Tech Brew Ride Home - Mon. 01/10 – Take-Two Acquires Zynga

Episode Date: January 10, 2022

Take-Two takes out Zynga for $12.7 billion dollars. The SEC wants private unicorn companies to report more financial details. The open source developer who borked a bunch of projects to protest working for the man, I guess. And the weekend Web3 debate between Moxie Marlinspike and Vitalic Buterin. Sponsors: Grammarly.com/techmeme EditorX.com Links: Take-Two to acquire mobile gaming giant Zynga for $12.7B (TechCrunch) SEC Pushes for More Transparency From Private Companies (WSJ) Matter was a major star at CES 2022, but can it maintain its shine? (The Verge) Dev corrupts NPM libs 'colors' and 'faker' breaking thousands of apps (BleepingComputer) My first impressions of web3 (Moxie.org) Response From Vitalic Buterin on Reddit Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the Tech Meme right home for Monday, January 10th, 2021. I'm Brian McCullough today. Take 2 takes out Zinga for $12.7 billion. The SEC wants private unicorn companies to report more financial details, the open source developer who borked a bunch of projects to protest working for the man, I guess, and the weekend Web 3 debate between Moxie Marlinspike and Vitalik Buterin. Here's what you miss today in the world of tech. Big news in gaming. Take 2 announced this morning, it will, acquire Zinga for $12.7 billion or $9 and 86 cents per share, which represents a 64% premium on Zinga's January 7th closing price. Take 2, of course, develops Grand Theft Auto, Red Dead,

other titles, of course, and Zinga, well, Zinga was the first social gaming company, right? A Monster in Mobile, quoting TechCrunch. The deal will bring together two gaming powerhouses, Take 2 in consoles and PC games, including such iconic titles as Grand Theft Auto, and Zinga, in a massive swath of mobile games, a genre that was arguably largely defined by the company. It's behind Farmville, Empires and Puzzles, Words with Friends and More. As with a lot of other consolidation moves, this is about cost savings through synergies. Take Two said the deal would help the larger business save about $100 million annually after two years. Take Two already has a number of mobile game titles and has expanded its franchises into mobile,

but this will give the company a significantly larger holding in the space. This is key, considering how Zinga has fared over the years. Since a huge boom in its share price when it first went public, the company has been on a bit of a roller coaster over the last year and has seen its share price drop, making it an acquisition target. The move also puts to an end an era of sorts, as a startup based out of San Francisco's Soma district, just as the city was coming into its own,

as a tech hub separate from Silicon Valley, it was an early mover in spotting and scaling the mobile gaming opportunity. Initially, it found huge traction as a social gaming giant leaning on growth by way of Facebook's social graph. But as that became annoying and spammy, over time, Facebook changed the rules and cut off Zinga's audience supply. More generally, the mobile gaming market has proven to be a more precarious one when it comes to consumer taste and usage. And so a lot of Zinga's success has been banked around finding and sometimes acquiring the next hot new title and franchise to replace those that have waned in popularity.

One of its bigger recent acquisitions was acquiring in 2020 Turkey's peak games, which had already established traction with tune blast and toy blast for $1.8 billion. Combining with Take 2, which also publishes Red Dead Redemption, Midnight Club, NBA 2K, Bioshock, Borderlands, Civilization, Mafia, and Curbel Space Program, will give it a large library of franchises and IP from which to build new mobile gaming experiences. Similarly, Zinga's IP may now find new traction on different formats and different screens, end quote. Quoting 10A Jayapuria on Twitter, the goal is to strengthen Take-2's overall mobile and cross-platform ambitions by leveraging Zinga's expertise and portfolio, end quote. But one more angle to consider, possibly, quoting Stephen Totilio. With this purchase, Take-Two doesn't just get Farmville and Words with Friends, doesn't just get hyper-casual hitmaker Rollic. It also gets a dedicated NFT slash blockchain division, end quote. And possibly big news for possibly a ton. of startups. Sources are telling the Wall Street Journal that the Securities and Exchange Commission

is pushing for more transparency from large private companies, read unicorns, including increasing disclosures and tightening of investor qualifications. Quote, the SEC, Wall Street's top regulator, has begun work on a plan to require more private companies to routinely disclose information about their finances and operations, according to a semi-annual rulemaking agenda and and people familiar with the matter. It is also considering tightening the qualifications that investors must meet to access private markets and increasing the amount of information that some non-public companies must file with the agency. When they're big firms, they can have a huge impact on thousands of people's lives with absolutely no visibility for investors, employees, and their unions,

