National

From the Valley to D.C., Big Tech players like Facebook, Google and Amazon are under more scrutiny than ever as new technology develops and privacy and antitrust concerns grow in lockstep with companies’ ambitions.

Technology

A Texas law aimed at punishing social media companies if they "censor" users will go into effect for now, a three-person panel of federal appeals court judges ruled on Wednesday.

Why it matters: The move, which stays a lower court order that temporarily blocked the law, is a win for Republicans who claim social media companies have waged a campaign to silence conservative ideas and beliefs. 

Details: The law allows users to sue a social media company if they are blocked from posting or have their posts removed, which civil liberties experts and tech advocates argue would force companies to let problematic speech such as hate and misinformation stay up on their platforms, Protocol reports.

Wednesday's decision was supported by two unnamed judges who did not immediately provide the court's reasoning.

Catch up quick: The Computer & Communications Industry Association (CCIA) and NetChoice filed suit against Texas shortly after the law was enacted, calling it unconstitutional. 

A lower court judge ruled in December that the law "prohibits virtually all content moderation, the very tool that social media platforms employ to make their platforms safe, useful, and enjoyable for users."

After the law was blocked, a spokesperson for Texas Gov. Greg Abbott (R) told the Austin American-Statesman that "[a]lowing biased social media companies to cancel conservative speech is hostile to the free speech foundation America was built on."

What they're saying: "This unexplained order contravenes established First Amendment law," CCIA president Matt Schruers said in a statement. "No option is off the table. We will do what is necessary to ensure that the free market, not government fiat, decides what speech digital services do and do not disseminate."

"In an unusual and unfortunate move, a split 2-1 5th Circuit panel lifted the injunction without ruling on the merits and without issuing an opinion explaining the order,"  said Carl Szabo, vice president and general counsel of NetChoice.

"Because HB 20 is constitutionally rotten through and through, we are weighing our options and plan to appeal the order immediately."

Attorney Scott Wilkens of The Knight First Amendment Institute, which filed an amicus brief supporting the social media companies' challenge, also released a statement saying the decision "will have terrible consequences for speech online."

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A daily look at the most significant and interesting stories affecting Austin. Written by Nicole Cobler and Asher Price.

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Appeals court lets Texas social media law take effect

The law aims to punish social media companies if they "censor" users.

Photo of the Texas state capitol with Texas and American flags flying on a staff

An American flag flies with the Texas state flag outside the Texas State Capitol building in Austin on March 15, 2017. Photo: David Paul Morris/Bloomberg via Getty Images

Texas

Big Tech

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

Politics & Policy

Somewhere in Omaha, Warren Buffett and Charlie Munger must be smiling, as the upheaval in cryptocurrency punctuates their disdain for the sector.

Why it matters: Crypto’s been more of an undercard to what ails the broader market, but it’s slowly moving from undercard to a main event. A lot of small investors piled into crypto as the market boomed – money they may not be able to recover if they’re not ‘hodl-ing’ for the long-term.

Whether you agree or disagree with the Oracle of Omaha (he infamously called Bitcoin "rat poison"),  one thing is for certain: these are grim days in crypto land.

The sector is getting roiled by similar, if not identical, dynamics that are driving stocks lower and bond yields higher (i.e. tighter monetary policy, higher rates), with selling pressures intensifying:

Bitcoin is lodged at its lowest levels in a year at $30,000, off more than 50% from its peak hit last fall.

Shares of Coinbase, the crypto trading platform, dived by 25% intraday, and are down over 80% from the IPO price. 

Terra (UST), a stablecoin meant to trade at parity with the dollar, is now trading significantly below that level. And Luna, caught in UST’s crossfire, is off a staggering 96%...on the day.

Zoom out: An alternative asset class once billed as an inflation hedge, crypto (in theory) should be thriving in an environment of high prices.

In particular, Bitcoin was once promoted as a ‘safe-haven’ from what ails fiat money. But the sector now moves in near lock-step with risk-sensitive stocks, and are subjecting investors to the same speculative roller coaster hammering stocks. 

Yes, but: All stablecoins are not created equal. USDC, a more prominent version backed by Circle, is still holding parity. 

Thought bubble: Washington is still figuring out how to regulate crypto, and how to classify assets like stablecoins, which some argue should be treated like a bank given their explosive growth. The lack of clarity raises questions about whether, if at all, investors can be made whole if Terra fails.

Dark days in crypto world

Bitcoin is off more than 50% from its peak last fall.

Illustration of several different coins combined to form one glitching coin

Cryptocurrencies

After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

Axios Gaming

Electronic Arts is planning “three big launches” of mobile games this year, CEO Andrew Wilson has told investors.

