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China, the EU, and Facebook's GlobalCoin

May 24 · Issue #332 · View online
The Interface
Thanks for indulging my week spent away reporting. It has been a productive trip, and I’ll have much more to share with you from it soon. In the meantime, I spent my plane ride catching up on the week’s news. I’ll see you again on Tuesday after our Memorial Holiday.
The big news from this week in social networking fell broadly into three categories: China, the European Union, and money. Let’s consider them in turn.
As the trade war escalates, China has been at the forefront of recent Big Tech discussions. As Ben Thompson noted in a sharp piece, Big Tech’s conflict with China began long ago, when the country began blocking most US-based services. Now, amid growing fears about surveillance and espionage, America is putting more pressure on Chinese companies, most recently putting severe restrictions on Huawei.
In recent days, we’ve seen tech companies attempt to use the Trump Administration’s fears over China to their own advantage. Nitasha Tiku sums it up nicely in Wired:
Over the past week, both Facebook chief operating officer Sheryl Sandberg and former Google CEO Eric Schmidt made the same appeal to American nationalism, with differing degrees of subtlety: Breaking up Big Tech will only help China.
It’s a politically expedient plea as calls for regulating tech intensify amid growing concern about China’s tech prowess and an escalating US-China trade war. But the argument rests on the idea that what’s good for Facebook and Google is good for America. It also ignores how Silicon Valley is simultaneously seeking growth through partnerships with some of those same Chinese competitors, such as Google’s investment in and reported talks with Tencent to bring Google Cloud to China.
There’s no doubt that big American companies project America’s influence and values around the world — a kind of soft power whose value is hard to measure. That power scales proportionally along with the companies’ size — and so, as Tiku notes, makes for an expedient argument at a time when many voices are calling for these companies to be broken up. I don’t know whether this argument will carry the day — but I do expect that we’ll be hearing it a lot more.
Related question: given this backdrop, how should we expect TikTok parent ByteDance to fare? The Chinese company has almost never granted an interview to the American press, but it’s shipping new products at an impressive pace. It just released a new chat app America called Flipchat, and it’s reportedly planning a new music service. Meanwhile, David Carroll — one of the key figures in the Cambridge Analytica drama — warns that TikTok could one day lead to a data privacy scandal on a similar scale. And Ryan Broderick, who calls TikTok “China’s most important export right now,” wonders about the consequences of American teens embracing an app that is also effectively an arm of the Chinese government:
How TikTok handles other facets of privacy and data are also unclear. Last year, its owner ByteDance cooperated with China’s state censors, adding thousands of human moderators to remove “vulgar” content from one of its other apps that is a newsfeed. And Douyin now sends out official push notifications and emergency alerts for Chinese President Xi Jinping’s administration, essentially making it a channel of communication for the government.
Are fears of a rising TikTok xenophobic or justified? I welcome your thoughts on the subject.
China doesn’t hold free and fair elections, but the European Union does. EU Parliamentary elections took place this week, and the results will be announced Sunday. How well did Facebook protect itself against attacks?
On one hand, misinformation networks amassed tens of millions of followers and generated lots of engagement. Natasha Lomas reports:
Following the independent investigation, Facebook has taken down a total of 77 pages and 230 accounts from Germany, UK, France, Italy, Spain and Poland — which had been followed by an estimated 32 million people and generated 67 million ‘interactions’ (i.e. comments, likes, shares) in the last three months alone.
The bogus mainly far-right disinformation networks were not identified by Facebook — but had been reported to it by campaign group Avaaz — which says the fake pages had more Facebook followers and interactions than all the main EU far right and anti-EU parties combined.
Meanwhile, an Oxford University study found that individual pieces of fake news on Facebook can receive four times as much engagement as news stories produced by non-lying professionals. (It also found that professional news sites receive much more engagement overall, as Lomas notes here in a separate story.)
But for the most part, observers seem skeptical that fake news will have played a major role in this election. Researchers Alex Krasodomski and Josh Smith write in Wired UK that the majority of political speech online is primarily emotional rather than factual — and while false facts can whip up hysteria, the power of individual pieces of fake news to do that is likely small.
