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Facebook acquires the VR game studio behind one of the Rift’s best titles

Posted by | Facebook, Gaming, M&A, Oculus Rift, Sanzaru Games, TC, Virtual reality | No Comments

Facebook is aiming to build on its VR hardware launches of 2019 with an investment in virtual reality software.

Facebook announced today that it has acquired Bay Area VR studio Sanzaru Games, the developer of “Asgard’s Wrath,” considered by many enthusiasts to be one of the Oculus Rift’s best games. Terms of the deal weren’t disclosed, but the studio will continue to operate its offices in the U.S. and Canada with “the vast majority” of employees coming aboard following the acquisition, Facebook says.

The 13-year-old game studio has created a total of four titles for the Oculus Rift, including “Asgard’s Wrath” and “Marvel Powers United VR,” both of which were at least partially funded by Oculus Studios. Sanzaru has also made a number of titles on console and mobile systems, releasing games structured around their own IP alongside licensed titles for properties like Sonic and Spyro.

Following Facebook’s acquisition of Beat Games in November, the Sanzaru Games purchase showcases Facebook’s continued interest in propping up VR game studios and aligning them around their interests while allowing them to operate independently. While Beat Games’ “Beat Saber” was considered a more mass market title, Sanzaru’s “Asgard’s Wrath” represented a play toward courting serious gamers with a lengthier first-person adventure title.

Facebook has already injected billions of dollars into its VR ambitions and, as the company hopes to build out the content ecosystems of hardware it released last year (including the Oculus Quest and Oculus Rift S), there is little to suggest that their rate of investment will slow in the near future.

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Games already are social networks

Posted by | augmented reality, clash of clans, discord, epic games, Facebook, Gaming, High Fidelity, league of legends, Philip Rosedale, Social, Virtual reality, virtual worlds | No Comments

Video games are only getting more popular.

Roughly 2.5 billion people around the world played games last year, double the number of players in 2013. Gaming is a $149 billion industry, growing 7% year over year, with the U.S. as its largest market. In America, the average gamer is 33 years old and 46% of gamers are female, according to the Entertainment Software Association.

(This is part one of a seven-part series about virtual worlds.)

Per Quartz reporter Dan Kopf’s summary of U.S. Department of Labor data:

More people now report playing games on a typical day — 11.4% in 2017 compared to 7.8% in 2003 — and, on days they do play games, they spend more time doing so — about 145 minutes in 2017, compared to 125 in 2003.

Young people are the biggest driver of the trend. From 2003 to 2015, 15-24 year olds spent less than 25 minutes playing games on the average day. From 2015 to 2017, those in that age group dedicated almost 40 minutes a day to games.

Mobile games account for a large part of this dramatic growth, but all major game categories are growing. The console gaming market — the oldest segment and most expensive due to hardware cost — expanded more than 7% last year alone.

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A multiverse, not the metaverse

Posted by | augmented reality, epic games, Facebook, fortnite, Gaming, Minecraft, Mojang, Roblox, Social, Virtual reality, virtual worlds | No Comments

Following web forums, web platforms and mobile apps, we are entering a new stage of social media — the multiverse era — where the virtual worlds of games expand to become mainstream hubs for social interaction and entertainment. In a seven-part Extra Crunch series, we will explore why that is the case and which challenges and opportunities are making it happen.

In 10 years, we will have undergone a paradigm shift in social media and human-computer interaction, moving away from 2D apps centered on posting content toward shared feeds and an era where mixed reality (viewed with lightweight headsets) mixes virtual and physical worlds. But we’re not technologically or culturally ready for that future yet. The “metaverse” of science fiction is not arriving imminently.

Instead, the virtual worlds of multiplayer games — still accessed from phones, tablets, PCs and consoles — are our stepping stones during this next phase.

Understanding this gradual transition helps us reconcile the futuristic visions of many in tech with the reality of how most humans will participate in virtual worlds and how social media impacts society. This transition centers on the merging of gaming and social media and leads to a new model of virtual worlds that are directly connected with our physical world, instead of isolated from it.

Multiverse virtual worlds will come to function almost like new countries in our society, countries that exist in cyberspace rather than physical locations but have complex economic and political systems that interact with the physical world.

