Facebook’s News Tab – Is it a Win or a Disaster in the Making?–Futurum Tech Podcast

This week’s episode of the Futurum Tech Podcast took a main dive into Facebook and its ongoing travails on the political, business, and news curation fronts. In our Fast Fives, we talked about the new RCS rollout across U.S. carriers which could really create an iMessage experience for Android users. We discussed NVIDIA’s Smart Everything Revolution splash at MWCA 2019, the latest breakthrough needed to make 5G mainstream from Ericsson’s perspective, and Qualcomm’s focus on FWA at the 5G Summit in Barcelona and much more.

Our Main Dive

What is going on at Facebook and does it does it bode for its long-term business model? And can we put a value on news feeds curated by journalists? We talk about Zuck’s testimony this week, and other interesting things about the technology giant’s behavior.

Our Fast Five

We dig into this week’s interesting and noteworthy news in the Fast Five segment of our Podcast:

Tech Bites

In the Tech Bites part of our Futurum Tech News Podcast, we talked about the news that focused on Softbank and its investment strategies as it relates to the company’s Vision Fund. How will Softbank navigate the fallout from the WeWork IPO implosion and ongoing losses at Uber?

Crystal Ball: Our Predictions and Guesses

In our Crystal Ball conversation we discuss Facebook’s news tab play. Is it a win or disaster in the making? Who gets paid and how? Is it fostering deeper divisions and split realities for Facebook users? Does Zuckerberg even understand what his platform actually is (as opposed to what he claims it is)?

Transcript:

Olivier Blanchard: Welcome to this week’s edition of FTP, the Futurum Tech Podcast. Hi. I’m Olivier Blanchard, Senior Analyst with Futurum Research, and joining me today is my colleague Ron Westfall. And we’re going to start today’s show with a discussion about Facebook’s new news tab, then we’ll share a few of our favorite tech stories of the week in our Fast Five segment, followed by Tech Bites, in which we highlight one of the biggest tech related fails of the week, and we will end the show as usual with our Crystal Ball. As always, before we begin, it goes without saying that this show is intended for informational purposes only, and no advice or insights provided here, no matter how great they sound, should be taken as investment advice. All right, so now that’s out of the way, Ron, how are you today? How’s this week been? I think we’ve all been on the road and publishing reports and all kinds of stuff, so before we actually get into the main topic I just wanted to see how you do, and I haven’t talked to you in like a week.

Ron Westfall: Right on. You hit the nail on the head right there Olivier. In fact, I was at Mobile World Congress Americas in Los Angeles. So I got to do the show and catch important keynotes I’d like to highlight in our conversation today. I’ll start off with that note.

Olivier Blanchard: Okay. Excellent. So I just got back from Europe. I went to Barcelona for the 5G Summit that was put on by Qualcomm. It kind of parallel tracks. You’ve got the Mobile World and I’ve got the 5G Summit and I think these are pretty intertwined, and I’ll definitely be talking about that as well in our Fast Five segments. So without further adieu, let’s talk about Facebook. Facebook is in the news this week for… On the one hand, Mark Zuckerberg was on Capitol Hill testifying and sparring with a few lawmakers, so maybe we can inject a little bit of that into our discussion, but the main thing that caught my eye in Facebook’s kind of forward or backwards evolution, is now trying to add a more robust or more specific news feed feature to the Facebook experience.

Essentially, it’s like a news tab. I guess it got deployed this week, or today, to a few thousand people in kind of like a beta test, and it may become available for other users in the future. And the main idea is to have a dedicated news tab where Facebook users can just essentially go in and customize the types of news and news sources they want, and essentially move the type of news tab service or feature they might already have on their phone or their computer, and move it into the Facebook ecosystem, and essentially allow Facebook to become the portal for that news feed, so it lives inside, as opposed to outside of it. So there’s some positives and negatives to that, but before I go into it I just want to get a reaction from you, kind of like a first reaction of, what do you think of this? Where is this going? Is this good, bad, something in the middle? Go for it.

