Source Code

Maps is where the money is

Your five-minute guide to what's happening in tech this Friday, from how AB 5 has been bad for Uber riders to the latest twists in the internet-provider space race.

Good morning! This Friday, Google Maps gets an update, how an old privacy law is increasingly important for technology companies, and a developer wants to charge you $1,000 a month for an underground bunk bed.

People Are Talking

AB 5 has been bad for Uber riders, says CEO Dara Khosrowshahi:

  • "Service levels to riders have gotten worse" and "prices in California have gone up more than anywhere else in the country."

Existing cybersecurity problems will only get worse with 5G, Akamai security chief Andy Ellis told Protocol's Adam Janofsky:

  • "We buy this world full of connected devices, and the mortgage is that at some point we have to secure them before they cause more problems for us."

Russian trolls didn't influence American voters, according to a Russian troll indicted for influencing American voters:

  • "I believe that what occurs in another country, it's pretty hard for me to influence it." And later: "Blaming me is the same as blaming Zuckerberg for creating Facebook."

Twitter is looking outside SF to grow its talent pool, says CEO Jack Dorsey:

  • "Concentration in San Francisco is not serving us any longer, and we will strive to be a far more distributed workforce, which we will use to improve our execution."
  • A Twitter spokesperson told Protocol's Levi Sumagaysay that "there's incredible talent around the world, and we have to be able to work in a way that supports them as employees regardless of where they live."

The Big Story

Google turns on the Maps money tap

Google Maps is 15 years old, and, like any 15-year-old, really ought to start earning its keep. So Google's making some big changes to one of its most quietly important products. Maps has a new icon (not a fan, personally), a new Contribute tab that's going to infuriate everyone at Yelp, and a new focus on helping people find places to go rather than just helping them get there.

  • In many ways it makes Maps a more useful real-world search engine, which means it has a straighter path toward making lots of ad money for Google. A Morgan Stanley analyst told Bloomberg last year that "the most under-monetized asset that I cover is Google Maps," and that eventually Google would flip on the money switch. This might be the moment.
  • Maps head Jen Fitzpatrick told Wired that "we do see that there is potential to, in a thoughtful utility-focused way, have ads continue to play in the broader maps experience." She emphasized that Google cares about user experience, but still: Get ready for more sponsored pizza places, and a little ad-flagged arrow in your AR view pointing to sweet savings down the block.

For years, Google has obsessed over how it might translate its excellence in searching on a screen to searching in the real world. Glass, Lens and countless other projects have aimed at that same goal. Maps seems to be the obvious place for Google to focus those efforts — and the company knows it.

Does your business advertise on Google Maps? How do you as a user feel about the way it's changed? Send me a note: david@protocol.com.

Regulation

An old privacy law with newfound significance

Last week, Facebook paid $550 million to settle an Illinois lawsuit from 2015 that actually pertains to a law the state passed in 2008. Protocol's Charles Levinson has the story of how the Biometric Information Privacy Act was passed and why 12 years later it matters in a big way.

  • BIPA required that companies receive permission from users before collecting biometric facial recognition data.
  • Facebook didn't get permission before it rolled out a feature that suggested who might be in that photo you just uploaded, and a suit filed in 2015 alleged that it was violating the law as a result.

Facebook agreed to the settlement after the Supreme Court declined to hear its appeal. Privacy advocates are now using the hefty settlement to make the case to legislators debating privacy laws in other states that they should emulate the tough provisions in the Illinois law, like an individual's private right to sue companies.

  • "It underscores why you have to have meaningful access to justice for an individual," Washington representative Norma Smith told Charles. "We should have a meaningful voice in how our personhood is sliced and diced and monetized." (Facebook's legal team at Mayer Brown LLP declined to comment for the article.)
  • Facebook, of course, is hardly new to receiving large fines for questionable practices. And even the big ones don't seem to ding the company's spirits — or its share price.

Read Charles' story for the full details on BIPA, the fight over privacy legislation, and what it might take for these questions to actually be answered in court.

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Space

The internet-provider space race is taking off

It's still not clear if the future of internet connection involves balloons or drones hovering above us, but it definitely involves satellites. And there's a bit of an arms race going on:

Both companies are planning to offer a service in the next year or so, though with very different business models: Starlink plans to compete directly with Comcast and Verizon, while OneWeb plans to partner with them to extend their range to hard-to-reach places.

If you're counting, that's a lot of satellites heading into the skies. And the Times reports that some astronomers are worried about radio interference — and all that machinery getting in the way of their view of the stars.

