Today, Amazon Web Services is a mainstay in the cloud infrastructure services market, a $60 billion juggernaut of a business. But in 2008, it was still new, working to keep its head above water and handle growing demand for its cloud servers. In fact, 15 years ago last week, the company launched Amazon EC2 in beta. From that point forward, AWS offered startups unlimited compute power, a primary selling point at the time.
EC2 was one of the first real attempts to sell elastic computing at scale — that is, server resources that would scale up as you needed them and go away when you didn’t. As Jeff Bezos said in an early sales presentation to startups back in 2008, “you want to be prepared for lightning to strike, […] because if you’re not that will really generate a big regret. If lightning strikes, and you weren’t ready for it, that’s kind of hard to live with. At the same time you don’t want to prepare your physical infrastructure, to kind of hubris levels either in case that lightning doesn’t strike. So, [AWS] kind of helps with that tough situation.”
An early test of that value proposition occurred when one of their startup customers, Animoto, scaled from 25,000 to 250,000 users in a 4-day period in 2008 shortly after launching the company’s Facebook app at South by Southwest.
At the time, Animoto was an app aimed at consumers that allowed users to upload photos and turn them into a video with a backing music track. While that product may sound tame today, it was state of the art back in those days, and it used up a fair amount of computing resources to build each video. It was an early representation of not only Web 2.0 user-generated content, but also the marriage of mobile computing with the cloud, something we take for granted today.
For Animoto, launched in 2006, choosing AWS was a risky proposition, but the company found trying to run its own infrastructure was even more of a gamble because of the dynamic nature of the demand for its service. To spin up its own servers would have involved huge capital expenditures. Animoto initially went that route before turning its attention to AWS because it was building prior to attracting initial funding, Brad Jefferson, co-founder and CEO at the company explained.
“We started building our own servers, thinking that we had to prove out the concept with something. And as we started to do that and got more traction from a proof-of-concept perspective and started to let certain people use the product, we took a step back, and were like, well it’s easy to prepare for failure, but what we need to prepare for success,” Jefferson told me.
Going with AWS may seem like an easy decision knowing what we know today, but in 2007 the company was really putting its fate in the hands of a mostly unproven concept.
“It’s pretty interesting just to see how far AWS has gone and EC2 has come, but back then it really was a gamble. I mean we were talking to an e-commerce company [about running our infrastructure]. And they’re trying to convince us that they’re going to have these servers and it’s going to be fully dynamic and so it was pretty [risky]. Now in hindsight, it seems obvious but it was a risk for a company like us to bet on them back then,” Jefferson told me.
Animoto had to not only trust that AWS could do what it claimed, but also had to spend six months rearchitecting its software to run on Amazon’s cloud. But as Jefferson crunched the numbers, the choice made sense. At the time, Animoto’s business model was for free for a 30 second video, $5 for a longer clip, or $30 for a year. As he tried to model the level of resources his company would need to make its model work, it got really difficult, so he and his co-founders decided to bet on AWS and hope it worked when and if a surge of usage arrived.
That test came the following year at South by Southwest when the company launched a Facebook app, which led to a surge in demand, in turn pushing the limits of AWS’s capabilities at the time. A couple of weeks after the startup launched its new app, interest exploded and Amazon was left scrambling to find the appropriate resources to keep Animoto up and running.
Dave Brown, who today is Amazon’s VP of EC2 and was an engineer on the team back in 2008, said that “every [Animoto] video would initiate, utilize and terminate a separate EC2 instance. For the prior month they had been using between 50 and 100 instances [per day]. On Tuesday their usage peaked at around 400, Wednesday it was 900, and then 3,400 instances as of Friday morning.” Animoto was able to keep up with the surge of demand, and AWS was able to provide the necessary resources to do so. Its usage eventually peaked at 5000 instances before it settled back down, proving in the process that elastic computing could actually work.
At that point though, Jefferson said his company wasn’t merely trusting EC2’s marketing. It was on the phone regularly with AWS executives making sure their service wouldn’t collapse under this increasing demand. “And the biggest thing was, can you get us more servers, we need more servers. To their credit, I don’t know how they did it — if they took away processing power from their own website or others — but they were able to get us where we needed to be. And then we were able to get through that spike and then sort of things naturally calmed down,” he said.
The story of keeping Animoto online became a main selling point for the company, and Amazon was actually the first company to invest in the startup besides friends and family. It raised a total of $30 million along the way, with its last funding coming in 2011. Today, the company is more of a B2B operation, helping marketing departments easily create videos.
While Jefferson didn’t discuss specifics concerning costs, he pointed out that the price of trying to maintain servers that would sit dormant much of the time was not a tenable approach for his company. Cloud computing turned out to be the perfect model and Jefferson says that his company is still an AWS customer to this day.
While the goal of cloud computing has always been to provide as much computing as you need on demand whenever you need it, this particular set of circumstances put that notion to the test in a big way.
Today the idea of having trouble generating 3,400 instances seems quaint, especially when you consider that Amazon processes 60 million instances every day now, but back then it was a huge challenge and helped show startups that the idea of elastic computing was more than theory.
On the heels of Heroes announcing a $200 million raise earlier today, to double down on buying and scaling third-party Amazon Marketplace sellers, another startup out of London aiming to do the same is announcing some significant funding of its own. Olsam, a roll-up play that is buying up both consumer and B2B merchants selling on Amazon by way of Amazon’s FBA fulfillment program, has closed $165 million — a combination of equity and debt that it will be using to fuel its M&A strategy, as well as continue building out its tech platform and to hire more talent.
Apeiron Investment Group — an investment firm started by German entrepreneur Christian Angermayer (known first for biopharmaceuticals, then investing and crypto, including playing a role in SoftBank investing in Wirecard) — led the Series A equity round, with Elevat3 Capital (another Angermayer firm that has a strategic partnership with Founders Fund and Peter Thiel) also participating. North Wall Capital was behind the debt portion of the deal. We have asked and Olsam is only disclosing the full amount raised, not the amount that was raised in equity versus debt. Valuation is also not being disclosed.
Being an Amazon roll-up startup from London that happens to be announcing a fundraise today is not the only thing that Olsam has in common with Heroes. Like Heroes, Olsam is also founded by brothers.
Sam Horbye previously spent years working at Amazon, including building and managing the company’s Business Marketplace (the B2B version of the consumer Marketplace); while co-founder Ollie Horbye had years of experience in strategic consulting and financial services.
Between them, they had also built and sold previous marketplace businesses, and they believe that this collective experience gives Olsam — a portmanteau of their names, “Ollie” and “Sam” — a leg up when it comes to building relationships with merchants; identifying quality products (versus the vast seas of search results that often feel like they are selling the same inexpensive junk as each other); and understanding merchants’ challenges and opportunities, and building relationships with Amazon and understanding how the merchant ecosystem fits into the e-commerce giant’s wider strategy.
Olsam is also taking a slightly different approach when it comes to target companies, by focusing not just on the usual consumer play, but also on merchants selling to businesses. B2B selling is currently one of the fastest-growing segments in Amazon’s Marketplace, and it is also one of the more overlooked by consumers.”It’s flying under the radar,” Ollie said.
“The B2B opportunity is very exciting,” Sam added. “A growing number of merchants are selling office supplies or more random products to the B2B customer.”
Estimates vary when it comes to how many merchants there are selling on Amazon’s Marketplace globally, ranging anywhere from 6 million to nearly 10 million. Altogether those merchants generated $300 million in sales (gross merchandise value), and its growing by 50% each year at the moment.
And consolidating sellers — in order to achieve better economies of scale around supply chains, marketing tools and analytics, and more — is also big business. Olsam estimates that some $7 billion has been spent cumulatively on acquiring these businesses, and there are more out there: Olsam estimates that there are some 3,000 businesses in the UK alone making more than $1 million each in sales on Amazon’s platform.
(And to be clear, there are a number of other roll-up startups beyond Heroes also eyeing up that opportunity. Raising hundreds of millions of dollars in aggregate, others have made moves this year include Suma Brands ($150 million); Elevate Brands ($250 million); Perch ($775 million); factory14 ($200 million); Thrasio (currently probably the biggest of them all in terms of reach and money raised and ambitions), Heyday, The Razor Group, Branded, SellerX, Berlin Brands Group (X2), Benitago, Latin America’s Valoreo and Rainforest and Una Brands out of Asia.)
“The senior team behind Olsam is what makes this business truly unique,” said Angermayer in a statement. “Having all been successful in building and selling their own brands within the market and having worked for Amazon in their marketplace team – their understanding of this space is exceptional.”
Heroes, one of the new wave of startups aiming to build big e-commerce businesses by buying up smaller third-party merchants on Amazon’s Marketplace, has raised another big round of funding to double down on that strategy. The London startup has picked up $200 million, money that it will mainly be using to snap up more merchants. Existing brands in its portfolio cover categories like babies, pets, sports, personal health and home and garden categories — some of them, like PremiumCare dog chews, the Onco baby car mirror, gardening tool brand Davaon and wooden foot massager roller Theraflow, category best-sellers — and the plan is to continue building up all of these verticals.
Crayhill Capital Management, a fund based out of New York, is providing the funding, and Riccardo Bruni — who co-founded the company with twin brother Alessio and third brother Giancarlo — said that the bulk of it will be going toward making acquisitions, and is therefore coming in the form of debt.
Raising debt rather than equity at this point is pretty standard for companies like Heroes. Heroes itself is pretty young: it launched less than a year ago, in November 2020, with $65 million in funding, a round comprised of both equity and debt. Other investors in the startup include 360 Capital, Fuel Ventures and Upper 90.
Heroes is playing in what is rapidly becoming a very crowded field. Not only are there tens of thousands of businesses leveraging Amazon’s extensive fulfillment network to sell goods on the e-commerce giant’s marketplace, but some days it seems we are also rapidly approaching a state of nearly as many startups launching to consolidate these third-party sellers.
Many a roll-up play follows a similar playbook, which goes like this: Amazon provides the marketplace to sell goods to consumers, and the infrastructure to fulfill those orders, by way of Fulfillment By Amazon and its Prime service. Meanwhile, the roll-up business — in this case Heroes — buys up a number of the stronger companies leveraging FBA and the marketplace. Then, by consolidating them into a single tech platform that they have built, Heroes creates better economies of scale around better and more efficient supply chains, sharper machine learning and marketing and data analytics technology, and new growth strategies.
