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Fintech all-star Nubank raises a $750M mega round

By Marcella McCarthy

In 2013, Colombian businessman David Velez decided to reinvent the Brazilian banking system. He didn’t speak Portuguese, nor was he an engineer or a banker, but he did have the conviction that the system was broken and that he could fix it. And as a former Sequoia VC, he also had access to capital.

His gut instinct and market analysis were right. Today, Nubank announced a $750 million extension to its Series G (which rang in at $400 million this past January), bringing the round to a total of $1.15 billion and their valuation to $30 billion — $5 billion more than when we covered them in January.

The extension funding was led by Berkshire Hathaway, which put in $500 million, and a number of other investors.

Velez and his team decided now was a good time to raise again, because, “We saw a great opportunity in terms of growth rate and we’re very tiny when compared to the incumbents,” he told TechCrunch.”

Nubank is the biggest digital bank in the world by number of customers: 40 million. The company started as a tech company in Brazil that offered only a fee-free credit card with a line of credit of R$50 (about USD$10). 

It now offers a variety of financial products, including a digital bank account, a debit card, insurance, P2P payment via Pix (the Brazilian equivalent of Zelle), loans, rewards, life insurance and an account and credit card for small business owners. 

Nubank serves unbanked or underserviced citizens in Brazil — about 30% of the population — and this approach can be extremely profitable because there are many more clients available.

The banking system in Brazil is one of the few bureaucracies in the country that is actually quite skillful, but the customer service remains unbearable, and banks charge exorbitant fees for any little transaction. 

Traditionally, the banking industry has been dominated by five major traditional banks: Itaú Unibanco, Banco do Brasil, Bradesco, Santander and Caixa Economica Federal. 

While Brazil remains Nubank’s primary market, the company also offers services in Colombia and Mexico (services launched in Mexico in 2018). The company still only offers the credit card in both countries.

“The momentum we’re seeing in Mexico is terrific. Our Mexican credit card net promoter score (NPS) is 93, which is the highest we’ve had in Nubank history. In Brazil the highest we’ve had was 88,” Velez said.

The company has been on a hiring spree in the last few months, and brought on two heavyweight executives. Matt Swann replaced Ed Wible (the original CTO and co-founder). Wible continues to be an important player in the company, but more in a software developer capacity. Swann previously served as CTO at Bookings.com and StubHub, and as CIO of the Global Consumer Bank at Citi, so he brings years of experience of scaling tech businesses, which is what Nubank is focused on now, though Velez wouldn’t confirm which countries are next.

The other major hire, Arturo Nunez, fills the new role of chief marketing officer. Nunez was head of marketing for Apple Latin America, amongst other roles with Nike and the NBA. 

It may sound a little odd for a tech company not to have had a head of marketing, but Nubank takes pride in having a $0 cost of acquisition (CAC). Instead of spending money on marketing, they spend it on customer service and then rely on word of mouth to get the word out.

Since we last spoke with Velez in January regarding the $400 million Series G, the company went from having 34 million customers to now having 40 million in a span of roughly 6 months. The funds will be used to grow the business, including hiring more people.

“We’ve seen the entire market go digital, especially people who never thought they would,” Velez said. “There is really now an avalanche of all backgrounds [of people] who are getting into digital banking.”

Cabify launches ‘Cabify Go!’, a multi-modal subscription service

By Rebecca Bellan

Cabify wants to own the way people in cities move. The Spanish-born ride-hailing company is rolling out a pilot multi-modal subscription model to 40,000 users in Madrid this week, with plans to expand to its other markets throughout Spain and Latin America.

The “Cabify Go!” subscription service appears to have something for everyone. All of Cabify’s different mobility offerings — ride-hailing service, electric micromobility subsidiary MOVO, bike subscription service Bive and courier service — are already available under one app, but now customers will also be able to select one of three plans that reflect the mobility needs of different users. Select users will now see a “Go!” button on the top-right corner of the screen. This is a step toward making the Cabify name ubiquitous among city dwellers planning a trip, whether they’re taking an old-fashioned taxi ride to the airport or are riding a scooter to work. 

“The subscription scheme ‘Cabify Go!’ is born to make our app their recurring platform, with diverse available services,” Leonor Barrueco, Cabify’s VP of growth, told TechCrunch. “This approach is strongly aligned with our goal of becoming the leading multi-mobility platform. At this stage there’s an opportunity to get closer to our users’ multiple and varying needs. We want to offer our users convenient, diverse and sustainable ways to move around the city at an affordable monthly fee.”

The main subscription offering, “Cabify Go! Todo en uno” or “Everything in one” plan, costs €6.95 per month and gives users a blanket 10% discount on all their Cabify trips, as well as 30% off Cabify Envíos, its courier service. Subscribers also get two free cancellations each month and are exempt from the additional fee incurred from high demand. 

Cabify is also offering the “A dos ruedas” or “On two wheels” plan, which costs €19.95 per month and includes 10 free MOVO rides of up to €6 without any additional cost. The mobility company expects subscriptions to help bring on new users. Currently, the rate of new users in Cabify’s moped segment is nearly 1.5 times higher than the ride-hailing services’ rate, according to Barrueco. 

“Given the convergence of the platform space where customers can demand a variety of booming multi-mobility services, some users might be new to alternative options whilst some are new to the whole multi-mobility ecosystem,” said Barrueco.

Finally, its “Pedelea” or “Pedal” plan includes the Bive long-term rental service for electric or mechanical bikes, with a competitive monthly price of €49.95 and €28.95, respectively. Servicing and maintenance is included, as well as a 10% discount on ride-hailing trips. 

Bive, which Cabify introduced about a year ago, has already spread from Madrid to Valencia, Sevilla and Barcelona. By integrating the service into Cabify’s subscription offerings, the company hopes to promote the Bive service through another outlet, an idea borne out by internal insights. Barrueca says that 50% of Bive’s user base are new users to the Cabify platform. 

There are no sign-up or cancellation fees for any of the services, and users can cancel at any time, according to Barrueco. But that’s par for the course when it comes to mobility subscriptions, which seem to be on the rise as the subscription business model grows to answer shifting consumption habits.

According to monetization tech developer Telecoming’s 2021 Subscronomics Report, in the European market, “with a base of 353 million households and more than 2,100 connected devices (22% of the total worldwide), 560 million subscriptions will be purchased this year (25% of the worldwide total).” This is expected to contribute to a global subscriptions industry of almost $228 billion, which is 31% higher than in 2020, with an average YOY growth of 23% from now until 2025. 

Other companies that have jumped on the monthly rental train early include Unagi with its e-scooters, Swapfiets with bikes and e-bikes and Onto with electric vehicles.

Barrueco says one of Cabify’s goals in increasing its own business is to contribute to the transformation of cities to be more people-centric and environmentally friendly by making shared modes of transport more accessible.

“One of the company’s top priorities is to ramp up and consolidate our multimobility service proposition which provides our users with diverse sustainable alternatives and aims to replace the dominance of the private car,” said Barrueco.

While the global share of EVs over Cabify’s entire fleet is only about 1%, with hybrid vehicles accounting for 3%, Cabify is targeting 2025 for full electrification for collaborating fleets in Spain, and 2030 in Latin America. The company is collaborating with a number of stakeholders, including IDB Invest, the Ministry of Energy in Chile and car brands to test suitable EV models.

