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Facebook’s alternate reality

Image: Facebook / Protocol
Facebook Aria

Good morning! This Thursday, Facebook has big — and small — dreams for Oculus, everybody at Snowflake is rich now, the techlash is very real, and who knows what's next for TikTok.

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The Big Story

Facebook doubles down on its alternate reality

The tech industry has basically either given up on gone quiet on virtual and augmented reality. Except Facebook, which continues to loudly press on. Yesterday it announced a new Oculus Quest, lots of new games and software, and a partnership that might be more important than anything else it talked about.

The interesting short-term challenge is whether the new, cheaper, better Oculus Quest 2, armed with games people know and love like Splinter Cell and Assassin's Creed, can become Facebook's version of a gaming console. As Facebook's Mike Verdu told Protocol's Seth Schiesel, that's clearly what it's going for.

  • "Games came first, they are well-established and will be a huge business for a really long time," Verdu said. "Gaming is the main driver of user engagement and spending. It's the place where it's evolved enough to where developers are seeing numerical success and have reached a self-sustaining state in VR."
  • Those games are all for Quest now, too. Oculus is ditching the Rift line, with its PC hookups, and going all-in on the standalone Quest.

Longer-term, its new partnership is huge: Facebook's working with EssilorLuxottica, the Italian company that makes approximately all of the world's glasses and sunglasses, to design smart glasses. The first pair to roll out will be smart Ray-Bans, coming next year.

  • Judging by the hefty research prototypes Facebook's calling Project Aria, Ray-Ban has its work cut out. But AR glasses are never going to work until they look like regular glasses, and nobody does that better than Luxottica.
  • This partnership is also a significant statement of purpose: These are not goofy gadgets that Facebook's marketing team hopes to make acceptable, like AirPods. They're going to try their damndest to make a set of AR glasses that people actually want to wear.
  • By the way, the Glasshole Phenomenon is still a huge concern. Facebook might even be over-compensating: Protocol's Janko Roettgers wrote that Facebook is sending Aria testers out with T-shirts explaining what they're doing.

Can Facebook make all of this work while the rest of the industry remains quiet on the technology? I guess we'll see some clues in the holiday sales of the Quest 2 and the product that Ray-Ban helps to ship.

In related news: The next generation of consoles is just about upon us. Two PlayStation 5 models, two Xboxes, one Quest, and a whole lot of $70 games coming to a screen near you this holiday season. I'm a longtime PS4 user, so probably heading to PS5. Which one are you most excited about?

Markets

Snowflake melts the markets

Shakeel Hashim writes: Snowflake was already set to be the biggest and most important IPO of the year so far, and on listing yesterday it proved that to be the case — and then some.

  • Last week, Snowflake set its expected price range at $75 to $85 per share, valuing the company at around $21 billion. Earlier this week, it raised that price range to $100 to $110, before finally pricing the IPO at $120.
  • But the price kept climbing: On Wednesday morning, reports came in that it was expected to open at $155. Then $165. Then $200. Then ... you get the picture. Ultimately, it opened at $245 and closed at $253.93, up 111.6% from the IPO price.
  • As Protocol's Tom Krazit writes, with a valuation of $69.9 billion, Snowflake instantly became one of the most valuable companies in enterprise technology, and its IPO leap is a sign of surging demand for cloud-based enterprise software.

Snowflake's pop isn't unprecedented. A lot of other recent tech IPOs have performed similarly: So far this year, Lemonade, Agora, and nCino have all more than doubled on listing, while BigCommerce shares tripled. But none of those were nearly as big as Snowflake, which is the largest-ever software IPO.

But do those jumps mean the IPO process is broken, as critics are keen to assert? Their argument is that such huge pops mean that companies are leaving money on the table that they could be investing in their businesses.

  • But the reality is more complicated: Buying into an IPO is risky, as cases like Rackspace and Uber show, and investors expect to be rewarded for that risk.
  • Selling at a discount can help companies attract a better caliber of investors — like Berkshire Hathaway, for instance, which may not have invested at a higher price. In the case of Snowflake, that's particularly important: It's likely that the Berkshire "halo effect" accounted for at least some of the pop. If Snowflake had priced higher, Berkshire might not have invested, and other investors might never have flocked to it at all.

Both sides have a point. And in the coming days, we'll get to see whether IPO detractors have a better alternative. Unity, which is expected to list on Friday, reportedly used an online auction process to set its price, similar to what Google did back in 2004. Palantir goes public via a direct listing next week, which avoids the pricing process altogether. Regulatory changes mean that companies will soon be able to raise money via a direct listing too, rather than just sell existing shares, which could encourage much more experimentation — and then there's the whole SPAC phenomenon. In other words, you're not done hearing from our friend Mr. Gurley yet.

Regulation

The techlash is real

A full third of Americans think that tech companies aren't regulated enough, according to a new study from FleishmanHillard. And 56% of Americans — and 59% of those surveyed around the world — think that tech companies "need to take more action to address the consequences of their policies, practices and products."

  • FleishmanHillard's Sophie Scott said the study was done to inject some numbers into conversations about privacy and regulation that are so often "based on feeling, rather than data." She said the data showed her that while a lot of people still trust and like the tech industry, opposition is growing.
  • Gen Z trusts tech the least, Scott said, which should be particularly alarming for tech companies. "What does that mean for recruitment in the tech sector?" she asked. "If you're facing increased competition from health care and automotive and these other growing industries, how are you going to handle that?"

