Tech Brew Ride Home - Wed. 02/05 – Shein And Temu In Deep Trouble

Episode Date: February 5, 2025

Temu And Shein got a reprieve from the USPS, but they are still in deep, deep trouble. I’ll explain why. Alphabet earnings disappoint their investors but cheer investors of Nvidia. Google and Meta going in different directions when it comes to AI. And why are people increasingly refusing to pay ransomware? Sponsors: Acorns.com/ride Links: USPS Resumes Accepting Packages From China After Unexpected Suspension (Wired) Google expects to spend $75 billion this year on the AI race (The Verge) Google drops pledge not to use AI for weapons or surveillance (The Washington Post) Meta says it may stop development of AI systems it deems too risky (TechCrunch) After a bruising year, Sonos readies its next big thing: a streaming box (The Verge) 35% Year-over-Year Decrease in Ransomware Payments, Less than Half of Recorded Incidents Resulted in Victim Payments (Chainalysis) Apple Launches New 'Invites' App (MacRumors) 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 Techmeme right home for Wednesday, February 5th, 2025. I'm Brian McCullough today. Temu and Sheean got a reprieve from the USPS, but they are still in deep, deep trouble. I'll explain why. Alphabet earnings disappoint their investors, but cheer investors of Nvidia.

Google and meta are going in different directions when it comes to AI, and why are people increasingly refusing to pay ransomware? Here's what you missed today in the world of tech. The United States Postal Service this morning said it will resume accepting mail from China and Hong Kong. after suspending service and is working with customs and border protection on the new China tariffs. I told you on Monday that if the tariffs against China held up, this was potentially a huge issue for the likes of Sheehan, Temu, and Ali Express. While the USPS had halted all inbound parcels from China and Hong Kong after President Trump ended the de minimis exception, I told you about, sending the e-commerce industry into chaos. Here's why that was potentially a big deal,

quoting the Financial Times. The U.S. Postal Service gave no real. reason for its decision to suspend packages temporarily, which would also cover Hong Kong, saying only that it would still accept flat parcels and letters. Customs agents now have to check and clear packages mailed from China following Trump's decision to scrap the de minimis rules, exempting shipments under $800 from duties. The changes will drive up sharply the cost of the four million parcels a day arriving in the U.S. under the de minimis exemption, about 30% of which come from Chinese e-commerce groups Temu and Sheen, with four Blights disrupted. The new tariffs threatened to hit China's burgeoning international e-commerce trade at a moment when Beijing is relying on exports to offset weak demand in its domestic economy, end quote.

And quoting Wired. Daniel, the owner of a trucking company based in Alberta, Canada, who asked to only use his first name for privacy reasons, tells Wired that two of its company's trucks were turned away at the U.S. border in New York and Montana today because they contained packages originally from China. After speaking with a U.S. Customs and Border Protection Agent in Montana, the company was able to get a third truck into Washington State by removing all packages from China, Daniel says. We talked to the Montana CBP cargo supervisor and they said everything is from the higher up, Daniel says. A lot of trucks were actually turned away today at the border we were told by our drivers and a lot of officers were checking the trucks and questioning drivers like, are you sure there are no made-in-China items in there? This is your last chance. They were actually going through the trucks and randomly checking the packages. end quote. Previously, packages like the ones Daniel's company often handles could move freely

across the border. Trump's executive order, though, not only imposes an additional 10% tariff on goods from China, but also ends a key import tax exemption, one that has enabled the rise of Chinese e-commerce platforms like Temu and Sheehan. Known as de minimis, the rule waives import duties for small packages valued at less than $800 shipped into the U.S. originally intended to exempt personal gifts and other items that Americans send home from trips abroad. It has since allowed foreign businesses to more easily sell goods to U.S. consumers without needing to worry about paying import taxes. The number of day-minimus packages has soared in recent years as the e-commerce market has become more global, making it difficult, if not impossible, for customs and border

protection to keep track of all the parcels flowing into the U.S., end quote. Yeah, here's the other thing. Even if you were like, well, who cares? I could live without Temu and Sheehan. Except there are ripple effects. Temu spent $3 billion marketing last year. Sheehan ran 80,000 ads across Google's platforms last year. These are huge players in the online advertising market. So if they stop spending because they can't sell, that could have an impact on the bottom line at places like Meta and Alphabet. Recapping Alphabet's earnings in about two minutes. Alphabet reported Q4 revenue up 12% year-on-year to $96.47 billion. Net income up 28% year-on-year to 26.54 billion. Services revenue up 10% to 84%.