Why it matters: After years of plans and hints, some of the biggest franchises in console and PC gaming are coming to phones this year.

The details: EA’s slate includes a mobile version of its runaway battle royale hit Apex Legends, a Lord of the Rings game made by a studio behind a top Star Wars mobile title and Tap Sports Baseball 22.

Waiting in the wings is a mobile version of EA’s Call of Duty rival Battlefield, which Wilson said yesterday could sneak out by the end of next March, if it tests well enough.

Not just EA: Activision Blizzard has a Diablo game coming to mobile in June and a Warcraft mobile game for later in the year.

Ubisoft management emphasized to investors today that it “​​plans to grow our biggest franchises” with “four promising mobile games under development.” It has mobile games tied to Rainbow Six Siege and The Division deep in development.

Between the lines: Mobile gaming is a vast market of more than 3 billion players but that doesn’t mean franchises that have been huge on PC or console will automatically thrive.

Mobile has its own mammoths, like Playrix’s Homescapes and Zynga’s Hair Challenge.

Traditional publishers have literally bought into this in the last several years, paying billions for the makers of so-called casual mobile hits.

Activision bought Candy Crush maker King in 2016, EA grabbed Playdemic and Glu, and Take-Two now prepares to gollop Zynga. All acquired companies made huge so-called casual mobile hits.

Those big publishers are now bringing their own traditional franchises over too with increased intensity, and the confidence that modern phones can create experiences that console and PC players won’t sneer at.

All the big players haven’t figured it out.

Nintendo yesterday reported declining annual mobile revenue and has discontinued more mobile games in recent years than it has announced.

Sony gaming boss Jim Ryan told Axios last June that PlayStation’s expansion into mobile would “see the first fruits of this sooner than you might think,” but hasn’t resulted in much more than mobile division hiring announcements and a WipEout spinoff since.

The bottom line: The phone is the biggest platform for gaming worldwide, and everyone’s drawn into its gravitational pull.

Sign up for the new Axios Gaming newsletter here.

EA, Activision, Ubisoft bet big on mobile games

Battlefield, Diablo, Rainbow Six and more are coming to phones

Photo of a cell phone and the logo for Electronic Arts

Photo Illustration: Thiago Prudêncio/SOPA Images/LightRocket via Getty Images

Video games

Gaming

The Senate has voted to confirm Alvaro Bedoya to the Federal Trade Commission, giving Democratic chair Lina Khan a majority at the agency after a long wait. 

Why it matters: Khan can now move forward with the aggressive pro-competition agenda she's planned, with three Democratic members sitting on the five-member commission.

Driving the news: The Senate voted Wednesday afternoon to confirm Bedoya 51-50, with Vice President Kamala Harris casting the tie-breaking vote. 

Between the lines: It's not very common for an FTC nominee vote to be so split between parties. 

Republicans have said Bedoya, a privacy expert, professor and former Senate Judiciary Committee staffer, is unsuitable for the job. 

What they're saying:  “Alvaro Bedoya’s confirmation as a commissioner on the Federal Trade Commission is good news for the American people and brings the agency back to full strength to enforce antitrust protections, fight against price gougers, market manipulators, and those trying to rip off American consumers,” Senate Majority Leader Chuck Schumer said in a statement. 

The other side: “Today’s vote sends a clear message to businesses of all sizes: buckle up," said Neil Bradley, executive vice president of the Chamber of Commerce, which fought against both Khan's and Bedoya's confirmations, in a statement. 

"Chair Khan now has the potential third vote she needs to unleash greater uncertainty — the enemy of business growth and opportunity — on the economy.”

Senate confirms Bedoya for FTC seat, giving Democrats majority

His arrival at the commission will give chair Lina Khan a chance to enact tougher policies.

Photo Illustration: Pavlo Gonchar/SOPA Images/LightRocket via Getty Images

Federal Trade Commission (FTC)

Axios Login

Google on Wednesday announced a new affordable smartphone, the Pixel 6a, as well as a set of noise-canceling Pixel Buds Pro headphones and its first Pixel smartwatch.

Why it matters: Google is increasing its investment in developing its own hardware and incorporating technology from its Fitbit acquisition.

The $449 Pixel 6a uses lower-end cameras and foregoes some niceties to come in hundreds of dollars cheaper than the Pixel 6 and Pixel 6 Pro. It also has a smaller screen than the Pixel 6 and Pixel 6 Pro, which some may see as a feature rather than a drawback.

The $199 Pixel Buds Pro offers active noise cancellation, with support for spatial audio coming later via a software update. Both the Pixel 6a and Pixel Buds Pro will be available for pre-order July 21 and start shipping July 28.

