Facebook’s regulation dodge: Let us, or China will

Facebook is leaning on fears of China exporting its authoritarian social values to counter arguments that it should be broken up or slowed down. Its top executives have each claimed that if the U.S. limits its size, blocks its acquisitions, or bans its cryptocurrency, Chinese company’s absent these restrictions will win abroad, bringing more power and data to their government. CEO Mark Zuckerberg, COO Sheryl Sandberg, and VP of communications Nick Clegg have all expressed this position.

The latest incarnation of this talking point came in today and yesterday’s congressional hearings over Libra, the Facebook-spearheaded digital currency it hopes to launch in the first half of 2020. Facebook’s head of its blockchain subsidiary Calibra David Marcus wrote in his prepared remarks to the House Financial Services Committee today that:

“I believe that if America does not lead innovation in the digital currency and payments area, others will. If we fail to act, we could soon see a digital currency controlled by others whose values are dramatically different”

Senate Banking Committee Holds Hearing On Facebook's Proposed Crypto Currency

WASHINGTON, DC – JULY 16: Head of Facebook’s Calibra David Marcus testifies during a hearing before Senate Banking, Housing and Urban Affairs Committee July 16, 2019 on Capitol Hill in Washington, DC. The committee held the hearing on “Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations.” (Photo by Alex Wong/Getty Images)

Marcus also told the Senate Banking Subcommittee yesterday that “I believe if we stay put we’re going to be in a situation in 10, 15 years where half the world is on a blockchain technology that is out of reach of our national-security apparatus” .

This argument is designed to counter House-drafted “Keep Big Tech Out Of Finance” legislation that Reuters reports would declare that companies like Facebook that earn over $25 billion in annual revenue “may not establish, maintain, or operate a digital asset . . .  that is intended to be widely used as medium of exchange, unit of account, store of value, or any other similar function.”

The message Facebook is trying to deliver is that cryptocurrencies are inevitable. Blocking Libra would just open the door to even less scrupulous actors controlling the technology. Facebook’s position here isn’t limited to cryptocurrencies, though.

The concept crystallized exactly a year ago when Zuckerberg said “I think you have this question from a policy perspective, which is, do we want American companies to be exporting across the world?” in an interview with Recode’s Kara Swisher.

“We grew up here, I think we share a lot of values that I think people hold very dear here, and I think it’s generally very good that we’re doing this, both for security reasons and from a values perspective. Because I think that the alternative, frankly, is going to be the Chinese companies. If we adopt a stance which is that, ‘Okay, we’re gonna, as a country, decide that we wanna clip the wings of these companies and make it so that it’s harder for them to operate in different places, where they have to be smaller,’ then there are plenty of other companies out that are willing and able to take the place of the work that we’re doing.”

When asked if he specifically meant Chinese companies, Zuckerberg doubled down, saying:

“Yeah. And they do not share the values that we have. I think you can bet that if the government hears word that it’s election interference or terrorism, I don’t think Chinese companies are going to wanna cooperate as much and try to aid the national interest there.”

WASHINGTON, DC – APRIL 10: Facebook co-founder, Chairman and CEO Mark Zuckerberg testifies before a combined Senate Judiciary and Commerce committee hearing in the Hart Senate Office Building on Capitol Hill April 10, 2018 in Washington, DC. Zuckerberg, 33, was called to testify after it was reported that 87 million Facebook users had their personal information harvested by Cambridge Analytica, a British political consulting firm linked to the Trump campaign. (Photo by Chip Somodevilla/Getty Images)

This April, Zuckerberg went deeper when he described how Facebook would refuse to comply with data localization laws in countries with poor track records on human rights. The CEO explained the risk of data being stored in other countries, which is precisely might happen if regulators hamper Facebook and innovation happens elsewhere. Zuckerberg told philosopher Yuval Harari that:

“When I look towards the future, one of the things that I just get very worried about is the values that I just laid out [for the internet and data] are not values that all countries share. And when you get into some of the more authoritarian countries and their data policies, they’re very different from the kind of regulatory frameworks that across Europe and across a lot of other places, people are talking about or put into place . . . And the most likely alternative to each country adopting something that encodes the freedoms and rights of something like GDPR, in my mind, is the authoritarian model, which is currently being spread, which says every company needs to store everyone’s data locally in data centers and then, if I’m a government, I can send my military there and get access to whatever data I want and take that for surveillance or military.

