Year: 2019

AT&T’s live TV streaming service, DirecTV Now, is not doing so well. Along with AT&T’s fourth quarter earnings released this morning, the company reported a sizable loss of 267,000 DirecTV Now subscribers. This left AT&T with fewer DirecTV Now customers at the end of the year (1.6 million), than it had in Q2 (1.8 million).

The company attributed the decline to the end of promotional package pricing, which sometimes saw the service priced as low as $10 per month for an introductory period. It had also offered device giveaways – like Roku streaming sticks or Apple TV boxes – to encourage sign-ups.

AT&T says its “discounted introductory offers ended,” which resulted in the dramatic loss.

But that’s masking a larger concern. DirecTV Now subscribers didn’t see the value in paying full price for streaming live TV via AT&T’s service, even though its streaming packages start at $40 per month – which is a competitive price point among similar live TV services. Hulu with Live TV, for example, just raised prices for its core live TV package to $45 per month, and YouTube TV raised its price to $40 per month last March.

Even the low-cost skinny bundle from Dish’s Sling TV inched up its base package by $5 per month last summer.

The subscribers who are ditching DirecTV Now aren’t necessarily doing so because they’re not interested in streaming TV – they may just find the DirecTV Now product lacking.

Its cloud DVR feature, for instance, only offers 20 hours of recording space and saves shows for a month. Sling TV and Hulu offer 50 hours of storage. YouTube TV’s DVR is unlimited. Several services today offer to save shows for far longer than 30 days, as well.

The DirecTV Now interface is fairly basic, compared to rivals, who are today competing on making services better personalized to customers. DirecTV Now, meanwhile, considers marking favorite channels or bookmarking shows to a library a form of personalization.

The company is also putting its eggs in a number of different baskets, when it comes to streaming. Instead of just offering one package that customers can customize with add-ons, it offers multiple streaming services. While DirecTV Now does offer tiered pricing plans that increase the number of channels available, AT&T additionally today operates a second, low-cost, entertainment-focused service called WatchTV, which is bundled with some AT&T wireless plans and largely meant to reduce wireless subscriber churn.

On top of that, the company’s WarnerMedia division is rolling out yet another service later this year, to leverage AT&T’s newly acquired WarnerMedia properties, like HBO. And HBO has its own over-the-top offering, too, with HBO NOW.

That means AT&T’s DirecTV Now won’t only be competing with other live TV services, it will be competing with other AT&T streaming services, too.

Of course, one could argue that it’s not fair to position a live TV streaming service against one that’s more movie-focused, as the upcoming direct-to-consumer WarnerMedia offering will be. But at the end of the day, consumers only have so many extra dollars per month to spending on streaming. And they don’t seem to be dropping Netflix.

Instead, they’re choosing from among dozens of options to customize their cord cutter bundles, ranging from true a la carte TV, as with Amazon Channels, to free TV and movies, as with The Roku Channel, to live TV streaming services and subscription videos services, like Hulu. Perhaps AT&T believes if it offers enough variety, at least one of its services will get inserted into that mix.

More concerning for DirecTV Now’s future is that AT&T believes the answer to concerns is to raise prices and reduce the number of channels. As The Wall St. Journal recently reported, AT&T execs think newcomers like Google’s YouTube TV are subsidizing an unprofitable service. AT&T CEO Randall Stephenson said in December that DirecTV Now will not do that – in fact, it’s in the process of “thinning the content out” to keep the price tag around “$50 to $60” – meaning, at least $10 per month more than it is today.

In the wake of TechCrunch’s investigation yesterday, Apple blocked Facebook’s Research VPN app before the social network could voluntarily shut it down. The Research app asked users for root network access to all data passing through their phone in exchange for $20 per month. Apple tells TechCrunch that yesterday evening it revoked the Enterprise Certificate that allows Facebook to distribute the Research app without going through the App Store.

TechCrunch had reported that Facebook was breaking Apple’s policy that the Enterprise system is only for distributing internal corporate apps to employees, not paid external testers. That was actually before Facebook released a statement last night saying that it had shut down the iOS version of the Research program without mentioning that it was forced by Apple to do so.

