Just being on the platform doesn't automatically give veteran politicians the same swag as Beto or AOC (whose "Instagram feed is a master class in political brand building," according to Wired).
How they use it: Ocasio-Cortez makes mac and cheese while talking about her progressive platform or addressing her critics. O'Rourke goes to Whataburger or the dentist or plays the air drums in his minivan while discussing politics.
- People are drawn to their quotidian content because they've already bought into their personalities.
For O'Rourke and Ocasio-Cortez (who combined have over 2 million Instagram followers), Instagram and live-streaming were staples of their 2018 campaigns. Appearing as an "unfiltered" version of yourself on social media is natural for a 29-year-old. It's not so natural for those who look like they could be your parents or grandparents.
- Hillary Clinton learned that the hard way in 2015 when she used Snapchat to tell her followers that she was "just chillin' in Cedar Rapids." She instantly became a meme.
The bottom line: The future of political discourse is vertically-oriented, always in selfie mode, and probably a little grainy. But just because it's live doesn't mean it's raw. Or any good.
5. Startup rate improves, but still far below pre-recession levels
The economy may be doing fine, but it’s still producing fewer new businesses every year than it did before the Great Recession struck, Axios' Kim Hart reports. That's according to an analysis by the Economic Innovation Group, a policy and advocacy group founded by Sean Parker.
Driving the news: According to the latest Census Bureau data, 2016 was the best year for U.S. business formation since the financial crisis a decade ago. While that’s good news for the economy, the startup rate is still well below historical norms.
Why it matters: The startup rate is one indicator of economic vitality. For example, new businesses create new jobs. Even with the uptick in startup formation in 2016, new firms only employed 2% of all workers, and there were over half a million fewer jobs in startups in 2016 than before the recession.
- Meanwhile, older and more established firms employ a growing number of workers. In fact, the share of all U.S. jobs found in firms that are at least 16 years old reached 74% in 2016 — its highest threshold ever.
Tech impact: The trend is more pronounced in the high-tech sector, EIG found, despite the sector’s general enthusiasm for disruption and startups.
- In fact, not only are fewer firms being founded than in the past, but even the most high-potential startups in every new cohort fail to survive and scale at rates similar to the years before the Great Recession.
- Axios' Dion Rabouin notes in his Axios Markets newsletter this morning that a December NBER study states...
"[B]oth the declining startup rate and the rising dominance of older firms can in large part be attributed to demographic factors. ... With population growth now at an 80-year low on the most recent numbers, it seems that the country’s demographic reckoning is beginning to make itself felt in the economy."
The bottom line: Fewer new businesses translates to wage stagnation, lower productivity, and uneven economic development between different regions of the country.
6. Take note
- Today is the very last day of CES in Las Vegas.
- Amazon is developing its own streaming service for gamers (The Information)
- Alphabet, Google's parent company, faces a shareholder suit over its handling of settlements with executives accused of sexual misconduct. (Axios)
- It's not that hard, an investigation found, to get Microsoft's Bing search engine to provide links to illegal child pornography. (TechCrunch)
- Ford is shutting down its Chariot consumer shuttle service. (Axios)
7. After you Login
Start your weekend right with The Hu, a bracing mixture of traditional Mongolian instruments and heavy metal.