StockTok: FTC chair calls efforts to protect data “woefully inadequate”

Mark Zuckerberg takes a step back from Washington, Snap partners with Google on My AI and other notable stories from this week

Welcome to “StockTok,” The Fly’s weekly recap of Wall Street’s reactions to social media stock news.

During Connect 2024, Meta Platforms (META) disclosed Orion, previously codenamed Project Nazare, which the company believes is “the most advanced pair of AR glasses ever made.” “They enable digital experiences that are unconstrained by the limits of a smartphone screen. With large holographic displays, you can use the physical world as your canvas, placing 2D and 3D content and experiences anywhere you want,” Meta says. Smart assistant Meta AI will run on Orion. Beginning at Connect and continuing throughout the year, Meta is opening up access to its Orion product prototype for Meta employees and select external audiences.

Also, during the conference, Meta noted that it is adding new AI features to Ray-Ban Meta glasses to help users remember things like where they parked, translate speech in real time, answer questions about things you’re seeing and more. Further, the company said it is advancing partnerships with Spotify (SPOT) and Amazon Music (AMZN) and adding new ones with Audible and iHeart (IHRT) to give you more ways to listen. Users can now ask Meta AI to record and send voice messages on WhatsApp and Messenger. Meta adding video to Meta AI.

Additionally, the company introduced the newly opened source Llama 3.2 with new multimodal features. Users can now use their voice to talk to Meta AI on Messenger, Facebook, WhatsApp and Instagram DM, and it’ll respond back out loud. Users can also now share photos in chats with Meta AI, and Meta AI can understand what it’s looking at and answer questions about it. Meta also testing a Meta AI translation tool that will automatically translate the audio of Reels. Additionally, the company said it is expanding its business AIs to thousands of businesses using click-to-message ads on WhatsApp and Messenger in English, so they can quickly set up business AIs that can talk to their customers, offer support and facilitate commerce.

Lastly, Meta unveiled Meta Quest 3S, a headset with the same mixed reality capabilities and fast performance as Meta Quest 3, but at a lower price point. Starting at $299.99. Preorders are available today; expected to start shipping on October 15. In addition to the new budget-friendly Meta Quest 3S headset, Meta is also dropping the price of the 512GB Meta Quest 3 from $649.99 to $499.99.

HOLDING: 

Shares of Trump Media & Technology (DJT) were up 60c, or 5%, to $13.39 in pre-market trading. Inside shareholders of Trump Media were allowed to start selling their shares this past Friday, the end of the traditional six-month lockup period after the stock’s debut in March, and Tuesday marked the end of the two-day requirement for stock sales to be disclosed if any company executive or insiders decided to sell their shares. Republican presidential candidate Donald Trump, the largest shareholder in Trump Media with a stake that represents nearly 60% of the company’s outstanding stock, said earlier this month that he didn’t plan to sell any of his shares of the parent of Truth Social.

NO FAITH: 

After years of involving himself in politics, Meta CEO Mark Zuckerberg has started expressing cynicism and he, as well as others at the top of the company, believes both parties loath technology, Theodore Schleifer and Mike Isaac of The New York Times reported. In public, Zuckerberg is declining to engage with Washington except when necessary. Similarly, in private, he has stopped supporting programs at his philanthropy that could be considered partisan and has tamped down employee activism at Meta.

NO THANKS: 

Meta is rejecting the European Union’s, EU, voluntary AI safety pledge that is planned as a stopgap measure before the bloc’s AI Act rules go fully into effect in 2027, Gian Volpicelli of Bloomberg wrote. A spokesperson said the company could join the AI Pact initiative at a later stage but is now prioritizing “focusing on our compliance work under the AI Act at this time.”

UPGRADED ENTERPRISE OFFERINGS: 

Zoom announced several new add-on products and functionalities to its enterprise offerings portfolio for the Zoom platform. Zoom advanced enterprise offerings consist of a portfolio of Zoom products and features that help organizations meet their compliance, security, privacy, survivability, and manageability requirements. Zoom Compliance Manager Plus: Launched in March and powered by Theta Lake, Zoom Compliance Manager is an offering that provides archiving, eDiscovery, legal hold, and information protection offerings for enterprises. Zoom Compliance Manager Plus enhances ZCM with advanced features such as risk detection, data loss protection, and advanced trends analysis. These capabilities will further help organizations fulfill regulatory obligations and mitigate organizational communications compliance risks. Zoom Meeting Survivability: Introduces a new level of network redundancy and enables business continuity, helping to ensure uninterrupted Zoom meeting service even during internet disruption due to outages from a storm, natural disaster, or carrier failure. Utilizing Zoom Node, a central hub for hosting Zoom workloads on premises, this functionality keeps meetings running via a failover to data centers where meetings are hosted on your local servers with minimal disruption to the end users. Zoom Mesh for Meetings: With Zoom Mesh, companies can optimize bandwidth usage and save up to 60% on internet bandwidth and associated costs. Already available for Zoom Webinars and Zoom Events, this capability now extends to Zoom Meetings for a user experience regardless of bandwidth constraints. Zoom Customer Managed Key Hybrid: CMK Hybrid enhances Zoom’s current CMK data privacy offering by providing customers with more options to manage the encryption keys used to protect data maintained by Zoom. CMK Hybrid allows customers to control the entire encryption/decryption process on premises. Zoom Team Chat messages, for example, can be encrypted locally by the Zoom Workplace app. Zoom CMK Hybrid will be available for Zoom Workplace starting with the support of Zoom Team Chat in Q4 2024.