“This common journey to the general adoption of EVs entails tackling a number of urban and sector-wide challenges such as the scarcity of EV models that are autonomy-wise compatible with ride-hailing services, battery life spans, legal certainty in access to credit or the characteristics and availability of charging points,” said Barrueco.

Apple’s new encrypted browsing feature won’t be available in China, Saudi Arabia and more: report

By Rita Liao

Apple announced a handful of privacy-focused updates at its annual software developer conference on Monday. One called Private Relay particularly piques the interest of Chinese users living under the country’s censorship system, for it encrypts all browsing history so nobody can track or intercept the data.

As my colleague Roman Dillet explains:

When Private Relay is turned on, nobody can track your browsing history — not your internet service provider, anyone standing in the middle of your request between your device and the server you’re requesting information from. We’ll have to wait a bit to learn more about how it works exactly.

The excitement didn’t last long. Apple told Reuters that Private Relay won’t be available in China alongside Belarus, Colombia, Egypt, Kazakhstan, Saudi Arabia, South Africa, Turkmenistan, Uganda and the Philippines.

Apple couldn’t be immediately reached by TechCrunch for comment.

Virtual private networks or VPNs are popular tools for users in China to bypass the “great firewall” censorship apparatus, accessing web services that are otherwise blocked or slowed down. But VPNs don’t necessarily protect users’ privacy because they simply funnel all the traffic through VPN providers’ servers instead of users’ internet providers, so users are essentially entrusting VPN firms with protecting their identities. Private Relay, on the other hand, doesn’t even allow Apple to see one’s browsing activity.

In an interview with Fast Company, Craig Federighi, Apple’s senior vice president of software engineering, explained why the new feature may be superior to VPNs:

“We hope users believe in Apple as a trustworthy intermediary, but we didn’t even want you to have to trust us [because] we don’t have this ability to simultaneously source your IP and the destination where you’re going to–and that’s unlike VPNs. And so we wanted to provide many of the benefits that people are seeking when in the past they’ve decided to use a VPN, but not force that difficult and conceivably perilous privacy trade-off in terms of trusting it a single intermediary.”

It’s unclear whether Private Relay will simply be excluded from system upgrades for users in China and the other countries where it’s restricted, or it will be blocked by internet providers in those regions. It also remains to be seen whether the feature will be available to Apple users in Hong Kong, which has seen an increase in online censorship in the past year.

Like all Western tech firms operating in China, Apple is trapped between antagonizing Beijing and flouting the values it espouses at home. Apple has a history of caving in to Beijing’s censorship pressure, from migrating all user data in China to a state-run cloud center, cracking down on independent VPN apps in China, limiting free speech in Chinese podcasts, to removing RSS feed readers from the China App Store.

Apple’s new App Store Guidelines aim to crack down on fraud and scams

By Sarah Perez

Apple today is releasing a new version of its App Store Review Guidelines, its lengthy document which dictates the rules which apps must abide by in order to be published to its App Store. Among the more notable changes rolling out today, are several sections that will see Apple taking a harder stance on App Store fraud, scams and developer misconduct, including a new process that aims to empower other developers to hold bad actors accountable.

One of the key updates on this front involves a change to Apple’s Developer Code of Conduct (Section 5.6 and 5.6.1-5.6.4 of the Review Guidelines).

This section has been significantly expanded to include guidance stating that repeated manipulative or misleading behavior or other fraudulent conduct will lead to the developer’s removal from the Apple Developer Program. This is something Apple has done for repeated violations, it claims, but wanted to now ensure was clearly spelled out in the guidelines.

In an entirely new third paragraph in this section, Apple says that if a developer engages in activities or actions that are not in accordance with the developer code of conduct, they will have their Apple Developer account terminated.

It also details what, specifically, must be done to restore the account, which includes providing Apple with a written statement detailing the improvements they’ve made, which will have to be approved by Apple. If Apple is able to confirm the changes has been made, it may then restore the developer’s account.

Apple explained in a press briefing that this change was meant to prevent a sort of catch and release scenario where a developer gets caught by Apple, but then later reverts their changes to continue their bad behavior.

As part of this update, Apple added a new section about developer identity (5.6.2). This is meant to ensure the contact information for developers provided to Apple and customers is accurate and functional, and that the developer isn’t impersonating other, legitimate developers on the App Store. This was a particular issue in a high-profile incident of App Store fraud which involved a crypto wallet app that scammed a user out of his life savings (~$600,000) in Bitcoin. The scam victim had been deceived because the app was using the same name and icon as a different company that made a hardware crypto device, and because the scan app was rated 5 stars. (Illegitimately, that is).

Related to this, Apple clarified the language around App Store discovery fraud (5.6.3) to more specifically call out any type of manipulations of App Store charts, search, reviews and referrals. The former would mean to crack down on the clearly booming industry of fake App Store ratings and reviews, which can send scam app up higher in charts and search.

Meanwhile, the referral crackdown would address consumers being shown incorrect pricing outside the App Store in an effort to boost installs.

There are hundreds of these. And then, there's hundreds of *real* ones too:
⭐
"SCAM. What shady business. Downloaded this app on concept. It doesn’t even work. There is no free version AT ALL. You are tricked into downloading and then asked to pay $7.99 per FREAKING WEEK. Wow."

— Kosta Eleftheriou (@keleftheriou) January 31, 2021

Another section (5.6.4) addresses issues that come up after an app is published, including negative customer reports and concerns and excessive refund rates, for example. If Apple notices this behavior, it will investigate the app for violations, it says.

Of course, the question here is: will Apple actually notice the potential scammers? In recent months, a growing number of developers believe Apple is allowing far too many scammers to fall through the cracks of App Review.

One particular thorn in Apple’s side has been Fleksy keyboard app founder Kosta Eleftheriou, who is not only suing Apple for the revenue he’s personally lost to scammers, but also formed a sort of one-man bunco squad to expose some of the more egregious scams to date. This has included the above-mentioned crypto scam; a kids game that actually contained a hidden online casino; and a VPN app scamming users out of $5 million per year, among many others.

The rampant fraud taking place on the App Store was also brought up during Apple’s antitrust hearing, when Georgia’s Senator Jon Ossoff asked Apple’s Chief Compliance Officer Kyle Andeer why Apple was not able to locate scams, given they’re “trivially easy” to identify.

Apple downplayed the concerns then, and continues to do so through press releases like this one which noted how the App Store stopped over $1.5 billion in fraudulent transactions in 2020.

But a new update to these Guidelines seems to be an admission that Apple may need a little help on this front. It says developers can now directly report possible violations they find in other developers’ apps. Through a new form that standardizes this sort of complaint, developers can point to guideline violations and any other trust and safety issues they discover. Often, developers notice the scammers whose apps are impacting their own business and revenue, so they’ll likely turn to this form now as a first step in getting the scammer dealt with.

Another change will allow developers to appeal a rejection if they think there was unfair treatment of any kind, including political bias. Previously, Apple had allowed developers to appeal App Store decisions and suggest changes to guidelines.

These are only a handful of the many changes rolling out with today’s updated App Store Review Guidelines.

