Robinhood lacked proper insurance so will change checking & savings feature

Robinhood will rename and revamp its upcoming checking and banking features after encountering problems with its insurance. The company published a blog post this evening explaining “We plan to work closely with regulators as we prepare to launch our cash management program, and we’re revamping our marketing materials, including the name . . . Stay tuned for updates.”

Robinhood’s new high-interest, zero-fee checking and savings feature seemed too good to be true. Users’ money wasn’t slated  to fully protected. The CEO of the Securities Investor Protection Corporation, a nonprofit membership corporation that insures stock brokerages, tells TechCrunch its insurance would not apply to checking and savings accounts the way Robinhood originally claimed. “Robinhood would be buying securities for its account and sharing a portion of the proceeds with their customers, and that’s not what we cover,” says SIPC CEO Stephen Harbeck. “I’ve never seen a single document on this. I haven’t been consulted on this.”

That info directly conflicts with comments from Robinhood’s comms team, which told me yesterday users would be protected because the SIPC insures brokerages and the checking/savings feature is offered via Robinhood’s brokerage that is a member of the SIPC.

If Robinhood checking and savings is indeed ineligible for insurance coverage from the SIPC, and since it doesn’t qualify for FDIC protection like a standard bank, users’ funds would have been at risk. Robinhood co-CEO Baiju Bhatt told me that “Robinhood invests users’ checking and savings money into government-grade assets like U.S. treasuries and we collect yield from those assets and pay that back to customers in the form of 3 percent interest.” But Harbeck tells me that means users would effectively be loaning Robinhood their money, and the SIPC doesn’t cover loans. If a market downturn caused the values of those securities to decline and Robinhood couldn’t cover the losses, the SIPC wouldn’t necessarily help users get their money back. 

Robinhood’s team insisted yesterday that customers would not lose their money in the event that the treasuries in which it invests decline, and that only what users gamble on the stock market would be unprotected, as is standard. But now it appears that because Robinhood is misusing its brokerage classification to operate checking and savings accounts where it says users don’t have to invest in stocks and other securities, SIPC insurance wouldn’t apply. “I have an issue with some of the things on their website about whether these checking and savings accounts would be protected. I referred the issue to the SEC,” Harbeck tells me. TechCrunch got in touch with the SEC, but it declined to comment.

Robinhood planned to start shipping its Mastercard debit cards to customers on December 18th with users being added off the waitlist in January. That may now be delayed due to the insurance problem and it’s announcement that it will change how it works and is positioned.

Robinhood touted how its checking and savings features have no minimum account balance, overdraft fees, foreign transaction fees or card replacement fees. It also has 75,000 free-to-use ATMs in its network, which Bhatt claims is more than the top five U.S. banks combined. And its 3 percent interest rate users earn is much higher than the 0.09 percent average interest rate for traditional savings, and beats  most name-brand banks outside of some credit unions.

But for those perks, users must sacrifice brick-and-mortar bank branches that can help them with troubles, and instead rely on a 24/7 live chat customer support feature from Robinhood. The debit card has Mastercard’s zero-liability protection against fraud, and Robinhood partners with Sutton Bank to issue the card. But it’s unclear how the checking and savings accounts would have been protected against other types of attacks or scams.

Robinhood was likely hoping to build a larger user base on top of its existing 6 million accounts by leveraging software scalability to provide such competitive rates. It planned to be profitable from its margin on the interest from investing users’ money and a revenue-sharing agreement with Mastercard on interchange fees charged to merchants when you swipe your card. But long term, Robinhood may use checking and savings as a wedge into the larger financial services market from which it can launch more lucrative products like loans.

That could fall apart if users are scared to move their checking and savings money to Robinhood. Startups can suddenly fold or make too risky of decisions while chasing growth. Robinhood’s valuation went from $1.3 billion last year to $5.6 billion when it raised $363 million this year. That puts intense pressure on the company to grow to justify that massive valuation. In its rush to break into banking, it may have cut corners on becoming properly insured. It’s wise for the company to be rethinking the plan to ensure it doesn’t leave users exposed or hurt its reputation by launching without adequate protection.

[Update 12/14/2018 9:30pm pacific: This article has been significantly updated to include information about Robinhood planning to change its checking and savings feature before launch to ensure users aren’t in danger or losing their money.]

[DIsclosure: The author of this article knows Robinhood co-founders Baiju Bhatt and Vlad Tenev from college 10 years ago.]

