Tech Brew Ride Home - Wed. 04/07 – TLDR: Coinbase Is A Helluva Business

Starting point is 00:00:00 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 ride home for Wednesday, April 7th, 2021. I'm Brian McCullough today. Coinbase has revealed the numbers behind their business and they are brain exploding emoji. A big Patreon raise shows the money bags are getting serious about this creator economy thing.

Starting point is 00:00:51 Nobody is crying at Plaid over that failed visa merger. There's a new king of the gaming laptop hill and I try my best to unravel the twisted tale of the latest Facebook data scandal. Here's what you missed today in the world of tech. As promised, Coinbase has reported its quarterly earnings ahead of next week's direct listing on the stock market. And the TLDR is they have a great business. I mean, they have a great business, quoting decrypt. Coinbase announced its 2021 first quarter earnings on Tuesday, revealing that the crypto giant made a profit of between $730,30 million and $800. million on revenue of approximately $1.8 billion. The results amounted to a blockbuster quarter for

Starting point is 00:01:42 Coinbase, eclipsing its performance for the entire previous year, end quote. Let me repeat that last line. Their first quarter of this year was better than all of last year. Also, let me point out those margins. Profit of $800 million on $1.8 billion in revenue. That's Amazing. They had trading volume of $335 billion, so there you go. As long as crypto is hot, they can make bank easily. And they have 56 million users, which is a lot. But when you consider that they believe everyone will be into crypto someday, clearly there's plenty of room for growth. They're not even at 100 million users. Let me quote a tweet thread from Romine Scheth about these numbers, quote,

Starting point is 00:02:37 those user numbers are larger than almost every global bank, every payment gateway, including Square, Venmo, etc., every major stock trading platform, including Robin Hood. He then goes on, quote, margin profile. NASDAQ did around 48% net income margins in 2020. ICE, which is the owner of the NYSE, did around 33% of net income margins in 2020. so Coinbase has eclipsed both with materially better profitability. NASDAQ did $2.9 billion in revenue in 2020 on 48% profit margins.

Starting point is 00:03:15 ICE did $6 billion in revenue in 2020 on 33% profit margins. So Coinbase is bigger than both exchanges. The idea that another exchange could buy Coinbase at this point or become the de facto for crypto is now officially out the window. So, Coinbase owns the space. Coinbase is the ultimate pick and shovels business. If there's a gold rush, the price of gold may go up or down, but picks and shovels are always a wonderful way to make money. That's Coinbase in a nutshell, end quote.

Starting point is 00:03:48 I've heard a lot of people say that Coinbase hitting public markets is sort of like the Netscape IPO moment for crypto, the event that validates the entire space. And hopefully, this is exactly what we'll talk about tonight in a Twitter space. with Romine Scheth himself at 9 p.m. Eastern time. But until then, I'll leave you with the small irony that the biggest business yet built in the crypto space is sort of antithetical to the whole idea of crypto. It's a completely centralized marketplace. It's an interesting raise sort of day. Patreon has raised $155 million in a series F led by Tiger Global Management at a $4 billion valuation, which is up. quite significantly from the $1.2 billion valuation that it got just back in September. What does this

Starting point is 00:04:43 mean? I think it means that the big money people are getting serious about this whole idea of the creator economy. Patreon has been around for years, and I can remember not too long ago people poo-pooing it saying that it was a neat little company, but also a niche little company, not a company that they thought could ever achieve true scale. I guess the thinking on that has changed, quoting the Wall Street Journal. Jack Conte, Patreon's chief executive and co-founder, said there was already a changing tide in the way creators were connecting with their audiences. The pandemic accelerated it. The platform, which has drawn the likes of Grammy-winning guitarist Steve Vi, and the True Crime Obsessed podcast, has seen rapid growth in the past year and now has more than 200,000 creators

Starting point is 00:05:31 supported by some 7 million fans, company officials said. Patreon, which isn't profitable at this point, offers three levels of membership for creators and takes a 5 to 12% cut of the monthly income earned plus a payment processing fee, end quote. One of the things to watch going forward here is that take rate percentage just mentioned. Remember, substack's take is in that range around 10%,

Starting point is 00:05:57 and that seems to be the range that a lot of these creator platforms are settling into, but the big platforms that are entering the space, platforms like Twitter, have been promising to reduce that take rate, possibly reduce it down to nothing in some cases. So will there be pressure on the margins of these creator platforms if there end up being so many of them? Speaking of creator platforms, sources are telling Bloomberg that Clubhouse is in talks to raise a new funding, round from investors at a valuation of around $4 billion, which is interesting because their last round in January saw them valued at $1 billion. It's also interesting because the whispers around

Starting point is 00:06:48 the valley as of late have been that Clubhouse's growth has stalled out slightly. I definitely feel like the buzz around Clubhouse has stalled out a bit. Though remember, they're not even on Android yet. So who knows, there's probably tons of room for them to. continue to grow as well. And what will also be soups interesting will be to see if Andresen Horowitz joins this round. No word on that yet. But it will be telling one way or another if they decide to triple down on Clubhouse, especially so soon after doubling down on them. And finally, for the raises today, remember Plad when they had that acquisition from Visa fail because the government signaled it might be blocked? I said at the time, mark my words.

