Cached Check

Good morning.

Google’s apparently following Apple and others’ leads and becoming the next big tech firm to move into finance.

Specifically, to offer checking accounts to consumers through Project “Cache,” whereby the company will partner with banks and credit unions to offer the new services.

What’s in it for Google? More consumer information and insight, particularly around personal finances. ‘Cause nothing could ever go wrong there.

To whit: The FT is reporting that popular health websites in the UK are sharing sensitive user data with dozens of companies including Google and Facebook (including medical symptoms and diagnoses). This info would presumably be protected under GDPR, but you should probably talk to your family doctor first.

More digital money stuff…Facebook has dropped Libra but added “Facebook Pay,” which will allow users to shop, donate to causes, send money to friends, etc on Facebook, Messenger, and Instagram. Don’t ask for change.

Today’s funding fun: DoorDash is raising $100M from T. Rowe Price Group and others to bring it to a $13B valuation. And digital freight marketplace Convoy, which matches truckers with cargo shippers, has raised a $400M Series D at a $2.75B valuation.

10-4, Billy Big Rigger!

Are You A Libra?

If you’ve been wondering what the price of Bitcoin was, today it’s hovering around $10,150.

If you’ve been wondering what’s going on with Facebook’s cryptocurrency, Libra, you need only look so far as Basel, Switzerland.

According to a report in the Financial Times, Libra representatives are meeting with officials from 26 central banks (including the US Fed and the Bank of England) there today to “answer some difficult questions” about Facebook’s plans for the cryptocurrency.

European Central Banker Benoît Coeuré is chairing the meeting, and has warned in advance that Libra has to clear a “very high” bar, with EU finance ministers having concerns that Libra (and other CCs) could destabilize finance and undercut the authority of government banks. 

Facebook, conversely, has presented Libra as a means of democratizing money, and potentially providing banking to many who don’t currently have access. And, creating a format that’s independent of any single country.  

Coeuré in CNBC: “As a new technology, stablecoins are largely untested, especially on the scale required to run a global payment system. They give rise to a number of serious risks related to public policy priorities. The bar for regulatory approval will be high.”

Investitech

It’s Friday the 13th. And the U.S. investigatory knives have come out for Big Tech in the U.S. House of Representatives.

As The New York Times reports, a House committee investigating Amazon, Apple, Facebook and Google over possible antitrust violations today sent the four companies detailed requests for documents, emails and other communications.

According to the report, investigators are seeking information on the companies’ businesses, acquisitions and conduct in digital markets including internet search, advertising and e-commerce.

The Times report suggests the House documents indicate congressional staff have “done considerable homework on the companies under scrutiny,” with one request to Google naming 14 senior executives and asking for their communications on a series of company moves that included Google’s purchase of DoubleClick in 2008 and AdMob in 2011.

Similarly, with Facebook, the House is asking for extensive internal information about its acquisitions of Instagram in 2012 and WhatsApp in 2014. Both companies were, at the time of their acquisition, “potentially emerging competitors” until Facebook bought them.

The House inquiry joins several other investigations into big tech, including the Justice Department and the Federal Trade Commission.

Texas Two Step

CNBC is reporting that Twitter and Facebook have suspended numerous accounts they say are tied to a Chinese disinformation campaign against pro-democracy protests in Hong Kong.

Twitter indicated it had suspended 936 accounts likely related to the activity, and that the information was designed to sow political discord in Hong Kong. Facebook removed seven pages, three groups and five accounts, one of which had 15,500 followers.

Meanwhile, back on the ranch, the computer systems of 23 small Texas towns have been seized and held for ransom in a widespread, coordinated cyberattack, according to a report from The New York Times.

Texas’ Department of Information Resources was “racing to bring systems back online” after the attack, and it was unclear who was responsible but that the state had described the attacker as “one single threat actor.”

Last year, there were 54 publicly reported attacks on city, county/state governments, court systems, emergency services, and school districts in Texas. So far this year there have been 61 (excluding these most recent attacks).

Now comes that lingering question: Pay the ransom and get your systems back, or lose a lot of data, time, and resources and possibly rebuild from scratch?!

You can learn more about IBM Security solutions here.

More News from Facebook

Are you still getting a lot of your news from Facebook?

If so, you’ll be glad to hear Facebook is offering news outlets millions of dollars for the rights to put their content in a new news section that Facebook hopes to launch later this year.