Throughout these posts, I make a distinction between the “physical,” “virtual,” and “real” worlds. Our physical world defines tangible existence like in-person interactions and geographic location. The virtual world is that of digital technology and cyberspace: websites, social media, games. The real world is defined by the norms of what we accept as normal and meaningful in society. Laws and finance aren’t physical, but they are universally accepted as concrete aspects of life. I’ll argue here that social media apps are virtual worlds we have accepted as real — unified with normal life rather than separate from it — and that multiverse virtual worlds will make the same crossover.

In fact, because they incentivize small group interactions and accomplishment of collaborative tasks rather than promotion of viral posts, multiverse virtual worlds will bring a healthier era for social media’s societal impact.

The popularity of massive multiplayer online (MMO) gaming is exploding at the same time that the technology to access persistent virtual worlds with high-quality graphics from nearly any device is hitting the market. The rise of Epic Games’ Fortnite since 2017 accelerated interest in MMO games from both consumers who don’t consider themselves gamers and from journalists and investors who hadn’t paid much attention to gaming before.

In the decade ahead, people will come to socialize as much in virtual worlds that evolved from games as they will on platforms like Instagram, Twitter and TikTok. Building things with friends within virtual worlds will become common, and major events within the most popular virtual worlds will become pop culture news stories.

Right now, three-quarters of U.S.-based Facebook users interact with the site on a daily basis; Instagram (63%), Snapchat (61%), YouTube (51%) and Twitter (41%) have similarly penetrated the daily lives of Americans. By comparison, the percentage of people who play a game on any given day increased from just 8% in 2003 to 11% in 2016. Within the next few years, that number will multiply as the virtual worlds within games become more fulfilling social, entertainment and commercial platforms.

As I mentioned in my 2020 media predictions article, Facebook is readying itself for this future and VCs are funding numerous startups that are building toward it, like Klang Games, Darewise Entertainment and Singularity 6. Epic Games joins Roblox and Mojang (the company behind Minecraft) as among the best-positioned large gaming companies to seize this opportunity. Startups are already popping up to provide the middleware for virtual economies as they become larger and more complex, and a more intense wave of such startups will arrive over the next few years to provide that infrastructure as a service.

Over the next few years, there will be a trend: new open-world MMO games that emphasize social functionality that engages users, even if they don’t care much about the mission of the game itself. These new products will target casual gamers wanting to enter the world for merely a few minutes at a time since hardcore gamers are already well-served by game publishers.

Some of these more casual, socializing-oriented MMOs will gain widespread popularity, the economy within and around them will soar and the original gaming scenario that provided a focus on what to do will diminish as content created by users becomes the main attraction.

Let’s explore the forces that underpin this transition. Continue reading through the seven articles in this series (which will be linked below as they are published daily over the next six days):

  1. Games already are social networks
  2. Social apps already are lightweight virtual worlds
  3. What virtual worlds in this transition era look like
  4. Why didn’t this already happen?
  5. How virtual worlds could save society
  6. The rise of virtual economies and their merging with our “real” economy
  7. Competitive landscape of the multiverse

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Shopify joins Facebook’s cryptocurrency Libra Association

Posted by | cryptocurrency, eCommerce, Facebook, Libra, Libra Association, Mobile, payments, Shopify, Social, stablecoin, TC | No Comments

After eBay, Visa, Stripe and other high-profile partners ditched the Facebook -backed cryptocurrency collective, Libra scored a win today with the addition of Shopify. The e-commerce platform will become a member of Libra Association, contributing at least $10 million and operating a node that processes transactions for the Facebook-originated stable coin.

If Libra manages to assuage international regulators’ concerns, which are currently blocking its roll out, Shopify could gain a way to process transactions without paying credit card fees. Libra is designed to move between wallets with zero or nearly-zero fees. That could save money for Shopify and the 1 million merchants running online shops on its platform.

Shopify stressed that helping merchants reduce fees and bringing commerce opportunities to developing nations as reasons it’s joining the Libra Association . “Much of the world’s financial infrastructure was not built to handle the scale and needs of internet commerce,” Shopify writes. Here are the most critical parts of its announcement:

Our mission is to make commerce better for everyone and to do that, we spend a lot of our time thinking about how to make commerce better in parts of the world where money and banking could be far better . . . As a member of the Libra Association, we will work collectively to build a payment network that makes money easier to access and supports merchants and consumers everywhere . . . Our mission has always been to support the entrepreneurial journey of the more than one million merchants on our platform. That means advocating for transparent fees and easy access to capital, and ensuring the security and privacy of our merchants’ customer data. We want to create an infrastructure that empowers more entrepreneurs around the world.