Google offered a first look at the Pixel Watch, due out this fall. The round smartwatch includes Fitbit exercise and sleep tracking and will come in both WiFi and cellular models.

It also teased the design for the Pixel 7 and Pixel 7 Pro, due out later this year, which will be powered by an updated Google Tensor chip.

Google also said it plans a Pixel Tablet, to be released sometime in 2023.

The big picture: While Google spent only a small portion of its I/O developer conference keynote talking hardware, it's a huge area of investment for the company. Plus, people tend to pay more attention to shiny new devices than to software updates.

Between the lines: Google saved perhaps its coolest demo for the end, showing prototype AR glasses that allow people to speak different languages and look at one another while seeing a translation on the display of the glasses.

An "AI test kitchen" online will allow people to see some of the capabilities of new machine learning models while also help to spot and report flaws and limitations.

Google is adding 24 languages (spoken by 300 million people) to Translate, in part by reducing its reliance on bilingual examples as a prerequisite to adding new languages.

The Chrome browser will create virtual credit card numbers when people shop online, potentially reducing fraud. The feature will come later to iOS and Android.

An update to Google Wallet will support, among other things, digital state driver's licenses, similar to a feature Apple is offering for the iPhone.

Google is adding a more immersive view of cities and restaurants in Maps, starting with a handful of cities.

Go deeper: We'll have more from Google I/O in tomorrow's Axios Login newsletter. (Sign up here).

Google announces new Pixel phones, teases first smartwatch

It also used its I/O developer conference to unveil an "AI Test Kitchen" and updates to Maps and Translate.

Google's Pixel hardware family, including Pixel Watch and Pixel Buds Pro

Google

The crypto market has been in a downward trajectory since November, but venture investors — and the crypto companies they've backed in Q1 — do not seem to have gotten the memo, per new data from CB Insights.

Why it matters: With the sharp market dive in recent days, expect numbers to look different going forward.

The big picture: Crypto and blockchain companies globally raised a record amount of venture funding this past quarter, largely driven by a number of mega deals ($100 million and above) and investors' recently replenished coffers.

By the numbers: Companies raised $9.2 billion in venture capital globally in Q1 across 461 deals, while U.S. venture deals hit $5.8 billion or 63% of global funding. 

There were 28 mega deals, a record quarter, up from 17 in Q4 and 18 in Q3.

There are now 62 unicorns (private companies valued at $1 billion and over), with 14 new ones from this quarter, the same number of new entrants as Q4. The U.S. remains the land of crypto unicorns as the home to 40 of them. 

Between the lines: Average and median deal size remained flat compared to the previous quarter — and while median deal size was down in Asia, it hit record highs in the U.S. and Europe.

Mid and late-stage median deal sizes also fell year-over-year, while early-stage deal size increased slightly to $4 million. 

Zooming in: Despite NFTs largely dominating headlines last year, DeFi was this quarter's winner, adding four new unicorn startups. 

With $2.1 billion invested across 71 deals, DeFi startup funding is on pace for a record year. Q1's dollars invested have already surpassed prior quarters. 

Average and median deal sizes for DeFi startups are also at all-time highs, and mid-stage deals are growing as a share of overall deal activity, suggesting the category is starting to mature. 

Meanwhile, NFT startups saw deal activity and deal size remain flat from Q4, and startups in the custody and wallet, and exchange and broker categories saw mostly declines in investment activity. 

Yes, but: Exit activity was in line with the broader market, with a sharp decline in M&A, IPOs, and SPAC deals.  

M&A hit its lowest activity level since Q3 2020 with nine deals this past quarter, with the rest also declining. 

What we're watching: How the rest of the year pans out. Crypto VCs have a lot of fresh dry powder and an unusually strong belief that downturns yield some of the best startups, but they're not immune from the larger uncertainties.  

Crypto startup funding boomed in Q1 despite ongoing market slide

The crypto market has been in a downward trajectory since November, but venture investors do not seem to have gotten the memo.

Axios Media Trends

Facebook parent Meta on Wednesday said it would be withdrawing its earlier request for policy guidance from the independent Oversight Board it helped create and fund on its content moderation decisions related to Russia’s war in Ukraine. 

Why it matters: Meta says it's withdrawing the request due to "ongoing safety and security concerns," but it didn't specify what those concerns were, or why they would prohibit it from moving forward with the request. 

This is the first time Meta has revoked a policy guidance request to the board. 

Details: In a statement, Meta said it stands by its efforts related to the Russian invasion of Ukraine "and believe we are taking the right steps to protect speech and balance the ongoing security concerns on the ground."