TechCrunch’s investigation discovered that Facebook has been quietly operated the Research program on iOS and Android since 2016, recently under the name Project Atlas. It recruited 13 to 35 year olds, 5 percent of which were teenagers, with ads on Instagram and Snapchat and paid them a monthly fee plus referral bonuses to install Facebook’s Research app, the included VPN app that routes traffic to Facebook, and to ‘Trust’ the company with root network access to their phone. That lets Facebook pull in a user’s web browsing activity, what apps are on their phone and how they use them, and even decrypt their encrypted traffic. Facebook went so far as to ask users to screenshot and submit their Amazon order history. Facebook uses all this data to track competitors, assess trends, and plan its product roadmap.

Facebook was forced to remove its similar Onavo Protect app in August last year after Apple changed its policies to prohibit the VPN app’s data collection practices. But Facebook never shut down the Research app with the same functionality it was running in parallel. In fact, TechCrunch commissioned security expert Will Strafach to dig into the Facebook Research app, and we found that it featured tons of similar code and references to Onavo Protect. That means Facebook was purposefully disobeying the spirit of Apple’s 2018 privacy policy change while also abusing the Enterprise Certificate program.

Facebook’s legitimate internal-use only apps like pre-launch versions of Facebook and Instagram as well as its employee logistics apps are still functioning for some employees, a source says. However, they could cease to function if Apple completely blocked Facebook from distributing employee-only apps even if they abide by its policies. As we predicted it might do, that would be a much stricter punishment than just blocking the Reseearch app that would disrupt Facebook’s business protocol. For reference, Facebook’s main iOS app still functions normally.

This morning, Apple informed us it had banned Facebook’s Research app yesterday before the social network seemingly pulled it voluntarily. Apple provided us with this strongly worded statement condemning the social network’s behavior:

“We designed our Enterprise Developer Program solely for the internal distribution of apps within an organization. Facebook has been using their membership to distribute a data-collecting app to consumers, which is a clear breach of their agreement with Apple. Any developer using their enterprise certificates to distribute apps to consumers will have their certificates revoked, which is what we did in this case to protect our users and their data.”

That comes in direct contradiction to Facebook’s initial response to our investigation. Facebook claimed it was in alignment with Apple’s Enterprise Certificate policy and that the program was no different than a focus group.

Seven hours later, a Facebook spokesperson said it was pulling its Research program from iOS without mentioning that Apple forced it to do so, and issued this statement disputing the characterization of our story:

“Key facts about this market research program are being ignored. Despite early reports, there was nothing ‘secret’ about this; it was literally called the Facebook Research App. It wasn’t ‘spying’ as all of the people who signed up to participate went through a clear on-boarding process asking for their permission and were paid to participate. Finally, less than 5 percent of the people who chose to participate in this market research program were teens. All of them with signed parental consent forms.”

We refute those accusations by Facebook. As we wrote yesterday night, Facebook did not publicly promote the Research VPN itself and used intermediaries that often didn’t disclose Facebook’s involvement until users had begun the signup process. While users were given clear instructions and warnings, the program never stresses nor mentions the full extent of the data Facebook can collect through the VPN. A small fraction of the users paid may have been teens, but we stand by the newsworthiness of its choice not to exclude minors from this data collection initiative.

The situation will surely worsen the relationship between Facebook and Apple after years of mounting animosity between the tech giants. Apple’s Tim Cook has repeatedly criticized Facebook’s data collection practices, and Facebook’s Mark Zuckerberg has countered that it offers products for free for everyone rather than making products few can afford like Apple. Flared tensions could see Facebook receive less promotion in the App Store, fewer integrations into iOS, and more jabs from Cook. Meanwhile, the world sees Facebook as having been caught red-handed threatening user privacy and breaking Apple policy.

If you’re interested in Meizu’s insane smartphone that doesn’t have any port or button, you can now pre-order it on Indiegogo for $1,299. Supply is limited as the company is only selling 100 units for now.

The Meizu Zero looks like any modern phone at first sight. But if you look beyond the display, you’ll notice that there’s absolutely zero port or button.

