A network of scammers used a ring of established right-wing Facebook pages to stoke Islamophobia and make a quick buck in the process, a new report from the Guardian reveals. But it’s less a vast international conspiracy and more simply that Facebook is unable to police its platform to prevent even the most elementary scams — with serious consequences.
The Guardian’s multi-part report depicts the events like a scheme of grand proportions executed for the express purpose of harassing Representatives Ilhan Omar (D-MI), Rashida Tlaib (D-MN) and other prominent Muslims. But the facts it uncovered point towards this being a run-of-the-mill money-making operation that used tawdry, hateful clickbait and evaded Facebook’s apparently negligible protections against this kind of thing.
The scam basically went like this: an administrator of a popular right-wing Facebook page would get a message from a person claiming to share their values that asked if they could be made an editor. Once granted access, this person would publish clickbait stories — frequently targeting Muslims, and often Rep. Omar, since they reliably led to high engagement. The stories appeared on a handful of ad-saturated websites that were presumably owned by the scammers.
That appears to be the extent of the vast conspiracy, or at least its operations — duping credulous conservatives into clicking through to an ad farm.
Its human cost, however, whether incidental or deliberate, is something else entirely. Rep. Omar is already the target of many coordinated attacks, some from self-proclaimed patriots within this country; just last month, an Islamophobic Trump supporter pleaded guilty in federal court to making death threats against her.
Social media is asymmetric warfare in that a single person can be the focal point for the firepower — figurative but often with the threat of literal — of thousands or millions. That a Member of Congress can be the target of such continuous abuse makes one question the utility of the platform on which that abuse is enabled.
In a searing statement offered to the Guardian, Rep. Omar took Facebook to task:
I’ve said it before and I’ll say it again: Facebook’s complacency is a threat to our democracy. It has become clear that they do not take seriously the degree to which they provide a platform for white nationalist hate and dangerous misinformation in this country and around the world. And there is a clear reason for this: they profit off it. I believe their inaction is a grave threat to people’s lives, to our democracy and to democracy around the world.
Despite the scale of its effect on Rep. Omar and other targets, it’s possible and even likely that this entire thing was carried out by a handful of people. The operation was based in Israel, the report repeatedly mentions, but it isn’t a room of state-sponsored hackers feverishly tapping their keyboards — the guy they tracked down is a jewelry retailer and amateur SEO hustler living in a suburb of Tel Aviv who answered the door in sweatpants and nonchalantly denied all involvement.
The funny thing is that, in a way, this does amount to a vast international conspiracy. On one hand, it’s a guy in sweatpants worming his way into some trashy Facebook pages and mass-posting links to his bunk news sites. But on the other, it’s a coordinated effort to promote Islamophobic, right-wing content that produced millions of interactions and doubtless further fanned the flames of hatred.
Why not both? After all, they represent different ways that Facebook fails as a platform to protect its users. “We don’t allow people to misrepresent themselves on Facebook,” the company wrote in a statement to the Guardian. Obviously, that isn’t true. Or rather, perhaps it’s true in the way that running at the pool isn’t allowed. People just do it anyway, because the lifeguards and Facebook don’t do their job.
Facebook ads are an effective and affordable way marketing method. Here are six essential strategies every ecommerce brand needs in 2020.
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Facebook is building its own version of Instagram Close Friends, the company confirms to TechCrunch. There are a lot people that don’t share on Facebook because it can feel risky or awkward as its definition of “friends” has swelled to include family, work colleagues and distant acquaintances. No one wants their boss or grandma seeing their weekend partying or edgy memes. There are whole types of sharing, like Snapchat’s Snap Map-style live location tracking, that feel creepy to expose to such a wide audience.
The social network needs to get a handle on microsharing. Yet Facebook has tried and failed over the years to get people to build Friend Lists for posting to different subsets of their network.
Back in 2011, Facebook said that 95% of users hadn’t made a single list. So it tried auto-grouping people into Smart Lists like High School Friends and Co-Workers, and offered manual always-see-in-feed Close Friends and only-see-important-updates Acquaintances lists. But they too saw little traction and few product updates in the past eight years. Facebook ended up shutting down Friend Lists Feeds last year for viewing what certain sets of friends shared.
