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Netflix nears a $150B market cap as its subscribers continue to balloon

Published April 16, 2018

Just last quarter Netflix passed a $100 billion market cap — and we might already be talking about it as a $150 billion company before too long with yet another big financial quarter that sent its stock soaring.

Netflix, again, beat out some expectations Wall Street held for the first quarter and provided a pretty good outlook for the next quarter as well, where it said it expected to add around 6.2 million new subscribers. In the first quarter, Netflix added 7.41 million new subscribers — around 2 million of them domestic and the rest internationally. The company continued to see some pretty strong streaming revenue growth, which was up around 43% year-over-year in the first quarter this year, to around $3.6 billion.

With all this, Netflix now has nearly 119 million paid streaming memberships — and it wasn’t all that long when Netflix finally said just over two years ago that it would begin opening up in hundreds of new countries internationally. The company’s shares are up around 6% in extended trading, sending its market cap up north of $140 billion. And all this subscriber growth, too, comes before we’re seeing a new tie-up with Comcast’s cable subscriptions that may end up driving that even more. As usual, Netflix expects to lose a ton of money and says it expects between -$3 billion to -$4 billion in free cash flow, but that’s usually not what investors are looking for.

One of the big questions Netflix still has right now is what kind of price tag it will carry as a tack-on to a Comcast subscription. Earlier this week, the companies announced that Comcast would bundle Netflix in to its cable subscriptions, offering yet another entry point for Netflix to ferret up potential consumers that haven’t quite cut the cord yet but still might be interested in Netflix’s content. Netflix normally carries a price tag of around $13.99, but the companies have not said what its price will be as part of a cable bundle yet.

Following Netflix’s last earnings report — which it, as you might expect, included some blowout subscriber numbers — the company rocketed past a market cap of $100 billion. Since then it’s only been an upward trend for Netflix, which prior to its first-quarter report was worth more than $130 billion. Despite increasing spend on original content, that subscriber number is still mostly where it gets its market value because it’s a forward predictor of its revenue.

Netflix late last year said it expected to spend between $7 billion and $8 billion on original content this year, a number that seems to periodically get an upward revision and is still a dramatic step up from 2017. The company in its report today said it expected to spend between $7.5 billion and $8 billion on original content, and expects that marketing and content spend to weight toward the second half of 2018.

But it has to continue to invest in original content because it is a way to attract new subscribers, and also because it’s content that it can more easily distribute across different geographies and itself has control of the rights and what happens to it. It relies on shows like Stranger Things or Altered Carbon to bring in new users, which then hopefully stick around and eventually help recoup the cost of those shows — and then the cycle starts anew.

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FCC dings T-Mobile $40M for faking rings on calls that never connected

Published April 16, 2018

T-Mobile will pay $40 million as part of a settlement with the FCC for playing ringing sounds to mislead customers into thinking their calls were going through when in fact they had never connected in the first place. The company admitted it had done so “hundreds of millions” of times over the years.

The issue at hand is that when someone is trying to call an area with poor connectivity, it can sometimes take several seconds to establish a line to the other party — especially if a carrier itself does not serve the area in question and has to hand off the call to a local provider. That’s exactly what T-Mobile was doing, and there’s nothing wrong with it — just a consequence of spotty coverage in rural areas.

But what is prohibited is implying to the caller that their call has gone through and is ringing on the other end, if that’s not the case. Which is also exactly what T-Mobile was doing, and had been doing since 2007. Its servers began sending a “local ring back tone” when a call took a certain amount of time to complete around then.

As the FCC estimates it, and T-Mobile later confirmed:

Because T-Mobile applied this practice to out-of-network calls from its customers on SIP routes that took more than a certain amount of time on a nationwide basis and without regard to time of day, the LRBT was likely injected into hundreds of millions of calls each year.

It’s not just a bad idea: it’s against the law. In 2014 the FCC’s Rural Call Completion Order took effect, prohibiting exactly this practice, which it called “false audible ringing”:

[O]ccurs when an originating or intermediate provider prematurely triggers audible ring tones to the caller before the call setup request has actually reached the terminating rural provider. That is, the calling party believes the phone is ringing at the called party’s premises when it is not. An originating or intermediate provider may do this to mask the silence that the caller would otherwise hear during excessive call setup time. As a result, the caller may often hang up, thinking nobody is available to receive the call. False audible ringing can also make it appear to the caller that the terminating rural provider is responsible for the call failure, instead of the originating or intermediate provider.