I just think that that’s a really bad future. And that’s not the direction, as someone who’s building one of these internet services, or just as a citizen of the world, I want to see the world going. If a government can get access to your data, then it can identify who you are and go lock you up and hurt you and your family and cause real physical harm in ways that are just really deep.”

facebook logo down glitch

Facebook’s newly hired head of communications Nick Clegg told reporters back in January that:

“These are of course legitimate questions, but we don’t hear so much about China, which combines astonishing ingenuity with the ability to process data on a vast scale without the legal and regulatory constraints on privacy and data protection that we require on both sides of the Atlantic . . .  [and this data could be] put to more sinister surveillance ends, as we’ve seen with the Chinese government’s controversial social credit system.”

In response to Facebook co-founder Chris Hughes’ call that Facebook should be broken up, Clegg wrote in May that “Facebook shouldn’t be broken up — but it does need to be held to account. Anyone worried about the challenges we face in an online world should look at getting the rules of the internet right, not dismantling successful American companies.”

He hammered home the alternative the next month during a speech in Berlin:

“If we in Europe and America don’t turn off the white noise and begin to work together, we will sleepwalk into a new era where the internet is no longer a universal space but a series of silos where different countries set their own rules and authoritarian regimes soak up their citizens’ data while restricting their freedom . . . If the West doesn’t engage with this question quickly and emphatically, it may be that it isn’t ours to answer. The common rules created in our hemisphere can become the example the rest of the world follows.”

COO Sheryl Sandberg made the point most directly in an interview with CNBC in May:

“You could break us up, you could break other tech companies up, but you actually don’t address the underlying issues people are concerned about . . . While people are concerned with the size and power of tech companies, there’s also a concern in the United States about the size and power of Chinese tech companies and the … realization that those companies are not going to be broken up.

WASHINGTON, DC – SEPTEMBER 5: Facebook chief operating officer Sheryl Sandberg testifies during a Senate Intelligence Committee hearing concerning foreign influence operations’ use of social media platforms, on Capitol Hill, September 5, 2018 in Washington, DC. Twitter CEO Jack Dorsey and Facebook chief operating officer Sheryl Sandberg faced questions about how foreign operatives use their platforms in attempts to influence and manipulate public opinion. (Photo by Drew Angerer/Getty Images)

Scared Tactics

Indeed, China does not share the United States’ values on individual freedoms and privacy. And yes, breaking up Facebook could weaken its products like WhatsApp, providing more opportunities for apps like Chinese tech giant Tencent’s WeChat to proliferate.

But letting Facebook off the hook won’t solve the problems China’s influence poses to an open and just internet. If Framing the issue as ‘strong regulation lets China win’ creates a false dichotomy. There are more constructive approaches if Zuckerberg seriously wants to work with the government on exporting freedom via the web. And the distrust Facebook has accrued through the mistakes it’s made in the absence of proper regulation arguably do plenty to hurt the perception of how American ideals are spread through its tech companies.

Breaking up Facebook may not be the answer, especially if it’s done in retaliation for its wrong-doings instead of as a coherent way to prevent more in the future. To that end, a better approach might be stopping future acquisitions of large or rapidly growing social networks, forcing it to offer true data portability so existing users have the freedom to switch to competitors, applying proper oversight of its privacy policies, and requiring a slow rollout of Libra with testing in each phase to ensure it doesn’t screw consumers, enable terrorists, or jeopardize the world economy.

Resorting to scare tactics shows that it’s Facebook that’s scared. Years of growth over safety strategy might finally catch up with it. The $5 billion FTC fine is a slap on the wrist for a company that profits more than that per quarter, but a break-up would do real damage. Instead of fear-mongering, Facebook would be better served by working with regulators in good faith while focusing more on preempting abuse. Perhaps it’s politically savvy to invoke the threat of China to stoke the worries of government officials, and it might even be effective. That doesn’t make it right.

Highlights from Facebook’s Libra Senate hearing

Facebook will only build its own Calibra cryptocurrency wallet into Messenger and Whatsapp, and will refuse to embed competing wallets, the head of Calibra David Marcus told the Senate Banking Committee today. Calibra will be interoperable so users can send money back and forth with other wallets, and Marcus committed to data portability so users can switch entirely to a competitor. But solely embedding Facebook’s own wallet into its leading messaging apps could give the company a sizable advantage over banks, PayPal, Coinbase, or any other potential wallet developer.

Other highlights from the “Examining Facebook’s Proposed Digital Currency and Data Privacy Considerations” hearing included Marcus saying:

  • The US should “absolutely” lead the world in rule-making for cryptocurrencies
  • “Yes” Libra will comply with all US regulations and not launch until the US lawmakers’ concerns have been answered
  • “You will not have to trust Facebook” because it’s only one of 28 current and potentially 100 or more Libra Association members and it won’t have special privileges
  • “Yes I would” accept his compensation from Facebook in the form of Libra as a show of trust in the currency
  • It is “not the intention at all” for Calibra to sell or directly monetize user data directly, though if it offered additional financial services in partnership with other financial organizations it would ask consent to use their data specifically for those purposes.
  • Facebook’s core revenue model around Libra is that more online commerce will lead businesses to spend more on Facebook ads

But Marcus also didn’t clearly answer some critical questions about Libra and Calibra.