point one billion and other bets revenue down 39% to 400 million. You know, I like to keep track of how YouTube is doing because it would be such a monster business on its own. YouTube ad revenue was up 14% to hit $10.47 billion just in the quarter. Google Cloud revenue was up 30% to $11.96 billion. So at this point, Google Cloud and YouTube taken together are at a $110 billion annual revenue run rate. So, yeah, they finally found some big business beyond search. But what matters to Wall Street right now? CapEx spending. Alphabet said it expects 2025 CAPX to come in around $75 billion versus the $58 billion

that Wall Street was expecting. Thus, Alphabet being down 7% this morning in pre-market versus Nvidia being up almost 2%. Why? Wall Street hates that Google will be spending so much on Nvidia chips, but Wall Street loves that Google will be spending so much on Nvidia chips. Quoting the verge, capital expenditures have become a hot topic as of late as big tech companies race to build infrastructure to support their growing AI ambitions, and today's announcement from Alphabet is clearly meant to keep the company in that conversation.

Alphabet spent $32.3 billion on capital expenditures in 2023, so $75 billion in 2025 would be a big jump. And while Google's press release today doesn't specifically say that the upcoming capital expenditures are all for AI. Given the amount of money flowing into AI infrastructure across the industry, it seems likely that a good amount of the expense will go toward benefiting Google's AI work. AI continues to benefit Google's business as well. Google Cloud revenues are up 10% to $12 billion, which Google says is led by growth in Google Cloud platform across GCP products, AI infrastructure, and generative AI solutions. On today's investor call, CEO Sundar Pichai said that the company has very good ideas for native ad concepts in its Gemini AI assistant. He also teased that

Google plans to put new search experiences in front of users through the course of 2025, end quote. Google related, they have dropped language from their AI principles that said Google would not pursue AI applications, quote, likely to cause overall harm, such as for weapons and surveillance, quoting the Washington Post. The company's AI principles previously included a section listing for applications we will not pursue. As recently as Thursday, that included weapons, surveillance, technologies that, quote, cause or are likely to cause overall harm, and use cases, contravening principles of international law and human rights, according to a copy hosted by the Internet Archive. A spokesperson for Google declined to answer specific questions about

its policies on weapons and surveillance, but referred to a blog post published Tuesday by the company's head of AI Demis Hasabis and its senior vice president for technology and society James Manjika. The executives wrote that Google was updating its AI principles because the technology had become much more widespread and there was a need for companies based in democratic countries to serve government and national security clients. There's a global competition taking place for AI leadership within an increasingly complex geopolitical landscape. We believe democracies should lead in AI development guided by core values like freedom, equality, and respect for human rights. Hassabis and Manjika wrote, and we believe that companies, governments, and organizations sharing

these values should work together to create AI that protects people, promotes global growth, and supports national security, end quote. Google's updated AI principles page includes provisions that say the company will use human oversight and take feedback to ensure that its technology is used in line with, quote, widely accepted principles of international law and human rights. The principles also say the company will test its technology to mitigate unintended or harmful outcomes, end quote. Meanwhile, meta has defined the types of AI systems that it deemed, too risky to release, including ones capable of aiding in cybersecurity, chemical, and biological

attacks, quoting TechCrunch. As meta defines them, both high-risk and critical-risk systems are capable of aiding in cybersecurity, chemical, and biological attacks. The difference being that critical risk systems could result in a catastrophic outcome that cannot be mitigated in a proposed deployment context. High-risk systems, by contrast, might make an attack easier to carry out, but not as reliably or dependably as a critical risk system. Which sort of attacks are we talking about here? Meta gives a few examples like the automated end-to-end compromise of a best practice protected corporate-scale environment

and the proliferation of high-impact biological weapons. The list of possible catastrophes in Meta's document is far from exhaustive, the company acknowledges, but includes those that Meta believes to be the most urgent and plausible to arise as a direct result of releasing a powerful AI system. If meta determines a system is high risk, the company says it will limit access to the system internally and won't release it until it implements mitigations to, quote, reduce risk to moderate levels. If, on the other hand, a system is deemed critical risk, meta says it will implement unspecified security protections to prevent the system from being exfiltrated and stop development until the system can be made less dangerous, end quote. sources are telling the verge that Sonos will release an Android-based streaming box in the coming months, priced between $200 and $400 that combines content from Netflix, Max, and more.

So, you know, after the year from hell, I guess they're swinging for the fences. Quoting the verge, after the most tumultuous nine months in Sonos's history, the brand is trying to find its footing again. Even as the work continues to rehabilitate the company's beleaguered mobile app, Sonos is planning to take a big swing in a new product category. getting into video for the first time. In the coming months, Sonos will release a streaming player that sources tell me could cost between $200 and $400, a truly staggering price for its category.