Users and carriers complained after this rule took effect, and also sought remedy with T-Mobile directly. The FCC looked into it and T-Mobile reported that it had solved the problem — but complaints continued. It became clear that the company had been violating the rule for years and in great volume and had not in fact stopped; hence the settlement and $40 million penalty.

T-Mobile will also have to take action within 90 days to stop the practice (if it hasn’t already) and issue regular reports to the FCC every year for the next three years that it is still in compliance. You can read the full consent decree here (PDF).

Update: FCC Commissioner Clyburn points out in a separate statement that despite evidence of widespread consumer harm, there’s nothing for users in the settlement.

[T]here is absolutely nothing in this consent decree to compensate consumers. Prior consent decrees have included direct-to-consumer benefits, such as refunds or discounts, or notifications to customers who have been impacted.

Despite demonstrating a clear and tangible consumer harm, in this consent decree, consumers are treated as a mere
afterthought.

The $40 million civil penalty, which will be paid to the U.S. Treasury, is dwarfed by larger, unpaid fines recently proposed against individual robocallers—and the volume of potential violations here outpaces any robocalling action the Commission has taken. And the compliance plan does not contain any concessions that would explain such a massive discount.

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Here’s the ultra-low-light phone camera Sony promised

Published April 16, 2018

Sony promised an “ultra low-light camera” during its Mobile World Congress press conference back in February. The off-hand announcement was intended to throw a bit of shade at Samsung’s recent flagship, but ultimately had the unintended consequence of undermining the company’s own newly announced XZ2. But, then, Sony’s never been great when it comes to marketing handsets.

That said, the company didn’t waste a lot of time delivering on that promise. If I had to hazard a guess, I would say that the Xperia XZ2 Premium was the phone the company would have liked to have led with at the world’s largest mobile show, but it just wasn’t fully baked at the time. In fact, the handset won’t actually be arriving until this summer.

When it does hit retail, it will sport a number of improvements over the regular XZ2 (and likely a steep price tag to match). Most notable here are the upgrades to the camera, because, well, Sony. The company says the phone’s capable of capturing ultra-low-light stills with an ISO of up to of 51,200 — with up to 12,800 for video. Press materials issued this morning say the phone accomplishes this by utilizing its dual camera sensors (a new addition with the XZ2 line), utilizing the company’s AUBE signal processor.

That’s a pretty impressive feat, if true, and would certainly surpass Samsung’s recent low-light camera advancements. I can’t say as I’m always excited to try out the latest Xperia handset, but this is one I’ll want to put through its paces. Sony’s certainly wowed us with its camera prowess in the past — in fact, that’s really the main thing Xperias have going for them. U.S. availability, on the other hand, isn’t likely to be one of them.

Other bits and bobs worth mentioning: There’s a 4K HDR display here, pretty much a given on a Sony flagship at this point, along with 4K movie recording. The phone also sports a similarly smooth design to the other XZ2 models — a notable upgrade from the old, boxy design. There’s also a beefy 3540mAh battery on board, along with a Snapdragon 845.

Given Sony’s traditional use of the Xperia line as a funnel for camera technology, I’d say it’s probably safe to expect similar low-light cameras to start trickling into other manufacturers’ handsets in the not too distant future.

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iHeartRadio opens up its playlists to all users with launch of Playlist Radio

Published April 16, 2018

iHeartRadio is best known for its free service offering thousands of live, streaming AM and FM radio stations and its ability to create your own custom station, similar to Pandora. Today, the company is adding a new feature for all users – both free and paid – that blurs the lines between streaming radio and the typically premium-only option of using playlists: Playlist Radio.

Like most playlists, Playlist Radio isn’t a random assortment of songs.

Instead, the songs it plays are curated and programmed by radio DJs and other iHeartRadio staff. That means there isn’t an algorithm deciding what to play next – you’re listening to a selection of songs an actual person has put together.

However, because it’s still “radio” you can’t do some of the things you could with the premium product’s playlists – like reorganizing tracks, adding or removing songs, or playing a particular song in the playlist on-demand. Instead, the songs will play in their given order, though you can skip up to six songs per hour within a playlist – the same as free users have when they’re listening to iHeartRadio’s artist stations.

The addition of Playlist Radio opens up iHeartRadio’s over 1,000 existing playlists to a wider audience.

This includes all nearly the artist-created, genre-based, activity-focused, musical era-focused, and theme-based playlists, with the exception of a handful of playlists that have too few songs to turn into a radio experience.

Before now, those playlists were only available behind a paywall for iHeartRadio Plus, the $4.99/month on-demand music service, and iHeartRadio All Access, which offers unlimited access to millions of songs and offline listening.