Ron Westfall: Right on. In fact, I will supply a two-prong perspective. I’ll start, first of all, on Mark Zuckerberg’s testimony at the Hill. As we know, he was testifying in front of the House Financial Services Committee, and got grilling from representatives, such as Maxine Waters, and it did make for some interesting fireworks in the sense that, here is Facebook, a Silicon Valley sweetheart, getting basically a slap down from many of the committee members who are a part of the Democratic Party. That included everything from enabling unfettered speech on the platform, and to whether or not Facebook needs to get into vetting political advertising. The upshot was Ms. Waters was accusing Facebook of, basically, suppressing freedom of speech, because of their ongoing policies, and that is to the detriment of the African American community and that it can actually end up suppressing votes.

And so this has been a challenging week for Facebook. In fact, it’s more interesting if Facebook is not in the news in any week of the calendar year. So that has certainly set of more Facebook headlines. In the meantime, related to what was going on at Capitol Hill. Yes, Facebook has initiated its news tab, and I think its impact will be limited, at least in the near time, to those who use Facebook as their daily portal. Like, once upon a time AOL was the portal for many people, not just getting that information-

Olivier Blanchard: I’m glad you bring that up, actually, because that’s exactly what came to mind when I first saw it. It’s like, wow, is Facebook trying to become the new AOL?

Ron Westfall: Right on. The parallel is there, and in essence already doing that. What is actually helpful, when you’re looking at it from a strength/weakness perspective. On the strength side, they have enlisted some impressive journalist sources, including the Wall Street Journal, Washington Post, The LA Times, The Chicago Tribune, and other top-tier publications. So at least Facebook is getting off on the right foot in terms of who they’re collaborating with and that will certainly help those who are using Facebook for their across the board portal.

Olivier Blanchard: Right. And I kind of agree, but everything that comes from Facebook now is sort of suspicious to me. I hate to be that way, and I’m not a conspiracy theorist, and I’m not a cynic, but behavior is behavior. There’s one thing that kind of bothers me about this. Actually, several things. Going back to some of the strategic narratives that Facebook has introduced over the last year, I just kept going back to this notion that Mark Zuckerberg wants to make Facebook more about closed gardens, about private groups as opposed to this big open forum. There’s this notion, at least in my mind, that if you switch the platform, or move it towards more private groups, towards more customization. First of all, you move a lot of content off the public square, where it can essentially hide and fester.

You don’t necessarily see what Facebook is really about, or what other people see. You only see what you see. So there’s a lot of potential for disinformation and for toxic types of content and conversations, and everything that ensues, within Facebook. It just becomes a lot more opaque.

The rationale for it, based on Facebook’s perspective, is that it’s really all about the user, and it’s about customization. So moving public conversations into private groups, or private rooms, is really about minimizing conflict and creating more custom, personal experiences. This news feed idea, to me, seems to fit into that fairly well.

I’m looking at Facebook’s press release right now, and it says, and I quote, “As we talked to people and publishers, we identified key features to make Facebook News valuable. Number one is Today’s Stories, chosen by a team of journalists to catch up on the news throughout the day.” First of all, “chosen by a team of journalists,” is very vague. What journalists? Chosen how? It’s not even an algorithm play, so I’m a little bit confused about what that means.

“Second, personalization based on the news you read, share and follow. So you can find new interests and topics, and Facebook News is fresh and interesting every time you open it.” So essentially, this is the algorithm piece that’s going to base the news that you see on the news that you already read, share and follow, which is what Facebook already does. But what it tends to do is show you the same type of content that you already interact with, which means it’s going to reinforce certain points of view, certain perspectives, even certain sources, to the detriment of a richer kind of approach to news.

“Number three, Topic Sections. To dive deeper into business, entertainment, health, science, tech and sports.” That’s fine. That’s just a normal feature of any kind of news feature or news tab. The fourth item is your subscriptions. A section for people who have linked their paid news subscriptions to their Facebook account is great. It makes a lot of sense. And then controls to hide articles, topics and publishers that you don’t want to see. Which, again, I understand there’s value to that.

