Tech Brew Ride Home - Thu. 03/07 - Facebook Pivots To Privacy

Episode Date: March 7, 2019

Facebook pivots to privacy, Huawei follows through on suing the US government, Duplex rolls out wide, and Bird’s white label scooter scheme. Sponsors: Lightstream.com/ride Metalab.co Links: A Privacy-Focused Vision for Social Networking (Mark Zuckerberg) A 'privacy-focused' Facebook would kill Zuckerberg's business model (The Guardian) Facebook’s Privacy Cake (Ben Thompson/Stratechery) Mark Zuckerberg Tried Hard To Get Facebook Into China. Now The Company May Be Backing Away. (Buzzfeed News) Amazon's joint health-care venture finally has a name: Haven (CNBC) Huawei: US Congress acted as 'judge, juror and executioner' with ban on our products (CNN) Google brings its Duplex AI restaurant booking assistant to 43 states (TechCrunch) How Bird plans to blanket the world with electric scooters without going bankrupt (The Verge) 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 ride home for Thursday, March 7th, 2019. I'm Brian McCullough today. Facebook pivots to privacy.

Huawei follows through on suing the U.S. government. Duplex rolls out wide and Bird's white-label scooter scheme. Here's what you missed today in the world of tech. Yesterday, Mark Zuckerberg posted a piece titled, A Privacy-focused Vision for Social Networking. I could quote, at length from the piece, link is in the show notes for the full Monty, but let me just quote this small section and then let's focus on giving you a TLDR so we can assess what's happened here. I believe the future of communication will increasingly shift to private encrypted services where people can be confident what they say to each other stays secure and their messages and content won't stick around forever.

This is the future I hope we will help bring about, end quote. So, the TLDR on all of this. If Mark Zuckerberg's stated goals for Facebook for years now have always been openness and sharing, at the very least, this piece is signaling a strategic shift. Not openness, not share everything to the whole world, no. Sharing, but privately with specific people of your choice. Facebook, again, he says, believes that the future of social is messaging. specifically encrypted secure messaging.

The concrete promise in Zuckerberg's message is something that they've been signaling for a while now, and we've spoken about before, unifying Instagram DMs, Facebook Messenger, and WhatsApp, into a single encrypted messaging service. So from a certain angle, you can read this as Facebook walking away from the news feed, the thing that made it Facebook, its primary business model and product. And from a certain angle, forget copying stories, the idea of moving to ephemeral messaging and posts can be read as straight-up copying Snap's original idea with a sprinkling of WhatsApp thrown in. And from a certain angle, some people are reading this as a defensive play. If all of our apps are one unified product, then you can't break us up or ask us to spin off one of these services. Some people are reading this as Facebook saying, y'all don't trust us to keep your data secure well no more evasions we're going to lean into this seeming weakness and improve on it all the way until we can prove to you that we are a company that is

focused on privacy and security first others are reading this message as a clever faint to avoid regulation sort of like okay you don't like what people are sharing on our platform and we don't want to be in the business of becoming moderators and editors so we're going to shift our platform to direct private communications so that we don't have to get into the editorial business. As Alex Stamos tweeted, quote, right now Facebook gets crap from the same people for both invading people's privacy and not policing communications enough. This is the judo move. In a world where everything is encrypted and doesn't last long, entire classes of scandal are invisible to the media, end quote. And some people just flat out don't believe this

message at all. Some people think it's all bluster and no substance. Walt Musberg, for example, tweeted, Mark Zuckerberg today, I believe we should be working towards a world where people can speak privately and live freely, knowing that their information will only be seen by who they want to see it. How long has he personally believed this? An hour? A day? End quote. And in The Guardian, Alex Hearn wrote, quote, Facebook is an advertising business first and foremost and one of the most successful ever to exist. But the privacy-focused vision Zuckerberg has, even a denuded version of privacy, would wound that business to the core. The endless scroll of a news feed, the passive consumption of an Instagram story, even the immersive experience of an Oculus VR headset may lend themselves to

advertising at scale, but a closed, encrypted one-to-one messaging app doesn't. So whether or not Zuckerberg believes what he's saying, the fact that Facebook's stock price is barely changed on the news of Zuckerberg's note suggests that the people who actually own Facebook don't. They read that letter and decided that their money was perfectly safe where it was. From their conclusion, it shouldn't be hard to draw your own, end quote. Lots of people, by the way, noted something similar. If you take Zuck's message at face value, it represents a pivot away from the advertisements in feeds model that has made it so successful. Casey Newton writes, quote, in his post, Zuckerberg says,

Private encrypted messaging tools will also create room for new business tools, especially ones around payments and commerce, the company's current pet obsessions. The services will eventually become, quote, a platform for many other kinds of private services, he writes, end quote. But as Casey wrote later, let's say you do take Zuck at his word and News Feed becomes a legacy product. That indeed means Facebook will need to find, essentially, an entirely new business model. And unless it's super confident that it can monetize messaging, secure messaging, by the way, At the same level of success, then what will the new model be? Commerce and payments.