There are a few others, however, also worth highlighting:

  • Apple clarified rules around “hookup” apps to ensure developers understand porn and prostitution are not allowed on the App Store — often an issue with the fly-by-night hookup apps, which bait and switch users.
  • Creator content apps are instructed that they must follow rules for user-generated content, when applicable, meaning they must have content blocking, reporting and robust moderation.
  • Apple added the ability for licensed pharmacies and licensed cannabis dispensaries to facilitate purchasing provided they’re legal and geogated.
  • Apps that report criminal activity require the developers to work with local law enforcement. (Citizen is a recent example of an app gone awry when users hunted down the wrong person. That level of carelessness may be coming to an end now.)
  • Bait-and-switch marketing and ads about app pricing isn’t allowed.
  • Cellular carrier apps can now include other kinds of subscription apps besides music and video services.
  • Apple clarifies that developers can communicate on email with anyone, but says they can’t target customers acquired through the App Store with messages about how to make purchases outside of the App Store.
  • Apple has enough drinking game apps. Stop sending them in.
  • Apps that offer account creation also have to offer account deletion.
  • Other clarity was added around in-app purchases for gift cards, app metadata, bug fix submissions, and more. But these were not major changes.

read more about Apple's WWDC 2021 on TechCrunch

Apple to introduce A/B testing and in-app events to the App Store

By Sarah Perez

Apple today announced a number of coming changes and improvements to the App Store that will help developers better target their apps to users, get their apps discovered by more people and even highlight what sort of events are taking place inside their apps to entice new users to download the app and encourage existing users to return.

The company said its App Store today sees 600 million weekly users across 175 countries, and has paid out more than $230 billion to developers since the App Store launched, highlighting the business opportunity for app developers.

However, as the App Store has grown, it’s become harder for app developers to market their apps to new users or get their apps found. The new features aim to address that.

Image Credits: Apple

One change involves the app’s product page. Starting this year, app developers will be able to create multiple custom product pages to showcase different features of their app for different users. For instance, they’ll be able to try out things like different screenshots, videos, and even different app icons to A/B test what users like the most.

They’ll also be able to advertise the dynamic things that are taking place inside their apps on an ongoing basis. Apple explained that apps and games are constantly rolling out new content and limited time events like film premieres on streaming services, events like Pokémon GO fests, or Nike fitness challenges. But these events were often only discoverable by those who already had the app installed and then opted in to push notifications.

Image Credits: Apple

Apple will now allow developers to better advertise these events, with the launch of in-app events “front and center on the App Store.” The events can be showcased on the app’s product page. Users can learn more about the events, sign up to be notified or quickly join the event, if it’s happening now. They can also discover events with personalized recommendations and through App Store search.

App Store editors will curate the best events and the new App Store widget will feature upcoming events right on users’ home screens, too.

Apple says the feature will be open to all developers, including those who already run events and those who are just getting started.

read more about Apple's WWDC 2021 on TechCrunch

SoftBank pours up to $150M into GBM, a Mexico City-based investment platform

By Mary Ann Azevedo

Grupo Bursátil Mexicano (GBM) is a 35-year-old investment platform in the Mexican stock market. In its first three decades of life, GBM was focused on providing investment services to high net worth individuals and local and global institutions.

Over the past decade, the Mexico City-based brokerage has ramped up its digital efforts, and, in the past five years, has evolved its business model to offer services to all Mexicans with the same products and services it offers large estates.

Today, GBM is announcing it has received an investment of “up to” $150 million from SoftBank via the Japanese conglomerate’s Latin America Fund at a valuation of “over $1 billion.” The investment is being made through one of GBM’s subsidiaries and is not contingent on anything, according to the company.

Co-CEO Pedro de Garay Montero told TechCrunch that GBM has built an app, GBM+, that organizes and invests clients’ money through three different tools: Wealth Management, Trading and Smart Cash.

Last year was a “historic” one for the company, he said, and GBM went from having 38,000 investment accounts in January 2020 to more than 650,000 by year’s end. In the first quarter of 2021, that number had grown to over 1 million — representing more than 30x growth from the beginning of 2020.

For some context, according to the National Banking and Securities Commission (CNBV), there were only 298,000 brokerage accounts in Mexico at the end of 2019, and that number climbed to 940,000 by the end of 2020 — with GBM holding a large share of them.

Most of GBM’s clients are retail clients, but the company also caters to “most of the largest investment managers worldwide,” as well as global companies such as Netflix, Google and BlackRock. Specifically, it services 40% of the largest public corporations in Mexico and a large base of ultra high net worth individuals.

The company is planning to use its new capital in part to invest “heavily” in customer acquisition.

Montero said that half of its team of 450 are tech professionals, and that the company plans to also continue hiring as it focuses on growth in its B2C and B2B offerings and expanding into new verticals.

“We are improving our already robust financial education offering,” he added, “so that Mexicans can take control of their finances. GBM’s mission is to transform Mexico into a country of investors.”

Because Mexico is such a huge market — with a population of over 120 million and a GDP of more than $1 trillion — GBM is laser-focused on growing its presence in the country.

“The financial services industry is dominated by big banks and is inefficient, expensive and provides a poor client experience. This has resulted in less than 1% of individuals having an investment account,” Montero told TechCrunch. “We will be targeting clients through our own platform and internal advisors, as well as growing our base of external advisors to reach as many people as possible with the best investment products and user experience.”

When it comes to institutional clients, he believes there is “enormous potential” in serving both the large corporations and the SMEs “who have received limited services from banks.”

Juan Franck, investment lead for SoftBank Latin America Fund in Mexico, believes the retail investment space in Mexico is at an inflection point.

“The investing culture in Mexico has historically been low compared to the rest of the world, even when specifically compared to other countries in Latin America, like Brazil,” he added. “However, the landscape is quickly changing as, through technology, Mexicans are being provided more education around investing and more investment alternatives.”

In the midst of this shift, SoftBank was impressed by GBM’s “clear vision and playbook,” Franck said.

So, despite being a decades-old company, SoftBank sees big potential in the strength of the digital platform that GBM has built out.

“GBM is the leading broker in Mexico in terms of trading activity and broker accounts,” he said. “The company combines decades of industry know-how with an entrepreneurial drive to revolutionize the wealth management space in the country.”

Europe wants to go its own way on digital identity

By Natasha Lomas

In its latest ambitious digital policy announcement, the European Union has proposed creating a framework for a “trusted and secure European e-ID” (aka digital identity) — which it said today it wants to be available to all citizens, residents and businesses to make it easer to use a national digital identity to prove who they are in order to access public sector or commercial services regardless of where they are in the bloc.

The EU does already have a regulation on electronic authentication systems (eIDAS), which entered into force in 2014, but the Commission’s intention with the e-ID proposal is to expand on that by addressing some of its limitations and inadequacies (such as poor uptake and a lack of mobile support).

It also wants the e-ID framework to incorporate digital wallets — meaning the user will be able to choose to download a wallet app to a mobile device where they can store and selectively share electronic documents which might be needed for a specific identity verification transaction, such as when opening a bank account or applying for a loan. Other functions (like e-signing) is also envisaged being supported by these e-ID digital wallets.

Other examples the Commission gives where it sees a harmonized e-ID coming in handy include renting a car or checking into a hotel. EU lawmakers also suggest full interoperability for authentication of national digital IDs could be helpful for citizens needing to submit a local tax declaration or enrolling in a regional university.

Some Member States do already offer national electronic IDs but there’s a problem with interoperability across borders, per the Commission, which noted today that just 14% of key public service providers across all Member States allow cross-border authentication with an e-Identity system, though it also said cross-border authentications are rising.

A universally accepted ‘e-ID’ could — in theory — help grease digital activity throughout the EU’s single market by making it easier for Europeans to verify their identity and access commercial or publicly provided services when travelling or living outside their home market.