What is notable about Heroes, though — apart from the fact that it’s the first roll-up player to come out of the U.K., and continues to be one of the bigger players in Europe — is that it doesn’t believe that the technology plays as important a role as having a solid relationship with the companies it’s targeting, key given that now the top marketplace sellers are likely being feted by a number of companies as acquisition targets.
“The tech is very important,” said Alessio in an interview. “It helps us build robust processes that tie all the systems together across multiple brands and marketplaces. But what we have is very different from a SaaS business. We are not building an app, and tech is not the core of what we do. From the acquisitions side, we believe that human interactions ultimately win. We don’t think tech can replace a strong acquisition process.”
Image Credits: Heroes
Heroes’ three founder-brothers (two of them, Riccardo and Alessio, pictured above) have worked across a number of investment, finance and operational roles (the CVs include Merrill Lynch, EQT Ventures, Perella Weinberg Partners, Lazada, Nomura and Liberty Global) and they say there have been strong signs so far of its strategy working: of the brands that it has acquired since launching in November, they claim business (sales) has grown five-fold.
Collectively, the roll-up startups are raising hundreds of millions of dollars to fuel these efforts. Other recent hopefuls that have announced funding this year include Suma Brands ($150 million); Elevate Brands ($250 million); Perch ($775 million); factory14 ($200 million); Thrasio (currently probably the biggest of them all in terms of reach and money raised and ambitions), Heyday, The Razor Group, Branded, SellerX, Berlin Brands Group (X2), Benitago, Latin America’s Valoreo and Rainforest and Una Brands out of Asia.
The picture that is emerging across many of these operations is that many of these companies, Heroes included, do not try to make their particular approaches particularly more distinctive than those of their competitors, simply because — with nearly 10 million third-party sellers today on Amazon globally — the opportunity is likely big enough for all of them, and more, not least because of current market dynamics.
“It’s no secret that we were inspired by Thrasio and others,” Riccardo said. “Combined with COVID-19, there has been a massive acceleration of e-commerce across the continent.” It was that, plus the realization that the three brothers had the right e-commerce, fundraising and investment skills between them, that made them see what was a ‘perfect storm’ to tackle the opportunity, he continued. “So that is why we jumped into it.”
In the case of Heroes, while the majority of the funding will be used for acquisitions, it’s also planning to double headcount from its current 70 employees before the end of this year with a focus on operational experts to help run their acquired businesses.
The digital transformation currently sweeping society has likely reached your favorite local restaurant.
Since 2013, Boston-based Toast has offered bars and eateries a software platform that lets them manage orders, payments and deliveries.
Over the last year, its customers have processed more than $38 billion in gross payment volume, so Alex Wilhelm analyzed the company’s S-1 for The Exchange with great interest.
“Toast was last valued at just under $5 billion when it last raised, per Crunchbase data,” he writes. “And folks are saying that it could be worth $20 billion in its debut. Does that square with the numbers?”
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Airbnb, DoorDash and Coinbase each debuted at past Y Combinator Demo Days; as of this writing, they employ a combined 10,000 people.
Today and tomorrow, TechCrunch reporters will cover the proceedings at YC’s Summer 20201 Demo Day. In addition to writing up founder pitches, they’ll also rank their favorites.
Even remotely, I can feel a palpable sense of excitement radiating from our team — anything can happen at YC Demo Day, so sign up for Extra Crunch to follow the action.
Thanks very much for reading; I hope you have an excellent week.
Senior Editor, TechCrunch
Image Credits: Ron Miller/TechCrunch
In August 2006, AWS activated its EC2 cloud-based virtual computer, a milestone in the cloud infrastructure giant’s development.
“You really can’t overstate what Amazon was able to accomplish,” writes enterprise reporter Ron Miller.
In the 15 years since, EC2 has enabled clients of any size to test and run their own applications on AWS’ virtual machines.
To learn more about a fundamental technological shift that “would help fuel a whole generation of startups,” Ron interviewed EC2 VP Dave Brown, who built and led the Amazon EC2 Frontend team.
Image Credits: Jasmin Merdan (opens in a new window)/ Getty Images
Most managers agree that OKRs foster transparency and accountability, but running a team effectively has different challenges when workers are attending all-hands meetings from their kitchen tables.
Instead of just discussing key metrics before board meetings or performance reviews, make them part of the day-to-day culture, recommends Jeremy Epstein, Gtmhub’s CMO.
“Strengthen your team by creating authentic workplace transparency using numbers as a universal language and providing meaning behind your team’s work.”
Image Credits: Getty Images under an Andrii Yalanskyi (opens in a new window) license
Many founders must overcome a few emotional hurdles before they’re comfortable pitching a potential investor face-to-face.
To alleviate that pressure, Unicorn Capital founder Evan Fisher recommends that entrepreneurs use pre-pitch meetings to build and strengthen relationships before asking for a check:
“This is the ‘we actually aren’t looking for money; we just want to be friends for now’ pitch that gets you on an investor’s radar so that when it’s time to raise your next round, they’ll be far more likely to answer the phone because they actually know who you are.”
Pre-pitches are good for more than curing the jitters: These conversations help founders get a better sense of how VCs think and sometimes lead to serendipitous outcomes.
“Investors are opportunists by necessity,” says Fisher, “so if they like the cut of your business’s jib, you never know — the FOMO might start kicking hard.”
Image Credits: MirageC (opens in a new window) / Getty Images
FischerJordan’s Deeba Goyal and Archita Bhandari break down the pandemic’s impact on alternative lenders, specifically what they had to do to survive the crisis, taking a look at smaller lenders including Credibly, Kabbage, Kapitus and BlueVine.
“Only those who were able to find a way through the complexities of their existing capital sources were able to maintain their performance, and the rest were left to perish or find new funding avenues,” they write.
Image Credits: Nigel Sussman (opens in a new window)
Customer engagement software company Freshworks’ S-1 filing depicts a company that’s experiencing accelerating revenue growth, “a great sign for the health of its business,” reports Alex Wilhelm in this morning’s The Exchange.
“Most companies see their growth rates decline as they scale, as larger denominators make growth in percentage terms more difficult.”
Studying the company’s SEC filing, he found that “Freshworks isn’t a company where we need to cut it lots of slack, as we might with an adjusted EBITDA number. It is going public ready for Big Kid metrics.”
Fifteen years ago this week on August 25, 2006, AWS turned on the very first beta instance of EC2, its cloud-based virtual computers. Today cloud computing, and more specifically infrastructure as a service, is a staple of how businesses use computing, but at that moment it wasn’t a well known or widely understood concept.
The EC in EC2 stands for Elastic Compute, and that name was chosen deliberately. The idea was to provide as much compute power as you needed to do a job, then shut it down when you no longer needed it — making it flexible like an elastic band. The launch of EC2 in beta was preceded by the beta release of S3 storage six months earlier, and both services marked the starting point in AWS’ cloud infrastructure journey.
You really can’t overstate what Amazon was able to accomplish with these moves. It was able to anticipate an entirely different way of computing and create a market and a substantial side business in the process. It took vision to recognize what was coming and the courage to forge ahead and invest the resources necessary to make it happen, something that every business could learn from.
The AWS origin story is complex, but it was about bringing the IT power of the Amazon business to others. Amazon at the time was not the business it is today, but it was still rather substantial and still had to deal with massive fluctuations in traffic such as Black Friday when its website would be flooded with traffic for a short but sustained period of time. While the goal of an e-commerce site, and indeed every business, is attracting as many customers as possible, keeping the site up under such stress takes some doing and Amazon was learning how to do that well.
Those lessons and a desire to bring the company’s internal development processes under control would eventually lead to what we know today as Amazon Web Services, and that side business would help fuel a whole generation of startups. We spoke to Dave Brown, who is VP of EC2 today, and who helped build the first versions of the tech, to find out how this technological shift went down.
The genesis of the idea behind AWS started in the 2000 timeframe when the company began looking at creating a set of services to simplify how they produced software internally. Eventually, they developed a set of foundational services — compute, storage and database — that every developer could tap into.
But the idea of selling that set of services really began to take shape at an executive offsite at Jeff Bezos’ house in 2003. A 2016 TechCrunch article on the origins AWS described how that started to come together:
As the team worked, Jassy recalled, they realized they had also become quite good at running infrastructure services like compute, storage and database (due to those previously articulated internal requirements). What’s more, they had become highly skilled at running reliable, scalable, cost-effective data centers out of need. As a low-margin business like Amazon, they had to be as lean and efficient as possible.
They realized that those skills and abilities could translate into a side business that would eventually become AWS. It would take a while to put these initial ideas into action, but by December 2004, they had opened an engineering office in South Africa to begin building what would become EC2. As Brown explains it, the company was looking to expand outside of Seattle at the time, and Chris Pinkham, who was director in those days, hailed from South Africa and wanted to return home.
When it comes to contactless, automated supermarket shopping, Imagr is backing a vision-based approach. But unlike Amazon Go stores, which use cameras and sensors to monitor the shopper as they walk in and out without scanning or paying at checkout, this New Zealand-based company thinks the only images that should be captured and analyzed are those of products going into a shopping cart.
The early-stage startup has invented tech that attaches to the trolley and uses cameras to detect and label products, adding them to a virtual cart where shoppers can checkout without ever interacting with a human or waiting in a line.
The contactless shopping space has been growing slowly for years, but more recently it has seen a boost in the pandemic era, where the less we share air with another human, the better. The value of transactions processed by frictionless checkout technology is estimated to reach $387 billion by 2025, according to a 2020 study from Juniper Research.
“With Covid, I think what you probably saw was a huge rush on supermarkets that really exposed a number of things retailers weren’t prepared for,” Will Chomley, CEO and co-founder, told TechCrunch. “It also really highlighted the fact that the end user wanted a solution that was completely frictionless, and it demonstrated that their infrastructure was not capable of handling that sort of thing. But it also showed that as staff started to refuse to turn up to work because they didn’t want to catch it, retailers needed solutions to be able to run these stores on less staff.”
Amazon Go’s automated convenience stores are expanding internationally, which Chomley says scares retailers who fear competition from the tech giant. At the same time, countries around the world are looking at going cashless, making this a ripe moment to focus on the frictionless checkout space.