Chairman Crapo asked if Facebook would collect data about transactions made with Calibra that are made on Facebook, such as when users buy products from businesses they discover through Facebook. Marcus instead merely noted that Facebook would still let users pay with credit cards and other mediums as well as Calibra. That means that even though Facebook might not know how much money is in someone’s Calibra wallet or their other transactions, it might know how much the paid and for what if that transaction happens over their social networks.

Senator Tillis asked how much Facebook has invested in the formation of Libra. TechCrunch has also asked specifically how much Facebook has invested in the Libra Investment Token that will earn it a share of interest earned from the fiat currencies in the Libra Reserve. Marcus said Facebook and Calibra hadn’t determined exactly how much it would invest in the project. Marcus also didn’t clearly answer Senator Toomey’s question of why they Libra Association is considered a not-for-profit organization if it will pay out interest to members.

The hearing is ongoing and we’ll continue to update this article with more highlights

Facebook’s testimony to congress: Libra will be regulated by Swiss

The head of Facebook’s blockchain subsidiary Calibra David Marcus released his prepared testimony before congress for tomorrow and Wednesday, explaining that “The Libra Association expects that it will be licensed, regulated, and subject to supervisory oversight. Because the Association is headquartered in Geneva, it will be supervised by the Swiss Financial Markets Supervisory Authority (FINMA). We have had preliminary discussions with FINMA and expect to engage with them on an appropriate regulatory framework for the Libra Association. The Association also intends to register with FinCEN as a money services business.”

Below you can read the full testimony:

Bankrupt Maker Faire revives, reduced to Make Community

Maker Faire and Maker Media are getting a second chance after suddenly going bankrupt, but they’ll return in a weakened capacity. Sadly, their flagship crafting festivals remain in jeopardy, and it’s unclear how long the reformed company can survive.

Maker Media suddenly laid off all 22 employees and shut down last month, as first reported by TechCrunch. Now its founder and CEO Dale Dougherty tells me he’s bought back the brands, domains, and content from creditors and rehired 15 of 22 laid off staffers with his own money. Next week, he’ll announce the relaunch of the company with the new name “Make Community“.

Read our story about how Maker Faire fell apart

The company is already working on a new issue of Make Magazine that it will hope to publish quarterly (down from six times per year) and the online archives of its do-it-yourself project guides will remain available. I hopes to keep publishing books. And it will continue to license the Maker Faire name to event organizers who’ve thrown over 200 of the festivals full of science-art and workshops in 40 countries. But Dougherty doesn’t have the funding to commit to producing the company-owned flagship Bay Area and New York Maker Faires any more.

Maker Faire Layoffs

“We’ve succeeded in just getting the transition to happen and getting Community set up” Dougherty tells me. But sounding shaky, he asks “Can I devise a better model to do what we’ve been doing the past 15 years? I don’t know if I have the answer yet.” Print publishing proved tougher and tougher recently. Combined with declining corporate sponsorships of the main events, Maker Media was losing too much money to stay afloat last time.

On June 3rd, we basically stopped doing business. And, you know, the bank froze our accounts” Dougherty said at a meetup he held in Oakland to take feedback on his plan, according a recording made by attendee Brian Benchoff. Grasping for a way to make the numbers work, he told the small crowd gathered “I’d be happy if someone wanted to take this off my hands.”

Maker Faire

Maker Faire [Image via Maker Faire Instagram]

For now, Dougherty is financing the revival himself “with the goal that we can get back up to speed as a business, and start generating revenue and a magazine again. This is where the community support needs to come in because I can’t fund it for very long.”

Dale 1

Maker Faire founder and Make Community CEO Dale Dougherty

The immediate plan is to announce a new membership model next week at Make.co where hobbyists and craft-lovers can pay a monthly or annual fee to become patrons of Make Community. Dougherty was cagey about what they’ll get in return beyond a sense of keeping alive the organization that’s held the maker community together since 2005. He does hope to get the next Make Magazine issue out by the end of summer or early fall, and existing subscribers should get it in the mail.

The company is still determining whether to move forward as a non-profit or co-op instead of as a venture-backed for-profit as before. “The one thing i don’t like about non-profit is that you end up working for the source you got the money from. You dance to their tune to get their funding” he told the meetup.