Then a year ago, Instagram made a breakthrough. Instead of making a complicated array of Friend Lists you could never remember who was on, it made a single Close Friends list with a dedicated button for sharing to them from Stories. Instagram’s research found 85% of a user’s Direct messages go to the same three people, so why not make that easier for Stories without pulling everyone into a group thread? Last month I wrote that “I’m surprised Facebook doesn’t already have its own Close Friends feature, and it’d be smart to build one.”
How Facebook Favorites works
Now Facebook is in fact prototyping its a feature similar to Instagram Close Friends called Favorites. It lets users designate certain friends as Favorites, and then instantly send them their Facebook Story or a camera-based post from Messenger to just those people, each in their own message thread.
The feature was first spotted inside Messenger by reverse engineering master and frequent TechCrunch tipster Jane Manchun Wong. Buried in the Android app is the code that let Wong generate the screenshots (above) of this unreleased feature. They show how when users go to share a Story or camera post from Messenger, they can instantly send it over chat to everyone on in their Favorites, and edit who’s on that list by adding up to 10 people manually or from algorithmic suggestions. For now Favorites isn’t an audience for sharing Stories like Instagram Close Friends is, but you could imagine Facebook expanding Favorites to have that functionality down the line.
[Update: Facebook had originally confirmed Favorites was for sharing via Stories, but later corrected itself saying posts are sent to Favorites via Messenger.]
A Facebook spokesperson confirmed to me that this feature is a prototype that the Messenger team created. It’s an early exploration of the microsharing opportunity, and the feature isn’t officially testing internally with employees or publicly in the wild. The spokesperson describes the Favorites feature as a type of shortcut for sharing to a specific set of people. They tell me that Facebook is always exploring new ways to share, and as discussed at its F8 conference this year, Facebook is focused on improving the experience of sharing with and staying more connected to your closest friends.
Unlocking creepier sharing
There are a ton of benefits Facebook could get from a Favorites feature if it ever launches. First, users might share more often if they can make content visible to just their best pals, as those people wouldn’t get annoyed by over-posting. Second, Facebook could get new, more intimate types of content shared, from the heartfelt and vulnerable to the silly and spontaneous to the racy and shocking — stuff people don’t want every single person they’ve ever accepted a friend request from to see. Favorites could reduce self-censorship.
“No one has ever mastered a close friends graph and made it easy for people to understand . . . People get friend requests and they feel pressure to accept,” Instagram director of product Robby Stein told me when it launched Close Friends last year. “The curve is actually that your sharing goes up and as you add more people initially, as more people can respond to you. But then there’s a point where it reduces sharing over time.” Google+, Path and other apps have died chasing this purposefully selective microsharing behavior.
Facebook Favorites could stimulate lots of sharing of content unique to its network, thereby driving usage. After all, Facebook said in April that it had 500 million daily Stories users across Facebook and Messenger posting from the camera, and the same number as Instagram Stories and WhatsApp Status.
Before Instagram launched Close Friends, it actually tested the feature under the name Favorites and allowed you to share feed posts as well as Stories to just that subset of people. And last month Instagram launched the Close Friends-only messaging app Threads that lets you share your Auto-Status about where or what you’re up to.
Facebook Favorites could similarly unlock whole new ways to connect. Facebook can’t follow some apps like Snapchat down more privacy-centric product paths because it knows users are already uneasy about it after 15 years of privacy scandals. Apps built for sharing to different graphs than Facebook have been some of the few social products that have succeeded outside its empire, from Twitter’s interest graph, to TikTok’s fandoms of public entertainment, to Snapchat’s messaging threads with besties.
A competent and popular Facebook Favorites could let it try products in location, memes, performances, Q&A, messaging, live streaming and more. It could build its own take on Instagram Threads, let people share exact location just with Favorites instead of just what neighborhood they’re in with Nearby Friends or create a dedicated meme resharing hub like the LOL experiment for teens it shut down. At the very least, it could integrate with Instagram Close Friends so you could syndicate posts from Instagram to your Facebook Favorites.
The whole concept of Favorites aligns with Facebook CEO Mark Zuckerberg’s privacy-focused vision for social networking. “Many people prefer the intimacy of communicating one-on-one or with just a few friends,” he writes. Facebook can’t just be the general purpose catch-all social network we occasionally check for acquaintances’ broadcasted life updates. To survive another 15 years, it must be where people come back each day to get real with their dearest friends. Less can be more.
Facebook’s latest transparency report is out.
The social media giant said the number of government demands for user data increased by 16% to 128,617 demands during the first half of this year compared to the second half of last year.
That’s the highest number of government demands it has received in any reporting period since it published its first transparency report in 2013.
