Facebook, More Facebook and Lyft

Hello and welcome to Dan’s Debrief! Sorry it’s coming out a day late (again). It might start sending it out on Friday’s going forward.

Here we go…..

Major News

Facebook (tries) to gives local news a boost

Just a day after Facebook announced it couldn’t find enough news to fill its local news aggregator called “Today In,” the social media giant has launched a $300 million initiative to support local news organizations.

The figure and purpose might look familiar to some of you. Last year, Google announced the “Google News Initiative,” a $300 million investment to help support local journalism and to combat fake news.

This announcement comes at a time when Facebook is under fire for multiple issues, including the negative impact the platform has had on the news business. Since the launch of Google and Facebook, news organizations have struggled to compete for advertising dollars. Local news organizations are shuttering at a startling rate creating news deserts across the country. News deserts are communities that lack access to a credible news organization (imagine if your hometown or city didn’t have a local newspaper).

The Wall Street Journal reported that according to Facebook data, a third of American’s live in a location that doesn’t produce enough local news for the company to provide a localized aggregator.

My take: While I give Facebook credit for putting money toward helping local news outlets, it’s hard to view the move in a genuine manner. The local news business could obviously benefit from more funding, but that’s not going to create a sustainable path forward for the industry. Facebook has become an integral distribution point for news. What would really help the industry is if Facebook brokered more balanced partnerships with news outlets and created more useful tools for delivering local news.

Inflection point for online platforms

Last week, internet platforms were used to spread and broadcast a horrific shooting in New Zealand. As Facebook, Youtube and Reddit are continuously being used to spread hate speech, both lawmakers and users are starting to consider whether these platforms are causing more harm than good.

All of these platforms are designed to distribute content to a lot of people very quickly. That can be dangerous when it comes to certain types of content. Users are also only pushed content based on their interests, keeping users in “filter bubbles” that reinforce existing beliefs.

Charlie Warzel, an opinion writer at large for The New York Times, published a piece earlier this week arguing that we’re reassessing the wrong aspects of internet platforms. Building an effective system for moderating content is dominating the conversation around social media and internet platforms. But, even with Facebook’s sophisticated AI program for detecting harmful content, out of 1.5 million videos uploaded of the New Zealand shooting, 300,000 videos made it through its algorithms.

Warzel argues that we need to start thinking about the incentive system that’s built into platforms like Facebook and Youtube. This very long sentence sums his argument:

“Focusing only on moderation means that Facebook, YouTube and other platforms, such as Reddit, don’t have to answer for the ways in which their platforms are meticulously engineered to encourage the creation of incendiary content, rewarding it with eyeballs, likes and, in some cases, ad dollars.”

My take: Facebook, Youtube, Twitter and similar platforms reward extreme content because it’s likely to spur user engagement. That becomes dangerous when the content is hate speech or incites violence. These platforms have created an ecosystem where divisive and extremist content can flourish because it’s profitable. That’s the problem.

Lyft’s IPO is heating up

Last week, I wrote about some highlights from Lyft’s S-1 (the document companies file with SEC when they’re preparing to go public).

Lyft submitted its updated S-1 earlier this week, providing its pricing range and valuation target. The ride-hailing startup has also started its roadshow, or the process of pitching its stock to institutional investors before it goes public.

According to Reuters, Lyft’s IPO is already oversubscribed, meaning there’s more investor’s interested in buying shares than there are to sell. Lyft set an initial price target between $62 and $68 per share, which could work out to a $23 billion valuation. With so much investor interest this early, it’s likely Lyft will hit exceed that valuation.

Here are some of Lyft’s largest shareholders and their relative payouts, per the company’s S-1 (assuming they sell at the IPO price):

Rakuten Europe: $2 billion (30 million shares)

General Motors: $1.3 billion (Almost 19 million shares)

Fidelity: $1.3 billion (Almost 19 million shares)

Andreessen Horowitz: $1 billion (15 million shares). They invested about $60 million six years ago.