Fact-checking, then, is not enough to defend us from manipulation or harassment. Indeed, of the cases we reviewed, nearly half did not even make factual statements. The same is true for doxxing, online abuse, spam, algorithmic manipulation and poisoning of communication channels. Information operations are rarely about changing the things people believe, but changing the way they feel. Anger and fear are not things we can correct with better facts.
(Counterpoint: if a viral WhatsApp thread falsely tells you that there’s a stranger in town stealing babies, you can absolutely address the anger and fear with better facts.)
In any case, Facebook (and Twitter, and YouTube) seemed to have weathered the EU Parliamentary elections without any major unforced errors.
Finally: money.
Facebook’s forthcoming cryptocurrency has generated a steady stream of stories about its development. This week we learned first that Facebook has incorporated a new company to house its payment efforts. Brenna Hughes Neghaiwi reports:
Facebook has set up a new financial technology company in Switzerland focusing on blockchain and payments as well as data analytics and investing, Geneva’s commercial register shows.
Libra Networks, with Facebook Global Holdings as stakeholder, was registered in Geneva on May 2 to provide financial and technology services and develop related hardware and software, plans submitted on the Swiss register reveal.
Next, we learned that the cryptocurrency has a codename — the appropriately grandiose “GlobalCoin” — and that it could launch next year. Szu Ping Chan reports:
Facebook is expected to outline plans in more detail this summer, and has already spoken to Bank of England governor Mark Carney. Founder Mark Zuckerberg met Mr Carney last month to discuss the opportunities and risks involved in launching a crypto-currency.
Facebook has also sought advice on operational and regulatory issues from officials at the US Treasury. The firm is also in talks with money transfer firms including Western Union as it looks for cheaper and faster ways for people without a bank account to send and receive money.
If you’re still wondering what Facebook hopes to get out of this — and I certainly am — Ben Thompson offers a guess:
If the company wants to eliminate credit card fees, that doesn’t leave much room to impose its own fees. In fact, I don’t think that Facebook wants to impose any fees at all: thinks about it — what could possibly be more valuable to an advertising-based business than knowing exactly what customers are spending their money on? I suspect Facebook is content with knowing about the flow of its’ users money; that is a very attractive replacement for, say, the inane contents of user-to-user messaging.
We’ll know soon enough.

Pelosi videos, altered to make her seem drunk, are spreading on YouTube, Twitter and Facebook
Twitter Bans #Resistance-Famous Krassenstein Brothers for Allegedly Operating Fake Accounts
How Silicon Valley gamed Europe’s privacy rules
Facebook Backs Away From the Hard Sell on Political Ads
The Facebook Loophole That Makes Political Ads Look Like Regular Content
Google, Facebook and Twitter to testify at election security hearing
Google Antitrust Complaint Threatens Plan for Auto Dashboard Dominance
Inside Google's Civil War
Democrats Running For President Say Social Media Companies Have A White Nationalist Problem. Some Think Regulation Should Be The Answer.
Republicans and Democrats agree: it’s time to regulate facial recognition tech
Senator proposes strict Do Not Track rules in new bill
A contentious legal debate over user agreements has been delayed after Elizabeth Warren called it ‘dangerous’
Snapchat Employees Abused Data Access to Spy on Users
Q&A with Neal Mohan: the man with YouTube’s most impossible job
Facebook’s A.I. Whiz Now Faces the Task of Cleaning It Up. Sometimes That Brings Him to Tears.
Thanks to Facebook, Your Cell Phone Company Is Watching You Closer Than Ever
Facebook is experimenting with robots to push its AI research forward
My Dad, the Facebook Addict
Can “Indie” Social Media Save Us?
Instagram will now support landscape video on IGTV
TikTok owner ByteDance’s long-awaited chat app is here
The White House’s ‘Tech Bias’ Reporting Form Is a Masterpiece of Trumpism
And finally ...
Snapchat Bans Porn Lenses, Porn Studio Vows to Carry On
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