Year: 2019

Californians have a lot to enjoy — great weather, big waves, solid microbreweries, and of course extremely high taxes on prepaid mobile service. But this controversial last feature is being adjusted after a judge found at least part of the state’s Mobile Telephony Surcharge to be unconstitutional. As a result, bills could shrink by a couple bucks starting this month.

The tax, which funds various local services like 911 and so on, was raised in 2016 and depending on various factors could be around 20 percent of the bill. That turns a $50 bill into a $60 bill, which is especially rough when you consider that lower prepaid plans are often preferred by people with limited incomes. So the tax was unpopular from the start — not that many are particularly liked.

In addition to making users angry, it attracted the attention of wireless carriers: MetroPCS filed a lawsuit alleging that the way the tax was calculated conflicted with federal rules set by the FCC. The details are buried in a mound of legalese, but essentially the problem was that California was effectively taxing inter-state services as well as within-state ones, which is not allowed either by state or federal law.

The challenge took its course and although the California government argued that its tax was compliant with the FCC’s rules, the judge ultimately decided otherwise.

“The California Prepaid Mobile Telephony Services Surcharge Collection Act [i.e. the tax increase passed in 2014 and instituted in 2016], in its entirety, conflicts with federal law and therefore is preempted and unconstitutional,” she wrote in the order concluding the case.

Example bills from T-Mobile show how fees could change. The amounts will differ based on region and bill total.

Although California is appealing the case, the judge’s order prevents it from collecting the tax in the meantime. So as long as that injunction remains in place, mobile bills should see a small break.

It won’t be a lot — an example provided by T-Mobile showed total taxes and fees reduced by about $3. But hey, every little bit counts.

The actual amount you pay your carrier shouldn’t change, though. Your $40 or $75 plan will remain the same; it’s only the associated taxes that are effected. The way they’re listed may also change; for instance, AT&T is replacing the “Prepaid MTS Surcharge” line item with “CA Surcharges, Fees & Taxes.” Its announcement doesn’t explicitly mention a change in amount, but unless it adds a fee of its own to make up the difference, it seems that users there and at other carriers will see similarly lowered taxes.

If you’re curious how much your bill will drop, if at all, your best bet is to call customer service and ask them to check.

Researchers at Michigan State University are exploring the idea that there’s more to “social media addiction” than casual joking about being too online might suggest. Their paper, titled “Excessive social media users demonstrate impaired decision making in the Iowa Gambling Task” (Meshi, Elizarova, Bender and Verdejo-Garcia) and published in the Journal of Behavioral Addictions, indicates that people who use social media sites heavily actually display some of the behavioral hallmarks of someone addicted to cocaine or heroin.

The study asked 71 participants to first rate their own Facebook usage with a measure known as the Bergen Facebook Addiction Scale. The study subjects then went on to complete something called the Iowa Gambling Task (IGT), a classic research tool that evaluates impaired decision making. The IGT presents participants with four virtual decks of cards associated with rewards or punishments and asks them to choose cards from the decks to maximize their virtual winnings. As the study explains, “Participants are also informed that some decks are better than others and that if they want to do well, they should avoid the bad decks and choose cards from the good decks.”

What the researchers found was telling. Study participants who self-reported as excessive Facebook users actually performed worse than their peers on the IGT, frequenting the two “bad” decks that offer immediate gains but ultimate result in losses. That difference in behavior was statistically significant in the latter portion of the IGT, when a participant has had ample time to observe the deck’s patterns and knows which decks present the greatest risk.

The IGT has been used to study everything from patients with frontal lobe brain injuries to heroin addicts, but using it as a measure to examine social media addicts is novel. Along with deeper, structural research, it’s clear that researchers can apply to social media users much of the existing methodological framework for learning about substance addiction.

The study is narrow, but interesting, and offers a few paths for follow-up research. As the researchers recognize, in an ideal study, the researchers could actually observe participants’ social media usage and sort them into categories of high or low social media usage based on behavior rather than a survey they fill out.

Future research could also delve more deeply into excessive users across different social networks. The study only looked at Facebook use, “because it is currently the most widely used [social network] around the world,” but one could expect to see similar results with the billion-plus monthly Instagram and potentially the substantially smaller portion of people on Twitter.