The U.S. government led the way with the most number of requests — 50,741 demands for user data resulting in some account or user data given to authorities in 88% of cases. Facebook said two-thirds of all the U.S. government’s requests came with a gag order, preventing the company from telling the user about the request for their data.
But Facebook said it was able to release details of 11 so-called national security letters (NSLs) for the first time after their gag provisions were lifted during the period. National security letters can compel companies to turn over non-content data at the request of the FBI. These letters are not approved by a judge, and often come with a gag order preventing their disclosure. But since the Freedom Act passed in 2015, companies have been allowed to request the lifting of those gag orders.
The report also said the social media giant had detected 67 disruptions of its services in 15 countries, compared to 53 disruptions in nine countries during the second half of last year.
And, the report said Facebook also pulled 11.6 million pieces of content, up from 5.8 million in the same period a year earlier, which Facebook said violated its policies on child nudity and sexual exploitation of children.
The social media giant also included Instagram in its report for the first time, including removing 1.68 million pieces of content during the second and third quarter of the year.
- Facebook says a bug caused its iPhone app’s inadvertent camera access
- California accuses Facebook of ignoring subpoenas in state’s Cambridge Analytica investigation
- Facebook says at least 50 million users affected by security breach
- Facebook has suspended ‘tens of thousands’ of apps suspected of hoarding data
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Facebook today announced it has filed suit in California against domain registrar OnlineNIC and its proxy service ID Shield for registering domain names that pretend to be associated with Facebook, like www-facebook-login.com or facebook-mails.com, for example. Facebook says these domains are intentionally designed to mislead and confuse end users, who believe they’re interacting with Facebook.
These fake domains are also often associated with malicious activity, like phishing.
While some who register such domains hope to eventually sell them back to Facebook at a marked-up price, earning a profit, others have worse intentions. And with the launch of Facebook’s own cryptocurrency, Libra, a number of new domain cybersquatters have emerged. Facebook was recently able to take down some of these, like facebooktoken.org and ico-facebook.org, one of which had already started collecting personal information from visitors by falsely touting a Facebook ICO.
Facebooks’ new lawsuit, however, focuses specifically on OnlineNIC, which Facebook says has a history of allowing cybersquatters to register domains with its privacy/proxy service, ID Shield. The suit alleges that the registered domains, like hackingfacebook.net, are being used for malicious activity, including “phishing and hosting websites that purported to sell hacking tools.”
The suit also references some 20 other domain names that are confusingly similar to Facebook and Instagram trademarks, it says.
OnlineNIC has been sued before for allowing this sort of activity, including by Verizon, Yahoo, Microsoft and others. In the case of Verizon (disclosure: TechCrunch parent), OnlineNIC was found liable for registering more than 600 domain names similar to Verizon’s trademark, and the courts awarded $ 33.15 million in damages as a result, Facebook’s filing states.
Facebook is asking for a permanent injunction against OnlineNIC’s activity, as well as damages.
The company says it took this issue to the courts because OnlineNIC has not been responsive to its concerns. Facebook today proactively reports instances of abuse with domain name registrars and their privacy/proxy services, and often works with them to take down malicious domains. But the issue is widespread — there are tens of millions of domain names registered through these services today. Some of these businesses are not reputable, however. Some, like OnlineNIC, will not investigate or even respond to Facebook’s abuse reports.
Attorney David J. Steele, who previously won the $ 33 million judgement for Verizon, is representing Facebook in the case.
“By mentioning our apps and services in the domain names, OnlineNIC and ID Shield intended to make them appear legitimate and confuse people. This activity is known as cybersquatting and OnlineNIC has a history of this behavior,” writes Facebook, in an announcement. “This lawsuit is one more step in our ongoing efforts to protect people’s safety and privacy,” it says.
OnlineNIC has been asked for comment and we’ll update if it responds.
The Daily Crunch is TechCrunch’s roundup of our biggest and most important stories. If you’d like to get this delivered to your inbox every day at around 9am Pacific, you can subscribe here.
Facebook’s news section, which was previously reported to be imminent, is here: The company is rolling out Facebook News in a limited test in the U.S. as a home screen tab and bookmark in the main Facebook app.
Should publishers trust Facebook? Well, Josh Constine argues that none of them have learned the right lessons from the last 10 years.
The Go is clearly Google’s attempt to lead the way for manufacturers looking to explore Chromebook life outside the classroom. It has some nice hardware perks, but it’s not the revolution or revelation ChromeOS needs.