There are a lot of publishers I don’t want to see, but at the same time it can be kind of bad, because depending on, I guess… Even just politically, what side of the aisle, assuming there’s a left aisle and a right aisle politically, you might completely self-censor, or essentially censor the other side and only consume news from one side, and not get a full picture. Given Facebook’s role in this division of perspective and this, kind of, split reality that we’re all living in this very politically charged environment, whether it’s right vs. left or whatever the dynamic is. I find that a little bit dangerous, because now you have quote, unquote, journalists, or editors, or whatever they really are, selecting news items, and you have an algorithm that’s going to basically drive you deeper into your own rabbit hole, if that makes any sense. So now that I’ve monologue’d for twenty minutes… Thoughts?

Ron Westfall: I think to begin with, Facebook is being smart about enlisting the ecosystem, if you will, partners, the vague journalist description. At the very least offloads having Facebook employees doing the curating and the decision making as to what should appear in the feed. That’s clearly something that Mark Zuckerberg has made clear, that they don’t want to be in that game. They do want to at least have that responsibility be reflective of what the ecosystem can supply in that regard. And it does beg the question of, who are the journalists, and so forth, but at least it’s a starting point in that regard and they can always expand the journalist pool.

It’s also running in parallel with what you hit on. There are plenty of news feeds out there that anybody who’s a serious consumer of political news, or news in general, already has these tools at their convenience to use across the internet in general, but also whenever they’re looking at any portal, their filters, their feeds, and so forth. And so I think it kind of goes full circle, and that what Facebook is supplying is really just more convenience for their hardcore users. And also, in essence, co-sharing the responsibility for how this news who can be curated to anybody who wants to use the Facebook news filter. So that’s one tick away, in terms of what are some of the offsetting benefits, despite those prominent weaknesses that you succinctly pointed out.

Olivier Blanchard: That makes a lot of sense, actually. So let me switch gears just a little bit, and talk about the business model a little bit. I found an article, and this will be in the show notes, on Vox, or actually Recode, and it talks about how this would work initially, and I don’t think this is a very finalized model. I think it’s just kind of like the beta test. If you access or click on a link for an article, from the Washington Post for instance, within this essentially inner-channel on Facebook, you’ll be redirected to the publishers site. You’ll go to the actual article in the Washington Post and you’ll have accessed that article for free. And from that point if you want to jump to another article, like say you find a link embedded in the article, there’s links after the article when you’re done, then that’s when you actually hit the publishers pay wall. That seems a little odd to me, given that a lot of these publishers try to limit the number of articles you can read per month already.

So that would have to play well with that. Whether it’s the New York Times, Washington Post, whatever, it’ll usually… unless you have a subscription that you can take with you, and that automatically it’s going to click with this, it will tell you only have like three articles remaining this month. So I’m not exactly sure how the news feed works or bypasses that, or makes it any different from what it already is. What we learn today is, allegedly, or what’s being reported by Recode, is that Facebook agreed to pay News Corp. $3 million to have them come and actually participate in this program, which is something that Zuckerberg, just a year ago, had said absolutely no to.

I’m trying to understand how that works and how Facebook ultimately monetizes this, because if they end up having to foot the bill, to pay the publishers for this access, to provide that access to their users, that’s a financial hit that Facebook doesn’t need to take. I mean, they can afford to, but it doesn’t need to, and it can scale and get out of hand pretty quickly. So what does this turn into a year and a half down the road? Is it still something that Facebook offers for free, or does your screen become just completely filled with additional ads? Where do you think this goes from a business standpoint?

Ron Westfall: Yeah, that’s an important aspect here, and I think at the beginning, yes, it’s just a mere $3 million within the Facebook revenue stream. As a result, they can afford to do just this. Experiment. See how this model can work and how they can monetize it. Sure, they’ll get some money from revenue sharing, new eyeballs that go to the pay walls of the participating publishers. But I think looking at it from a broader perspective, what it is, is it’s preempting what they participate as the regulators becoming more severe about how the news is handled on the Facebook website. Now they can turn around and say, “Hey, look. We’ve enlisted News Corp. as a strategic partner, we have these publishers lined up, and they are providing us valuable feedback, and providing us the means to do that.” Provide diversified perspectives on the Facebook website, and it’s taking Facebook out of the loop again of having to curate it internally.