Starting point is 00:07:38 No one at Plaid will be crying over this scuppered deal because the price of the deal at the time, $5.3 billion, seemed absurdly low to me in this day and age of fintech startups being hot. And fast forward to today, Plaid has raised a $425 million Series D at a valuation of $13.4 billion. This would be more then, quoting TechCrunch. When the Visa-Plad deal did finally grind to a halt in the face of regulatory scrutiny, there was chatter amongst startup and venture folks that the sale dying out was a good thing. Why? Because Plaid had had a great 2020 and was generally agreed to be worth far more than what Visa had agreed to pay. The startup's series devaluation confirms the sentiment, and it wasn't merely altimeter that was willing to put capital into the company at its new valuation.

Starting point is 00:08:32 The group is joined by two more new investors, Silver Lake partner, and Ribbet Capital. Silver Lake is a private equity Leviathan with dozens of billions of dollars under management, while Ribbitt is known for its myriad fintech bets. In short, Plad has picked up a hybrid of investor scale, late stage guidance, and fintech acumen in a single round. A number of prior investors also put capital into the round, end quote. Yeah, nobody crying at Plaid. Given all of that raise news, let me take the opportunity to share these numbers with you. According to CrunchBased data, global venture funding reached $125 billion in the first quarter of this year, which of course just ended last week. That's up 94% year over year and represents an all-time record high, quoting Crunch Base.

Starting point is 00:09:30 Global funding last quarter hit an all-time high, marking the first single quarter to reach above $100 billion. according to crunch-based data. Alongside the investment boom, new unicorn startups, those private companies valued at $1 billion or more, were created at a rapid pace in the first quarter with an average of close to two new unicorns per working day well above all previous quarter counts, end quote. Let's do a hard gear shift to gadget news.

Starting point is 00:10:04 Gamers, I have a new laptop for you to dream of. Alienware has announced the M-50svety. R5 gaming laptop, starting at $2,2,230. That comes with AMD Risen 5,000 H-Series CPUs, the first alienware laptop since 2007 to make use of AMD processors, quoting the verge. In case you haven't noticed, AMD's processors have been on a tear in the past year, delivering great performance without compromising on efficiency when you aren't gaming. This is just the latest company to join along the likes of Asu,

Starting point is 00:10:40 Lenovo, and even Dell with its G515 SE to name a few. AMD touting laptops are already among some of the best gaming laptops you can buy, yet Alienware is possibly the most well-known gaming brand to go AMD yet. The base configuration of the M15R5 has the Octacore Rhizan 7-5800H processor and NVIDIA's RTX 3060. You can upgrade to the Ryzen 9, 5900 HX octacore processor. and the RTX 3070. Both the RTX 360 and 370 have a total graphics power level of 115 watts,

Starting point is 00:11:19 with 10 watts of extra boost available for up to 125 watts of maximum graphics power. Interestingly, the 3060 has a higher base and boost clock, base of 1387 megahertz and boost of 1,702 megahertz, then the 3070 option does, which has a base of 1110 megahertz and a boost of 1,500770. 60 megahertz. Either way, these are some of the highest clock speeds we've yet seen in a reasonably thin 2021 gaming laptop. Alienware is pushing the boost clocks nearly all the way to the ceiling, and it's great that it's transparent about these power specs since Nvidia now requires that manufacturers share it. Screen-wise, the R5 can be configured with a range of high refresh rate

Starting point is 00:12:01 displays. The base FHD screen has a 3-millimeter response time screen with a 165-hhertz refresh rate and your options for upgrading are either a dimmer 300-knit 1080P panel with a faster 360 hertz refresh rate, one millisecond response time, and only 100% SRGB color coverage, or a brighter 400-knit Q-QD screen that has a 240-hertz refresh rate, one millisecond response time, 100% DCIP3 color gamut, plus G-Sync, which should deliver the smoothest experience, even if you. your frame rate dips, end quote. Finally today, let's end with the story that's actually been at the top of tech meme all day, but I saved it for the end today because, well, it's confusing and it's also exhausting. You would think that after all these years, I'd have a better nose for Facebook