In addition, the playlists will be updated every week, save for those where it doesn’t make sense – like those focused on a particular era, like ’60’s music, for example.

“One of the things we’re most excited about and the area where i feel like we really excel is in music curation,” explains iHeart’s Chief Product Officer, Chris Williams, of how Playlist Radio came to be. “We have some of the greatest music curators on the planet within iHeartRadio. We have the best radio programmers, music directors, and program directors who are out there curating every single day for their radio stations. So we tapped into the resources that we had there, as well as finding some external expertise.”

The idea is that these programmers have already built these great, curated listening experiences, but because free products can only offer radio play as opposed to on-demand streams, the subset of iHeartRadio’s 110+ million registered users who aren’t on a subscription tier were missing out.

However, Playlist Radio could also drive those free users to upgrade, in order to better take advantage of the on-demand options.

“I think it’s exposing a great listening experience to our existing free users, and offering them up a listening opportunity that doesn’t exist on the free tier right now,” says Williams. “I think what radio does a brilliant job at is programming formatically. And I think what Playlist Radio does a great job of is offering listening occasions that are thematic,” he notes. The new products aims to marry the two. 

While on-demand music services are growing, there’s an increased interest in lean-back modes of listening, even for on-demand users who can play whatever they choose. For example, Pandora just challenged Spotify with the launch of dozens of personalized playlists based on its Music Genome; and Spotify, of course, is still well-loved for its popular “Discover Weekly” personalized playlist and its curated trendsetters, like RapCaviar.

Of course, the launch also comes at a time when iHeartRadio is facing steep competition from those competitors and others, including Apple and Amazon, in music.

In fact, the streaming service’s parent company, iHeartMedia – which also owns hundreds of radio stations, a concert business, and a 90% stake in Clear Channel Outdoor’s billboard company – recently filed for Chapter 11 bankruptcy. Consumers won’t know the difference when it comes to using iHeartRadio’s streaming service in the near-term. However, Pandora investor Liberty Media (SiriusXM’s owner) was interested in a deal with iHeartMedia which could impact iHeartRadio’s business in the future.

Playlist Radio is rolling out today to all iHeartRadio users on iOS, Android and desktop, before making its way to other platforms.

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Tony Fadell is worried about smartphone addiction

Published April 16, 2018

This weekend, former Apple engineer and consumer gadget legend Tony Fadell penned an op-ed for Wired. In it, he argued that smartphone manufacturers need to do a better job of educating users about how often they use their mobile phones, and the resulting dangers that overuse might bring about.

Take healthy eating as an analogy: we have advice from scientists and nutritionists on how much protein and carbohydrate we should include in our diet; we have standardised scales to measure our weight against; and we have norms for how much we should exercise.

But when it comes to digital “nourishment”, we don’t know what a “vegetable”, a “protein” or a “fat” is. What is “overweight” or “underweight”? What does a healthy, moderate digital life look like? I think that manufacturers and app developers need to take on this responsibility, before government regulators decide to step in – as with nutritional labelling. Interestingly, we already have digital-detox clinics in the US. I have friends who have sent their children to them. But we need basic tools to help us before it comes to that.

Plenty of studies have shown that too much screen time and internet/smartphone addiction can be damaging to our health, both physically and psychologically. And while there are other players involved in our growing dependence on our phones (yes, I’m talking to you, Facebook), the folks who actually build those screens have ample opportunity to make users more aware of their usage.

In his article, Fadell brings up ways that companies like Apple could build out features for this:

You should be able to see exactly how you spend your time and, if you wish, moderate your behaviour accordingly. We need a “scale” for our digital weight, like we have for our physical weight. Our digital consumption data could look like a calendar with our historical activity. It should be itemised like a credit-card bill, so people can easily see how much time they spend each day on email, for example, or scrolling through posts. Imagine it’s like a health app which tracks metrics such as step count, heart rate and sleep quality.

With this usage information, people could then set their own targets – like they might have a goal for steps to walk each day. Apple could also let users set their device to a “listen-only” or “read-only” mode, without having to crawl through a settings menu, so that you can enjoy reading an e-book without a constant buzz of notifications.

9to5Mac brought up a Bloomberg piece from February that not only shows Apple’s capability to build out this feature, but their willingness to do so for young people, with a reported new feature that would let parents see how much time their kids are staring at their screens.

Unlike Facebook, which has tweaked its algorithm to prioritize meaningful connection over time spent on the platform, Apple’s revenue is not dependent on how much you use your phone. So, maybe we’ll see a digital health feature added to Apple products in the future.

