Tech Brew Ride Home - Tue. 12/20 – An Old Crypto Mystery Resurfaces

Episode Date: December 20, 2022

Amazon settles two EU antitrust cases. An old crypto mystery resurfaces and dormant wallets spring back to life. TikTok will tell you why they recommended that video. Is growth at Mastadon a flood or a trickle? And Coinbase is now worth less than Doge. Sponsors: Storyblok.com/ridehome Microsoft's Worklab Podcast Links: Amazon Agrees to Settle EU Antitrust Cases, Avoiding Fines (WSJ) Bitcoin Addresses Tied to Defunct Canadian Crypto Exchange QuadrigaCX Wake Up (CoinDesk) TikTok’s new feature will tell you why a particular video appeared in your For You feed (TechCrunch) Apple to start making MacBooks in Vietnam by mid-2023 (NikkeiAsia) Netflix’s Ad-Supported Tier Was Its Least Popular Plan, Analytics Firm Estimates (WSJ) More than two million users have flocked to Mastodon since Elon Musk took over Twitter (The Verge) Magna to Buy Veoneer Vehicle Safety Unit for $1.5 Billion (Bloomberg) Silicon Valley start-ups race for debt deals in funding crunch (FT) Coinbase’s Value Is $1 Billion Below ‘Joke’ Token Dogecoin’s (Bloomberg) 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 Tuesday, December 20th, 2020. I'm Brian McCullough today. Amazon settles two EU antitrust cases and old crypto mystery resurfaces as dormant wallets spring back to life. TikTok will tell you why they recommended that video to you is growth at Mastodon, a flood or a trickle, and Coinbase is now worth less than Doge.

Here's what you miss today in the world of tech. All right, let's see if we can pull this off. If I don't say his name, maybe I won't invoke him, sort of Candyman style. We'll explain that at the end of the show. Amazon has agreed to settle two EU antitrust cases related to third-party sellers on its platform. Amazon won't be paying a fine because of the settlement and will adhere to the commitments made in the settlement for seven years, quoting the Wall Street Journal. As part of the deal, Amazon is committing to giving third-party sellers that use Amazon an equal shot at being selected as the default option for the buttons in Amazon's so-called buy-box and to qualify for its prime shipping program. The buy box contains the ad to basket and buy now buttons on the Amazon website.

The company will also abstain from using non-public data about sellers on its marketplace to compete against them. The deal settles charges the EU level two years ago against Amazon for allegedly violating competition law by using non-public information for merchants in its competition against them. The EU since then has been investigating potential charges related to the Bybox and Prime program. Amazon said Tuesday that it continues to disagree with several of the EU's allegations about its business practices, but engaged in a settlement to preserve its ability to serve customers and businesses in Europe, end quote. A different kind of crypto story for once. This is like an old-school crypto story,

the kind we used to have back in the early days of crypto. It's a mystery story, quoting CoinDesk. More than 100 Bitcoins tied to the defunct Canadian crypto exchange Quadringa were transferred out of cold wallets thought to be beyond anyone's control over the weekend after sitting dormant for more than three years. The company's bankruptcy trustee, Ernst & Young, did not initiate the transfers coin desk has learned. Quadringa CX went bankrupt in 2019 after the apparent death of founder and CEO Gerald Cotton. At the time of its collapse, Quadringa was believed to have over. thousands of customers nearly $200 million in various cryptocurrencies, a staggering failure for what was once Canada's largest crypto exchange. Ernst & Young, which is acting as the trustee for

Quadringa's estate, announced in February 2019 that it lost control of about 100 Bitcoin, after mistakenly sending the coins to Quadringa operated cold wallets that the Big Four Financial Services firm said it couldn't access. At the time, the Bitcoin was worth around $355,000 U.S. The Bitcoin in these addresses remained frozen until last Friday when the coins and all five addresses left between 652 p.m. Eastern Time and 7.14 p.m. Eastern Time. Magdalena Gronoska, a bankruptcy inspector and member of Quadringa's creditor committee, said the funds were not moved by Ernst & Young. In total, 104.34 BTC worth around $1.7 million at press time has left Quadringa's wallets. Many of these funds appear to have

have been distributed to different wallets. Bankruptcy inspectors are aware Quadringa funds have moved. Thank you to blockchain investigators for following flows. We're working to gather more information, and I hope we are able to recover stolen funds, Grinaska said. A spokesperson for EY and an attorney with Miller Thompson, which represents Quadringa's creditors, did not return requests for comment. In early reports, Ernst & Young said that Cotton, as the sole proprietor of Quadringa in its waning days, was the only person who could access its funds. Investigators claim that Cotton did not maintain clear records, part of why the effort to recover customer funds is dragging into a fourth year, end quote.