Starting point is 00:13:03 scandals. They tend to come irregularly like storms do, but you can bet you'll get another one eventually. So maybe I'm just a little rusty since it has been a while since we had a new Facebook scandal. But that whole kerfuffle around the 533 million account records leaking, including phone numbers that I brought up yesterday, as I said, I kind of bought the Facebook spin that this was old news. Old bad news, but old news nonetheless, that big scraping incident from 2019 that we already knew about. Well, I guess maybe that was wrong because this new scandal continues to be a rolling thing into its second day. Maybe this is why. quoting Wired. Facebook's initial response was simply that the data was previously reported on in

Starting point is 00:13:50 2019 and that the company patched the underlying vulnerability in August of that year. Old news. But a closer look at where exactly this data comes from produces a much murkier picture. In fact, the data, which first appeared on the criminal dark web in 2019, came from a breach that Facebook did not disclose in any significant detail at the time and only fully acknowledged Tuesday evening in a blog post attributed to product management director Mike Clark. One source of the confusion was that Facebook has had any number of breaches and exposures from which this data could have originated. Was it the 540 million records, including Facebook IDs, comments, likes, and reaction data

Starting point is 00:14:29 exposed by a third party and disclosed by the security firm Upguard in April 2019? Or was it the 419 million Facebook user records including hundreds of millions of phone numbers, names and Facebook IDs scraped from the social network by bad actors before a 2018 Facebook policy change that were exposed publicly and reported by TechCrunch in September of 2019. Did it maybe have something to do with the Cambridge Analytica third party data sharing scandal of 2018, or was this somehow related to the massive 2018 Facebook data breach that compromised access tokens and virtually all personal data from about 30 million users? In fact, the answer appears to be none of the above.

Starting point is 00:15:08 As Facebook eventually explained in background comments to Wired and in its Tuesday blog, the recent public trove of 533 million records is an entirely different data set that attackers created by abusing a flaw in a Facebook address book context import feature. Facebook says it patched the vulnerability in August 2019, but it's unclear how many times the bug was exploited before then. The information from more than 500 million Facebook users in more than 106 countries, contains Facebook IDs, phone numbers, and other information about early Facebook users like Mark Zuckerberg and U.S. Secretary of Transportation Pete Buttigieg, as well as the European

Starting point is 00:15:48 Union Commissioner for Data Protection, Didier Rinders. Other victims include 61 people who list the Federal Trade Commission and 651 people who list Attorney General in their details on Facebook. The closest Facebook came to acknowledging the source of this breach previously was a comment in a fall 2019 news article. That September, Forbes reported on a related vulnerability in Instagram's mechanism to import contacts. The Instagram bug exposed users' names, phone numbers, Instagram handles, and account ID numbers. At the time, Facebook told the researcher who disclosed the flaw that the Facebook security team was, quote, already aware of the issue due to an internal finding, end quote. A spokesperson told Forbes at the time, quote, we have changed the contact importer

Starting point is 00:16:34 on Instagram to help prevent potential abuse. We are grateful to the researcher who raised the issue, end quote. Forbes noted in the September 2019 story that there was no evidence that the vulnerability had been exploited, but also no evidence that it had not been. In its blog post today, Facebook links to a September 2019 article from CNET as evidence that the company publicly acknowledged the 2019 data exposure, but the CNET story refers to findings from a researcher who also contacted Wired in May 2019 about a trove of Facebook data, including names and phone numbers. The leak the researcher had learned about was the same one TechCrunch reported on in September 2019, and according to the September 2019 CNET story, it is the same one CNET was

Starting point is 00:17:15 describing. Facebook told TechRunch at the time, quote, this data set is old and appears to have information obtained before we made changes last year, 2018, to remove people's ability to find others using their phone numbers, end quote. Those changes were aimed at reducing the risk that Facebook's search and account recovery tools could be exploited for mass scraping, end quote. Did you follow any of that because I just read it and I didn't. But the TLDR is this. If I understand it, this is a new trove of data, at least partially, from a totally different data leak that Facebook was sort of whistling past the graveyard about and people just suddenly woke up about this and put two and two together. And that's why this story persists. It's kind of not old news

Starting point is 00:18:01 after all. As I mentioned earlier in the show, be sure to check Twitter tonight at 9 p.m. Eastern time, 6 p.m. Pacific to hear Chris Messina and I talk about this coin-based stuff and a bunch of other things from this week. I assume anyone that follows me on Twitter will be able to see and join the room. But if you don't see it, actually let me know because I'm curious to learn about that. I'm at Brian MCC, as you'll recall. Come and raise your hand. Talk to you tomorrow.

Tech Brew Ride Home - Wed. 04/07 – TLDR: Coinbase Is A Helluva Business

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