Russia demands representation from big tech, AG coalition targets Instagram and other notable stories from this week
Welcome to "#SocialStocks," The Fly's weekly recap of Wall Street's reactions to social media stock news.
ANTITRUST LATEST: European Union lawmakers are agreeing on how to target big tech firms, such as Apple (AAPL) and Google (GOOG, GOOGL), as part of efforts by the bloc to curb anti-competitive practices in the sector, the Financial Times' Javier Espinoza reported. The European Parliament's main political parties reached a deal that would apply to companies with a market capitalization of at least EUR 80B and offering at least one internet service, the author says. The move means the rules would draw more firms than previously thought into the EU's planned Digital Markets Act, the author noted. Under the potential new rules, companies such as Google, Apple, Amazon (AMZN), Facebook (FB), and Microsoft (MSFT) would fall under the act's scope, as well as Booking (BKNG) and Alibaba (BABA). The agreement enables EU lawmakers to vote on the package next week. Once agreed upon EU member states it would then become law. The proposed rules will additionally increase the power of national competition authorities to scrutinize tech companies’ acquisitions of smaller rivals, citing concerns that they are buying competitors in an effort to take out challengers.
The U.S. Federal Trade Commission said in a court filing that a federal court should let its antitrust suit against Facebook proceed as the social media giant has "interfered with the competitive process by targeting nascent threats through exclusionary conduct," Reuters' Diane Bartz and Chris Sanders reported. In August the FTC rejuvenated its antitrust case against Facebook, now Meta Platforms, adding detail on the accusation the social media company overpowered or bought rivals and asking a judge to force it to sell Instagram and WhatsApp. In a filing with the U.S. District Court for the District of Columbia, the FTC said that for more than a decade, Facebook's market share exceed the levels needed to establish monopoly power. "The FTC has once again brought a monopolization case without a monopolist. Its claims ignore the reality that people have more choices than ever before in how they share, connect, and communicate, and its second complaint should be dismissed just like the first," a Meta spokesperson said in a statement.
FROM RUSSIA WITH THREATS: Russia has threatened to restrict or even ban some major technology companies, most of which are American, like Google, Facebook, Twitter (TWTR) and Apple, and others like Telegram and TikTok, if they are not "officially represented on Russian soil by the end of 2021," reported Reuters. Russia's state communications regulator said earlier that "Russia has taken steps this year to support and promote its domestic tech sector over Silicon Valley alternatives, proposing taxes on foreign-owned digital services, tax cuts for domestic IT firms and requiring smartphones, computers and other devices bought in Russia to offer users Russian software on start-up."
ZOOM EARNINGS: Despite beating analyst expectations, Zoom (ZM) shares fell 6% at the beginning of the week when the company reported Q3 earnings. "In Q3, we held our premier user event, Zoomtopia, on our Zoom Events service. During this immersive, multi-track conference, we showcased how Zoom is placing people at the center of our communications platform, connecting their disparate work streams into our technology, moving beyond enterprises' ability to collaborate internally, and empowering them to communicate face-to-face with their customers through Zoom Events and our upcoming Video Engagement Center. We also showcased innovations such as hot desking, whiteboarding, and smart gallery, all designed to empower both co-located and remote hybrid workforces as some companies test return to office programs," said Zoom founder and CEO, Eric Yuan. "Through innovation and dedication, we will continue to deliver happiness to our customers. Looking forward, we expect to close the year between $4.079 to $4.081 billion in total revenue, representing approximately 54% year-over-year growth, alongside strong profitability and operating cash flow growth. We are well on our way to becoming an indispensable platform for enterprises, individuals, and developers to connect, collaborate, and build in the flexible hybrid world of work. We believe our global brand, innovative technologies, and large customer base position us well for the future." The company provided revenue outlook for Q4 and raises its full-year revenue guidance. Following the results and forward-looking guidance, the companies price target was lowered at several firms. Also, BofA analyst Brad Sills downgraded Zoom to Neutral from Buy with a price target of $270, down from $385, citing decelerating customer count metrics as churn remained heightened. The results and outlook suggest that reopening headwinds continue to weigh on growth and "record low" quarter-over-quarter enterprise and online customer metrics suggest churn continues to weigh on customer count, Sills told investors. A broader slowdown in both new customer growth and expansion activity, along with still heightened online churn, give little certainty as to the bottom for growth, the analyst added.