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Kolide raises $8M to turn application and device management into a smart database

Published April 16, 2018

More devices are coming onto the Internet every single day, and that’s especially true within organizations that have a fleet of devices with access to sensitive data — which means there are even more holes for potential security breaches.

That’s the goal of Kolide. The aim is to ensure that companies have access to tools that give them the ability to get a thorough analysis of every bit of data they have — and where they have it. The Kolide Cloud, its initial major rollout for Mac and Linux devices, turns an entire fleet of apps and devices into what’s basically a table that anyone can query to get an up-to-date look at what’s happening within their business. Kolide looks to provide a robust set of tools that help analyze that data. By doing that, companies may have a better shot at detecting security breaches that might come from even mundane miscalculations or employees being careless about the security of that data. The company said today it has raised $8 million in new venture financing in a round led by Matrix Partners.

“It’s not just an independent event,” Kolide CEO Jason Meller said. “The way I think about it, if you look at any organization, there’s a pathway to a massive security incident, and the pathway is rather innocuous. Let’s say I’m a developer that works at one of these organizations and I need to fix a bug, and pull the production database. Now I have a laptop with this data on this, and I did this and didn’t realize my disk wasn’t encrypted. I went from these innocuous activities to something existentially concerning which could have been prevented if you knew which devices weren’t encrypted and had customer data. A lot of organizations are focused on these very rare events, but the reality is the risk that they face is mishandling of customer data or sensitive information and not thinking about the basics.”

Kolide is built on top of Osquery, a toolkit that allows organizations to essentially view all their devices or operations as if it were a single database. That means that companies can query all of these incidents or any changes in the way employees use data or the way that data is structured. You could run a simple select query for, say, apps and see what is installed where. It allows for a level of granularity that could help drill down into those little innocuous incidents Meller talks about, but all that still needs some simpler approach or interface for larger companies that are frantically trying to handle edge cases but may be overlooking the basics.

Like other companies looking to build a business on top of open source technology, the company looks to offer ways to calibrate those tools for a company’s niche needs that they necessarily don’t actively cover. The argument here is that by basing the company and tools on open source software, they’ll be able to lean on that community to rapidly adapt to a changing environment when it comes to security, and that will allow them to be more agile and have a better sales pitch to larger companies.

There’s going to be a lot of competition in terms of application monitoring and management, especially as companies adopt more and more devices in order to handle their operations. That opens up more and more holes for potential breaches, and in the end, Kolide hopes to create a more granular bird’s-eye view of what’s happening rather than just creating a flagging system without actually explaining what’s happening. There are some startups attacking device management tools, like Fleetsmith does for Apple devices (which raised $7.7 million), and to be sure provisioning and management is one part of the equation. But Kolide hopes to provide a strong toolkit that eventually creates a powerful monitoring system for organizations as they get bigger and bigger.

“We believe data collection is an absolute commodity,” Meller said. “That’s a fundamentally different approach, they believe the actual collection tools are proprietary. We feel this is a solved problem. Our goal isn’t to take info and regurgitate it in a fancy user interface. We believe we should be paid based on the insights and help manage their fleet better. We can tell the whole industry is swinging this way due to the traction OSQuery had. It’s not a new trend, it’s really the end point as a result of companies that have suffered from this black box situation.”

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The psychological impact of an $11 Facebook subscription

Published April 15, 2018

Would being asked to pay Facebook to remove ads make you appreciate their value or resent them even more? As Facebook considers offering an ad-free subscription option, there are deeper questions than how much money it could earn. Facebook has the opportunity to let us decide how we compensate it for social networking. But choice doesn’t always make people happy.

In February I explored the idea of how Facebook could disarm data privacy backlash and boost well-being by letting us pay a monthly subscription fee instead of selling our attention to advertisers. The big takeaways were:

  • Mark Zuckerberg insists that Facebook will remain free to everyone, including those who can’t afford a monthly fee, so subscriptions would be an opt-in alternative to ads rather than a replacement that forces everyone to pay
  • Partially decoupling the business model from maximizing your total time spent on Facebook could let it actually prioritize time well spent because it wouldn’t have to sacrifice ad revenue
  • The monthly subscription price would need to offset Facebook’s ad earnings. In the US & Canada Facebook earned $19.9 billion in 2017 from 239 million users. That means the average user there would have to pay $7 per month

However, my analysis neglected some of the psychological fallout of telling people they only get to ditch ads if they can afford it, the loss of ubiquitous reach for advertisers, and the reality of which users would cough up the cash. Though on the other hand, I also neglected the epiphany a price tag could produce for users angry about targeted advertising.

