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What really happened at Equifax

Your five-minute guide to what's happening in tech this Tuesday, from the future of digital banking to a report card for the web.

Good morning! This Tuesday, the DOJ blames China for Equifax, Uber and Postmates fail to temporarily block AB 5, and the Vision Fund takes its first official loss.

People Are Talking

The FTC needs an overhaul to take on big tech, Senator Josh Hawley said:

  • "Google and Facebook have acquired hundreds of companies in the last two decades, yet the FTC never once intervened to try to block any of these acquisitions."

Amazon wants Trump to testify in its JEDI case, along with other White House officials:

  • "The question is whether the President of the United States should be allowed to use the budget of the DoD to pursue his own personal and political ends."

Also, Amazon is already the company politicians want it to be, according to … its global affairs head Jay Carney:

  • "When it comes to creating jobs, raising wages, providing benefits and training employees for higher-paying jobs, Amazon is doing many good things — for the economy, and for American workers."
  • Carney also had A Big Day on Twitter dealing with criticism of his comments, which Matt Stoller summed up thusly: "That's interesting now pay your taxes."

The case against Theranos' Elizabeth Holmes should be dismissed, her attorney said:

  • "The indictment is full of ambiguity and fudging language, the government is inserting these phrases so they can shift their theory as they go along in the trial."

The Big Story

The international conspiracy behind the Equifax hack

It was the hack everyone heard about, leading to the settlement that caused us all to naively try to claim our $125. Equifax remains one of the biggest data breaches ever — and now we know what allegedly happened.

  • Attorney General William Barr said at a press conference Monday that the DOJ has identified and indicted four members of China's People's Liberation Army in connection with the hack.
  • Barr made clear how extraordinary this was: "We normally don't bring criminal charges against members of another country's military or intelligence services outside the United States … the deliberate indiscriminate theft of the vast amounts of sensitive personal data of civilians as occurred here cannot be countenanced."

Our friends at POLITICO have a good rundown of exactly how the hack worked, if you want more details.

I asked Protocol's security reporter, Adam Janofsky, what he thought of it. Here's what he said:

  • The indictment might look like a win for U.S. prosecutors and Equifax — and in some ways it is — but it's important to remember that a lot of the damage done won't be reversed.
  • The Chinese military likely has a trove of sensitive information on about half of all Americans, which it can use to spy on government officials or blackmail people who are financially stressed.
  • Perhaps even worse, the data could be fed into Chinese artificial intelligence tools to target Americans, Barr said.

Equifax might naturally want everyone to move on: One Equifax employee described the day to me as "drinking from a firehose," but also said that it's "like one of those traumatic experiences we can put behind us."

  • But the pressure might not be finished just yet. Senator Mark Warner said in a statement that, "the indictment does not detract from the myriad of vulnerabilities and process deficiencies that we saw in Equifax's systems and response to the hack."

How much time is your business spending thinking about China, or hackers at all? Or, actually, here's my real question: Did anyone reading this email ever get their $125? If so, please send me an email: david@protocol.com. I want to learn your ways.

Fintech

A finance app gets its banking wings

Varo Money took a big step to becoming a national, digital-only bank, announcing Monday that it's set to receive the first-ever "de novo national bank charter" for a banking startup. It means the company will soon be able to operate as a full-fledged bank, instead of relying on a partner to handle some services.

This is a key moment for Varo, and for the fintech industry as a whole, Varo CEO Colin Walsh told me.

  • He recalled a Bloomberg Law story from late last year saying Varo was "an important bellwether for the fate of fintech banking." If Varo couldn't get approved, there was little hope for anyone else. That's how it felt to him, too.
  • Walsh also said he doesn't expect the process to be easier for the long list of other tech companies hoping for a charter — he said that the Federal Deposit Insurance Corporation is likely to make everyone jump through the same hoops as Varo did, and many companies simply won't have the expertise or resources.

Varo's been working with regulators since the company's early days in 2016. Walsh says the process hasn't been easy: Varo filed 5,000 pages in applications, had FDIC employees prowling its offices for weeks, and had to build new teams and new systems to satisfy regulatory requirements.

But now Varo, which focuses on lower- and middle-income customers, can offer more to users. "We're not going to open branches, we're not going to open cash vaults, we're not planning to buy an ATM network anytime soon," Walsh said. But it does plan to have a pretty complete product line soon after it becomes an official national bank in the second quarter of this year.