EU lawmakers also seem to believe there’s an opportunity to ‘own’ a strategic piece of the digital puzzle here, if they can create a unifying framework for all European national digital IDs — offering consumers not just a more convenient alternative to carrying around a physical version of their national ID (at least in some situations), and/or other documents they might need to show when applying to access specific services, but what commissioners billed today as a “European choice” — i.e. vs commercial digital ID systems which may not offer the same high-level pledge of a “trusted and secure” ID system that lets the user entirely control who gets to sees which bits of their data.

A number of tech giants do of course already offer users the ability to sign in to third party digital services using the same credentials to access their own service. But in most cases doing so means the user is opening a fresh conduit for their personal data to flow back to the data-mining platform giant that controls the credential, letting Facebook (etc) further flesh out what it knows about that user’s Internet activity.

“The new European Digital Identity Wallets will enable all Europeans to access services online without having to use private identification methods or unnecessarily sharing personal data. With this solution they will have full control of the data they share,” is the Commission alternative vision for the proposed e-ID framework.

It also suggests the system could create substantial upside for European businesses — by supporting them in offering “a wide range of new services” atop the associated pledge of a “secure and trusted identification service”. And driving public trust in digital services is a key plank of how the Commission approaches digital policymaking — arguing that it’s a essential lever to grow uptake of online services.

However to say this e-ID scheme is ‘ambitious’ is a polite word for how viable it looks.

Aside from the tricky issue of adoption (i.e. actually getting Europeans to A) know about e-ID, and B) actually use it, by also C) getting enough platforms to support it, as well as D) getting providers on board to create the necessary wallets for envisaged functionality to pan out and be as robustly secure as promised), they’ll also — presumably — need to E) convince and/or compel web browsers to integrate e-ID so it can be accessed in a streamlined way.

The alternative (not being baked into browsers’ UIs) would surely make the other adoption steps trickier.

The Commission’s press release is fairly thin on such detail, though — saying only that: “Very large platforms will be required to accept the use of European Digital Identity wallets upon request of the user.”

Nonetheless, a whole chunk of the proposal is given over to discussion of “Qualified certificates for website authentication” — a trusted services provision, also expanding on the approach taken in eIDAS, which the Commission is keen for e-ID to incorporate in order to further boost user trust by offering a certified guarantee of who’s behind a website (although the proposal says it will be voluntary for websites to get certified).

The upshot of this component of the proposal is that web browsers would need to support and display these certificates, in order for the envisaged trust to flow — which sums to a whole lot of highly nuanced web infrastructure work needed to be done by third parties to interoperate with this EU requirement. (Work that browser makers already seem to have expressed serious misgivings about.)

Web browsers will be forced/compelled to accept authentication certificates. This is to guarantee the proof of the website operator identity. What standards should be used here? Will web browsers implement it? pic.twitter.com/sygngNHyQW

— Lukasz Olejnik (@lukOlejnik) June 3, 2021

Another big question-mark thrown up by the Commission’s e-ID plan is how exactly the envisaged certified digital identity wallets would store — and most importantly safeguard — user data. That very much remains to be determined, at this nascent stage.

There’s discussion in the regulation’s recitals, for example, of Member States being encouraged to “set-up jointly sandboxes to test innovative solutions in a controlled and secure environment in particular to improve the functionality, protection of personal data, security and interoperability of the solutions and to inform future updates of technical references and legal requirements”.

And it seems that a range of approaches are being entertained, with recital 11 discussing using biometric authentication for accessing digital wallets (while also noting potential rights risks as well as the need to ensure adequate security):

European Digital Identity Wallets should ensure the highest level of security for the personal data used for authentication irrespective of whether such data is stored locally or on cloud-based solutions, taking into account the different levels of risk. Using biometrics to authenticate is one of the identifications methods providing a high level of confidence, in particular when used in combination with other elements of authentication. Since biometrics represents a unique characteristic of a person, the use of biometrics requires organisational and security measures, commensurate to the risk that such processing may entail to the rights and freedoms of natural persons and in accordance with Regulation 2016/679.

In short, it’s clear that underlying the Commission’s big, huge idea of a unified (and unifying) European e-ID is a complex mass of requirements needed to deliver on the vision of a secure and trusted European digital ID that doesn’t just languish ignored and unused by most web users — some highly technical requirements, others (such as achieving the sought for widespread adoption) no less challenging.

The impediments to success here certainly look daunting.

Nonetheless, lawmakers are ploughing ahead, arguing that the pandemic’s acceleration of digital service adoption has shown the pressing need to address eIDAS’ shortcomings — and deliver on the goal of “effective and user-friendly digital services across the EU”.

Alongside today’s regulatory proposal they’ve put out a Recommendation, inviting Member States to “establish a common toolbox by September 2022 and to start the necessary preparatory work immediately” — with a goal of publishing the agreed toolbox in October 2022 and starting pilot projects (based on the agreed technical framework) sometime thereafter.

“This toolbox should include the technical architecture, standards and guidelines for best practices,” the Commission adds, eliding the large cans of worms being firmly cracked open.

Still, its penciled in timeframe for mass adoption — of around a decade — does a better job of illustrating the scale of the challenge, with the Commission writing that it wants 80% of citizens to be using an e-ID solution by 2030.

The even longer game the bloc is playing is to try to achieve digital sovereignty so it’s not beholden to foreign-owned tech giants. And an ‘own brand’, autonomously operated European digital identity does certainly align with that strategic goal.

For SaaS startups, differentiation is an iterative process

By Ram Iyer
Jason VandeBoom Contributor
Jason VandeBoom is founder and CEO of ActiveCampaign, a customer experience automation (CXA) company.

Software as a service has been thriving as a sector for years, but it has gone into overdrive in the past year as businesses responded to the pandemic by speeding up the migration of important functions to the cloud. We’ve all seen the news of SaaS startups raising large funding rounds, with deal sizes and valuations steadily climbing. But as tech industry watchers know only too well, large funding rounds and valuations are not foolproof indicators of sustainable growth and longevity.

To scale sustainably, grow its customer base and mature to the point of an exit, a SaaS startup needs to stand apart from the herd at every phase of development. Failure to do so means a poor outcome for founders and investors.

As a founder who pivoted from on-premise to SaaS back in 2016, I have focused on scaling my company (most recently crossing 145,000 customers) and in the process, learned quite a bit about making a mark. Here is some advice on differentiation at the various stages in the life of a SaaS startup.

Launch and early years

Differentiation is crucial early on, because it’s one of the only ways to attract customers. Customers can help lay the groundwork for everything from your product roadmap to pricing.

The more you know about your target customers’ pain points with current solutions, the easier it will be to stand out. Take every opportunity to learn about the people you are aiming to serve, and which problems they want to solve the most. Analyst reports about specific sectors may be useful, but there is no better source of information than the people who, hopefully, will pay to use your solution.

The key to success in the SaaS space is solving real problems. Take DocuSign, for example — the company found a way to simply and elegantly solve a niche problem for users with its software. This is something that sounds easy, but in reality, it means spending hours listening to the customer and tailoring your product accordingly.

Paramount+ will launch a $4.99 monthly ad-supported subscription

By Amanda Silberling

If you didn’t want to shell out $9.99 per month to watch the meme-worthy iCarly reboot, now you won’t have to. On Monday, Paramount+ will launch its ad-supported Essential Plan, priced at $4.99 per month.