It reiterated steps it has taken to combat misinformation around the war, including establishing a special operations center to monitor its platforms and adding new safety features in Ukraine and Russia.

What they're saying: In response, the board said that it understands Meta's concerns but is "disappointed" by the company’s decision.

The board also noted the request withdrawal "does not diminish Meta’s responsibility to carefully consider the ongoing content moderation issues which have arisen from this war, which the Board continues to follow. " 

The big picture: Meta, then Facebook, established the Oversight Board in 2019 following years of criticism over inconsistencies in how it moderates content on its platform. 

Case decisions from the board are binding, meaning Meta is responsible for implementing them, but policy recommendations from the board are not.

The company began referring its first set of cases over to the board in 2021, and the board published its first set of decisions in January, overturning Facebook's original action in four of the five cases it chose to review out of 20,000 cases submitted.

To date, Meta and the hoard have worked well together publicly, with Meta referring cases and promising to implement the binding decisions while considering the recommendations. 

Our thought bubble: Meta established the board to help guide its decision-making around content moderation, especially in thorny situations like wars, where real-time events are often misinterpreted and misconstrued for political purposes. 

Meta's withdrawal of the policy advisory opinion request that it sent to the Oversight Board last month undermines the ability of the board to help guide the tech giant's decision-making, as it sets a precedent for Meta to continue withdrawing requests in the future.

Facebook withdraws guidance request for Ukraine war content policies

Meta says it's withdrawing the request due to "ongoing safety and security concerns."

Drawing of a judge with a Facebook thumb over his hand.

Meta (company)

Twitter agreed to be acquired by Elon Musk for around $44 billion in cash. The news came weeks after the tech mogul launched his unsolicited, take-it-or-leave-it offer.

State of play: Musk has talked for a while about the things he would want to change about the social media platform, from adding an edit button to limiting content moderation.

Here's a look at everything Musk has  said he wants to alter:

Musk said he would like to reform the platform's use of permanent user bans, including reversing former President Trump's ban — a stance that Twitter co-founder Jack Dorsey agrees with.

Musk called Twitter's ban of Trump after the Jan. 6 Capitol riot "morally wrong and flat out stupid" because it didn't silence Trump but drove him to create his own social media platform, Truth Social.

He believes permanent bans on Twitter should be quite rare because they "fundamentally undermine trust in Twitter as a town square where everyone can voice their opinion," though he said they could be used against "spam" or "scam" accounts.

Instead, he would like the platform to temporarily suspend people who tweet something "that is illegal or destructive to the world" or delete the tweet entirely.

Musk noted the social media platform's lack of an edit button back in a 2019 tweet: "Where’s the edit function when you really need it!?" he wrote.

At the TED2022 conference in April 2022, Musk said he wants Twitter to have an “edit” button and believes the problems critics raise can be resolved. “I think you only have the edit capability for a short period of time, and zero out all retweets and favorites” after an edit.

In April 2022, Musk polled his followers on whether they'd want an edit button. About 74% of more than 4.4 million respondents voted yes.

Worth noting: Twitter confirmed after the poll it is working on an edit button, adding, "No, we didn't get the idea from a poll."

Musk has also suggested allowing long-form tweets. 

He commented on a long Twitter thread in April 2022: "My most immediate takeaway from this novella of a thread is that Twitter is *way* overdue for long form tweets!"

Where it stands: Twitter has a 280 character limit. The company increased from a 140 characters in 2017. 

Musk once called spam bots "the single most annoying problem" on Twitter. He tweeted in April 2022: "If our twitter bid succeeds, we will defeat the spam bots or die trying!" 

He wrote in a reply to that tweet that Twitter would "authenticate all real humans" under his ownership. 

Musk has said he's concerned about bias being inherent to Twitter's algorithm — which he said he'd solve with an open-source algorithm.

In late March 2022, he tweeted, "I’m worried about de facto bias in 'the Twitter algorithm' having a major effect on public discourse. How do we know what’s really happening?"

Musk polled his followers on whether they'd support an open-source algorithm. About 83% of more than 1.1 million respondents said they would.

Be smart: An open-source algorithm would make publicly available the calculus which determines what appears on a person's Twitter feed.

Musk has outlined his free speech-first vision for Twitter. He said at the TED2022 conference he thinks Twitter should not regulate content beyond what is required by the laws of the countries it operates in.

"A lot of people are going to be super unhappy with West Coast high tech as the de facto arbiter of free speech," Musk said in a tweeted in January 2021.

Our thought bubble: It's easier to advocate broad policy change from the outside of a company like Twitter than to enact it from within. It's also worth remembering that Musk has been a mercurial tweeter, and his plans could easily change.