According to a report from the WSJ, Facebook reps have told news execs they would be willing to pay as much as $3M a year to license headlines and previews of articles from news outlets.

Turbo to Facebook: I’ll do it for $1.5M!

Outlets FB pitched to: ABC News, Dow Jones, WAPO, and Bloomberg.

It’s unclear if this is a move intended to assuage all those publishers that have watched their digital revenues get sucked up into the FB vortex, or an honest-to-goodness attempt to compete with burgeoning aggregators like Apple News (and their paid version, Apple News +).

In any event, the WSJ seems to conclude that the publishers are (rightfully) skeptical — they’ve been burned by FB’s fake news models in the past (see Facebook for Instant Articles).

Don’t Send in the Telegram!

On the subject of Puerto Rico and the Telegram chat hacks: Am I the only person out there wondering how this happened if Telegram is supposed to be so secure?

I’ve looked on Telegram’s Twitter feed and blog, and it’s a major no comment, bury your head in the sand.

Rumors have abounded today that PR Gov. Rickardo Rossello will be resigning, but I’ve received no telegrams to that effect just yet.

Did nobody everywhere learn anything from Iran Contra??!  If you don’t want it to become a scandal, don’t write it down. ANYWHERE!  The Nation magazine went long on this story a few years ago now.

On to the much bigger story of the day: The U.S. Federal Trade Commission has hit Facebook with a $5 billion fine and new privacy checks, reports a lot of outlets, including The Verge.

In the agreement filed today, the FTC alleges that Facebook violated the law by failing to protect data from third parties, serving ads through the use of phone numbers provided for security, and lying to users that its facial recognition software was turned off by default. In order to settle those charges, Facebook will pay $5 billion — the second-largest fine ever levied by the FTC — and agree to a series of new restrictions on its business.

Aside from the multibillion-dollar fine, Facebook will be required to conduct a privacy review of every new product or service that it develops, and these reviews must be submitted to the CEO and a third-party assessor every quarter. As it directly relates to Cambridge Analytica, Facebook will now be required to obtain purpose and use certifications from apps and third-party developers that want to use Facebook user data. However, there are no limits on what data access the company can authorize to those groups once the disclosure is made.

NOTE: I own a few Facebook shares, but I still have four words…fox (still)…guarding…henhouse.

On the streaming wars front: Netflix is launching a $2.80 per month mobile-only subscription plan in India, although it’s restricted to one mobile device at 480p def.

Will Netflix expand this option to the U.S. and other markets to gain more share? Stay tuned!

And on the funding front: Payroll and HR software maker Gusto raised a $200M Series D co-led by Fidelity and Generation Investment Management, and camping listing/booking platform Hipcamp raised a $25M Series B led byy Andreessen Horowitz, bringing its total take to $41.8M. 

Don’t forget to bring the marshmallows!

Facebook Introduces Crypto Play

Facebook introduced its new plan around cryptocurrency earlier today, including Libra, a new cryptocurrency, and Calibra, a new Facebook subsidiary that will oversee Libra financial services.

It was a crypto shot hear ‘round the world.

More details from The New York Times:

The effort, announced with 27 partners as diverse as Mastercard and Uber, could face immediate skepticism from people who question the usefulness of cryptocurrencies and others who are wary of the power already accumulated by the social media company.

The cryptocurrency, called Libra, will also have to overcome concern that Facebook does not effectively protect the private information of its users — a fundamental task for a bank or anyone handling financial transactions.

But if the project, which Facebook hopes to begin next year with 100 partners, should come together, it would be the most far-reaching attempt by a mainstream company to jump into the world of cryptocurrencies, which is best known for speculative investments through digital tokens like Bitcoin and outside-the-law e-commerce, like buying drugs online.

If Facebook treats our money the way they’ve treated our personal information, buying drugs online will very well appear a viable option.

All kidding aside, the move is already sending shockwaves through nation states and federal banks around the globe.

According to a report in Bloomberg, French Finance Minister Bruno Le Maire said Libra shouldn’t be seen as a replacement for traditional currencies, that “it is out of the question” that Libra “become a sovereign currency. It can’t and it must not happen.”

A German member of the European Parliament, Markus Ferber, said that “Multinational corporations such as Facebook must not be allowed to operate in a regulatory nirvana when introducing virtual currencies.”