Facebook bug exposed up to 6.8M users’ unposted photos to apps

Reset the “days since the last Facebook privacy scandal” counter, as a Facebook has just revealed a Photo API bug gave app developers too much access to the photos of up to 5.6 million users. The bug allowed apps users had approved to pull their timeline photos to also receive their Facebook Stories, Marketplace photos, and most worryingly, photos they’d uploaded to Facebook but never shared. Facebook says the bug ran for 12 days from September 13th to September 25th.

Facebook initially didn’t disclose when it discovered the bug, but in response to TechCrunch’s inquiry, a spokesperson says that it was discovered and fixed on September 25th. They say it took time for the company to investigate whch apps and people were impacted, and build and translate the warning notification it will send impacted users. The delay could put Facebook at risk of GDPR fines for not promptly disclosing the issue within 72 hours that can go up to 20 million pounds or 4 percent of annual global revenue.

Facebook provided merely a glib “We’re sorry this happened” in terms of an apology. It will provide tools next week for app developers to check if they were impacted and it will work with them to delete photos they shouldn’t have. The company plans to notify people it suspects may have been impacted by the bug via Facebook notification that will direct them to the Help Center where they’ll see if they used any apps impacted by the bug. It’s recommending users log into apps to check if they have wrongful photo access. Here’s a look at a mockup of warning notifcation users will see:

The privacy failure will further weaken confidence that Facebook is a reponsible steward for our private data. It follows Facebook’s massive security breach that allowed hackers to scrape 30 million people’s information back in September. There was also November’s bug allowing websites to read users’ Likes, October’s bug that mistakenly deleted people’s Live videos, and May’s bug that changed people’s status update composer privacy settings. It increasingly looks like the social network has gotten too big for the company to secure. Curiously, Facebook discovered the bug on September 25th, the same day as its 30 million user breach. Perhaps it kept a lid on the situation in hopes of not creating an even bigger scandal.

That it keeps photos you partially uploaded but never posted in the first place is creepy, but the fact that these could be exposed to third-party developers is truly unacceptable. And it seems Facebook is so tired of its failings that it couldn’t put forward even a seemingly heartfelt apology is telling. This company’s troubles are not only souring users on Facebook, but employees and the tech industry as large as well. CEO Mark Zuckerberg told Congress earlier this year that “We have a responsibility to protect your data, and if we can’t then we don’t deserve to serve you.” What does Facebook deserve at this point?

They scaled YouTube. Now they’ll shard everyone with PlanetScale

When the former CTOs of YouTube, Facebook, and Dropbox seed fund a database startup, you know there’s something special going on under the hood. Jiten Vaidya and Sugu Sougoumarane saved YouTube from a scalability nightmare by inventing and open sourcing Vitess, a brilliant relational data storage system. But in the decade since working there, the pair have been inundated with requests from tech companies desperate for help building the operational scaffolding needed to actually integrate Vitess.

So today the pair are revealing their new startup PlanetScale that makes it easy to build multi-cloud databases that handle enormous amounts of information without locking customers into Amazon, Google, or Microsoft’s infrastructure. Battletested at YouTube, the technology could allow startups to fret less about their backend and focus more on their unique value proposition. “Now they don’t have to reinvent the wheel” Vaidya tells me. “A lot of companies facing this scaling problem end up solving it badly in-house and now there’s a way to solve that problem by using us to help.”

PlanetScale has quietly raised a $3 million seed round in April led by SignalFire and joined by a who’s who of engineering luminaries. They include YouTube co-founder and CTO Steve Chen, Quora CEO and former Facebook CTO Adam D’Angelo, former Dropbox CTO Aditya Agarwal, PayPal and Affirm co-founder Max Levchin, MuleSoft co-founder and CTO Ross Mason, Google director of engineering Parisa Tabriz, and Facebook’s first female engineer and South Park Commons Founder Ruchi Sanghvi. If anyone could foresee the need for Vitess implementation services, it’s these leaders who’ve dealt with scaling headaches at tech’s top companies.

But how can a scrappy startup challenge the tech juggernauts for cloud supremacy? First, by actually working with them. The PlanetScale beta that’s now launching lets companies spin up Vitess clusters on its database-as-a-service, their own through a licensing deal, or on AWS with Google Cloud and Microsoft Azure coming shortly. Once these integrations with the tech giants are established, PlanetScale clients can use it as an interface for a multi-cloud setup where they could keep their data master copies on AWS US-West with replicas on Google Cloud in Ireland and elsewhere. That protects companies from becoming dependent on one provider and then getting stuck with price hikes or service problems.

