Mar 7, 2019

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1 big thing: Facebook’s pivot is bigger than privacy

Illustration: Sarah Grillo/Axios

Facebook's decision to shift gears to focus on encrypted private messaging will either cement the social network's global dominance or end it.

Either way, it will change the way more than one-third of the world's population engages with the internet, Axios' Sara Fischer and Scott Rosenberg report.

Driving the news: The wording of CEO Mark Zuckerberg's Wednesday announcement is a clear response to public outcry over Facebook's flawed custody of users' data.

Why it matters: But the shift, if it actually happens, could go a lot further than privacy principles. If the move from desktop to mobile brought us Facebook 2.0, a pivot from open networks to private ones would usher in Facebook 3.0.

The big picture: Transforming any product the size of Facebook is daunting. Dominant tech companies that pull it off extend their sway into new eras. Otherwise, they fade.

  • Microsoft pulled this off when it scrambled its jets to build a web browser 2 decades ago.
  • Apple deftly transitioned from a computer-centric to a phone-oriented company over the past decade.
  • Both Google and Facebook (after some missteps) made the leap from desktop-focused services to mobile, too.
  • Zuckerberg is painting Facebook's next shift on the same scale.

Driving cryptocurrency adoption: Facebook is reportedly working on making a cryptocurrency that will let users transfer money in WhatsApp, using what's being dubbed "Facebook coin."

  • If Facebook successfully deployed that system to the combined messaging platform it plans to build from WhatsApp, Instagram and Messenger, it could become a dominant cryptocurrency overnight — building an on-ramp to the new technology for millions the way AOL populated the internet in the '90s.

Changing data storage: In his note, Zuckerberg conceded that these changes would make it difficult for Facebook to operate in some countries that are increasingly demanding platforms store users' data locally.

  • Zuckerberg said Facebook would protect user information by keeping data centers out of "countries that have a track record of violating human rights like privacy or freedom of expression."
  • That might lock Facebook out of some countries altogether (it's already banned in China). But since Facebook is synonymous with the internet in many places, it's plausible to imagine that this change could force some governments to think differently about those policies.

Tougher misinformation tracking: Encryption makes it even harder for researchers to track and study misinformation, and for platforms to limit it.

Redefining small business and micropayments: Facebook sees business as a prime market for the unified messaging service that it's building.

  • Consumers may not care about Messenger, WhatsApp and Instagram integration, but it's attractive for businesses — particularly small businesses — trying to reach customers.
  • Zuckerberg said on last quarter's earnings call that creating a new buying experience, where users have a more direct relationship with sellers, is a "very big" opportunity for Facebook.

Be smart: The more information users exchange behind encrypted doors, the less data Facebook has to target ads.

Go deeper: Sara and Scott have more here and read more about the "Facebook coin" via a piece by Axios' Dion Rabouin here.

2. Huawei sues U.S. over sales restrictions

Photo: Ina Fried/Axios

Huawei said Wednesday night that it has filed a federal lawsuit against the U.S. government, challenging the constitutionality of a law that keeps it from selling its telecommunications gear here.

Why it matters: The U.S. has launched an all-out blitz aimed at stopping the Chinese equipment vendor from selling its current and future products throughout the world.

Details: Huawei is seeking an injunction as well as a declaration that the law being used to limit its sales, Section 889 of the National Defense Authorization Act, is unconstitutional.

  • That part of the law specifically prohibits government entities, government contractors and those receiving federal funding from buying equipment made by Huawei and ZTE, another Chinese telecom gear maker.

What they're saying: Huawei says the NDAA violates the constitution in several ways, including unfairly singling out the Chinese companies and violating Huawei's right to due process.

  • "It is an abuse of the lawmaking process," said Guo Ping, Huawei's rotating chairman, during a webcast. "The U.S. congress has repeatedly failed to produce any evidence supporting its restrictions on Huawei products."
  • He added that security concerns are misplaced, saying Huawei has never and will never install "backdoors" in its products, nor will it allow others to do so.

The big picture: This is the latest in a series of battles between Huawei and the U.S. government.

  • In addition to banning sales of the company's gear in the U.S., the Trump administration has been seeking to get allies to also pledge not to use Huawei gear.
  • The administration has also filed criminal charges against the company for trade secrets theft and for evading U.S. sanctions against Iran.
  • It's seeking to have the company's CFO extradited from Canada to face charges.

Go deeper: Read the lawsuit.

3. Apple hiring 1,200 in Qualcomm's backyard

Apple said Wednesday it plans to hire 1,200 people over the next 3 years to staff its expanded offices in San Diego — home to chipmaker Qualcomm, with whom Apple is currently embroiled in a bitter legal battle.

By the numbers: That's 200 more than the company's original plan, and is in addition to the 600 people Apple already employs in San Diego.

Why it matters: The move comes as Apple is reportedly looking to beef up its in-house modem chip operations, although the iPhone maker stressed it is hiring for a wide range of engineering functions.

Between the lines: Apple's timing is impeccable, as the announcement comes just as a patent suit between Apple and Qualcomm goes to trial in San Diego.

The big picture: Apple, like other major tech giants, has been expanding its U.S. operations in an effort to capitalize on the fact that there are people with technical talent spread throughout the country and not everyone wants to deal with the Bay Area's sky-high housing prices.

  • Apple is also opening large offices in Seattle and the LA suburb of Culver City in addition to a $1 billion expansion in Austin, Texas.
  • As for San Diego, it's a hub for software developers, biotech and chip firms and an attractive option for tech talent looking to relocate.
4. Bird rolls out scooter franchises

A Bird electric scooter in Germany. Photo: Nicolas Armer/picture alliance via Getty Images

Scooter company Bird is finally rolling out its franchise program, Axios' Kia Kokalitcheva reports. The program, first announced last fall, will provide select entrepreneurs with scooters and software for them to operate local scooter rental services.

The big picture: This could be a clever way for the company to outsource some of its growth into new markets. But it will also be interesting to see whether it’ll be a healthy business.

  • Although Bird founder and CEO Travis VanderZanden tells Axios that the franchise model will be “economically good,” the company and rival Lime have reportedly been burning a lot of cash and are raising more.

How it works: Entrepreneurs will purchase scooters through Bird at cost (meaning they’ll pay whatever Bird pays to its manufacturers, roughly $500 a piece). They'll also have free access to its software technologies, including its mobile apps, and management software on the backend.

  • In some cases, these local fleets will sport Bird’s brand. In others, they’ll have custom brands that will be marked as “powered by Bird.”
  • The only fee they’ll pay Bird is a 20% revenue cut from rides, and they will be responsible for other expenses like charging and repairing the scooters.
  • Bird will work with only one fleet operator per city, though it won’t require them to sign exclusivity deals. Ideally, Bird hopes it will provide such a great product and service that such entrepreneurs will be happy and won’t want to work with competitors should that become an option.

The first such fleet will debut in Auckland, New Zealand, and more will roll out in that country, Canada and Latin America.

5. Take Note

On Tap

  • RSA Conference continues in San Francisco.

Trading Places

  • Toymaker Mattel named tech PR veteran and former Brew CEO Dena Cook as EVP and global head of communications.
  • TechNet added Postmates CEO Bastian Lehmann to its board of directors.


  • Amazon plans to close all of its 87 pop-up stores in the U.S. as it evaluates its next steps in brick-and-mortar retail. (CNBC)
  • A new study, highlighted by Vox, finds self-driving cars are more likely to hit a black person than a white person — the latest example of the very real impact of algorithmic bias. (Axios)
6. After you Login

The Chicago Bears have a new kicker who is named Chris Blewitt.