Jul 24, 2019

Axios Login

By Ina Fried
Ina Fried

Situational awareness: DoorDash CEO Tony Xu says the company is doing away with its controversial practice of counting customer tips toward a worker's guaranteed minimum pay.

Today's Smart Brevity count: 1,464 words, < 6 min read.

1 big thing: Facebook-FTC settlement gets personal

Illustration: Sarah Grillo/Axios

The Federal Trade Commission has settled with Facebook over allegations that it "repeatedly used deceptive disclosures and settings to undermine users’ privacy preferences," in a deal that will apply some new oversight to its practices and force it to pay $5 billion, Axios' David McCabe reports.

Why it matters: Revelations last year that the political consultancy Cambridge Analytica had gathered a large trove of Facebook user data, and failed to get rid of it, set off a broader reckoning around data privacy in the era of Big Tech.

Details:

  • Facebook will pay $5 billion under the settlement for violating a 2012 agreement with the FTC.
  • The social giant will have to "conduct a privacy review of every new or modified product, service, or practice before it is implemented, and document its decisions about user privacy," the agency said.
  • The deal establishes a privacy committee on Facebook's board and makes CEO Mark Zuckerberg personally part of the process of complying with the new restrictions.
  • Separately, the company reached a $100 million settlement with the Securities and Exchange Commission for "making misleading disclosures regarding the risk of misuse of Facebook user data."
  • Before going into effect, the settlement needs the approval of a federal court.

What they're saying: Zuckerberg said in a post that as a result of the deal, Facebook was "going to make some major structural changes to how we build products and run this company."

Yes, but: Democratic policymakers were critical of the settlement, which was approved by the Republican-controlled FTC along party lines.

  • "Even though this settlement is historic, in order to support it I would have to be confident that its combined terms would effectively deter Facebook from engaging in future law violations and send the message that order violations are not worth the risk," said Democratic FTC Commissioner Rebecca Kelly Slaughter in her dissent from the vote approving the settlement.
  • "I do not believe that is the case," she said.

The FTC also sued Cambridge Analytica, and settled with its former top executive and the developer responsible for making the app that collected the Facebook data in question.

The big picture: The settlement will roil an already active debate among lawmakers and advocates over how to best regulate data-hungry online services like Facebook.

What's next: Facebook has its earnings call this afternoon.

Go deeper:

2. The antitrust vise tightens on tech

Illustration: Sarah Grillo/Axios

Separately, Big Tech — including Facebook — is getting squeezed on another front via the Justice Department.

What's new: The Justice Department announced Tuesday that it will probe the market power of online platforms, in another sign of deepening trouble in Washington for major tech companies, David reports.

Why it matters: Antitrust action is one of the most significant steps a government can take to rein in a company — and Justice's announcement is the kind that can kick off years-long probes.

Details:

  • The DOJ said it was looking at concerns about major online platforms and how they could be "engaging in practices that have reduced competition, stifled innovation, or otherwise harmed consumers."
  • Specifically, it indicated it would look at "search, social media, and some retail services online" — wording that indirectly points to Google, Facebook and Amazon.

Flashback: The first indication that the DOJ under Attorney General William Barr could pursue antitrust investigations against major Silicon Valley companies came earlier this year, when the agency split jurisdiction over competition concerns about tech companies with the Federal Trade Commission.

  • Justice took Google and Apple, and the FTC took Facebook and Amazon.
  • DOJ spokesperson Alexei Woltornist declined to comment on how Tuesday's announcement fit into that arrangement.

The big picture: Support for more aggressive antitrust enforcement has grown on the left in recent years, culminating in presidential candidate Elizabeth Warren's proposal to break up Big Tech.

  • President Trump has also been extremely critical of major tech companies over alleged — and unsubstantiated — censorship of conservative voices.
  • The House Judiciary Committee is conducting its own investigation of major tech firms with its chairman, Rep. David Cicilline (D-R.I.), saying Tuesday that Facebook, Amazon and Google hadn't adequately answered the panel's questions during a recent hearing.

Between the lines: An antitrust prosecution would be a first for this generation of tech companies, which have benefited from enforcers' practice of identifying market dominance by looking for places where it results in higher consumer prices. Google and Facebook give away most of their services for free.