Imagr, which recently had a pop-up shop in London to demonstrate its tech, is currently raising its Series A after it raised $9.5 million in seed funding at the end of November 2019 in a round led by Toshiba Tec. Chomley says Imagr has raised a total of $12.5 million to date, and as it raises its next round, is in the market for strategic partners rather than just VC money. The company says the tech is there, it just needs to scale.
The startup’s original smart shopping carts, complete with a halo on top that houses cameras and lights to detect products going in and out of the cart, can be seen in Japan’s 150 H2O Retailing stores, and the company says it has one contract due to go live this year in the U.K., as well as another two in the works and some other plans in Europe that can’t yet be confirmed publicly.
The haloed version of the shopping cart is not, however, the end product for Imagr. The plan is to roll out a more modular version by Q4, where instead of an entire cart, you get three pieces of hardware that attach to a standard cart. Each module will have its own set of lights and cameras, as well as a microprocessor where data is analyzed then sent up into the cloud and back to the shopper’s app and virtual cart with less than one second latency. Chloe Lamb, brand and communications lead, says Imagr has built a prototype that’s currently for sale.
Lamb also said the modular method just makes more sense when scaling. Smart carts can cost retailers between $5,000 and $10,000 per unit and require a lot of maintenance compared to simple shopping carts, which tend to cost retailers under $100 and will get beat up for years before being replaced. Amazon’s walk out tech is expected to cost retailers upwards of $1 million for installation and hardware, and that doesn’t include maintenance over time. Currently, the full system that it’s piloting is about $75,000 and includes 10 carts, an imaging station, a server station to run the system, full integration into a customer-facing store and Imagr support over the duration of the pilot. Imagr didn’t share how much its current model of trolleys cost versus its modular system, but says it’ll be a cheaper endeavor.
Shopic, an Israeli smart trolley company, also has a smaller piece of hardware that attaches to a cart, but the difference is it relies on a barcode scanner rather than computer vision.
“They have the hardware, but we have the software,” said Lamb. “Our vision/AI is better. Like, we’ve cracked the hardest part of it and it’s the AI, and for us it’s been figuring out how we put that in a smaller vessel.”
Shopic and Amazon aren’t the only other hopefuls in this space. Standard Cognition has copied Amazon’s style of walkout tech to distribute to stores. Earlier this year, the San Francisco-based company, which is now valued at $1 billion, raised $150 million in a Series C and announced a partnership with Circle K, the convenience store chain owned by Alimentation Couch-Tard Inc.
Aside from being kind of creepy – the all-seeing cameras may be trained on what you are buying but also are scanning the store, and you, at large – Lamb says the walkout tech that Standard is offering is incredibly expensive and not at all scalable in the short term.
“You couldn’t overhead that,” said Lamb. “The maintenance alone, having to have AI engineers on site, plus the storage capacity needed for all the data you collect. The server room you would need would be intense.”
Running the Imagr system in one store uses the same amount of data as streaming HD Netflix for a day, the company said.
“Shopping carts just made sense to me because everyone already used carts or baskets, they were what retailers were comfortable buying and what users were comfortable using,” said Chomley. “It didn’t require a huge overhaul of the systems. It’s the method of least disruption, faster payback period, better customer experience and no privacy concerns.”
And while it’s within the realm of possibility that the approach of above-head tech gets cheaper over time, it’s not as quick or clear of a path to market, claimed Chomley.
“Amazon proved the market; it proved that the end user wants something frictionless, and I think that’s really healthy for our business,” said Chomley. “But what Amazon did is they built a supermarket for the technology, whereas we have built technology for a supermarket. And that’s where retailers will say we can’t process 1.6 terabytes of information every second. We need something that fits into our store and our operations.”
As items go into Imagr’s shopping cart, they appear in the app’s virtual cart.
Lamb says many retailers look at Imagr as an elevation from the scan-and-shop because it’s not too far off in terms of pricing, but the difference is retailers get to see what’s in the cart. It’s a lot harder to shoplift by pretending to scan an item when the cart is watching and making a record of what goes in and out.
Imagr offers a white label solution for retailers that they can own, operate and scale themselves. This means the retailer would own all the hardware, software and the white labeled app. Imagr has a shared licensing agreement for data with retailers because it needs to get smarter and keep training its models. Lamb said that Imagr hopes to offer inventory analytics in the future to help retailers avoid inventory distortion.
“Our intention would be to essentially provide them the ability to track everything that comes in and out,” said Lamb. “In a perfect world, like, I don’t know all the coke sells out, and it pings one of the retail workers in the store and she’s got to restock, shelf 7A. That’s what we’re working towards. We don’t have a hard solution for it but there’s definitely demand for that.”
The meeting, which also included attendees from the financial and education sectors, was held following months of high-profile cyberattacks against critical infrastructure and several U.S. government agencies, along with a glaring cybersecurity skills gap; according to data from CyberSeek, there are currently almost 500,000 cybersecurity jobs across the U.S that remain unfilled.
“Most of our critical infrastructure is owned and operated by the private sector, and the federal government can’t meet this challenge alone,” Biden said at the start of the meeting. “I’ve invited you all here today because you have the power, the capacity and the responsibility, I believe, to raise the bar on cybersecurity.”
In order to help the U.S. in its fight against a growing number of cyberattacks, Big Tech pledged to invest billions of dollars to strengthen cybersecurity defenses and to train skilled cybersecurity workers.
Apple has vowed to work with its 9,000-plus suppliers in the U.S. to drive “mass adoption” of multi-factor authentication and security training, according to the White House, as well as to establish a new program to drive continuous security improvements throughout the technology supply chain.
Google said it will invest more than $10 billion over the next five years to expand zero-trust programs, help secure the software supply chain and enhance open-source security. The search and ads giant has also pledged to train 100,000 Americans in fields like IT support and data analytics, learning in-demand skills including data privacy and security.
“Robust cybersecurity ultimately depends on having the people to implement it,” said Kent Walker, Google’s global affairs chief. “That includes people with digital skills capable of designing and executing cybersecurity solutions, as well as promoting awareness of cybersecurity risks and protocols among the broader population.”
And, Microsoft said it’s committing $20 billion to integrate cybersecurity by design and deliver “advanced security solutions.” It also announced that it will immediately make available $150 million in technical services to help federal, state and local governments with upgrading security protection, and will expand partnerships with community colleges and nonprofits for cybersecurity training.
Other attendees included Amazon Web Services (AWS), Amazon’s cloud computing arm, and IBM. The former has said it will make its security awareness training available to the public and equip all AWS customers with hardware multi-factor authentication devices, while IBM said it will help to train more than 150,000 people in cybersecurity skills over the next five years.
While many have welcomed Big Tech’s commitments, David Carroll, managing director at Nominet Cyber, told TechCrunch that these latest initiatives set a “powerful precedent” and show “the gloves are well and truly off” — but some within the cybersecurity industry remain skeptical.
“So 500,000 open cybersecurity jobs and almost that same amount or more looking for jobs,” said Khalilah Scott, founder of TechSecChix, a foundation for supporting women in technology, in a tweet. “Make it make sense.”
Point Pickup Technologies, a last-mile delivery service, has acquired white label e-commerce platform GrocerKey for $42 million, according to the company. With the acquisition, Point Pickup now allows retailers to offer same-day delivery, from purchase to fulfillment to delivery, under their own brand name, rather than under third parties like Instacart.
Instacart made a killing delivering groceries and goods for retailers during the coronavirus pandemic, with a generated revenue of $1.5 billion in 2020 and $35 billion worth of sales. The company has an estimated 9.6 million active users and over 500,000 “shoppers” who pick up and deliver goods.
New entrants to the same-day delivery space are cropping up, which aligns with the expected growth of the industry to $20.36 billion by 2027, according to Allied Market Research. But companies like Amazon and Instacart that perform this service and host a delivery marketplace get far more than sales revenues – they also get all the customer data.
Tom Fiorita, founder and CEO of Point Pickup, says retailers should have a right to own that data themselves. The acquisition of GrocerKey, which brings on board the company’s front-end consumer-facing sales engine and predictive analytics, puts the data and brand recognition back in the retailer’s hands.
“If you are a customer of Instacart, you pay them a subscription, they own your buying habits, your credit cards, your data,” Fiorita told TechCrunch. “Instacart was a big thing during COVID because no one had delivery. So now retailers woke up and said, ‘Oh my god, I can’t just have an Instacart-like marketplace be selling my goods. I don’t know who my customers are, I don’t have their credit cards or data.’ And you know data runs the world now.”
Another recent, if not smaller, entrant to the space is Canadian startup Tyltgo, which operates under a similar model to what Point Pickup is now offering via GrocerKey’s technology. In both cases, the buyer goes directly onto the merchant’s platform and places the order through them, so it feels like they’re interacting with the brand they purchased from. And on Tuesday, Walmart also announced a new white-label delivery service that would allow other merchants to tap into its own delivery platform to get orders to their customers.
Fiorita founded Point Pickup in 2015 as a reaction to Amazon’s increased omnipotence with the noble, if not naive, mission to “save local America.” Walmart and Kroger, two of the largest grocery retailers in the U.S., are Point Pickup’s top customers, alongside other nationwide retailers like Albertsons, Giant Eagle and more. But Fiorita believes the service his company is offering will be even more impactful when it starts to work its way down to the mid-sized and small- to medium-sized businesses.
“We built this not only to survive against Amazon or Instacart, but because these small businesses need this for their survival,” Fiorita said. “These companies will no longer survive if they continue to allow other companies to sell their merchandise and to own their customer, including the data, the advertising, the CPG dollars and everything.”
Point Pickup offers deliveries of everything from grocery to general merchandise, pharmacy and oversized delivery. It has a network of 350,000 gig economy drivers across 25,000 ZIP codes in all 50 states.
Since the company’s network of drivers, who often pick and pack the products for the customer as well as deliver the goods, comprises all gig workers with their own vehicles, Point Pickup doesn’t have a clear picture of the percentage of its fleet that’s electric or hybrid. Fiorita speculates it’s probably on par with nationwide rates, if not higher. A recent Pew Research report found that 7% of Americans say they own an EV or hybrid.