SpaceX president and COO Gwynne Shotwell shed a little more light on her company’s current thinking with regards to the mission timelines for its forthcoming Starship spacefaring vehicle.
Amazon shares fell by nearly 7% in after-hours trading on Thursday after the company reported its first earnings miss in two years.
In a letter by Sens. Charles Schumer (D-NY) and Tom Cotton (R-AR), the lawmakers asked the acting director of national intelligence Joseph Maguire if the app maker could be compelled to turn Americans’ data over to Chinese authorities.
Enterprise software investor Rory O’Driscoll says that while the cloud is obviously here to stay, the next five years in cloud investing will neither be the same nor as easy as the last 10. (Extra Crunch membership required.)
Startup funding experts — including Forward Partners managing partner Nic Brisbourne, Target Global partner Malin Holmberg and DocSend co-founder and chief executive officer Russ Heddleston — will sit down together on the Extra Crunch Stage at TechCrunch Disrupt Berlin.
While Facebook CEO Mark Zuckerberg seemed cheerful and even jokey when he took the stage today in front of journalists and media executives (at one point, he described the event as “by far the best thing” he’d done this week), he acknowledged that there are reasons for the news industry to be skeptical.
Facebook, after all, has been one of the main forces creating a difficult economic reality for the industry over the past decade. And there are plenty of people (including our own Josh Constine) who think it would be foolish for publishers to trust the company again.
For one thing, there’s the question of how Facebook’s algorithm prioritizes different types of content, and how changes to the algorithm can be enormously damaging to publishers.
“We can do a better job of working with partners to have more transparency and also lead time about what we see in the pipeline,” Zuckerberg said, adding, “I think stability is a big theme.” So Facebook might be trying something out as an “experiment,” but “if it kind of just causes a spike, it can be hard for your business to plan for that.”
At the same time, Zuckerberg argued that Facebook’s algorithms are “one of the least understood things about what we do.” Specifically, he noted that many people accuse the company of simply optimizing the feed to keep users on the service for as long as possible.
“That’s actually not true,” he said. “For many years now, I’ve prohibited any of our feed teams … from optimizing the systems to encourage the maximum amount of time to be spent. We actually optimize the system for facilitating as many meaningful interactions as possible.”
For example, he said that when Facebook changed the algorithm to prioritize friends and family content over other types of content (like news), it effectively eliminated 50 million hours of viral video viewing each day. After the company reported its subsequent earnings, Facebook had the biggest drop in market capitalization in U.S. history.
Zuckerberg was onstage in New York with News Corp CEO Robert Thomson to discuss the launch of Facebook News, a new tab within the larger Facebook product that’s focused entirely on news. Thomson began the conversation with a simple question: “What took you so long?”
The Facebook CEO took this in stride, responding that the question was “one of the nicest things he could have said — that actually means he thinks we did something good.”
Zuckerberg went on to suggest that the company has had a long interest in supporting journalism (“I just think that every internet platform has a responsibility to try to fund and form partnerships to help news”), but that its efforts were initially focused on the News Feed, where the “fundamental architecture” made it hard to find much room for news stories — particularly when most users are more interested in that content from friends and family.
So Facebook News could serve as a more natural home for this news (to be clear, the company says news content will continue to appear in the main feed as well). Zuckerberg also said that since past experiments have created such “thrash in the ecosystem,” Facebook wanted to make sure it got this right before launching it.
In particular, he said the company needed to show that tabs within Facebook, like Facebook Marketplace and Facebook Watch, could attract a meaningful audience. Zuckerberg acknowledged that the majority of Facebook users aren’t interested in these other tabs, but when you’ve got such an enormous user base, even a small percentage can be meaningful.
“I think we can probably get to maybe 20 or 30 million people [visiting Facebook News] over a few years,” he said. “That by itself would be very meaningful.”
Facebook is also paying some of the publishers who are participating in Facebook News. Zuckerberg described this as “the first time we’re forming long-term, stable relationships and partnerships with a lot of publishers.”
Several journalists asked for more details about how Facebook decided which publishers to pay, and how much to pay them. Zuckerberg said it’s based on a number of factors, like ensuring a wide range of content in Facebook News, including from publishers who hadn’t been publishing much on the site previously. The company also had to compensate publishers who are taking some of their content out from behind their paywalls.