So where should we land on this?  We’ve seen all manner of cryptocurrency plays come and go, Mt. Gox crash and burn, etc.  

I think we should all take a deep breath and remember we’re not talking about some upstart ICO. We’re talking about the world’s biggest social network with the largest number of users introducing a form of digital currency that could upend traditional banking and fiat currency as we know it.

Potentially.

But only if its user base, and the vendors who participate, trust in the new system and, ultimately, in the currency (and, hence, in blockchain).

And trust is not something Facebook has exactly had an overabundance of the past couple of years.

Facebook tries to offer reassurances. Back to the Times: “Your financial data will never be used to target ads on Facebook,” said Kevin Weil, vice president of product for Calibra. 

The currency itself is being built so that any software developer in the world can build a digital wallet or other services on top of it, similar to the way that Bitcoin can be sent between people.

The structure of the new Libra currency is based on the blockchain technology made famous by Bitcoin.

The blockchain concept makes it possible to hold and move digital currencies almost instantly, usually with low transaction fees. Because blockchains are shared databases, they can function without any central operator like the central banks that have historically governed currencies. This structure will allow Libra to be overseen by many companies.

Customers will be able to hold and spend their Libra with businesses that accept the currency, and there will be services that quickly convert Libra into traditional currencies and send the money to traditional bank accounts, according to project documents released on Tuesday.

And the most important graph:

Initially, the Calibra subsidiary will offer little more than a wallet to hold and spend Libra. When Libra is released next year, the plan is to make the wallet available to the billions of people who have accounts with Facebook Messenger and WhatsApp.

If Facebook can create a viable, useful form of currency on platforms with the scale of Messenger and WhatsApp — as Tencent has done with WeChat in China — well, it could literally break the bank.

All of them.

Facebook Coin

Happy Friday.

For you golf fans, this year’s U.S. Open is off to a walloping good start, and, even better, if you’re a Tiger Woods fan, he’s in the hunt (-1 in the first round).

Justin Rose seems to have put together quite the round, tying the record 65 (-6) that Tiger himself set at Pebble Beach back in 2000. We’ll see if the wind starts whipping and the greens start firming up in round 2. Or perhaps the marine layer will blow, and nobody will be able to see anything, including the golfers.

While the golfers do their thing, Facebook’s long-not-very-well-kept secret blockchain/cryptocurrency payment project, "Project Libra," is getting some big named backers, according to a report from The Wall Street Journal.

Visa, Mastercard, PayPal, and Uber have all backed the new cryptocurrency, and each will invest around $10 million in a consortium that will govern the digital coin, the "Libra."

According to the Journal, that money would be used to fund the creation of the coin, one which will be pegged to a basket of government-issued currencies to avoid the wild swings witnessed by other cryptocurrencies.

The Verge also reported on the development, and addressed how the new "stablecoin" might be used:

As well as allowing users to send money over Facebook’s messaging products like WhatsApp and Messenger, Facebook hopes that its partnerships with e-commerce firms will allow users to spend the currency online. The company is reportedly also looking into developing ATM-like physical terminals for people to convert their money into Libra.

The Block reports that Facebook has also posted additional blockchain jobs this week, just ahead of the release of a whitepaper next week formally announcing Project Libra.

Be interesting to see whether or not the value of a bitcoin changes one way or the other over the course of the next week.

The Ghost Chatters

The British sigint intelligence GCHQ is listening, and apparently they want to listen some more.

Potentially, to your encrypted chats.

So a group of 47 companies and institutions have come out firmly against a proposal by the G-men to eavesdrop on encrypted messages.

In an open letter that was published on Lawfare, The Verge writes, “the companies say that the plans would undermine security, threaten trust in encrypted messaging services, and ultimately endanger citizens’ right to privacy and free expression.”

The proposal from GCHQ was first published last November as part of a series of essays, and does not necessarily reflect a legislative agenda from the intelligence agency at this point. In the essay, two senior British intelligence officials argue that law enforcement should be added as a “ghost” participant in every encrypted messaging conversation.

So basically, intelligence firms would be CCed on your encrypted messages without any of the chatters knowing there was a “ghost” in the chat.

I foresee a full-on battle royale over privacy and encryption vs. national security and eavesdropping headed our way, on both sides of the Atlantic.