Fiorita said that the type of car drivers own is taken into account during recruitment and that the company is looking for ways to incentivize drivers to buy less polluting vehicles. He also said Point Pickup is a vehicle-agnostic platform, meaning it’s piloting other delivery vessels like drones and autonomous robots.
To compete with the big dogs in the space like Amazon and Walmart, both of which are either testing or already have in place electric delivery vans, Point Pickup will have to also make efforts to beef up its strategy in the carbon emissions space.
More than 10 companies currently compete across Europe with an instant grocery delivery business model. Half of them were established in 2020, the year of the pandemic. These companies have raised more than $2 billion to date.
Existing and well-funded online food-delivery service players like Delivery Hero are also joining the race by launching dedicated grocery offerings. However, if lessons from the world’s largest online grocery market, China ($400 billion), matter, then it’s clear that instant delivery is not the magic bullet to crack the dominance of Europe’s incumbent supermarket chains in the overall $2 trillion-plus flat market.
Instead, China’s quick-commerce equivalents (like Dingdong Maicai, Miss Fresh and Meituan Maicai) compete alongside a wealth of other online grocery models (such as Pinduoduo, JD’s Super and Alibaba’s Taoxianda), which have helped bring total market penetration to 20% and beyond.
Quick commerce suffers from narrower profit margins compared to competing models and is addressing lower consumer demand in China than anyone in the West is expecting it to achieve in Europe and the U.S. If the performance of online grocery platforms in China (a market five to seven years ahead of Europe in terms of online retail) is anything to go by, a range of B2C business models would be more likely to displace the traditional grocery retailers.
The idea of ordering groceries online and having them delivered to consumers in less than an hour is nothing new. Back in the heyday of the dot-com bubble, a company attempted to do just that: Kozmo.com. Founded in 1998, it raised more than $250 million (around $400 million in today’s dollars) from investors, promising to deliver food, among other items, to consumers within an hour, while charging no delivery fees.
In 1999, it had revenues of $3.5 million and a loss of $1.8 million. However, in 2001, the business was shut down by its board after the company could not make the business model work at scale.
Some 15 years later, another company had a go. Gopuff was established in Philadelphia in 2013 and originally targeted students. What started out as a hookah delivery service soon expanded into a much broader convenience store offering and delivered to customers in approximately 30 minutes.
Gopuff was most recently valued at $15 billion after raising a total of $3.4 billion — 75% of which occurred in the past 12 months. Last year, Gopuff grew revenues from around $100 million to $340 million.
Kozmo.com went out of business after just three years. Meanwhile, Gopuff was turned down by several VCs in its early days, and it wasn’t until the pandemic that it saw a rapid acceleration in fundraising. Little did teams at either company know that they would later become the inspiration for a whole generation of founders in Europe.
Has anything fundamentally changed in the 20 years since Kozmo.com? Indeed, we’ve seen little technological progress that would hugely affect the operations of an instant commerce business. However, there have been much larger shifts in consumer habits.
Firstly, the number of global internet users has skyrocketed (from below 500 million to beyond 4 billion), and mobile internet has taken over. Secondly, demand for online grocery delivery has grown significantly due to the COVID-19 pandemic, as consumers have preferred to make retail purchases from home for safety reasons. Thirdly, consumers are now accustomed to paying fees for delivery services, typically around $2 per order, which Kozmo notoriously did not do.
While many online grocery business models exist, the instant grocery, quick-commerce approach has been the favorite of European entrepreneurs and VCs over the past 18 months. The model itself, also referred to as q-commerce, is not that hard to understand.
Companies maintain a small product offering of around 1,000–2,000 SKUs that consumers would otherwise find in convenience or drug stores. These products are purchased directly from brands or through distributors and are stored in self-operated microwarehouses close to customers’ locations.
Marketing tactics are aggressive, often employing vouchers for first-time users of up to $12 (50% of an average shopping basket), and many startups offer their products at supermarket price or even at a discount of 10%–15%. Delivery usually happens by bicycle, e-bike or scooter, within 10-30 minutes of an order being placed, for a fee of around $2 with no minimum order value.
Companies like Getir from Istanbul (total funding: $1 billion, last valuation: $7.5 billion) and Gorillas from Berlin (total funding: $335 million, last valuation: $1 billion) are leading the way. When Gorillas announced its $290 million Series B in March 2021, it became the fastest European startup to achieve unicorn status (nine months after launch). The company is already rumored to be seeking Series C financing at a $2.5 billion valuation.
There are more than 10 companies across Europe with more or less the same business model. Those include the 2020-established Flink (Germany-based, $300 million raised), Zapp (U.K.-based, $100 million raised), Dija (U.K.-based, $20 million raised and just acquired by Gopuff), Jiffy (U.K.-based, $7 million raised) and Cajoo (France-based, $6 million raised).
There is also JOKR, which was started by the founder of Foodpanda. JOKR was only established in Q1 2021, but right after incorporation raised one of the largest ever initial seed rounds (rumored to be $100 million) and subsequently a $170 million Series A in July to bring the model to Europe, Latin America and the U.S.
Likewise, companies coming from food delivery have pushed further into this space and received additional funding in recent months, notably Delivery Hero through Dmart and Glovo through SuperGlovo, following role models in the U.S., such as DoorDash.
As these companies approach later-stage financing sometime in the future, questions will be asked about the path to profitability in an industry of notoriously thin margins. Indeed, this is an uncomfortable truth that hasn’t changed since the early days of Kozmo.com.
The available figures show that old patterns are repeating. Gopuff recently reported an EBITDA of negative $150 million on $340 million in revenue (EBITDA margin: -45%). Furthermore, an analysis by the German business monthly Manager Magazine concluded that Gorillas was operating at negative unit economics of -6%. Additional costs, such as overhead and technology, might push this number up significantly further.
Don’t call Jane Technologies the Amazon of weed. Instead, think of Jane Technologies as the Shopify of weed, and it’s an important distinction. While other startups attempt to build a destination marketplace like Amazon, Jane Technologies is trying something more powerful. The company is building the backends for dispensaries that are quickly taking their cannabis offerings online, and the company accounts for 20% of all legal cannabis sales in the United States. To Jane Technologies, the future of cannabis isn’t a single destination like Amazon; the future of cannabis is the neighborhood dispensary that sells weed online, and Jane wants to power their online store.
Today, the company is announcing a $100m Series C financing round, bringing the total amount raised since its founding in 2015 to $130 million. Honor Ventures lead the round, and Founding Managing Partner Jeffery Housenbold joined Jane Technologies’ board of directors.
Jane Technologies expects to use the additional capital to grow its digital footprint and its teams across multiple areas of operations. The company intends to build new features and expand its product offering for large and small cannabis operations.
Online cannabis retail sales are quickly becoming the norm as consumers’ expectations change, and Jane offers a turn-key solution to build a robust online presence quickly.
Socrates Rosenfeld, Jane Technologies co-founder and CEO, is quick to point out Jane’s current positioning is a long time in the making. In an interview with TechCrunch, he says that this was a bet the company made in 2015 that the future of e-commerce is not a marketplace, but the complete digitization of all commerces.
“I think we are really seeing the next chapter of what the future of E-commerce will look like,” Rosenfeld said, “not just in the cannabis industry perhaps across the world with various retail verticals like alcohol, convenience goods, restaurants, and groceries. Local establishments [now have] some digital connective tissue to their local community, and I don’t think there’s a more challenging environment than the cannabis industry. I’m very proud of the team that we’ve come this far and still have a long way to go, but I think that’s the direct result of us being able to raise this [100 million].
It’s often cited that cannabis was one of the winners of the COVID-19 pandemic. Sales lit up as the world shut down. Jane Technologies’ internal numbers lend more supporting evidence. According to their data, only 17% of legal cannabis sales were done online before the pandemic. However, during the height of the pandemic, online sales reached a high of 52%, and now, halfway through 2021, Jane Technologies says online sales account for 38% of all legal cannabis sales.
According to Rosenfeld, in 2019, Jane saw $100 million in total transactional volume with one million people on the platform and worked with 1,000 dispensaries. In 2021, the company forecasts it will reach $3.5 billion in total transactional volume and is now working with 2,100 dispensaries, including in Canada. Even more impressive, the company has nearly doubled the number of products listed on its product database, with 700,000 items up from 350,000, showing a dramatic increase in cannabis products available to the consumer.
“We feel extremely fortunate to be born from the cannabis industry where there was no direct consumer ecosystem,” Rosenfeld said. “And we had to go and figure out a way to connect and tie the consumer to the brand and the retailer. We couldn’t do that by shipping products directly to the consumer, and we couldn’t do that by competing against the retailer; we had to work in partnership with our retail partners to provide them with powerful e-commerce enablement tools.”
Last month Jane Technologies partnered with its first Canadian retailer, High Tide. Then, two months ago, the company launched Jane Roots, a powerful all-in-one e-commerce platform that allows dispensaries to focus mainly on the front-end design while Jane takes care of the retail integrations.
“Over the last 25 years I’ve spent working with e-commerce companies, few have become enduring global platforms,” said Jeffrey Housenbold, Founding Managing Partner of Honor Ventures, in a released statement. “Jane has all the right ingredients to become the next eBay or Shopify. They are creating a win-win for all constituents in the ecosystem – brands, retailers and consumers all benefit from their platform and trust Jane to be the go-to service provider to build the future of cannabis commerce on a global basis. I’m excited to watch Socrates and his team build an amazing company, a great place to work and a trusted brand.”
Movies Anywhere, an app that allows you to centralize your digital movie collection from across services, is rolling out a new feature that will help you make better sense of your growing library. The company today introduced an AI-powered feature called “My Lists,” which automatically groups movies together based on any number of factors — like genre, actors, franchise, theme and more.
For digital movie collectors with larger libraries, the feature could make browsing through the available options feel more like scrolling through the recommendations you’d find on a modern-day streaming service, like Netflix. That is, instead of scrolling down through endless pages showing you all your purchased movies in order of purchase or alphabetically, as before, you can now quickly scan rows where the content is organized in ways that make it easier to discover what’s actually in your library.
For example, if you had purchased all the movies from a particular franchise, they would now be on their own row together. This is an improvement over how you had to locate these movies in your collection before — where they’d be sandwiched between the other titles you bought in between the franchise purchases.