So this is something that could be the equivalent of the major operators simply deciding that it’s easier to pay a fine than to make it easier for, like a C-Lek , to have access to their network assets. It’s kind of the price of doing business. I think in that regard, no matter how it turns out in a year and a half from now, if it is at least assuaging some of the more severe outcomes that could come from increased regulatory scrutiny of Facebook, then it could be worth exponentially more in that regard.

Olivier Blanchard: Yeah. I agree. We need to kind of close the segment and move on to the Fast Five, but I’m just going to throw this one little note out there, this little tidbit that I found kind of interesting. A year ago, Mark Zuckerberg had explained, in a quote, “People come to Facebook primarily not to consume news, but to communicate with people.” I felt that’s kind of interesting, because I’m not sure Mark Zuckerberg understands what his platform is actually used for. Either that or he’s just being coy. Essentially, whether it’s Twitter or Facebook, for a lot of people that has become the news feed. And I’ve watched very different types of people use Facebook, including senior citizens on airplanes, and kind of like looking over next to me at their feed, not to be creepy or anything, but just because I’m interested in what news sources pop up in their feed.

Facebook has become a news source. It really is kind of like a clearing house for every news item you might be interested in. Not only that, but a clearing house for these specific sources and filters that you want to experience that news through. For Mark Zuckerberg a year ago to say, “the point of Facebook is not to consume news.” And for us to be here now, where he’s literally paying news publishers to push their news through his platform, and through a very specific portal on his platform, I think is a pretty radical shift and doesn’t really jibe with where Mark was a year ago, with regard to the purpose of his platform.

Ron Westfall: Times have changed.

Olivier Blanchard: Yeah. To be continued. It just blows my mind that he’s actually paying publishers, and that they’re not paying him. He has the channel and he has the eyeballs, and he’s paying them, and I find that a little strange still.

Ron Westfall: The irony.

Olivier Blanchard: Yeah. We’ll see where that goes. So moving on, lets switch to our Fast Five. So my first Fast Five… I’ll just go ahead and begin. Is actually kind of interesting, and it’s a little bit of a holy grail of communications for mobile. We all know that one of the pain points in the Apple vs. Android mobile experience, is that Apple has iMessage, and iMessage is fantastic and everybody loves it. And there hasn’t really been, until now, a realistic answer to iMessage for the Android ecosystem. You have just texting, and there’s different solutions that are put out by different OEM’s, like Samsung has its own thing, and what have you. But there’s been this kind of discussion about this model called RCS, which is GSMA’s old bridge communication service, kind of industry standard, to kind of create this brand agnostic Android unified messaging system. And apparently we may actually be seeing that come to fruition next year, in 2020.

I’ll believe it when I see it, because we’ve kind of been talking about this for a really long time, but all four major US carriers, Verizon, Sprint, T-Mobile, AT&T, have announced that they’re actually joining forces to deliver unified RCS messaging in the US for Android smartphones next year. I’ll believe it when I see it, but that’s the news and I wanted to let everybody know, because it has come up before and it’s something a lot of us in the Android ecosystem have been bemoaning for quite some time. So we’ll see what happens. All right. So what’s your first Fast Five?

Ron Westfall: You bet, Olivier. And yes, that is good news for those of us in the Android ecosystem. And yes, back to Mobile World Congress Americas, which had been conducted this last week in Los Angeles, and was overall a very rewarding event. It really does illustrate the progress that’s being made in the 5G ecosystem, in terms of not just the operators here in the US, but also throughout North America and Latin America. It’s a combination of many of the technology trends that we’ve been talking about actually becoming commercialized, becoming market ready. In parallel to the 5G Americas round table event last month, we’re hearing operators like AT&T proclaiming that by this time next year, the US will be awash, will be bathing in 5G. So that is indeed a robust proclamation.