Musk plans for a free speech-first Twitter

What Elon Musk and Gilded Age financier Jay Gould have in common

Everything Elon Musk wants to change about Twitter

Twitter on Monday agreed to be acquired by Elon Musk for around $44 billion in cash.

Elon Musk speaks at a press conference at SpaceX's Starbase facility near Boca Chica Village in South Texas on February 10, 2022. Photo: JIM WATSON/AFP via Getty Images

Elon Musk

Media

Axios Pro Rata

Remote hiring startup Deel has raised new venture capital funding at a $12 billion valuation, after having been valued at $5.5 billion last fall, Axios has learned from multiple sources.

Why it matters: This price increase stands in stark contrast to plummeting tech valuations in the public markets.

It also suggests that venture capitalists aren't anticipating major hiring slowdowns, or at least not for the sort of overseas talent in which Deel specializes.

Details: The round size is $50 million. New investors include Laurene Powell Jobs' Emerson Collective, while existing company backers include Andreessen Horowitz, Spark Capital and Y Combinator.

San Francisco-based Deel CEO Alex Bouaziz recently disclosed that the company's annual recurring revenue rate is $100 million, with a source saying that the company's pace has since accelerated. The source adds that Deel's 2021 burn rate was "single digit millions," but is expected to increase in 2022.

Spokespeople for Deel and Emerson declined comment.

Scoop: Deel raises funds at $12 billion valuation

It stands in stark contrast to plummeting tech valuations in the public markets.

Illustration of keyboard letters spelling "Helped Wanted"

Venture capital

"Look out below" is the new mantra for tech valuations. So let's peek at how that's playing in the deals universe, as investors try to determine the sharpness of those falling knives:

Private equity: This is widely being viewed as a buying opportunity, with PE pros kicking tires on tech companies they previously viewed as overvalued. 

No one is calling a bottom, but PE doesn't need to buy there. It just needs a defensible price. Particularly at diversified firms that have largely avoided large tech deals over the past year or two.

The caveat is that most prospective sellers haven't yet accepted lower valuations as the new normal. As one software-focused investor told me: "For a lot of companies it's going to take another month or two of seasoning before they get serious about doing deals."

Late-stage VC: Everyone's talking a good game about price discipline, but we're still seeing plenty of massive up-rounds. 

See today's announcement that employee onboarding company Rippling raised at $11.25 billion, versus $6.5 billion last fall. Or the raise by remote hiring firm Deel at a $12 billion valuation, compared to its $5.5 billion mark in October.

In short, it's not about rounds getting done at lower prices. It's about rounds getting done or not. Plenty of companies are finding themselves in that latter bucket, but stalled fundraises don't get press releases.

Early-stage VC: This is where investors want to play in this sort of market, given the relatively low valuations and long runways. Sources say that there's starting to be a bit of price pullback, more at Series A than at seed, so as not to hamstring startups when it comes time to raise a Series B.

Yes, it's a self-serving argument that gives VC funds greater ownership stakes. That doesn't make it wrong.

Crypto: Web3 startups seemed immune as of just a few weeks back. But there's only so long that investors can ignore the crypto correction (e.g., Bitcoin down 48% year-to-date).

Maybe most worrisome is the stock slump for Coinbase, which many VCs use as a proxy for crypto company cohort health.

Yesterday's earnings report caused Coinbase shares to open this morning down around 25%, for an all-time low. Plus, the company felt compelled to detail what would happen to user assets if the company were to go bankrupt.

Coinbase stock price

Data: Yahoo Finance; Chart: Axios Visuals

Everyone seems to agree that a lot of the drop is tied to the Fed rate hikes, similar to what happened in 2000. The disagreement is if a recession is around the corner, as followed in 2001. And, if so, how severe it might be.

The bottom line: Private equity and venture capital are long-term asset classes. Investment decisions, however, must be made in the present tense.

What the tech rout means for tech deals

Chicken Soup for the Soul Entertainment, a consumer video and entertainment company, said Wednesday that it plans to acquire Redbox, the struggling video rental company, in an all-stock transaction.

Why it matters: The deal gives Chicken Soup for the Soul Entertainment direct-to-consumer distribution. It gives Redbox much-needed liquidity after its business took a hit due to COVID.

Catch up quick: Redbox runs several media distribution assets, including a DVD rental kiosk business, a TV on-demand platform and an ad-supported streaming platform. The company went public via a merger with a blank check company last year, but the market for those types of special IPO mergers has since devolved.

Chicken Soup for the Soul Entertainment to acquire Redbox

Chicken Soup needed an ad-supported video distribution service that Redbox has. Redbox needed content for its service.

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