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Tech Roundup: YouTube Ad Fiasco, Palmer Luckey Leaves FB

Sejuti Banerjea

The top news from last week included Alphabet’s GOOGL YouTube running into serious trouble with advertisers and Oculus founder Palmer Luckey leaving Facebook FB.

Here are the details-

The YouTube Ad Controversy

YouTube will host its Brandcast event on May 4, a marketing event at which it shares success stories while helping brands reach their targeted audiences. So any controversy at this time is bad for YouTube, because it can be used by brands to negotiate advantageous deals for themselves. And that’s exactly what seems to be happening...

A couple of weeks back, the UK government discovered that its ads were appearing next to inappropriate content and between then and now, around 250 companies operating in the UK including L’Oreal and McDonald’s withdrew their UK ads from the platform. Although Google apologized and made changes to its ad platform giving more control to advertisers, big Fortune 500 companies like Pepsi, Starbucks, General Motors, Wal-Mart, J&J, JPMorgan Chase, Ford, AT&T and Verizon pulled their U.S. ads. Analysts currently estimate that the revenue hit could be anywhere between $750 million to a billion dollars.

The main problem according to Moody’s is the extremely high volumes (400 hours of video are uploaded to YouTube every minute) that make it very difficult to police the content. But because ads placed alongside content that doesn’t correspond to the brand’s positioning hurts the brand, Moody’s thinks it’s an objection well taken and would be credit negative.

However, the agency says that these brands contribute relatively fewer dollars than the vast majority of YouTube advertisers that continue to spend on the platform and the pullback is in any case temporary because of measures taken by Google. Also, while Google’s fix will increase costs related to investments in personnel, A.I. and machine learning to facilitate review of material being uploaded, this won’t be so significant as to warrant a change in the current Aa2 investment rating.  

Bottom line: There are only two really big digital ad-serving platforms (Facebook and YouTube) that draw a very large number of users and it’s advantageous for brands to be on both of them. Moreover, the controversy is an industrywide phenomenon with the problem not restricted to YouTube.

So while YouTube can’t take too hard a stand when negotiating with brands, it may not get pushed into a corner either; more so because it can also point to Google Preferred to access the top 5% content on YouTube (at a premium of course). The bottom line impact will likely also be insignificant because Google is anyway investing in artificial intelligence and machine learning to improve and enhance its algorithms and search results.

Palmer Luckey Leaves Facebook

Oculus co-founder Palmer Luckey is leaving Facebook and it isn’t clear whether it was his own decision. But the young face of virtual reality (VR) has been keeping a low profile over the past few months, as a number of things hit his public image. The first was a lawsuit by ZeniMax that Oculus had misappropriated trade secrets while Luckey had violated a non-disclosure agreement.

The jury ruled that there was no misappropriation, but Luckey and co-founder Iribe were asked to pay $500 million for the violation of the non-disclosure agreement. To make matters worse, Luckey had invested $10,000 in Nimble America, which some people consider a far right organization. A story by The Daily Beast reporters Gideon Resnick and Ben Collins said that Luckey had written unflattering posts/memes on Hillary Clinton, which apparently led some women to resign from the company.

Facebook said, “Palmer will be dearly missed. Palmer’s legacy extends far beyond Oculus. His inventive spirit helped kickstart the modern VR revolution and helped build an industry. We’re thankful for everything he did for Oculus and VR, and we wish him all the best.”



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Other stories


Intel’s New Strategy Officer: Aicha Evans, the former general manager of Intel’s INTC Devices and Communications Group has been appointed as Chief Strategy Officer. It will be her responsibility to drive Intel’s long-term strategy as it moves from the PC centric business model to a more data centric one. She will also be responsible for speeding up decision making and execution of the long term strategy throughout the company.

Microsoft’s European IoT/A.I. Lab: Microsoft MSFT has selected Munich, Germany for its third IoT and A.I. Insiders lab (the other two are in Redmond, Washington and Shenzen, China). The purpose of the lab is to provide IoT and A.I. startups necessary facilities (laser cutter, reflow oven, 3D printers) as well as staff with expertise (in IoT hardware, embedded systems software, cloud engineering, IoT, machine learning and A.I.), so they use Microsoft technologies in their development process and facilitate their proliferation. This will help Microsoft become a strong player in the IoT and AI markets, which are still in their very early stages of development. 


Apple’s iPhone Win in China: The Beijing IP Court has ruled that an intellectual property infringement case filed by defunct local manufacturer, Shenzhen Baili Marketing Services Co against Apple AAPL for the exterior smartphone design was without merit. The court held that the distinctions in design were clear to consumers and that Baili didn’t have grounds to claim exclusivity in its designs. Apple said Baili was trying to pass off Apple’s designs as its own. Baili’s lawyer said the Chinese company would appeal the decision.

Since this follows Tim Cook’s visit to the country when he promised further investments, it’s not clear if the lawsuit was part of the discussions. But in May last year, when the IP Court granted Baili a sales injunction in Beijing against the iPhone 6 and iPhone 6 Plus, it was immediately suspended pending an appeal from Apple.

Apple Wins Against Australian Banks: The Australian Competition and Consumer Commission (ACCC) hasn’t granted permission to the four major banks - Commonwealth Bank of Australia, Westpac Banking Corporation, the National Australia Bank, and Bendigo and Adelaide Bank – to collectively bargain for inclusion in Apple Pay or access to Apple’s NFC controller. Access would have allowed banks to create their own wallets on Apple devices without paying Apple thus increasing competition with Apple Pay, but the ACCC thought that it would also impact competition between Apple and Google. Apple doesn’t allow NFC access to any of its 3,500 banking partners in the 15 markets where Apple Pay is available.