This less-expensive plan will replace the CBS All Access plan, which included commercials, but also granted access to local CBS stations. If you’re currently subscribed to that $5.99 per month plan, you can keep it. But starting Monday, it won’t be around anymore for new subscribers. 

What makes the Essential Plan different from CBS All Access? Subscribers on the new tier will get access to Marquee Sports (including games in the NFL, UEFA Champions, and Europa Leagues), breaking news on CBSN, and all of Paramount’s on-demand shows and movies. This includes offerings from ViacomCBS-owned channels like BET, Comedy Central, MTV, Nickelodeon, the Smithsonian Channel, and more. But, local live CBS station programming will no longer be included. So, if that’s a deal-breaker, you might want to subscribe to CBS All Access this weekend. 

The existing Premium Plan ($9.99 per month) removes commercials and adds support for 4K, HDR, and Dolby Vision. Like other streaming services, only Premium subscribers will have access to mobile downloads. 

Both plans include access to parental controls and up to six individual profiles. The service doesn’t have a watch list at this time. But that has become a baseline feature for being competitive in this space, so it’s not a matter of if, but when. 

For comparison, the basic Netflix plan costs $8.99 per month, but only lets you watch on one screen at a time. That makes it harder to share an account with family or friends. Their standard tier is $13.99, making it a bit pricier than Paramount+.

Earlier this week, HBO Max unveiled their own lower-cost, ad-supported subscription tier, priced at $9.99 per month. The WarnerMedia-Discovery merger could also have major implications for the popular streaming service, though how that shakes out in terms of content libraries, or even possibly a combined streaming app, remains to be seen. 

Ultimately, consumers will make their decisions about which services to pay for based on a variety of key factors including content, pricing, and user experience. On the content front, Paramount+ plans to announce a slate of big-name titles when the new plan goes live on Monday, in hopes of wooing new subscribers. But the low-cost plan may also appeal to those who don’t necessarily care about top movies – they just want an affordable add-on to their current streaming lineup that provides them with access to some of the programs Netflix lacks. 

Paramount+ owner ViacomCBS said it added 6 million global streaming subscribers across their Paramount+, Showtime OTT, and BET+ services in Q1, to end the quarter with 36 million global users. Most of those come from Paramount+.

Roku debuts a 15-minute weekly series that recommends what to watch next

By Sarah Perez

Roku is expanding its programming for its free content hub, The Roku Channel, with today’s launch of its own weekly entertainment program called “Roku Recommends.” The 15-minute show will leverage Roku’s data to highlight the Top 5 titles for viewers to stream that week. While not exactly “original programming” the way that Roku’s recent additions of its acquired Quibi content is, the series will run only on Roku, where it can be found in The Roku Channel and Featured Free, with new episodes every Thursday.

The series is the first production to emerge from the new Roku Brand Studio — a studio that aims to produce video ads and other custom branded content for ad partners. The show is produced by Funny Or Die, and Mike Farah, Beth Belew and Jim Ziegler serve as executive producers.

The show’s co-hosts include entertainment reporter and AfterBuzz TV co-founder Maria Menounos and former NFL player Andrew “Hawk” Hawkins. The duo will present the Top 5 titles to viewers. These recommended shows or movies may come from any of the thousands of channels across the Roku platform, based on data exclusive to the platform.

“According to Nielsen data, the average streamer spends more than seven minutes searching for what to watch next,” said Chris Bruss, head of Roku Brand Studio, in a statement. “We are uniquely positioned to use our trending data both to help consumers find incredible movies and shows and to help advertisers go beyond the traditional 30-second ad to entertain streamers who otherwise spend time in ad-free, subscription-only environments,” he added.

The series will also allow for ad sponsors. The company says it has already signed on several national advertisers, starting with Walmart, to sponsor the program. Advertisers will have access to Roku’s Measurement Partner Program to determine whether or not their integration reaches subscription video on-demand (SVOD)-only streaming users, as well as view other metrics about their video ad campaign’s reach, brand perception and impact.

The series comes at a time when the streaming landscape is shifting. Today’s streaming services regularly serve up recommended content based on what their customers are watching — Netflix, for example, shows rows of popular and trending content, as well as a Top 10 list of newly popular titles. But as the number of available streaming services grows, larger entities merge, and content jumps around as licensing agreements end and start, consumers may be more in need of a set of current recommendations from across channels and services, not just those isolated inside one service.

Amazon Fire TV’s update recently addressed this need with the introduction of a new “Find” feature that aims to make it easier for users to search and browse movies, shows and free content across its platform. Roku, however, didn’t have a recommendation system of its own.

It’s also interesting to see that Roku is willing to use its proprietary streaming data in this way — something it could choose to do more with further down the road to help build out a broader set of recommendations.

Brazilian proptech startup QuintoAndar lands $300M at a $4B valuation

By Mary Ann Azevedo

Fintech and proptech are two sectors that are seeing exploding growth in Latin America, as financial services and real estate are two categories in particular dire need of innovation in a region.

Brazil’s QuintoAndar, which has developed a real estate marketplace focused on rentals and sales, has seen impressive growth in recent years. Today, the São Paulo-based proptech has announced it has closed on $300 million in a Series E round of funding that values it at an impressive $4 billion.

The round is notable for a few reasons. For one, the valuation — high by any standards but especially for a LatAm company — represents an increase of four times from when QuintoAndar raised a $250 million Series D in September 2019.

It’s also noteworthy who is backing the company. Silicon Valley-based Ribbit Capital led its Series E financing, which also included participation from SoftBank’s LatAm-focused Innovation Fund, LTS, Maverik, Alta Park, an undisclosed U.S.-based asset manager fund with over $2 trillion in AUM, Kaszek Ventures, Dragoneer and Accel partner Kevin Efrusy.

Having backed the likes of Coinbase, Robinhood and CreditKarma, Ribbit Capital has historically focused on early-stage investments in the fintech space. Its bet on QuintoAndar represents clear faith in what the company is building, as well as its confidence in the startup’s plans to branch out from its current model into a one-stop real estate shop that also offers mortgage, title, insurance and escrow services.

The latest round brings QuintoAndar’s total raised since its 2013 inception to $635 million.

Ribbit Capital Partner Nick Huber said QuintoAndar has over the years built “a unique and trusted brand in Brazil” for those looking for a place to call home.

“Whether you are looking to buy or to rent, QuintoAndar can support customers through the entire transaction process: from browsing verified inventory to signing the final contracts,” Huber told TechCrunch. “The ability to serve customers’ needs through each phase of life and to do so from start to finish is a unique capability, both in Brazil and around the world.”

QuintoAndar describes itself as an “end-to-end solution for long-term rentals” that, among other things, connects potential tenants to landlords and vice versa. Last year, it expanded also into connecting a home buyers to sellers.

Image Credits: QuintoAndar

TechCrunch spoke with co-founder and CEO Gabriel Braga and he shared details around the growth that has attracted such a bevy of high-profile investors.

Like most other businesses around the world, QuintoAndar braced itself for the worst when the COVID-19 pandemic hit last year — especially considering one core piece of its business is to guarantee rents to the landlords on its platform.

“In the beginning, we were afraid of the implications of the crisis but we were able to honor our commitments,” Braga said. “In retrospect, the pandemic was a big test for our business model and it has validated the strength and defensibility of our business on the credit side and reinforced our value proposition to tenants and landlords. So after the initial scary moments, we actually felt even more confident in the business that we are building.”

