newsletter͏ ͏ ͏ ͏ ͏ ͏
with Louise Matsakis
| San Francisco|| Washington, D.C.|| Beijing|
Hi, and welcome to Semafor Tech, a twice-weekly newsletter from Reed Albergotti and me. For the last few weeks, I’ve been thinking about what would really happen if the U.S. government were to ban TikTok. The drastic measure would have plenty of implications for Americans, but I increasingly believe that TikTok itself would survive, and even thrive, in other parts of the world. Today, I have some details about one of its fastest growing businesses in Southeast Asia: e-commerce.
Plus, a Q&A with the U.S. Federal Trade Commission’s chief technology officer by freelancer Ben Brody, formerly of Protocol, and some shocking figures from Reed about how much money venture capitalists aren’t spending.
Was this email forwarded to you? Sign up here!
➚ MOVE FAST: Apple. The iPhone maker is now the only tech giant to have avoided layoffs (at least so far). It has instituted hiring freezes and CEO Tim Cook took a pay cut. Now, Cook looks like the one big tech CEO who deserves a raise.
➘ BREAK THINGS: Every other tech company. Layoffs at Google parent Alphabet announced today bring the total number of job cuts by just three big tech companies this month to 40,000. Whether they are really hurting or just trying to appease Wall Street, the bloodletting is astonishing.
The number of successful rocket launches in 2022 — a new record. U.S. company SpaceX, the Chinese government, and private firms in China accounted for more than two-thirds of the total, collectively sending 123 rockets to orbit and making it look as easy as firing up an Estes.
TikTok's Chinese sales to overseas consumers are booming
TikTok’s revenue from selling Chinese products to international consumers increased almost fivefold in 2022 from the previous year, according to internal information obtained by Semafor.
Last year, merchants from China produced over five million videos and livestreams on the app, marketing products ranging from platform pool slides to puffer vests, the records show. The content was made as part of “Project Aquaman,” TikTok’s ambitious plan to bring a version of China’s $400 billion livestream shopping industry to other markets around the world.
At the center of the initiative is TikTok Shop, a feature that allows users to buy items directly through the app without needing to navigate to an external website. It launched in the UK in 2021, but is most widely used in Southeast Asian countries, like Indonesia and Thailand. TikTok began testing the feature in the U.S. late last year, Semafor previously reported.
The internal information also reflects Chinese-owned TikTok’s close ties to the People’s Republic. In one record, for example, it referred to the best-selling products on TikTok Shop according to the Chinese city where they are made: leather purses from Baigou, wigs from Xuchang, and Crystals from Donghai. (I’ve written previously about the latter two e-commerce hubs for Semafor.)
TikTok didn't comment in time for publication of this story.
— Diego Mendoza contributed to this reportCFOTO/Sipa USA/Reuters
As tensions between the U.S. and China escalated over the past few years, TikTok went to great lengths to appear separate from its Chinese parent company, ByteDance. But these internal records show that in other parts of the world, the app is playing a huge and growing role in cross-border e-commerce, which largely relies on connections to the People’s Republic.
The documents also paint an instructive picture of what TikTok would look like if the U.S. government decides to crack down even more on the company. In recent weeks, Congress, over a dozen states, and several cities have banned TikTok from government-owned devices and Wi-Fi networks, including on state college campuses. While the measures are more symbolic than substantive, U.S. lawmakers seem willing to make it even harder for TikTok to operate in America, which is its most profitable market.
But even if the U.S. were to fully ban TikTok, as one bill introduced by Republican Senator Marco Rubio would, the app would still have hundreds of millions of users in other regions, many of whom are now increasingly using it for online shopping. And while the Indian government banned TikTok in 2020, leaders in places like Thailand and Indonesia don’t necessarily have the same stance toward China as those in Washington.
THE VIEW FROM INDONESIA
TikTok’s merchant management app was the most-downloaded shopping platform in Indonesia last year, according to the news site Tech in Asia. Across the country, many business owners are now reaching customers through the video platform, like Inggit Pambudi and his wife Mudya Ayu, who sell headscarves in the West Java district of Cicalengka, which has been nicknamed “Hijab Village.”
“We don’t even have any physical store,” Pambudi told Al Jazeera. “When I learned that I can livestream and sell my products on TikTok, I thought that it’s a good opportunity for us.”
- The head of TikTok’s U.S. e-commerce business, Sandie Hawkins, reports to a ByteDance executive — not TikTok’s CEO, The Information reported earlier this week.
- TikTok is being more transparent with U.S. lawmakers about its ambitious plans to reorganize its American operations, an effort it hopes will address concerns about its Chinese ownership, according to the Wall Street Journal.
