Jan 30, 2020

Axios Login

By Ina Fried
Ina Fried

Yesterday, I learned the coolest parent trick ever, thanks to my fabulous partner, A.J. And today, I offer it to you.

Meanwhile, today's Login is 1,379 words, a 5-minute read.

1 big thing: Facebook's decade of unstoppable growth
Expand chart
Data: Company filings; Chart: Axios Visuals

Despite an onslaught of scrutiny and scandal over the past few years, Facebook closed out the second decade of the millennium stronger than ever, as Axios' Sara Fischer reports.

The big picture: The tech giant brought in nearly $70 billion in revenue for 2019, up more than 25% from the year prior and up more than 1,300% from 2012, the year it went public.

Why it matters: Facebook's continued ability to post double-digit revenue growth every year speaks to its ability to innovate and adapt, even in the face of regulatory headwinds and increased competition.

  • Case in point: Even in regions like North America and Europe, where the company's user growth has plateaued and privacy regulation has been introduced, Facebook has still managed to squeeze significantly more money from each user every year.
  • In the U.S. and Canada, Facebook has increased its user base by less than 4% in the past two years — but it has increased its revenue per user there by more than 60%.

Driving the news: Facebook said Wednesday on its fourth-quarter earnings call that it settled a class-action privacy-violation lawsuit by Illinois residents for $550 million. The news comes just months after Facebook settled a suit by the Federal Trade Commission by paying $5 billion — the largest such penalty in U.S. history.

  • For the past several quarters, Facebook has warned investors that it expects revenue pressure in light of increased regulatory scrutiny, particularly around privacy and targeted advertising. But so far these fines have proven moot in getting the tech giant to fundamentally change its business, which continues to grow substantially.

Be smart: Facebook has kept itself growing in recent years by getting more creative about advertising formats and products, while still adhering to its focus on promoting free expression and making advertising tools broadly accessible.

The bottom line: Facebook recognizes that there's a gulf between its prodigious growth and its beleaguered reputation. On an investor call following Facebook's earnings report Wednesday, CEO Mark Zuckerberg said that over the next decade, his goal was to close that gap by being more transparent about Facebook's values.

"We're focused on communicating more clearly about what we stand for. One critique of our approach for much of the last decade is that because we wanted to be liked, we didn't want to communicate our views as clearly, because we worried about offending people.... Our goal for the next decade isn't to be liked, but understood. In order to be trusted, people need to know what we stand for."
— Zuckerberg
2. Tech responds to coronavirus outbreak

Illustration: Aïda Amer/Axios

The largest tech companies are responding to the Chinese coronavirus outbreak in two main ways: limiting employee travel to China and trying to make sure their users have access to accurate health information.

Why it matters: Like the virus itself, the spread of misinformation is hard to slow.

Driving the news:

  • Google has temporarily shut its offices in mainland China, Taiwan and Hong Kong. (The mainland China office handles some sales and engineering for Google's ads business.)
  • Apple said Tuesday it has closed one store in the region.
  • All the big tech companies told Axios they are following CDC advice and limiting non-critical travel to China.
  • Alibaba co-founder Jack Ma is contributing $14.5 million to help fight the spread of the disease, per Bloomberg.

Our thought bubble: The big question now is whether the outbreak and travel limits lead to lost revenue or product delays.

Meanwhile: On the content front, Google, Facebook and Twitter are all taking steps to promote verified information.

  • Facebook has been giving ad credits to the World Health Organization and Philippines Department of Health to share information. It is also returning dedicated information modules when users search for terms related to the outbreak.
  • YouTube is returning text results when people search for "coronavirus" and other terms, reminding users that the situation is rapidly changing while also aiming to point to authoritative video results. Google is also trying to put extra focus on verified information in search results, including showing information that has been fact-checked where possible.
  • Twitter has adjusted its results to point to authoritative, local-language information when people search for virus-related terms.

At the same time, Bloomberg reports that false information is spreading fast. The Daily Beast reports that TikTok videos show teens pretending to have the disease.

3. Huawei's trial by "what if"

Illustration: Aïda Amer/Axios

U.S. critics of Huawei are ramping up a campaign to make the Chinese telecom giant a global pariah even as key American allies remain unsold on the case against the company, Axios' Scott Rosenberg reports.

Where it stands: U.S. officials and experts advocating blocking trade with Huawei lack hard evidence of Beijing-backed misdeeds, so they're asking the rest of the world to make choices based on "what if" scenarios.

Driving the news: U.K. Prime Minister Boris Johnson announced Tuesday that the U.K. would use Huawei as one supplier for "non-core" parts of its 5G network.

  • The British choice flouted U.S. security warnings and threats that such a move could endanger the longstanding "special relationship" between the nations and cause the U.S. to stop sharing intelligence with its transatlantic ally.
  • Wednesday, the EU followed suit, recommending restrictions on Huawei, but not an outright ban.

The big picture: U.S. efforts to quarantine Huawei come as the Trump administration pursues a trade war with China and Americans grow more concerned over Beijing's willingness to bend technology to its own ends.

The case against Huawei relies on two key scenarios.

1. Espionage: Huawei critics and human rights experts, citing the company's close relationship with China's government and military, along with the provisions of China's 2017 National Intelligence Law, say that any country that uses the company's equipment to build a next-generation 5G wireless network will open its communications networks to Chinese spying and surveillance.

2. Sabotage: In a future crisis, Huawei critics say, use of the company's equipment in key networks could render them vulnerable to surprise attacks or give China access to U.S. energy facilities, factories and other critical infrastructure.

Throughout this conflict, which began early in 2018 and ramped up dramatically last year when the U.S. declared a national emergency and barred U.S. firms from trade with Huawei, the Chinese company has vehemently denied any wrongdoing.

  • "You need to put in place mechanisms where you can prove — and we're prepared to prove — that we are not subject to the undue influence of the China government," Andy Purdy, chief security officer for Huawei USA, told Axios. "We think that needs to apply to everyone, given the sophistication of nation-states around the world."

The catch: The spying and cyberwarfare scenarios that drive U.S. efforts to block Huawei from the global 5G market remain theoretical at this point.

The bottom line: The intelligence community broadly believes Huawei can't be trusted. But in the absence of evidence, many in industry remain skeptical, and allied governments aren't falling in line with the U.S.

4. Enterprise VR startup nabs new funding

Photo: Courtesy of Spatial

Spatial, a company that creates team workspaces in virtual reality, has landed $14 million in new funding, bringing its total raised to $22 million.

Why it matters: Spatial has some impressive technology, but will likely need to play a long game, as VR adoption has proven to be slower than once hoped.

  • The company is working with a handful of early customers, including Mattel, Purina and BNP Paribas.
  • Investors include iNovia, Lerer Hippeau, Expa, Whitestar Capital, Kakao Ventures, Baidu Ventures, and Instagram co-founder Mike Krieger. 

My thought bubble: The most interesting thing about Spatial is the way it works across phones and different VR headsets, including Oculus, Microsoft Hololens and Qualcomm's new XR2 reference design. I had the chance to try it out last year at Snapdragon Summit, and the cross-platform capabilities are impressive.

5. Take Note

On Tap

  • Earnings reports include Amazon and Electronic Arts.

Trading Places

  • Former HBO chief Richard Plepler is joining the board of podcast startup Luminary.
  • Apple has hired engineer Ruslan Meshenberg away from Netflix as it looks to grow its streaming business, according to a Wall Street Journal report.

ICYMI

6. After you Login

What instrument do you play? Oh, I play the barcodes. (You'll need sound for this one.)

Ina Fried