Politics

Facebook is infuriating Republicans. So why isn’t that helping with Democrats?

Nancy Pelosi won't meet with the company — and Hill aides say an election-eve conversion isn't going to make things better.

Mark Zuckerberg, Joel Kaplan and Andy Stone walking down a hall

Democratic aides lay the blame, at least in part, at the feet of Joel Kaplan, Facebook's global public policy chief, seen walking here with Mark Zuckerberg.

Photo: Samuel Corum/Getty Images

With Donald Trump behind in the polls and the Republicans' hold on the Senate in doubt, Facebook has suddenly begun to cede ground on issues important to Democratic lawmakers. The company has banned political ads that might delegitimize election results, blocked the right-wing conspiracy group QAnon and, this week, limited the spread of a conspiratorial article about Vice President Joe Biden and his son Hunter.

The moves are infuriating Republicans on Capitol Hill — but they don't seem to be helping Facebook with Democrats.

House Speaker Nancy Pelosi and her staff have refused to meet with Facebook representatives for months, two sources told Protocol. Aides said that other House Democrats have also barred their staffs from meeting with the company. And they say that, with four years of missteps and deflections, Facebook has dug itself such a big hole with Congressional Democrats that a deathbed conversion isn't going to change anyone's mind.

Said one House Democratic aide: "A decision on political ads 20 days before the election — either they're unbelievably naive and have never read anything about the problems with our elections that they've caused, or they had a meeting where they said, 'Joe Biden might win, Kamala Harris might win, we should hedge our bets and do something that will at least give us a talking point later to say, huh, those guys were trying.'"

Facebook denies that its recent content decisions have been politically motivated. A spokesperson pointed out that Facebook's policies on QAnon have evolved over time and that the Biden story tested its year-old viral misinformation policy.

"While many Republicans think we should do one thing, many Democrats think we should do the exact opposite," a spokesperson said. "We've faced criticism from Republicans for being biased against conservatives and Democrats for not taking more steps to restrict the exact same content. Our job is to create one consistent set of rules that applies equally to everyone."

Despite Facebook's protestations, Democrats on Capitol Hill continue to be wary.

For Pelosi, it's at least partly personal: The speaker was livid that Facebook wouldn't take down a video that had been manipulated to make her look drunk. It's also awkward: Facebook's lead lobbyist for House Democrats is Catlin O'Neill, Pelosi's former chief of staff.

Neither Pelosi nor O'Neill responded to questions from Protocol.

Other Hill Democrats have their own reasons for blocking Facebook. "The immense, and somewhat sudden, public distrust of Facebook makes lawmakers and staffers really wary of being associated with them," said one Hill aide. "Despite a robust team of senior folks from both sides of the aisle — and significant ability to provide political support to members of Congress — they find their access and influence is diminished."

But the public's perception of Facebook is only part of the problem. A former Republican Senate aide said there's another factor: Facebook's "arrogant" lobbying approach of spending time and energy ingratiating itself to whoever's the most powerful at the moment.

"I think there's a lack of desire for people from Facebook to meet with the average rank-and-file members and establish relationships there," the former aide said.

That sentiment was echoed by two different House aides, who said Facebook has reoriented its lobbying strategy since 2016 to focus on the Trump administration and the Republican Senate.

One House aide who works for a member of the Congressional Black Caucus said that Facebook over the last few years has "shifted their game to the Senate and to the White House, realizing that we're not worth it."

But Facebook said it has met repeatedly with the CBC's Tech 2020 Caucus in the past year. Sheryl Sandberg met with the members and staff of the caucus twice in 2019, and Facebook's vice president of global affairs, Nick Clegg, met with them at the beginning this year to discuss Facebook's civil rights audit.

Facebook also said it has hosted 13 briefings on election integrity for House staff this year. Asked about its relations with Hill staffers more generally, a company spokesperson said: "We value our relationships with members of Congress and their staffs and will continue working with them on important issues."

Over the past year, countless commentators, critics, journalists and Facebook employees have accused Facebook of making decisions that benefit President Trump, pointing out that its hands-off approach to speech has offered the president and the right to take full advantage of its powerful algorithms. A Facebook executive recently conceded that the right has a massive advantage on the platform, arguing that "right-wing populism is always more engaging." But Democratic aides lay the blame, at least in part, at the feet of Joel Kaplan, Facebook's global public policy chief, and Kevin Martin, Facebook's vice president of U.S. public policy, two well-known establishment Republicans.

"At [Facebook], you've got Kaplan, Martin — none of them are working for Tom Petri or Susan Collins, they're all hardcore Republicans," said one House Democratic aide. "So there's that side with respect to their rules, and you always wonder how much they view these issues in terms of partisan advantage or impact." No matter how many Democrats the company is able to woo over, that reputation has planted itself firmly in the psyche of Capitol Hill.

Facebook, which can offer six-figure salaries that dwarf the salaries offered by members of Congress, continues to hire key Capitol Hill staffers. As recently as June, Facebook hired Ritika Rodrigues Robertson, Republican Rep. Ken Buck's longtime chief of staff, onto its policy team. Buck has been the most prominent Republican to sign onto antitrust proposals to rein in Big Tech's power, making Robertson an important strategic hire as Congress continues to scrutinize Facebook's alleged monopoly power.

Before that, in May, Facebook's policy shop hired Aparna Patrie, who was a counsel to Democratic Sen. Richard Blumenthal, a prominent Facebook critic.

But those strategic hires were received with a mixture or raised eyebrows and side-eye by many staffers on the Hill, aides told Protocol — a big change from not so long ago.

"Facebook had the best of all worlds a decade ago, and continuing on for many years thereafter," said Jeff Hauser, the director of the Revolving Door Project, which scrutinizes the ties between corporate America and government. "Now, once you've gotten there it's like going to Big Tobacco or something; you are going to be outside of good, center-left society."

Hauser said more and more staff, particularly Democrats, are staying away from Facebook job offers because "there's a widespread understanding that tech ties are problematic" if they hope to join the executive branch at some point.

"I know people have passed on offers and waited for something else because they just don't want to work there," said one Democratic House aide. The aide added that he personally wouldn't work there.

It's a noticeable shift. The aide who works for a member of the CBC described aides avoiding eye contact with Facebook lobbyists at a popular Dunkin' Donuts location in the Capitol.

Another House Democratic aide said one peer on the Hill justified a move to Facebook this year by saying, "'If I want to see change, I need to go there and be a part of it.'"

"I was like, 'You really think that?'" the aide said. "It just wasn't quite the same."

Each of the big tech companies is facing its own levels of political tumult. Later this month, the CEOs of Facebook, Twitter and Google will appear before the Senate Commerce Committee to explain their content moderation practices and the future of Section 230 — a hearing that comes after the White House reportedly pressured GOP members to rail against tech ahead of Nov. 3.

But aides said Facebook has aggravated staff and the members they work for more than any of the other tech companies. And it's hard to imagine how the company will climb out of that hole over the next four years.

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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