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May 29, 2020
Good morning! This Friday, what Facebook and Google want from India, a whole bunch of troubles at WeWork, and SoftBank's back to its old ways. Want Index in your inbox each morning? Subscribe here.
What Matters Today
- Overnight: Twitter applied a label to one of Donald Trump's tweets, saying it "violated the Twitter rules about glorifying violence." Expect further fury from Trump this morning. Read Protocol's Source Code and this behind-the-scenes story from Issie Lapowsky and Emily Birnbaum for a full account of what's going on.
- Also: WeWork's board is due to vote on the appointment of two new board members, who will review whether a special committee of the board was allowed to sue SoftBank on WeWork's behalf. The committee doesn't want the new directors to be appointed, but on Wednesday a court blocked them from stopping the process. The dispute comes amid new problems for the company: IBM said it would leave a WeWork building, which is now up for sale; and WeWork is also being sued by a real estate firm, which alleges the company broke a commitment to help develop apartments.
- TrueCar, an online car marketplace, said it would lay off 219 people, around 30% of its staff.
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- Amazon said it will permanently retain around 70% of its 175,000 new workers.
- Dell beat revenue estimates, partly thanks to double-digit revenue growth in its commercial notebooks group.
- VMware, which is majority-owned by Dell, reported 39% year-on-year growth in recurring revenue.
- The U.K. government is reportedly planning to build a "D10" group of countries, including the U.S., which will work on developing 5G infrastructure providers outside of China.
- Wearable shipments were up almost 30% in Q1, with Apple taking a 29% market share.
- ByteDance has reportedly hired more than 150 engineers in California and an investor relations director in New York. Reuters reports that the moves are a concerted effort to move the company's power away from China.
- DoorDash launched a service for restaurants to build their own websites so that they don't have to pay to market on DoorDash. The new service will be free for the rest of the year.
- Nuro will use self-driving robots to deliver CVS pharmacy purchases.
- Elon Musk got a $775 million payday, his first payout for meeting Tesla's share price targets.
- Tile complained about Apple to the European competition commissioner, saying the company was unfairly favoring its own app over Tile's.
- Salesforce's guidance for the current quarter was below expectations, sending its shares down.
- Magic Leap's CEO stepped down, telling employees that the company has pivoted to making enterprise tools after raising a new funding round.
- Nio, the Chinese electric vehicle company, missed revenue estimates. The company's CEO said it might list its Nio China unit.
Tech's battle for India: Understanding Jio
If the 2010s were about Chinese tech, the 2020s look set to be about India. A huge battle is unfolding in the world's second most populous country, with local companies and foreign giants alike duking it out for control of its rapidly digitizing economy.
The best example of that is Jio Platforms, which has received around $10 billion of investment in the last five weeks, with another $5.5 billion reportedly on its way. Today on Protocol, I have a long piece explaining what exactly investors are betting on.
- In short, they're hoping it can become the WeChat of India. That's sort of always been Jio's plan, which it began executing a decade ago.
- Jio Platforms is majority-owned by Reliance Industries Limited (RIL), India's most-valuable company, and run by Mukesh Ambani, Asia's richest man. Back in 2010, Ambani started a $33 billion spending spree to build a nationwide 4G network in India. The aim of that, analysts told me, was to get Indians online — because once they were online, RIL could monetize them.
The network now has almost 400 million subscribers, and it's started to offer them a range of digital services like mobile wallets, remote education and online healthcare.
- Now RIL's getting into ecommerce, too. It already owns two huge grocery chains in the country and has just launched JioMart, which enables consumers to get delivery from those stores, alongside the millions of independent "kirana" stores across the country.
- But Jio's always faced one problem: How to get people to actually use those services. That's where Facebook comes in. "A lot of these smaller retailers are [already] doing lots of transactions on WhatsApp," Counterpoint Research's Tarun Pathak told me.
- By integrating JioMart with WhatsApp, JioMart is in front of millions of customers from day one. Facebook, meanwhile, gets a comprehensive ecommerce solution on its platform (that, realistically, it could never have built itself).
For Facebook, this is almost existentially important. With China off the table, India presents Facebook's last big growth opportunity. Being able to sell ecommerce ads, as well as make money from WhatsApp Pay, is Facebook's big chance at being able to monetize that opportunity.
But it's not going to be easy. Keep reading to find out why.
- "These companies are already extraordinarily powerful, but they're well positioned to emerge as the biggest winners of Covid-19 unless some legislative action is taken." — The Open Markets Institute's Sandeep Vaheesan said Big Tech M&A could get out of hand.
- "There are other companies going quickly to remote work and doing contracts that got fast-tracked." — Okta CEO Todd McKinnon said only 12% of the identity verification company's customers were "in COVID-19 impacted industries."
- "There were so many people at the centre that I thought it would be disastrous if the virus spread." — A warehouse worker for Coupang, a South Korean ecommerce company, helped explain why its facility has seen a recent coronavirus outbreak.
Diving Even Deeper
Tech's battle for India: A crowded market
Something I wondered before writing this piece is why Facebook needs Jio — why doesn't it just take over India by itself?
- It's actually already tried, and it was a disaster. In 2015, Facebook launched Free Basics in India, which offered free internet — but only for certain services (including, obviously, Facebook). After a huge backlash, the service was banned for violating net neutrality rules.
- More recently, Facebook has struggled to launch WhatsApp Pay. Regulators have given it an awful lot of grief, with the product now under review from India's competition authorities.
India's a very complicated market, and it seems Facebook's learned that it's easiest to crack with a local partner. That'll likely prove true, especially with one as dominant as RIL.
- Facebook's not the only one pursuing the partnership route. On Thursday, the Financial Times reported that Google is considering a stake in Vodafone Idea, Jio's rival.
- Google already has a partnership with India's other carrier, Bharti Airtel, which sells Google's enterprise software to its customers. But while Bharti's stock is near all-time highs, Vodafone Idea's has plunged over the last five years (thanks in part to a price war ignited by Jio) — presenting a "sweet bargain," according to Greyhound Research's Sanchit Vir Gogia.
If Google does get involved, Jio will find it even tougher to execute its already ambitious plans to build a giant ecosystem — one which Bharti and Vodafone also want to build.
- The Indian market is much more developed than China's was when WeChat came around. "Category leaders have been established," Gogia told me.
- That means building a super app will likely require acquisitions — which in turn requires time and capital.
Investors are clearly happy to offer up the capital. So now it's just a matter of time…
SoftBank's back, baby!
In some ways, today feels like a welcome return to the Before Days. SoftBank is involved in a weird WeWork dispute; it's investing a ton of money in a futuristic self-driving car company; and it doubled its top Vision Fund exec's salary to $15 million last year. (As a reminder, the Vision Fund lost $13 billion last year.) It's all very classic SoftBank, and I'm glad we've quickly moved on from that whole "profitability is important" spiel. With everything else haywire, some things have to remain constant.