News aggregator SmartNews raises $230 million, valuing its business at $2 billion

SmartNews, a Tokyo-headquartered news aggregation website and app that’s grown in popularity despite hefty competition from built-in aggregators like Apple News, today announced it has closed on $230 million in Series F funding. The round brings SmartNews’ total raise to date to over $400 million and values the business at $2 billion — or as the company touts in its press release, a “double unicorn.” (Ha!)

The funding included new U.S. investors Princeville Capital and Woodline Partners, as well as JIC Venture Growth Investments, Green Co-Invest Investment, and Yamauchi-No.10 Family Office in Japan. Existing investors participating in this round included ACA Investments and SMBC Venture Capital.

Founded in 2012 in Japan, the company launched to the U.S. in 2014 and expanded its local news footprint early last year. While the app’s content team includes former journalists, machine learning is used to pick which articles are shown to readers to personalize their experience. However, one of the app’s key differentiators is how it works to pop users’ “filter bubbles” through its “News From All Sides” feature, which allows its users to access news from across a range of political perspectives.

It has also developed new products, like its Covid-19 vaccine dashboard and U.S. election dashboard, that provide critical information at a glance. With the additional funds, the company says it plans to develop more features for its U.S. audience — one of its largest, in addition to Japan —  that will focus on consumer health and safety. These will roll out in the next few months and will include features for tracking wildfires and crime and safety reports. It also recently launched a hurricane tracker.

The aggregator’s business model is largely focused on advertising, as the company has said before that 85-80% of Americans aren’t paying to subscribe to news. But SmartNews’ belief is that these news consumers still have a right to access quality information.

In total, SmartNews has relationships with over 3,000 global publishing partners whose content is available through its service on the web and mobile devices.

To generate revenue, the company sells inline ads and video ads, where revenue is shared with publishers. Over 75% of its publishing partners also take advantage of its “SmartView” feature. This is the app’s quick-reading mode, and alternative to something like Google AMP. Here, users can quickly load an article to read, even if they’re offline. The company promises publishers that these mobile-friendly stories, which are marked with a lightning bolt icon in the app, deliver higher engagement — and its algorithm rewards that type of content, bringing them more readers. Among SmartView partners are well-known brands like USA Today, ABC, HuffPost, and others. Currently, over 70% of all SmartNews’ pageviews are coming from SmartView first.

SmartNews’ app has proven to be very sticky, in terms of attracting and keeping users’ attention. The company tells us, citing App Annie July 2021 data, that it sees an average time spent per user per month on U.S. mobile devices that’s higher than Google News or Apple News combined.

Image Credits: App Annie data provided by SmartNews

The company declined to share its monthly active users (MAUs), but had said in 2019 it had grown to 20 million in the U.S. and Japan. Today, it says its U.S. MAUs doubled over the last year.

According to data provided to us by Apptopia, the SmartNews app has seen around 85 million downloads since its October 2014 launch, and 14 million of those took place in the past 365 days. Japan is the largest market for installs, accounting for 59% of lifetime downloads, the firm noted.

“This latest round of funding further affirms the strength of our mission, and fuels our drive to expand our presence and launch features that specifically appeal to users and publishers in the United States,” said SmartNews co-founder and CEO Ken Suzuki. “Our investors both in the U.S. and globally acknowledge the tremendous growth potential and value of SmartNews’s efforts to democratize access to information and create an ecosystem that benefits consumers, publishers, and advertisers,” he added.

The company says the new funds will be used to invest in further U.S. growth and expanding the company’s team. Since its last fundraise in 2019, where it became a unicorn, the company more than doubled its headcount to approximately 500 people globally. it now plans to double its headcount of 100 in the U.S., with additions across engineering, product, and leadership roles.

The Wall Street Journal reports SmartNews is exploring an IPO, but the company declined to comment on this.

The SmartNews app is available on iOS and Android across more than 150 countries worldwide.

PayPal acquires Japan’s Paidy for $2.7B to crack the buy-now, pay-later market in Asia  

PayPal Holdings, the U.S. fintech company, announced an acquisition of Paidy, a Japanese buy now, pay later (BNPL) service platform, for approximately $2.7 billion (300 billion yen), mostly in cash, to enhance its business in Japan.

The transaction completion including the regulatory approval is expected in the fourth quarter of 2021.

After the acquisition, the Japan-based company will continue to operate its existing business and maintain the brand while the leaders, Paidy’s president and CEO Riku Sugie and founder and executive chairman of Paidy Russel Cummer, keep their positions.

Japan is the third largest e-commerce market in the world, and so this is a significant move by PayPal to gain more market share both in the country and the region, specifically in the area of providing deferred payment services as an alternative to credit cards.

PayPal has long played nice with payment cards – users can upload details of their cards to PayPal and use it as a kind of digital wallet to manage how they pay for things online through it – but it got its start actually as a payment platform in itself, where people could pay into and out of PayPal accounts. Paidy is, in that sense, a strengthening of PayPal’s first-party rails, providing a way to ‘own’ that flow of money on its own infrastructure, not involving the card networks.

Paidy is basically a two-sided payments service, acting as a middleman between consumers and merchants in Japan. Using machine learning it determines the creditworthiness of a consumer related to a particular purchase, and then it underwrites those transactions in seconds, guaranteeing payments to merchants. Consumers then make deferred payment to Paidy for those goods.

Paidy’s platform, which offers a monthly payment installment service branded ‘3-Pay’, enables shoppers to make purchases online and then pay for them each month in a consolidated bill at a convenience store or via bank transfer.

“Paidy pioneered buy now, pay later solutions tailored to the Japanese market and quickly grew to become the leading service, developing a sizable two-sided platform of consumers and merchants,” said Peter Kenevan, vice president, head of Japan at Paypal.

Paidy has more than 6 million registered users, and the plan is to integrate PayPal and other digital and QR wallets with Paidy Link to connect further online and offline merchants.

In April 2021, the Japan-based company launched Paidy Link, allowing users to link digital wallets with their Payidy account. PayPal was the first digital wallet partner to integrate with Paidy Link.

“PayPal was a founding partner for Paidy Link and we look forward to looking together to create even more value,” Sugie said in a statement.