Alphabet Inc.: $885 million (13 million shares)

Fred Wilson, a prominent venture capitalist at Union Square Ventures, wrote a great analysis of what Lyft’s S-1 indicates about public vs. private market valuations.

Something interesting I discovered

Have you ever been talking about a product with a friend and then shortly after you start seeing ads for that same product on Instagram and Facebook? And then, you start freaking out because you think your phone’s constantly listening to you? It’s okay, you’re not alone and there’s a somewhat reasonable and plausible explanation.

Roger McNamee, an early Facebook investor and advisor, recently published a book called “Zucked: Waking Up to the Facebook Catastrophe.” In the book, McNamee provides an insider’s analysis of how he thinks Facebook presents a huge risk to democracy and the general health of the public.

In the book, McNamee provides an explanation for the frightening phenomenon I mentioned above. As many of you already know Facebook (and other internet platforms) collect data about their users. What you may not realize is just how much data they collect and what they do with it.

Facebook integrates multiples sets of data about its users to generate shockingly accurate insights and predictions about their behavior. McNamee calls this algorithm a “behavioral prediction engine” and says that it’s responsible for the creepy ads that pop up on your Facebook and Instagram feeds.

Facebook’s algorithms have become so accurate they can predict your behavior and thus, your future interest in a very specific product. Using those insights, Facebook’s algorithms will then push you ads for that product before you even realize you’re interested in it.

McNamee is a former Facebook insider with a vast knowledge about technology, Facebook’s algorithms and the platform’s design and incentive system. If you trust his analysis, then this explains why Facebook and Instagram appear to be listening to your conversations and pushing you ads accordingly.

Company of the Week — Mage

Remember Magic Cards? Well there’s a platform dedicated to buying and selling them. Check out Mage.

Quick hits

Y-Combinator Demo Days: Here’s TechCrunch’s breakdown of YC’s current cohort of interesting startups.

Instagram launched a shopping features so users no longer have to leave the app to purchase products.

Google released a new platform for gaming called Stadia. And some think it’s the future of gaming.

Best of the Internet

OpenAI Is Beating Humans at ‘Dota 2’ Because It’s Basically Cheating — Motherboard — motherboard.vice.com
AI defeating human players at ‘Dota 2’ is impressive, but it was only possible thanks to significant guardrails and an inhuman advantage.

5 big takeaways from SXSW 2019 | PitchBook — pitchbook.com
SXSW 2019 was a sensory overload of colorful exhibits, talk of how to put everything on blockchain, how to grow a smoking hot cannabusiness and more.

Startups Aim to Overhaul Trading in Treasurys — WSJ — www.wsj.com
Treasurys trading went electronic more than a decade ago, but the market remains bifurcated. Now, some new platforms aim to reshape the $15 trillion U.S. Treasurys market, letting investors shop around for better prices.

Facebook Wants to Feed Users More Local News. There Just Isn’t Enough of It. — WSJ — www.wsj.com
Facebook played a role in the decline of local newspapers. Now it has a problem: One-third of Americans live in a place where the social network can’t find enough local news to feed its aggregator.

Purdue has banned Netflix, Hulu and other streaming services. Will it get students to pay attention during class? — Chicago Tribune — www.chicagotribune.com
Purdue University is blocking Netflix, Hulu and other streaming services from being used in classrooms to prevent its wireless computer network from being choked by non-academic traffic. Some Chicago-area students say classroom streaming is widespread among their peers.

The New Social Network That Isn’t New at All — The New York Times — www.nytimes.com
When an inveterate tweeter and social media hound decided to change his ways, what did he turn to? An email newsletter.

Starbucks Innovates By Pouring $100M Into Other Food Startups — news.crunchbase.com
Starbucks Corporation just poured $100 million into a food startup-focused fund, Valor Siren Ventures Fund.