QuintoAndar describes itself as “a distant market leader” with more than 100,000 rentals under management and about 10,000 new rentals per month. Its rental platform is live in 40 cities across Brazil, while its home-buying marketplace is live in four. Part of its plans with the new capital is to expand into new markets within Brazil, as well as in Latin America as a whole.

The startup claims that, in less than a year, QuintoAndar managed to aggregate the largest inventory among digital transactional platforms. It now offers more than 60,000 properties for sale across Sao Paulo, Rio de Janeiro, Belho Horizonte and Porto Alegre. To give greater context around the company’s growth of that side of its platform: In its first year of operation, QuintoAndar closed more than 1,000 transactions. It has now surpassed the mark of 8,000 transactions in annualized terms, growing between 50% and 100% quarter over quarter.

As for the rentals side of its business, Braga said QuintoAndar has more than 100,000 rentals under management and is closing about 10,000 new rentals per month. The company is not profitable as it’s focused on growth, although it’s unit economics are particularly favorable in certain markets such as Sao Paulo, which is financing some of its growth in other cities, according to Braga.

Now, the 2,000-person company is looking to begin its global expansion with plans to enter the Mexican market later this year. With that, Braga said QuintoAndar is looking to hire “top-tier” talent from all over.

“We want to invest a lot in our product and tech core,” he said. “So we’re trying to bring in more senior people from abroad, on a global basis.”

Some history

CEO Braga and CTO André Penha came up with the idea for QuintoAndar after receiving their MBAs at Stanford University. As many startups do, the company was founded out of Braga’s personal “nightmare” of an experience — in this case, of trying to rent an apartment in Sao Paulo.

The search process, he recalls, was difficult as there was not enough information available online and renters were forced to provide a guarantor, or co-signer, from the same city or pay rent insurance, which Braga described as “very expensive.”

“Overall, I felt it was a very inefficient and fragmented process with no transparency or tech,” Braga told me at the time of the company’s last raise. “There was all this friction and high cost involved, just real tangible problems to solve.”

The concept for QuintoAndar (which can be translated literally to “Fifth Floor” in Portuguese) was born.

“Little by little, we created a platform that consolidated supply and inventory in a uniform way,” Braga said.

The company took the search phase online for the first time, according to Braga. It also eliminated the need for tenants to provide a guarantor, thereby saving them money. On the other side, QuintoAndar also works to help protect the landlord with the guarantee that they will get their rent “on time every month,” Braga said.

It’s been interesting watching the company evolve and grow over time, just as it’s been fascinating seeing the region’s startup scene mature and shine in recent years.

SaaS needs to take a page out of the crypto playbook

By John Chen
John Chen Contributor
John is a principal at Fika Ventures in Los Angeles.

By the time I joined Box in late 2012, the “consumerization of the enterprise” movement was well underway. The playbook was clear: The lessons and tactics from the rise of consumer apps — viral loops, social referrals, frictionless onboarding — could be distilled, packaged and ported over to enterprise.

And the promise was subversive — great products could galvanize a loyal user base and wrest free the fates of multimillion-dollar contracts from suited salespeople peddling unusable software behind closed doors.

While the consumerization of SaaS has taught us how to more effectively get in front of users, this next decade will be about how to properly incentivize them to do the necessary work to have the right product experience.

A decade later, this promise has largely proven true. The consumer playbook contributed to the meteoric rise of Slack, Zoom, Airtable and others, specifically around user acquisition and onboarding. They are beautiful products that are discovered from the bottom up, self-serve, free to start and pay as you grow.

But while this might seem like one of the best times to build a SaaS company, one look at Product Hunt might paint a different story. For every success story like Airtable, there are a dozen lookalikes employing the same consumer-inspired playbook that are getting drowned out.

And for any first-mover startup in a new category thinking they’re reaching escape velocity, there are a dozen copycats in YC waiting around the corner, complete with their beautifully designed apps, and the promise of being “blazingly fast and delightfully simple.”

Image Credits: Fika Ventures

Conventional wisdom suggests that many of these newcomer apps will fall short because they don’t clearly communicate their differentiation, or their signup process isn’t streamlined enough, or they have poor documentation and tutorial videos, or they haven’t courted the right influencers on Twitter, or just plain poor execution.

While some (or all) of these might be true on the individual app level, there is something bigger happening on the aggregate level, and it comes back to one insidious assumption carried over from the consumer playbook: the myth of frictionless onboarding.

The reality is that onboarding is never frictionless. In fact, it’s quite the opposite — it demands that the user uproot their old habits and switch to this new way of being or doing. Just like with a new fitness program, participants feel good after completing the workout, but it takes a lot of activation energy to start and hard work to get there. Similarly, it takes work on the user’s part to get results, and most apps expect users to do this work for free.

But in a crowded marketplace with infinite alternatives, the only way to capture and hold a user’s attention is to directly incentivize them to experience the product, not just be exposed to it. Today’s growth playbook overindexes on spending ad dollars (with diminishing returns) to get premium placement and eyeballs on Google, Facebook or Product Hunt, but very few have tried putting those dollars to work toward ensuring users are actually having the experience they are supposed to.

2019 subscription customer acquisition cost study. Image Credits: Profitwell

To do this, SaaS needs to take a page out of the crypto playbook. So while the past decade of the consumerization of SaaS has taught us how to more effectively get in front of users, this next decade will be about the cryptofication of SaaS and how to properly incentivize users to do the necessary work to have the right experience with your product.

EU bodies’ use of US cloud services from AWS, Microsoft being probed by bloc’s privacy chief

By Natasha Lomas

Europe’s lead data protection regulator has opened two investigations into EU institutions’ use of cloud services from U.S. cloud giants, Amazon and Microsoft, under so called Cloud II contracts inked earlier between European bodies, institutions and agencies and AWS and Microsoft.

A separate investigation has also been opened into the European Commission’s use of Microsoft Office 365 to assess compliance with earlier recommendations, the European Data Protection Supervisor (EDPS) said today.

Wojciech Wiewiórowski is probing the EU’s use of U.S. cloud services as part of a wider compliance strategy announced last October following a landmark ruling by the Court of Justice (CJEU) — aka, Schrems II — which struck down the EU-US Privacy Shield data transfer agreement and cast doubt upon the viability of alternative data transfer mechanisms in cases where EU users’ personal data is flowing to third countries where it may be at risk from mass surveillance regimes.

In October, the EU’s chief privacy regulator asked the bloc’s institutions to report on their transfers of personal data to non-EU countries. This analysis confirmed that data is flowing to third countries, the EDPS said today. And that it’s flowing to the U.S. in particular — on account of EU bodies’ reliance on large cloud service providers (many of which are U.S.-based).

That’s hardly a surprise. But the next step could be very interesting as the EDPS wants to determine whether those historical contracts (which were signed before the Schrems II ruling) align with the CJEU judgement or not.

Indeed, the EDPS warned today that they may not — which could thus require EU bodies to find alternative cloud service providers in the future (most likely ones located within the EU, to avoid any legal uncertainty). So this investigation could be the start of a regulator-induced migration in the EU away from U.S. cloud giants.

Commenting in a statement, Wiewiórowski said: “Following the outcome of the reporting exercise by the EU institutions and bodies, we identified certain types of contracts that require particular attention and this is why we have decided to launch these two investigations. I am aware that the ‘Cloud II contracts’ were signed in early 2020 before the ‘Schrems II’ judgement and that both Amazon and Microsoft have announced new measures with the aim to align themselves with the judgement. Nevertheless, these announced measures may not be sufficient to ensure full compliance with EU data protection law and hence the need to investigate this properly.”