regulators, or the public, said Democratic SEC Commissioner Alison Lee, who has called for the change. I'm not interested in forcing medium and small-sized companies into the reporting regime, end quote. Federal statute requires companies with more than 2,000 shareholders of record to register their securities with the SEC and periodically disclose key information whether or not they have conducted an IPO. But that threshold is rarely crossed because SEC rules allow an unlimited number of people to own shares in street name, often through the same broker-dealer or investment vehicle, and be counted as one shareholder. The SEC has been intentionally undercounting shareholders for decades, said Tyler Galash,

executive director of the Healthy Markets Association and Investor Trade Group. Now the agency is working on a proposal that would enable regulators to look under the hood of such entities for a more complete shareholder tally. Its goal is to push large private companies into the same disclosure regime that their publicly traded counterparts face. It is unclear how many private companies could be forced to register with the SEC under the plan, in large part that is because regulators have little visibility into the shareholder base of private companies. The impact of the SEC's plan changes will likely depend on the types of entities the agency decides to look through. One option would be to count each investor in a feeder fund, a vehicle set up by broker dealers to pool assets for multiple

clients for private market deals as distinct shareholders of record. A more aggressive path would be to count the number of people investing through a venture capital fund or private equity fund. Industry lawyers say the transparency sought by the SEC would hit companies with the cost of going public, regularly producing reams of paperwork, without any of the benefits. Republican SEC commissioners Elad Roisman and Hester Pierce said the plan would hurt growing companies in need of capital. They added that the 2012 Jobs Act raised the number of shareholders a private company can have without registering with the SEC to 2,000 from 500 to allow companies greater flexibility, end quote. Matter. The smart home standard backed by Apple, Amazon, Google, Samsung, and others that I told you about recently,

apparently had a good CES with around 30 companies showcasing support for the new standard in Las Vegas, quoting the verge. Practically, every smart home device announcement this week had the tagline, and we announced our support for matter. Plus, the infrastructure gained significant support. There are new chips designed for matter. Amazon announced device makers can now add frustration-free setup on their matter-certified devices with just the Matter SDK. No Amazon-specific SDK required. and Google showed off its own version of a simplified setup, Fast pair with built-in support for Matter. All these announcements mean that as developers build new smart home products,

all you'll have to do once you get them home is plug them in and they'll be ready to go. The other interesting announcement was confirmation from Amazon that Alexa will share your smart home with other voice assistants. The main promise of Matter has been cross-platform compatibility that you will be able to control your smart devices with the app or voice assistant of your choice. Now we're seeing exactly how that will be done. Amazon introduced new tools for developers that let them add Alexa as an additional way to control a device already set up in another system. While today you can control, say, a Phillips Hugh light bulb with multiple apps and voice assistance, you currently have to set it up with each one individually. With matter, it'll be one and done. As a nice bonus, this new capability also adds local connectivity to the device, allowing for quicker response times and the chance to use your devices even if the internet is down, end quote.

Over the weekend, an open-source developer who expressed regret for supporting, quote, Fortune 500s, broke around 19,000 projects by corrupting NPM libraries with millions of weekly downloads, quoting bleeping computer. Users of popular open source libraries' colors and faker were left stunned after they saw their applications using these libraries, printing gibberish data and breaking. Some surmise the NPM libraries had been compromised, but it turns out there's much more to the story. The developer of these libraries intentionally introduced an infinite loop that brick thousands of projects that depend on colors and faker. The colors library receives over 20 million weekly downloads on NPM alone and has 19,000 projects relying on it, whereas Faker receives over 2.8 million weekly downloads on NPM and has over 2,500 dependents.

Yesterday, users of popular open-source projects such as Amazon's cloud development kit were left stunned on seeing their applications print gibberish messages on their console. These messages included the text Liberty, Liberty, Liberty, followed by a sequence of non-asky characters. The developer named Marac Squires added a new American flag module to Colors.js. Library yesterday in version 1.4.44 Liberty 2 that he then pushed to GitHub and NPM. In November 2020, Marac had warned that he will no longer be supporting the big corporations with his, quote, free work, and that commercial entities should consider either forking the projects or compensating the dev with a yearly, quote, six-figure salary.

Respectively, I am no longer going to support Fortune 500s and other smaller-sized companies with my free work. There isn't much else to say, the developer previously wrote, take this as an opportunity to send me a six-figure yearly contract or fork the project and have someone else work on it. Maroc's bold move has opened up a can of worms and attracted mixed responses. Some members of the open source software community have praised the developer's actions, while others are appalled by it. Some dubbed this an instance of, quote, yet another OSS developer going rogue, whereas Infosec expert Veson Security called the action irresponsible, stating,

quote, If you have problems with businesses using your free code for free, don't publish free code. By sabotaging your own widely used stuff, You hurt not only big business, but anyone using it. This trains people not to update because stuff might break, end quote. GitHub has reportedly suspended the developer's account, and that too has caused mixed reactions, end quote. Finally today, and also from over the weekend, the Web3 Civil War continued.