The volume button has been replaced with a touch-sensitive surface. The fingerprint sensor is integrated in the display. Wireless charging is the only way to charge the device. And if you’re thinking about putting your SIM card in the phone, there’s no SIM slot either — I hope your carrier supports eSIM cards.

There’s no speaker grille either. Meizu is using the screen as a display by sending vibrations through the display. It also works as a microphone, apparently.

It’s unclear if this is just a giant joke or an actual product. But it’s an interesting experiment. For $1,299, you get a phone with a 5.99-inch AMOLED display and a Snapdragon 845 system-on-a-chip. The company expects to ship the device in April 2019.

If you are a web developer, you know how complex many of the traditional web content management systems have been. One of the big problems has been managing the underlying infrastructure for the system. Cosmic JS, a member of the Winter 2019 Y Combinator class, wants to simplify that by taking care of the infrastructure part for you, while providing a flexible front end for content creators.

“Our customers benefit from using Cosmic because they can avoid the pain of building and maintaining their own CMS infrastructure. For a monthly service fee, we provide a seamless infrastructure for them, and it allows them to focus on what really matters, building great products and user experiences,” Cosmic JS CEO and co-founder Tony Spiro told TechCrunch.

As with so many YC companies, this one started with a pain point the founders were feeling in their jobs developing websites in an agency setting in 2014. Spiro was building the websites and CMO and co-founder Carson Gibbons was servicing accounts, and they saw a problem with the infrastructure piece.

“We found that there was a huge bottleneck just installing and maintaining our own backend infrastructure management. So around that time, I began building out Cosmic on the side. I thought it would be great if there was just a web dashboard and an API to deliver content as a service. And so that’s how it all got started,” Spiro explained. By removing infrastructure management from the equation, Cosmic was freeing developers to concentrate solely on the customer-facing bits.

Cosmic JS content edit view. Screenshot: Cosmic JS

Spiro and Gibbons left their jobs to concentrate on Cosmic full time after the release of the initial version in 2016. They aim the product at web development teams with between 5 and 100 members. The product has three main user types: developers, site managers and content producers. So far, it has attracted 250 customers in 100 countries.

While it’s not open source, it does rely on community members to build extensions and apps. “We have hundreds of apps (ready-made websites and applications) and extensions built by our community,” Spiro said. These tools enable Cosmic to connect to best of breed services and tools like photos, videos or search without having to create them from scratch.

Cosmic JS website templates and apps. Screenshot: Cosmic JS

Spiro says that they joined Y Combinator at the behest of their advisors and investors and it has been a formative experience. “We applied and got in, and and now we’re surrounded by just some of the most impressive and intelligent people in technology.” Spiro said.

So far Cosmic JS includes the two co-founders with some contractors and freelancers helping out along with the extended development community. The company has received some funding, but the founders weren’t ready to share the amount just yet.

Their goal is to continue building the paid user base, and increase community participation through outreach and events.

India’s largest bank has secured an unprotected server that allowed anyone to access financial information on millions of its customers, like bank balances and recent transactions.

The server, hosted in a regional Mumbai-based datacenter, stored two months of data from SBI Quick, a text message and call-based system used to request basic information about their bank accounts by customers of of the government-owned State Bank of India (SBI), the largest bank in the country and a highly ranked company in the Fortune 500.

But the bank had not protected the server with a password, allowing anyone who knew where to look to access the data on millions of customers’ information.

It’s not known for how long the server was open, but long enough for it to be discovered by a security researcher, who told TechCrunch of the leak, but did not want to be named for the story.

SBI Quick allows SBI’s banking customers to text the bank, or make a missed call, to retrieve information back by text message about their finances and accounts. It’s ideal for millions of the banking giant’s customers who don’t use smartphones or have limited data service. By using predefined keywords, like “BAL” for a customer’s current balance, the service recognizes the customer’s registered phone number and will send back current amount in that customer’s bank account. The system can also be used to send back the last five transactions, block an ATM card, and make inquiries about home or car loans.

It was the back-end text message system that was exposed, TechCrunch can confirm, storing millions of text messages each day.

A redacted example of some of the banking and credit information found in the database. (Image: TechCrunch)

The passwordless database allowed us to see all of the text messages going to customers in real-time, including their phone numbers, bank balances, and recent transactions. The database also contained the customer’s partial bank account number. Some would say when a check had been cashed, and many of the bank’s sent messages included a link to download SBI’s YONO app for internet banking.