What’s Best For Everyone

This conversation is relevant because Zuckerberg was asked twice by congress about Facebook potentially offering subscriptions. Zuckerberg endorsed the merits of ad-supported apps, but never ruled out letting users buy a premium version. “We don’t offer an option today for people to pay to not show ads” Zuckerberg said, later elaborating that “Overall, I think that the ads experience is going to be the best one. I think in general, people like not having to pay for a service. A lot of people can’t afford to pay for a service around the world, and this aligns with our mission the best.”

But that word ‘today’ gave a glimmer of hope that we might be able to pay in the future.

Facebook CEO and founder Mark Zuckerberg testifies during a US House Committee on Energy and Commerce hearing about Facebook on Capitol Hill in Washington, DC, April 11, 2018. (Photo: SAUL LOEB/AFP/Getty Images)

What would we be paying for beyond removing ads, though?. Facebook already lets users concerned about their privacy opt out of some ad targeting, just not seeing ads as a whole. Zuckerberg’s stumping for free Internet services make it seem unlikely that Facebook would build valuable features and reserve them for subscribers

Spotify only lets paid users play any song they want on-demand, while ad-supported users are stuck on shuffle. LinkedIn only lets paid users message anyone they want and appear as a ‘featured applicant’ to hirers, while ad-supported users can only message their connections. Netflix only lets paid users…use it at all.

But Facebook views social networking as a human right, and would likely want to give all users any extra features it developed like News Feed filters to weed out politics or baby pics. Facebook also probably wouldn’t sell features that break privacy like how LinkedIn subscribers can see who visited their profiles. In fact, I wouldn’t bet on Facebook offering any significant premium-only features beyond removing ads. That could make it a tough sell.

Meanwhile, advertisers trying to reach every member of a demographic might not want a way for people to pay to opt-out of ads. If they’re trying to promote a new movie, a restaurant chain, or an election campaign, they’d want as strong of penetration amongst their target audience as they can get. A subscription model punches holes in the ubiquity of Facebook ads that drive businesses to the app.

Resentment Vs Appreciation

But the biggest issue is that Facebook is just really good at monetizing with ads. For never charging users, it earns a ton of money. $40 billion in 2017. Convincing people to pay more with their wallets than their eyeballs may be difficult. And the ones who want to pay are probably worth much more than the average.

Let’s look at the US & Canada market where Facebook earns the most per user because they’re wealthier and have more disposable income than people in other parts of the world, and therefore command higher ad rates. On average US and Canada users earn Facebook $7 per month from ads. But those willing and able to pay are probably richer than the average user, so luxury businesses pay more to advertise to them, and probably spend more time browsing Facebook than the average user, so they see more of those ads.

Brace for sticker shock, because for Facebook to offset the ad revenue of these rich hardcore users, it might have to charge more like $11 to $14 per month.

With no bonus features, that price for something they can get for free could seem way too high. Many who could afford it still wouldn’t justify it, regardless of how much time they spend on Facebook compared to other media subscriptions they shell out for. Those who truly can’t afford it might suddenly feel more resentment towards the Facebook ads they’ve been scrolling past unperturbed for years. Each one would be a reminder that they don’t have the cash to escape Facebook’s data mines.

But perhaps it’s just as likely that people would feel the exact opposite — that having to see those ads really isn’t so bad when faced with the alternative of a steep subscription price.

People often don’t see worth in what they get for free. Being confronted with a price tag could make them more cognizant of the value exchange they’re voluntarily entering. Social networking costs money to operate, and they have to pay somehow. Seeing ads keeps Facebook’s lights on, its labs full of future products, and its investors happy.

That’s why it might not matter if Facebook can only get 4 percent, or 1 percent, or 0.1 percent of users to pay. It could be worth it for Facebook to build out a subscription option to empower users with a sense of choice and provide perspective on the value they already receive for free.

For more big news about Facebook, check out our recent coverage:

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Elon Musk says Tesla will be profitable in Q3 and Q4

Published April 13, 2018

Tesla is one of the more interesting companies for Wall Street that had an interesting couple of months this year — and it seems even tweets from Elon Musk, who said that the company will be profitable in the back half of the year, may be enough to swing its stock.

