PACIFIC • Facebook's Problem Is Facebook

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What's Done: Mark Zuckerberg just got grilled by European Parliament over the company's data privacy problems.

The Highlight: "In total you apologized 15 or 16 times in the last decade," Guy Verhofstadt, leader of the Alliance of Liberals and Democrats for Europe, said after Zuckerberg apologized, again. "Every year you have one or another wrongdoing with your company. ... Are you able to fix it? And if you've already confronted so many dysfunctions, there clearly has to be a problem."

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The Big Picture: Facebook's data privacy problem isn't a glitch, it's the central feature. Facebook succeeds by collecting, harvesting and profiting off your data. In fact, many of Facebook's proposed solutions to its myriad problems are structured to give them more access to your data.

To wit, look at one idea Facebook has for stopping people from posting naked photos of other people, mentioned in today's New York Times:

• "Niamh Sweeney, Facebook's policy chief for Ireland ... said that one way Facebook was trying to address the issue was by inviting individuals to preemptively submit naked or other embarrassing pictures of themselves so the company's software could block efforts to post the images. (A pilot program is underway in Australia.)"

As for the hearing ... The questions were good. The format wasn't.

My colleague Samuel Burke emailed from Brussels during the hearing: "It's a shit show so far. The questions are excellent and very poignant, except the format is totally in favor of Zuckerberg. They are ALL asking questions first and then later on Zuckerberg will answer in one fell swoop."

Bonus: Paul Tweed, the lawyer who made his name suing news organizations on behalf of Hollywood stars, is setting his sights on Facebook, per NYT's David Kirkpatrick:

• "I say to Facebook, 'What is the difference between you and a national newspaper being responsible for the letters they publish on their letters page? Why do you have to be treated differently?' Facebook can't say, 'We are not a publisher; we are just a platform.' I have been hearing that from them for years, and I never believed it."



Axios' Sara Fischer has a great piece about how "impatient, distracted consumers" are upending the media landscape. "Americans are increasingly picky, impatient, distracted and demanding," she writes, "and their media diets are changing so fast that most traditional industries can no longer keep up."

We hope PACIFIC holds your attention.


Rise of China: Warner hits Trump on ZTE

President Trump now says there is no deal with China on ZTE, contradicting a Wall Street Journal report that his administration had reached a tentative agreement to revive the telecom company. Lawmakers had criticized the president for bowing to China and putting US national security at risk.

Sen. Mark Warner emails PACIFIC:

• "It's disappointing to see the President reverse course. While the intelligence community has to do a better job at conveying to telecommunication companies and local governments how ZTE and its dangerous technology is making us more vulnerable, it's also important to emphasize that the President shouldn't be using national security concerns as a chit in a so-far failed negotiation with China."

Meanwhile ... Trump's trade truce with China continues to ruffle feathers because it does nothing to to stop China's theft of US intellectual property.

Steve Bannon, former Trump White House chief strategist, to Bloomberg:

• "The best thing to do with China is a confrontation ... a confrontation to tell them, 'We're firm in these beliefs. We're not going to let you steal our innovation. We're not going to let you just sit there and rape Silicon Valley. It's not going to happen."

What Warner told me last month:

• "American companies have bastardized themselves so much to get into the Chinese market that they've given away a lot of the intellectual capital ... They prostituted themselves to get into that market."

The Big Picture: New POLITICO Investigation: "How China acquires 'the crown jewels' of U.S. technology," by Cory Bennett and Bryan Bender:

• "The Committee on Foreign Investment in the United States, the main vehicle for protecting American technology from foreign governments, rarely polices the various new avenues Chinese nationals use to secure access to American technology."

• "CFIUS lacks the resources to deal with increasingly complex cases, which revolve around lines of code and reams of personal data more than physical infrastructure."

• "The gap in oversight became a more urgent problem in 2015, when China unveiled its 'Made in China 2025' strategy of working with private investors to buy overseas tech firms.

Money Quote, via ex-CFUIS member Paul Rosenzweig:

• "I knew what was critical in 1958 — tanks, airplanes, avionics. Now, truthfully, everything is information. The world is about information, not about things. And that means everything is critical infrastructure. That, in some sense, means CFIUS really should be managing all global trade."