As part of the Libra Association, Shopify will become a validator node operator, gain one vote on the Libra Association council and can earn dividends from interest earned on the Libra reserve in proportion to its investment, which is $10 million at a minimum.

The Libra Association had lost much of its e-commerce expertise when a string of members abandoned the project in October amidst regulatory scrutiny. That included traditional payment processors like Visa and Mastercard, online processors like Stripe and PayPal and marketplaces like eBay. That threw into question whether Libra would have the right partners to make the cryptocurrency accepted in enough places to be useful to people.

As it works to convince regulators Libra is safe, Facebook has been working on its other payment plays, including Facebook Pay and WhatsApp Pay, that rely on traditional bank transfers or credit cards.

Shopify’s CEO Tobi Lutke tweeted that “Shopify spends a lot of time thinking about how to make commerce better in parts of the world where money and banking could be far better. That’s why we decided to become a member of the Libra Association.”

“We are proud to welcome Shopify, Inc. (SHOP) to the Libra Association. As a multinational commerce platform with over one million businesses in approximately 175 countries, Shopify, Inc. brings a wealth of knowledge and expertise to the Libra project,” writes Dante Disparte, the Libra Association’s head of Policy and Communications. “Shopify joins an active group of Libra Association members committed to achieving a safe, transparent, and consumer-friendly implementation of a global payment system that breaks down financial barriers for billions of people.”

A recent hire further tied the two companies together. Facebook’s former lead product manager for its payment platform and billing teams, Kaz Nejatian, in September became Shopify’s VP and GM of money.

Operating an e-commerce store can be difficult or impossible without a traditional bank account that can be tough to attain in some developing countries. Libra could allow these merchants to establish a Libra Wallet where payments are sent instantly, without steep credit card fees, and in theory could be cashed out at local brick-and-mortar establishments or ATMs for local fiat currency.

Shopify’s credit card readers

But for any of that to happen, the Libra Association will have to convince the U.S. government, the EU and more that it won’t help terrorists launder money, hurt people’s privacy or weaken nations’ power in the global financial system. “The French Finance Minister Bruno Le Maire said, “the monetary sovereignty of countries is at stake from a possible privatisation of money . . . we cannot authorise the development of Libra on European soil.”

Libra was initially slated to launch in 2020. We’ll see.

Here’s the full list of Libra Association members:

Current

Facebook’s Calibra, Shopify, PayU, Farfetch, Lyft, Spotify, Uber, Illiad SA, Anchorage, Bison Trails, Coinbase, Xapo, Andreessen Horowitz, Union Square Ventures, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking.

Former members

Vodafone, Visa, Mastercard, Stripe, PayPal, Mercado Pago, Bookings Holdings, eBay.

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WhatsApp hits 2 billion users, up from 1.5 billion 2 years ago

Posted by | Apps, Facebook, instagram, Media, Messenger, Mobile, NSO Group, Vahan, WhatsApp, Will Cathcart, Y Combinator | No Comments

WhatsApp, the most popular messaging app, revealed today just how big it has become. The Facebook -owned app said it has amassed two billion users, up from 1.5 billion it revealed two years ago. It also remains free of ads and does not charge its users any fee.

The announcement today makes WhatsApp only the second app from Facebook to join the two-billion-users club. (Facebook’s marquee app has 2.5 billion users.) In an earnings call in late January, Facebook also noted that that there were 2.26 billion users that opened either Facebook, Messenger, Instagram or WhatsApp each day, up from 2.2 billion last quarter. The family of apps sees 2.89 billion total monthly users, up 9% year-over-year.

WhatsApp, founded 11 years ago and sold to Facebook for $19 billion six years ago, took the opportunity today to reiterate that it is committed to providing end-to-end encryption to its customers all over the globe — a crucial feature lauded by security experts everywhere but something that many governments are increasingly trying to contest.

“Strong encryption acts like an unbreakable digital lock that keeps the information you send over WhatsApp secure, helping protect you from hackers and criminals. Messages are only kept on your phone, and no one in between can read your messages or listen to your calls, not even us. Your private conversations stay between you,” WhatsApp wrote in a blog post.

Among the governments that are attempting to force WhatsApp into dropping encryption is India (which happens to be WhatsApp’s largest market, with 400 million users), Australia and the U.S.