Making Moves

  • Michael Murphy is the new CEO of vaping company Pax Labs. No word on Murphy's favorite oil flavor or how big a cloud he can blow.
  • WeWork shook up its board. Three members have been dropped from the group Adam Neumann bossed around, and will be replaced in part by SoftBank's Kirthiga Reddy — WeWork's first female board member.
  • Amazon is hiring. A lot. Again. The company says it plans to create 15,000 jobs in Bellevue, Washington, and build "its biggest tower ever" in the town. Unlike other Amazon real-estate plans, this was announced without months of public buildup and competition.
  • Okta named Craig Weissman as its new chief architect. Weissman was formerly CTO at Salesforce, and told Business Insider that part of his job is to help turn Okta into a "true platform."
  • Jan Chong, longtime senior director of engineering at Twitter, is now VP of engineering at the financial-automation firm Tally.

In Other News

  • Google turned its endless supply of free food into a five-year study on healthy eating. The company changed plate sizes, moved snacks and coffee farther apart, and found it could subtly lead employees to better habits. Please, someone, come to the Protocol office and do the same to me.
  • Uber and Lyft drivers continue to share articles, tips and warnings about coronavirus in Facebook groups, sometimes to problematic effect. "Please do NOT post bogus crap just to get people riled up," the moderator of one large San Francisco group wrote recently. "Do your research before posting, and if it's just a photo without a supporting article it will be deleted. No racist Asian comments will be tolerated."
  • Jeff Bezos posted a truly glorious sub-'gram on Thursday, asking what to do in a nightmarish business situation. Turns out he may have been referring to organizing a meeting with the White House adviser Peter Navarro. (To answer your question, Jeff, the answer is (E): Yell "Alexa, save me!" and have your private Prime Air plane swoop you away.)
  • The FCC announced its plans to reuse chunks of spectrum, currently claimed by satellite providers, for various 5G purposes. There's an auction for the spectrum planned for the end of this year, and the spectrum could be back in use by 2021.
  • A D.C. appeals court said it won't reconsider last year's net neutrality repeal. The appeal had been brought forward by 15 states and various trade groups, including one representing Amazon, Microsoft, Facebook, and Alphabet.
  • The U.S. offered its first safety exemption for self-driving cars — to Nuro, a startup that now plans to launch as many as 5,000 vehicles onto American streets. Their first job will be the most important thing any vehicle can ever do: delivering Domino's pizza.
  • Huawei, Xiaomi and BBK are building a platform to rival Google's Play Store, Reuters reports. The "Global Developer Service Alliance" would allow non-Chinese developers to upload to all three of the companies' app stores at the same time, chipping away at Google's services revenue.

One More Thing

I found you a new place to sleep in SF

You know those SF real estate stories that pop up every now and then, where you can buy a bunch of broken boards that someone calls a "house" for the low, low price of $9 million? I can beat that: A developer wants to build 88 underground "sleeping pods" underneath apartment buildings in the city — and charge $1,000 a month in rent. Key amenities: No doors and no windows, but you do get a "privacy curtain" and plenty of company from the five other people sleeping in fancy bunkbeds right next to yours. Want your own bathroom? Too bad, that's only for the upstairs people paying twice as much for hardly any more space. Don't get your hopes up, though, because the project hasn't cleared the city yet — and rent will probably double before it does.

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Thoughts, questions, tips? Send them to me, david@protocol.com, or our tips line, tips@protocol.com. See you tomorrow.

Correction: An earlier version of this newsletter incorrectly characterized Facebook's recent settlement related to Illinois' Biometric Information Privacy Act. The settlement is being used to argue in favor of a right to sue in privacy laws being debated elsewhere; it did not end any private citizens' right to sue. An earlier version also misspelled the name of Protocol reporter Levi Sumagaysay. This story was updated Feb. 7, 2020.

Image: Yuanxin

Yuanxin Technology doesn't hide its ambition. In the first line of its prospectus, the company says its mission is to be the "first choice for patients' healthcare and medication needs in China." But the road to winning the crowded China health tech race is a long one for this Tencent- and Sequoia-backed startup, even with a recent valuation of $4 billion, according to Chinese publication Lieyunwang. Here's everything you need to know about Yuanxin Technology's forthcoming IPO on the Hong Kong Stock Exchange.

What does Yuanxin do?

There are many ways startups can crack open the health care market in China, and Yuanxin has focused on one: prescription drugs. According to its prospectus, sales of prescription drugs outside hospitals account for only 23% of the total healthcare market in China, whereas that number is 70.2% in the United States.

