Jul 18, 2019

Axios Login

By Ina Fried
Ina Fried

I promise you will only look less than 6 minutes older when you finish reading Login, which comes in at 1,496 words.

1 big thing: Face-aging app rejuvenates old questions

Screenshot of FaceApp on the Google Play store

A viral photo-filter app that lets people see older versions of themselves is highlighting concerns about handing personal information to overseas-developed apps, as well as any app that has vague privacy policies.

What's new: FaceApp, which has gone viral before, has re-emerged as the most popular iPhone app as people flock to post their digitally aged selves on social media, Axios' Sara Fischer and I report.

  • The app, owned by Russia's Wireless Lab, has risen to the top of Apple's App Store and #FaceAppChallenge has exploded on social media.

Why it matters: To date, most of the data regulation debate has focused on apps built by U.S. companies that use data to drive advertising dollars.

  • The recent surge of foreign app downloads is sparking a new conversation about the national and economic security implications when companies in other countries (and potentially their governments) might be able to access U.S. personal data through free, viral apps.

The bigger picture: FaceApp's renewed popularity has some worried that the Russian company behind it may be accessing millions of users' data with relatively little oversight.

  • The Democratic National Committee has warned staffers on 2020 candidates' campaigns not to use FaceApp.
  • Senate Minority Leader Chuck Schumer on Wednesday evening called for the FBI and the Federal Trade Commission to investigate FaceApp's national security and privacy risks. He emphasized that the app is "owned by a Russia-based company."

Yes, but: Others are skeptical that there is much to be worried about.

  • Tests have shown the company is uploading only the images being aged, not entire photo libraries.
  • And the company told TechCrunch that while it does briefly store photos, it deletes them within 48 hours and also uses U.S.-based cloud services to handle the data. (Read FaceApp's privacy policy here.)
  • Colorado Gov. Jared Polis certainly didn't seem concerned, posting his own aged photo on Twitter, with the caption: "Well, I guess this is what 6 months being Governor does to you."

Between the lines: Other foreign-made apps have been surging in the U.S., thanks mostly to investments in advertising on Big Tech platforms, like Facebook or Google.

  • Shein, a major Chinese retailer, has experienced 2.5 million new installs in the U.S. in the past quarter alone, per Apptopia — its most ever from the country.
  • TikTok, the Bytedance-owned social karaoke app, is exploding in the U.S. and spent $1 billion on advertising in the U.S. in 2018.
  • Wish, the Chinese retailer that rivals Shein, is still the No. 1 shopping app in the U.S. for both the Apple App Store and Google Play store.

Be smart: While privacy is a major issue, U.S. experts are also concerned about the economic and national security consequences of foreign-made apps.

  • "Say there’s a sensitive U.S. military officer with a kid who's making memes on TikTok. Is it possible that there’s data being collected through that usage that could be useful to a Chinese intelligence service? Yeah, that’s possible. But we haven’t seen evidence of that yet," Graham Webster of New America told Axios' Erica Pandey.
  • From a competition perspective, there's the issue of Chinese apps being able to access marketing vehicles like Google and Facebook with paid advertising to drive app downloads in the U.S., while no such opportunity exists for U.S.-based apps in China.

Our thought bubble: "Foreign-made" is relative, of course, and for much of the world beyond U.S. borders, relying on apps from Google, Facebook or American startups raises similar concerns.

2. Netflix takes a hit as streaming wars mount

Illustration: Lazaro Gamio/Axios

For the first time in nearly a decade, Netflix announced yesterday that it lost subscribers in the U.S., shocking investors and sending its stock into a tailspin, Sara and I report.

Why it matters: Netflix blamed a weak original content lineup and price hikes last quarter for its second quarter earnings miss. While it estimates that its numbers next quarter will be better, the subscriber loss has investors worried that Netflix's lead in the streaming wars may not be so big for very long.

By the numbers: Netflix lost more than 100,000 U.S. subscribers, vs. expectations it would add more than 500,000.

  • International subscriber numbers were up 2.8 million, which was far less than the roughly 5 million that had been anticipated.
  • The company also missed slightly on revenue, but exceeded earnings per share.

Be smart: The momentum behind Netflix's record subscriber growth was bound to slow at some point, especially in the U.S. where its user base is saturated.

  • Yes, but: The surprise loss puts more pressure on Netflix to invest even more in original content to prevent further losses. This comes amid reports that executives are looking to be more budget conscious in an effort to alleviate the company's massive debt load.