Ultimately, we know that social media is shifting human behavior and potentially its neurological underpinnings, we just don’t know the extent of it — yet. Due to the methodical nature of behavioral research and the often extremely protracted process of publishing it, we likely won’t know for years to come the results of studies conducted now. Still, as this study proves, there are researchers at work examining how social media is impacting our brains and our behavior — we just might not be able to see the big picture for some time.

Sites like Amazon and eBay have made it very compelling for consumers to buy online rather than in stores, in part because prices are very competitive and in many cases cheaper than what buyers might find in traditional retailers. But in the U.K., it turns out that some of those low prices are in part due to sellers dodging taxes, so now the government is cracking down.

The U.K.’s tax authority has “red-flagged” 4,600 online merchants, from a total of 7,000 investigations, in the last two years that have been evading sales taxes on goods sold in the U.K. on major marketplace sites like Amazon and eBay. Many of those online stores have been shut down and deleted as a result, while those now selling to U.K. buyers legitimately are giving the U.K.’s tax coffers a £205 million ($255 million) boost.

The numbers are the latest milestones in a long-term, ongoing operation by HM Revenue and Customs (HMRC). The authority has been working in conjunction with seven online marketplaces — Amazon, eBay, Fruugo.com, Wolf & Badger, Etsy, ASOS and Flubit — which last year signed on to cooperate in the investigation to identify merchants evading taxes by providing records of sales and other data obtained by the HMRC itself (we asked and it did not elaborate on what the latter entails).

The HMRC has estimated that between £1 billion and £1.5 billion ($1.3-1.9 billion) in collections were lost in a single year (2017) by companies failing to pay sales taxes on goods, with between £600 million and £900 million of that coming from overseas sellers.

The HMRC defines overseas sellers as a merchant that sells goods “in the UK to UK consumers and don’t have a business establishment in the UK.” Merchants based outside the EU that sell goods to U.K. consumers and then import them to the U.K. are also overseas sellers.

The Joint and Several Liability (JSL) notices — as the red flag notices are officially called — have been around since 2016, part of a wider remit both to identify tax loss and also weed out those who might be tricking the system to the detriment of U.K. businesses.

“Delivering a fair and level playing field for businesses is a top priority for this government,” said Financial Secretary to the Treasury, Mel Stride MP, in a statement. “These figures show that HMRC, working closely with the major online marketplaces, is making real headway tackling this serious and damaging evasion.”

But the agreements signed earlier this year with marketplaces like Amazon to help identify violating online sellers has given the program a boost: now, if a seller’s account does not get removed after it has been red-flagged, the marketplaces themselves become liable for any future sales taxes that the sellers incur. (It does not appear that they are liable for past taxes, though.)

The HMRC said that another consequence of the operation has been a boost in VAT (value-added tax, or sales tax) registrations by overseas companies. Between 2017 and the end of 2018, there were 58,000 VAT registration applications, compared to only 1,650 between 2015 and 2016.

Bungie, creator of the popular Halo and Destiny franchises, is splitting from publisher Activision and will go its own way, the company announced today. It’s almost certainly good news for gamers and the company itself, but it also won’t fix the problems that plagued Destiny and its sequel since their launches.

In a blog post, the company explained that the partnership had run its course:

We have enjoyed a successful eight-year run and would like to thank Activision for their partnership on Destiny. Looking ahead, we’re excited to announce plans for Activision to transfer publishing rights for Destiny to Bungie. With our remarkable Destiny community, we are ready to publish on our own, while Activision will increase their focus on owned IP projects.

The planned transition process is already underway in its early stages, with Bungie and Activision both committed to making sure the handoff is as seamless as possible

Bungie and Activision teamed up all those years ago essentially because the former needed a jump start to develop Destiny, and the latter was of course always looking for big titles to produce and milk for cash.

The deal was, briefly stated, $500 million for four games over ten years — which sounds reasonable on its face, but the first Destiny had a troubled development and took years to become the game people expected; the sequel infamously was rumored to have been rebooted less than a year and a half before release. Meanwhile both games needed a steady drip of new content to keep players online.