When famed developer Maxi Marlon Spike released a blog post giving his, shall we say, mixed assessment of Web3 apps, saying these apps and wallets inevitably depend on centralized services like OpenC, Infura, and Alchemy, which don't even provide authenticated responses. I highly, highly recommend quoting the whole thing, but let me quote this small section real quick. With the shift to mobile, we now live firmly in a world of clients and servers, with the former completely unable to act as the latter. And those questions seem more important to me than ever. Meanwhile, Ethereum actually refers to servers as clients, so there's not even a word for an actual untrusted client-server interface,

that will have to exist somewhere, and no acknowledgement that if successful, there will ultimately be billions more clients than servers. For example, whether it's running on mobile or the web, a DAP-like autonomous art or first derivative needs to interact with the blockchain somehow in order to modify or render state, the collectively produced work of art, the edit history for it, the NFT derivatives, etc. That's not really possible to do from the client, though, since the blockchain can't live on your mobile device or in your desktop browser, realistically. So the only alternative is to interact with the blockchain via a node that's running remotely on a server somewhere. A server. But as we know, people don't want to run their own servers. As it happens,

companies have emerged that sell API access to an Ethereum node. They run as a service, along with providing analytics, enhanced APIs, they've built on top of the default Ethereum APIs and access to historical transactions, which sounds familiar. At this point, there are basically two companies. Almost all DAPs use either Infura or Alchemy in order to interact with the blockchain. In fact, even when you connect a wallet like Metamask to a DAP and the DAP interacts with the blockchain via your wallet, Metamask is just making calls to Infura. These client APIs are not using anything to verify blockchain state or the authenticity of responses. The results aren't even signed. An app like Autonomous Arts says, hey, what's the output of this view function on this

smart contract, alchemy or inferior responds with a JSON blob that says this is the output and the app renders it. This was so surprising to me. So much work, energy, and time has gone into creating a trustless distributed consensus mechanism, but virtually all clients that wish to access it do so by simply trusting the outputs from these two companies without any further verification. It also doesn't seem like the best privacy situation. Imagine if every time you interacted with a website in Chrome, your request first went to Google before being routed to the destination and back. That's the situation with Ethereum today, end quote. Then, Ethereum co-founder Vitalik Buteran responded by writing, quote, the properly authenticated decentralized blockchain world is coming, but it is being slowed by,

quote, limited technical resources and funding, quoting from his missive. Moxie's critiques in the second half of the post strike me as having a correct criticism of the current state of the ecosystem, but they are missing where the blockchain ecosystem is going. There's already teams working on implementing some of the things he's talking about. These efforts, contrary to Moxie's claim that there's little cryptography involved in crypto, correct about much of what's happening today, are heavily based on some of the most cutting edge and advanced cryptography out there. Virkle trees, ZK Snarks, and the EVM-BLS signature aggregation, and so on.

As for my theory about why this hasn't happened yet, I would say a lot of it comes down to limited technical resources and funding. It's easier to build things the lazy centralized way, and it takes serious effort to do it right. The Ethereum ecosystem did not have that much resources up till about four years ago. Of course, around four years ago, the ecosystem did start to have a lot of resources, but new projects are slow to ramp up, and the centralized workarounds have had years of head start. One thing that makes the ramp up even slower is the chain of dependencies. In order to have light clients, we need to have a light client-friendly chain, which is a deep change to the protocol, and so the only realistic opportunity to implement it is in the switch to POS, where we're only now at the point where we have the POS, and full integration with the merge is coming soon.

Fortunately, the dependencies are being attacked and resolved one by one, and there has already been a lot of progress. Once the general purpose hard legwork is done by a few dedicated teams, building trustless applications will become much more feasible for all dev teams that would just need to plug into the libraries. So I think the properly authenticated decentralized blockchain world is coming and is much closer to being here than many people think. Of course, it's always possible that all this tech will get built and many people will not care, but I'm more optimistic. Users generally accept defaults given by developers, and many developers really do genuinely care about decentralization and trustlessness. And growing legal issues with running centralized points of trust will push them to care more. Decentralized options that users reject today, for example running a full node, really are quite deep. difficult today, so it's understandable that users are sticking to the more centralized options

that at least they can easily use. None of the proposals outlined here are anywhere remotely as difficult, and even running a full note itself will get easier and cheaper over time as ideas like statelessness and history expiry come into play. So I see no technical reason why the future needs to look like the status quo today, end quote. For those asking over the weekend, yes, the Twitter space that Chris and I did about the tools that we used to do our work, is going to be published. It's just going to go live this weekend. We recorded it early for scheduling reasons. So don't worry. You can still look for that on Saturday. Talk to you tomorrow.