Will Cathcart, the chief executive of WhatsApp, has said in the past that the messaging platform will fight for the privacy of its users. This was on display last October, when WhatsApp filed a suit in federal court accusing Israeli mobile surveillance maker NSO Group of creating an exploit that was used hundreds of times to hack into targets’ phones.

“Strong encryption is a necessity in modern life. We will not compromise on security because that would make people less safe. For even more protection, we work with top security experts, employ industry leading technology to stop misuse as well as provide controls and ways to report issues — without sacrificing privacy,” the company said today.

The two-billion milestone is a big feat for WhatsApp, which gained immense popularity without any marketing in developing markets such as India, where calls and texts were fairly expensive for most people. There is no app in India today that has a greater penetration than WhatsApp, for instance.

But even as WhatsApp has amassed all the users in the world, it is still struggling to make any substantial contribution to Facebook’s bottom line. In recent years, WhatsApp has introduced tools for businesses to connect with their customers. But something even more interesting has happened in the meantime.

Scores of startups in developing markets today are building businesses around WhatsApp. Vahan, a Y Combinator-backed startup, uses WhatsApp to help delivery startups find blue-collar workers. Digi-Prex, a Hyderabad-based startup, runs an eponymous online subscription pharmacy to serve patients with chronic diseases. Patients share their prescription with Digi-Prex through WhatsApp and the startup’s workers then deliver the medication to them on a recurring cycle.

I think the next justdial will be built on top of @whatsapp … especially for India (or other markets where WhatsApp is big)

anyone working on this?

— miten sampat (@miten) February 11, 2020

But this immense popularity has also created other challenges for WhatsApp. The platform has been used to spread false information that has resulted in gruesome fatalities in real world. WhatsApp has rushed to make product changes and run campaigns to educate users, but it’s a long battle.

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Twitter-backed ShareChat eyes fantasy sports in India

Posted by | Apps, Asia, dream11, Facebook, Gaming, Hotstar, india, sequoia capital, sharechat, Social, Twitter, Xiaomi | No Comments

The growing market of fantasy sports in India may soon have a new and odd entrant: ShareChat .

The local social networking app, which in August last year raised $100 million in a financing round led by Twitter, has developed a fantasy sports app and has been quietly testing it for six months, two sources familiar with the matter told TechCrunch.

ShareChat’s fantasy sports app, called Jeet11, allows betting on cricket and football matches and has already amassed more than 120,000 registered users, the sources said. The app, or its website, does not disclose its association with ShareChat.

A ShareChat spokesperson confirmed the existence of the app and said the startup was testing the product.

Jeet11 is not available for download on the Google Play Store due to the Android maker’s guidelines on betting apps, so ShareChat has been distributing it through Xiaomi’s GetApps app store and the Jeet11 website, and has been promoting it on Instagram. It is also available as a web app.

Fantasy sports, a quite popular business in many markets, has gained some traction in India in recent years. Dream11, backed by gaming giant Tencent, claimed to have more than 65 million users early last year. It has raised about $100 million to date and is already valued north of $1 billion.

Bangalore-based MPL, which counts Sequoia Capital India as an investor and has raised more than $40 million, appointed Virat Kohli, the captain of the Indian cricket team, as its brand ambassador last year.

In the last two years, scores of startups have emerged to grab a slice of the market, and the vast majority of them are focused on cricket. Cricket is the most popular sport in India, just ask Disney’s Hotstar, which claimed to have more than 100 million daily active users during the cricket season last year.

Or ask Facebook, which unsuccessfully bid $600 million to secure streaming rights of the IPL cricket tournament. It has since grabbed rights to some cricket content and appointed the Hotstar chief as its India head.

So it comes as no surprise that many sports betting apps have signed cricketers as their brand ambassador. Hala-Play has roped in Hardik Pandya and Krunal Pandya, while Chennai-based Fantain Sports has appointed Suresh Raina.

But despite the growing popularity of fantasy sports apps, where users pick players and bet real money on their performances, the niche is still sketchy in many markets that consider it betting. In fact, Twitter itself restricts promotion of fantasy sports services in many markets across the world.

In India, too, several states, including Assam, Arunachal Pradesh, Odisha, Sikkim and Telangana, have banned fantasy sports betting. Jeet11 currently requires users to confirm that they don’t live in any of the restricted states before signing up for the service.