Pressure from Activision meant Bungie had to focus on meeting deadlines rather than pursue the “it’s ready when it’s ready” philosophy that companies like Rockstar have the luxury of. This may have contributed to the widely berated microtransation store built into Destiny 2 and the half-baked nature of its early content releases, like the much-maligned Curse of Osiris.

But ultimately these choices have been shown to be Bungie’s, and the responsibility rests on them as the developer. Delivering for both gamers and shareholders is tough, but that’s the deal they struck, and it seems as if they simply weren’t able to do it.

Getting the rights to Destiny back must have been like pulling teeth, but it may also be that Activision would rather cut Bungie loose while it’s ahead rather than attempt to rush the third entry in the series. Although both companies are being very polite about it right now, chances are the inside story will emerge soon; Kotaku’s Jason Schreier, who has followed the game and company closely for years, reported that champagne corks were flying at Bungie headquarters, so clearly some tension has been relieved.

History repeats, it seems: Bungie was originally an independent developer (and creator of the beloved Marathon games) and was acquired by Microsoft during the development of its breakout hit Halo. It later negotiated its independence from Microsoft, only to apparently walk into the same trap again a few years afterward.

What this means for Destiny players is unclear, but the trend away from yearly installments and towards longer development times and bigger payoffs has generally been a good one for players. If Bungie leans that way and Destiny 3 ends up coming out a year after it might have under Activision, it will almost certainly be better for it.

In the first days of 2017, Osterhout Design Group arrived up at CES with a two-story booth and huge promises. The startup’s founder, Ralph Osterhout, wanted to take the small San Francisco-based company even further past its military contractor roots in AR, building out major enterprise and consumer businesses with flashy new product lines. The company had just raised $58 million, and the Las Vegas electronics show served as its launchpad for its R-8 and R-9 augmented reality glasses lines that Osterhout hoped would bring “glasses to the masses.”

Less than a year later, however, the company had burned through its funding and couldn’t pay employees. By early 2018, ODG had lost half of its workforce as it sought loans to pay back employees. Today, a skeleton crew awaits a patent sale less than a week away after acquisitions from several large tech companies, including Facebook and Magic Leap, fell through, multiple sources tell TechCrunch.

ODG founder and CEO Ralph Osterhout

Ralph Osterhout, 73, founded ODG 20 years ago as a high-tech toy company, built after his previous venture, Machina, collapsed in what a Wired report at the time called “a spectacular bankruptcy.” After underwriting ODG with $14,000 of his own cash, Osterhout kept the startup plugging along on its own merits before he decided that it was time to reach for outside funding to turn his company into a powerhouse in the burgeoning augmented reality industry. At the end of 2016, the company raised a $58 million round led by 21st Century Fox.

ODG was already getting thousands of orders for its R-7 glasses, an enterprise-focused product that it billed as a head-worn Android tablet that could help workers go through checklists, review documents and share live video feeds hands-free. Osterhout wanted to get AR glasses into the hands of consumers and take advantage of new tech advances, even as Magic Leap was teasing the release of its own heavily hyped consumer product.

“I hope Magic Leap is a huge success. I want everyone in AR to be a huge success,” Osterhout said in an interview with TechCrunch in 2017. “[Augmented reality] is going to be transformative.”

Months later, a large Chinese firm approached ODG with an offer north of the company’s $258 million Series A valuation, a source tells TechCrunch. Talks fell through, but ODG’s leadership was at their most ambitious and felt like they couldn’t be stopped.

At the same time, following the CES 2017 product unveil, some employees wondered whether having three distinct product lines under development aimed at roughly the same customer was the right direction for the company with around 100 employees. Ralph Osterhout’s strong internal popularity kept these concerns at bay even as the company faced double-digit return rates from customers of its current-generation R-7 glasses due to manufacturing issues.

“That’s a little bit the story of ODG and Ralph, in general: everything is a prototype, nothing is finished, and before one thing is 60 percent done, you’re already onto the next one,” a former employee tells TechCrunch. “I think the heart of ODG’s downfall was its lack of focus.”

The company never ended up shipping the R-9 or the R-8 or even fulfilling all of its R-7 orders. It blew through its funding before the fall of 2017, and it wasn’t long before employees were on half-pay and soon stopped getting paid at all. ODG sought backing from Chinese firms, but sources say that a negative trade environment hampered those efforts. In 2018, it received an $8 million loan from a Chinese firm used to pay back employees as Osterhout began trying to scrounge together an exit strategy, seeking out buyers for the company that bore his name.