“Japan has been a vibrant environment for our growth to date and we’re honored to have our team’s hard work and potential recognized by a global leader. Together with Paypal, we will be able to further achieve our mission of taking the hassle out of shopping,” Cummer said.

After years of inaction against adtech, UK’s ICO calls for browser-level controls to fix ‘cookie fatigue’

In the latest quasi-throwback toward ‘do not track‘, the UK’s data protection chief has come out in favor of a browser- and/or device-level setting to allow Internet users to set “lasting” cookie preferences — suggesting this as a fix for the barrage of consent pop-ups that continues to infest websites in the region.

European web users digesting this development in an otherwise monotonously unchanging regulatory saga, should be forgiven — not only for any sense of déjà vu they may experience — but also for wondering if they haven’t been mocked/gaslit quite enough already where cookie consent is concerned.

Last month, UK digital minister Oliver Dowden took aim at what he dubbed an “endless” parade of cookie pop-ups — suggesting the government is eyeing watering down consent requirements around web tracking as ministers consider how to diverge from European Union data protection standards, post-Brexit. (He’s slated to present the full sweep of the government’s data ‘reform’ plans later this month so watch this space.)

Today the UK’s outgoing information commissioner, Elizabeth Denham, stepped into the fray to urge her counterparts in G7 countries to knock heads together and coalesce around the idea of letting web users express generic privacy preferences at the browser/app/device level, rather than having to do it through pop-ups every time they visit a website.

In a statement announcing “an idea” she will present this week during a virtual meeting of fellow G7 data protection and privacy authorities — less pithily described in the press release as being “on how to improve the current cookie consent mechanism, making web browsing smoother and more business friendly while better protecting personal data” — Denham said: “I often hear people say they are tired of having to engage with so many cookie pop-ups. That fatigue is leading to people giving more personal data than they would like.

“The cookie mechanism is also far from ideal for businesses and other organisations running websites, as it is costly and it can lead to poor user experience. While I expect businesses to comply with current laws, my office is encouraging international collaboration to bring practical solutions in this area.”

“There are nearly two billion websites out there taking account of the world’s privacy preferences. No single country can tackle this issue alone. That is why I am calling on my G7 colleagues to use our convening power. Together we can engage with technology firms and standards organisations to develop a coordinated approach to this challenge,” she added.

Contacted for more on this “idea”, an ICO spokeswoman reshuffled the words thusly: “Instead of trying to effect change through nearly 2 billion websites, the idea is that legislators and regulators could shift their attention to the browsers, applications and devices through which users access the web.

“In place of click-through consent at a website level, users could express lasting, generic privacy preferences through browsers, software applications and device settings – enabling them to set and update preferences at a frequency of their choosing rather than on each website they visit.”

Of course a browser-baked ‘Do not track’ (DNT) signal is not a new idea. It’s around a decade old at this point. Indeed, it could be called the idea that can’t die because it’s never truly lived — as earlier attempts at embedding user privacy preferences into browser settings were scuppered by lack of industry support.

However the approach Denham is advocating, vis-a-vis “lasting” preferences, may in fact be rather different to DNT — given her call for fellow regulators to engage with the tech industry, and its “standards organizations”, and come up with “practical” and “business friendly” solutions to the regional Internet’s cookie pop-up problem.

It’s not clear what consensus — practical or, er, simply pro-industry — might result from this call. If anything.

Indeed, today’s press release may be nothing more than Denham trying to raise her own profile since she’s on the cusp of stepping out of the information commissioner’s chair. (Never waste a good international networking opportunity and all that — her counterparts in the US, Canada, Japan, France, Germany and Italy are scheduled for a virtual natter today and tomorrow where she implies she’ll try to engage them with her big idea).

Her UK replacement, meanwhile, is already lined up. So anything Denham personally champions right now, at the end of her ICO chapter, may have a very brief shelf life — unless she’s set to parachute into a comparable role at another G7 caliber data protection authority.

Nor is Denham the first person to make a revived pitch for a rethink on cookie consent mechanisms — even in recent years.

Last October, for example, a US-centric tech-publisher coalition came out with what they called a Global Privacy Standard (GPC) — aiming to build momentum for a browser-level pro-privacy signal to stop the sale of personal data, geared toward California’s Consumer Privacy Act (CCPA), though pitched as something that could have wider utility for Internet users.

By January this year they announced 40M+ users were making use of a browser or extension that supports GPC — along with a clutch of big name publishers signed up to honor it. But it’s fair to say its global impact so far remains limited. 

More recently, European privacy group noyb published a technical proposal for a European-centric automated browser-level signal that would let regional users configure advanced consent choices — enabling the more granular controls it said would be needed to fully mesh with the EU’s more comprehensive (vs CCPA) legal framework around data protection.

The proposal, for which noyb worked with the Sustainable Computing Lab at the Vienna University of Economics and Business, is called Advanced Data Protection Control (ADPC). And noyb has called on the EU to legislate for such a mechanism — suggesting there’s a window of opportunity as lawmakers there are also keen to find ways to reduce cookie fatigue (a stated aim for the still-in-train reform of the ePrivacy rules, for example).

So there are some concrete examples of what practical, less fatiguing yet still pro-privacy consent mechanisms might look like to lend a little more color to Denham’s ‘idea’ — although her remarks today don’t reference any such existing mechanisms or proposals.

(When we asked the ICO for more details on what she’s advocating for, its spokeswoman didn’t cite any specific technical proposals or implementations, historical or contemporary, either, saying only: “By working together, the G7 data protection authorities could have an outsized impact in stimulating the development of technological solutions to the cookie consent problem.”)

So Denham’s call to the G7 does seem rather low on substance vs profile-raising noise.

In any case, the really big elephant in the room here is the lack of enforcement around cookie consent breaches — including by the ICO.

Add to that, there’s the now very pressing question of how exactly the UK will ‘reform’ domestic law in this area (post-Brexit) — which makes the timing of Denham’s call look, well, interestingly opportune. (And difficult to interpret as anything other than opportunistically opaque at this point.)