In a first, TikTok has begun telling users why a video was recommended for them in the 4-U feed, such as previous interactions or followed accounts, etc., quoting TechCrunch. To understand why a particular video has been recommended to you in your 4-U feed, you can now tap on the Share panel and select the question mark icon called Why This Video. From there, you can see reasons why a particular video was recommended to you. You may be informed that you saw a particular video because of your interactions, such as content you watch, like or share, comments you post, or searches, or you may be told that you have been shown the video because of accounts you follow.

TikTok says you may also be informed that you were shown a particular video because it was posted recently in your region or that the content is popular in your region. This feature is one of many ways we're working to bring meaningful transparency to the people who use our platform and builds on a number of steps we've taken towards that goal, the company said in a blog post. Looking ahead, we'll continue to expand this feature to bring more granularity and transparency to content recommendations, end quote. Also a first. Sources are saying that Apple plans to move some MacBook production to Vietnam in 2023, asking Foxcon to begin as early as May to further diversify Apple supply chain beyond China.

quoting Niki Asia. Apple has been working to add production sites outside of China for all of its major product lines, but doing so for the final one, the MacBook has taken longer due to the complex supply chain needed for making laptop computers. After the MacBook production shifts, all of Apple's flagship products basically will have one more production location beyond China. iPhones in India and MacBooks, the Apple Watch and iPads in Vietnam. One person with direct knowledge of the matter told Niki Asia, what Apple wants now is an out-of-China option for at least part of production for all of its products, end quote. The company has been working on plans to move some MacBook manufacturing to Vietnam for nearly two years and has set up a test production line in the

country, Nika Asia reported earlier. Apple makes between 20 million and 24 million MacBooks annually, with production spread between bases in the Chinese cities of Chengdu in Sichuan province and Shanghai. The shift to Vietnam comes amid not only rising geopolitical tensions, but also production disruptions caused by China's zero-COVID policies, and, uncertainty from their sudden loosening in recent weeks. For China, the loss of its lock-on MacBook production symbolizes the broader weakening of its position as the world's factory. Top electronics makers from Apple, HP and Dell to Google and meta, have all made at least some plans to ship production and sourcing away from China since former U.S. President Donald

Trump started a terrafore against the country, end quote. More data on how Netflix is doing with that whole pivot-to- ads thing. According to Antenna, of Netflix's U.S. signups in November were for its ad tier. Fifty-seven percent of subscribers to the ads plan were rejoining or were new sign-ups, while 43 percent were users that were downgrading from the subscription plan. So does that mix work for Netflix? It was the least popular plan selected over this period by users. But then Netflix doesn't exactly want everyone to switch over. They only want customers who they otherwise aren't making money from to join the ad tier. So it's a good sign, I guess, if more new users are signing up for ad-supported than existing users are downgrading to it, quoting the journal.

The goal for streaming services that launch lower-cost ad-supported plans typically is to recruit as many new users as possible while minimizing those who trade down from more expensive plans. Warner Brothers Discovery-owned HBO Max, which launched its own $9.99 a month ad-supported plan in June 2021, had stronger early results, according to Antenna. HBO Max's ad-supported plan accounted for 15% of new U.S. signups in the first month, and only 14% of the new customers were downgrading from its premium tier. A Netflix spokeswoman said there were inaccuracies in Antenna's figures, quote, it's still very early days for our ad-supported tier, and we're pleased with its launch and engagement, as well as the eagerness of advertisers to partner with Netflix, she said.

Advertising for us is crawl, walk, run. We're definitely crawl right now, said co-chief executive Ted Sarandos earlier this month at an investor conference. Netflix hasn't publicly forecast how many new customers it expects the new plan to draw. By the end of November, 0.2% of Netflix subscribers in the U.S. were on the ad-supported plan, antenna estimated. The streaming giants overall customer additions in the U.S. in November were lower than they were in October, antenna found. The new plan thus far is not moving the needle. In boosting the average revenue Netflix gets from each subscriber, said Jonathan Carson, co-founder and chief executive of Antenna. Is this going to drive new incremental growth? It's super early,

he said, end quote. But then, you know, numbers are funny things. It all depends on how you parse them. For example, Mastodon CEO Eugen Rochko says that that social network reached two and a half million monthly active users in November up from around 300,000 in October, as Twitter users fled the service. So like those Netflix numbers, does that sound good to you? Or is this actually bullish for Twitter that not that many people have jumped ship? Quoting TechCrunch, Rochko sounds confident in Mastodon's future, quote, understanding that freedom of the press is absolutely essential for a functional democracy. We are excited to see Mastodon grow and become a household name in newsrooms across the world, and we are committed to continuing to improve our software to face up to new challenges that come with rapid growth and increasing demand, he wrote, end quote. but David Withheimer shows why numbers are often in the eye of the beholder by tweeting, quote, Mastodon grew 750% in a single month and now has roughly 0.75% of Twitter's monthly active users.

