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Microsoft CEO Satya Nadella Says Failed TikTok Deal ‘Strangest Thing I’ve Worked On’

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By Reuters | Updated: 28 September 2021

Microsoft’s near-acquisition of social media app TikTok last year was the “strangest thing I’ve ever worked on,” Chief Executive Officer Satya Nadella said on Monday.

TikTok had been ordered by then-US President Donald Trump to separate its US, version from Chinese parent ByteDance because of national security concerns about the collection of US users’ data. Microsoft in August 2020 began talks on the proposed acquisition but the deal collapsed by September.

Trump’s divestment push ended by the time he left office in January and no potential suitor ending up acquiring TikTok.

Speaking at the Code Conference in Beverly Hills, California, Nadella said he was looking forward to bringing Microsoft’s security, child safety, and cloud expertise to TikTok.

“It’s unbelievable,” Nadella said of the experience during an on-stage interview. “I learned so many things about so much and so many people. First of all, TikTok came to us. We didn’t go to TikTok.”

“TikTok was caught in between a lot of things happening across two capitals,” Nadella continued. “President Trump had a particular point of view of what he was trying to get done there, and then it just dropped off. The [US government] had a particular set of requirements and then it just disappeared.”

Nadella said what attracted ByteDance CEO Zhang Yiming to Microsoft was the US company’s services related to content moderation and child safety, developed through products included in Xbox video gaming tools and on business social network LinkedIn.

ByteDance did not immediately respond to a request for comment.

Nadella said he has no idea whether the US is still pushing for a deal under President Joe Biden. The Biden administration has said it is reviewing the national security concerns.

“At this point, I’m happy with what I have,” Nadella said.

He also expressed support for greater government regulation of cryptocurrency rules, which could stifle ransomware attacks since the ransoms often flow through opaque systems.

© Thomson Reuters 2021

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Tencent Says ‘Loophole’ Allowed WeChat Searches on Google, Bing

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By Reuters | Updated: 22 October 2021

Tencent’s WeChat has fixed a glitch that allowed some of its content to be searchable by external search engines, the owner of China’s most popular messaging app said on Friday, raising questions over regulators’ latest attempt to crackdown on the internet sector.

Some of WeChat’s content, including articles on its public accounts page, was briefly searchable in the last few days on Alphabet-owned Google and Microsoft’s Bing, but not on China’s dominant search engine Baidu, Reuters checks showed.

The change had prompted speculation that Tencent was heeding a call by Chinese authorities for its tech giants to tear down “walled gardens” in the country’s cyberspace which has come amid a wide ranging crackdown on the sector.

“Due to recent technological upgrades, the official accounts’ robots protocol had loopholes, which caused the external crawlers to scrape part of the official accounts’ content,” Tencent said in a statement in Chinese.

“The loopholes have since been fixed.”

Google, Microsoft, and Baidu did not immediately respond to a request for comment. Google is not available in China.

The ability to find WeChat content on Google and Bing was initially raised by users on developer forums. China’s internet sector has been long dominated by a handful of technology giants who have historically blocked rivals’ links as well as their search crawlers, a practice is often referred to as ‘walled gardens’.

In recent months, this practice has been targeted by Chinese authorities as part of a sweeping regulatory crackdown.

Last month, China’s Ministry of Industry and Information Technology (MIIT) ordered companies to stop blocking links, which they said has affected users’ experience and damaged consumer rights.

The MIIT has also been studying plans and conducting research to make WeChat content available on external search engines, according to a person with direct knowledge.

MIIT did not immediately respond to requests for comment.

Some users on China’s Twitter-like Weibo platform expressed dismay over Tencent’s comments.

“This should be an important attempt of creating an open internet space, how can you call it a bug,” said one user.

© Thomson Reuters 2021

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Snap Shares Plunge 25 percent as Apple Privacy Changes Hit Advertising Business

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By Reuters | Updated: 22 October 2021

Shares of Snap plummeted 25 percent on Thursday after the owner of photo messaging app Snapchat said privacy changes implemented by Apple Inc on iOS devices hurt the company’s ability to target and measure its digital advertising.