“It doesn’t help matters either that the fantasy sports business’ attempts at legitimacy involve trying to be seen as video games — a cursory glance at a speakers panel for any Indian video game developer event is evidence of this — rather than riding on its own merits,” said Rishi Alwani, a long-time analyst of Indian gaming market and publisher of news outlet the Mako Reactor.

An executive who works at one of the top fantasy sports startups in India, speaking on the condition of anonymity, said that despite handing out cash rewards to thousands of users each day, it is still challenging to retain customers after the conclusion of any popular cricket tournament. “And that’s after you have somehow convinced them to visit your website or download the app,” he said.

For ShareChat, which has been exploring ways to monetize its 60 million-plus users and posted a loss of about $58 million on no revenue in the financial year ending March 31, that’s anything but music to the ears. In recent months, the startup, which serves users in more than a dozen local languages, has been experimenting with ads.

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Netflix begins streaming in AV1 on Android

Posted by | alliance for open media, Amazon, Android, Apple, Apps, Facebook, Google, Media, Microsoft, Mobile, Netflix, nvidia, Videolan | No Comments

Netflix announced this week that it has started to stream titles in AV1 on Android in what could significantly help the two-year-old media codec gain wider adoption.

The world’s biggest streaming giant said on Wednesday that by switching from Google’s VP9 — which it previously used on Android — to AV1, its compression efficiency has gone up by 20%.

At the moment, only “select titles” are available to stream in AV1 for subscribers “who wish to reduce their cellular data usage by enabling the ‘Save Data’ feature,” the American firm said.

Netflix hasn’t shared much about the benefit AV1 will provide to customers, but the new media codec’s acceptance nonetheless sends a message by itself.

Tech giants, including Google, have spent years developing and improving media codecs as consumption of data skyrocketed and low-cost devices began to sell like hotcakes. But they just can’t seem to settle on one media codec and universally support it.

Think of Safari and YouTube, for instance. You can’t stream YouTube videos in 4K resolution on Safari, because Apple’s browser does not support Google’s VP9. And Google does not support HEVC for 4K videos on YouTube.

AV1 is supposed to be the savior media codec that gets universal support. It’s royalty-free and it works atop of open-source dav1d decoder that has been built by VideoLAN, best known for its widely popular media player VLC and FFmpeg communities. It is sponsored by the Alliance for Open Media.

Who are the members of Alliance for Open Media? Nearly all the big guys: Apple, Google, Amazon, Netflix, Nvidia, ARM, Facebook, Microsoft, Mozilla, Samsung and Tencent, among others.

But that’s not to say there aren’t roadblocks in the adoption of AV1. Compared to HEVC — the format that AV1 is supposed to replace in popularity — encoding in AV1 was noticeably slower a year ago, as per some benchmark tests.

Adoption of AV1 by various browsers, according to analytics firm StatCounter. Safari is yet to support it.

Netflix’s announcement suggests that things have improved. The streaming giant said its goal is to support AV1 on all of its platforms. “In the spirit of making AV1 widely available, we are sponsoring an open-source effort to optimize 10-bit performance further and make these gains available to all,” it said in a blog post.

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Messenger Kids adds expanded parental controls, details how much kids’ data Facebook collects

Posted by | Apps, chat, children, Facebook, kids, messaging, Messenger, Messenger Kids, Mobile, privacy, Security, Social | No Comments

Facebook’s messaging app for families with children, Messenger Kids, is being updated today with new tools and features to give parents more oversight and control over their kids’ chats. Now, parents will be able to see who a child is chatting with and how often, view recent photos and videos sent through chat, access the child’s reported and block list, remotely log out of the app on other devices and download the child’s chats, images and videos, both sent and received. The company is also introducing a new blocking mechanism and has updated the app’s Privacy Policy to include additional information about data collection, use and deletion practices.

The Messenger Kids app was first introduced in late 2017 as a way to give kids a way to message friends and family with parental oversight. It arrived at a time when kids were already embracing messaging — but were often doing so on less controlled platforms, like Kik, which attracted predators. Messenger Kids instead allows the child’s parents to determine who the child can chat with and when, through built-in parental controls.

In our household, for example, it became a convenient tool for chatting with relatives, like grandparents, aunts, uncles and cousins, as well as a few trusted friends, whose parents I knew well.

But when it came time to review the chats, a lot of scrolling back was involved.