The adtech industry will of course be watching developments in the UK with interest — and would surely be cheering from the rooftops if domestic data protection ‘reform’ results in amendments to UK rules that allow the vast majority of websites to avoid having to ask Brits for permission to process their personal data, say by opting them into tracking by default (under the guise of ‘fixing’ cookie friction and cookie fatigue for them).

That would certainly be mission accomplished after all these years of cookie-fatigue-generating-cookie-consent-non-compliance by surveillance capitalism’s industrial data complex.

It’s not yet clear which way the UK government will jump — but eyebrows should raise to read the ICO writing today that it expects compliance with (current) UK law when it has so roundly failed to tackle the adtech industry’s role in cynically sicking up said cookie fatigue by failing to take any action against such systemic breaches.

The bald fact is that the ICO has — for years — avoided tackling adtech abuse of data protection, despite acknowledging publicly that the sector is wildly out of control.

Instead, it has opted for a cringing ‘process of engagement’ (read: appeasement) that has condemned UK Internet users to cookie pop-up hell.

This is why the regulator is being sued for inaction — after it closed a long-standing complaint against the security abuse of people’s data in real-time bidding ad auctions with nothing to show for it… So, yes, you can be forgiven for feeling gaslit by Denham’s call for action on cookie fatigue following the ICO’s repeat inaction on the causes of cookie fatigue…

Not that the ICO is alone on that front, however.

There has been a fairly widespread failure by EU regulators to tackle systematic abuse of the bloc’s data protection rules by the adtech sector — with a number of complaints (such as this one against the IAB Europe’s self-styled ‘transparency and consent framework’) still working, painstakingly, through the various labyrinthine regulatory processes.

France’s CNIL has probably been the most active in this area — last year slapping Amazon and Google with fines of $42M and $120M for dropping tracking cookies without consent, for example. (And before you accuse CNIL of being ‘anti-American’, it has also gone after domestic adtech.)

But elsewhere — notably Ireland, where many adtech giants are regionally headquartered — the lack of enforcement against the sector has allowed for cynical, manipulative and/or meaningless consent pop-ups to proliferate as the dysfunctional ‘norm’, while investigations have failed to progress and EU citizens have been forced to become accustomed, not to regulatory closure (or indeed rapture), but to an existentially endless consent experience that’s now being (re)branded as ‘cookie fatigue’.

Yes, even with the EU’s General Data Protection Regulation (GDPR) coming into application in 2018 and beefing up (in theory) consent standards.

This is why the privacy campaign group noyb is now lodging scores of complaints against cookie consent breaches — to try to force EU regulators to actually enforce the law in this area, even as it also finds time to put up a practical technical proposal that could help shrink cookie fatigue without undermining data protection standards. 

It’s a shining example of action that has yet to inspire the lion’s share of the EU’s actual regulators to act on cookies. The tl;dr is that EU citizens are still waiting for the cookie consent reckoning — even if there is now a bit of high level talk about the need for ‘something to be done’ about all these tedious pop-ups.

The problem is that while GDPR certainly cranked up the legal risk on paper, without proper enforcement it’s just a paper tiger. And the pushing around of lots of paper is very tedious, clearly. 

Most cookie pop-ups you’ll see in the EU are thus essentially privacy theatre; at the very least they’re unnecessarily irritating because they create ongoing friction for web users who must constantly respond to nags for their data (typically to repeatedly try to deny access if they can actually find a ‘reject all’ setting).

But — even worse — many of these pervasive pop-ups are actively undermining the law (as a number of studies have shown) because the vast majority do not meet the legal standard for consent.

So the cookie consent/fatigue narrative is actually a story of faux compliance enabled by an enforcement vacuum that’s now also encouraging the watering down of privacy standards as a result of such much unpunished flouting of the law.

There is a lesson here, surely.

‘Faux consent’ pop-ups that you can easily stumble across when surfing the ‘ad-supported’ Internet in Europe include those failing to provide users with clear information about how their data will be used; or not offering people a free choice to reject tracking without being penalized (such as with no/limited access to the content they’re trying to access), or at least giving the impression that accepting is a requirement to access said content (dark pattern!); and/or otherwise manipulating a person’s choice by making it super simple to accept tracking and far, far, far more tedious to deny.

You can also still sometimes find cookie notices that don’t offer users any choice at all — and just pop up to inform that ‘by continuing to browse you consent to your data being processed’ — which, unless the cookies in question are literally essential for provision of the webpage, is basically illegal. (Europe’s top court made it abundantly clear in 2019 that active consent is a requirement for non-essential cookies.)

Nonetheless, to the untrained eye — and sadly there are a lot of them where cookie consent notices are concerned — it can look like it’s Europe’s data protection law that’s the ass because it seemingly demands all these meaningless ‘consent’ pop-ups, which just gloss over an ongoing background data grab anyway.

The truth is regulators should have slapped down these manipulative dark patterns years ago.

The problem now is that regulatory failure is encouraging political posturing — and, in a twisting double-back throw by the ICO! — regulatory thrusting around the idea that some newfangled mechanism is what’s really needed to remove all this universally inconvenient ‘friction’.

An idea like noyb’s ADPC does indeed look very useful in ironing out the widespread operational wrinkles wrapping the EU’s cookie consent rules. But when it’s the ICO suggesting a quick fix after the regulatory authority has failed so spectacularly over the long duration of complaints around this issue you’ll have to forgive us for being sceptical.

In such a context the notion of ‘cookie fatigue’ looks like it’s being suspiciously trumped up; fixed on as a convenient scapegoat to rechannel consumer frustration with hated online tracking toward high privacy standards — and away from the commercial data-pipes that demand all these intrusive, tedious cookie pop-ups in the first place — whilst neatly aligning with the UK government’s post-Brexit political priorities on ‘data’.

Worse still: The whole farcical consent pantomime — which the adtech industry has aggressively engaged in to try to sustain a privacy-hostile business model in spite of beefed up European privacy laws — could be set to end in genuine tragedy for user rights if standards end up being slashed to appease the law mockers.

The target of regulatory ire and political anger should really be the systematic law-breaking that’s held back privacy-respecting innovation and non-tracking business models — by making it harder for businesses that don’t abuse people’s data to compete.