It’s very positive and it’s also running in parallel with what we’re seeing in North-East Asia, where in Korea there are already 3 million 5G subscribers, with 5 million expected by the end of the year. As part of this year’s event at Mobile World Congress Americas, NVIDIA made its debut. It was audacious. They conducted a pre-show keynote where they basically debuted their Smart Everything Revolution proposition. That includes six major components, and that is: AI. No surprise there. GPU architecture, which wouldn’t have universal support, necessarily. Vendors such as Intel might differ with how much GPU’s needed, but nonetheless-

Olivier Blanchard: No comment.

Ron Westfall: SmartNIC, cloud native, and then super-computing edge platforms, which NVIDIA debuted at the show. They’re calling it the EGX. And then finally, 5G vRAN, and they announced a partnership with Ericsson with the idea that you can use a GPU architecture to drive the virtual RAN capabilities that are needed to give the operators the agility, the time to market flexibility, and so forth, that’s essential to making the 5G use cases work, to make them scale. So this is all very exciting. It’s showing that there’s more of an ecosystem play here. A player like NVIDIA stepping up at a major Mobile World Congress event to showcase how they can influence what’s going on, but also how they are doing it already.

Olivier Blanchard: I have a very similar story. Since this event was kind of happening in parallel with the 5G Summit in Barcelona, it was really interesting. In one day, essentially Qualcomm explained the entire strategy for 5G for everybody. Which is, on the one hand, kind of the phases of deployment and how that would work. So you have the sub-6, it’s kind of like a twice as fast 4G type improvement, even though it’s a completely new radio system. Then there’s the millimeter wave portion of 5G that comes a little bit later that’s very different technology from what we’ve seen so far. Very short range, but very high speed, but also rather limited, because it can bounce off buildings and do bank shots, and do very complicated, cool things, to connect devices to antennas, but it also has to be able to penetrate buildings and essentially just solve a lot of very complicated engineering problems to work.

So you have all of these solutions kind of working together; 4G, the sub-6 spectrum, the millimeter wave in 5G, sort of working together in concert. One of the main topics, and it was almost kind of like… If you were to play a drinking game at this event, you would have had alcohol poisoning if your card included DSS, which is short for Dynamic Spectrum Sharing. I think we’ll probably have to write some specific articles, or do a white paper on DSS, because it’s so integral to the success of 5G, and kind of helps explain why 5G is so radically different from 4G. DSS essentially enables the IoT. It enabled carriers to deploy 5G services a lot faster than when the switch was from 3G to 4G. It was a really important point.

One thing you mentioned earlier as well was the focus on AI, and it was really interesting being at a 5G summit, where we’re supposed to be talking about mobile, and the IoT, and self-driving cars, and kind of like this big infrastructure play. And hearing about AI, not just AI in terms of the AI that goes in mobile phones and how that works with faster processing, but the notion of the edge cloud, and essentially distributed AI that lives on your phone, on the edge of the network, in the network, in the cloud. It’s just like AI everywhere. And that was a huge and very fundamental part of it, of how the 5G revolution, the 5G ecosystem that we’re creating, isn’t just about fast speeds, it’s not about antennas, it’s not just about that. It’s also about the proliferation of artificial intelligence across the network, from point-to-point, and how all that plays together.

So it was a really interesting event, and I can’t wait to write about it. Everyone who’s listening should definitely look for our articles about 5G and the future of mobile on the Futurum Insights Blog. A little pitch there for that. Okay, so on that note, Ron, what is your second Fast Five for this week?

Ron Westfall: Yes, exactly. And it is pivoting off of what you just said, particularly when it comes to dynamic spectrum sharing. That is going to be a game changer. It’s allowing the operators to deploy their new mobile 5G services capabilities in a much more flexible fashion than they did with previous iterations of mobile technology.

Leading into that is the fact that at the event, Ericsson conducted its analyst conference, and there they showcased the fact that they achieved a network slicing on a live 5G stand-alone network. And why this significant is that it’s demonstrating, first of all, that as the operators are deploying, they have to use non-standalone. That is, they’re combining 4G and 5G together and leveraging existing assets to ease the debut of 5G, but the end game is to have stand-alone 5G in order to be able to tap into all these capabilities, and part of that is organic AI integration. And part of that also is using dynamic spectrum sharing.