Q&A: Stephanie Nguyen of the U.S. Federal Trade Commission
Nguyen has been the FTC’s chief technology officer since October. Agency Chair Lina Khan brought her on as one of several academics helping to remake the FTC as an unapologetic foe to tech companies and Big Business. She explains what technologists might be watching that the agency’s lawyers are missing.
Q: What is the job of the FTC CTO’s office?
A: The goal is to help with the agency's cases and investigations, to use our expertise as people who've worked in tech products and services. We do a lot of engaging with staff and leadership to identify various types of harm and market failures.
What this looks like in practice is having our technologists be able to draft specifications in our civil investigative demands, or subpoenas, and to be asking questions around algorithmic pricing models or data anonymization or cryptography and security protocols.
What are the different forms of multifactor authentication? Are AI systems even capable of doing what they advertise? We're closely following how the digital economy is impacted by changes in commercial surveillance.
Q: Chair Khan has talked about not just wanting to punish for particular harms but to stop them before they happen. Can you explain how that works?
A: I would look to the recent case of Drizly, which requires the company to publish limits on how long they keep different pieces of data. Ideally, this promotes a view that retention of data beyond [the time period that] is useful to users is a risk and not an asset.
Q: Tell me how you got into this?
A: I'm a human–computer interaction designer, and my career has really been centered around studying how technology can be used to hurt people, and then designing and building systems that actually help [people] do things like pay their student loans or get access to diabetes medication.
What's important to me, especially at the FTC, is that companies actually follow the laws that are built to protect the public. I've watched my parents interact with opaque systems that prey on non-native English speakers, especially around dark patterns and [user interfaces] that inundate them with legalese or default settings that share their information or suddenly enroll them in annual subscriptions. [Editor’s note: After this conversation, the FTC announced Epic Games would pay $245 million “for allegedly using dark patterns to dupe millions of Fortnite players into making unintentional purchases.”]
This should not be the case. That is something that almost every person who has bought something online can really feel because it’s like a million paper cuts a day.Unsplash/Oberon Copeland @veryinformed.com
Q: Reporting and surveys show the FTC workforce isn't particularly happy and they have doubts about the leadership. Is that something that you've experienced?
A: I have worked in several government agencies. Here, I feel valued. I feel like people listen to me — I have an impact.
Q: What do you hope to look back and say were your main accomplishments as the CTO?
A: I want to make sure the work that we do reflects what farmers and workers and business owners and consumers are experiencing today. Without having technologists — especially user experience researchers, anthropologists, social scientists who actually talk to humans and study how technology directly impacts them — we aren't seeing the full picture.
One Good Text with … Gabriel Nicholas & Aliya Bhatia
Gabriel and Aliya are both researchers at the Center for Democracy and Technology, where they’re studying how large language models — such as ChatGPT — work in languages other than English.
After reading a bunch of articles about Reed Hastings stepping down as co-CEO of Netflix, one thing stood out: The stories mostly focus on what’s happened to the company over the last 12 months, when they should really look at what Hastings did over the last 25 years.
Sure, the future of Netflix is a fascinating story that will be covered with rigor. But this is a moment to take a step back and appreciate the tenure of an entrepreneur who has had an enormous impact on entertainment, pop culture, and tech.
Netflix started off sending DVDs through the mail when people still went to video rental shop Blockbuster. Hastings made the difficult decision in 2007 to completely disrupt his own company by pivoting to streaming — when streaming was still difficult for most consumers.
Perhaps most remarkably, he turned the company into a film studio with hit shows, such as Orange Is the New Black and House of Cards. A decade later, Apple is winning Oscars and Amazon has acquired the movie and TV studio MGM. None of that would have happened without Netflix leading the way.
- Instagram launched a new feature called Quiet Mode, which functions similarly to the Do Not Disturb button on iPhones. If someone sends you an Instagram direct message while it’s enabled, they’ll receive an auto-reply saying you have Quiet Mode turned on.
- TikTok announced it will start labeling state-affiliated media outlets in 40 markets “whose editorial output or decision-making process is subject to control or influence by a government.” Several Chinese state media publications have already been impacted.
- Twitter officially banned third-party apps like Tweetbot and Twitterrific, which have played a long part in its history. But Twitter doesn’t serve advertisements through them, and the company’s new owner, Elon Musk, needs money.
Are you enjoying Semafor Tech? The more people read us, the better we’ll get. So please share it with your family, friends and colleagues to get those network effects rolling.
And hey, we can’t inform you on what’s happening in tech from inside your spam folder. Be sure to add firstname.lastname@example.org (you can always reach me by replying to these emails) and email@example.com to your contacts. In Gmail, drag this newsletter over to your ‘Primary’ tab.
Thanks for reading.
Want more Semafor? Explore all our newsletters at semafor.com/newsletters
— Reed and Louise