The bank sent out close to three million text messages on Monday alone.

The database also had daily archives of millions of text messages each, going back to December, allowing anyone with access a detailed view into millions of customers’ finances.

We verified the data by asking India-based security researcher Karan Saini to send a text message to the system. Within seconds, we found his phone number in the database, including the text message that he received back.

“The data available could potentially be used to profile and target individuals that are known to have high account balances,” said Saini in a message to TechCrunch. Saini previously found a data leak in India’s Aadhaar, the country’s national identity database, and a two-factor bypass bug in Uber’s ride-sharing app.

Saini said that knowing a phone number “could be used to aid social engineering attacks — which is one the most common attack vector here with regard to financial fraud,” he said.

SBI claims more than 500 million customers across the globe with 740 million accounts.

Just days earlier, SBI accused Aadhaar’s authority, UIDAI, of mishandling citizen data that allowed fake Aadhaar identity cards to be created, despite numerous security lapses and misuse of the system. UIDAI denied the report, saying there was “no security breach” of its system. (UIDAI often uses the term “fake news” to describe coverage it doesn’t like.)

TechCrunch reached out to SBI and India’s National Critical Information Infrastructure Protection Centre, which receives vulnerability reports for the banking sector. The database was secured overnight.

Despite several emails, SBI did not comment prior to publication.

Sinemia’s ticket plans change about as often as box office receipts — but at least they appear to be a bit of good news for customers. The movie subscription service, which has made a name for itself in the wake of MoviePass’s on-going struggles, announced. this morning that it has dropped the pricing on its monthly plan.

Beginning this week, one ticket a month plans start at $4 a month — down two buck from before. That means three tickets a month now run $8. The price also includes a new roll over feature, letting subscribers grab one unused ticket per month, which sounds like a nice piece of added flexibility. The plans work with the company’s reintroduced card and will be in effect with Sinemia Enterprise, a white label service the company has introduced for theater chains.

The news comes as chief competitor MoviePass looks to right the ship. That service is set to announce the return of the unlimited movie plan that help get the company in hot water in the first place. Those details should be released later this week.

When considering the structural impact of technology companies on our economy and society, we tend to focus on questions of scale and monopoly.

It’s true that the FAANG companies and more recent winners (Airbnb, Uber) have surfed a combination of network effects, preferential access to capital and classic efficiencies of scale to generate tremendous value for their shareholders—to the detriment of new entrants who attempt to unseat them.

At their high water mark in mid-2018, FAANG alone made up 11% of the total market cap of the S&P 500 and 38% of the index’s year-to-date gain, representing a doubling in their influence in only five years. The question of regulating technology companies—to the point of instituting anti-trust actions—has even become a rare point of relative concord between Democrats and Republicans in Congress.

But is the narrative of tech companies in the 2010s only a story of economic consolidation and growing inequality? Many of the most successful B2B startups of the last decade are aligned by a theme that paints a different picture. By transforming the nature of the costs required to start a business, these startups are reducing the influence of capital and leveling the playing field for new entrants to share in the surplus generated by the secular shift to a tech-mediated economy.

Source: Getty Images/MIKIEKWOODS

A Path To Equal Opportunity: Turning Fixed Costs Into Variable Costs

What do AWS, WeWork, Stord, Gusto and RocketLawyer have in common? They provide cloud computing services, office space, warehouse storage, payroll management and access to legal templates, respectively—at first glance, not a particularly congruent set of services.

But they are alike in the economic purpose they serve for their customers. Each of these services takes a fixed cost—a bank of servers, a lease, a legal retainer—and transforms it into a variable cost. As a refresher, a fixed cost stays constant regardless of output, and variable costs scale with the output of a business.

When my father started his software consulting business in the early 1990s, I remember the giant boxes of AIX servers that arrived at our apartment, and tagging along to office tours in central New Jersey before he decided to run the company out of our spare bedroom. Back then, starting almost any kind of business was hard because of high fixed costs. Without AWS or WeWork, you shelled out up front for hardware and a lease.