The new Messenger Kids features will help with the oversight aspects for those parents who allow their kids to online chat. That decision, of course, is a personal one. Some parents don’t want their kids to have smartphones and outright ban apps, particularly ones that allow interactions. Others, myself included, believe that teaching kids to navigate the online world is part of your parental responsibility. And despite Facebook’s reputation, there aren’t other chat apps offering these sort of parental controls — or the convenience of being able to add everyone in your family to a child’s chat list with ease. (After all, grandma and grandpa are already on Facebook and Messenger, but getting them to download new apps remains difficult.)

In the updated app, parents will be able to see who a child has been chatting with, and whether that’s text or video chat, over the past 30 days. This can save parents’ time, as they may not feel the need to review chat with trusted family members, for instance, so can redirect their focus and energy on reviewing the chats with friends. A log of images will help parents to see if all images and videos being sent and received are appropriate, and remove them or block them if not.

Parents also can now see if a child has blocked or reported a user in the app, or if they’ve unblocked them. This could be useful for identifying those problematic friends — the kind who sometimes cause trouble, but are later forgiven, then unblocked. (Anyone who’s dealt with tween-age drama can attest to the fact that there’s one in every group!) By gaining access to this information, parents can sit down with the child to talk about when to take that step and block someone, and when a disagreement with a friend can instead be worked out. These are decisions that a child will have to make on their own one day, so being able to use this as a teaching moment is useful.

With the update, unblocking is supported and parents are still able to review chats with blocked contacts. However, blocked contacts will remain visible to one another and will stay in shared group chats. They just aren’t able to message one-on-one. Kids are warned if they return to or are added to chats with blocked contacts. (If parents want a full block, they can just remove the blocked contact from the child’s contact list, as before.)

Remote device logout lets you make sure the child is logged out of Messenger Kids on devices you can’t physically access and control — like a misplaced phone. And the option to download the child’s information, similar to Facebook’s feature, lets you download a copy of everything — messages, images and videos. This could be a way to preserve their chat history when the child outgrows the app.

The Messenger Kids’ privacy policy was updated, as well, to better detail the information being collected. The app also attempts to explain this in plain language to the kids, using cute photos. In reality, parents should read the policy for themselves and make a decision, accordingly.

The app collects a lot of information — including names, profile photos, demographic details (gender and birthday), a child’s connection to parents, contacts’ information (like most frequent contacts), app usage information, device attributes and unique identifiers, data from device settings (like time zones or access to camera and photos), network information and information provided from things like bug reports or feedback/contact forms.

To some extent, this information is needed to help the app properly operate or to alert parents about a child’s activities. But the policy includes less transparent language about the collected information being used to “evaluate, troubleshoot, improve, create, and develop our products” or being shared with other Facebook Companies. There’s a lot of wiggle room there for extensive data collection on Facebook’s part. Service providers offering technical infrastructure and support, like a content delivery network or customer service, may also gain access to collected information, but must adhere to “strict data confidentiality and security obligations,” the policy claims, without offering further details on what those are.

Despite its lengthiness, the policy leaves plenty of room for Facebook to collect private information and share it. If you have a Facebook account, you’ve already agreed to this sort of “deal with the devil” for yourself, in order to benefit from Facebook’s free service. But parents need to strongly consider if they’re comfortable making the same decision for their children.

The policy also describes things Facebook plans to roll out later, when Messenger Kids is updated to support older kids. As kids enter tween to teen years, parents may want to loosen the reigns a bit. The new policy will cover those changes, as well.

It’s unfortunate that the easiest tool, and the one with the best parental controls, is coming from Facebook. The market is ripe for a disruptor in the kids’ space, but there’s not enough money in that, apparently. Facebook, of course, sees the potential of getting kids hooked early and can invest in a product that isn’t directly monetized. Few companies can afford to do this, but Apple would be the best to take Facebook on in this area.

Apple’s iMessage is a large, secure and private platform — but it lacks these advanced parental controls, as well as the other bells and whistles (like built-in AR filters) that make the Messenger Kids app fun. Critically, it doesn’t work across non-Apple devices, which will always be a limiter when it comes to finding an app that the extended family can use together.

To be clear, there is no way to stop Facebook from vacuuming up the child’s information except to delete the child’s Messenger Kids Account through the Facebook Help Center. So consider your choices wisely.