The pandemic has accelerated some existing trends, like it has in so many ways, said FleishmanHillard's Natasha Kennedy. "What we've seen is, trust has just really been challenged and eroded over the course of the pandemic." She said FleishmanHillard is telling clients that they need to continue to restate their missions "to align with the collective good," and to continue to talk about what they're doing and where they're struggling. Transparency and trust are more important to people than ever.

  • A couple of other interesting numbers: About a third of people also say they just don't trust tech companies, and the percentage of people who think tech needs to do more to address its issues has gone up more than 20% just since last year.
  • The techlash, if you want to call it that, may not yet be a society-wide phenomenon. But it's a real thing, and you'd be making a mistake to ignore it.

A MESSAGE FROM PHILIPS

Philips

Stronger care … from more efficient operations

In a defining moment for healthcare, it's even more crucial to deliver patient-centered care efficiently. At Philips, we are committed to providing intelligent, automated workflows that seek to improve patient care. More efficient healthcare means stronger, more resilient healthcare.

Learn more.

People Are Talking

The Treasury Department won't get a kickback for the TikTok sale, and President Trump seemed surprised:

  • "Amazingly, I find that we're not allowed to do that."

Some people are concerned the TikTok deal doesn't pass security muster. Trump said he plans to look over the details today:

  • "I'm not prepared to sign off on anything. I have to see the deal. They're going to be reporting to me tomorrow morning."
  • And on the prospect of ByteDance keeping a majority stake in TikTok: "Conceptually, I can tell you, I don't like that."

Tech giants continue to meet to talk about elections, and one of their goals is to prevent the platforms themselves from being part of the problem:

  • "[We discussed] ways to counter targeted attempts to undermine the election conversation before, during and after the election. This include preparing for possible so-called 'hack and leak' operations attempting to use platforms and traditional media to amplify unauthorized information drops." (Wikileaks, anyone?)

Making Moves

President Trump nominated Nathan Simington to the FCC. Trump is looking to replace Michael O'Rielly, with whom he disagrees about bias and censorship on the internet.

Nadia Rawlinson is Slack's new chief people officer. She joins from Live Nation, and has led HR teams at Rakuten and Groupon over the years. She'll be responsible for helping define – and implement – whatever the future of work looks like at Slack. Robby Kwok got a new job internally, too, as Stewart Butterfield's chief of staff.

Facebook is hiring for a similar job: director of remote work. This person will "develop and govern Facebook's long-term, global remote workforce strategy and approach to flexibility" — a process guaranteed to ruffle some feathers internally.

Anduril made two big hires: Megan Milam, the company's new head of government relations, and Meagan Murray, its new head of people.

In Other News

  • China could block the Nvidia-Arm deal. The Financial Times reports that getting authorities' approval could be challenging, given the current frosty relations between the U.S. and China. It sounds like the ByteDance deal would sail through.
  • The Justice Department said WeChat users won't be penalized for using the app. But it added that using the app "could be directly or indirectly impaired through measures targeted at other transactions." Expect more details about what that really means by the end of this week.
  • Apple filed a motion against Epic, calling it "a saboteur, not a martyr." Apple said Epic's Fortnite update was "one of the most egregious acts of sabotage that Apple has experienced," and accused it of starting a fire, pouring gasoline on it, and then asking the Court for help putting it out. It also said Unreal Engine was now a "potential threat." Not that Apple's annoyed or anything.
  • On Protocol: For years, Oracle's tried to reform Section 230. If it now has ties to a social media platform, will that change? According to Oracle's top lobbyist, no!
  • Amazon launched podcasts in its Music app, including a range of original productions from DJ Khaled and Will Smith. The endeavor seems to be separate from Audible's recent podcast efforts.
  • Spotify employees reportedly raised concerns over Joe Rogan, who is now exclusive to the platform. In an all-hands meeting where a particularly controversial transphobic episode was discussed, CEO Daniel Ek said it would stay up after the company "made a different judgment call."
  • The EU said it will propose its own digital services tax next year if an OECD and G20 agreement can't be reached. Earlier this year, the U.S. pulled out of the OECD talks.
  • Amazon is planning to open 1,000 suburban warehouses, reports Bloomberg. The small delivery hubs would help speed up shipping times — and make Amazon much less reliant on UPS.
  • Telefonica is partnering with Rakuten on "open RAN," which could help provide an alternative to traditional 5G equipment from Huawei, Ericsson and Nokia. Telefonica thinks at least half of its sites upgraded in the next few years will use open RAN tech.
  • On Protocol: Evernote CEO Ian Small oversaw an 18-month rebuild of the troubled app. A new version's finally here, and the stakes are very high.
  • Biz Stone's got a new gig: logo designer. While working out of Spark Capital's office, he put together a branding deck for the company. That got sent to Pentagram, which basically used Biz's work unchanged.

One More Thing

In VR, there is no remote work

You wake up, strap on your Quest 2, and suddenly you're able to email on a giant screen floating in your living room, meet with your team as if you were there together and even feel like you're working in the middle of the wilderness. That's Facebook's vision for the Oculus-powered Infinite Office future of work, at least. No wonder it's so willing to let people move out of the Bay Area!

A MESSAGE FROM PHILIPS

Philips

Stronger care … from more efficient operations

In a defining moment for healthcare, it's even more crucial to deliver patient-centered care efficiently. At Philips, we are committed to providing intelligent, automated workflows that seek to improve patient care. More efficient healthcare means stronger, more resilient healthcare.

Learn more.

Today's Source Code was written by David Pierce, with help from Shakeel Hashim. Thoughts, questions, tips? Send them to david@protocol.com, or our tips line, tips@protocol.com. Enjoy your day, see you tomorrow.

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