Suitors for the company included Magic Leap, Facebook, Razer and Lenovo, sources tell TechCrunch. In each case talks fell through, as Osterhout was convinced that his company was being undervalued by the prospective acquirers.

ODG’s San Francisco offices in 2016

Sources say that Magic Leap continued to bump up its offer, eventually signing a letter of intent in the final months of 2018 to purchase the startup. The final proposed purchase price ended up at $35 million, still a far cry from its 2016 valuation, a source familiar with the deal tells TechCrunch.

This offer came with stipulations for the types of engineers Magic Leap wanted to bring aboard, leading ODG to shrink its staff to just a couple dozen employees. As the startup whittled itself down to prepare for a disappointing, yet relatively dignified, sign-off, Magic Leap began to grow cagey about finalizing the acquisition, sources say. As the deal started to fall through, some in ODG’s leadership began to wonder aloud whether Magic Leap was “acting in poor faith” and was only looking to starve the company before purchasing assets at a discount in a patent sale.

“Ralph turned around and he didn’t have a company or team anymore, and then Magic Leap goes, you know what, we’re just going to buy the IP, we don’t want the company, you don’t have a company anymore,” one source said.

Magic Leap did not respond to a request for comment.

With the deal shot and the indebted company in shambles, the team dwindled down further to a skeleton crew — essentially a deals team — as company assets were put up for sale by IP advisory firm Hillco Streambank. The company’s patent portfolio up for sale next week includes 107 issued patents and 83 pending applications.

The 20-year-old company has already seen its early work in foundational AR patents pay off for it. In 2014, Microsoft paid around $150 million to acquire a trove of ODG patents after deciding not to buy the company outright. In documents reviewed by TechCrunch, ODG highlights a number of AR patents in its collection that it believes existing products from companies like Magic Leap, Google and Facebook infringe on, specifically pointing to diagrams of systems like the Magic Leap One and Oculus Quest that they claim conflict with its prior art.

With a patent sale (spotted first by UploadVR), ODG’s leadership is looking to recoup enough to pay back the company’s debts, as well as the employees who worked for months on partial salaries.

Whether or not ODG’s downfall was largely a cause of mismanagement, the disparity between acquisition offers and its 2016 valuation showcases a broader cool down in the augmented reality industry, as capital-intensive efforts in enterprise and hardware have proven to be a more difficult sell for investors heading into 2019.

Last month, Blippar, an enterprise-focused AR startup that raised more than $130 million, collapsed after failing to secure an emergency influx of cash. Just yesterday, it was reported that Meta, an AR hardware startup with $73 million in funding from Y Combinator, Tencent and Comcast, had fallen into insolvency. Magic Leap itself has had issues breaking into broader markets: In November the startup lost out to Microsoft on a $480 million military contract.

Asked whether they would pin the company’s failures on the broader industry slowdown, a former employee said, “From an internal standpoint, all I saw was, we are fucking it up.”

Ralph Osterhout did not respond to a request for comment.

Months after an earth-shattering New York Times investigation exposed Google parent company Alphabet’s $90 million payout to Android co-founder Andy Rubin, despite the accusations of sexual misconduct made against him, a Google shareholder is suing the company.

James Martin filed suit in the San Mateo Superior Court Thursday morning, alleging the company’s leaders deployed massive allowances to poor-behaving executives to cover up harassment scandals. Both Rubin and Google’s former head of search Amit Singhal, who peacefully left the company in 2016 amid harassment allegations that weren’t made public until the following year, are listed as defendants in the court filing. This is because the plaintiff is seeking a full return of the massive payouts awarded to the embattled former execs.

With charges including breach of fiduciary duty, unjust enrichment, abuse of power and corporate waste, per The Washington Post, the lawsuit asks for an end of nondisclosure and arbitration agreements at Google, which ensure workplace disputes are settled behind closed doors and without any right to an appeal. Martin is also requesting Google incorporate three new directors to the Alphabet board and put an end to supervoting shares, which gives certain shareholders more voting control.