Facebook has been trying to crack that nut for over a decade now, as we said to Connie Chan last weekend. But then again, think about Facebook's seemingly serious moves into crypto, something that we will talk about this weekend. Maybe there is an outline of a deeper plan here, and maybe that plan is to move towards a more diversified pie, as it were, a la the Chinese model that Connie said. told us about? As I tend to do in moments like these, I'm going to lean on Ben Thompson here, who says, actually, all of this makes perfect sense. This is, he says, a privacy cake that Facebook can have and eat too. He notes that Zuckerberg, in his message, outlined six main things. Private interactions, encryption, reducing permanence of content, shared, sent, posted, what have you, safety, interoperability, secure data storage. Ben notes that all of this is a valuable space to own.

It's exactly why Snapchat succeeded before Facebook came in and capped its growth. Also, maybe this is a sort of, we're going to create an iPhone to kill the iPod because the supplanting of the iPod is inevitable, so we'll do it before our competitors can. quote, to the extent the rise of one-to-one networking is inexorable, the better it is for Facebook that it happened on their properties. Not only does Facebook preserve the ability to advertise on privacy-focused platforms, the company can leverage data from Facebook to advertise in its messaging products, it also prevents would-be competitors from capturing leverageable attention, end quote. In other words, if Facebook does do what Zuck says, they are moving in a direction that they would be. need to move in anyway. And if so, then all of the other side benefits that people are arguing about

are just that. Side benefits. Facebook already has your data, so presumably it can already monetize messages while securing them. It can also, at the same time, reap all of the PR and regulatory and even structural benefits that this move would engender and still keep doing what it's always done, but in a slightly different way. Quoting Ben, they can very much afford a privacy-centric messaging offering in a way that any would-be challenger could not. Privacy, it turns out, is a competitive advantage for Facebook, not the cudgel the company's critics hoped it might be, end quote. Ben concludes by writing this, quote, Facebook is not an inherently bad actor. It is perfectly reasonable that the company can be instituting genuinely user-friendly changes like end-to-end encryption, even as

as it furthers its own self-interest. Relatedly and most importantly, there needs to be much more appreciation for the anti-competitive tradeoffs inherent in an absolutist approach to privacy. Facebook is doing what its fiercest critics supposedly want and enhancing its competitive position as a result, end quote. One more key thing from that Zuckerberg note.

In the post yesterday, Zuckerberg wrote as a part of the efforts to build secure messaging, quote, as we build our infrastructure around the world, we've chosen not to build data centers in countries that have a track record of violating human rights like privacy or freedom of expression. If we build data centers and store sensitive data in these countries, rather than just catching non-sensitive data, it could make it easier for those governments to take people's information, end quote. So that would mean Facebook is not going to do business in China, among possibly other places. A senior Facebook source has to be a social Facebook source has to be a

confirmed that to Ryan Mack at BuzzFeed News. Indeed, the company has no current plans to enter the Chinese market, something that would be a huge strategic change for Facebook. Facebook has courted Chinese authorities assiduously for years now. Quoting Mack, still the source left the possibility open, making it clear that the company has no plans at the present time to go into China. Zuckerberg tried hard, they said, but there's no way to do this, quote, in the foreseeable future, end quote. As William Turton joked on Twitter, that feeling when you learn Mandarin for nothing, end quote. That still mysterious joint health care venture from Amazon, Berkshire Hathaway,

and J.P. Morgan Chase, has a name. It will be called Haven, quoting CNBC. In addition to its new brand, the company also unveiled a website with more details about the venture, including a number of areas of focus. These include improving the process of navigating the complex health care system, and accessing affordable treatments and prescription drugs. Haven also said on its website that it's interested in working with clinicians and insurance companies to improve the overall health care system suggesting the venture wants to work with existing players,

such as insurers, providers, and pharmacy benefit managers, rather than uprooting them, end quote. As anticipated, Huawei has sued the U.S. government challenging the law that bans federal agencies from buying that company's products. Quoting CNN, this ban not only is unlawful but also restricts Huawei from engaging in fair competition

ultimately harming U.S. consumers, Huawei deputy chairman Gao Ping said at a news conference in the company's headquarters of the Chinese city of Shenzhen. He accused Congress of acting as judge, jury, and executioner by imposing the ban.