I've seen images of the upcoming product which is deep into development and about as nondescript as streaming hardware gets. Viewed from the top, the device is a flattened black square and slightly thicker than a deck of trading cards. But the Android-based streamer, codenamed Pinewood, is designed to be more than just another competitor to the Apple TV 4K, Nvidia Shield, or Roku Ultra. Don't get me wrong, streaming is a huge focus for the product. Sources familiar with Pinewood tell me it has a beautiful interface,

despite the software being developed in partnership with a digital ads firm. Sonos plans to combine content from numerous platforms, including Netflix, Macs, and Disney Plus under a single unified software experience. Universal Search across streaming accounts will be supported. We've seen similar efforts to mask the fragmented nature of modern entertainment from Sonos's soon-to-be rivals, but I'm told this is a cornerstone of Pinewood's appeal. Sonos voice control will be integrated, and Pinewood will also ship with a physical remote control

that includes shortcuts for popular streaming apps. I see this as a welcome alternative to using your phone or voice to navigate around the software, which could grow tiring. The hardware's potential extends well beyond these features. According to people familiar with its development, Pinewood serves as an HDMI switch and has several HDMI ports with pass-through functionality. You'll be able to plug external devices like gaming consoles or 4K, Blu-ray players into it. Sonos engineers have been frustrated over the years by

unpredictable issues between its soundbars and certain TVs. These can include audio sync delays, brief signal dropouts, and other bugs that can prove challenging to reproduce, let alone fix. With Pinewood, Sonos aims to take greater control of the I.O. stack. The box will be able to wirelessly transmit lag-free TV audio to the company's soundbars and other Sonos products. In some cases, it could upgrade home theater sound beyond A TV's original capabilities. Pinewood also unlocks a capability that Sonos customers have been requesting for years. You'll be able to configure a genuine surround sound system using the company's other speakers. Instead of relying so heavily on a soundbar, you can create dedicated front, left, and right channels with, say, to Era 300s.

This will allow for far more advanced Dolby-Atmos setups, but Sonos is still finalizing exactly which speaker arrangements will be supported, end quote. In 2024, ransomware attackers received around $813.55 million in payments from victims, which is down 35% on 2023's record $1.25 billion. Down 35%. Why? More victims are refusing to pay the ransom, which I think is good news. Victims now feel that they have more power over their situation. I wonder what has happened to make that so. Quoting chain analysis, the total volume of ransom payments decreased Euro over year by approximately 35 percent, driven by increased law enforcement actions, improved international collaboration, and a growing refusal by victims to pay. In response, many attackers

shifted tactics with new ransomware strains emerging from rebranded, leaked, or purchase code, reflecting a more adaptive and agile threat environment. Ransomware operations have also become faster with negotiations often beginning within hours of data exfiltration. Attackers range from nation-state actors to ransomware-as-service operations, loan operators, and data theft extortion groups, such as those who extorted and stole data from Snowflake, a cloud service provider. Incident response data show that the gap between the amounts demanded and paid continues to increase. In the second half of 2024, there was a 53% difference between the two factors. Reporting from incident response firms suggest a majority of clients opt not to pay altogether,

which means the actual gap is larger than the below numbers suggest, end quote. Finally, today we had a couple of cute little product releases on yesterday's show, and here's one more. Apple yesterday debuted invites an app to help plan events like birthdays, graduations, and more, with Image Playground and writing tool tie-ins, quoting Mac Rumors. The app supports creating invitations that can be sent out to people. There are options to choose a background image from the Photos app. Choose one of Apple's built-in images or select an emoji background with font customization available. Apple automatically adds in information from the maps and weather apps so that invitees have all of the data they need for an event, such as weather conditions and directions.

Apple designed invites with Apple intelligence in mind. When creating an invite, there is an option to take advantage of Image Playground to create original images using text-based descriptions. Writing tools can also be employed to find the ideal phrasing for an invitation. People who receive invites can RSVP, and there is a built-in method that allows the sender to track who has responded. When the event happens, there's an option. to create a collaborative event soundtrack so everyone can contribute music and a dedicated shared album lets eventgoers see photos and videos and contribute their own. Invites is a ICloud Plus service, which means that it is available to ICloud Plus subscribers. ICloud Plus is priced starting at 99 cents per month, and it provides users with additional ICloud storage over the free 5 gigabytes that comes with any device. While anyone is able to respond to an invite that's sent out creating invites is limited to iCloud plus subscribers apple invites is available for all iphone models

that run ios 18 or later and the app can be downloaded from the app store for free end quote again just a fun little app and useful if you happen to be a subscriber i guess nothing more for you today talk to you tomorrow