The Tesla and SpaceX founder sent a tweet very early this morning that the company would be profitable and cash-flow positive in the third and fourth quarter this year. Tesla is known for setting ambitious targets and forecasts, especially as it looks to ramp up Model 3 production to around 2,500 vehicles per week. Musk said he took direct control of Model 3 production earlier this month in a note to employees, also sent out at around 3 a.m. pacific time. Tesla’s shares were up slightly, gaining around 2% in trading today.

The Economist used to be boring, but smart with a wicked dry wit. Now it’s just boring (sigh). Tesla will be profitable & cash flow+ in Q3 & Q4, so obv no need to raise money.

— Elon Musk (@elonmusk) April 13, 2018

Tesla saw a small bump in its stock throughout the day. While it could be for a variety of reasons, Musk’s data point may have offered a small amount of clarity (and optimism) around whether the company will be able to eventually turn a profit. The tweet was fired off as a response to a story by The Economist that said the company may have to raise additional capital at some point, according to banking firm Jeffries. (It was also quite snarky.)

On Tesla’s last call to discuss the company’s quarterly results with Wall Street analysts, Musk said that the company would begin generating “positive quarterly operating income on a sustained basis,” and said he was “cautiously optimistic” that the company would be GAAP profitable. Musk said the company wanted to hit a production target of 5,000 Model 3 vehicles per week at some point in 2018, though did not give a specific time frame. The tweet, while fired off as a response to a story by The Economist, appears to offer another small data point as to when it might happen.

Earlier this month, Tesla fell back behind Ford in terms of its market cap as some pressure has hit the stock. Tesla has had to address a fatal crash involving its autopilot, in addition to a voluntary recall of 123,000 Model S vehicles. There is some skepticism around whether Tesla will hit its production targets from Wall Street (making cars is hard, it seems).

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Facebook shouldn’t block you from finding friends on competitors

Published April 13, 2018

Twitter, Vine, Voxer, MessageMe. Facebook has repeatedly cut off competitors from its feature for finding your Facebook friends on their apps… after jumpstarting its own social graph by convincing people to upload their Gmail contacts. Meanwhile, Facebook’s Download Your Information tool merely exports a text list of friends’ names you can’t use elsewhere.

As Congress considers potential regulation following Mark Zuckerberg’s testimonies, it should prioritize leveling the playing field for aspiring alternatives to Facebook and letting consumers choose where to social network. And as a show of good faith and argument against it abusing its monopoly, Facebook should make our friend list truly portable.

It’s time to free the social graph — to treat it as a fundamental digital possession, the way the Telecommunications Act of 1996 protects your right to bring your phone number with you to a new network.

The two most powerful ways to do this would be for Facebook to stop, or Congress to stop it from, blocking friend finding on competitors like it’s done in the past to Twitter and more. And Facebook should change its Download Your Information tool to export our friend list in a truly interoperable format. When you friend someone on Facebook, they’re not just a name. They’re someone specific amongst often many with the same name, and Facebook should be open to us getting connected with them elsewhere.

Facebook takes data it won’t give

While it continues til this day, back in 2010 Facebook goaded users to import their Gmail address books so they could add them as Facebook friends. But it refused to let users export the email addresses of their friends to use elsewhere. That led Google to change its policy and require data portability reciprocity from any app using its Contacts API.

So did Facebook back off? No. It built a workaround, giving users a deep link to download their Gmail contacts from Google’s honorable export tool. Facebook then painstakingly explained to users how to upload that file so it could suggest they friend all those contacts.

Google didn’t want to stop users from legitimately exporting their contacts, so it just put up a strongly worded warning to Gmail users: “Trap my contacts now: Hold on a second. Are you super sure you want to import your contact information for your friends into a service that won’t let you get it out? . . . Although we strongly disagree with this data protectionism, the choice is yours. Because, after all, you should have control over your data.” And Google offered to let you “Register a complaint over data protectionism.”

Eight years later, Facebook has grown from a scrappy upstart chasing Google to become one of the biggest, most powerful players on the internet. And it’s still teaching users how to snatch their Gmail contacts’ email addresses while only letting you export the names of your friends — unless they opt-in through an obscure setting, because it considers contact info they’ve shared as their data, not yours. Whether you should be allowed to upload other people’s contact info to a social network is a bigger question. But it is blatant data portability hypocrisy for Facebook to encourage users to import that data from other apps but not export it.

In some respects, it’s good that you can’t mass-export the email addresses of all your Facebook friends. That could enable spamming, which probably isn’t what someone had in mind when they added you as friend on Facebook. They could always block, unfriend or mute you, but they can’t get their email address back. Facebook is already enduring criticism about how it handled data privacy in the wake of the Cambridge Analytica scandal.