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Facebook hits 2.5B users in Q4 but shares sink from slow profits

Posted by | Advertising Tech, Apps, Earnings, Facebook, Facebook Earnings, Facebook Earnings Q4 2019, Facebook Family of Apps, instagram, Mobile, Social, TC | No Comments

Facebook beat Wall Street estimates in Q4 but slowing profit growth beat up the share price. Facebook reached 2.5 billion monthly users, up 2%, from 2.45 billion in Q3 2019 when it grew 1.65%, and it now has 1.66 billion daily active users, up 2.4% from 1.62 billion last quarter when it grew 2%. Facebook brought in $21.08 billion in revenue, up 25% year-over-year, with $2.56 in earnings per share.

But net income was just $7.3 billion, up only 7% year-over-year compared to 61% growth over 2018. Meanwhile, operating margins fell from 45% over 2018 to 34% for 2019. Expenses grew to $12.2 billion for Q4 2019, up a whopping 34% from Q4 2018. For the year, Facebook’s $46 billion in expenses are up 51% vs 2018. One big source of those expenses? Headcount grew 26% year-over-year to 44,942, and Facebook now has over 1000 engineers working on privacy.

While Facebook’s user base keeps growing rather steadily, it’s having trouble squeezing more and more cash out of them with as much efficiency.

Facebook’s Q4 2019 earnings beat expectations compared to Zack’s consensus estimates of $20.87 billion in revenue and $2.51 earnings per share. Facebook shares fell over 7% in after-hours trading following the earnings announcement after closing up 2.5% at a peak $223.23 today. Still, Facebook remains near its previous share price high before this month.

Facebook CEO Mark Zuckerberg had previously warned that addressing hate speech, election interference, and other content moderation and safety issues would be costly. Still, expenses grew and profits shrunk faster than Wall Street seems to have expected. Facebook will have to hope its promise of using scalable AI to handle more of these jobs comes to fruition soon.

But some might see today as the proper reckoning for Facebook — penance for years of neglecting safety in favor of growth. Facebook’s CFO David Wehner confirms it has also just agreed to pay $550 million in a settlement over its violation of the Illinois Biometric Information Privacy Act. The class action suit stems from Facebook collecting users’ facial recognition data to power its Tag Suggestions feature that recommends friends tag you in photos in which you appear. The record-breaking settlement still falls far short of the $35 billion in potential penalties Facebook could have received.

Facebook’s executives are apparently bullish on its value despite the share price being at a peak, as today Facebook announced plans to grow its share-repurchase program by $10 billion, adding to its previous authorization of buying back up to $24 billion worth.

Facebook managed to add 1 million daily users in the U.S. & Canada region where it earns the most money after returning to growth there last quarter following a year of slow or no growth. Facebook’s stickiness, or daily to monthly active user ratio remained at 66% amidst competition from apps like TikTok and a resurgent Snapchat.

Masking The Shift To Instagram

Facebook notes that there are now 2.26 billion users that open either Facebook, Messenger, Instagram, or WhatsApp each day, up from 2.2 billion last quarter. The family of apps sees 2.89 billion total monthly users, up 9% year-over-year.

Facebook released a new stat with this earnings report: Family Average Revenue Per Person. That’s essentially the company’s total revenue divided by total users on Facebook, Messenger, Instagram, and WhatsApp. Clearly, the company is trying to use Instagram’s growing ad revenue to make the rest of the company look stronger. This might help mask changes in the Facebook app’s own revenue as teens look to more youthful content feeds. Wehner confirmed the company will cease sharing Facebook-only stats in favor of Family Of Apps stats in late 2020.

Sadly Facebook’s isn’t calling this metric FARPP

Earnings Call Highlights

Zuckerberg stressed Facebook’s need to stay focused on addressing social issues and consequences of the company’s growth during the earnings call. He said Facebook will continue to make its apps more private and secure.

As for product updates, Zuckerberg seized on opportunities in commerce. Facebook is building out WhatsApp Pay, and he says “I expect this to start rolling out in a number of countries and for us to make a lot of progress here in the next six months.” 140 million small businesses now use its tools. People bought almost $5 million in content on the Oculus Store on Christmas Day, which Zuckerberg called a milestone. He says Facebook’s Spark AR platform is most used of its kind by developers, with hundreds of millions of people experiencing face filters built with it.

Regarding plans to integrate the family’s chat interfaces, Zuckerberg says Messenger, Instagram, and WhatsApp will retain their brands. He also noted they’re already quite integrated on the backend…which could be an attempt to persuade regulators it might be difficult to break up the company.