You may also discover that you own a lot of movies within a particular category, like “Action Thrillers,” or those with a central theme, like “strong female friendships,” which could help you narrow down your movie night selection.
These algorithmically created lists can also be edited, allowing you to add or remove titles — or even delete the list altogether.
Image Credits: Movies Anywhere
Plus, you can now make lists of your own, too. So you could make a list of favorites, movies you want to watch with your family, or however else you want to further organize your collection. You could even use the feature to make a “to watch” list of movies you’ve purchased, but hadn’t yet made time for.
The Movie Anywhere app has been around for years, but is now jointly operated by Disney, Universal, WB, Sony Pictures and 20th Century Fox, after migrating to a new platform back in 2017. Its biggest selling point for digital movie collectors is that you can in one place get to all the movies you bought from various services. That includes digital downloads offered by iTunes, Vudu, Prime Video, YouTube, Xfinity and others. Before, you would have to switch from app to app to figure out if you had ever purchased a given title.
My Lists is one of many features the company has added over time to keep its app feeling current. Last year, for instance, it introduced a digital movie lending feature called Screen Pass, and it earlier had launched a co-watching feature called Watch Together, which let users watch with up to nine friends.
The new My Lists is available today in the Movies Anywhere mobile app, desktop and on streaming devices from the navigation bar.
Welcome back to This Week in Apps, the weekly TechCrunch series that recaps the latest in mobile OS news, mobile applications and the overall app economy.
The app industry continues to grow, with a record 218 billion downloads and $143 billion in global consumer spend in 2020. Consumers last year also spent 3.5 trillion minutes using apps on Android devices alone. And in the U.S., app usage surged ahead of the time spent watching live TV. Currently, the average American watches 3.7 hours of live TV per day, but now spends four hours per day on their mobile devices.
Apps aren’t just a way to pass idle hours — they’re also a big business. In 2019, mobile-first companies had a combined $544 billion valuation, 6.5x higher than those without a mobile focus. In 2020, investors poured $73 billion in capital into mobile companies — a figure that’s up 27% year-over-year.
This Week in Apps offers a way to keep up with this fast-moving industry in one place with the latest from the world of apps, including news, updates, startup fundings, mergers and acquisitions, and suggestions about new apps and games to try, too.
Do you want This Week in Apps in your inbox every Saturday? Sign up here: techcrunch.com/newsletters
(Photo Illustration by Jakub Porzycki/NurPhoto via Getty Images)
Creator platform OnlyFans is getting out of the porn business. The company announced this week it will begin to prohibit any “sexually explicit” content starting on October 1, 2021 — a decision it claimed would ensure the long-term sustainability of the platform. The news angered a number of impacted creators who weren’t notified ahead of time and who’ve come to rely on OnlyFans as their main source of income.
However, word is that OnlyFans was struggling to find outside investors, despite its sizable user base, due to the adult content it hosts. Some VC firms are prohibited from investing in adult content businesses, while others may be concerned over other matters — like how NSFW content could have limited interest from advertisers and brand partners. They may have also worried about OnlyFans’ ability to successfully restrict minors from using the app, in light of what appears to be soon-to-come increased regulations for online businesses. Plus, porn companies face a number of other issues, too. They have to continually ensure they’re not hosting illegal content like child sex abuse material, revenge porn or content from sex trafficking victims — the latter which has led to lawsuits at other large porn companies.
The news followed a big marketing push for OnlyFans’ porn-free (SFW) app, OFTV, which circulated alongside reports that the company was looking to raise funds at a $1 billion+ valuation. OnlyFans may not have technically needed the funding to operate its current business — it handled more than $2 billion in sales in 2020 and keeps 20%. Rather, the company may have seen there’s more opportunity to cater to the “SFW” creator community, now that it has big names like Bella Thorne, Cardi B, Tyga, Tyler Posey, Blac Chyna, Bhad Bhabie and others on board.
The TikTok logo is seen on an iPhone 11 Pro max. Image Credits: Nur Photo/Getty Images
Earlier this month, Senators Amy Klobuchar (D-MN) and John Thune (R-SD) sent a letter to TikTok CEO Shou Zi Chew, which said they were “alarmed” by the change, and demanded to know what information TikTok will be collecting and what it plans to do with the data. This wouldn’t be the first time TikTok got in trouble for excessive data collection. Earlier this year, the company paid out $92 million to settle a class-action lawsuit that claimed TikTok had unlawfully collected users’ biometric data and shared it with third parties.
Image Credits: Apple
Image Credits: Facebook
Image Source: The Pokémon Company
Image Credits: Sensor Tower
Image Credits: Samsung
South Korea’s GS Retail Co. Ltd will buy Delivery Hero’s food delivery app Yogiyo in a deal valued at 800 billion won ($685 million USD). Yogiyo is the second-largest food delivery app in South Korea, with a 25% market share.
Gaming platform Roblox acquired a Discord rival, Guilded, which allows users to have text and voice conversations, organize communities around events and calendars and more. Deal terms were not disclosed. Guilded raised $10.2 million in venture funding. Roblox’s stock fell by 7% after the company reported earnings this week, after failing to meet Wall Street expectations.
Travel app Hopper raised $175 million in a Series G round of funding led by GPI Capital, valuing the business at over $3.5 billion. The company raised a similar amount just last year, but is now benefiting from renewed growth in travel following COVID-19 vaccinations and lifting restrictions.
Indian quiz app maker Zupee raised $30 million in a Series B round of funding led by Silicon Valley-based WestCap Group and Tomales Bay Capital. The round values the company at $500 million, up 5x from last year.
Danggeun Market, the publisher of South Korea’s hyperlocal community app Karrot, raised $162 million in a Series D round of funding led by DST Global. The round values the business at $2.7 billion and will be used to help the company launch its own payments platform, Karrot Pay.
Bangalore-based fintech app Smallcase raised $40 million in Series C funding round led by Faering Capital and Premji Invest, with participation from existing investors, as well as Amazon. The Robinhood-like app has over 3 million users who are transacting about $2.5 billion per year.
Social listening app Earbuds raised $3 million in Series A funding led by Ecliptic Capital. Founded by NFL star Jason Fox, the app lets anyone share their favorite playlists, livestream music like a DJ or comment on others’ music picks.
U.S. neobank app One raised $40 million in Series B funding led by Progressive Investment Company (the insurance giant’s investment arm), bringing its total raise to date to $66 million. The app offers all-in-one banking services and budgeting tools aimed at middle-income households who manage their finances on a weekly basis.
Indian travel booking app ixigo is looking to raise Rs 1,600 crore in its initial public offering, The Economic Times reported this week.
Trading app Robinhood disappointed in its first quarterly earnings as a publicly traded company, when it posted a net loss of $502 million, or $2.16 per share, larger than Wall Street forecasts. This overshadowed its beat on revenue ($565 million versus $521.8 million expected) and its more than doubling of MAUs to 21.3 million in Q2. Also of note, the company said dogecoin made up 62% of its crypto revenue in Q2.
Image Credits: Polycam
3D scanning software maker Polycam launched a new 3D capture tool, Photo Mode, that allows iPhone and iPad users to capture professional-quality 3D models with just an iPhone. While the app’s scanner before had required the use of the lidar sensor built into newer devices like the iPhone 12 Pro and iPad Pro models, the new Photo Mode feature uses just an iPhone’s camera. The resulting 3D assets are ready to use in a variety of applications, including 3D art, gaming, AR/VR and e-commerce. Data export is available in over a dozen file formats, including .obj, .gtlf, .usdz and others. The app is a free download on the App Store, with in-app purchases available.
Jiobit, the tracking dongle acquired by family safety and communication app Life360, this week partnered with emergency response service Noonlight to offer Jiobit Protect, a premium add-on that offers Jiobit users access to an SOS Mode and Alert Button that work with the Jiobit mobile app. SOS Mode can be triggered by a child’s caregiver when they detect — through notifications from the Jiobit app — that a loved one may be in danger. They can then reach Noonlight’s dispatcher who can facilitate a call to 911 and provide the exact location of the person wearing the Jiobit device, as well as share other details, like allergies or special needs, for example.
When your app redesign goes wrong…
Prominent App Store critic Kosta Eleftheriou shut down his FlickType iOS app this week after too many frustrations with App Review. He cited rejections that incorrectly argued that his app required more access than it did — something he had successfully appealed and overturned years ago. Attempted follow-ups with Apple were ignored, he said.
Anyone have app ideas?
Hello and welcome back to TechCrunch’s China roundup, a digest of recent events shaping the Chinese tech landscape and what they mean to people in the rest of the world.
This week, investors’ concerns mount as news came that the Chinese government has taken a stake ByteDance, TikTok’s parent and one of the world’s largest private internet firms. Meanwhile, Amazon’s crackdown on Chinese sellers continues and is forcing many traders in southern China out of business, and the government passed a sweeping data protection law that will take effect in November.
The Chinese government’s grand plan to assert more control over the country’s internet behemoths continues. This week, The Information reported that a domestic entity of ByteDance sold a 1% stake to a government affiliate in April. The deal was also recorded on Tianyancha, a database of publicly available corporate information, as well as the official enterprise registration index.
The move didn’t come abruptly. Beijing was mulling over small shares in private tech firms as early as 2017. The Wall Street Journal reported at the time that internet regulators discussed taking 1% stakes in companies including WeChat operator Tencent, Twitter-like Weibo and YouTube-like Youku.
In April 2020, WangTouTongDa, a subsidiary of China Internet Investment Fund, which is in turn controlled by China’s top internet watchdog, acquired a 1% stake in Weibo for 10 million yuan, according to Weibo’s filing to the U.S. securities regulator. Weibo did not mention WangTouTongDa’s relationship with the state in its filing.
Similarly, ByteDance sold a 1% stake to three entities set up by top regulatory bodies: China Internet Investment Fund; China Media Group, controlled by the Communist Party’s propaganda department; and the Beijing municipal government’s investment arm.
In response to Beijing’s move on ByteDance, Republican senator Marco Rubio urged President Joe Biden this week to block TikTok in the U.S.
Exactly how much power Beijing gains over ByteDance from taking the small stake remains fuzzy, but Weibo’s disclosure to investors offers some clues.