The bottom line: These are the sorts of investigations that, if they pick up steam, can humble corporate giants and have major implications for the economy.

  • The last major antitrust case in the sector was Justice's pursuit of Microsoft beginning in the late '90s.
  • Some say the case cowed Microsoft, giving Google the space to be successful and, ultimately, grow into a giant of its own.
3. Snapchat snaps back

Illustration: Axios Visuals

Snapchat's parent company has had a bumpy ride through a series of product and corporate setbacks in 2018. But now it's slowly making a comeback, Axios' Sara Fischer and Kia Kokalitcheva report.

Why it matters: Snap's story is yet another example of the harsh realities of going public and facing comparisons to expansive rivals — in this case, Facebook. Now that Snap is regaining momentum, investors' enthusiasm for the company's long-term potential is also creeping back.

Driving the news: Snap surprised Wall Street Tuesday with better-than-expected second quarter earnings results, proving that its efforts to expand globally are working.

  • The company added 13 million new daily active users last quarter, and increased the amount of revenue it made per user by 37% year over year. That marked the second quarter in a row that Snapchat posted user growth, after losing users last year.
  • Analysts were already anticipating strong growth, with many having upgraded Snap's stock ahead of the earnings report, but a 12% bump in Snap's stock price following the announcement shows that investors are bullish on Snap's forward outlook.

Between the lines: Among the slew of news the company discussed on Tuesday's earnings call, 3 points stood out as priorities for the company...

  1. AR: Snap is seeing positive momentum in its suite of creative tools, particularly its augmented reality product called Lenses. Snapchat estimates that a whopping 7 million to 9 million of its 13 million new users joined the app because of the face swap filters.
  2. Discover: Snap says its content audience increased 35% year-over-year and that total daily time spent watching shows on its content platform Discover increased by over 60% year-over-year.
  3. Snap Kit: Snapchat only recently unveiled its software kits, which let third-party developers integrate Snapchat tools and features into their apps. Snap says that 11 apps created by its partners are currently in the Top 100 of the iOS App Store and Google Play Store.

The big picture: Tuesday's outcome shows renewed investor optimism about Snap's prospects.

  • The company narrowed its quarterly losses to $255 million from $353 million this time last year, and also beat analyst expectations of its losses.
  • One of Snapchat's social media rivals, Twitter, faced similar challenges in its early years as a public company, but has now been profitable for the past six quarters.

Yes, but: Snapchat still has a long way to go to convince investors that it has the growth potential of rival apps.

  • These include Facebook-owned Instagram, which already has more than 1 billion users globally, or even Chinese-owned karaoke app TikTok, which reportedly crossed the 1 billion mark for worldwide installs in February.

Go deeper: Snap stock price up after beating Q2 analyst expectations

4. A social media cautionary tale

Rather than just leave a resignation letter on the boss' desk, the communications head for independent British parliament member Jared O'Mara posted his exit memo on his Twitter account.

And oh, what a letter it was:

"Jared, you are the most disgustingly morally bankrupt person I have ever had the displeasure of working with," they said in the first of several tweets. "You do not care about your constituents. You do not care about anyone but yourself."

The tweets, signed by Gareth Arnold, were deleted after many hours, but not before they were preserved for posterity. Also available are all of Arnold's subsequent tweets from his own account.

Our thought bubble: Even if you let a social media person or team handle your accounts, it's probably not a good idea if they're the only ones with the password.

5. Take Note

On Tap

Trading Places

  • The NSA is adding a new cyber directorate to be led by Anne Neuberger. (WSJ)
  • Former Rackspace CEO Joe Eazor has joined Dell as EVP and chief customer officer. (The Information)

ICYMI

  • Apple wants its forthcoming Mac Pro excluded from U.S. tariffs. (Bloomberg)
  • Read this profile of "self-proclaimed nerd and reformed jerk" Craig Newmark. (CNET)
  • The creator of the retweet button shares his lasting regrets on his invention. (BuzzFeed News)
6. After you Login

This cardinal spent the day stalking advice columnist Amy Dickinson. So she pulled out her phone and captured some amazing slo-mo footage — which I now share here. For more details, Ask Amy.

Ina Fried