PlanetScale also promises to uphold the principles that undergirded Vitess. “It’s our value that we will keep everything in the query pack completely open source so none of our customers ever have to worry about lock-in” Vaidya says.

PlanetScale co-founders (from left): Jiten Vaidya and Sugu Sougoumarane

Battletested, YouTube Approved

He and Sougoumarane met 25 years ago while at Indian Institute Of Technology Bombay. Back in 1993 they worked at pioneering database company Informix together before it flamed out. Sougoumarane was eventually hired by Elon Musk as an early engineer for X.com before it got acquired by PayPal, and then left for YouTube. Vaidya was working at Google and the pair were reunited when it bought YouTube and Sougoumarane pulled him on to the team.

“YouTube was growing really quickly and the relationship database they were using with MySQL was sort of falling apart at the seams” Vaidya recalls. Adding more CPU and memory to the database infra wasn’t cutting it, so the team created Vitess. The horizontal scaling sharding middleware for MySQL let users segment their database to reduce memory usage while still being able to rapidly run operations. YouTube has smoothly ridden that infrastructure to 1.8 billion users ever since.

“Sugu and Mike Solomon invented and made Vitess open source right from the beginning since 2010 because they knew the scaling problem wasn’t just for YouTube, and they’ll be at other companies 5 or 10 years later trying to solve the same problem” Vaidya explains. That proved true, and now top apps like Square and HubSpot run entirely on Vitess, with Slack now 30 percent onboard.

Vaidya left YouTube in 2012 and became the lead engineer at Endorse, which got acquired by Dropbox where he worked for four years. But in the meantime, the engineering community strayed towards MongoDB-style key-value store databases, which Vaidya considers inferior. He sees indexing issues and says that if the system hiccups during an operation, data can become inconsistent — a big problem for banking and commerce apps. “We think horizontally-scaled relationship databases are more elegant and are something enterprises really need.

Database Legends Reunite

Fed up with the engineering heresy, a year ago Vaidya committed to creating PlanetScale. It’s composed of four core offerings: professional training in Vitess, on-demand support for open source Vitess users, Vitess database-as-a-service on Planetscale’s servers, and software licensing for clients that want to run Vitess on premises or through other cloud providers. It lets companies re-shard their databases on the fly to relocate user data to comply with regulations like GDPR, safely migrate from other systems without major codebase changes, make on-demand changes, and run on Kubernetes.

The PlanetScale team

PlanetScale’s customers now include Indonesian ecommerce giant Bukalapak, and it’s helping Booking.com, GitHub, and New Relic migrate to open source Vitess. Growth is suddenly ramping up due to inbound inquiries. Last month around when Square Cash became the number one app, its engineering team published a blog post extolling the virtues of Vitess. Now everyone’s seeking help with Vitess sharding, and PlanetScale is waiting with open arms. “Jiten and Sugu are legends and know firsthand what companies require to be successful in this booming data landscape” says Ilya Kirnos, founding partner and CTO of SignalFire.

The big cloud providers are trying to adapt to the relational database trend, with Google’s Cloud Spanner and Cloud SQL, and Amazon’s AWS SQL and AWS Aurora. Their huge networks and marketing war chests could pose a threat. But Vaidya insists that while it might be easy to get data into these systems, it can be a pain to get it out. PlanetScale is designed to give them freedom of optionality through its multi-cloud functionality so their eggs aren’t all in one basket.

Finding product market fit is tough enough. Trying to suddenly scale a popular app while also dealing with all the other challenges of growing a company can drive founders crazy. But if it’s good enough for YouTube, startups can trust PlanetScale to make databases one less thing they have to worry about.

Facebook relaunches search ads to offset slowing revenue

It’s an ad duoply battle. Facebook is starting to test search ads in its search bar and Marketplace, directly competing with Google’s AdWords. Facebook first tried Sponsored Results back in 2012 but eventually shut down the product. Now it’s going to let a small set of automotive, retail, and ecommerce industry advertisers show users in the US and Canada. Facebook may expand search ads to more countries based on the test’s performance.

The reintroduction of search ads could open an important new revenue stream at a time when Facebook’s revenue growth is quickly decelerating as it runs out of News Feed ad space, the Stories format advertisers are still adapting to gains popularity, and users shift their time to other apps. In Q3 2018, revenue grew 33 percent year-over-year, but that’s far slower than the 49 percent YOY gain it had a year ago, and the 59 percent from Q3 2016. Opening up new ad inventory for search could reinvigorate the revenue growth rate that, combined with Facebook’s privacy and security scandals, has applied intense pressure to leaders Mark Zuckerberg and Sheryl Sandberg.