“This is not an exact formula — maybe we’ll get to that over time — but it’s all within a band,” he said.
Zuckerberg was also asked about how Facebook will deal with accuracy and quality, particularly given the recent controversy over its unwillingness to fact check political ads.
He sidestepped the political ads question, arguing that it’s unrelated to the day’s topics, then said, “This is a different kind of thing.” In other words, he argued that the company has much more leeway here to determine what is and isn’t included — both by requiring any participating publishers to abide by Facebook’s publisher guidelines, and by hiring a team of journalists to curate the headlines that show up in the Top Stories section.
“People have a different expectation in a space dedicated to high-quality news than they do in a space where the goal is to make sure everyone can have a voice and can share their opinion,” he said.
As for whether Facebook News will include negative stories about Facebook, Zuckerberg seemed delighted to learn that Bloomberg (mostly) doesn’t cover Bloomberg.
“I didn’t know that was a thing a person could do,” he joked. More seriously, he said, “For better or worse, we’re a prominent part of a lot of the news cycles. I don’t think it would be reasonable to try to have a news tab that didn’t cover the stuff that Facebook is doing. In order to make this a trusted source over time, they have to be covered objectively.”
Permitting falsehood in political advertising would work if we had a model democracy, but we don’t. Not only are candidates dishonest, but voters aren’t educated, and the media isn’t objective. And now, hyperlinks turn lies into donations and donations into louder lies. The checks don’t balance. What we face is a self-reinforcing disinformation dystopia.
That’s why if Facebook, Twitter, Snapchat and YouTube don’t want to be the arbiters of truth in campaign ads, they should stop selling them. If they can’t be distributed safely, they shouldn’t be distributed at all.
No one wants historically untrustworthy social networks becoming the honesty police, deciding what’s factual enough to fly. But the alternative of allowing deception to run rampant is unacceptable. Until voter-elected officials can implement reasonable policies to preserve truth in campaign ads, the tech giants should go a step further and refuse to run them.
This problem came to a head recently when Facebook formalized its policy of allowing politicians to lie in ads and refusing to send their claims to third-party fact-checkers. “We don’t believe, however, that it’s an appropriate role for us to referee political debates and prevent a politician’s speech from reaching its audience and being subject to public debate and scrutiny” Facebook’s VP of policy Nick Clegg wrote.
The Trump campaign was already running ads with false claims about Democrats trying to repeal the Second Amendment and weeks-long scams about a “midnight deadline” for a contest to win the one-millionth MAGA hat.
After the announcement, Trump’s campaign began running ads smearing potential opponent Joe Biden with widely debunked claims about his relationship with Ukraine. Facebook, YouTube and Twitter refused to remove the ad when asked by Biden.
In response to the policy, Elizabeth Warren is running ads claiming Facebook CEO Mark Zuckerberg endorses Trump because it’s allowing his campaign lies. She’s continued to press Facebook on the issue, asking “you can be in the disinformation-for-profit business, or you can hold yourself to some standards.”
We intentionally made a Facebook ad with false claims and submitted it to Facebook’s ad platform to see if it’d be approved. It got approved quickly and the ad is now running on Facebook. Take a look: pic.twitter.com/7NQyThWHgO
— Elizabeth Warren (@ewarren) October 12, 2019
It’s easy to imagine campaign ads escalating into an arms race of dishonesty.
Campaigns could advertise increasingly untrue and defamatory claims about each other tied to urgent calls for donations. Once all sides are complicit in the misinformation, lying loses its stigma, becomes the status quo, and ceases to have consequences. Otherwise, whichever campaign misleads more aggressively will have an edge.
“In open democracies, voters rightly believe that, as a general rule, they should be able to judge what politicians say themselves.” Facebook’s Clegg writes.
But as is emblematic of Facebook’s past mistakes, it’s putting too much idealistic faith in society. If all voters were well educated and we weren’t surrounded by hyperpartisan media from Fox News to far-left Facebook Pages, maybe this hands-off approach might work. But in reality, juicy lies spread further than boring truths, and plenty of “news” outlets are financially incentivized to share sensationalism and whatever keeps their team in power.
Protecting the electorate should fall to legislators. But incumbents have few reasons to change the rules that got them their jobs. The FCC already has truth in advertising policies, but exempts campaign ads and a judge struck down a law mandating accuracy.
Granted, there have always been dishonest candidates, uninformed voters, and one-sided news outlets. But it’s all gotten worse. We’re in a post-truth era now where the spoils won through deceptive demagoguery are clear. Cable news and digitally native publications have turned distortion of facts into a huge business.
