Facebook Is “Pivoting” to Privacy
Follow James on Twitter @jwangARK
According to a 3,000+ word essay penned this week by CEO Mark Zuckerberg, Facebook is shifting its focus from public content-sharing to private messaging secured by end-to-end encryption.
After the announcement, public debate centered on whether Zuckerberg is being disingenuous or blowing up Facebook’s business model. As illustrated by Ben Thompson, the reality is neither: Facebook is a pragmatic company with a fast-follow culture and will adapt its business models and services to changing norms.
Facebook is not pivoting but it is embracing privacy in adjacent products. Adding end-to-end encryption to its messaging applications will improve Facebook’s standing with privacy advocates and distance it from law enforcement. Nothing is changing, however, in its core Facebook and Instagram newsfeeds, which will continue to deliver targeted ads generating more than $50 billion in annual revenues.
That said, Facebook is making some hard decisions, as it has vowed not to store user data in countries with weak human rights records even if they threaten to ban it. In other words, China may not be in its future plans any longer.
Facebook’s real challenge will not be new privacy features but new revenue models as it attempts to scale its business further. Tencent’s WeChat has evolved from a messaging service to a platform involving e-commerce, payments, and travel. In the West other companies have captured those markets, throwing into question whether or not Facebook has a real role to play in them.
Coinbase Addresses the Controversy Surrounding Its Acquisition of Neutrino
Follow Yassine on Twitter @yassineARK
After a prolonged period of tension, the controversy surrounding Coinbase’s acquisition of Neutrino reached a head this week.
On February 19, Coinbase acquired blockchain analytics company Neutrino to further its “mission of bringing the open financial system to the world.” By analyzing public blockchain data, Neutrino and other such companies aim to identify bad actors and prevent the theft of funds from accounts.
After the announcement, news broke that the Neutrino team had a controversial past. Specifically, the CEO of Neutrino was the former COO of Hacking Team, a company that enabled “governments and corporations to monitor the communications of internet users, decipher their encrypted files and emails, record Skype and other Voice over IP communications, and remotely activate microphones and cameras on target computers.”
Outraged by the news, the crypto community urged users to delete Coinbase, promoting the hashtag #DeleteCoinbase on Twitter. Addressing the negative press, Coinbase responded that it was aware that Neutrino’s co-founders had worked at Hacking Team but did not condone or defend the actions of Hacking Team. It also disclosed that it acquired Neutrino to “migrate away from current providers who were selling client data to outside sources”.
Not anticipating the outrage that its inadvertent sale of client data would cause, Coinbase finally admitted the lapse in its due diligence process and announced that employees formerly affiliated with Hacking Team would transition out of Coinbase.
Demonetization in India Catapulted Digital Wallets into Popularity
Follow Max on Twitter @mfriedrichARK
According to researchers from Northwestern University, digital wallet usage exploded after India demonetized its economy. On November 8, 2016, India announced that it would void as much as 86% of circulating cash, forcing consumers to deposit cash into their bank accounts until they could withdraw new bills. The swap did not take place as smoothly as regulators had planned as the new bills did not appear for two months, leaving Indian consumers and businesses without their most-used transaction medium.
In response, they shifted to a new transaction medium – digital wallets. As shown in the charts below, mobile payment transactions surged after the announcement. Researchers learned that digital wallet adoption was strongest in the areas most affected by the demonetization and that, for most consumers and businesses, the shift was permanent.
Innovation typically gains traction during crises as consumers and businesses look for better, cheaper, and faster solutions to their needs. We believe that the temporary supply-side shock in India has led to the permanent adoption of a new technology.
Source: Crouzet, N., Gupta, A., & Mezzanotti, F. (2018). Shocks and Technology Adoption: Evidence from Electronic Payment Systems.