“We’re running a small test to place ads in Facebook search results, and we’ll be evaluating whether these ads are beneficial for people and businesses before deciding whether to expand it” Facebook product manager Zoheb Hajiyani to TechCrunch in a statement. Facebook will have to balance the injection of the ads with remaining an easy way to search for friends, content, businesses and more.

Advertisers with access will be able to simply extend their existing Newss Feed ads to the new “Search” placement through the Facebook Ads Manager. For now, advertisers won’t pick specific keywords to advertise agains, and instead may appear in search terms related to auto or retail topics. Ads will featured a “Sponsored” tag, and are subject to the same transparency controls around “Why Am I Seeing This?” Facebook plans to evaluate the benefits for users and advertisers in order to determine whether to roll out the ads to more countries and categories.

Instagram launches walkie-talkie voice messaging

You’d think Facebook would be faster at copying itself. Five years after Facebook Messenger took a cue from WhatsApp and Voxer to launch voice messaging, and four months after TechCrunch reported Instagram was testing its own walkie talkie feature, voice messaging is rolling out globally on Instagram Direct today. Users can hold down the microphone button to record a short voice message that appears in the chat as an audio wave form that recipients can then listen to at their leisure. The feature offers an off-camera asynchronous alternative to the video calling feature Instagram released in June.

Hands-free Direct messaging could make Instagram a more appealing chat app for drivers, people on the move with their hands full, or users in the developing world who want a more intimate connection without having to pay for the data for long audio or video calls. It could also be a win for users in countries with less popular languages or ones that aren’t easily compatible with smartphone keyboards, as they could talk to friends instead of typing.

The launch deepens Facebook’s entry into the voice market. From its first voice messaging and VOIP features back in 2013 to its new voice control system Aloha that works on its recently launched Portal video chat screen, Facebook has long taken an interest in the accessibility of voice but only got serious about building it across its products in 2018.

Facebook ends platform policy banning apps that copy its features

Facebook will now freely allow developers to build competitors to its features upon its own platform. Today Facebook announced it will drop Platform Policy section 4.1 which stipulates “Add something unique to the community. Don’t replicate core functionality that Facebook already provides.”

Facebook had previously enforced that policy selectively to hurt competitors that had used its Find Friends or viral distribution features. Apps like Vine, Voxer, MessageMe, Phhhoto and more had been cut off from Facebook’s platform for too closely replicating its video, messaging, or GIF creation tools. Find Friends is a vital API that lets users find their Facebook friends within other apps.

The move will significantly reduce the platform risk of building on the Facebook platform. It could also cast it in a better light in the eyes of regulators. Anyone seeking ways Facebook abuses its dominance will lose a talking point. And by creating a more fair and open platform where developers can build without fear of straying too close to Facebook’s history or roadmap, it could reinvigorate its developer ecosystem.

A Facebook spokesperson provided this statement to TechCrunch:

“We built our developer platform years ago to pave the way for innovation in social apps and services. At that time we made the decision to restrict apps built on top of our platform that replicated our core functionality. These kind of restrictions are common across the tech industry with different platforms having their own variant including YouTube, Twitter, Snap and Apple. We regularly review our policies to ensure they are both protecting people’s data and enabling useful services to be built on our platform for the benefit of the Facebook community. As part of our ongoing review we have decided that we will remove this out of date policy so that our platform remains as open as possible. We think this is the right thing to do as platforms and technology develop and grow.”

The change comes after Facebook locked down parts of its platform in April for privacy and security reasons in the wake of the Cambridge Analytica scandal. Diplomatically, Facebook said it didn’t expect the change to impact its standing with regulators but it’s open to answering their questions.

Earlier in April, I wrote a report on how Facebook used Policy 4.1 to attack competitors it saw gaining traction. The article “Facebook shouldn’t block you from finding friends on competitors” advocated for Facebook to make its social graph more portable and interoperable so users could decamp to competitors if they felt they weren’t treated right in order for to coerce Facebook to act better.

The policy change will apply retroactively. Old apps that lost Find Friends or other functionality will be able to submit their app for review and once approved, will regain access.

Friend lists still can’t be exported in a truly interoperable way. But at least now Facebook has enacted the spirit of that call to action. Developers won’t be in danger of losing access to that Find Friends Facebook API for treading in its path.