It’s critical to note that the government holds stakes in the domestic operating entity of both Weibo and ByteDance. Internet companies in China often set up offshore entities that are entitled to the financial benefits of their mainland Chinese operations through contractual agreements. The framework is called a variable interest entity or VIE. While the structure allows Chinese firms to seek overseas funding due to China’s restrictions on foreign investments, it has come under increasing scrutiny by Beijing.
Weibo said in the filing that WangTouTongda, its state-owned investor, will be able to appoint a director to the three-member board of its Chinese entity and veto certain matters related to content and future financings.
ByteDance likely has a similar arrangement with its state investor. The government did not obtain a stake in TikTok, which is a subsidiary of a separate offshore entity incorporated in the Cayman Islands, The Information pointed out. This should provide some reassurance to U.S. regulators, though concerns about Beijing’s sway in Chinese companies abroad probably won’t go away.
Indeed, the Biden administration in June replaced the Trump-era orders to ban ByteDance and WeChat with a more measured policy requiring the Commerce Department to review apps with ties to “jurisdiction of foreign adversaries” that may pose national security risks.
TikTok has been fighting accusations that it hands over user data to Beijing. ByteDance is the fourth-largest lobbying spender in the U.S. so far this year, just after Amazon, Facebook and Alphabet. Beijing’s investment is going to cost it more campaign efforts.
In May, I reported that Amazon shuttered some of its largest sellers from China over violations of platform rules, including using fake reviews and incentives to solicit positive reviews from customers. The crackdown drove China’s online exporters into a panic, and as it turned out, it wasn’t a one-off ambush from Amazon but a prolonged war. While the exact number of Chinese stores affected is not disclosed, industry observers such as Marketplace Pulse said “hundreds of” top Chinese sellers had been suspended as of early July.
Punished accounts are suspended, with their goods withheld and deposits frozen by Amazon. Companies in Shenzhen, home to the majority of the world’s Amazon sellers, laid off thousands of staff in recent months. The owner of a sizable seller in Shenzhen recently died by suicide due to the debacle, according to an acquaintance of the owner.
To sellers that have survived the crackdown, the attack by Amazon “would have happened sooner or later.” Most of the exporters I talked to came to the same conclusion: The Seattle-based titan now wants quality and design over generic products that compete solely on price and manipulation of ranking.
The Chinese government has taken note of the incidents. An official from the Ministry of Commerce compared the wave of store closures as Chinese exporters being “fish out of water” during a press conference in July.
“Due to differences in laws, culture and business practices around the world, [Chinese] companies are facing risks and challenges as they go overseas,” said Li Xingqian, director of foreign trade at the Commerce Ministry.
“We will help companies improve their risk control and comply with international trade standards.” Meanwhile, the official called for “the platform/platforms to cherish the important contribution from various companies and fully respect different trade entities.”
And finally, China passed a sweeping data protection law this week that will strictly limit how tech companies collect user information, but the rules won’t likely have an impact on state surveillance. The regulation, which was proposed last year, will take effect on November 1. Read more about the rules here:
Software as a service is one of the most important sectors in tech today. While its transformative potential was quite clear before the pandemic, the sudden pivot to distributed workforces caused interest in SaaS products to skyrocket as medium and large enterprises embraced digital and remote sales processes, significantly expanding their utility.
This phenomenon is global, but India in particular has the opportunity to take its SaaS momentum to the next level. The Indian SaaS industry is projected to generate revenue of $50 billion to $70 billion and win 4%-6% of the global SaaS market by 2030, creating as much as $1 trillion in value, according to a report by SaaSBOOMi and McKinsey.
The Indian SaaS industry is projected to generate revenue of $50 billion to $70 billion and win 4%-6% of the global SaaS market by 2030.
There are certain important long-term trends that are fueling this expansion.
The Indian SaaS community has seen a flurry of innovation and success. Entrepreneurs in India have founded about a thousand funded SaaS companies in the last few years, doubling the rate from five years ago and creating several unicorns in the process. Together, these companies generate $2 billion to $3 billion in total revenues and represent approximately 1% of the global SaaS market, according to SaaSBOOMi and McKinsey.
These firms are diverse in terms of the clients they serve and the problems they solve, but several garnered global attention during the pandemic by enabling flexibility for newly remote workers. Zoho helped streamline this pivot by providing sales teams with apps for collateral, videos and demos; Freshworks offered businesses a seamless customer experience platform, and Eka extended its cloud platform to unify workflows from procurement to payments for the CFO office.
Other SaaS firms stayed busy in other ways. Over the course of the pandemic, 10 new unicorns emerged: Postman, Zenoti, Innovacer, Highradius, Chargebee and Browserstack, Mindtickle, Byju, UpGrad and Unacademy. There were also several instances of substantial venture funding, including a $150 million deal for Postman, bringing the total amount raised by the Indian SaaS community in 2020 to around $1.5 billion, four times the investment in 2018.
While the Indian SaaS community has made admirable progress in recent years, there are several key growth drivers that could lead to as much as $1 trillion in revenue by 2030. They include:
The number of enterprises that are comfortable with assessing products and making business decisions via Zoom is increasing rapidly. This embrace of digital go-to-market fundamentally levels the playing field for Indian companies in terms of access to customers and end markets.
Facebook is a monopoly. Right?
Mark Zuckerberg appeared on national TV today to make a “special announcement.” The timing could not be more curious: Today is the day Lina Khan’s FTC refiled its case to dismantle Facebook’s monopoly.
To the average person, Facebook’s monopoly seems obvious. “After all,” as James E. Boasberg of the U.S. District Court for the District of Columbia put it in his recent decision, “No one who hears the title of the 2010 film ‘The Social Network’ wonders which company it is about.” But obviousness is not an antitrust standard. Monopoly has a clear legal meaning, and thus far Lina Khan’s FTC has failed to meet it. Today’s refiling is much more substantive than the FTC’s first foray. But it’s still lacking some critical arguments. Here are some ideas from the front lines.
To the average person, Facebook’s monopoly seems obvious. But obviousness is not an antitrust standard.
First, the FTC must define the market correctly: personal social networking, which includes messaging. Second, the FTC must establish that Facebook controls over 60% of the market — the correct metric to establish this is revenue.
Though consumer harm is a well-known test of monopoly determination, our courts do not require the FTC to prove that Facebook harms consumers to win the case. As an alternative pleading, though, the government can present a compelling case that Facebook harms consumers by suppressing wages in the creator economy. If the creator economy is real, then the value of ads on Facebook’s services is generated through the fruits of creators’ labor; no one would watch the ads before videos or in between posts if the user-generated content was not there. Facebook has harmed consumers by suppressing creator wages.
A note: This is the first of a series on the Facebook monopoly. I am inspired by Cloudflare’s recent post explaining the impact of Amazon’s monopoly in their industry. Perhaps it was a competitive tactic, but I genuinely believe it more a patriotic duty: guideposts for legislators and regulators on a complex issue. My generation has watched with a combination of sadness and trepidation as legislators who barely use email question the leading technologists of our time about products that have long pervaded our lives in ways we don’t yet understand. I, personally, and my company both stand to gain little from this — but as a participant in the latest generation of social media upstarts, and as an American concerned for the future of our democracy, I feel a duty to try.
According to the court, the FTC must meet a two-part test: First, the FTC must define the market in which Facebook has monopoly power, established by the D.C. Circuit in Neumann v. Reinforced Earth Co. (1986). This is the market for personal social networking services, which includes messaging.
Second, the FTC must establish that Facebook controls a dominant share of that market, which courts have defined as 60% or above, established by the 3rd U.S. Circuit Court of Appeals in FTC v. AbbVie (2020). The right metric for this market share analysis is unequivocally revenue — daily active users (DAU) x average revenue per user (ARPU). And Facebook controls over 90%.
The answer to the FTC’s problem is hiding in plain sight: Snapchat’s investor presentations:
Snapchat July 2021 investor presentation: Significant DAU and ARPU Opportunity. Image Credits: Snapchat
This is a chart of Facebook’s monopoly — 91% of the personal social networking market. The gray blob looks awfully like a vast oil deposit, successfully drilled by Facebook’s Standard Oil operations. Snapchat and Twitter are the small wildcatters, nearly irrelevant compared to Facebook’s scale. It should not be lost on any market observers that Facebook once tried to acquire both companies.
The FTC initially claimed that Facebook has a monopoly of the “personal social networking services” market. The complaint excluded “mobile messaging” from Facebook’s market “because [messaging apps] (i) lack a ‘shared social space’ for interaction and (ii) do not employ a social graph to facilitate users’ finding and ‘friending’ other users they may know.”
This is incorrect because messaging is inextricable from Facebook’s power. Facebook demonstrated this with its WhatsApp acquisition, promotion of Messenger and prior attempts to buy Snapchat and Twitter. Any personal social networking service can expand its features — and Facebook’s moat is contingent on its control of messaging.
The more time in an ecosystem the more valuable it becomes. Value in social networks is calculated, depending on whom you ask, algorithmically (Metcalfe’s law) or logarithmically (Zipf’s law). Either way, in social networks, 1+1 is much more than 2.
Social networks become valuable based on the ever-increasing number of nodes, upon which companies can build more features. Zuckerberg coined the “social graph” to describe this relationship. The monopolies of Line, Kakao and WeChat in Japan, Korea and China prove this clearly. They began with messaging and expanded outward to become dominant personal social networking behemoths.
In today’s refiling, the FTC explains that Facebook, Instagram and Snapchat are all personal social networking services built on three key features:
Unfortunately, this is only partially right. In social media’s treacherous waters, as the FTC has struggled to articulate, feature sets are routinely copied and cross-promoted. How can we forget Instagram’s copying of Snapchat’s stories? Facebook has ruthlessly copied features from the most successful apps on the market from inception. Its launch of a Clubhouse competitor called Live Audio Rooms is only the most recent example. Twitter and Snapchat are absolutely competitors to Facebook.
Messaging must be included to demonstrate Facebook’s breadth and voracious appetite to copy and destroy. WhatsApp and Messenger have over 2 billion and 1.3 billion users respectively. Given the ease of feature copying, a messaging service of WhatsApp’s scale could become a full-scale social network in a matter of months. This is precisely why Facebook acquired the company. Facebook’s breadth in social media services is remarkable. But the FTC needs to understand that messaging is a part of the market. And this acknowledgement would not hurt their case.