Last time, he burned through $10 million in venture funding from Obvious Ventures, Raine Ventures, and Floodgate. That could make VCs weary of putting more cash into a questionable business model. But if enough of the 80,000 remaining Make Magazine subscribers, 1 million YouTube followers, and millions who’ve attended Maker Faire events step up, pehaps the company can find surer footing.

“I hope this is actually an opportunity not just to revive what we do but maybe take it to a new level” Dougherty tells me. After all, plenty of today’s budding inventors and engineers grew up reading Make Magazine and being awestruck by the massive animatronic creations featured at its festivals.

Audibly peturbed, the founder exclaimed at his community meetup “It frustrates the heck out of me thinking that I’m the one backing up Maker Faire when there’s all these billionaires in the valley.”

Maker Faire lives

Visa funds $40M for no-password crypto vault Anchorage

Visa and Andreessen Horowitz are betting even bigger on cryptocurrency, funding a big round for fellow Facebook Libra Association member Anchorage’s omnimetric blockchain security system. Instead of using passwords that can be stolen, Anchorage requires cryptocurrency withdrawals to be approved by a client’s other employees. Then the company uses both human and AI review of biometrics and more to validate transactions before they’re executed, while offering end-to-end insurance coverage.

This new-age approach to cryptocurrency protection has attracted a $40 million Series B for Anchorage led by Blockchain Capital and joined by Visa and Andreessen Horowitz. The round adds to Anchorage’s $17 million Series A that Andreessen led just six months ago, demonstrating extraordinary momentum for the security startup.

As a custodian, our work is focused on building financial plumbing that other companies depend on for their operations to run smoothly. In this regard we have always looked at Visa as a model” Anchorage co-founder and president Diogo Mónica tells me.

“Visa was ‘fintech’ before the term existed, and has always been on the vanguard of financial infrastructure. Visa’s investment in Anchorage is helpful not only to our company but to our industry, as a validation of the entire ecosystem and a recognition that crypto will play a key role in the future of global finance.”

Anchorage Crypto 1

Cold-storage, where assets are held in computers not connected to the Internet, has become a popular method of securing Bitcoin, Ether, and other tokens. But the problem is that this can prevent owners from participating in governance of certain cryptocurrency where votes are based on their holdings, or earning dividends. Anchorage tells me it’s purposefully designed to permit this kind of participation, helping clients to get the most out of their assets like capturing returns from staking and inflation, or joining in on-chain governance.

As 3 of the 28 founding members of the Libra Association that will govern the new Facebook-incubated cryptocurrency; Anchorage, Visa, and Andreessen Horowitz will be responsible for ensuring the stablecoin stays secure. While Facebook is building its own custodial wallet called Calibra for users, other Association members and companies hoping to dive into the ecosystem will need ways to protect their Libra stockpiles.

“Libra is exactly the kind of asset that Anchorage was created to hold” Mónica wrote the day Libra was revealed. “Our custody solution , so that asset-holders don’t face a trade-off between security and usability.” The company believes that custodians shouldn’t dictate what coins their clients hold, so it’s working to support all types of digital assets. Anchorage tells me that will include support for securing Libra in the future.

Libra Association Founding Partners

You’ve probably already used technology secured by Anchorage’s founders, who engineered Docker’s containers that are used by Microsoft, and Square’s first encrypted card reader. Mónica was at Square when he met his future Anchorage co-founder Nathan McCauley who’d been working on anti-reverse engineering tech for the U.S. military. When a company that had lost the password to a $1 million cryptocurrency account asked for their help with security, they recognized a recognized the need for a more idiot-proof take on asset protection.

“Anchorage applies the best of modern security engineering for a more advanced approach: we generate and store private keys in secure hardware so they are never exposed at any point in their life cycle, and we eliminate human operations that expose assets to risk” Mónica says. The startup competes with other crypto custody firms like Bitgo, Ledger, Coinbase, and Gemini.

Anchorage CryptocurrencyLast time we spoke, Anchorage was cagey about what I could reveal regarding how its transaction validation system worked. With the new funding, it’s feeling a little more secure about its market position and was willing to share more.

Anchorage ditches usernames, passwords, email addresses, and phone numbers completely. That way a hacker can’t just dump your coins into their account by stealing your private key or SIM-porting your number to their phone. Instead, clients whitelist devices held by their employees, who use the Anchorage app to submit transactions. You’d propose selling $10 million worth of Bitcoin or transferring it to someone else as payment, and a minimum of two-thirds of your designated co-workers would need to concur to form a quorum that approves the transfer.

But first, Anchorage would’s artificial intelligence and human staff would check for any suspicious signals that might indicate a hack in progress. It uses behavioral analysis (do you act like a real human and similar to how you have before), biometric signals (do you look like you), and network signals (is your device what and where it should be) to confirm the transaction is legitimate. The same process goes down if you try to add a new whitelisted device or change who has permission to do what.