NEW TWITTER FEATURES: Twitter blogged that it is incorporating aliases for participants in its content moderation tool Birdwatch: "We want everyone to feel comfortable contributing to Birdwatch. Aliases let contributors write and rate notes without sharing their Twitter usernames. A Birdwatch alias is a new, auto-generated display name that participants get when they join Birdwatch. Aliases are not publicly associated with contributors' Twitter accounts, so everyone can write and rate notes privately. Further, we believe aliases have the potential to: Reduce bias. By keeping focus on the content of notes rather than who's writing them, aliases have the potential to reduce bias that people might have around specific authors. Reduce polarization. Recent research indicates aliases might reduce polarization by helping people feel comfortable crossing partisan lines, or criticizing their own side without the prospect of peer pressure or retribution." Users will have five randomly-generated options to choose from, and at this time choices cannot be changed. Birdwatch profile pages will show all the notes users have written and attribute them to the alias. Separately, Twitter said in a thread: "Today we announced our latest Twitter Shopping experiment: Live Shopping! Whether you're a home shopping super fan or catching up on your favorite creator's latest purchases, live video has been transforming the way we shop for years. We are incredibly excited to be partnering with one of the most recognizable brands in the world, @Walmart (WMT) for this test! Be sure to tune into their Live Event, hosted by @jasonderulo on November 28 at 7pm ET! Live Shopping on Twitter gives businesses the power to engage with their most influential fans, in a space where they are most receptive. But we know there is more for us to explore and iterate on. Stay tuned for more and in the meantime, be sure to chat, watch, and SHOP!"
ENCRYPTED MESSAGING DELAYED: Facebook Messenger and Instagram's plans to introduce end-to-end encryption have now been pushed back to 2023 due to warnings from child safety campaigners, The Sunday Telegraph reported. Meta previously said the change would happen in 2022 at the earliest. "We're taking our time to get this right and we don't plan to finish the global rollout of end-to-end encryption by default across all our messaging services until sometime in 2023," Antigone Davis, the head of safety at Meta, wrote.
CASH FOR CONTENT: Facebook is offering musicians and celebrities payments to host Live Audio Rooms, The Information's Sarah Krouse and Kaya Yurieff report. According to two people with direct knowledge of the situation, production companies working for Facebook have contacted music artists and social media stars in recent weeks offering payment packages to host Facebook Live Audio Rooms, adding that the packages can amount to hundreds of thousands of dollars over several sessions. At the high end, the proposed payouts are more than what Clubhouse has offered creators for its live audio accelerator program. Yurieff noted that the payouts reflect Facebook’s ability to use its financial muscle to break into live audio, a market full of competition.
AGS VS IG: New York Attorney General Letitia James has announced that she and a coalition of attorneys general from around the nation are investigating Meta "for providing and promoting the social media platform Instagram to children and young adults despite knowing that such use is associated with physical and mental health harms." The coalition of attorneys general are examining whether the company violated state consumer protection laws and put the public at risk. The investigation targets, among other things, the techniques utilized by Meta to increase the frequency and duration of engagement by young users and the resulting harms caused by such extended engagement. The announcement follows recent reports revealing that Meta's own internal research shows that using Instagram is associated with increased risks of physical and mental health harms on young people, including depression, eating disorders, and even suicide. In May, as part of a bipartisan coalition of 44 attorneys general, Attorney General James urged Facebook to abandon its plans to launch a version of Instagram for children under the age of 13. “Doesn’t make a difference if you call it Instagram, Facebook, or Meta, the fact still remains the same: These social media platforms are extremely dangerous and have been proven to cause both physical and mental harm in young people,” said Attorney General James. “Time and again, Mark Zuckerberg and the companies he run have put profits over safety, but our investigation seeks to end that behavior. Our coalition will not hesitate to take whatever action is necessary to protect children and young adults from the harms Instagram and other social media platforms risk to so many.”