GEMINI-MY AI INTEGRATION: 

Google Cloud (GOOGL) announced an expanded strategic partnership with Snap (SNAP) to power generative AI experiences within My AI, Snapchat’s AI-powered chatbot and one of the largest consumer chatbots available. Snapchat will leverage the multimodal capabilities of Gemini on Vertex AI, particularly the technology’s ability to understand and operate across different types of information like text, audio, image, video, and code, to offer more features for the Snapchat community through My AI. “This partnership with Google Cloud reinforces everything that’s so important to serving our community. Snap is all about empowering people to express themselves, live in the moment, learn about the world, and have fun together. Now with Gemini in My AI, Snapchatters can learn so much more about the world, do it really quickly in the moment, and easily share that with friends,” said Evan Spiegel, CEO of Snap.

SHARES COMING AND GOING: 

Cathie Wood’s ARK Investment bought 115.2K shares of Pinterest (PINS) on Monday. Separately, but also on Monday. Meta Platforms disclosed that its chief product officer Christopher Cox sold 20K shares of common stock on September 19 in a total transaction size of $11.15M. Last week, Snap CFO Derek Anderson disclosed the sale of 97,608 class A common shares of the company on September 16 at a price of $9.2913 per share.

PACT: 

Sprout Social (SPT) announced their publishing, engagement, customer care, advocacy, and AI-powered business intelligence solutions have been added to the National Association of State Procurement Officials ValuePoint Cloud Solutions Contract held by Carahsoft Technology. The contract enables Carahsoft and its reseller partners to provide Sprout Social’s products to participating state and local government agencies. NASPO ValuePoint Cloud Solutions Contract is a cooperative purchasing program facilitating public procurement solicitations and agreements using a lead-state model. The program provides the highest standard of excellence in public cooperative contracting. By leveraging the leadership and expertise of all states and the purchasing power of their public entities, NASPO ValuePoint Cloud Solutions delivers the highest valued, reliable and competitively sourced contracts, offering public entities outstanding pricing.

ISSUING STOCK NOT SUSTAINABLE: 

Zoom is reducing the practice of paying workers with company stock, Brody Ford of Bloomberg reported. In a note to employees this week read by Bloomberg, CEO Eric Yaun said issuing equity in Zoom at its current rate is “not sustainable.” The company plans to phase out its “annual performance equity plan” over the next two years and instead some employees will receive higher cash bonuses.

AI USAGE: 

Most daily users of Meta AI do so through WhatsApp, followed by Facebook, and few via Instagram, The Information’s Kalley Huang noted. The vast majority of Meta AI’s users are outside the U.S., according to the report.

DATA PROTECTION MONETIZATION: 

A new Federal Trade Commission staff report that examines the data collection and use practices of major social media and video streaming services shows they engaged in vast surveillance of consumers in order to monetize their personal information while failing to adequately protect users online, especially children and teens. The staff report is based on responses to six orders issued in December 2020 to nine companies including some of the largest social media and video streaming services: Amazon.com) which owns the gaming platform Twitch; Facebook, YouTube; Twitter (TWTR); Snap; ByteDance, which owns the video-sharing platform TikTok; Discord Inc.; Reddit (RDDT); and WhatsApp Inc. The orders asked for information about how the companies collect, track and use personal and demographic information, how they determine which ads and other content are shown to consumers, whether and how they apply algorithms or data analytics to personal and demographic information, and how their practices impact children and teens. “The report lays out how social media and video streaming companies harvest an enormous amount of Americans’ personal data and monetize it to the tune of billions of dollars a year,” said FTC Chair Lina Khan. “While lucrative for the companies, these surveillance practices can endanger people’s privacy, threaten their freedoms, and expose them to a host of harms, from identify theft to stalking. Several firms’ failure to adequately protect kids and teens online is especially troubling. The Report’s findings are timely, particularly as state and federal policymakers consider legislation to protect people from abusive data practices.” The report found that the companies collected and could indefinitely retain troves of data, including information from data brokers, and about both users and non-users of their platforms. The staff report further highlights that many companies engaged in broad data sharing that raises serious concerns regarding the adequacy of the companies’ data handling controls and oversight. In particular, the staff report noted that the companies’ data collection, minimization and retention practices were “woefully inadequate.” In addition, the staff report found that some companies did not delete all user data in response to user deletion requests. The staff report also found that the business models of many of the companies incentivized mass collection of user data to monetize, especially through targeted advertising, which accounts for most of their revenue. It further noted that those incentives were in tension with user privacy, and therefore posed risks to users’ privacy. Notably, the report found that some companies deployed privacy-invasive tracking technologies, such as pixels, to facilitate advertising to users based on preferences and interests. Furthermore, the staff report concluded that the social media and video streaming services didn’t adequately protect children and teens on their sites. The report also noted some of the potential competition implications of the companies’ data practices. It noted that companies that amass significant amounts of user data may be in a position to achieve market dominance.