The challenge will be scaling security to an ever-broadening range of digital assets, each with their own blockchain quirks and complex smart contracts. Even if Anchorage keeps coins safely in custody, those variables could expose assets to risk while in transit. Now with deeper pockets and the Visa vote of confidence, Anchorage could solve those problems as clients line up.

While most blockchain attention has focused on the cryptocurrencies themselves and the exchanges where you can buy and sell them, a second order of critical infrastructure startups is emerging. Companies like Anchorage could make Bitcoin, Ether, Libra, and more not just objects of speculation or the domain of experts, but safely functioning elements of the new world economy.

HQ Trivia has paid out $6M, but winners complain of delays

HQ Trivia’s troubles continue after a failed mutiny to oust the CEO, a 92% decline in downloads since versus a year ago, and layoffs of 20% of its staff last week. Users continue to complain about delays for payouts of their prizes from the live mobile trivia game, and about being booted from the game for no reason while on the final question.

Notably, Jeopardy winner Alex Jacob claims he hasn’t been paid the $20,000 he won on HQ Trivia on June 10th. This could shake players faith in HQ and erode their incentive to compete.

An HQ Trivia representative tells TechCrunch that the game has paid out $6.25 million to date and that 99% of players have been eligible to cash out within 48 hours of winning, but some winners may have to wait up to 90 days for it to ensure they didn’t break the rules to win. Given Jacob’s large jackpot, it’s possible the delay could be due to the company investigating to ensure he won fairly, though he’s clearly skilled at trivia given he won Jeopardy’s Tournament Of Champions in 2015. Jacob did not respond to requests for interview.

“We strive to make a game that is fair and fun for all players. As such, we have a rigorous process of reviewing winners for eligibility to receive cash prizes. Infrequently, we disqualify players for violating HQ‘s Terms of Service and Contest Rules” HQ Trivia’s press alias anonymously reponded to our request for comment. “It may take some eligible winners up to 90 days to receive cash prizes, however 99% of players have been able to cash out within 48 hours of winning a game and we have paid out a total of $6,252,634.58 USD to winners since launch.”

It seems that HQ’s internal problems are now metastasizing into public issues. Its team being short-staffed and distracted by weak morale could lengthen payout delays, which make players worry if they’ll ever get their cash. When they share those sentiments to social media, it could discourage others from playing. That, combined with concerns that bots and cheaters are winning the games, splitting the jackpots into tiny fractions so legitimate winners get less, has hurt the perception of HQ as a game where the smartest can win big.

Back in April, TechCrunch reported that 20 of HQ’s 35 staffers were preparing a petition to the board to remove CEO and co-founder Rus Yusupov for mismanagement. Yusupov caught wind of the plot and fired two of the leaders of the movement. However, HQ’s board decided it would bring in a new CEO. Board member and Tinder CEO Elie Seidman told TechCrunch that Yusupov had accepted he would be replaced by someone with the ability fire him and that a CEO search was ongoing. The startup’s lead investor Lightspeed has pledged to provide 18 months of funding once a new CEO was hired.

However, multiple sources tell TechCrunch that a new CEO has yet to be installed. One source tells me that management had promised a new CEO by the beginning of August, but that Yusupov had stalled the process seemingly to remain in power. HQ Trivia, Yusupov, and Seidman did not respond for requests for comment regarding the CEO search.

When asked about morale at the company, a source familiar with HQ’s internal situation told me “It’s terrible.” Yusupov is said to continue to be tough to work with, making decisions without full buy-in from the rest of the company. A substantial portion of the team was allegedly unaware of plans to launch a $9.99 subscription tier for HQ’s second game HQ Words until the company tweeted out the announcement.

Hopefully HQ Trivia can find a new captain to steer this ship back into smoother waters. The game has hundreds of thousands of players and many more with fond memories of competing. There’s still hope if it can evolve the product to give new users a taste of gameplay without waiting for the next scheduled match, find new revenue in expanded brand partnerships, fight off the bots and cheaters, and get everyone paid promptly. Perhaps there’s room for television tie-ins to bring HQ to a wider audience.

But before the startup can keep quizzing the world, HQ Trivia must endure its internal tests of resolve and find a champ to lead it.

HQ Trivia lays off ~20% as it preps subscriptions

HQ Trivia is struggling after a mutiny failed to oust its CEO. Downloads per month are down 92% versus last June according to Sensor Tower. And now four sources confirm that HQ laid off staff members this week. One said about 20% of staff was let go, and another said six to seven employees were departing. That aligns with Digiday reporter Kerry Flynn’s tweet that 7 employees were let go bringing HQ to under 30 (shrinking from 35 to 28 staffers would be a 20% drop).