The Santa Monica, California-based company, which earns the vast majority of its revenue from selling digital advertising on the app, said the issue was compounded by global supply chain disruptions and labor shortages and caused brands to pull back on their advertising spending.

The results for Snap, which is the first of the major social media companies to report earnings, cast a shadow over Facebook and Twitter, which release third quarter results next week..

Snap’s results also knocked Facebook shares down 6 percent, Twitter down 7 percent and Alphabet fell 3 percent on Thursday.

The Apple privacy updates were rolled out broadly in June and prevent digital advertisers from tracking iPhone users without their consent.

A new ad measurement tool provided by Apple hampered the ability for companies to measure the performance of their ads, upending many of the ways advertisers have been accustomed to doing business for decades, said Snap Chief Executive Evan Spiegel during a conference call with analysts.

“This has definitely been a frustrating setback for us,” he said.

Snap added it expects the Apple privacy changes and global supply chain disruptions to linger through the fourth quarter, which is typically the highest-earning period for social media companies when brands ramp up marketing for the holiday season.

Many of the advertisers who place ads on Snapchat are in the beauty, fashion and consumer goods industries.

Snap said the supply chain disruptions affected a wide variety of advertisers across industries and regions.

Revenue for the third quarter ended September 30 was $1.07 billion, missing consensus estimates of $1.1 billion (roughly Rs. 8,000 crore), according to IBES data from Refinitiv.

Daily active users, a metric watched closely by advertisers and investors, rose 23 percent year-over-year to 306 million, beating analyst estimates of 301.9 million.

Snapchat has worked to attract and retain users by building new features like the ability to discover restaurants and stores through a map feature, or play virtual games with friends.

The net loss during the quarter was $72 million (roughly Rs. 540 crore), or 5 cents (roughly Rs. 4) per share, narrowing from $199.9 million (roughly Rs. 1,495 crore), or 14 cents (roughly Rs. 10) per share, in the year-ago quarter.

Snap forecast fourth quarter revenue between $1.16 billion (roughly Rs. 8,670 crore) to $1.2 billion (roughly Rs. 8,970 crore), and daily active users between 316 million to 318 million.

© Thomson Reuters 2021

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PayPal Said to Be in $45-Billion Bid for Pinterest

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By Reuters | Updated: 22 October 2021

PayPal has offered to buy Pinterest for $45 billion (roughly Rs. 3,36,770 crore), people familiar with the matter said, a combination that could herald more financial technology and social media tie-ups in e-ecommerce.

It would be the biggest acquisition of a social media company, surpassing Microsoft’s $26.2 billion (roughly Rs. 1,95,990 crore) purchase of LinkedIn in 2016.

The deal talks come as internet shoppers increasingly buy items they see on social media, often following “influencers” on platforms such as Instagram and TikTok. Acquiring Pinterest would allow PayPal to capture more of that e-commerce growth and diversify its income though advertising revenue.

PayPal has offered $70 (roughly Rs. 5,200) per share, mostly in stock, for Pinterest, one of the sources said. The online payments provider hopes to successfully negotiate and announce a deal by the time it reports quarterly earnings on November 8, the source added.

The sources cautioned that no deal was certain and terms could change. They asked not to be identified because the matter is confidential.

PayPal and Pinterest did not respond to requests for comment. Bloomberg News first reported on the companies’ talks on Wednesday.

PayPal shares fell 4.9 percent to close at $258.36 (roughly Rs. 19,330), while Pinterest shares jumped 12.8 percent to $62.68 (roughly Rs. 4,690).

“(The) combination would be a significant positive for PayPal’s ongoing monetisation initiatives on both sides of its merchant and consumer platforms, especially if Pinterest’s social commerce platform gets integrated with Honey’s AI into PayPal’s destination app,” Wedbush analysts wrote in a note.

The payments behemoth was among the big winners of the COVID-19 pandemic, as more people used its services to shop online and pay bills to avoid stepping out. Its shares have risen about 36 percent in the last 12 months, giving it a market capitalisation of nearly $320 billion (roughly Rs. 23,94,100 crore).

Pinterest was valued at about $13 billion (roughly Rs. 97,275 crore) when it went public in 2019. It also saw a huge spike in users looking for crafts and DIY project ideas, as lockdown curbs kept people at home.