Boasberg believes revenue is not an apt metric to calculate personal networking: “The overall revenues earned by PSN services cannot be the right metric for measuring market share here, as those revenues are all earned in a separate market — viz., the market for advertising.” He is confusing business model with market. Not all advertising is cut from the same cloth. In today’s refiling, the FTC correctly identifies “social advertising” as distinct from the “display advertising.”
But it goes off the deep end trying to avoid naming revenue as the distinguishing market share metric. Instead the FTC cites “time spent, daily active users (DAU), and monthly active users (MAU).” In a world where Facebook Blue and Instagram compete only with Snapchat, these metrics might bring Facebook Blue and Instagram combined over the 60% monopoly hurdle. But the FTC does not make a sufficiently convincing market definition argument to justify the choice of these metrics. Facebook should be compared to other personal social networking services such as Discord and Twitter — and their correct inclusion in the market would undermine the FTC’s choice of time spent or DAU/MAU.
Ultimately, cash is king. Revenue is what counts and what the FTC should emphasize. As Snapchat shows above, revenue in the personal social media industry is calculated by ARPU x DAU. The personal social media market is a different market from the entertainment social media market (where Facebook competes with YouTube, TikTok and Pinterest, among others). And this too is a separate market from the display search advertising market (Google). Not all advertising-based consumer technology is built the same. Again, advertising is a business model, not a market.
In the media world, for example, Netflix’s subscription revenue clearly competes in the same market as CBS’ advertising model. News Corp.’s acquisition of Facebook’s early competitor MySpace spoke volumes on the internet’s potential to disrupt and destroy traditional media advertising markets. Snapchat has chosen to pursue advertising, but incipient competitors like Discord are successfully growing using subscriptions. But their market share remains a pittance compared to Facebook.
The FTC has correctly argued for the smallest possible market for their monopoly definition. Personal social networking, of which Facebook controls at least 80%, should not (in their strongest argument) include entertainment. This is the narrowest argument to make with the highest chance of success.
But they could choose to make a broader argument in the alternative, one that takes a bigger swing. As Lina Khan famously noted about Amazon in her 2017 note that began the New Brandeis movement, the traditional economic consumer harm test does not adequately address the harms posed by Big Tech. The harms are too abstract. As White House advisor Tim Wu argues in “The Curse of Bigness,” and Judge Boasberg acknowledges in his opinion, antitrust law does not hinge solely upon price effects. Facebook can be broken up without proving the negative impact of price effects.
However, Facebook has hurt consumers. Consumers are the workers whose labor constitutes Facebook’s value, and they’ve been underpaid. If you define personal networking to include entertainment, then YouTube is an instructive example. On both YouTube and Facebook properties, influencers can capture value by charging brands directly. That’s not what we’re talking about here; what matters is the percent of advertising revenue that is paid out to creators.
YouTube’s traditional percentage is 55%. YouTube announced it has paid $30 billion to creators and rights holders over the last three years. Let’s conservatively say that half of the money goes to rights holders; that means creators on average have earned $15 billion, which would mean $5 billion annually, a meaningful slice of YouTube’s $46 billion in revenue over that time. So in other words, YouTube paid creators a third of its revenue (this admittedly ignores YouTube’s non-advertising revenue).
Facebook, by comparison, announced just weeks ago a paltry $1 billion program over a year and change. Sure, creators may make some money from interstitial ads, but Facebook does not announce the percentage of revenue they hand to creators because it would be insulting. Over the equivalent three-year period of YouTube’s declaration, Facebook has generated $210 billion in revenue. one-third of this revenue paid to creators would represent $70 billion, or $23 billion a year.
Why hasn’t Facebook paid creators before? Because it hasn’t needed to do so. Facebook’s social graph is so large that creators must post there anyway — the scale afforded by success on Facebook Blue and Instagram allows creators to monetize through directly selling to brands. Facebooks ads have value because of creators’ labor; if the users did not generate content, the social graph would not exist. Creators deserve more than the scraps they generate on their own. Facebook suppresses creators’ wages because it can. This is what monopolies do.
Facebook has long been the Standard Oil of social media, using its core monopoly to begin its march upstream and down. Zuckerberg announced in July and renewed his focus today on the metaverse, a market Roblox has pioneered. After achieving a monopoly in personal social media and competing ably in entertainment social media and virtual reality, Facebook’s drilling continues. Yes, Facebook may be free, but its monopoly harms Americans by stifling creator wages. The antitrust laws dictate that consumer harm is not a necessary condition for proving a monopoly under the Sherman Act; monopolies in and of themselves are illegal. By refiling the correct market definition and marketshare, the FTC stands more than a chance. It should win.
A prior version of this article originally appeared on Substack.
Most startup origin stories don’t begin on an NFL field, but that’s where founder, CEO and offensive tackle Jason Fox conceptualized the idea behind Earbuds. As he watched first overall draft pick Cam Newton warm up before a game in 2011, dancing to music, Fox couldn’t help but wonder what the future NFL MVP was listening to — and he bet that the crowd of 85,000 fans were curious too.
Ten years later, Earbuds has raised a $3 million Series A round for its social listening app, led by Ecliptic Capital with additional investment from the Andre Agassi Foundation and LFG Ventures.
Since its launch in 2019, Earbuds has allowed users — whether they’re famous artists, NFL stars or ordinary people — to share their favorite playlists, livestream music like a DJ and comment on other people’s music picks. Some notable figures on the app include the artist Nelly and professional quarterbacks like Baker Mayfield and Patrick Mahomes, the highest-paid player in the NFL. Mayfield and Mahomes are also investors in the app.
With this recent raise, Fox and his team of six plan to expand the app to add creator monetization tools, incentivizing people to use the app. Plus, Earbuds also announced that it hired two former product and engineering leaders from Apple, David Ransom and Sean Moubry, who joined Earbuds as head of Product and head of Engineering, respectively. Tech veteran Drew Larner also came aboard as a senior advisor and investor — in 2015, he sold the streaming app Rdio to Pandora. Pandora was then sold to Sirius XM for $3.5 billion in 2018.
Image Credits: Earbuds’ interface allows users to search for athlete accounts/Earbuds.
To use Earbuds, users must have a paid account on Spotify or Apple Music. Soon, Fox says, Earbuds should have integrations with paid versions of Amazon Music and Pandora, too. These integrations are how the app, available on both iOS and Android, is able to source music for streaming. But regardless of which platform a listener uses, they can still take advantage of the social features on Earbuds, listening along to live playlists and commenting along with other listeners.
When you connect your account, you’re able to easily import your existing playlists. Then, on the app, you can add voice clips to comment on your song choices. When listening to a stream, users have the option to save the playlist to their streaming service or share it as an Instagram story.
Fox declined to share monthly active user numbers, but expressed confidence that soliciting users from other streaming platforms’ existing subscriber base won’t be a big hurdle for user acquisition; when it comes to paid streaming music subscribers, Spotify has 165 million users, Apple Music has at least 60 million and Amazon music has at least 55 million.
“We want to continue to add additional streaming partners to accommodate everyone. We want to connect with all users regardless of what platform they use,” Fox said.
Image Credits: Earbuds founder and CEO Jason Fox/Earbuds.
Fox wants more musical artists to use the app, but given his background as an NFL player, much of the company’s existing marketing has been targeted toward athletes and sports fans — a particularly interesting potential market for Earbuds is NCAA athletes, who are newly able to monetize their image and likeness.
“You’ve got the quarterback before the big rivalry game, and they want to be able to monetize the fans while they’re listening to music and getting amped up with them before the game,” Fox explained.
Since these monetization tools haven’t rolled out yet, there’s currently no in-app purchases available on Earbuds. This would give Earbuds, which isn’t yet profitable, another income stream. So far, the app has made money through in-app sponsored posts from partners like the NBA, the NFL playoffs, smart speaker companies and beverage companies.
“We can continue to do that, but we feel like the majority of growth and revenue moving forward will be through partnerships, integrations and supporting the creator economy,” Fox said. Currently, Earbuds has a partnership with Apple Music, so if someone subscribes to the platform via Earbuds, Earbuds gets a cut of their subscription payment.
As streaming services like Spotify grow, social listening apps like Earbuds are emerging too. Spotify itself has rolled out more social listening features lately, including a Music + Talk platform similar to Earbuds’ existing offerings.
Amazon has rolled out India’s first celebrity voice feature on Alexa with the nation’s biggest movie star Amitabh Bachchan as the company makes a push to lure more users in the world’s second-most populated nation.
The company, which rolled out the voice of Samuel Jackson on Alexa in the U.S. in 2019, said users in India can add the Bollywood legend’s voice to their Echo devices (starting today) or Amazon shopping app (in a few weeks) for an introductory price of 149 Indian rupees ($2) a year.
The 78-year-old actor is providing Amazon with stories from his life, a selection of poems from his father, tongue twisters, and motivational quotes. Amazon customers can also ask Alexa to play music, set alarms, get weather updates and get answers in Bachchan’s signature style.
And the company will also apply neural speech technology to make Alexa sound like Bachchan regardless of the question, the company said. (Amit ji, remind me to ask you about Amazon’s antitrust situation in India later today.)
“Working with Amazon to introduce my voice on Alexa was a new experience in bringing together the magic of voice technology and artistic creativity. I am excited that my well-wishers can now interact with me via this new medium, and looking forward to hear how they feel about this,” said Bachchan in a statement.
A household name, Bachchan emerged as Bollywood’s top star in the 1970s playing characters who battled corruption. He has also done scores of advertisements for brands and initiatives from everything including hair oil to UNICEF-backed polio vaccination campaign.
The company announced its collaboration with Bollywood legend last year. But the pandemic forced Amazon’s engineering teams to work remotely for this project. There were also additional complexions. Globally, users can trigger Alexa with one-word wake alert. “Alexa, do this.” But in case of Bachchan, Amazon has introduce a two-word wake system to Alexa. “Amit ji.”
“At Amazon & Alexa, we consistently innovate on behalf of our customers and building the Amitabh Bachchan celebrity voice experience with one of India’s most iconic voices has been a labor of love. Creating the world’s first bi-lingual celebrity voice required us to invent & re-invent across almost every element of speech science – wake word, speech recognition, neural text-to-speech and more,” said Puneesh Kumar, Country Leader for Alexa, Amazon India, in a statement.