Yuanxin started with physical stores. Since 2015, it has opened 217 pharmacies immediately outside Chinese hospitals. "A pharmacy has to be on the main road where a patient exits the hospital. It needs to be highly accessible," Yuanxin founder He Tao told Chinese media in August. Then, patients are encouraged to refill their prescriptions on Yuanxin's online platforms and to follow up with telehealth services instead of returning to a hospital.

From there, Yuanxin has built a large product portfolio that offers online doctor visits, pharmacies and private insurance plans. It also works with enterprise clients, designing office automation and prescription management systems for hospitals and selling digital ads for big pharma.

Yuanxin's Financials

Yuanxin's annual revenues have been steadily growing from $127 million in 2018 to $365 million in 2019 and $561 million in 2020. In each of those three years, over 97% of revenue came from "out-of-hospital comprehensive patient services," which include the company's physical pharmacies and telehealth services. More specifically, approximately 83% of its retail sales derived from prescription drugs.

But the company hasn't made a profit. Yuanxin's annual losses grew from $17 million in 2018 to $26 million in 2019 and $48 million in 2020. The losses are moderate considering the ever-growing revenues, but cast doubt on whether the company can become profitable any time soon. Apart from the cost of drug supplies, the biggest spend is marketing and sales.

What's next for Yuanxin

There are still abundant opportunities in the prescription drug market. In 2020, China's National Medical Products Administration started to explore lifting the ban on selling prescription drugs online. Although it's unclear when the change will take place, it looks like more purely-online platforms will be able to write prescriptions in the future. With its established market presence, Yuanxin is likely one of the players that can benefit greatly from such a policy change.

The enterprise and health insurance businesses of Yuanxin are still fairly small (accounting for less than 3% of annual revenue), but this is where the company sees an opportunity for future growth. Yuanxin is particularly hoping to power its growth with data and artificial intelligence. It boasts a database of 14 million prescriptions accumulated over years, and the company says the data can be used in many ways: designing private insurance plans, training doctors and offering chronic disease management services. The company says it currently employs 509 people on its R&D team, including 437 software engineers and 22 data engineers and scientists.

What Could Go Wrong?

The COVID-19 pandemic has helped sell the story of digital health care, but Yuanxin isn't the only company benefiting from this opportunity. 2020 has seen a slew of Chinese health tech companies rise. They either completed their IPO process before Yuanxin (like JD, Alibaba and Ping An's healthcare subsidiaries) or are close to it (WeDoctor and DXY). In this crowded sector, Yuanxin faces competition from both companies with Big Tech parent companies behind them and startups that have their own specialized advantages.

Like each of its competitors, Yuanxin needs to be careful with how it processes patient data — some of the most sensitive personal data online. Recent Chinese legislation around personal data has made it clear that it will be increasingly difficult to monetize user data. In the prospectus, Yuanxin elaborately explained how it anonymizes data and prevents data from being leaked or hacked, but it also admitted that it cannot foresee what future policies will be introduced.

Who Gets Rich

  • Yuanxin's founder and CEO He Tao and SVP He Weizhuang own 29.82% of the company's shares through a jointly controlled company. (It's unclear whether He Tao and He Weizhuang are related.)
  • Tencent owns 19.55% of the shares.
  • Sequoia owns 16.21% of the shares.
  • Other major investors include Qiming, Starquest Capital and Kunling, which respectively own 7.12%, 6.51% and 5.32% of the shares.

What People Are Saying

  • "The demands of patients, hospitals, insurance companies, pharmacies and pharmaceutical companies are all different. How to meet each individual demand and find a core profit model is the key to Yuanxin Technology's future growth." — Xu Yuchen, insurance industry analyst and member of China Association of Actuaries, in Chinese publication Lanjinger.
  • "The window of opportunity caused by the pandemic, as well as the high valuations of those companies that have gone public, brings hope to other medical services companies…[But] the window of opportunity is closing and the potential of Internet healthcare is yet to be explored with new ideas. Therefore, traditional, asset-heavy healthcare companies need to take this opportunity and go public as soon as possible." —Wang Hang, founder and CEO of online healthcare platform Haodf, in state media China.com.

Zeyi Yang
Zeyi Yang is a reporter with Protocol | China. Previously, he worked as a reporting fellow for the digital magazine Rest of World, covering the intersection of technology and culture in China and neighboring countries. He has also contributed to the South China Morning Post, Nikkei Asia, Columbia Journalism Review, among other publications. In his spare time, Zeyi co-founded a Mandarin podcast that tells LGBTQ stories in China. He has been playing Pokemon for 14 years and has a weird favorite pick.

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