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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.

Power

The video game industry is bracing for its Netflix and Spotify moment

Subscription gaming promises to upend gaming. The jury's out on whether that's a good thing.

It's not clear what might fall through the cracks if most of the biggest game studios transition away from selling individual games and instead embrace a mix of free-to-play and subscription bundling.

Image: Christopher T. Fong/Protocol

Subscription services are coming for the game industry, and the shift could shake up the largest and most lucrative entertainment sector in the world. These services started as small, closed offerings typically available on only a handful of hardware platforms. Now, they're expanding to mobile phones and smart TVs, and promising to radically change the economics of how games are funded, developed and distributed.

Of the biggest companies in gaming today, Amazon, Apple, Electronic Arts, Google, Microsoft, Nintendo, Nvidia, Sony and Ubisoft all operate some form of game subscription. Far and away the most ambitious of them is Microsoft's Xbox Game Pass, featuring more than 100 games for $9.99 a month and including even brand-new titles the day they release. As of January, Game Pass had more than 18 million subscribers, and Microsoft's aggressive investment in a subscription future has become a catalyst for an industrywide reckoning on the likelihood and viability of such a model becoming standard.

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Nick Statt
Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at nstatt@protocol.com.

Over the last year, financial institutions have experienced unprecedented demand from their customers for exposure to cryptocurrency, and we've seen an inflow of institutional dollars driving bitcoin and other cryptocurrencies to record prices. Some banks have already launched cryptocurrency programs, but many more are evaluating the market.

That's why we've created the Crypto Maturity Model: an iterative roadmap for cryptocurrency product rollout, enabling financial institutions to evaluate market opportunities while addressing compliance requirements.

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Caitlin Barnett, Chainanalysis
Caitlin’s legal and compliance experience encompasses both cryptocurrency and traditional finance. As Director of Regulation and Compliance at Chainalysis, she helps leading financial institutions strategize and build compliance programs in order to adopt cryptocurrencies and offer new products to their customers. In addition, Caitlin helps facilitate dialogue with regulators and the industry on key policy issues within the cryptocurrency industry.
Protocol | Policy

Lina Khan wants to hear from you

The new FTC chair is trying to get herself, and the sometimes timid tech-regulating agency she oversees, up to speed while she still can.

Lina Khan is trying to push the FTC to corral tech companies

Photo: Graeme Jennings/AFP via Getty Images

"When you're in D.C., it's very easy to lose connection with the very real issues that people are facing," said Lina Khan, the FTC's new chair.

Khan made her debut as chair before the press on Wednesday, showing up to a media event carrying an old maroon book from the agency's library and calling herself a "huge nerd" on FTC history. She launched into explaining how much she enjoys the open commission meetings she's pioneered since taking over in June. That's especially true of the marathon public comment sessions that have wrapped up each of the two meetings so far.

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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.

Protocol | Fintech

Beyond Robinhood: Stock exchange rebates are under scrutiny too

Some critics have compared the way exchanges attract orders from customers to the payment for order flow system that has enriched retail brokers.

The New York Stock Exchange is now owned by the Intercontinental Exchange.

Photo: Aditya Vyas/Unsplash

As questions pile up about how powerful and little-known Wall Street entities rake in profits from stock trading, the exchanges that handle vast portions of everyday trading are being scrutinized for how they make money, too.

One mechanism in particular — exchange rebates, or payments from the exchanges for getting certain trades routed to them — has raised concerns with regulators and members of Congress.

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Tomio Geron

Tomio Geron ( @tomiogeron) is a San Francisco-based reporter covering fintech. He was previously a reporter and editor at The Wall Street Journal, covering venture capital and startups. Before that, he worked as a staff writer at Forbes, covering social media and venture capital, and also edited the Midas List of top tech investors. He has also worked at newspapers covering crime, courts, health and other topics. He can be reached at tgeron@protocol.com or tgeron@protonmail.com.

Protocol | Workplace

The Activision Blizzard lawsuit has opened the floodgates

An employee walkout, a tumbling stock price and damning new reports of misconduct.

Activision Blizzard is being sued for widespread sexism, harassment and discrimination.

Photo: Bloomberg/Getty Images

Activision Blizzard is in crisis mode. The World of Warcraft publisher was the subject of a shocking lawsuit filed by California's Department of Fair Employment and Housing last week over claims of widespread sexism, harassment and discrimination against female employees. The resulting fallout has only intensified by the day, culminating in a 500-person walkout at the headquarters of Blizzard Entertainment in Irvine on Wednesday.

The company's stock price has tumbled nearly 10% this week, and CEO Bobby Kotick acknowledged in a message to employees Tuesday that Activision Blizzard's initial response was "tone deaf." Meanwhile, there has been a continuous stream of new reports unearthing horrendous misconduct as more and more former and current employees speak out about the working conditions and alleged rampant misogyny at one of the video game industry's largest and most powerful employers.

Keep Reading Show less
Nick Statt
Nick Statt is Protocol's video game reporter. Prior to joining Protocol, he was news editor at The Verge covering the gaming industry, mobile apps and antitrust out of San Francisco, in addition to managing coverage of Silicon Valley tech giants and startups. He now resides in Rochester, New York, home of the garbage plate and, completely coincidentally, the World Video Game Hall of Fame. He can be reached at nstatt@protocol.com.
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