And also it’s enabling, what we’ve been hearing about, network slicing. That is being able to dedicate resources of a network specifically to the needs of an enterprise. And that can be, for example, on-demand services, but it can also enable what can be characterized as capabilities that are only specific to the application that’s required. For example, you’re not having to virtualize the entire network in order to get one connection, i.e., the VPN model. What you’re doing is you’re combining all the required network resources at the core, at the edge, at the site, in order to enable something like smart manufacturing. And only those resources that are required for that smart manufacturing capability is what’s being allocated.

So this is the major difference maker, and it’s also illustrating that 5G is experiencing a renaissance again. I know that I’m repeating myself on that, but it’s important to understand that a year ago, if we had the same conversation, we’re like, “Oh, it’s been over hyped. 5G is stalling out. We’re going to have to wait until 2022 to really see 5G have an impact on operator decision making,” and so forth. But here we are, Q4 of 2019, and already we can anticipate 2020 is going to be, really, the beginning of the 5G era in a meaningful, societal way. Certainly at least in parts of North-East Asia, in North America, as well as Western Europe. That is certainly, I think, encouraging.

Olivier Blanchard: I’m going to break my own rule here and just add something to that, because I forgot to mention it earlier. One of the things that was really interesting also about the 5G Summit, or at least the timing of the 5G Summit, is I think something like 30 plus OEM’s announced that they were developing 5G fixed access equipment solutions. What that means is, essentially right now, for fixed access customers, so people who want ultra-high-speed internet. The main solution up until this point, or the ideal solution, was fiber, and it could be really expensive and actually was really complicated to get fiber to everybody. That’s why a lot of operators weren’t able to do it, and why fiber wasn’t really available to everybody yet.

5G actually solves this problem, and these fixed wireless access equipment solutions essentially give the ability to provide, kind of like this last mile solution to customers who want ultra-high-speed internet, couldn’t get it any other way, or for whom it was very expensive to get it through fiber. Now you can actually scale that by essentially having a device that capitalizes on 5G service, and extends that service and those capabilities to customers in that last mile. 5G’s also revolutionary in that way because it could very well replace fiber to provide this ultra-high speed, ultra-high secure internet access to tens of millions of customers across the US. That’s also something to look at, because that brings a whole different business dynamic to the operators and the carriers, and a lot of OEM’s in between. That’s also really exciting.

Let me talk about one little news item that kind of made a little blip in my radar, and it was something about Samsung. Samsung had a little bit of a PR snafu in the past few days relating to security, and specifically fingerprint sensor security on the S10, and I think the Note as well. I think it was kind of misunderstood and misreported by the press a little bit, what actually happened. They’ve already issued a patch. They’ve released a solution for it, and I think it’s going to work, because the problem was actually fairly simple.

So here’s what happens. There are essentially two types of fingerprint sensors on phones. There’s one that is a 2D sensor, that essentially takes an image of your fingerprints, and when you put your fingerprint on the sensor, the through the screen sensor, it essentially just matches the image that it has in its own memory with your fingerprints. Even though it’s a 2D image, that’s how it kind of recognizes the fingerprint. And there’s another solution that actually is a 3D scan of your fingerprints. It actually doesn’t just take an image of it, it literally, kind of like a radar essentially, looks at the ridges and valleys of your fingerprint. So it’s a true 3D system.

What Samsung uses, and I think they’re the only ones on the market right now to use this, is the 3D version, that ultrasound sensor as opposed to an optical sensor. Everybody else uses the optical sensor. And this week, Samsung got dinged because somebody discovered that there was a flaw with this 3D sensor, this ultrasonic sensor, as opposed to the optical sensor. And the reason why is because that particular user used a silicon based, a not approved silicon based screen cover on their S10, I think. What that did is, it kind of created this gooier, not very… Essentially it blocked the sensor from going as deep as it needed to go with the ridges and valleys of the fingerprints, and created a much more flat and amorphous kind of image of the fingerprint, which then allowed anybody who applied pressure on the silicon screen cover to unlock the phone.