 

Below is an excerpt from our previous reporting on how Facebook has previously enforced Platform Policy 4.1 that before today’s change was used to hamper competitors:

  • 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.

Facebook adds free TV shows Buffy, Angel, Firefly to redefine Watch

Facebook hasn’t had a hit show yet for its long-form video hub Watch, so it’s got a new plan: digging up some deceased cult favorites from television. First up, Facebook is making all episodes of Joss Whedon’s Buffy The Vampire Slayer, Angel, and Firefly free on Facebook Watch. There’ll be simultaneous viewing Watch Parties where fans can live-comment together for Buffy at 3 pm PT today, Angel tomorrow at 12 pm PT and Firefly on Sunday at 12 pm PT. Facebook recruited Buffy star Sarah Michelle Gellar to promote the launch.

These shows aren’t original, and they’re far from exclusive, as they’re included in a Hulu subscription and are available to rent or buy on other platforms. But at least they’re not run-of-the-mill web content. With Facebook’s remake of MTV’s Real World not arriving until Spring 2019, these sci-fi and horror shows are the most high-profile programs available on the free ad-supported streaming service. The hope is that fans of these shows will come get a taste of Watch, and then explore the rest of its programming.

However, Facebook downplayed this as a change is overarching strategy when I asked if it would be licensing more old TV shows. Instead, it’s trying to build a well-rounded mix of content. A Facebook spokesperson provided this statement:

No – this doesn’t reflect a strategy shift. We’re focused on bringing content to Watch that people want to discuss and create a community around — whether that’s live sports like UEFA Champions League in Latin America, compelling shows like Sorry For Your Loss, Queen America and Sacred Lies, or even nostalgia content like Real World reboot we’re bringing to Watch next year. Buffy, Firefly and Angel are pop culture favorites with dedicated fan bases, and we’re excited for the opportunity to bring these shows back in a way that enables fans to watch and discuss together on the same platform.

There’s no guarantee Whedon fans will flock to Watch in droves. [TechCrunch owner] Verizon tried the same thing, bringing Veronica Mars and Babylon 5 to its Go90 streaming service. That failed to move the needle and Go90 eventually shut down. Meanwhile, Watch Party’s simultaneous viewing hasn’t blossomed into a phenomenon, but perhaps bringing the feature to Messenger (which TechCrunch reports Facebook is internally testing) could more naturally spur these social consumption experiences.

Watch has made some progress since its lackluster August 2017 debut. Indeed, 50 million people now spend at least 1 minute per month with Watch. For comparison, more than 18 Snapchat Shows have over 10 million unique viewers per month. Facebook Watch users spend 5X longer watching than on clips discovered on News Feed videos. But Facebook Watch really needs to pour the cash in necessary to secure a tent-pole series — its Game of Thrones or House of Cards. That might mesh well with its new strategy of conceding the younger audience that’s abandoning Facebook in favor of targeting older users, CNBC reported.

With so much free video content floating around and plenty of people already subscribing to Netflix, Hulu and/or HBO, it’s been tough for Watch to gain traction when it’s so far outside the understood Facebook use case. Laying a bed of diverse content is a good baby step, but it needs something truly must-see if it’s going to wedge its way into our viewing habits.

Facebook staff discussed selling API access to apps in 2012-2014

Following a flopped IPO in 2012, Facebook desperately brainstormed new ways to earn money. An employee of unknown rank sent an internal email suggesting Facebook charge developers $250,000 per year for access to its platform APIs for making apps that can ask users for access to their data. Employees also discussed offering Tinder extended access to users’ friends’ data that was being removed from the platform in exchange for Tinder’s trademark on “Moments”, which Facebook wanted to use for a photo sharing app it later launched. Facebook decided against selling access to the API, and did not strike a deal with Tinder or other companies including Amazon and Royal Bank Of Canada mentioned in employee emails.

The discussions were reported by the Wall Street Journal as being part of a sealed court document its reporters had reviewed from a lawsuit by bikini photo finding app developer Six4Three against Facebook alleging anti-competitive practices in how it changed the platform in 2014 to restrict access to friends’ data through the platform.

The biggest question remaining is how high in rank the employees who discussed these ideas were. If the ideas were seriously considered by high-ranking executives, especially CEO Mark Zuckerberg, the revelation could contradict the company’s long-running philosophy on not selling data access. Zuckerberg told congress in April that “I can’t be clearer on this topic: We don’t sell data.” If the discussion was between low-level employees, it may have been little more than an off-hand suggestion as Facebook was throwing ideas against the wall, and may have been rejected or ignored by higher-ups. But either way, now that the discussion has leaked, it could validate the public’s biggest fears about Facebook and whether it’s a worthy steward of our personal data.