INCONSISTENT REGULATION: 

A group of companies, including Meta, Spotify and Prada (PRDSY), have warned the European Union, E.U., about the risks of missing out on the full benefits of AI due to the bloc’s tech regulations, according to Kim Mackrael of The Wall Street Journal. In an open letter coordinated by Meta, executives from over two dozen companies said AI can boost productivity and expand the economy, but Europe may reap fewer rewards. “Europe has become less competitive and less innovative compared to other regions and it now risks falling further behind in the AI era due to inconsistent regulatory decision making,” the letter said. Other companies who signed the letter include Ericsson (ERIC), SAP (SAP), and Thyssenkrupp.

Oppenheimer initiated coverage of Pinterest with an Outperform rating. Pinterest operates a discovery platform with high-intent users in search of products and inspiration, lending itself well to direct response advertising, the analyst tells investors in a research note. The firm said the company is the fastest-growing digital advertising platform excluding Meta Platforms. Third party integrations with Amazon and Google are driving improvements to Pinterest’s auction density and pricing, contends Opco. The firm sees upside to engagement and said the stock’s valuation is attractive at current levels.

Similarly, Deutsche Bank initiated coverage of Pinterest with a Buy rating. The firm views Pinterest as an “under-monetized,” scaled, increasingly personalized “digital catalog” that attracts an affluent, high purchase-intent user base. The platform’s ability to support those seeking inspiration all the way to the ultimate purchase activity is making Pinterest “increasingly indispensable for full-funnel advertisers,” the analyst tells investors in a research note. Deutsche says Pinterest’s value proposition is supported by the fact that 90% of its product searches are unbranded, implying advertisers can reach high-intent consumers before a product or brand has been selected. It expects further expansion to adjacent categories, which should drive user growth and engagement. The firm sees a “compelling case to make PINS a core holding for investors.”

Citi analyst Ronald Josey raised the firm’s price target on Meta Platforms and reiterated a Buy rating on the shares. As Reels ad load and usage continue to expand, Meta’s discovery engine and content recommendation models, powered in part by its investments in generative artificial intelligence, are a competitive advantage and represent a clear path of large language models return on investment, the analyst tells investors in a research note. The firm believes Meta’s competitive advantage is now “deeper and wider” given improved engagement, investments in generative AI, and multiple newer offerings. Meta remains the firm’s top pick across the internet sector.

B. Riley initiated coverage of Snap with a Neutral rating. The company’s sizable audience positions the company to generate growing advertising and subscription revenue streams and to increase profitability, but while its direct-response ads are viewed to be the primary drivers of growth in the near term, the brand ad growth on its platform is set to lag, the analyst told investors in a research note. A pickup in North American time spent and monetization gains from ad platform improvements could drive potential upside to the firm’s estimates, but it is hard to predict their magnitude and timing, the firm adds, also noting that the stock is trading at a premium to its peer group and that its valuation looks “full”.

B. Riley also started coverage of Reddit with a Buy rating. The company offers “monetization opportunities aplenty” as it offers a differentiated value proposition to users, advertisers, and content licensees through its “unique” platform powering tens of millions of users across 100K+ communities while creating a large and growing repository of curated content, the analyst tells investors in a research note. Reddit is in a relatively early phase of monetizing the platform through advertising and data licensing and is positioned for healthy top-line growth and margin gains in the coming years, the firm added.

Loop Capital maintained a Buy rating on Snap after attending the company’s partner summit this week. The firm noted that its views remain largely unchanged in that the company appears to be making progress but the recovery and reacceleration in advertising revenue remains choppy. Snap’s strong community growth continues with MAUs up 100M since last year’s event to now 850M, but while the firm believes that Snap has a better chance to lead the massive long-term opportunity for AR glasses than many investors believe, this will play out over several years and will not move the stock anytime soon, the analyst added.

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Originally Posted September 25, 2024 – StockTok: FTC chair calls efforts to protect data “woefully inadequate”

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