Yet the idea that you could find your Facebook friends on other apps is a legitimate reason for the platform to exist. It’s one of the things that’s made Facebook Login so useful and popular. Facebook’s API lets certain apps check to see if your Facebook friends have already signed up, so you can easily follow them or send them a connection request. But Facebook has rescinded that option when it senses true competition.

Data protectionism

Twitter is the biggest example. Facebook didn’t and still doesn’t let you see which of your Facebook friends are on Twitter, even though it has seven times as many users. Twitter co-founder Ev Williams, frustrated in 2010, said that “They see their social graph as their core asset, and they want to make sure there’s a win-win relationship with anybody who accesses it.”

Facebook went on to establish a formal policy that said that apps that wanted to use its Find Friends tool had to abide by these rules:

  •  If you use any Facebook APIs to build personalized or social experiences, you must also enable people to easily share their experiences back with people on Facebook.

  • You may not use Facebook Platform to promote, or to export user data to, a product or service that replicates a core Facebook product or service without our permission.

Essentially, apps that piggybacked on Facebook’s social graph had to let you share back to Facebook, and couldn’t compete with it. It’s a bit ironic, given Facebook’s overarching strategy for years has been “replicate core functionality.” From cloning Twitter’s asymmetrical follow and Trending Topics to Snapchat’s Stories and augmented reality filters, all the way back to cribbing FriendFeed’s News Feed and Facebook’s start as a rip-off of the Winklevii’s HarvardConnection.

Restrictions against replicating core functionality aren’t unheard of in tech. Apple’s iOS won’t let you run an App Store from inside an app, for example. But Facebook’s selective enforcement of the policy is troubling. It simply ignores competing apps that never get popular. Yet if they start to grow into potential rivals, Facebook has swiftly enforced this policy and removed their Find Friends access, often inhibiting further growth and engagement.

Here are few of examples of times Facebook has cut off competitors from its graph:

  • Voxer was one of the hottest messaging apps of 2012, climbing the charts and raising a $30 million round with its walkie-talkie-style functionality. In early January 2013, Facebook copied Voxer by adding voice messaging into Messenger. Two weeks later, Facebook cut off Voxer’s Find Friends access. Voxer CEO Tom Katis told me at the time that Facebook stated his app with tens of millions of users was a “competitive social network” and wasn’t sharing content back to Facebook. Katis told us he thought that was hypocritical. By June, Voxer had pivoted toward business communications, tumbling down the app charts and leaving Facebook Messenger to thrive.
  • MessageMe had a well-built chat app that was growing quickly after launching in 2013, posing a threat to Facebook Messenger. Shortly before reaching 1 million users, Facebook cut off MessageMe‘s Find Friends access. The app ended up selling for a paltry double-digit millions price tag to Yahoo before disintegrating.
  • Phhhoto and its fate show how Facebook’s data protectionism encompasses Instagram. Phhhoto’s app that let you shoot animated GIFs was growing popular. But soon after it hit 1 million users, it got cut off from Instagram’s social graph in April 2015. Six months later, Instagram launched Boomerang, a blatant clone of Phhhoto. Within two years, Phhhoto shut down its app, blaming Facebook and Instagram. “We watched [Instagram CEO Kevin] Systrom and his product team quietly using PHHHOTO almost a year before Boomerang was released. So it wasn’t a surprise at all . . . I’m not sure Instagram has a creative bone in their entire body.”
  • Vine had a real shot at being the future of short-form video. The day the Twitter-owned app launched, though, Facebook shut off Vine’s Find Friends access. Vine let you share back to Facebook, and its six-second loops you shot in the app were a far cry from Facebook’s heavyweight video file uploader. Still, Facebook cut it off, and by late 2016, Twitter announced it was shutting down Vine.

As I wrote in 2013, “Enforcement of these policies could create a moat around Facebook. It creates a barrier to engagement, retention, and growth for competing companies.” But in 2018, amongst whispers of anti-trust action, Facebook restricting access to its social graph to protect the dominance of its News Feed seems egregiously anti-competitive.

That’s why Facebook should pledge to stop banning competitors from using its Find Friends tool. If not, congress should tell Facebook that this kind of behavior could lead to more stringent regulation.

Friends aren’t just names

When Senator John Neely Kennedy asked Zuckerberg this week, “are you willing to give me the right to take my data on Facebook and move it to another social media platform?”, Zuckerberg claimed that “Senator, you can already do that. We have a Download Your Information tool where you can go get a file of all the content there, and then do whatever you want with it.”