An employee emailed others about the possibility of removing platform API access “in one-go to all apps that don’t spend… at least $250k a year to maintain access to the data”, the document shows. Facebook clarified to TechCrunch that these discussions were regarding API access, and not selling data directly to businesses. The fact that the discussions were specifically about API access, which Facebook continues to give away for free to developers, had not been previously reported.

Facebook provided this full statement to TechCrunch:

“As we’ve said many times, the documents Six4Three gathered for this baseless case are only part of the story and are presented in a way that is very misleading without additional context. Evidence has been sealed by a California court so we are not able to disprove every false accusation. That said, we stand by the platform changes we made in 2015 to stop a person from sharing their friends’ data with developers. Any short-term extensions granted during this platform transition were to prevent the changes from breaking user experience. To be clear, Facebook has never sold anyone’s data. Our APIs have always been free of charge and we have never required developers to pay for using them, either directly or by buying advertising.”

A half decade-later, with the world’s will turned against Facebook, the discussions of selling data access couldn’t come at a worse time for the company. Even if quickly aborted, the idea could now stoke concerns that Facebook has too much power and too much of our personal information. While the company eventually found other money-makers and became highly profitable, the discussions illuminate how Facebook could potentially exploit people’s data more aggressively if it deemed it necessary.

Facebook denies report that election war room was disbanded

Facebook’s election war room monitors and dashboards remain, since so does the threat of election interference. Facebook has confirmed to TechCrunch that its election war room that it paraded reporters through in October has not been disbanded and will be used again for future elections. That directly contradicts a report from Bloomberg today about the war room that claimed “it’s been disbanded”, citing confirmation from a Facebook spokesperson. That article has not received a formal correction or update despite the Facebook’s VP of product for election security Guy Rosen tweeting to Bloomberg’s Sarah Friar that “The war room was effective and we’re not disbanding it, we’re going to do more things like this.”

“Our war room effort is focused specifically on elections-related issues and is designed to rapidly respond to threats such as voter suppression efforts and civic-related misinformation. It was an effective effort during the recent U.S. and Brazil elections, and we are planning to expand the effort going forward for elections around the globe” a Facebook spokesperson tells TechCrunch. It seems there was a miscommunication between Facebook PR and Bloomberg.

Facebook created the war room at its Menlo Park HQ to monitor for election-related violations of its policies ahead of the Brazilian Presidential race and the US midterms. The room features screens visualizing the volume of foreign political content and voter suppressions efforts to a team of high-ranking teammates from Facebook as well as Instagram and WhatsApp. The goal was to speed up response times to sudden spikes in misinformation about candidates or how to vote to prevent the company from being caught flat-footed as it was in the 2016 presidential election when Russian agents pumped propaganda into the social network.

Facebook tells me that the way the war room works is that a few weeks before key elections, it’s staffed up. Interdisciplinary teams work through election day to identify and respond to threats. After an election concludes, staffers return to their teams where they continue 24/7 monitoring for policy-violating activity across the board. That’s because there’s typically much fewer voter suppression attempts and other surges of propaganda when elections are still many months or years away.

But when future key elections arise, the war room will buzz with activity again. The company plans to invest more in the effort since it succeeded in enhancing coordination between Facebook’s security teams. A spokesperson tells me that while the room might move locations to allow more space or be closer to a specific product group, the war room strategy remains.

The Verge sells an anti-Facebook t-shirt

“The war room will be operational ahead of major events, and it still stands. It was effective for our work in both the Brazil and US elections which is why it’s going to be expanded, not disbanded” Rosen tweeted. “Bottom line is the war room we built originally for the US midterms and for Brazil was effective. Going forward we’re expanding not disbanding the effort.”

Bloomberg had reported that “Facebook says [the war room] was never intended to be permanent, and the company is still assessing what is needed for future elections. The strategic response team is a more-permanent solution to crisis problems, a Facebook spokesperson said.” Rosen’s comment that “the headline is incorrect” referred to news aggregator Techmeme’s manually re-written headline “Facebook disbands its widely publicized “War Room”, says it wasn’t a permanent solution, touts Strategic Response Team as its way to handle future crises”, not Bloomberg’s headline “Facebook’s Sheryl Sandberg Is Tainted by Crisis After Crisis”.