Amazon and Microsoft have been contacted with questions regarding any special measures they have applied to these Cloud II contracts with EU bodies.

The EDPS said it wants EU institutions to lead by example. And that looks important given how, despite a public warning from the European Data Protection Board (EDPB) last year — saying there would be no regulatory grace period for implementing the implications of the Schrems II judgement — there hasn’t been any major data transfer fireworks yet.

The most likely reason for that is a fair amount of head-in-the-sand reaction and/or superficial tweaks made to contracts in the hopes of meeting the legal bar (but which haven’t yet been tested by regulatory scrutiny).

Final guidance from the EDPB is also still pending, although the Board put out detailed advice last fall.

The CJEU ruling made it plain that EU law in this area cannot simply be ignored. So as the bloc’s data regulators start scrutinizing contracts that are taking data out of the EU some of these arrangement are, inevitably, going to be found wanting — and their associated data flows ordered to stop.

To wit: A long-running complaint against Facebook’s EU-US data transfers — filed by the eponymous Max Schrems, a long-time EU privacy campaigners and lawyer, all the way back in 2013 — is slowing winding toward just such a possibility.

Last fall, following the Schrems II ruling, the Irish regulator gave Facebook a preliminary order to stop moving Europeans’ data over the pond. Facebook sought to challenge that in the Irish courts but lost its attempt to block the proceeding earlier this month. So it could now face a suspension order within months.

How Facebook might respond is anyone’s guess but Schrems suggested to TechCrunch last summer that the company will ultimately need to federate its service, storing EU users’ data inside the EU.

The Schrems II ruling does generally look like it will be good news for EU-based cloud service providers which can position themselves to solve the legal uncertainty issue (even if they aren’t as competitively priced and/or scalable as the dominant US-based cloud giants).

Fixing U.S. surveillance law, meanwhile — so that it gets independent oversight and accessible redress mechanisms for non-citizens in order to no longer be considered a threat to EU people’s data, as the CJEU judges have repeatedly found — is certainly likely to take a lot longer than ‘months’. If indeed the US authorities can ever be convinced of the need to reform their approach.

Still, if EU regulators finally start taking action on Schrems II — by ordering high profile EU-US data transfers to stop — that might help concentrate US policymakers’ minds toward surveillance reform. Otherwise local storage may be the new future normal.

Twitter teases its upcoming ‘premium’ service, which it plans to release globally

By Sarah Perez

Would you pay for an upgraded Twitter? That’s a question Twitter will soon answer when it rolls out a new subscription service that will present users with an expanded feature set available only to paid subscribers. This is a different offering than Twitter’s previously announced Super Follow subscription plans, which will allow users to subscribe to individual creators for access to exclusive content. Instead, the new subscription service will target Twitter’s power users who tweet frequently enough or otherwise engage with the product to the point that they’d be willing to pay to do even more.

Twitter has already broadly hinted at its forthcoming subscription plans, having told Bloomberg in February that it would “research and experiment” with ways to diversify its revenue beyond advertising in 2021 and beyond. Twitter ads are 85% of revenue, but Twitter often faces slowing or flat user growth. That has led the company to consider new ways to extract more money from existing users. It told Bloomberg this plan “may include subscriptions” and other approaches that gave businesses and users access to “unique features.”

It also reiterated its interest in subscription products during its Twitter Analyst Day later that same month, when it said it would “experiment with subscriptions.” And its Twitter Investor Relations account tweeted in March that it would “test subscription products in public.”

But so far, the only subscription product Twitter has fully detailed is Super Follow, also announced during its Analyst Day event. It had not specifically spelled out what its other subscription tests would look like, nor provided any sense as to when they would arrive beyond tests that would begin rolling out “over the course of this year.”

What we know of Twitter’s efforts on this particular front doesn’t come from official sources.

Instead, it comes from app researcher Jane Manchun Wong, who earlier this month scooped not only Twitter’s premium subscription offering itself but also its name and pricing. She found the forthcoming subscription plan, currently dubbed “Twitter Blue,” would cost $2.99 per month and would include access to new features like bookmark collections and the Undo Tweets feature that Twitter had previously confirmed to CNET were being tested.

However, when tech news site The Verge asked Twitter to comment on Twitter Blue, the company declined.

This week at J.P. Morgan’s Global Technology, Media, and Communications conference, Twitter spelled things out a bit more clearly.

Instead of vaguely hinting at forthcoming “experiments” or tests that gave “people and businesses of all sizes access to unique features,” as it said before (gotta love that corporate speak!), Twitter CFO Ned Segal told investors its new “premium service” would be aimed at people who use Twitter’s service — “and they pay us for it.”

Segal noted this premium offering was one of the two types of subscriptions that Twitter had in the works, the other being Super Follows.

The premium service also sounded less of an “experiment” than when Twitter had discussed its plans before. In earlier statements, it had seemed as if Twitter was embarking on some kind of research project to see if there was even any demand for a Twitter premium subscription at all. The wording the company used in the past didn’t make it clear how seriously this effort was.

Segal said the company would offer more info about Twitter’s premium service in the coming months. It would test the service to learn more, but then it would “ultimately roll it out to people around the world,” he said.

That’s no “experiment” — that’s a roadmap.

Twitter won’t replace the core, free product it offers, in case you were concerned. He cleared that up, too. It will provide premium features “on top of [Twitter’s] continuous improvement mindset around the free version of the service that everybody will continue to have access to.”

Twitter shouldn’t have to tweak the new offering too much, as it’s already done a lot of pre-launch research on what features users are most interested in, including via user base surveys back in 2020. Not surprisingly, the Undo Tweet option — as close as we’ll ever get to an “edit” button, was among those features users wanted most.

While Twitter didn’t really say anything we didn’t know already, thanks to assumptions, leaks and vague confirmations in the past, it’s nice to see it spelled out in a more straightforward manner as a forthcoming product meant for users worldwide.

“We want to make sure that we have a durable business for our benefit, but also for the benefit of people who use the service,” Segal said.

The question now remains whether Twitter’s users will actually subscribe.

Europe to press the adtech industry to help fight online disinformation

By Natasha Lomas

The European Union plans to beef up its response to online disinformation, with the Commission saying today it will step up efforts to combat harmful but not illegal content — including by pushing for smaller digital services and adtech companies to sign up to voluntary rules aimed at tackling the spread of this type of manipulative and often malicious content.

EU lawmakers pointed to risks such as the threat to public health posed by the spread of harmful disinformation about COVID-19 vaccines as driving the need for tougher action.

Concerns about the impacts of online disinformation on democratic processes are another driver, they said.

A new more expansive code of practice on disinformation is now being prepared — and will, they hope, be finalized in September, to be ready for application at the start of next year.

The Commission’s gear change is a fairly public acceptance that the EU’s voluntary code of practice — an approach Brussels has taken since 2018 — has not worked out as hope. And, well, we did warn them.

A push to get the adtech industry on board with demonetizing viral disinformation is certainly overdue.

It’s clear the online disinformation problem hasn’t gone away. Some reports have suggested problematic activity — like social media voter manipulation and computational propaganda — have been getting worse in recent years, rather than better.

