Dec 20, 2018

Axios Login

Ina Fried

Nope, yesterday wasn't the day Facebook stayed out of the news either.

1 big thing: 2018 was the year Zuckerberg failed to fix Facebook

Illustration: Rebecca Zisser/Axios

Facebook is closing out 2018 the way it started — under attack for betraying users' trust and oversharing their personal information, Axios' Scott Rosenberg reports.

The latest blow was the jaw-dropping New York Times report on how promiscuously Facebook shared user data with many partner companies.

That's not how it was supposed to go.

  • 2018 was going to be the year Mark Zuckerberg finally fixed Facebook.
  • Instead, it became the year Facebook's founder and CEO began admitting that some of Facebook's problems couldn't be fixed.

Why it matters: With more than 2 billion users — and countless more on other platforms like Instagram and WhatsAppFacebook is the biggest and most successful social network ever. If it stays broken, it will keep breaking things in the rest of the world.

That didn't happen. By May, he was estimating the fix would take three years, and toward the end of the year, Zuckerberg began saying that Facebook's problems could only be managed, not solved.

  • "These are hard problems," he told reporters on one of a long series of conference calls aimed at cleaning up a PR mess. 'There's no perfect solutions here and these really aren't problems that you ever fully fix."

As 2018 began, Facebook was already under fire over a long list of security breaches and privacy lapses, foreign-sponsored misinformation campaigns in the 2016 election, and a suspicion among a growing throng of users that the addictive service was a waste of their time.

In March, Facebook admitted that Cambridge Analytica — a consulting firm in the U.K. tied to the Trump campaign — had obtained access to hordes of users' data without their consent.

  • The scandal mashed together Facebook's biggest trouble spots — misuse of users' personal data and election manipulation.
  • Appearances before Congress by Zuckerberg and his lieutenant Sheryl Sandberg failed to derail increasingly serious talk of new national privacy regulations in the U.S. following the introduction of a strict policy in the EU.

Cambridge Analytics was the biggest scandal of the year, but the company was hit with negative revelations throughout 2018.

Since its earliest days — when the initial rollout of the News Feed in 2006 distressed many Facebook users — the company's crisis drill has been the same:

  1. Apologize.
  2. Fix things.
  3. Move forward.

This year, though, Facebook kept getting stuck at "apologize," with the next disaster blowing up before the previous one had time to subside. To the engineers who run Facebook, this is known as a "cascading failure."

The bottom line: It could take advertisers fleeing or mass user defections before we get more than apologies from Facebook.

Scott has more here.

2. Facebook shares take another hit

Facebook's many scandals are taking a toll on the company's stock, which fell 7% on Wednesday and is down more than 28% for the year.

The bottom line: Wall Street doesn't entirely know how Facebook's trust issues will impact its future financial results, but investors certainly don't like what they are seeing.

Behind the numbers: The drop Wednesday came as investors digested the New York Times report and also as D.C.'s attorney general sued Facebook over Cambridge Analytica and other privacy breaches.

Meanwhile, Facebook and even some outsiders defended some of the practices highlighted in the New York Times report. Deals with Spotify and Netflix, for example, allowed access to private messages in order to enable music and video sharing, not widespread snooping.

  • "No third party was reading your private messages, or writing messages to your friends without your permission," Facebook VP of product partnerships Ime Archebong said in a blog post. "Many news stories imply we were shipping over private messages to partners, which is not correct."

Former Facebook security chief Alex Stamos, not shy about criticizing the company when warranted, criticized the New York Times piece for equating different kinds of data-sharing deals. In particular, he defended the idea of allowing hardware makers to create their own Facebook integrations.

  • "[A]llowing for 3rd party clients is the kind of pro-competition move we want to see from dominant platforms," he said, noting that it would be bad if, say, Gmail was only accessible within Google's own apps. "For the NY Times to try to scandalize this kind of integration is wrong."

Yes, but: Even if the data sharing was well-meaning and there is no evidence that such privileged access was exploited, Facebook doesn't appear to have had the kind of controls in place that many users would expect.

3. Amazon's smart speaker lead seen shrinking
Expand chart
Adapted from eMarketer; Chart: Axios Visuals

The race to win the U.S. smart speaker market is heating up as Google and Apple begin to close in — albeit slowly — on Amazon's dominance, Axios' Sara Fischer reports.

Why it matters: Smart speakers are the equivalent of a virtual search bar, potentially letting tech companies dramatically expand their ads and commerce businesses. There are also billions of dollars at stake in smart speaker hardware sales.

By the numbers: According to eMarketer’s latest forecast, Amazon's Echo will drop below two-thirds of U.S. smart speaker users for the first time next year.

  • While Echo will still capture 63.3% of smart speaker users, it's beginning to face more competition from Google Home, which will account for 31.0% of smart speaker users in 2019, as well as smaller players, like Sonos One and Apple HomePod. (Percentages add up to more than 100 because some consumers own more than one company's device.)
  • Amazon’s share will continue to shrink through 2020, while those of its rivals will grow, eMarketer predicts.

Be smart: New competitors, like Apple's HomePod and Facebook's Portal, are entering the U.S. market this holiday season, which could also begin eating at Amazon's lead.

  • Amazon's voice technology is getting clobbered outside the U.S., as Google and Chinese companies look to expand their voice footprints internationally.
  • eMarketer notes that Amazon has managed to maintain its lead up to this point by brokering partnerships in which its voice assistant could be used on other premium speakers, like Sonos. But now other companies, like Google, are doing the same.
  • Amazon also faced a privacy controversy this year after its voice assistant technology, Alexa, accidentally sent out a recording of a couple's conversation.

The big picture: The U.S. is an important market for speaker makers to own because it has the largest smart speaker market in the world (representing 46% share of the global market), and it's still growing. Plus users here represent more potential spending than in most other markets.

Sara has more here.

4. Quantum computing bill passes House

Congress has overwhelmingly passed the National Quantum Act, a significant research funding effort, with the bill now headed to the president's desk.

Why it matters: As Chinese scientists — with significant support from their government — move decisively forward with quantum research, their American counterparts have been clamoring for a national plan to fund quantum science, notes Axios' Kaveh Waddell.

Details: Among other things, the National Quantum Act:

  • Forms a 10-year federal program to advance quantum science development.
  • Establishes a White House office to assist with interagency coordination and support strategic planning.
  • Supports basic research at various government and academic centers.

Background: Worried about falling behind in the early stages of a strategic race that could yield a new generation of communication and sensing technologies, the White House started the ball rolling in September.

5. Apple seeks patent for automated exercise tips

Apple is looking to patent a technique for automatically generating exercise recommendations. The application, filed in June 2017 and published Thursday, covers machine learning algorithms that can use data like vital signs and workout information to suggest particular exercises.

Why it matters: Apple has been spending a significant amount of time and energy on its fitness efforts, including establishing a lab dedicated to fitness tracking.

Meanwhile, Another newly published patent application suggests an interesting augmented reality approach to maps, allowing a user to point their camera in different ways to get additional data on what is around them.

Standard patent-related disclosure: Just because a company applies for or receives a patent is no guarantee the idea will ever find its way into a shipping product. Still, they can be interesting clues of where a company is spending its research dollars.

6. Take Note

On Tap

  • You've heard of Black Friday and Cyber Monday. Well, today is apparently National Regifting Day, so get those unwanted gadgets ready.


7. After you Login

Ford has created a prototype noise-cancelling doghouse to make 4th of July fireworks more palatable for your pooch.

Ina Fried