The original Bloomberg story had caused such a stire because it came merely five weeks after Facebook had lured scores of reporters to “tour” the war room, shoot video, and report on it. The company was eager to impress on the public that it was taking election security seriously and fighting hard against misinformation. The PR campaign succeeded, with the “war room” name proving especially tantalizing. The words appeared in headlines from many outlets including TechCrunch.

The whole situation has made the Facebook press corps more cynical and skeptical about how the company tries to manipulate their coverage. The idea that Facebook might have just made the war room for show and since shut it down left many with a sour taste, even if that didn’t end up being true. That feeling was only fueled by the New York Times’ report about how Facebook had hired opposition research firm Definers, whose employees tried to seed stories with journalists that defamed the social network’s critics, and wrote their own biased takes for Definers-affiliated publication NTK Network.

It’s clear that Facebook’s relationship with the press remains contentious. Some believe Facebook sucked ad dollars away from news sites before dialing down its referral traffic to those sites, possibly leaving outlets with a grudge. The Verge currently sells an anti-Facebook t-shirt in its merchandise store, showing protestors toppling its logo like a dictator’s statue. But Facebook does plenty to deserve the tough criticism, from failing to protect the 2016 elections, to its ruthless PR strategies, to how it’s allowed polarizing and sensational content to flourish, to how its growth hacking seeks to devour our attention.

As long as the “days since the last Facebook scandal” counter keeps getting reset to zero, it will remain in the hot seat. The systemic change necessary to put society’s well-being above its own growth may take years of rehiring, training, and a fundamental rethinking of its engagement-seeking business model.

Tech giants offer empty apologies because users can’t quit

A true apology consists of a sincere acknowledgement of wrong-doing, a show of empathic remorse for why you wronged and the harm it caused, and a promise of restitution by improving ones actions to make things right. Without the follow-through, saying sorry isn’t an apology, it’s a hollow ploy for forgiveness.

That’s the kind of “sorry” we’re getting from tech giants — an attempt to quell bad PR and placate the afflicted, often without the systemic change necessary to prevent repeated problems. Sometimes it’s delivered in a blog post. Sometimes it’s in an executive apology tour of media interviews. But rarely is it in the form of change to the underlying structures of a business that caused the issue.

Intractable Revenue

Unfortunately, tech company business models often conflict with the way we wish they would act. We want more privacy but they thrive on targeting and personalization data. We want control of our attention but they subsist on stealing as much of it as possible with distraction while showing us ads. We want safe, ethically built devices that don’t spy on us but they make their margins by manufacturing them wherever’s cheap with questionable standards of labor and oversight. We want groundbreaking technologies to be responsibly applied, but juicy government contracts and the allure of China’s enormous population compromise their morals. And we want to stick to what we need and what’s best for us, but they monetize our craving for the latest status symbol or content through planned obsolescence and locking us into their platforms.

The result is that even if their leaders earnestly wanted to impart meaningful change to provide restitution for their wrongs, their hands are tied by entrenched business models and the short-term focus of the quarterly earnings cycle. They apologize and go right back to problematic behavior. The Washington Post recently chronicled a dozen times Facebook CEO Mark Zuckerberg has apologized, yet the social network keeps experiencing fiasco after fiasco. Tech giants won’t improve enough on their own.

Addiction To Utility

The threat of us abandoning ship should theoretically hold the captains in line. But tech giants have evolved into fundamental utilities that many have a hard time imagining living without. How would you connect with friends? Find what you needed? Get work done? Spend your time? What hardware or software would you cuddle up with in the moments you feel lonely? We live our lives through tech, have become addicted to its utility, and fear the withdrawal.

If there were principled alternatives to switch to, perhaps we could hold the giants accountable. But the scalability, network effects, and aggregation of supply by distributors has led to near monopolies in these core utilities. The second-place solution is often distant. What’s the next best social network that serves as an identity and login platform that isn’t owned by Facebook? The next best premium mobile and PC maker behind Apple? The next best mobile operating system for the developing world beyond Google’s Android? The next best ecommerce hub that’s not Amazon? The next best search engine? Photo feed? Web hosting service? Global chat app? Spreadsheet?

Facebook is still growing in the US & Canada despite the backlash, proving that tech users aren’t voting with their feet. And if not for a calculation methodology change, it would have added 1 million users in Europe this quarter too.