Be really interesting to see how this plays out for Facebook, which owns leading encrypted messaging firm WhatsApp and Facebook Messenger (both of which would be likely targets for the ghost chatters), just as Mark Zuckerberg attempts to pivot Facebook towards a more private messaging-oriented firm (I remain skeptical there’s a viable business model there, and certainly not one nearly as robust as the one that maximizes the exploitation of user data for advertisers).

Breaking Up Facebook

Wow.

Check out this opinion piece in The New York Times by Facebook cofounder Chris Hughes, entitled “It’s time to Break Up Facebook.”

I’m going to assume it will defacto get him de-listed from the Mark and Priscilla Christmas card list.

In it, Hughes call for the breakup of Facebook into multiple companies, among other remedies:

First, Facebook should be separated into multiple companies. The F.T.C., in conjunction with the Justice Department, should enforce antitrust laws by undoing the Instagram and WhatsApp acquisitions and banning future acquisitions for several years. The F.T.C. should have blocked these mergers, but it’s not too late to act. 

And as to how such a breakup would work:

Facebook would have a brief period to spin off the Instagram and WhatsApp businesses, and the three would become distinct companies, most likely publicly traded. Facebook shareholders would initially hold stock in the new companies, although Mark and other executives would probably be required to divest their management shares.

Hughes also calls for a new agency “empowered by Congress to regulate tech companies. Its first mandate should be to protect privacy.”

Hughes tips his hat to the European General Data Protection Regulation, a law that “guarantees users a minimal level of protection.” He then writes that:

A landmark privacy bill in the United States should specify exactly what control Americans have over their digital information, require clearer disclosure to users and provide enough flexibility to the agency to exercise effective oversight over time. The agency should also be charged with guaranteeing basic interoperability across platforms.

Next, and finally, Hughes suggests this new agency should create guidelines for acceptable speech on social media:

This idea may seem un-American — we would never stand for a government agency censoring speech. But we already have limits on yelling “fire” in a crowded theater, child pornography, speech intended to provoke violence and false statements to manipulate stock prices. We will have to create similar standards that tech companies can use. These standards should of course be subject to the review of the courts, just as any other limits on speech are. But there is no constitutional right to harass others or live-stream violence.

As for Hughes being the billionaire pot calling the Facebook kettle black? Well, he has an answer for that, too:

I take responsibility for not sounding the alarm earlier. Don Graham, a former Facebook board member, has accused those who criticize the company now as having “all the courage of the last man leaping on the pile at a football game.” The financial rewards I reaped from working at Facebook radically changed the trajectory of my life, and even after I cashed out, I watched in awe as the company grew. It took the 2016 election fallout and Cambridge Analytica to awaken me to the dangers of Facebook’s monopoly. But anyone suggesting that Facebook is akin to a pinned football player misrepresents its resilience and power.

If it took you you until the Cambridge Analytica and 2016 election fallout to “awaken” you to “the dangers of Facebook’s monopoly,” one must ask the question were you living under a rock all those years, Mr. Hughes?

However, I’m not completely convinced of Hughes’ remedies, nor of the argument that Facebook is a monopoly.

There have been plenty of other social networks and messaging apps out there (and still are…LinkedIn…WhatsApp…Twitter…). It’s called consumer choice, and Facebook built the better mousetrap.

Just because we don’t like some of the mice it catches doesn’t mean we should break it up into Baby Zuckerbergs. 

As for data protection, I think there’s more room and inclination to maneuver there, and even Mark Zuckerberg himself has called for a GDPR-like set of regulations to provide even more consumer protection. Figuring out a solution on that front could prove a hamstring, however.

And even there I would proceed with caution.

Big data is going to fuel the next wave of innovation and serve as fuel for the next generation of artificial intelligence battles of the 21st Century, particularly when notable competitors like China have no qualms whatsoever about utilizing all varieties of data to power that engine.

Are we going to put a governor on the engine of AI before the plane has even left the ground?

Stop. Think. Deliberate. And then think some more.

It’s easy for Chris Hughes to want to dampen the Facebook bonfire after he’s cashed out his billions.

But if Facebook and its business model really bothers you that much, the easiest solution, and the one with the most market power, is this: Delete your account.

Nothing will send a clearer, unencrypted message to Mark Zuckerberg and team than that.