UK Wants WhatsApp Backdoor: U.K. Home Secretary Amber Rudd said that she will be meeting with companies like Google, Facebook and Twitter because it was “absurd to have a situation where terrorists are talking to each other on a formal platform and it can't be accessed.” And again, "We need to make sure that our intelligence services have the ability to get into situations like encrypted WhatsApp."

The comment followed a finding that Khalid Masood, the terrorist in this case, was active on WhatsApp just two minutes before a blast that killed four people near Britain's Houses of Parliament in Westminster. Needless to say, WhatsApp is “horrified at the attack,” but can do little about it because no one, including “hackers,” “oppressive regimes” or even its own employees can get into the encrypted messages.

Developments on Alphabet Case Against Uber: Uber is now saying that since Google has in October, filed for private arbitration against Levandowski for violating confidentiality obligations in his contract to improperly recruit his Waymo colleagues to Otto and Uber, it should also move the allegations of trade-secret theft and unfair competition against Uber into arbitration.

The logic is that since both these are related to Levandowski they should be handled similarly. Arbitration proceedings are private and also have different rules related to evidence, which could safeguard Uber’s reputation. The company is willing to continue the patent infringement aspect of the case in court.  

Earlier, Alphabet’s Waymo added a fourth patent that it says was infringed upon by Uber and furnished further details including the statement of an eye-witness in a new filing. The statement is from Pierre-Yves Droz, a former colleague and close confidant of Levandowski's (the ex-Googler who has allegedly run off with Waymo self-driving technology and trade secrets to form self-driving trucking company Otto, which was subsequently bought by Uber for $680 million).

The lawsuit specifies the time at which Levandowski met Uber executives in Jan 2016, registering the company that would become Otto the following day. Waymo is now seeking an injunction to prevent Uber from using the technology in its self-driving vehicles and seeking damages for any proven infringements.

New Technology/Products

Samsung’s New Devices and Services: At the Unpacked event in New York, Samsung launched the Galaxy S8 (i.e. 5.8-inch Galaxy S8 and 6.2-inch Galaxy S8 Plus), the latest of its flagship line of smartphones. The phones are thinner, have bigger displays (bezel-less curved edge called infinity display) and come with Bixby, its new AI cognitive assistant. Samsung also announced the Samsung DeX docking device that allows fast charging of the phone as well as two USB 2.0, Ethernet, USB type-C power-in and a cooling fan that enables users to seamlessly access apps, edit documents, browse the web, watch videos and reply to messages directly from the smartphone on a larger display.

An Android desktop experience is also possible by attaching a mouse and keyboard. The phone should be lapped up by consumers but may also have enterprise appeal. Samsung has announced that Citrix and VMware are partners enabling virtualization technologies to work with the phone.

Intel Talks 10nm Tech: At its first Technology and Manufacturing Day, Intel has said that it will have 14nm++ technology out this year, offering a 26% performance bump over its 14nm iteration and 12.5% over its 14nm+ tech released last year. It will also offer 20% better transistor performance over competing 14nm and 16nm technology. Intel is making this possible through what it calls hyper scaling technologies that have enabled it to offer superior PPA (Performance, Power, Area) than competitors. It’s also using a lithography technology called Self Aligned Dual Patterning for its 14nm, which will be followed up with Self Aligned Quad Patterning for 10nm.

Intel thinks that these technologies will enable it to maintain its PPA lead over competing technologies. But the danger remains given that competitors will be moving to 10nm this year and Intel probably won’t do that until 2019, at which time they will be serving up 7nm chips. Intel chips may lose their edge around that time, unless there’s more in store.

Cisco to Separate Networking Software: Cisco CSCO appears to be caving in under the increased competitive pressure in the switching business. The company is now planning to separately sell the networking software that it previously sold along with its switches. This will allow its existing and new customers to use the software along with cheaper switches from competitors such as Broadcom. There should be a resultant negative impact on its switching revenue as some hardware sales will be lost.

Cortana to Access Android Lock Screen: Microsoft has signaled its entry into the personal assistant space with the announcement that Cortana will have access to Android’s locked screen, offering users in the U.S., UK, and Australia access to things like weather updates, commute times and meeting information without having to first unlock their phones and launch the app. It is also reportedly working on a Cortana-powered home speaker to take on the likes of Amazon’s Alexa, Apple’s Siri, Google Assistant, Samsung’s upcoming Bixby. 

Amazon has the greatest lead in the space followed by Google and Apple, so the others have their work cut out. This is an increasingly important platform as the larger the ecosystem with which the assistant is connected, the greater the access to data. Voice Labs estimates that in 2015, 65% of U.S. smartphone owners were using voice assistants, up from 30% two years prior. It estimates that shipments of Google Home and Amazon Echo speakers will climb more than threefold to 24.5 million units in 2017 (as reported by Business Insider).

Amazon Drone Patents: Amazon AMZN has filed an application for a couple of drone technology patents. The first is for a “floating motor mount” connecting a propeller motor to the body of a drone, for modulation of vibration sounds from the propeller. The second patent is for technology that scans and photographs potential landing or drop-off destinations as the drone descends to the ground, facilitating decisions to speed up or slow depending on any obstructions with respect to the designated "delivery location identifier" put out by customers.

M&A and Collaborations

Alibaba’s Lazada Joins with Unilever: The two companies are collaborating on supply chain, fulfillment, data, marketing, social commerce and talent development to develop their FMCG business in Southeast Asia by wooing middle class spenders. The market is on its way to touch $25 billion by 2020.


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