That will leave the company short-handed as it attempts to diversify revenue with the upcoming launch of monthly subscriptions. “HQ Words Everyday. Coming next month . . .  Bigger prizes . . . More ways to win. $9.99/mo. subscription” the company tweeted from the account for its second game, the Wheel Of Fortune-style HQ Words. The company has been trying to regain momentum with new hosts since the departure of Quiz Daddy aka Scott Rogowsky, HQ Trivia’s original host.

hq trivia app 1

The cuts hit HQ’s HR, marketing, and product engineering teams, according to LinkedIn profiles of employees let go. The cuts could further hamper morale at the startup following a tough first half of the year. HQ Trivia and co-founder Rus Yusupov did not respond to repeated requests for comment.

HQ Trivia employees petitioned to remove co-founder Rus Yusupov from the CEO position

Following the tragic death of co-founder and CEO Colin Kroll, Yusupov retook control. But staff found him difficult to work with as he’d allowed the product to stagnate and popularity to decline. Yusupov was slow to make changes to the app, and “no one wanted to work under Rus” a source told me.

That led 20 of 35 staffers to sign a letter to HQ Trivia’s board asking them to remove Yusupov, though it was never formally sent. Yusupov caught wind of the plot and fired two of the leaders of the petition. That further sunk morale, leading to the exit of HQ Trivia’s SVP of brand partnerships and its marketing manager. The board began a search for a new CEO, though it’s unclear how that’s panned out.

Since then, new games HQ teased in April haven’t materialized as its download rate continued to suffer. It’s dropped to the #731 US game on iOS according to AppAnnie. HQ Trivia saw just 827,000 downloads from January through June 2019, down 92% from the 10.2 million it saw in the same time frame in 2018 according to Sensor Tower. That’s the same percentage drop in downloads from June 2019 versus June 2018, indicating Rogowsky’s replacements that started in April couldn’t turn things around.

Interest in the live game show format seems to be waning as a whole. HQ Trivia fan site HQTrivia.fan shut down this week fearing the end was near for the official game, and the (Business) INSIDER-run clone of the game on Facebook Watch called Confetti stopped airing at the end of June.

Rather than solely monetizing a waning audience via in-app purchases and sponsorships, HQ Words announced it would debut a $9.99 monthly subscription sometime this month that would grant access to winning “bigger prizes”. This could be a smart way to squeeze more dollars out of a smaller but more diehard audience.

While HQ Trivia was an inspiring approach to mobile gaming, its twice-daily games didn’t fit the always-on nature of mobile. It’s failed build a proper onboarding experience that gives users a taste of it games right away rather than forcing them to wait for the next scheduled match as we suggested over a year ago. Gamers are fickle, craving instant gratification, and HQ hasn’t tried to meet them in middle.

Perhaps there’s a future for HQ on cable television, or as a small but steady business on mobile catering to loyalists. But all the unfortunate events and mismanagement may make it difficult to exceed the $100 million valuation it raised money at during its peak.

 

We still don’t know how much of Libra Facebook owns

The $10 million entry fee to join the Facebook-developed cryptocurrency’s Libra Association is merely a minimum. Members who’ll verify transactions can opt to invest more in exchange for more Libra Investment Tokens that will earn them dividends from the interest earned by the Libra Reserve after it pays for infrastructure and operations costs. If regulators allow it to launch after today requesting a halt of development, and the cryptocurrency grows popular with tons of people cashing in local currencies for Libra, the Reserve that holds those assets could grow huge and generate meaningful returns via interest — especially for members willing to sink a ton of money in early.

But therein lies potential disalignment of incentives.

If you’re confused, read our guide to everything about Libra

Each Libra Association member only gets one vote on the council, including Facebook . But if Facebook puts in $500 million and another member like eBay antes just the $10 million minimum, Facebook has a much bigger incentive to get people cashing into Libra and holding onto the cryptocurrency so the Reserve earns interest on those dollars or other fiat, rather than just getting people to transact with it regardless of whether they hold on to Libra permanently. That could lead Facebook (and its Calibra subsidiary representing it) to push governance decisions that would disproportionately benefit it.

Ahead of the Libra announcement two weeks ago, Facebook’s head of blockchain and now Calibra David Marcus told me “The reserve earns interest on some of those treasuries. It’s a small amount and it’s variable but if the reserve becomes big it could become a substantial way to fund the association but also return capital to investors.”