Governments and regulators should not be trying to dismantle the principle of consent itself. Yet — at least in the UK — that does now look horribly possible.

Laws like GDPR set high standards for consent which — if they were but robustly enforced — could lead to reform of highly problematic practices like behavorial advertising combined with the out-of-control scale of programmatic advertising.

Indeed, we should already be seeing privacy-respecting forms of advertising being the norm, not the alternative — free to scale.

Instead, thanks to widespread inaction against systematic adtech breaches, there has been little incentive for publishers to reform bad practices and end the irritating ‘consent charade’ — which keeps cookie pop-ups mushrooming forth, oftentimes with ridiculously lengthy lists of data-sharing ‘partners’ (i.e. if you do actually click through the dark patterns to try to understand what is this claimed ‘choice’ you’re being offered).

As well as being a criminal waste of web users’ time, we now have the prospect of attention-seeking, politically charged regulators deciding that all this ‘friction’ justifies giving data-mining giants carte blanche to torch user rights — if the intention is to fire up the G7 to send a collect invite to the tech industry to come up with “practical” alternatives to asking people for their consent to track them — and all because authorities like the ICO have been too risk averse to actually defend users’ rights in the first place.

Dowden’s remarks last month suggest the UK government may be preparing to use cookie consent fatigue as convenient cover for watering down domestic data protection standards — at least if it can get away with the switcheroo.

Nothing in the ICO’s statement today suggests it would stand in the way of such a move.

Now that the UK is outside the EU, the UK government has said it believes it has an opportunity to deregulate domestic data protection — although it may find there are legal consequences for domestic businesses if it diverges too far from EU standards.

Denham’s call to the G7 naturally includes a few EU countries (the biggest economies in the bloc) but by targeting this group she’s also seeking to engage regulators further afield — in jurisdictions that currently lack a comprehensive data protection framework. So if the UK moves, cloaked in rhetoric of ‘Global Britain’, to water down its (EU-based) high domestic data protection standards it will be placing downward pressure on international aspirations in this area — as a counterweight to the EU’s geopolitical ambitions to drive global standards up to its level.

The risk, then, is a race to the bottom on privacy standards among Western democracies — at a time when awareness about the importance of online privacy, data protection and information security has actually never been higher.

Furthermore, any UK move to weaken data protection also risks putting pressure on the EU’s own high standards in this area — as the regional trajectory would be down not up. And that could, ultimately, give succour to forces inside the EU that lobby against its commitment to a charter of fundamental rights — by arguing such standards undermine the global competitiveness of European businesses.

So while cookies themselves — or indeed ‘cookie fatigue’ — may seem an irritatingly small concern, the stakes attached to this tug of war around people’s rights over what can happen to their personal data are very high indeed.

H2O Hospitality secures $30M Series C to expedite hotel digital transformation

The pandemic has triggered more demand for contactless and staff-less operations in the hospitality sector, and now H2O Hospitality, the unmanned hotel management company, has closed a $30 million round on the back of that boost. The South Korea and Japan-based startup automates front and backend processes including accommodation reservation, room management and front desk duties, and it will be using the funds to continue expanding its business.

The Series C round (equivalent to about 34 billion won) is being led by Kakao Investment and Korea Development Bank (KDB), Gorilla Private Equity, Intervest and NICE Investment also participated. With Southeast Asia’s joint fund, Kejora-Intervest Growth Fund also joined in the round, it is a sign that H2O Hospitality will be focusing specifically on the Southeast Asian Market. H2O Hospitality has raised $7 million Series B round from Samsung Ventures, Stonebridge Ventures, IMM Investment and Shinhan Capital in February 2020.

H2O Hospitality will expand its business further by adding various types of accommodations in South Korea and Japan in 2021 and 2022 and plans to enter Singapore and Indonesia in 4Q in 2022 in line with its Southeast Asia penetration strategy, according to H2O Hospitality co-founder and CEO John Lee.

“H2O Hospitality is currently speaking with several global hotel chain companies to partner with their digital transformation and operation outside of Korea and Japan,” Lee told TechCrunch.

H2O will invest in R&D to advance its customer channel solutions and contactless check-in systems depending on customer needs of each country in Asia, Lee continued.

“We need optimal system development and customization for each accommodation and situation to lead successful hotel digital transformation even after COVID-19,” Lee said in an email interview.

H2O Hospitality was founded in South Korea 2015 by CEO John Lee, and it has been on something of an acquisition-expansion spree. It entered Japan in 2017, for example, by acquiring several Japanese hospitality management companies. In 2021, H2O acquired two South Korean companies such as the contactless hotel solution company, ImGATE, and a local creator startup, Replace, in order to enhance its technology and ESG competence.

These days, the company operates approximately 7,500 accommodations including hotels, ryokans and guest houses, in Tokyo, Osaka, Seoul, Busan, and Bangkok.

 

H2O Hospitality’s Information and Communications Technology (ICT)-based hotel management system, which enables hotel management to automate and digitize, includes the Channel Management System (CMS), Property Management System (PMS), Room Management System (RMS), and Facility Management System (FMS).

Its integrated hotel management system can reduce hotel management’s fixed operating costs by 50%, while increasing revenue by as much as 20%, according to its statement.

“COVID-19 hit the hospitality industry the most and most of the hotels wanted to decrease their fixed cost level, but it was impossible with their current operational flow,” Lee continued, “They had to go through digital transformation”.

When asked how the pandemic affected H2O as COVID-19 still freezes most of the tourism industry, Lee said H2O’s revenue has been increased by as much as 30% before the pandemic, but that percentage has been dropped to 5-15% post COVID-19. Revenue drivers these days are based around tools it’s built to improve the efficiency of its customers. They include its automated dynamic pricing (ADR) tool and diverse sales channels like online and offline travel agencies in domestic and overseas, he said.

Lee also pointed out that H2O has been onboarding a lot of properties and that has also contributed to H2O’s revenue growth in the last 18 months. H2O was the only company in Asia, he claims, and many property owners have started to get onboard since August 2020, he explained.

“Every single hotel that we onboarded during the pandemic turned around their profits & losses statements and started to recover their financial loss,” Lee said.