Scaling social is hard, end quote. Indeed, like those Netflix numbers, is being less than 1% of Twitter's monthly active users, a sign of the beginning of a transition? Is this the sign of crawling before walking, or is it just, a crawl. Auto parts maker Magna has agreed to acquire a driver assistance unit from SSW partners for about $1.5 billion in cash and expects the combined sales of this unit to reach $3 billion in 2024. I'm covering this because it's kind of unclear where auto tech is at the moment. Recent headlines have made it seem like self-driving technology is in the middle of something of a washout, but that doesn't mean there's no value to this tech. if you were to, say, pull back from full self-driving, quoting Bloomberg.

Carmakers and suppliers have been fine-tuning their approach to self-driving and driver-assistance systems after struggling to deliver meaningful progress on deploying robotaxies on public roads. Volkswagen and Ford last month pulled their support from self-driving firm Argo, after pouring billions into the startup. Other carmakers like Tesla have fallen short on self-driving goals. Magnus deal follows Qualcomm's partnering with Private Equity Group SSW last, year to take Vionir private for $4.5 billion. The U.S. chipmaking giant took the Arriver Autonomous Driving Software Operation, while SSW worked alongside Vionnier management to buy

the rest of the Swedish company with plans to sell it onwards, end quote. Sign of the Times, according to the Financial Times, a drop in venture capital deals and a slowdown in the IPO market are pushing tech startups to debt-based options, as opposed to raising more equity rounds. Pre-Quinn shows new VC deals fell 42% year-over-year to $286 billion in the period from January to November of this year. Quote, leading startups have been aggressively cutting costs, creating a wave of layoffs across the tech sector. Still, a growing number of companies are running out of cash and are seeking more creative funding arrangements, according to interviews with VCs, entrepreneurs,

pension funds, and bankers. Company founders have entered into debt-focused deals, such as bridge loans, structured equity, convertible notes, participating bonds, and generous liquidation preferences. These moves are designed to avoid a dreaded down-round, accepting funding at a far lower valuation than a company had previously secured. Everyone is taking corrective action, said one investor based on Sand Hill Road, the California thoroughfare that is home to many of Silicon Valley's top venture capital groups from Sequoia Capital to Andreessen Horowitz. As the market route looks set to continue into next year. This person said that even founders of well-capitalized tech groups have had to ask, what are the adjustments we need so we can live longer? How can we punt financing

from next year into 2024? End quote. Among the largest debt deals this year is Arctic Wolf, a cybersecurity company valued at $4.3 billion, and backed by Al Rock Capital, which raised a $400 million convertible note in October twice as much as its largest equity financing. Softbank-backed delivery app GoPuff raised a $1 billion convertible note in March and has explored plans to borrow more since then, despite raising more than $2 billion last year, which had boosted its valuation to $15 billion by mid-2020. These deals come with a conversion premium, which allows their backers to convert shares at a higher price than an eventual IPO. Such deals represent a bet that the company will trade higher after going public. convertibles kick the can down the road, said Chris Ev Damon, a private company's investor at Bally Gifford. They are mostly being led by existing investors who are saying, we also don't want to get into this unpleasant valuation discussion right now, end quote.

Finally today, as ever with stories like this, I take no pleasure in telling you about this, but again, it is a real sign of the times. As of last night, Coinbase's market cap is $1 billion less than the market cap of Dogecoin, quoting Bloomberg. The exchange now has about $8 billion in market capitalization, while the value of Dogecoin originally created as a joke in 2013 is topping $9 billion. The measurement does not necessarily reflect the intrinsic worth of those projects, but it may show how a meme coin can outperform the shares of a major U.S.-based exchange amid a highly volatile market. Coinbase has been among the hardest hit crypto firms as investors yank coins off exchanges or exit the asset class as a whole. The exchange has laid off more than 18% of its workforce, or the equivalent of roughly 1,200 people this year. Chief Financial Officer Alisa Haas said the firm is preparing for 2023 with a more conservative bias. Coinbase is tied to the fortunes of the broader

crypto market, said Michael Sufi, partner at crypto trading firm Dexterity Capital. Dogecoin has no real connection to the macro, but instead is driven almost primarily by headlines and hype. Retail investors seem to be hungry for one last pop, end quote. Coinbase shares have tumbled by about 86% in 2022 and dropped 3.9% to a record low of $35.17 in Monday in New York, end quote. We did it, everybody. We went an entire episode without saying the words Elon Musk. I know, I just broke that by saying that, but it was a close-run thing, because in the that last story, I could have mentioned how Doge has rebounded in price ever since Elon took over Twitter. But still, let's chalk this up as a win for my sanity. Nonetheless, day two, obviously,

of my voice still recovering from my food poisoning. Talk to you tomorrow.