Yet Facebook, for all its talk about transparency with Libra, refused to tell me how much it’s invested into the Libra project as a whole or the Libra Investment Token. That should be a core question raised by congress when Marcus testifies before the Senate Banking Chair on July 16th and the House Financial Services Committee on July 17th. Facebook did not respond to requests for comment on this article. Congress should also be sure to ask how Libra will avoid a Cambridge Analytica-style crypto disaster given that apps built on the Libra developer platform aren’t subject to review.

The proportion of the total Libra Investment Tokens that Facebook owns in part determines how decentralized Libra really is. If Facebook owns the lion’s share or a majority, that could give it too much financial impetus to bend the rules in its favor even if it only has one vote on the council.

Here’s how. Facebook has led development of Libra to date. In fact, the Libra Association has yet to draw up and ratify a charter or formally admit members. Technically it’s just Facebook’s project right now. “So far we’ve been funding it all” Marcus told The Information’s Alex Heath. It’s also been coding it all, organizing it all, and communicating it all.

As such, for now the project can’t survive without Facebook, and may not be able to for quite a while. That means if that if at any time Facebook disagrees so strongly with the Libra Association that it threatens to pull out, it jeopardizes the investment of all the other members. That could coerce them to vote in support of its governance policy suggestions. Facebook thereby wouldn’t need more than one vote to have a much larger influence on the direction of the project.

Today in a Facebook Note (…not a Libra.org blog post), Marcus wrote “The levels of investments of each of the partners will most likely be public as well when that’s actually live.” But that’s far from a guarantee, and could come too late for regulators to intercede or other members to truly understand the assymetry.

Meanwhile, Marcus also said that “We’ve been basically lending money to the association that will be at some point repaid back.” That raises another question of how much Facebook has already sunk into the Libra project, how much it expects to be repaid, on what schedule. Members might be more skittish to join if they learn much of their $10 million investment might just go to paying Facebook back. 

That’s not to mention the other ways Facebook will earn money from Libra. Marcus wrote today that “If Libra is successful, Facebook will first benefit from it by enabling more commerce across its family of apps. More commerce means ads will be more effective, and advertisers will buy more of them to grow their businesses. Additionally, if we earn people’s trust with the Calibra wallet over time, we will also be in a position to start offering more financial services, and generate other revenue streams for the company.”

The fact that Facebook oversees development and has a massive head start on building its wallet that will be baked into its billion-plus user Messenger and WhatsApp products sure doesn’t hurt its prospects for offering other financial services. It will be first to market, instantly at scale, with an insider’s role in defining the rule book.

I’m not discounting the potential Libra has to aid the unbanked who can’t pay fees for having too little money in their accounts, or make commerce cheaper for small businesses. But if Facebook stands to earn outsized returns directly and indirectly from Libra, while expecting other members to foot its R&D bill, and these numbers aren’t made public soon, it’s reasonable to question how decentralized and altruistic this project really is.

Uber Eats invades restaurants with Dine-In option

Tired of cleaning up after take-out or getting hangry waiting at your table in restaurants? Well Uber Eats is barging into the dine-in business. A new option in some cities lets you order your food ahead of time, go to the restaurant, and then sit down inside to eat, a tipster from competing dine-in app Allset tells us. We tested it, and Uber Eats Dine-In even waives the standard Uber delivery and service fees.

Adding Dine-In lets Uber Eats insert itself into more food transactions, expand to restaurants that care about presentation and don’t do delivery, and avoid paying drivers while earning low-overhead revenue. Uber’s Dine-In option is now available in some cities including Austin, Dallas, Phoenix and San Diego where it could save diners time and fees while helping restaurants fill empty tables and waiters earn tips. But it also could coerce more restaurants to play ball with UberEats if their competitors do, eating into their margins.

UberEats Dine In Option

Uber confirmed the existence of the Dine-In option, telling me “We’re always thinking about new ways to enhance the Eats experience.” They also verified there are no delivery or service fees, and restaurants get 100% of tips left in-app buy users. However, we found some items were silently marked up from restaurants’ listed prices in both Uber Eats Delivery and Dine-In options, which could help it make some money directly from these purchases. We also discovered this buried Uber Help Center FAQ with more details.

Uber has been rapidly experimenting with Uber Eats, trying discounted specials, Uber Eats Pool where you pay less for slower delivery, and $9.99 unlimited delivery subscriptions. It’s steadily becoming an omnivore.

How Uber Dine-In Works

Dine-in appears next to the Delivery and Pick-Up options across the top of the Uber Eats app in select cities. You can choose to go eat “ASAP” or in some cases schedule when you want to arrive and sit down. You’ll be shown how long the food will take to prep, distance to the restaurant, your price, and the restaurant’s rating. You’ll then be notified as the order is prepared and approaches readiness. Then you just deliver yourself to the restaurant and add a tip in-app or on the table.