“While we are proud of the many India-first innovations and desi-delighters in this, it’s still Day 1 and we will continue to enrich this experience as science evolves.”
Facebook is out with a new report collecting the most popular posts on the platform, responding to critics who believe the company is deliberately opaque about its top-performing content.
Facebook’s new “widely viewed content reports” will come out quarterly, reflecting most viewed top News Feed posts in the U.S. every three months — not exactly the kind of real-time data monitoring that might prove useful for observing emerging trends.
With the new data set, Facebook hopes to push back against criticism that its algorithms operate within a black box. But like its often misleading blogged rebuttals and the other sets of cherry-picked data it shares, the company’s latest gesture at transparency is better than nothing, but not particularly useful.
So what do we learn? According to the new data set, 87% of posts that people viewed in the U.S. during Q2 of this year didn’t include an outside link. That’s notable but not very telling since Facebook still has an incredibly massive swath of people sharing and seeing links on a daily basis.
YouTube is predictably the top domain by Facebook’s chosen metric of “content viewers,” which it defines as any account that saw a piece of content on the News Feed, though we don’t get anything in the way of potentially helpful granular data there. Amazon, Gofundme, TikTok and others also in the top 10, no surprises there either.
Things get weirder when Facebook starts breaking down its most viewed links. The top five links include a website for alumni of the Green Bay Packers football team, a random online CBD marketplace and reppnforchrist.com, an apparently prominent portal for Christianity-themed graphic T-shirts. The subscription page for the Epoch Times, a site well known for spreading pro-Trump conspiracies and other disinformation, comes in at No 10, though it was beaten by a Tumblr link to two cats walking with their tails intertwined.
Image Credits: Facebook
Yahoo and ABC News are the only prominent national media outlets that make the top 20 when the data is sliced and diced in this particular way. Facebook also breaks down which posts the most people viewed during the period with a list of mostly benign if odd memes, including one that reads “If your VAGINA [cat emoji] or PENIS [eggplant emoji] was named after the last TV show/Move u watched what would it be.”
If you’re wondering why Facebook chose to collect and present this set of data in this specific way, it’s because the company is desperately trying to prove a point: That its platform isn’t overrun by the political conspiracies and controversial right-wing personalities that make headlines.
The dataset is Facebook’s latest argument in its long feud with New York Times reporter Kevin Roose, who created a Twitter account that surfaces Facebook’s most engaging posts on a daily basis, as measured through the Facebook-owned social monitoring tool CrowdTangle.
The top-performing link posts by U.S. Facebook pages in the last 24 hours are from:
1. Dan Rather
2. Ben Shapiro
3. Love Meow
4. Ben Shapiro
5. Dinesh D'Souza
6. Ben Shapiro
7. Ben Shapiro
8. Sean Hannity
9. Fox News
10. Steven Crowder
— Facebook's Top 10 (@FacebooksTop10) August 10, 2021
By the metric of engagement, Facebook’s list of top-performing posts in the U.S. are regularly dominated by far-right personalities and sites like Newsmax, which pushes election conspiracies that Facebook would prefer to distance itself from.
The company argues that Facebook posts with the most interactions don’t accurately represent the top content on the platform. Facebook insists that reach data, which measures how many people see a given post, is a superior metric, but there’s no reason that engagement data isn’t just as relevant if not more so.
“The content that’s seen by the most people isn’t necessarily the content that also gets the most engagement,” Facebook wrote, in a dig clearly aimed at Roose.
The platform wants to de-emphasize political content across the board, which isn’t surprising given its track record of amplifying Russian disinformation, violent far-right militias and the Stop the Steal movement, which culminated in deadly violence at the U.S. Capitol in January.
As The New York Times previously reported, Facebook actually scrapped plans to make its reach data widely available through a public dashboard over fears that even that version of its top-performing posts wouldn’t reflect well on the company.
Instead, the company opted to offer a taste of that data in a confusingly condensed quarterly report. The result shows plenty of inexplicable junk content (no really, what’s with the Packers site?), but less in the way of politics. Facebook’s cursory gesture of transparency notwithstanding, it’s worth remembering that nothing is stopping the company from letting people see a deeper, broader leaderboard of its most popular content. This isn’t that.
A group of senators sent new Amazon CEO Andy Jassy a letter Friday pressing the company for more information about how it scans and stores customer palm prints for use in some of its retail stores.
The company rolled out the palm print scanners through a program it calls Amazon One, encouraging people to make contactless payments in its brick and mortar stores without the use of a card. Amazon introduced its Amazon One scanners late last year, and they can now be found in Amazon Go convenience and grocery stores, Amazon Books and Amazon four-star stores across the U.S. The scanners are also installed in eight Washington state-based Whole Foods locations.
In the new letter, Senators Amy Klobuchar (D-MN), Bill Cassidy (R-LA) and Jon Ossoff (D-GA) press Jassy for details about how Amazon plans to expand its biometric payment system and if the data collected will help the company target ads.
“Amazon’s expansion of biometric data collection through Amazon One raises serious questions about Amazon’s plans for this data and its respect for user privacy, including about how Amazon may use the data for advertising and tracking purposes,” the senators wrote in the letter, embedded below.
The lawmakers also requested information on how many people have enrolled in Amazon One to date, how Amazon will secure the sensitive data and if the company has ever paired the palm prints with facial recognition data it collects elsewhere.
“In contrast with biometric systems like Apple’s Face ID and Touch ID or Samsung Pass, which store biometric information on a user’s device, Amazon One reportedly uploads biometric information to the cloud, raising unique security risks,” the senators wrote. “… Data security is particularly important when it comes to immutable customer data, like palm prints.”
The company controversially introduced a $10 credit for new users who enroll their palm prints in the program, prompting an outcry from privacy advocates who see it as a cheap tactic to coerce people to hand over sensitive personal data.
There’s plenty of reason to be skeptical. Amazon has faced fierce criticism for its other big biometric data project, the AI facial recognition software known as Rekognition, which the company provided to U.S. law enforcement agencies before eventually backtracking with a moratorium on policing applications for the software last year.
With two giants calling the shots and collecting whatever tolls they see fit, mobile software makers have long complained that app stores take an unfair cut of the cash that should be flowing directly to developers. Hearing those concerns, a group of senators introduced a new bill this week that, if passed, would greatly diminish Apple and Google’s ability to control app purchases in their operating systems and completely shake up the way that mobile software gets distributed.
The new bill, called the Open App Markets Act, would enshrine quite a few rights that could benefit app developers tired of handing 30% of their earnings to Apple and Google. The bill, embedded in full below, would require companies that control operating systems to allow third-party apps and app stores.
It would also prevent those companies from blocking developers from telling users about lower prices for their software that they might find outside of official app stores. Apple and Google would also be barred from leveraging “non-public” information collecting through their platforms to create competing apps.
“This legislation will tear down coercive anticompetitive walls in the app economy, giving consumers more choices and smaller startup tech companies a fighting chance,” said Senator Richard Blumenthal (D-CT), who introduced the bipartisan bill with Sen. Marsha Blackburn (R-TN), and Sen. Amy Klobuchar (D-MN). Klobuchar chairs the Senate’s antitrust subcommittee and Blackburn and Blumenthal are both subcommittee members.
Senator Blackburn called Apple and Google’s app store practices a “direct affront to a free and fair marketplace” and Sen. Klobuchar noted that their behavior raises “serious competition concerns.”
The bill draws on information collected earlier this year from that subcommittee’s hearing on app stores and competition. In the hearing, lawmakers heard from Apple and Google as well as Spotify, Tile and Match Group, three companies that argued their businesses have been negatively impacted by anti-competitive app store policies.
“… We urge Congress to swiftly pass the Open App Markets Act,” Spotify Chief Legal Officer Horacio Gutierrez said of the new bill. “Absent action, we can expect Apple and others to continue changing the rules in favor of their own services, and causing further harm to consumers, developers and the digital economy.”
The Coalition for App Fairness, a developer advocacy group, praised the bill for its potential to spur innovation in digital markets. “The bipartisan Open App Markets Act is a step towards holding big tech companies accountable for practices that stifle competition for developers in the U.S. and around the world,” CAF executive director Meghan DiMuzio said.
Hoping to head off future regulatory headaches, Apple dropped its own fees for companies that generate less than $1 million in App Store revenue from 30% to 15% last year. Google followed suit with its own gesture, dropping fees to 15% for the first $1 million in revenue a developer earns through the Play Store in a year. Some developers critical of the companies’ practices saw those changes as little more than a publicity stunt.
Developers have long complained about the high tolls they pay to distribute their software through the world’s two major mobile operating systems. That fight escalated over the last year when Epic Games circumvented Apple’s payments rules by allowing Fortnite players to pay Epic directly, setting off a legal fight that has huge implications for the mobile software world. Following a May trial, the verdict is expected later this year.
“This will make it easier for developers of all sizes to challenge these harmful practices and seek relief from retaliation, be it during litigation or simply because they dared speak up,” Epic Games VP of Public Policy Corie Wright said of the new bill.
Unlike Apple, Google does allow apps to be “sideloaded,” installed onto devices outside of the Google Play Store. But documents unsealed in Epic’s parallel case against Google revealed that the Play Store’s creator knows the sideloading process is a terrible experience for users — something the company brings up when pressuring developers to stick with its official app marketplace.
The counterargument here is that official app stores make apps safer and smoother for consumers. While Apple and Google extract heavy fees for selling mobile software through the App Store and the Google Play Store, the companies both argue that streamlining apps through those official channels protects people from malware and allows for prompt software updates to patch security concerns that could jeopardize user privacy.
“At Apple, our focus is on maintaining an App Store where people can have confidence that every app must meet our rigorous guidelines and their privacy and security is protected,” an Apple spokesperson told TechCrunch.
Adam Kovacevich, a former Google policy executive who leads the new tech-backed industry group Chamber of Progress, called the new bill “a finger in the eye” for Android and iPhone owners.
“I don’t see any consumers marching in Washington demanding that Congress make their smartphones dumber,” Kovacevich said. “And Congress has better things to do than intervene in a multi-million-dollar dispute between businesses.”
At least in Google’s case, the counterargument has its own counterargument. Android has long been notorious for malware, but apparently most of that malicious software isn’t making its way onto devices through sideloading — it’s walking through the Google Play Store’s front door.