For guidance, Wehner said “we expect our year-over-year total reported revenue growth rate in Q1 to decelerate by low-to-mid single digit percentage points as compared to our Q4 growth rate. “Factors driving this deceleration include the maturity of our business, as well as the increasing impact from global privacy regulation and other ad targeting related headwinds.”

Wehner says to expect that the worst of these privacy headwinds are still to come due to regulatory initiatives like GDPR and CCPA, mobile operating systems and browser providers like Apple and Google limiting access to ad targeting singals, and Facebook’s own product changes like the new way to disconnect off-Facebook data from your acccount.

On Facebook’s perception issues, Zuckerberg said “We’re also focused on communicating more clearly what we stand for. One critique of our approach for much of the last decade was that, because we wanted to be liked, we didn’t always communicate our views as clearly because we were worried about offending people. So this led to some positive but shallow sentiments towards us and towards the company. And my goal for this next decade isn’t to be liked, but to be understood, because in order to be trusted, people need to know what you stand for.”

Building Despite Scrutiny

The business aside, Facebook had another tough quarter under the scrutiny of journalists and regulators. Democratic presidential candidates have railed against Zuckerberg’s decision to continuing allowing misinformation in political ads. The company dropped out of the top 10 places to work, and pledged $130 million to fund an Oversight Board for its content policies.

The CEO was grilled on Capitol Hill about Facebook’s cryptocurrency Libra that seems stuck in its tracks as major partners like Visa and Stripe dropped out. Facebook took heat for how its treats content moderators and how it tried to cut off competitors from its developer platform. The FTC continued its anti-trust investigation and weighed an injunction that would halt Facebook intermingling its messaging app infrastructure.

But those headwinds didn’t stop Facebook’s march forward. Its four main apps took the top four spots amongst the most downloaded apps of the 2010s. It moved deeper into hardware sales with its new Portal TV attachable camera. It acquired gaming companies like Playgiga and the studio behind VR hit Beat Saber, while signing exclusive game streaming deals with influencers like Disguised Toast. It launched Facebook News, Facebook Pay, its dating feature in the US, and it tested a meme-making app called Whale.

Facebook’s share price remains near an all-time high despite today’s tumble. While the world may be increasingly uncomfortable with Facebook’s access to private data, there’s no debate about how incredibly valuable that data is.

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US regulators need to catch up with Europe on fintech innovation 

Posted by | Adyen, Amazon, Android, Apple, Chime, Column, Consumer Financial Protection Bureau, eqt ventures, Facebook, Finance, Google, Kabbage, Libra, monzo, Open Banking, Policy, Revolut, TC, Uber, Venmo, visa | No Comments
Alastair Mitchell
Contributor

Alastair Mitchell is a partner at multi-stage VC fund EQT Ventures and the fund’s B2B sales, marketing and SaaS expert. Ali also focuses on helping US companies scale into Europe and vice versa.
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Fintech companies are fundamentally changing how the financial services ecosystem operates, giving consumers powerful tools to help with savings, budgeting, investing, insurance, electronic payments and many other offerings. This industry is growing rapidly, filling gaps where traditional banks and financial institutions have failed to meet customer needs.

Yet progress has been uneven. Notably, consumer fintech adoption in the United States lags well behind much of Europe, where forward-thinking regulation has sparked an outpouring of innovation in digital banking services — as well as the backend infrastructure onto which products are built and operated.

That might seem counterintuitive, as regulation is often blamed for stifling innovation. Instead, European regulators have focused on reducing barriers to fintech growth rather than protecting the status quo. For example, the U.K.’s Open Banking regulation requires the country’s nine big high-street banks to share customer data with authorized fintech providers.

The EU’s PSD2 (Payment Services Directive 2) obliges banks to create application programming interfaces (APIs) and related tools that let customers share data with third parties. This creates standards that level the playing field and nurture fintech innovation. And the U.K.’s Financial Conduct Authority supports new fintech entrants by running a “sandbox” for software testing that helps speed new products into service.

Regulations, if implemented effectively as demonstrated by those in Europe, will lead to a net positive to consumers. While it is inevitable that regulations will come, if fintech entrepreneurs take the action to engage early and often with regulators, it will ensure that the regulations put in place support innovation and ultimately benefit the consumer.

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