There are currently about 16.4 million hotel rooms in the world that generate $570 billion a year, according to Lee. H2O believes that it can digitize all the lodging accommodations in the world as the company’s main goal is not building a hotel brand but allowing hotel owners to operate their properties with better operation, he said.

Lee explained that the current hotel operation process looks a lot like that of “2G phones”, that was at a stage before turning to smartphones, and H2O is turning the overall hotel operation into a “smartphone”.

“This is a very natural transition for the (hospitality) industry as it was also natural for the cellphone users to transit from 2G phone to smartphone,” Lee said.

Unfortunately, the cross-border inbound tourism market has still been stopped for both Korea and Japan even though each domestic market is still pumping demand for the market, Lee mentioned.

“We believe the inbound tourism market will recover within a year as the vaccinations grow for both countries (Korea and Japan),” Lee said.

Managing Director at Kejora-Intervest Growth Fund Jun-seok Kang told TechCrunch: “We knew this new wave for hotel digital transformation trend was coming even before the pandemic; however, COVID-19 definitely expedited the transition period, and we believe H2O will thrive in the transforming hotel market.”

H2O Hospitality secures $30M Series C to expedite hotel digital transformation

The pandemic has triggered more demand for contactless and staff-less operations in the hospitality sector, and now H2O Hospitality, the unmanned hotel management company, has closed a $30 million round on the back of that boost. The South Korea and Japan-based startup automates front and backend processes including accommodation reservation, room management and front desk duties, and it will be using the funds to continue expanding its business.

The Series C round (equivalent to about 34 billion won) is being led by Kakao Investment and Korea Development Bank (KDB), Gorilla Private Equity, Intervest and NICE Investment also participated. With Southeast Asia’s joint fund, Kejora-Intervest Growth Fund also joined in the round, it is a sign that H2O Hospitality will be focusing specifically on the Southeast Asian Market. H2O Hospitality has raised $7 million Series B round from Samsung Ventures, Stonebridge Ventures, IMM Investment and Shinhan Capital in February 2020.

H2O Hospitality will expand its business further by adding various types of accommodations in South Korea and Japan in 2021 and 2022 and plans to enter Singapore and Indonesia in 4Q in 2022 in line with its Southeast Asia penetration strategy, according to H2O Hospitality co-founder and CEO John Lee.

“H2O Hospitality is currently speaking with several global hotel chain companies to partner with their digital transformation and operation outside of Korea and Japan,” Lee told TechCrunch.

H2O will invest in R&D to advance its customer channel solutions and contactless check-in systems depending on customer needs of each country in Asia, Lee continued.

“We need optimal system development and customization for each accommodation and situation to lead successful hotel digital transformation even after COVID-19,” Lee said in an email interview.

H2O Hospitality was founded in South Korea 2015 by CEO John Lee, and it has been on something of an acquisition-expansion spree. It entered Japan in 2017, for example, by acquiring several Japanese hospitality management companies. In 2021, H2O acquired two South Korean companies such as the contactless hotel solution company, ImGATE, and a local creator startup, Replace, in order to enhance its technology and ESG competence.

These days, the company operates approximately 7,500 accommodations including hotels, ryokans and guest houses, in Tokyo, Osaka, Seoul, Busan, and Bangkok.

 

H2O Hospitality’s Information and Communications Technology (ICT)-based hotel management system, which enables hotel management to automate and digitize, includes the Channel Management System (CMS), Property Management System (PMS), Room Management System (RMS), and Facility Management System (FMS).

Its integrated hotel management system can reduce hotel management’s fixed operating costs by 50%, while increasing revenue by as much as 20%, according to its statement.

“COVID-19 hit the hospitality industry the most and most of the hotels wanted to decrease their fixed cost level, but it was impossible with their current operational flow,” Lee continued, “They had to go through digital transformation”.

When asked how the pandemic affected H2O as COVID-19 still freezes most of the tourism industry, Lee said H2O’s revenue has been increased by as much as 30% before the pandemic, but that percentage has been dropped to 5-15% post COVID-19. Revenue drivers these days are based around tools it’s built to improve the efficiency of its customers. They include its automated dynamic pricing (ADR) tool and diverse sales channels like online and offline travel agencies in domestic and overseas, he said.

Lee also pointed out that H2O has been onboarding a lot of properties and that has also contributed to H2O’s revenue growth in the last 18 months. H2O was the only company in Asia, he claims, and many property owners have started to get onboard since August 2020, he explained.

“Every single hotel that we onboarded during the pandemic turned around their profits & losses statements and started to recover their financial loss,” Lee said.

There are currently about 16.4 million hotel rooms in the world that generate $570 billion a year, according to Lee. H2O believes that it can digitize all the lodging accommodations in the world as the company’s main goal is not building a hotel brand but allowing hotel owners to operate their properties with better operation, he said.

Lee explained that the current hotel operation process looks a lot like that of “2G phones”, that was at a stage before turning to smartphones, and H2O is turning the overall hotel operation into a “smartphone”.

“This is a very natural transition for the (hospitality) industry as it was also natural for the cellphone users to transit from 2G phone to smartphone,” Lee said.

Unfortunately, the cross-border inbound tourism market has still been stopped for both Korea and Japan even though each domestic market is still pumping demand for the market, Lee mentioned.

“We believe the inbound tourism market will recover within a year as the vaccinations grow for both countries (Korea and Japan),” Lee said.

Managing Director at Kejora-Intervest Growth Fund Jun-seok Kang told TechCrunch: “We knew this new wave for hotel digital transformation trend was coming even before the pandemic; however, COVID-19 definitely expedited the transition period, and we believe H2O will thrive in the transforming hotel market.”

H2O Hospitality secures $30M Series C to expedite hotel digital transformation

The pandemic has triggered more demand for contactless and staff-less operations in the hospitality sector, and now H2O Hospitality, the unmanned hotel management company, has closed a $30 million round on the back of that boost. The South Korea and Japan-based startup automates front and backend processes including accommodation reservation, room management and front desk duties, and it will be using the funds to continue expanding its business.