The lawsuit also targets Rubin, Google co-founders Larry Page and Sergey Brin, chief executive officer Sundar Pichai and executive chairman Eric Schmidt. Former human resources director Laszlo Bock, chief legal officer David Drummond and former executive Amit Singhal are also named, as are long-time venture capitalists and Google board members John Doerr and Ram Shriram.

Google didn’t immediately respond to a request for comment.

Following the release of the NYT report, Googlers across the world rallied to protest the company’s handling of sexual misconduct allegations. The protestors had five key asks, including an end to forced arbitration in cases of harassment and discrimination, a commitment to end pay and opportunity inequity and a clear, uniform, globally inclusive process for reporting sexual misconduct safely and anonymously. Google ultimately complied with employees and put an end to forced arbitration; other tech companies, such as Airbnb, followed suit.

PeakSpan Capital, a four-year-old, Burlingame, Calif.-based venture firm, has closed its second fund with $265 million in capital commitments, according to a new SEC filing that shows that 68 investors were involved in the fundraise.

That’s a meaningful jump in size from the firm’s $150 million debut fund, which it closed in 2016.

PeakSpan was co-founded by Phil Dur and Brian Mulvey, longtime investors who’d spent the previous eight years working together for an outfit that’s no longer around (Investor Growth Capital).

Their firm specializes in growth-stage business software companies.

Among its newest bets is Cordial, a four-year-old, San Diego-based email platform that raised $15 million in Series B funding last summer led by PeakSpan; Inference, an eight-year-old, San Francisco-based company whose AI-driven self-service applications aim to replace human service and support agents (it has never announced its outside funding); and BookingBug, a 10-year-old, London-based customer engagement platform that raised $13.4 million in Series C funding last April, led by PeakSpan.

According to a new report published earlier this week by PwC and CB Insights, business software remains among the biggest areas of interest for VCs. According to the firms’ findings, 111 software deals (not relating to the internet or mobile) raised $3 billion from investors in the fourth quarter of last year, compared with 51 consumer products and services deals that attracted a collective $382 million.

Ford is shutting down Chariot, the shuttle startup that it purchased just two years ago that was supposed to be a part of the automaker’s fresh effort to move beyond the traditional business of buying and selling cars.

Chariot will end service on commuter routes in the U.K. on January 25, according to a company update Thursday. Other commuter routes in New York and San Francisco will cease by February 1. The dynamic shuttle service also had an enterprise business, which were routes with corporate and transit companies. Those enterprise routes in Austin, Chicago, Denver, Detroit and Seattle, will begin winding down by early March.

Chariot wouldn’t provide many details about why the service was shutting down except to allude to failing ridership numbers.

“In today’s mobility landscape, the wants and needs of customers and cities are changing rapidly,” the company wrote in a post on their website. The company went on to thank its customers for their support over the past five years.

Reports of sluggish demand and company morale had been trickling out for months now. A post in August by Streetsblog noted that Chariot’s shuttles in New York were empty most of the time, according to data provided by the company and evaluated by transit analyst Eric Goldwyn. That analysis found that Chariot’s fleet of 25 or so vans was serving around 1,000 riders total, or about nine riders per vehicle per day.

In February, Ali Vahabzadeh, the CEO and co-founder of ride-sharing startup Chariot left the company. He was replaced in the interim by Dan Grossman, who leads Microtransit for Ford Smart Mobility, while the company looked for a permanent person to lead Chariot.

Chariot has 625 total employees, including drivers; about 385 of those are in the Bay Area. Some Chariot employees will be offered opportunities in Ford Mobility, a company spokesperson said.

Chariot launched at Y Combinator and had only raised around $3 million before Ford acquired it, reportedly for $65 million plus earn-outs. It bases its service around a fleet of transit vans whose routes are aimed at commuters, and where routes are offered based on a “crowdsourced” vote.

Chariot was part of a slew of acquisitions and investments made by Ford since the automaker announced a broad transportation and mobility plan in 2015. That strategy, which has evolved over time, involves increasing connectivity (and the services that come with that feature) in its cars, developing autonomous vehicle technology, using big data collected from sensors in cars to learn more about how people travel and launching Ford Smart Mobility, a private subsidiary tasked with investing in and building out transportation services, including car sharing and ride hailing.