Most critically, targeted social network advertising combined with donation links create a perpetual misinformation machine. Politicians can target vulnerable demographics with frightening lies, then say only their financial contribution will let the candidate save them. A few clicks later and the candidate has the cash to buy more ads, amplifying more untruths and raising even more money. Without the friction of having to pick up the phone, mail a letter, or even type in a URL like TV ads request, the feedback loop is shorter and things spiral out of control.
Many countries including the UK, Ireland, and the EU ban or heavily restrict TV campaign ads. There’s plenty of precedent for policies keeping candidates’ money out of the most powerful communication mediums.
Campaign commercials on US television might need additional regulation as well. However, the lack of direct connections to donate buttons, microtargeting, and rapid variable testing weaken their potential for abuse. Individual networks can refuse ads for containing falsehoods as CNN recently did without the same backlash over bias that an entity as powerful as Facebook receives.
This is why the social networks should halt sales of political campaign ads now. They’re the one set of stakeholders with flexibility and that could make a united decision. You’ll never get all the politicians and media to be honest, or the public to understand, but just a few companies could set a policy that would protect democracy from the world’s . And they could do it without having to pick sides or make questionable decisions on a case-by-case basis. Just block them all from all candidates.
Facebook wrote in response to Biden’s request to block the Trump ads that “Our approach is grounded in Facebook’s fundamental belief in free expression, respect for the democratic process, and the belief that, in mature democracies with a free press, political speech is already arguably the most scrutinized speech there is.”
But banning campaign ads would still leave room for open political expression that’s subject to public scrutiny. Social networks should continue to let politicians say what they want to their own followers, barring calls for violence. Tech giants can offer a degree of freedom of speech, just not freedom of reach. Whoever wants to listen can, but they shouldn’t be able to jam misinformation into the feeds of the unsuspecting.
If the tech giants want to stop short of completely banning campaign ads, they could introduce a format designed to minimize misinformation. Politicians could be allowed to simply promote themselves with a set of stock messages, but without the option to make claims about themselves or their opponents.
Campaign ads aren’t a huge revenue driver for social apps, nor are they a high-margin business nowadays. The Trump and Clinton campaigns spent only a combined $ 81 million on 2016 election ads, a fraction of Facebook’s $ 27 billion in revenue that year. $ 284 million was spent in total on 2018 midterm election ads versus Facebook’s $ 55 billion in revenue last year, says Tech For Campaigns. Zuckerberg even said that Facebook will lose money selling political ads because of all the moderators it hires to weed out election interference by foreign parties.
Surely, there would be some unfortunate repercussions from blocking campaign ads. New candidates in local to national elections would lose a tool for reducing the lead of incumbents, some of which have already benefited from years of advertising. Some campaign ads might be pushed “underground” where they’re not properly labeled, though the major spenders could be kept under watch.
If the social apps can still offer free expression through candidates’ own accounts, aren’t reliant on politicians’ cash to survive, won’t police specific lies in their promos, and would rather let the government regulate the situation, then they should respectfully decline to sell campaign advertising. Following the law isn’t enough until the laws adapt. This will be an ongoing issue through the 2020 election, and leaving the floodgates open is irresponsible.
If a game is dangerous, you don’t eliminate the referee. You stop playing until you can play safe.
There’s a strategic cost to the defection of Visa, Stripe, eBay, and more from the Facebook -led cryptocurrency Libra Association . They’re not just names dropping off a list. Each potentially made Libra more useful, ubiquitous, or reputable. Now they could become obstacles to the token’s launch or growth.
Fearing regulators’ inquiries not just into their Libra involvement but the rest of their businesses, these companies are pulling out at least for now. None had made precise commitments to integrating Libra into their products, and they’ve said they could still get involved later. But their exit clouds the project’s future and leaves Facebook to absorb more of the blowback.
Here’s what each of the departing Libra Association members brought to the table and how they could spawn new challenges for the cryptocurrency:
With one of most widely-accepted payment methods, Visa could have helped make Libra universally spendable. It’s also one of the most prestigious names in finance, lending deep credibility to the project. Visa’s departure leaves Libra looking more like tech companies barging into payments, conjuring fears of their move fast, break things approach that could cause financial ruin if Libra runs into problems. It also could leave Libra with a much weaker presence in brick-and-mortar shops. No one will want to own a cryptocurrency that doesn’t appreciate in value and can’t be easily spent.