The Series C round (equivalent to about 34 billion won) is being led by Kakao Investment and Korea Development Bank (KDB), Gorilla Private Equity, Intervest and NICE Investment also participated. With Southeast Asia’s joint fund, Kejora-Intervest Growth Fund also joined in the round, it is a sign that H2O Hospitality will be focusing specifically on the Southeast Asian Market. H2O Hospitality has raised $7 million Series B round from Samsung Ventures, Stonebridge Ventures, IMM Investment and Shinhan Capital in February 2020.

H2O Hospitality will expand its business further by adding various types of accommodations in South Korea and Japan in 2021 and 2022 and plans to enter Singapore and Indonesia in 4Q in 2022 in line with its Southeast Asia penetration strategy, according to H2O Hospitality co-founder and CEO John Lee.

“H2O Hospitality is currently speaking with several global hotel chain companies to partner with their digital transformation and operation outside of Korea and Japan,” Lee told TechCrunch.

H2O will invest in R&D to advance its customer channel solutions and contactless check-in systems depending on customer needs of each country in Asia, Lee continued.

“We need optimal system development and customization for each accommodation and situation to lead successful hotel digital transformation even after COVID-19,” Lee said in an email interview.

H2O Hospitality was founded in South Korea 2015 by CEO John Lee, and it has been on something of an acquisition-expansion spree. It entered Japan in 2017, for example, by acquiring several Japanese hospitality management companies. In 2021, H2O acquired two South Korean companies such as the contactless hotel solution company, ImGATE, and a local creator startup, Replace, in order to enhance its technology and ESG competence.

These days, the company operates approximately 7,500 accommodations including hotels, ryokans and guest houses, in Tokyo, Osaka, Seoul, Busan, and Bangkok.

 

H2O Hospitality’s Information and Communications Technology (ICT)-based hotel management system, which enables hotel management to automate and digitize, includes the Channel Management System (CMS), Property Management System (PMS), Room Management System (RMS), and Facility Management System (FMS).

Its integrated hotel management system can reduce hotel management’s fixed operating costs by 50%, while increasing revenue by as much as 20%, according to its statement.

“COVID-19 hit the hospitality industry the most and most of the hotels wanted to decrease their fixed cost level, but it was impossible with their current operational flow,” Lee continued, “They had to go through digital transformation”.

When asked how the pandemic affected H2O as COVID-19 still freezes most of the tourism industry, Lee said H2O’s revenue has been increased by as much as 30% before the pandemic, but that percentage has been dropped to 5-15% post COVID-19. Revenue drivers these days are based around tools it’s built to improve the efficiency of its customers. They include its automated dynamic pricing (ADR) tool and diverse sales channels like online and offline travel agencies in domestic and overseas, he said.

Lee also pointed out that H2O has been onboarding a lot of properties and that has also contributed to H2O’s revenue growth in the last 18 months. H2O was the only company in Asia, he claims, and many property owners have started to get onboard since August 2020, he explained.

“Every single hotel that we onboarded during the pandemic turned around their profits & losses statements and started to recover their financial loss,” Lee said.

There are currently about 16.4 million hotel rooms in the world that generate $570 billion a year, according to Lee. H2O believes that it can digitize all the lodging accommodations in the world as the company’s main goal is not building a hotel brand but allowing hotel owners to operate their properties with better operation, he said.

Lee explained that the current hotel operation process looks a lot like that of “2G phones”, that was at a stage before turning to smartphones, and H2O is turning the overall hotel operation into a “smartphone”.

“This is a very natural transition for the (hospitality) industry as it was also natural for the cellphone users to transit from 2G phone to smartphone,” Lee said.

Unfortunately, the cross-border inbound tourism market has still been stopped for both Korea and Japan even though each domestic market is still pumping demand for the market, Lee mentioned.

“We believe the inbound tourism market will recover within a year as the vaccinations grow for both countries (Korea and Japan),” Lee said.

Managing Director at Kejora-Intervest Growth Fund Jun-seok Kang told TechCrunch: “We knew this new wave for hotel digital transformation trend was coming even before the pandemic; however, COVID-19 definitely expedited the transition period, and we believe H2O will thrive in the transforming hotel market.”

Apple’s dangerous path

Hello friends, and welcome back to Week in Review.

Last week, we dove into the truly bizarre machinations of the NFT market. This week, we’re talking about something that’s a little bit more impactful on the current state of the web — Apple’s NeuralHash kerfuffle.

If you’re reading this on the TechCrunch site, you can get this in your inbox from the newsletter page, and follow my tweets @lucasmtny


the big thing

In the past month, Apple did something it generally has done an exceptional job avoiding — the company made what seemed to be an entirely unforced error.

In early August — seemingly out of nowhere** — the company announced that by the end of the year they would be rolling out a technology called NeuralHash that actively scanned the libraries of all iCloud Photos users, seeking out image hashes that matched known images of child sexual abuse material (CSAM). For obvious reasons, the on-device scanning could not be opted out of.

This announcement was not coordinated with other major consumer tech giants, Apple pushed forward on the announcement alone.

Researchers and advocacy groups had almost unilaterally negative feedback for the effort, raising concerns that this could create new abuse channels for actors like governments to detect on-device information that they regarded as objectionable. As my colleague Zach noted in a recent story, “The Electronic Frontier Foundation said this week it had amassed more than 25,000 signatures from consumers. On top of that, close to 100 policy and rights groups, including the American Civil Liberties Union, also called on Apple to abandon plans to roll out the technology.”

(The announcement also reportedly generated some controversy inside of Apple.)

The issue — of course — wasn’t that Apple was looking at find ways that prevented the proliferation of CSAM while making as few device security concessions as possible. The issue was that Apple was unilaterally making a massive choice that would affect billions of customers (while likely pushing competitors towards similar solutions), and was doing so without external public input about possible ramifications or necessary safeguards.

A long story short, over the past month researchers discovered Apple’s NeuralHash wasn’t as air tight as hoped and the company announced Friday that it was delaying the rollout “to take additional time over the coming months to collect input and make improvements before releasing these critically important child safety features.”