Do you use an app like Varo, Robinhood, or Chime? What would entice you to switch? Let me know: david@protocol.com.

A MESSAGE FROM NASDAQ

Reimagining Markets Everywhere

Nasdaq Technology is reshaping the future of global markets by redefining what a marketplace can be.

Learn more here.

State of the Web

Twitter's up, Yahoo's down, and Google basically owns the web

SimilarWeb published its annual report on the state of the web on Monday, and it's full of interesting tidbits.

First, the not-so-surprising stuff:

  • Desktop web browsing is down slightly from last year (and has been decreasing for a while) while mobile traffic continues to climb.
  • Google still absolutely dominates the web. Twitter's traffic climbed last year, while Yahoo and Facebook's dropped — though Instagram and WhatsApp both grew significantly.

Then there's the somewhat-surprising stuff:

  • Amazon Prime Day has become a top-notch shopping holiday, up there with Black Friday.
  • The most mobile-friendly category on the web? Porn. Number two? Gambling. Turns out anything people want to do privately, they do on their phones. Though they pretty much do everything on their phones — the only category still dominated by the desktop is "Arts & Entertainment," which is mostly streaming media.

The report hits on everything from President Trump's continuing reign as the most popular search term on the planet to the remarkable rise of Google Flights and what it means for the online travel business. Flip through this and Benedict Evans' 2020 tech trends, and you'll have 2020 pretty much in focus.

Making Moves

Facebook is hiring a communications manager for its new Oversight Board. Key requirements: lots of experience, good relationships, and (I'm guessing) a remarkable tolerance for chaos.

Eileen Naughton, Google's head of HR, is leaving the company later this year. She's been involved in many of the company's high-profile internal clashes over the last few years.

Amazon's video efforts have a new leader: Mike Hopkins. Previously the chairman of Sony Pictures Television and before that the CEO of Hulu, Hopkins will oversee Prime Video and Amazon Studios.

In Other News

  • The White House officially announced its budget proposal for 2021 with a huge increase in AI and quantum spending. Keep in mind that the details will change — a lot — before anything actually passes.
  • Amazon is still winning the smart speaker war. A new report found about 70% of people playing music and setting timers and irritatedly shouting "no, I said the LIVING ROOM lights," are doing it with Alexa.
  • From Protocol: Uber and Postmates lost their bid for a temporary injunction against AB 5. That means California can enforce the gig-economy law while the fight continues in court.
  • The court challenge of the T-Mobile / Sprint merger is coming to a close. The NYT reports that a judge in Manhattan is planning to rule in favor of the deal.
  • A Business Insider story caused confusion about Slack. The story implied that IBM had decided to sign up 350,000 employees; Slack's stock spiked on the news, and even paused trading at one point. But in an SEC filing Slack said that IBM has actually been its largest customer for several years — it didn't sign up all 350,000 employees overnight.
  • The Bloomberg campaign made a plea to Silicon Valley: send us your best people, and help us win the election.
  • From POLITICO: Google is appealing a 2017 antitrust ruling against the company, giving Europe's big-tech fighters their first major public test.
  • Bill Gates may not be buying that superyacht after all, the BBC reports. But honestly, he should be. If he's not, get on it. And send me pictures.
  • From Protocol: Brandless became the first Vision Fund-backed company to shut down. Biz Carson reports that the company is stopping all orders and laying off nearly 90% of its staff.

One More Thing

When your car-share is a getaway car

One time, I rented a car only to find the windshield had been shattered. Turns out that was nothing: NBC News reports that users of car-sharing services like Getaround and Turo are increasingly finding their cars have been broken into — and even used to commit crimes. Why? Because as NBC puts it, "the app gives precise locations of cars, even for people just browsing without a reservation — and the keys are always left inside." Getaround responded to the story, explaining all the new and existing safety measures it's taking for people's cars.

A MESSAGE FROM NASDAQ

Reimagining Markets Everywhere

Nasdaq Technology is daring to think differently.

Learn more here.

Thoughts, questions, tips? Send them to me, david@protocol.com, or our tips line, tips@protocol.com. Enjoy your Tuesday, see you tomorrow.

Fintech

Circle’s CEO: This is not the time to ‘go crazy’

Jeremy Allaire is leading the stablecoin powerhouse in a time of heightened regulation.