As lockdowns eased, Pinterest has warned about slowing user growth, especially in the United States, its largest market. It has said it expects revenue growth mainly through deeper engagement with existing users rather than signing up new ones.

The market has valued Pinterest shares more cheaply than those of some younger social media platforms such as Snap but higher than more mature companies such as Twitter, according to Refinitiv Eikon valuation metrics.

PayPal’s offer represents a 26 percent premium to Pinterest’s closing price of $55.58 (roughly Rs. 4,160) on Tuesday and it is equivalent to 62 times the social media company’s earnings before interest, taxes, depreciation and amortisation over the last 12 months, according to Eikon.

By that metric, Microsoft paid 79 times LinkedIn’s earnings when it acquired it in all-cash deal. Pinterest, however, would be giving its shareholders some of PayPal’s stock, in a bet that this currency would appreciate over time over time as the combined company reaps revenue and cost synergies.

Pinterest is at a crossroads after co-founder Evan Sharp announced last week he would step down as chief creative officer to join LoveFrom, a firm led by Jony Ive, the designer of many Apple products.

Sharp founded the online scrapbook and photo-sharing platform in 2010 with Ben Silbermann, who is the San Francisco, California-based company’s chief executive officer, and Paul Sciarra, who left in 2012.

PayPal had been looking to boost its e-commerce offerings in recent years through acquisitions. It bought online coupon finder Honey Science in 2019 for $4 billion (roughly Rs. 29,920 crore) and Japanese buy-now-pay-later (BNPL) firm Paidy for $2.7 billion (20,195 crore) earlier this year. It acquired return-service provider Happy Returns in May.

Social media-driven commerce

Social media platforms that have not pursued mergers with fintech firms have been working on ways to allow consumers to buy directly from their platforms.

TikTok, for example, is testing a way for users to buy products directly on its short video app. It has partnered with ecommerce giant Shopify and in August began allowing retail brands to link their product catalogs to the app.

Analysts said the PayPal-Pinterest deal talks highlight the potential for other social media and fintech companies to join forces to capture swaths of the e-commerce market.

“Social/interactive commerce is growing in the United States and no one has won it yet. So rather than going against Amazon, PayPal is making a bet on a different kind of shopping model,” said Marketplace Pulse e-commerce analyst Joe Kaziukėnas.

© Thomson Reuters 2021

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WeChat Makes Content Searchable on Google and Bing

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By Reuters | Updated: 22 October 2021

Tencent’s WeChat has made its content searchable on some foreign search engines such as Alphabet-owned Google and Microsoft’s Bing, Reuters checks showed, in the latest tearing down of “walled gardens” in China’s internet sector.

Content from China’s most popular messaging app WeChat, including articles and videos on its popular public accounts page, a function similar to a news portal, has opened to external search engines, other than Tencent’s own Sogou search engine, in recent days.

Tencent, Google, and Microsoft did not immediately respond to a request for comment. Google is not available in China.

China’s Internet sector has been long dominated by a handful of technology giants who have historically blocked each others rivals’ links as well as their search crawlers. The practice is often referred to as ‘walled gardens’.

In recent months, this practice has been targeted by Chinese authorities as part of a sweeping regulatory crackdown.

Last month, China’s Ministry of Industry and Information Technology (MIIT) ordered companies to stop blocking links, which they said has affected users’ experience and damaged consumer rights.

The MIIT has been studying plans and conducting research to make WeChat content available on external search engines, according to a person with direct knowledge.

MIIT and Tencent did not immediately respond to requests for comment.

WeChat content however, is not yet searchable on Baidu, China’s dominant search engine, according to Reuters checks. Baidu didn’t immediately respond to a request for comment.

Citi analysts said in a Tuesday note that the potential “opening up of the social ecosystem to search engine” was a positive development for Baidu, as its “leading search gateway position has been weakened and diluted by the growth and dominance of super apps.”

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Google to Cut Its Commission by Half on App Subscriptions, to Charge 15 Percent Starting January

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By Reuters | Updated: 22 October 2021

Google announced Thursday it will lower a fee in its app store as pressure mounts on tech giants to loosen their grip over their online marketplaces.