The involvement of MasterCard alongside Visa made Libra look like the incumbents adapting to modern technologies. This made it less threatening, and gave cryptocurrency an air of inevitability. MasterCard would have also brought an even wider network of locations where Libra could one day be used for payment. Now MasterCard and Visa might actively work against Libra to prevent their payment methods being made obsolete by Libra and its elimination of transaction fees through the blockchain. Two of Libras biggest allies could become its biggest foes.
Facebook has repeatedly told regulators that its Calibra app plus integrations into Messenger and WhatsApp would not be the only Libra wallets, pointing to PayPal . Facebook’s head of Libra David Marcus told Congress when asked about the social network’s outsized power to exploit Libra through its own Calibra wallet that “you have companies like PayPal and others that will, of course, collaborate, but [also] compete with us”. Now Facebook won’t have a scaled payment method it doesn’t own to point to as a likely alternative for people who don’t want to trust Facebook’s Calibra, Messenger, or WhatsApp to be their Libra wallet. The Libra Association also loses PayPal’s enormous network of online merchants that accept it, plus the inroad to integration into its peer-to-peer payback app Venmo. PayPal convinced the mainstream public to trust online payments — the exact kind of trust Facebook desperately needs. The fact that Marcus was also the former president of PayPal but couldn’t keep it in the association raises concerns about the group’s coalition-building prowess.
Stripe’s enormous popularity with ecommerce vendors made it a valuable Libra Association member. Together with PayPal, Stripe facilitates a huge portion of online transactions outside of China. Its ease of integration made it a top pick for developers Facebook surely hoped would build atop Libra. Stripe’s exit destroys a critical bridge to the fintech startup ecosystem that could have helped institutionalize Libra. Now the association will have to work on engineering payment widgets from scratch without Stripe’s assistance, which could slow adoption if it ever launches.
There’s a clear reason all these payment processors bailed. Senators Brian Schatz (D-HI) and Sherrod Brown (D-OH) wrote a letter to Visa, MasterCard, and Stripe’s CEOs this week explaining that “If you take this on, you can expect a high level of scrutiny from regulators not only on Libra-related activities, but on all payment activities.”
As one of the longest standing ecommerce companies, eBay bolstered beliefs that Libra could be used to power transactions between untrusted strangers without a costly middleman. It might have also put Libra into practice on one of the top western online marketplaces outside of Amazon. Without destinations like eBay onboard, average netizens will have fewer opportunities to be exposed to Libra’s potential to eliminate transaction fees.
One of the lesser-known Libra Association members, Mercado Pago helps merchants receive payments via email or in installments. The idea of connecting financially underserved populations has been core to Facebook’s pitch for why Libra should exist. The Libra Association has been light on the details of how exactly it serves this demographic, relying on the inclusion of partners like Mercado Pago to help it figure this out later. Mercado Pago’s departure leaves Libra looking more like a financial power grab rather than a tool to assist the disadvantaged.
On Monday, the remaining Libra Association members will meet to finalize the initial member list, elect a board, and create a charter to govern the project. This forced the hands of the companies above, who had their last chance to depart this week before being pulled deeper into Libra.
Who’s left includes venture capital firms, ride sharing companies, non-profits, and cryptocurrency companies. They are less tied up with the status quo of payment processing, and therefore had less to lose. The blockchain-specific companies were likely hoping to piggyback on financial giants like Visa to get Libra approved and create more legitimacy for their industry as a whole.
These partners could help fund an ecosystem of Libra developers, create daily use cases, spread the system in the developing world, and push for alliances between Libra and cryptocurrency players. Facebook will need to fight to keep them aboard if it wants to avoid Libra looking like a unilateral disruption of the economy.
For Libra to actually launch, Facebook needs to make serious concessions and divert from its initial vision. Otherwise if it continues to butt heads with regulators, more members could flee. One option floated by Libra Association member Andreessen Horowitz’s a16z Crypto partner Chris Dixon was for Libra to be denominated in US dollars instead of a basket of international currencies. That might lessen fears that Libra intends to compete directly with the dollar.
It’s become apparent that Facebook will not get its ideal cryptocurrency out the door. This is the brand tax of 100 scandals coming back to bite it. Now the best it can hope for is to get even a watered-down version launched, prove it can actually help the underbanked, and then hope to convince regulators it’s well-intentioned.