Uber Eats should obviously make it easy for you to hail an Uber with the restaurant as the pre-set destination. An Uber spokesperson called that a good idea but not something it’s doing yet. Back in 2016, Uber tried a merchant-sponsored rides option where you’d get a rebate on your travel if you spent money at a given store. You could imagine restaurants that want to show off their ambiance giving customers some money back if they come across town to eat there.

Uber Dine In

The new feature could spell trouble for other dine-in apps like Allset that’s been in the business for four years. Users might also opt for Uber Eats Dine-In over restaurant reservation apps like OpenTable and Resy. Why waste time waiting to order and for your food to be cooked when you could just show up as it comes out of the oven?

“I think that more delivery players will be tapping into dine-in space. It’s all about convenience and time saving. But it’s going to be very difficult for them, given their focus on delivery” AllsetCEO Stas Matviyenko said of Uber becoming a competitor. He believes dedicated apps for different modes of dining will succeed. But Uber Eats’ ubiquity and its one-stop-shop model for all your dining needs could make it stickier than a dine-in only app you use less frequently.

UberEatsheader

With Dine-In, Uber could aid restaurants that are empty at the start or end of their open hours. Last year we reported that Uber Eats was giving restaurants prominence in a Featured section of the app to drive up demand if they offered discounts to customers. Similarly, Uber could let restaurants entice more Dine-In customers especially when foot-traffic was slow by providing discounts on food or subsidized Uber transportation. Better to knock a dollar or two off an entree if it means filling the restaurant at 5:30 or 9:30pm.

And now that Uber Eats does delivery, take-out, and dine-in, it’d make perfect sense to offer traditional restaurant reservations through the app as well. That would pit it directly against OpenTable, Resy, and Yelp. Instead of trying to own a single use case that might only appeal to certain demographics in certain situations, Uber Eats’ strategy is crystallizing: be the app you open whenever you’re hungry.

Calm raises $27M to McConaughey you to sleep

Meditation app unicorn Calm wants you to doze off to the dulcet tones of actor Matthew McConaughey’s southern drawl or writer Stephen Fry’s english accent. Calm’s Sleep Stories feature that launched last year is a hit, with over 150 million listens from its 2 million paid subscribers and 50 million downloads. While lots of people want to meditate, they need to sleep. The 7-year-old app has finally found its must-have feature that makes it a habit rather than an aspiration.

Keen to capitalize on solving the insomnia problems plaguing people around the world, Lightspeed tells TechCrunch it has just invested $27 million into a Series B extension round in Calm alongside some celebrity angels at a $1 billion valuation. The cash will help the $70 per year subscription app further expand from guided meditations into more self-help masterclasses, stretching routines, relaxing music, breathing exercises, stories for children, and celebrity readings that lull you to sleep.

Calm App

The funding adds to Calm’s $88 million Series B led by TPG that was announced in February that was also at a $1 billion valuation, bringing the full B round to $115 million and Calm’s total funding to about $141 million. Lightspeed partner Nicole Quinn confirms the fund started talks with Calm around the same time as TPG, but took longer to finish due diligence, which is why the valuation didn’t grow despite Calm’s progress since February.

“Nicole and Lightspeed are valueable partners as we continue to double down on entertainment through our content” Calm’s head of communications Alexia Marchetti tells me. The startup plans to announce more celebrity content tie-ins later this summer.

Broadening its appeal is critical for Calm amidst a crowded meditation app market including Headspace, Simple Habit, and Insight Timer plus newer entrants like Peloton’s mindfulness sessions and Journey’s live group classes. It’s become easy to find guided meditations online for free, so Calm needs to become a holistic mental wellness hub.

While it risks diluting its message by doing so much, Calm’s plethora of services could make it a gateway to more of your personal health spend, including therapy, meditation retreats, and health merchandise from airy clothing to yoga mats. But subscription fees alone are powering a big business. Calm quadrupled revenue in 2018 to reach $150 million in ARR and hit profitability.

Calm is poised to keep up its rapid revenue growth. After the launch of Sleep Stories, “it was incredible to see the engagement spike up and also the retention” says Quinn. Users can choose from having McConaughey describe the wonders of the cosmos, John McEnroe walk them through the rules of tennis, fairy tales like The Little Mermaid, and more.

Quinn tells me “Sleep Stories is now a huge percentage of the business, and also the length of time people spend on the app has gone up dramatically.” She tells me that so many startups are “trying to invent a problem where there isn’t one.” But difficulty snoozing is so widespread and detrimental that users are eager to pay for an app instead of a sleeping pill. Having the Inception actor talk about the universe until I pass out sounds alright, alright, alright.

Alright Alright Alright