The commission on subscriptions taken by Google Play will be lopped in half to 15 percent starting in January, vice president of product management Sameer Samat said in a blog post.

Currently Google gets a 30 percent cut for the first year of a subscription, then 15 percent on renewals.

Google said the new fee structure meant businesses would not have to wait for subscribers to renew – which they may or may not do – to benefit from a lower commission.

Google and Apple, whose operating systems run on 99 percent of the world’s smartphones, have argued that their respective app shop commissions are fair compensation for providing secure platforms.

But developers are furious over the lost profits, and regulators are critical of the grip the tech giants have on their online marketplaces.

Apple in recent months cut commissions from 30 percent to 15 percent in cases such as apps bringing in less than $1 million (roughly Rs. 7.4 crore) a year.

A US judge in September ordered Apple to loosen control over its App Store payment system, a blow to the global tech giant sparked by its anti-trust battle with Fortnite maker Epic Games

Epic launched the case aiming to break Apple’s grip on the App Store, accusing the iPhone maker of acting like a monopoly.

Both Apple and Epic have appealed the decision.

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TRUTH Social: Donald Trump Launches His Own Social Media App to ‘Stand Up to Big Tech’

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By Reuters | Updated: 21 October 2021

Former US President Donald Trump will launch his own social media app, TRUTH Social, that he said would “stand up to Big Tech” companies such as Twitter and Facebook that have barred him from their platforms.

TRUTH Social will be created through a new company formed by a merger of the Trump Media and Technology Group and a special acquisition company (SPAC), according to a press release distributed by both organisations.

“We live in a world where the Taliban has a huge presence on Twitter, yet your favourite American President has been silenced. This is unacceptable,” Trump said in a written statement included in the release.

“I am excited to send out my first TRUTH on TRUTH Social very soon. TMTG was founded with a mission to give a voice to all. I’m excited to soon begin sharing my thoughts on TRUTH Social and to fight back against Big Tech,” he said.

The social network, set for a beta launch next month and full rollout in the first quarter of 2022, is the first of three stages in the company’s plans, followed by a subscription video-on-demand service called TMTG+ that will feature entertainment, news, and podcasts, according to the news release.

In a slide deck on its website, the company envisions eventually competing against Amazon’s AWS cloud service and Google Cloud.

A Trump representative who declined to be named confirmed the contents of the TMTG news release to Reuters. Trump spokesperson Liz Harrington also tweeted a copy.

“For so long, Big Tech has suppressed conservative voices,” the former president’s son, Donald Trump Jr., told Fox News in an interview. “Tonight my father signed a definitive merger agreement to form what will ultimately be the Trump Media and Technology Group and TRUTH Social – a platform for everyone to express their feelings.”

Twitter, Facebook, and other social media platforms banned Trump from their services after hundreds of his supporters rioted at the US Capitol on January 6.

That protest came after a speech by Trump in which he falsely claimed that his November election loss was due to widespread fraud, an assertion rejected by multiple courts and state election officials.

The deal will list Trump Media & Technology Group on Nasdaq through a merger with Digital World Acquisition, a blank-check acquisition firm led by former investment banker Patrick Orlando.

Trump Media & Technology Group will receive $293 million (roughly Rs. 2,190 crores) in cash that Digital World Acquisition had in trust, assuming no shareholder of the acquisition firm chooses to redeem their shares, according to the statement.

Orlando, who has worked at Deutsche Bank and BT Capital Markets, has launched at least four SPACs and has plans for two more, according to his firm’s website and regulatory filings.

But none of the SPACs have completed a deal yet. A China-based SPAC that Orlando led failed last month to complete a merger with Giga Energy that would have valued the transportation solutions provider at $7.3 billion (roughly Rs. 54,650 crores), because it could not deliver the cash required, according to regulatory filings.

Shareholder redemptions reduce the amount of cash that Digital World Acquisition will have available to give to Trump Media & Technology Group at the closing of the deal.

The companies said in the statement that the completion of the merger is subject to redemptions not exceeding an agreed minimum cash requirement. The statement did not disclose what the requirement is, though that detail is typically contained in a regulatory filing that should follow on Thursday.

The deal values Trump Media & Technology Group at $875 million (roughly Rs. 6,550 crores), including debt, according to the news release.

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