So it was misconstrued as the sensor not working or the sensor not being reliable. What it was is just the phone hadn’t been programmed to recognize that certain screen covers, which haven’t been tested and might come from any source in the world, would cause a problem and would kind of interfere with the sensor. So what Samsung did is issued a patch that essentially tells the phone, or tells the sensor, when it can’t actually create a true, reliable, 3D image of the fingerprint, when you actually teach it to recognize it, it will just refuse it. What you’ll have to do is remove the cover and either replace it with one that’s actually approved by Samsung, or not one at all. Essentially what it does is it blocks the phone from recording a faulty fingerprint scan that isn’t complete, and that should work.

The lesson here, kids, is that if you buy a Samsung phone, you may want to be careful about what types of screen protectors you use, and make sure you use one that’s approved by Samsung. And you can check that on their website. Since this incident they’ve been particularly diligent in identifying the types of screen covers that you should use, and that will work with this ultrasonic sensor.

Our Tech Bites today could actually be pretty short, because I think we’ve already mentioned this a few times, and I just want to keep beating that dead horse. I’m not exactly sure why, I just have a fetish for it. I’ve always had a beef against unicorns and super high valuations of companies that didn’t seem to have a viable business model, and although Facebook was one of the companies that actually made it work, ultimately, there are a lot of other ones that still kind of struggle to make any business sense at all.

Two of those companies are obviously WeWork, which we’ve talked about a little bit in the last month, and Uber also. I like Uber, it’s a cool idea, but also they’re bleeding cash like nothing I’ve ever seen. At the middle of all this is Softbank. And Softbank, which kind of funds and actually took over WeWork this week, and has a lot of money invested in Uber, is planning to take a write down to its vision fund, which I think is about $100 billion total. I think they’re taking a $5 billion hit to reflect a kind of a slight nosedive in the value of some of those holdings. So I just want to kind of get your reaction on that, because I know you follow that even more closely than I do. Even though, again, no investment advice should be taken seriously on this show, but what do you think about this?

Ron Westfall: I don’t think it’s going to alter the overall idea of unicorns. I think it’s a combination of the novelty aspect, the idea that you can emulate the Facebook model, and that’s something that is really the end game for all of these different funds. But in the meantime, yes, due diligence is essential. Quite simply, Softbank is the latest example of a fund that just didn’t do their necessary due diligence to avoid the jam it got into, certainly with WeWork. As we know, they decided to, in essence, outbid J.P. Morgan, and basically continue to ensure that WeWork is an operational company.

They had already been WeWork’s largest investor to a tune of more than $10 billion, and with the latest deal that included an infusion of $5 billion in additional funding, and also $3 billion [inaudible] for existing shareholders outside of Softbank. That enabled Softbank to assure the market’s out there, but also others who are working with WeWork, that the company will be viable, and that obvious Adam Neumann will not have any influence on how WeWork evolves, because even though he had stepped down, he still had significant shares, and it could have altered how WeWork’s direction would have been implemented. This basically ends the Adam Neumann chapter, but it also gives him a $1.7 billion parachute, so it’s nice to have friends like Softbank.

On the Uber side, it’s more of the same. I think there’s not too much to add what we already emphasized just over a month ago. That is, Uber will continue to bleed cash until they can somehow enable a more automated model. That is, basically, more of their fleet will rely on cars that use autonomous vehicle capabilities, but that could take more time than originally anticipated, even though the software’s getting better, that there’s more regulatory recognition for how autonomous or self-driving cars could be used in fleet scenarios, and so forth. That is not a situation to envy, but in the meantime I will appreciate being able to use Uber in relation to waiting for a cab. I’ll be thankful for that.

Olivier Blanchard: Right now if I worked at Softbank, I’d be a little bit nervous. That’s me.

Ron Westfall: Yes. Even though… Yes.

Olivier Blanchard: From an employment standpoint, right? It’s a little precarious. I’m sure there are discussions going on there that are not pleasant for everybody.