The Chinese company, which is also a top smartphone maker, is asking a U.S. federal court to overturn part of the National Defense Authorization Act, which was signed by President Donald Trump in August. Huawei alleges that a portion of the law, which specifically forbids government agencies from using technology from Huawei and its smaller Chinese rival ZTE,

violates the U.S. Constitution by signaling out an individual or group for punishment without trial. Quote, the U.S. Congress has repeatedly failed to produce any evidence to support its restrictions on Huawei products, Gao said. We are compelled to take this legal action as a proper and last resort, end quote. Remember Duplex, that AI assistant feature from Google that debuted to G-Wiz reactions, but then caused some people to get weirded out by it all? Well, Google says it is bringing its Duplex AI restaurant booking assistant to 43 states beginning now.

The only catch being, you have to be a pixel 3 owner to take advantage of the service. Reflecting the general skepticism that Duplex has now engendered, Let me quote from TechCrunch. In the coming weeks, the service will be rolled out to users on other Android and iOS devices as the company continues to tweak the program based on user feedback. Meanwhile, that may or may not give the rest of us time to come to grips with the creepily natural interactions of Google's new AI, and quote. Finally today, this was apparently not new, but it was news to me. We like to think that the scooter companies are basically running the playbook of the ride-hailing companies, right?

It certainly looked that way early on when they threw scooters on city streets and then asked for permission later. That certainly sounded like the M.O. of how the ride-hailing firms got to ubiquity or how Airbnb did. But Uber, Lyft, Airbnb, they've all assiduously focused on branding themselves. One of the scooter companies, however, in essence, is sort of willing to franchise things, quoting from The Verge. Operating an electric scooter sharing service is expensive and hard. The scooters break down, or they get vandalized or impounded by local law enforcement. Scaling that business globally like Bird and Lyme are trying to do is even harder. Every scooter company today is operating out a loss,

but Bird in particular has an interesting plan to spread the gospel of the scooter without going completely bankrupt. It involves selling e-scooters to local entrepreneurs, providing them with advice and technical support to get started, letting them incur all the costs associated with maintenance and operations, and then taking a small percentage of each scooter trip. It's called Bird Platform, which the company originally unveiled last November, end quote. Bird CEO Travis Vanderzanden told the verge that this strategy is designed to allow Bird to grow faster. Bird Platform is rolling out in three markets, New Zealand, Canada, and Latin America.

If you're a local entrepreneur there, you can buy your scooters at cost from Bird. They'll give you advice and help you get started. and then you run your own show. You can set your own prices. You can even brand the scooters how you please. So it's sort of like white label scooter services. In essence, you can do what you want so long as you're not in a market

that Bird is already operating its own branded services in. They simply want what the piece describes as a 20% cut of each ride. And there were some other interesting details in this piece. Recently, Quartz's Allison Griswold crunched the numbers on scooter rentals in one market, Louisville, Kentucky. She found that the median scooter there took 70 trips over the course of its lifetime, and that lifespan was only 23 days.

Again, those unit economics do not work at all. Van der Zanden in the Verge piece actually acknowledged that to break even. Bird at least thinks it needs its scooters to have a lifespan of six months. so they have some work to do to get there, but Bird is deploying a new, more rugged, longer-lasting scooter, the Bird Zero. Quote, we've been hard at work on future hardware as well, van der Zanden told the Verge, with even bigger batteries and more ruggedized scooters,

which will circle back on at some point in the future. We're looking at every technology you could imagine. If it makes sense from an economic standpoint and ideally improves the writer experience, then it's a no-brainer, end quote. That's all for today. Thanks for the kind wishes on our podcast anniversary yesterday. We've got big news to announce tomorrow, at least I hope so,

still working out some of the last minute kinks. But guess what? Many of you have asked for it. So if all goes well, tomorrow we're going to roll out an ad-free podcast feed. Details to come tomorrow. Talk to you then.