One of the few tech backlashes that led to real flight was #DeleteUber. Workplace discrimination, shady business protocols, exploitative pricing and more combined to spur the movement to ditch the ridehailing app. But what was different here is that US Uber users did have a principled alternative to switch to without much hassle: Lyft. The result was that “Lyft benefitted tremendously from Uber’s troubles in 2018” eMarketer’s forecasting director Shelleen Shum told the USA Today in May. Uber missed eMarketer’s projections while Lyft exceeded them, narrowing the gap between the car services. And meanwhile, Uber’s CEO stepped down as it tried to overhaul its internal policies.

But in the absence of viable alternatives to the giants, leaving these mainstays is inconvenient. After all, they’re the ones that made us practically allergic to friction. Even after massive scandals, data breaches, toxic cultures, and unfair practices, we largely stick with them to avoid the uncertainty of life without them. Even Facebook added 1 million monthly users in the US and Canada last quarter despite seemingly every possible source of unrest. Tech users are not voting with their feet. We’ve proven we can harbor ill will towards the giants while begrudgingly buying and using their products. Our leverage to improve their behavior is vastly weakened by our loyalty.

Inadequate Oversight

Regulators have failed to adequately step up either. This year’s congressional hearings about Facebook and social media often devolved into inane and uninformed questioning like how does Facebook earn money if its doesn’t charge? “Senator, we run ads” Facebook CEO Mark Zuckerberg said with a smirk. Other times, politicians were so intent on scoring partisan points by grandstanding or advancing conspiracy theories about bias that they were unable to make any real progress. A recent survey commissioned by Axios found that “In the past year, there has been a 15-point spike in the number of people who fear the federal government won’t do enough to regulate big tech companies — with 55% now sharing this concern.”

When regulators do step in, their attempts can backfire. GDPR was supposed to help tamp down on the dominance of Google and Facebook by limiting how they could collect user data and making them more transparent. But the high cost of compliance simply hindered smaller players or drove them out of the market while the giants had ample cash to spend on jumping through government hoops. Google actually gained ad tech market share and Facebook saw the littlest loss while smaller ad tech firms lost 20 or 30 percent of their business.

Europe’s GDPR privacy regulations backfired, reinforcing Google and Facebook’s dominance. Chart via Ghostery, Cliqz, and WhoTracksMe.

Even the Honest Ads act, which was designed to bring political campaign transparency to internet platforms following election interference in 2016, has yet to be passed even despite support from Facebook and Twitter. There’s hasn’t been meaningful discussion of blocking social networks from acquiring their competitors in the future, let alone actually breaking Instagram and WhatsApp off of Facebook. Governments like the U.K. that just forcibly seized documents related to Facebook’s machinations surrounding the Cambridge Analytica debacle provide some indication of willpower. But clumsy regulation could deepen the moats of the incumbents, and prevent disruptors from gaining a foothold. We can’t depend on regulators to sufficiently protect us from tech giants right now.

Our Hope On The Inside

The best bet for change will come from the rank and file of these monolithic companies. With the war for talent raging, rock star employees able to have huge impact on products, and compensation costs to keep them around rising, tech giants are vulnerable to the opinions of their own staff. It’s simply too expensive and disjointing to have to recruit new high-skilled workers to replace those that flee.

Google declined to renew a contract with the government after 4000 employees petitioned and a few resigned over Project Maven’s artificial intelligence being used to target lethal drone strikes. Change can even flow across company lines. Many tech giants including Facebook and Airbnb have removed their forced arbitration rules for harassment disputes after Google did the same in response to 20,000 of its employees walking out in protest.

Thousands of Google employees protested the company’s handling of sexual harassment and misconduct allegations on Nov. 1.

Facebook is desperately pushing an internal communications campaign to reassure staffers it’s improving in the wake of damning press reports from the New York Times and others. TechCrunch published an internal memo from Facebook’s outgoing VP of communications Elliot Schrage in which he took the blame for recent issues, encouraged employees to avoid finger-pointing, and COO Sheryl Sandberg tried to reassure employees that “I know this has been a distraction at a time when you’re all working hard to close out the year — and I am sorry.” These internal apologizes could come with much more contrition and real change than those paraded for the public.

And so after years of us relying on these tech workers to build the product we use every day, we must now rely that will save us from them. It’s a weighty responsibility to move their talents where the impact is positive, or commit to standing up against the business imperatives of their employers. We as the public and media must in turn celebrate when they do what’s right for society, even when it reduces value for shareholders. And we must accept that shaping the future for the collective good may be inconvenient for the individual.

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