“It’s a complex environment. So every CEO and every board has to be a little bit cautious, because there’s a lot of uncertainty,” Circle CEO Jeremy Allaire told Protocol at Converge22.

Photo: Circle

Sitting solo on a San Francisco stage, Circle CEO Jeremy Allaire asked tennis superstar Serena Williams what it’s like to face “unrelenting skepticism.”

“What do you do when someone says you can’t do this?” Allaire asked the athlete turned VC, who was beaming into Circle’s Converge22 convention by video.

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Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Google Voice at (925) 307-9342.

Sponsored Content

Great products are built on strong patents

Experts say robust intellectual property protection is essential to ensure the long-term R&D required to innovate and maintain America's technology leadership.

Every great tech product that you rely on each day, from the smartphone in your pocket to your music streaming service and navigational system in the car, shares one important thing: part of its innovative design is protected by intellectual property (IP) laws.

From 5G to artificial intelligence, IP protection offers a powerful incentive for researchers to create ground-breaking products, and governmental leaders say its protection is an essential part of maintaining US technology leadership. To quote Secretary of Commerce Gina Raimondo: "intellectual property protection is vital for American innovation and entrepreneurship.”

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James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.
Enterprise

Is Salesforce still a growth company? Investors are skeptical

Salesforce is betting that customer data platform Genie and new Slack features can push the company to $50 billion in revenue by 2026. But investors are skeptical about the company’s ability to deliver.

Photo: Marlena Sloss/Bloomberg via Getty Images

Salesforce has long been enterprise tech’s golden child. The company said everything customers wanted to hear and did everything investors wanted to see: It produced robust, consistent growth from groundbreaking products combined with an aggressive M&A strategy and a cherished culture, all operating under the helm of a bombastic, but respected, CEO and team of well-coiffed executives.

Dreamforce is the embodiment of that success. Every year, alongside frustrating San Francisco residents, the over-the-top celebration serves as a battle cry to the enterprise software industry, reminding everyone that Marc Benioff’s mighty fiefdom is poised to expand even deeper into your corporate IT stack.

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Joe Williams

Joe Williams is a writer-at-large at Protocol. He previously covered enterprise software for Protocol, Bloomberg and Business Insider. Joe can be reached at JoeWilliams@Protocol.com. To share information confidentially, he can also be contacted on a non-work device via Signal (+1-309-265-6120) or JPW53189@protonmail.com.

Policy

The US and EU are splitting on tech policy. That’s putting the web at risk.

A conversation with Cédric O, the former French minister of state for digital.

“With the difficulty of the U.S. in finding political agreement or political basis to legislate more, we are facing a risk of decoupling in the long term between the EU and the U.S.”

Photo: David Paul Morris/Bloomberg via Getty Images

Cédric O, France’s former minister of state for digital, has been an advocate of Europe’s approach to tech and at the forefront of the continent’s relations with U.S. giants. Protocol caught up with O last week at a conference in New York focusing on social media’s negative effects on society and the possibilities of blockchain-based protocols for alternative networks.

O said watching the U.S. lag in tech policy — even as some states pass their own measures and federal bills gain momentum — has made him worry about the EU and U.S. decoupling. While not as drastic as a disentangling of economic fortunes between the West and China, such a divergence, as O describes it, could still make it functionally impossible for companies to serve users on both sides of the Atlantic with the same product.

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Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

A 'Soho house for techies': VCs place a bet on community

Contrary is the latest venture firm to experiment with building community spaces instead of offices.

Contrary NYC is meant to re-create being part of a members-only club where engineers and entrepreneurs can hang out together, have a space to work, and host events for people in tech.

Photo: Courtesy of Contrary

In the pre-pandemic times, Contrary’s network of venture scouts, founders, and top technologists reflected the magnetic pull Silicon Valley had on the tech industry. About 80% were based in the Bay Area, with a smattering living elsewhere. Today, when Contrary asked where people in its network were living, the split had changed with 40% in the Bay Area and another 40% living in or planning to move to New York.

It’s totally bifurcated now, said Contrary’s founder Eric Tarczynski.

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Biz Carson

Biz Carson ( @bizcarson) is a San Francisco-based reporter at Protocol, covering Silicon Valley with a focus on startups and venture capital. Previously, she reported for Forbes and was co-editor of Forbes Next Billion-Dollar Startups list. Before that, she worked for Business Insider, Gigaom, and Wired and started her career as a newspaper designer for Gannett.

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