Ron Westfall: True. I think it’s a clear takeaway. So we’ll see what that means from the Softbank side. We’re seeing the changes being done at WeWork. That’s obvious. We’re seeing what’s happening at Uber. You know, streamlining of headcount and so forth. Then it’s like Softbank looking at the mirror and deciding, “Okay, what do we need to do now to become smarter about how to use the vision fund?” Quite simply.

Olivier Blanchard: It seems like the reaction… Or the direction of the reaction anyway, that I’m seeing, is positive. So I think that Softbank is making the best of precarious situation. I haven’t lost faith in them yet. So it’s… yeah. It’s good.

Ron Westfall: There’s the other billions that isn’t being impacted by this directly.

Olivier Blanchard: Yeah. They do a lot of things well.

Ron Westfall: They will continue to be driving a lot of innovation, despite some of the hiccups here. So that’s very true.

Olivier Blanchard: And the squeaky wheel gets the grease and all the attention.

Ron Westfall: Yes.

Olivier Blanchard: That’s kind of what we’re talking about. We’re not talking about all the wins, we’re only talking about the messy wheels. Okay, so let’s move on to our last segment of our show so we can close this out. It’s the Crystal Ball. As usual, I kind of want to circle back to the original topic, which was the Facebook news tab. So if you would consult your crystal ball for me and look forward, I want to say, 2 years. Not super far in the future, because that’s too far for this kind of topic. We’re not talking about VR goggles or anything. Do you think that the Facebook news tab is ultimately… This is really simple one by the way. Is it overall a plus or minus for the Facebook brand experience 2 years from now?

Ron Westfall: Yeah, that’s interesting, because 2 years from now, that’s brilliant. We’re going to have a Presidential election in the meantime. And let’s say there isn’t a change in administration. I would say that would be a plus, because it will continue to enable Facebook to fend off more direct regulatory scrutiny. Particularly when it comes to curating the news and upholding first amendment rights of Facebook users, and so forth. Now the however is, if there’s a change in administration, I don’t think it’s going to matter. I think it will be not good for Facebook given what we just saw at the congressional hearings this week. Let alone, what some of the candidates are saying about what they would do to Facebook in particular, but also to tech giants across the board. And so, while that is certainly something that is no unique to Facebook, if that turns out to be the case, then the news feed just becomes a non-factor altogether. It’s a blank.

Olivier Blanchard: Yeah. I’m not sure that it makes a huge difference. Like I said earlier, I think I’m a little bit more concerned about the erosion of the transparency of the public place, the public forum, where everybody can see what everybody else is doing. And even though you can retreat into your own little private gardens and private rooms to discuss, you know, flat earth theory, and whether or not vaccines cause autism, and those types of things. At the same time, turning the entire Facebook ecosystem into this series of private rooms and private groups, and turning your news feed into this very tuned in, very specific, very narrow path into ideology and beliefs, and confirmation bias, I think worries me a little bit. But if there’s anything I know, it’s that giving people what they want is usually a good recipe for business. So while the impact on society may not be ideal, I think that individual users will get a lot of value out of a news feed service they can customize to the Nth degree.

Good luck to Facebook in their endeavor to kind of capture that. We joked a little bit about this feeling a lot like AOL, where Facebook becomes your little pocket of internet over here in the corner, but I think that for a segment of the population, and a segment of Facebook users, the AOL model makes perfect sense. And I think they tend to be on the older side, so it kind of works. I think there’s just something about the tech users psyche past a certain age, where you become a little bit more open to the AOL/future Facebook model. So we’ll have to see. I’m just curious about who’s actually going to make money in that deal, and who holds the power ultimately; the publishers or Facebook? Right now I’m not sure, 2 years from now, who has the upper hand in that power equation. So we’ll see.

Okay. Well that does it for this week’s edition of FTP, Futurum Tech Podcast,  so thanks a lot for tuning in. As always, hit that subscribe button if you haven’t already. Definitely look up our articles and analysis on the Futurum Blog if you haven’t already. Find us on Twitter for the latest and most updated news. And of course, catch us next week for another round of news and analysis at the intersection of tech and business, with the Futurum Tech Podcast. Until then, have a great week, everybody.

Disclaimer: The Futurum Tech Podcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such. 

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