Big Tech faces inquiry over communication during attack on the Capitol, Facebook to tease Ray-Ban smart glasses, and other notable stories from this week
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WHATSPRIVACY: WhatsApp, which touts its privacy features, says parent Facebook (FB) can't read messages sent between users, but a report by ProPublica on Tuesday claims that Facebook is paying more than 1,000 contract workers around the world to read through and moderate WhatsApp messages that are supposedly private or encrypted, Peter Elkind, Jack Gillum and Craig Silverman reported. ProPublica notes messages that appear on screen in the WhatsApp app such as; “No one outside of this chat, not even WhatsApp, can read or listen to them.” are simply untrue. WhatsApp’s director of communications, Carl Woog, admitted that teams of contractors in Austin and elsewhere comb WhatsApp messages to flag and remove “the worst” abusers. However, Woog told ProPublica that the company does not consider this work to be content moderation. Woog said “We actually don’t typically use the term for WhatsApp.” The company declined to make executives available for interviews for this article, but responded to questions with written comments. “WhatsApp is a lifeline for millions of people around the world,” the company said. “The decisions we make around how we build our app are focused around the privacy of our users, maintaining a high degree of reliability and preventing abuse.”
Earlier in the week, Ireland issued WhatsApp with a record $266M fine following an inquiry into the messaging app's transparency around sharing personal data with other Facebook companies, Reuters' Conor Humphries reported. WhatsApp said the fine was "entirely disproportionate" and that it planned to appeal. Ireland's Data Privacy Commissioner, which is the lead data privacy regulator for Facebook within the European Union, said the issues related to whether WhatsApp conformed in 2018 with EU data rules about transparency. "This includes information provided to data subjects about the processing of information between WhatsApp and other Facebook companies," the Irish regulator said in a statement. A WhatsApp spokesperson said in a statement, "We disagree with the decision today regarding the transparency we provided to people in 2018 and the penalties are entirely disproportionate," the spokesperson said. EU privacy watchdog the European Data Protection Board said it had given suggestions to the Irish agency in July to address criticism from its peers for taking too long to decide in cases involving tech giants and for not fining them enough for any breaches.
SMART GLASSES TEASER: Facebook and EssilorLuxottica's (ESLOY) Ray-Ban are teasing a reveal of their upcoming smart glasses on September 9, The Verge's Adi Robertson reported. The eyewear company posted a promotional page showing the glasses with the September date, while the brand's homepage also promised that "this is one story you're going to want to follow," possibly a reference to Facebook Stories, Robertson said. In addition, the announcement would coincide with certain teaser videos from Facebook CEO Mark Zuckerberg showing point-of-view video clips. Facebook has called its glasses, developed in partnership with Ray-Ban parent company EssilorLuxottica, a stepping stone toward “full augmented reality glasses.” Zuckerberg confirmed in July that the glasses would be Facebook’s next hardware launch. He specified that the glasses would “have [Ray-Ban’s] iconic form factor, and they let you do some pretty neat things.”
TWEET IN PEACE: Twitter (TWTR) intends to test new privacy features aimed at allowing users to have more control over their follower lists and who can see their posts and likes, Bloomberg's Kurt Wagner reported. The tools are related to what executives at the company call "social privacy," or how users manage their reputations and identities on the platform. This reportedly includes information like a person’s list of followers, the tweets they like, and whether their accounts are public or private. Twitter said yesterday that it is testing a new feature to allow users to remove a follower without blocking them. "To remove a follower, go to your profile and click "Followers", then click the three dot icon and select "Remove this follower,"" the company said. Twitter also announced Twitter Communities, a "place to connect with people who Tweet like you." The new feature is currently being tested on iOS and web, with an Android test coming "soon." At the moment, Communities are invite-only.
HOUSE COMMITTEE INQUIRES ON BIG TECH: Tech companies are in the middle of an inquiry by the the House select committee regarding the January 6th attack on the Capitol, "and ominous threats from Republicans," looking to delay the inquiry, wrote Russell Brandom for the Verge. The House select committee wants more details concerning communications between former President Trump and certain Republican house members, including House Minority Leader Rep. Kevin McCarthy (R-CA) and Rep. Jim Jordan (R-OH), added the Verge story. According to the Verge, the committee sent requests to 35 companies, including Facebook. and Twitter. Reportedly, the requests are likely to target some members of Congress who communicated with President Trump during the attack. Republican leaders have pushed back against the effort. In a statement Tuesday, McCarthy described the subpoenas as an effort “to strong-arm private companies to turn over individuals’ private data.”
ANALYST COMMENTARY: Citi analyst Tyler Radke lowered the firm's price target on Zoom Video (ZM) to $304 from $380 and keeps a Neutral rating on the shares. Following the Q2 earnings report, the analyst revised revenue estimates higher on expansion momentum among customers with greater than 10 hosts. However, fiscal 2023 is an exception with lower numbers due to heightened churn in the less than 10 host cohort.
Needham analyst Scott Berg upgraded Five9 (FIVN) to Buy from Hold with a $200 price target. Berg believes the current Zoom offer to acquire the company at a 0.5533 conversion rate is "fundamentally flawed" and thinks Zoom will need to raise its consideration or add cash to bracket a $200 price for Five9 shares, the analyst tells investors in a research note. Voting down the deal is also a win for shareholders as its independent price would likely be higher than current levels with a great near-term outlook, Berg added.
Stifel analyst J. Parker Lane raised the firm's price target on Sprout Social (SPT) to $135 from $105 and keeps a Buy rating on the shares. His Q2 checks and the strong fundamental performance across the group heightens his confidence in the multi-year growth outlook and sustainability of digital transformation spending patterns for many of the names in his software coverage, prompting him to adjust price targets "on a handful of names," Lane told investors.
Keywords: WhatsApp, encryption, privacy, data, Ray-Ban, smart glasses, privacy features, tweets, followers, House committee, inquiry, January 6, earnings report, acquisition, outlook