Having spent several years in the tech media, I will say that the only reason to release news on a Friday morning ahead of a long weekend is to ensure that the announcement is read and seen by as few people as possible, and it’s clear why they’d want that. It’s a major embarrassment for Apple, and as with any delayed rollout like this, it’s a sign that their internal teams weren’t adequately prepared and lacked the ideological diversity to gauge the scope of the issue that they were tackling. This isn’t really a dig at Apple’s team building this so much as it’s a dig on Apple trying to solve a problem like this inside the Apple Park vacuum while adhering to its annual iOS release schedule.

illustration of key over cloud icon

Image Credits: Bryce Durbin / TechCrunch /

Apple is increasingly looking to make privacy a key selling point for the iOS ecosystem, and as a result of this productization, has pushed development of privacy-centric features towards the same secrecy its surface-level design changes command. In June, Apple announced iCloud+ and raised some eyebrows when they shared that certain new privacy-centric features would only be available to iPhone users who paid for additional subscription services.

You obviously can’t tap public opinion for every product update, but perhaps wide-ranging and trail-blazing security and privacy features should be treated a bit differently than the average product update. Apple’s lack of engagement with research and advocacy groups on NeuralHash was pretty egregious and certainly raises some questions about whether the company fully respects how the choices they make for iOS affect the broader internet.

Delaying the feature’s rollout is a good thing, but let’s all hope they take that time to reflect more broadly as well.

** Though the announcement was a surprise to many, Apple’s development of this feature wasn’t coming completely out of nowhere. Those at the top of Apple likely felt that the winds of global tech regulation might be shifting towards outright bans of some methods of encryption in some of its biggest markets.

Back in October of 2020, then United States AG Bill Barr joined representatives from the UK, New Zealand, Australia, Canada, India and Japan in signing a letter raising major concerns about how implementations of encryption tech posed “significant challenges to public safety, including to highly vulnerable members of our societies like sexually exploited children.” The letter effectively called on tech industry companies to get creative in how they tackled this problem.


other things

Here are the TechCrunch news stories that especially caught my eye this week:

LinkedIn kills Stories
You may be shocked to hear that LinkedIn even had a Stories-like product on their platform, but if you did already know that they were testing Stories, you likely won’t be so surprised to hear that the test didn’t pan out too well. The company announced this week that they’ll be suspending the feature at the end of the month. RIP.

FAA grounds Virgin Galactic over questions about Branson flight
While all appeared to go swimmingly for Richard Branson’s trip to space last month, the FAA has some questions regarding why the flight seemed to unexpectedly veer so far off the cleared route. The FAA is preventing the company from further launches until they find out what the deal is.

Apple buys a classical music streaming service
While Spotify makes news every month or two for spending a massive amount acquiring a popular podcast, Apple seems to have eyes on a different market for Apple Music, announcing this week that they’re bringing the classical music streaming service Primephonic onto the Apple Music team.

TikTok parent company buys a VR startup
It isn’t a huge secret that ByteDance and Facebook have been trying to copy each other’s success at times, but many probably weren’t expecting TikTok’s parent company to wander into the virtual reality game. The Chinese company bought the startup Pico which makes consumer VR headsets for China and enterprise VR products for North American customers.

Twitter tests an anti-abuse ‘Safety Mode’
The same features that make Twitter an incredibly cool product for some users can also make the experience awful for others, a realization that Twitter has seemingly been very slow to make. Their latest solution is more individual user controls, which Twitter is testing out with a new “safety mode” which pairs algorithmic intelligence with new user inputs.


extra things

Some of my favorite reads from our Extra Crunch subscription service this week:

Our favorite startups from YC’s Demo Day, Part 1 
“Y Combinator kicked off its fourth-ever virtual Demo Day today, revealing the first half of its nearly 400-company batch. The presentation, YC’s biggest yet, offers a snapshot into where innovation is heading, from not-so-simple seaweed to a Clearco for creators….”

…Part 2
“…Yesterday, the TechCrunch team covered the first half of this batch, as well as the startups with one-minute pitches that stood out to us. We even podcasted about it! Today, we’re doing it all over again. Here’s our full list of all startups that presented on the record today, and below, you’ll find our votes for the best Y Combinator pitches of Day Two. The ones that, as people who sift through a few hundred pitches a day, made us go ‘oh wait, what’s this?’

All the reasons why you should launch a credit card
“… if your company somehow hasn’t yet found its way to launch a debit or credit card, we have good news: It’s easier than ever to do so and there’s actual money to be made. Just know that if you do, you’ve got plenty of competition and that actual customer usage will probably depend on how sticky your service is and how valuable the rewards are that you offer to your most active users….”


Thanks for reading, and again, if you’re reading this on the TechCrunch site, you can get this in your inbox from the newsletter page, and follow my tweets @lucasmtny

Lucas Matney

Report: India may be next in line to mandate changes to Apple’s in-app payment rules

Summer is still technically in session, but a snowball is slowly developing in the world of apps, and specifically the world of in-app payments. A report in Reuters today says that the Competition Commission of India, the country’s monopoly regulator, will soon be looking at an antitrust suit filed against Apple over how it mandates that app developers use Apple’s own in-app payment system — thereby giving Apple a cut of those payments — when publishers charge users for subscriptions and other items in their apps.

The suit, filed by an Indian non-profit called “Together We Fight Society”, said in a statement to Reuters that it was representing consumer and startup interests in its complaint.

The move would be the latest in what has become a string of challenges from national regulators against app store operators — specifically Apple but also others like Google and WeChat — over how they wield their positions to enforce market practices that critics have argued are anti-competitive. Other countries that have in recent weeks reached settlements, passed laws, or are about to introduce laws include Japan, South Korea, Australia, the U.S. and the European Union.

And in India specifically, the regulator is currently working through a similar investigation as it relates to in-app payments in Android apps, which Google mandates use its proprietary payment system. Google and Android dominate the Indian smartphone market, with the operating system active on 98% of the 520 million devices in use in the country as of the end of 2020.

It will be interesting to watch whether more countries wade in as a result of these developments. Ultimately, it could force app store operators, to avoid further and deeper regulatory scrutiny, to adopt new and more flexible universal policies.

In the meantime, we are seeing changes happen on a country-by-country basis.