But that’s not exactly true. You can export your photos that can be easily uploaded elsewhere. But your social graph — all those confirmed friend requests — gets reduced to a useless string of text. Download Your Information spits out merely a list of your friends’ names and the dates on which you got connected. There’s no unique username. No link to their Facebook profile. Nothing you can use to find them on another social network beyond manually typing in their names.

That’s especially problematic if your friends have common names. There are tons of John Smiths on Facebook, so finding him on another social network with just a name will require a lot of sleuthing, or guess-work. Depending on where you live, locating a particular Garcia, Smirnov or Lee could be quite difficult. Facebook even built a short-lived feature called Friendshake to help you friend someone nearby amongst everyone in their overlapping name space.

When I asked about this, Facebook told me that users can opt-in to having their email or phone number included in the Download Your Information export. But this privacy setting is buried and little-known. Just 4 percent of my friends, centered around tech savvy San Francisco, had enabled it.

As I criticized way back in 2010 when Download Your Information launched, “The data can be used as a diary, or to replace other information from a hard drive crash or stolen computer — but not necessarily to switch to a different social network.”

Given Facebook’s iron grip on the Find Friends API, users deserve decentralized data portability — a way to take their friends with them that Facebook can’t take back. That’s what Download Your Information should offer, but doesn’t.

Social graph portability

This is why I’m calling on Facebook to improve the data portability of your friend connections. Give us the same consumer protections that make phone numbers portable.

At the very least Facebook should include your friends’ unique Facebook username and URL. But true portability would mean you could upload the list to another social network to find your friends there.

One option would be for Facebook’s export to include a privacy-safe, hashed version of your friends’ email address that they signed up with and share with you. Facebook could build a hashed email lookup tool so that if you uploaded these nonsensical strings of characters to another app, they could cross-reference them against Facebook’s database of your friends. If there’s a match, the app could surface that person as someone with whom you might want to reconnect. Effectively, this would let you find friends elsewhere via email address without Facebook ever giving you or other apps a human-readable list of their contact info.

If you can’t take your social graph with you, there’s little chance for a viable alternative to Facebook to arise. It doesn’t matter if a better social network emerges, or if Facebook disrespects your privacy, because there’s nowhere to go. Opening up the social graph would require Facebook to compete on the merit of its product and policies. Trying to force the company’s hand with a variety of privacy regulations won’t solve the core issue. But the prospect of users actually being able to leave would let the market compel Facebook to treat us better.

For more on Facebook’s challenges with data privacy, check out TechCrunch’s feature stories:

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Google’s ‘Semantic Experiences’ let you play word games with its AI

Published April 13, 2018

Google does a great deal of research into natural language processing and synthesis, but not every project has to be a new Assistant feature or voice improvement. The company has a little fun now and then, when the master AI permits it, and today it has posted a few web experiments that let you engage with its word-association systems in a playful way.

First is an interesting way of searching through Google Books, that fabulous database so rarely mentioned these days. Instead of just searching for text or title verbatim, you can ask questions, like “Why was Napoleon exiled?” or “What is the nature of consciousness?”

It returns passages from books that, based on their language only, are closely associated with your question. And while the results are hit and miss, they are nice and flexible. Sentences answering my questions appeared even though they were not directly adjacent to key words or particularly specific about doing so.

I found, however, it’s not a very intuitive way to interact with a body of knowledge, at least for me. When I ask a question, I generally want to receive an answer, not a competing variety of quotes that may or may not bear on your inquiry. So while I can’t really picture using this regularly, it’s an interesting way to demonstrate the flexibility of the semantic engine at work here. And it may very well expose you to some new authors, though the 100,000 books included in the database are something of a mixed bag.

The second project Google highlights is a game it calls Semantris, though I must say it’s rather too simple to deserve the “-tris” moniker. You’re given a list of words and one in particular is highlighted. You type the word you most associate with that one, and the words will reorder with, as Google’s AI understands it, the closest matches to your word on the bottom. If you moved the target word to the bottom, it blows up a few words and adds some more.

It’s a nice little time waster, but I couldn’t help but feel I was basically just a guinea pig providing testing and training for Google’s word association agent. It was also pretty easy — I didn’t feel much of an achievement for associating “water” with “boat” — but maybe it gets harder as it goes on. I’ve asked Google if our responses are feeding into the AI’s training data.

For the coders and machine learning enthusiasts among you, Google has also provided some pre-trained TensorFlow modules, and of course documented their work in a couple of papers linked in the blog post.

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