Access to capital, whether in the form of a bank loan, savings, or friends and family was a prerequisite for entrepreneurship.

Today, startups make it possible to start and scale almost any kind of business while incurring few fixed costs. Want to found an ecommerce store? Start with a free Shopify account and dropship your inventory. Want to become a freelance designer? Put a shingle up on Fiverr and meet clients at a Breather you rent by the hour.

Whether software or hardware or labor, building a business is way easier when overhead is transformed into a string of flexible microservices that you only pay for as you grow.

Image courtesy of Getty Images

Lower Fixed Costs Means Capital Matters Less

Taken together, startups that turn fixed costs into variable costs make it less capital intensive to start a business. This decreases the influence of gatekeepers and aggregators of capital—an impact evident in the way entrepreneurs think about starting businesses today.

It’s no coincidence that the rise of B2B startups fitting this theme has coincided with the bootstrap movement, in which tech entrepreneurs with major ambitions demur from raising venture funding because—well, they don’t need the money anymore.

It has also coincided with a renaissance in freelance entrepreneurship: 56.7 million Americans freelanced in 2018. Beyond the economic benefits of working for yourself—the fastest growing segment of freelancers earns over $75,000 a year—freelancers can access the lifestyle and health benefits of owning their destiny, which aren’t directly captured but play a role in the economic picture. 51% of freelancers said no amount of money would lure them into a traditional job, and 64% reported feeling healthier and happier.

When capital plays a reduced role in new business formation, access to capital plays a smaller role in determining who will succeed. More companies are founded, and the economy becomes more likely to birth new Davids that will unseat the Goliaths. Economics 101: lower barriers to entry create markets that converge on perfect competition instead of oligarchic concentration.

Sourlce: Getty Images/ERHUI1979

Variable Costs Don’t Scale, But That’s OK

Variable costs have their downsides. A startup with a relatively higher proportion of fixed costs—the profile of the classic high-tech software business—can achieve higher profit margins as it scales. Compare Microsoft or Google, which pay high fixed costs in the form of salaries and servers but few costs in delivering their services and achieve operating margins of 25-30%, to Costco, which takes in more than $100B of annual revenue but earns an operating margin in the single digits.

That’s OK. Neither type of cost is “better” or “worse,” but having the option to decide how to structure costs through a company’s lifecycle can meaningfully impact an entrepreneur’s ability to execute a business idea.
Founders investigating startup ideas—and politicians debating the impact of technology—would do well to pay attention to how B2B companies have democratized access to entrepreneurship.

American Airlines and Apple Music have closed a deal that would give passengers access to the full library of Apple Music songs on AA flights.

Apple Music’s more than 50 million songs will be available on any domestic American Airlines flight equipped with Viasat satellite wifi at no extra cost to customers, marking the first commercial airline to offer exclusive access to Apple Music via in-flight wifi.

Here’s what VP of Apple Music Oliver Schusser had to say:

For most travelers, having music to listen to on the plane is just as important as anything they pack in their suitcases. With the addition of Apple Music on American flights, we are excited that customers can now enjoy their music in even more places. Subscribers can stream all their favorite songs and artists in the air, and continue to listen to their personal library offline, giving them everything they need to truly sit back, relax and enjoy their flight.

American Airlines has been investing in Viasat wifi, which has the bandwidth to allow for streaming video and music, as well as electrical outlets at every seat. This comes at a time when airlines are debating between seat-back entertainment and personal device entertainment.

American Airlines has also been rejuvenating its inflight entertainment library as a whole, adding new shows and movies as well as free live TV. In fact, American Airlines passengers flying on Super Bowl Sunday will be able to watch the big game in the air on select flights.

Here’s what American Airlines VP of Global Marketing Janelle Anderson had to say:

Our guests want to make the most of their time when flying us. That’s why we’re investing in faster Wi-Fi, a variety of entertainment options, and why we’re so excited to introduce Apple Music to more of our customers. Providing customers with more ways to stay connected throughout each flight is one way to show we value their business and the time they spend with us.

Meanwhile, Apple has yet another channel to market Apple Music in a competitive music streaming landscape. Just yesterday, Apple announced that Apple Music has hit 50 million global paid subscribers. The most recent number we have from industry leader Spotify is 87 million paying users as of November 2018.