The big picture: Netflix's original content investment is happening in response to studios reclaiming their popular library programs for their own rival subscription services.

  • In the past month, it was announced that "The Office" is moving to NBCUniversal's new streaming service and "Friends" will be available on HBO Max.
  • In a letter to investors, Netflix said it has been moving its own exclusive content to tighter windows and that it doesn't think losing catalogs will hurt its business in the long term.

What's next: Netflix is estimating higher third-quarter subscriber growth in light of popular content additions, including new seasons of "Stranger Things," "The Crown" and "Orange is the New Black."

  • While some analysts have predicted that Netflix would eventually include advertising in its offering to make more money, the company denied that assumption and instead said that it will continue to sell in-show brand sponsorships.

Go deeper: The business of Netflix

3. New rules on paying for campaign cybersecurity

Illustration: Sarah Grillo/Axios

It just got easier for cybersecurity toolmakers to offer campaigns help — but only by a little, Axios' Joe Uchill reports.

The big picture: Cybersecurity firms have flocked to provide free services to state election authorities, and some want to help protect political campaigns, too. But those efforts have been in legal limbo thanks to the complexities of election finance law.

Driving the news: The Federal Election Committee issued its final rules in a series of clarifying decisions last week: Firms may offer political campaigns the same discounts they offer other customers, but only nonprofits can provide campaigns with free services or deals special to the campaigns.

Why it matters: Though much of the political focus has moved to voting machines, those weren't what Russia hacked in 2016. Rather, it targeted campaigns and political groups — and getting their defenses correct in 2020 is critical.

Details: The FEC had been weighing whether Area 1, an anti-phishing security company, and Defending Digital Campaigns, an election security nonprofit, could offer free services to campaigns.

  • Last week, the FEC decided that Area 1 could offer the same discounts to campaigns it offers to everyone, and Defending Digital Campaigns, as a nonprofit, could offer free services.
  • Companies that want to cut prices for campaigns still generally can't.

Go deeper: Read Joe's full story here.

4. Elon Musk's plan to merge with AI

Illustration: Lazaro Gamio/Axios

For years, Elon Musk has been warning about apocalyptic runaway AI, calling it more dangerous than nukes. To stave off his feared future, in 2016 he launched Neuralink, a company to create cyborgs with the express mission of getting ahead of superhuman intelligence, Axios' Kaveh Waddell reports.

What's happening: Now, Musk says he has charted the long path to merging man and machine. In an elaborate presentation Tuesday night, he said his company has installed brain–computer links in rats and monkeys and aims to put them inside human skulls next year.

The big picture: Around the world, top research labs are building brain–computer interfaces (BCIs), devices that can both read brain activity directly from neurons and write information straight into the brain.

  • At this early stage, BCIs are being used to treat conditions and injuries related to the brain or nervous system, including Parkinson's disease or paralysis, allowing people to control, and even feel, prosthetic limbs with their minds.
  • In the far future, researchers want to implant interfaces into healthy people. Among their ideas is to use the implants for communication, or a super-efficient connection to an electronic device.

But for Musk, medical uses are a stepping stone to an existential imperative.

  • Last year, he told Axios on HBO that Neuralink's ultimate goal is to "achieve a long-term symbiosis with artificial intelligence."
  • BCI, he says, is the best defense against an alarming future in which AI suddenly surpasses human intelligence and leaves our species behind — or totally imperiled.

Go deeper:

5. Take Note

On Tap

Trading Places

  • Direct-to-consumer hearing aid startup Eargo has hired former Tesla finance executive Adam Laponis as CFO and former Apple engineer and Rappi CTO Fernando Cruz as VP of software engineering.

ICYMI

  • The European Commission today announced it has fined Qualcomm roughly $272 million "for abusing its market dominance in 3G baseband chipsets."
  • As part of its earnings report, eBay said it is evaluating whether it should sell off StubHub or its classifieds business. (LA Times)
  • IBM reported quarterly earnings that topped estimates, though revenue from its services businesses again dropped. (Bloomberg)
  • President Trump expressed concerns about a Pentagon cloud computing contract that is expected to be awarded to Microsoft or Amazon. (Bloomberg)
  • Uber overcharged some customers by as much as 100 times the proper fare, but the company says the charges are being reversed. (The Washington Post)
6. After you Login

It turns out the FaceApp challenge doesn't work on everyone.

Ina Fried