However getting visibility into the true scale of the disinformation problem remains a huge challenge given those best placed to know (ad platforms) don’t freely open their systems to external researchers. And that’s something else the Commission would like to change.

Signatories to the EU’s current code of practice on disinformation are:

Google, Facebook, Twitter, Microsoft, TikTok, Mozilla, DOT Europe (Former EDiMA), the  World  Federation  of Advertisers  (WFA) and its Belgian counterpart, the  Union  of  Belgian  Advertisers  (UBA);  the  European Association of Communications Agencies (EACA), and its national members from France, Poland and the Czech Republic — respectively, Association   des   Agences   Conseils   en   Communication   (AACC), Stowarzyszenie Komunikacji Marketingowej/Ad Artis Art Foundation (SAR), and Asociace Komunikacnich Agentur (AKA); the Interactive Advertising Bureau (IAB Europe), Kreativitet & Kommunikation, and Goldbach Audience (Switzerland) AG.

EU lawmakers said they want to broaden participation by getting smaller platforms to join, as well as recruiting all the various players in the adtech space whose tools provide the means for monetizing online disinformation.

Commissioners said they want to see the code covering a “whole range” of actors in the online advertising industry (i.e. rather than the current handful).

It’s certainly notable that the digital advertising industry body Internet Advertising Bureau is not on that list. (We’ve reached out to the IAB Europe to ask if it’s planning to join the code and will update this report with any response.)

In its press release today the Commission also said it wants platforms and adtech players to exchange information on disinformation ads that have been refused by one of them — so there can be a more coordinate response to shut out bad actors.

As for those who are signed up already, the Commission’s report card on their performance was bleak.

Speaking during a press conference, internal market commissioner Thierry Breton said that only one of the five platform signatories to the code has “really” lived up to its commitments — which was presumably a reference to the first five tech giants in the above list (aka: Google, Facebook, Twitter, Microsoft and TikTok).

Breton demurred on doing an explicit name-and-shame of the four others — who he said have not “at all” done what was expected of them — saying it’s not the Commission’s place to do that.

Rather he said people should decide among themselves which of the platform giants that signed up to the code have failed to live up to their commitments. (Signatories since 2018 have pledged to take action to disrupt ad revenues of accounts and websites that spread disinformation; to enhance transparency around political and issue-based ads; tackle fake accounts and online bots; to empower consumers to report disinformation and access different news sources while improving the visibility and discoverability of authoritative content; and to empower the research community so outside experts can help monitor online disinformation through privacy-compliant access to platform data.)

Frankly it’s hard to imagine who from the above list of five tech giants might actually be meeting the Commission’s bar. (Microsoft perhaps, on account of its relatively modest social activity vs the others.)

Safe to say, there’s been a lot of more hot air (in the form of selective PR) on the charged topic of disinformation vs hard accountability from the major social platforms over the past three years.

So it’s perhaps no accident that Facebook chose today to puff up its historical efforts to combat what it refers to as “influence operations” — aka “coordinated efforts to manipulate or corrupt public debate for a strategic goal” — by publishing what it couches as a “threat report” detailing what it’s done in this area between 2017 and 2000.

Influence ops refer to online activity that may be being conducted by hostile foreign governments or by malicious agents seeking, in this case, to use Facebook’s ad tools as a mass manipulation tool — perhaps to try to skew an election result or influence the shape of looming regulations. And Facebook’s ‘threat report’ states that the tech giant took down and publicly reported only 150 such operations over the report period.

Yet as we know from Facebook whistleblower Sophie Zhang, the scale of the problem of mass malicious manipulation activity on Facebook’s platform is vast and its response to it is both under-resourced and PR-led. (A memo written by the former Facebook data scientist, covered by BuzzFeed last year, detailed a lack of institutional support for her work and how takedowns of influence operations could almost immediately respawn — without Facebook doing anything.)

NB: If it’s Facebook’s “broader enforcement against deceptive tactics that do not rise to the level of [Coordinate Inauthentic Behavior]” that you’re looking for, rather than efforts against ‘influence operations’, it has a whole other report for that — the Inauthentic Behavior Report! — because of course Facebook gets to mark its own homework when it comes to tackling fake activity, and shapes its own level of transparency since there are no legally binding reporting rules on disinformation.

Legally binding rules on handling online disinformation aren’t in the EU’s pipeline either — but commissioners said today that they wanted a beefed up and “more binding” code.

They do have some levers to pull here via a wider package of digital reforms that’s coming (aka the Digital Services Act).

The DSA will bring in legally binding rules for how platforms handle illegal content and they intend the tougher disinformation code to plug into that (in the form of what they call a “co-regulatory backstop for the measures that will be included in the revised and strengthened Code”).

It still won’t be legally binding but it may earn compliant platforms wider DSA ‘credit’. So it looks like disinformation-muck-spreaders’ arms are set to be twisted in a pincer regulatory move by making sure this stuff is looped into the legally binding DSA.

Still, Brussels maintains that it does not want to legislate around disinformation.

The risks are that a centralized approach might smell like censorship — and it sounds keen to avoid that charge at all costs.

The digital regulation packages the EU has put forward since the 2019 collage took up its mandate aim generally to increase transparency, safety and accountability online, its values and transparency commissioner, Vera Jourova, said today.

Breton also said that now is the “right time” to deepen obligations under the disinformation code — with the DSA incoming — and also to give the platforms time to adapt (and involve themselves in discussions on shaping additional obligations).

In another interesting remark he also talked about regulators needing to “be able to audit platforms” — in order to be able to “check what is happening with the algorithms that push these practices”. Though quite how audit powers can be made to fit with a voluntary, non-legally binding code of practice remains to be seen.

Discussing areas where the current code has fallen short Jourova pointed to inconsistencies of application across different EU Member States and languages.

She also said the Commission is keen for the beefed up code to do more to enable and empower users to act when they see something dodgy online — such as by providing users with tools to flag problem content.

Platforms should also provide users with the ability to appeal disinformation content takedowns (to avoid the risk of opinions being incorrectly removed).

The focus for the code would be on tackling false “facts not opinions”, she emphasized, saying the Commission wants platforms to “embed fact-checking into their systems” and for the code to work towards a “decentralized care of facts”.

She went on to say that the current signatories to the code haven’t provided external researchers with the kind of data access the Commission would like to see — to support greater transparency into (and accountability around) the disinformation problem.

The code does require either monthly (for COVID-19 disinformation), six monthly or yearly reports from signatories (depending on the size of the entity) but what’s being provided so far doesn’t add up to a comprehensive picture of disinformation activity and platform reaction, she said.

She also warned that online manipulation tactics are fast evolving and highly innovative — while saying the Commission would nonetheless like to see signatories agree on a set of identifiable “problematic techniques” to help speed up responses.

EU lawmakers will be coming with a specific plan for tackling political ads transparency in November, she noted.

They are also, in parallel, working on how to respond to the threat posed to European democracies by foreign interference cyberops — such as the aforementioned influence operations often found hosted on Facebook’s platform.

The commissioners did not give many details of those plans today but Jourova said it’s “high time to impose costs on perpetrators” — suggesting that some interesting possibilities may be being considered, such as trade sanctions for state-backed disops (although attribution would be one challenge).

Breton said countering foreign influence over the “informational space” is important work to defend the values of European democracy.

He also said the Commission’s anti-disinformation efforts would focus on support for education to help equip citizens with the necessary critical thinking capabilities to navigate the huge quantities of variable quality information that now surrounds them.

 

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