Just yesterday, Apple reached a settlement in Japan that will let publishers of “reader” apps (those for using or consuming media like books and news, music, files in the cloud and more) to redirect users to external sites to provide alternatives to Apple’s proprietary in-app payment provision. Although it’s not as seamless as paying within the app, redirecting previously was typically not allowed, and in doing so the publishers can avoid Apple’s cut.

South Korean legislators earlier this week approved a measure that will make it illegal for Apple and Google to make a commission by forcing developers to use their proprietary payment systems.

And last week, Apple also made some movements in the U.S. around allowing alternative forms of payments, but relatively speaking the concessions were somewhat indirect: app publishers can refer to alternative, direct payment options in apps now, but not actually offer them. (Not yet at least.)

Some developers and consumers have been arguing for years that Apple’s strict policies should open up more. Apple however has long said in its defense that it mandates certain developer policies to build better overall user experiences, and for reasons of security. But, as app technology has evolved, and consumer habits have changed, critics believe that this position needs to be reconsidered.

One factor in Apple’s defense in India specifically might be the company’s position in the market. Android absolutely dominates India when it comes to smartphones and mobile services, with Apple actually a very small part of the ecosystem.

As of the end of 2020, it accounted for just 2% of the 520 million smartphones in use in the country, according to figures from Counterpoint Research quoted by Reuters. That figure had doubled in the last five years, but it’s a long way from a majority, or even significant minority.

The antitrust filing in India has yet to be filed formally, but Reuters notes that the wording leans on the fact that anti-competitive practices in payments systems make it less viable for many publishers to exist at all, since the economics simply do not add up:

“The existence of the 30% commission means that some app developers will never make it to the market,” Reuters noted from the filing. “This could also result in consumer harm.”

Reuters notes that the CCI will be reviewing the case in the coming weeks before deciding whether it should run a deeper investigation or dismiss it. It typically does not publish filings during this period.

Apple announces new settlement with Japan allowing developers to link to external websites  

Apple has made a settlement with Japanese regulator that it will allow developers of “reader” apps link to their own website for managing users account. The change goes to effect in early 2022.

This settlement comes after the Japan Fair Trade Commission (JFTC) has forced Apple to make a change its polices on the reader apps, like Netflix, Spotify, Audible and Dropbox, that provide purchased content or content subscriptions for digital magazines, newspapers, books, audio, music, and video.

“We have great respect for the Japan Fair Trade Commission and appreciate the work we’ve done together, which will help developers of reader apps make it easier for users to set up an manage their apps and service, while protecting their privacy and maintaining their trust,” Phill Schiller, who oversees the App Stores at Apple.

Before the change takes into effect next year, Apple will continue to update its guidelines and review process for users of readers app to make sure to be a better marketplace for users and developers alike, according to its statement.

Apple Stores announced last week several updates, which allow developers more flexibility for their customer, and the company also launched the News Partner Program to support local journalists.

Apple will also apply this change globally to all reader apps on the store.

Global lawmakers have been increasingly under scrutiny over the market dominance of Apple and other tech giants. Australia’s Competitions and Consumer Commission is also considering regulations for the digital payment system of Apple, Google and WeChat while South Korea became the first country to curb Apple and Google from imposing their own payment system on in-app purchases.

Apple provides more than 30 million registered developers.

Coral Capital closes third fund with $128M for startups in Japan

Coral Capital, a Tokyo-based venture capital firm, announced today that it has closed its third fund, Coral Capital III, raising $128 million (14 billion yen). Coral Capital’s total assets under management (AUM) is now $275 million.

Limited partners in the vehicle include Mizuho Bank, Mitsubishi Estate, Shinsei Bank, Pavilion Capital, Founders Found, Dai-ichi Life Insurance, GREE, and undisclosed domestic and international institutional investors.

Coral Capital, founded by two partners James Riney and Yohei Sawayama, will continue to invest in seed and early-stage companies in Japan, deploying first checks from $500,000 to $5 million, and follow-on funding, CEO and founding partner Riney told TechCrunch.

“We have made a few large follow-on investments – $20 million into SmartHR and $17 million into Graffer. we also allocated a significant portion of our latest fund for follow-on investment,” Riney said. About 30% of its third fund is from global investors including the US, Asia and Europe, and Coral Capital wants to be a bridge between its Japan-based portfolio companies and global venture capital community for reaching international scale, Riney continued.

What makes the latest fund unique is that it has a longer fund life that can be extended to 14 years, Riney said. “We want our founders to focus on building without the pressure of a VC looking for a quick exit,” Riney told TechCrunch. Its previous two funds had about 10 years of fund life, Riney noted.

Riney and Sawayama, who were co-founders of 500 Startups Japan, launched their first fund in partnership with 500 Startups in February 2016. Coral Capital has set up its $45 million second fund, Capital Fund II under their own brand name, in February 2019.

Coral Capital has invested in over 80 companies in Japan and exited 7 companies so far, according to Riney. It has made a raft of investments including SmartHR, Graffer, GITAI, and Kyoto Fusioneering.

The company will focus on investing digital transformation in areas including SaaS, insurance, fintech, healthcare, deep tech, fusion engineering companies, robotic companies, Riney told TechCrunch.

The Japanese startup ecosystem is striking its stride now compared to 9 years ago, Riney said. As Riney and Sawayama started investing in seed and early-stage startup companies back in 2012, the startup world was a black box in the country, according to Riney. There was less than a billion invested into startups every year and hardly any unicorns in Japan, and there was not enough information available in Japanese on building companies, he said.

Many startups in Japan are now forgoing an early IPO and raising larger amounts in later stage rounds, Riney said.

Japan’s annual startup investment is estimated at $5 billion, with six unicorns including Coral Capital’s portfolio company, up from just about $600 million in 2012. The $5 billion in annual startup investment is nothing when you consider that the U.S. and China attract tens of billions, and even neighboring country Korea attracts about $4 billion and produced Coupang, a decacorn, Riney said.  “We can do better, and we will” and Coral Capital will continue to support and play an important role in driving the ecosystem forward in Japan, Riney added.

Coral Capital also plans to double down on its media outlet, Coral Insights, and recruit staff for building its community. Many startup founders, employees, and investors publish content on their learnings, raising the bar for everyone in the ecosystem and Japan is starting to look a lot more like Silicon Valley, Riney said.