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What We'll Be Reading

POLITICO's new content-sharing partnership with Jack Ma's South China Morning Post: "Politico is deeply seated in the power structure in D.C. and we occupy a similar position in the power structures of Hong Kong and Beijing," SCMP CEO Gary Liu tells WSJ. "We really think this will enable us to explain both sides of U.S-Sino relations in a way no one else can."


Big Brother Bezos: How police use Amazon

Amazon has been selling Rekognition, its facial recognition technology, to local law enforcement agencies who are using it to identify suspects.

What Rekognition does, per Amazon:

• Reads faces and searches databases to identify individuals.

• Offers a "person tracking" feature that it says "makes investigation and monitoring of individuals easy and accurate."

• Amazon says Rekognition can be used to identify "all faces in group photos, crowded events, and public places such as airports."

Civil rights groups are up in arms.

From their letter to Jeff Bezos, sent today and signed by the ACLU, Human Rights Watch and roughly 40 other groups:

• "We demand that Amazon stop powering a government surveillance infrastructure that poses a grave threat to customers and communities across the country."

• "As advertised, Rekognition is a powerful surveillance system readily available to violate rights and target communities of color."

• "People should be free to walk down the street without being watched by the government."

• "Amazon Rekognition is primed for abuse in the hands of governments. This product poses a grave threat to communities, including people of color and immigrants, and to the trust and respect Amazon has worked to build."

Amazon spokeswoman Nina Lindsey:

• "Amazon requires that customers comply with the law and be responsible when they use [Amazon Web Services] ... When we find that AWS services are being abused by a customer, we suspend that customer's right to use our services."

The Big Picture: Amazon's compliance is not going to be enough to stop law enforcement offices from abusing new technology.

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Valinsky's Links

Facebook is full of could-be CEOs (Recode)

Twitter is killing off its TV apps (The Verge)

Apple's "Stories" gets showrunners (MacRumors)

Amazon is banning over-returners (WSJ)

Allbirds seeks staying power (WSJ)


Coffee Break: Starbucks' hidden power

My colleague Jordan Valinsky emails:

Starbucks is winning the mobile payments war.

Not Apple, not Google, not Samsung. ... New data from eMarketer reveals that more people in the US use the Starbucks app to make mobile payments than any other app, thanks to its lucrative rewards program.

By the end of the year, 23.4 million people will have used the Starbucks app, compared to 22 million for Apple, 11 million for Google and 9.9 million for Samsung Pay. Starbucks is expected to maintain the lead through 2022.

The Big Picture: There is an immense opportunity for global brands to retain customers -- and access their data -- through app subscriptions. That's as true for tech, media and telecom companies as it is for coffee chains.

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Talk of Tinseltown: The Great Talent Poach

Some big picture perspective in light of yesterday's Netflix-Obamas deal:

"Tech's TV Talent Trove," by Axios' Sara Fischer:

"Tech companies that don't have storytelling at their core are recruiting their way into the future of TV by poaching high-end names from TV networks or household names that they know will lure viewers."

The Scoreboard:

• Netflix "has hired Grey's Anatomy and Scandal creator Shonda Rhimes from ABC, and Nip/Tuck creator Ryan Murphy from FX."

• "Amazon [has] hired NBC veteran Vernon Sanders as co-head of television at Amazon Studios. He joins top TV exec Jennifer Salke, creator ... This Is Us."

• "Apple poached Jamie Erlicht and Zack Van Amburg, [of] "Breaking Bad" and "The Crown," from Sony Pictures Television last year."

The Big Picture: What Apple SVP Eddy Cue told me back in March, at SXSW: "We don't know anything about making television. We don't really know how to create shows. We were cognizant of that."

If you're not yet reading Fischer's weekly Media Trends newsletter, we recommend it.


What Next: Salesforce CEO Marc Benioff is opening the new Salesforce Tower in San Francisco today. At 61 stories, it is the tallest office building San Francisco. But Benioff's focus will be on the streets: specifically, homelessness and civic responsibility.

See you tomorrow.

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