Nine years after launching its online magazine, and three years after diversifying into the subscription box business, FabFitFun has raised $80 million in a growth round of funding led by Kleiner Perkins with participation from its previous investors Upfront Ventures and NEA. 

The Los Angeles-based company has steadily expanded its retail and lifestyle empire through subscription boxes, video… and even an augmented reality app.

Last year the company crossed $200 million in revenue and managed to net over 1 million subscribers for the service.

In a statement the company said the new financing would be used to expand FabFitFun membership offerings and consolidate its position as a marketing partner and platform for brands.

As a result of the investment, Kleiner Perkins general partners Mood Rowghani and Mary Meeker will join as board members and observers, respectively.

It’s been a long ride for co-founders Daniel and Michael Broukhim and Katie Rosen Kitchens. From a newsletter and blog to the subscription box to the launch of live programming last year.

For brands, the pitch is a new way to find customers and engage with them. The seasonally curated boxes and special exclusive co-branded box opportunities with Los Angeles’ pool of influencers results in hundreds of millions of targeted impressions, according to the company.

“FabFitFun has emerged into an exciting and entirely new distribution channel that brings retail to the platforms where consumers are most engaged,” said Mood Rowghani, a General Partner at Kleiner Perkins, in a statement. “The company’s personalized connection with its community allows brands to better understand and interact with consumers – establishing a long-term relationship rather than simply a transaction.”

China’s Alibaba continues to see slowing expansion in the latest quarter, but the e-commerce giant’s effort to spur new growth from new arenas have started to bear fruit.

The Hangzhou-based firm rang up $17 billion in revenue during the third quarter of 2019. That’s a 41 percent increase from the previous year but it also marks the slowest pace of growth since early 2016. Revenue from the quarter was driven by growth in the firm’s core e-commerce unit, the newly formed local services business between Koubei and Ele.me, and its fledgling cloud business, which now commands more than half of the Chinese market, Alibaba executive Joe Tsai said (paywalled) this month.

Revenue growth to its lowest since early 2016 as Alibaba weathers saturation and an economic slowdown in China

Revenue from Alibaba’s core commerce, “new initiatives” including local services, and cloud computing was up 40 percent, 73 percent and 84 percent, respectively. The commerce arm is expected to kick up growth when the giant finally starts monetizing its revamped user recommendation system and search engine, features that the giant launched last quarter. Alibaba said there’s no exact timeline for the rollout but the redesigns have already boosted user engagement and purchase conversion.

Alibaba trimmed its forecasted annual revenue target by four to six percent last November as China confronted a weakening economy at home and trade tensions with the U.S. Nonetheless, Alibaba executives continue to remind investors that domestic spending remains robust as shoppers look to upgrade consumption and impact of trade tensions is limited as Alibaba’s business depends primarily on local sales.

One highlight from the past quarter is the 33 million new monthly active users added to Alibaba’s online marketplaces on mobile devices, bringing the overall mobile MAU number to 699 million. Many of the new users are from third-and-lower tier cities, a victory Alibaba attributes to “simpler interfaces for first-time or less frequent users.” The giant has long coveted the next billions of internet users with a two-sided strategy. Aside from hawking products at them, Alibaba also enables farmers to sell rural produce to shoppers across China.

Alibaba’s forays into new fronts, though holding promise, have also put a squeeze on profitability. Costs of revenue stood at 52 percent in the December quarter, compared to 42 percent last year. The spike was due to the Ele.me consolidation, inventory and logistics costs from Alibaba’s aggressive offline expansion and direct import businesses, as well as spending by video streaming unit Youku on original content and licensing.

Digital entertainment remains the more lackluster performer across Alibaba’s business units as it grew at only 20 percent year-over-year. Youku is besieged by Alibaba’s peers Tencent and Baidu which each has their own video streaming business. Youku’s daily subscribers grew 64 percent in the past quarter though it hasn’t announced the exact user base in recent quarters. Both Tencent Video and Baidu’s iQiyi recently claimed to have crossed the 80 million subscriber mark.

Update: The title has been corrected.