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1. Tech firms pull back on facial recognition use by police
  • This week saw Amazon, Microsoft and IBM pull back on efforts to market facial-recognition technology to police departments across the US (see below) in the wake of the George Floyd protests. All three called for federal legislation to govern the use of facial recognition in surveillance. Concerns have surrounded facial recognition for years, particularly with regard to algorithms that reflect the biases of data sets and data scientists, and potential for privacy issues and “suspicionless surveillance.” Lately, there’s been renewed attention on growing police use of facial recognition on security-camera and drone footage, including to identify protesters.
  • Amazon put a one-year moratorium on US police use of its Rekognition platform. It called on Congress to implement stronger regulations to govern ethical use of facial recognition. Amazon has been in the spotlight on this topic – for its marketing of Rekognition to police forces (including for real-time use with body cameras) and its Ring subsidiary’s relationships with 1,350+ police departments. While Ring does not have facial recognition, police can run the footage through 3rd-party software.
  • IBM, in a letter to members of Congress, said the company “no longer offers general purpose IBM facial recognition or analysis software.” It separately confirmed that IBM will no longer research or develop the technology. In its statement, IBM said it opposed the use of any technology “for mass surveillance, racial profiling, [and] violations of basic human rights and freedoms.” It called for a national dialogue on whether and how police should use facial recognition, and national policy to encourage uses that support transparency and accountability.
  • The US regulatory landscape surrounding facial recognition is relatively nascent, with few requirements for documentation or tracking. Lack of transparency – in both algorithmic accuracy/bias as well as law enforcement use and training – is one of the key issues regulators will have to solve for. A handful of states (e.g. California, Oregon, New Hampshire) and cities have passed bans/moratoria on facial recognition in policing. In Mar 2020, Washington became the first state to implement detailed regulation governing facial recognition (backed by Microsoft) – at the time, it was considered a possible model for other states. The proposed Justice in Policing Act introduced earlier this week in Congress would ban use of facial recognition on bodycam footage without a warrant. Given the recent calls for a national law, we can expect to see further movement on this front.
  • Related Briefs:
    • Apr 15 2020: Geolocation tracking & the expansion of government surveillance
    • Oct 13 2019: Will national facial-recognition programs be a new normal?
2. Instacart speeds up in online grocery
  • Yesterday, grocery-delivery company Instacart announced it had raised $225M at a $13.7B valuation, nearly double its Dec 2018 valuation. It comes on the heels of a report based on analysis of credit-card transactions suggesting that Instacart may have overtaken Walmart in US online grocery in Mar 2020. According to Second Measure data, Instacart sales were up 500% in Apr 2020 (year-on-year), when it reportedly turned a small profit for the first time. Near its peak during the first two weeks of April, Instacart saw $700M per week in merchandise sales.
  • One of the most significant challenges facing Instacart is California’s AB-5, a law codifying a stringent test to determine whether a worker is a contractor. In Feb 2020, a San Diego court said Instacart would likely fail the AB-5 test – meaning that, without changes, Instacart’s shoppers would probably be determined to be employees and entitled to associated benefits. Instacart continues to fight the injunction but, like other gig-economy players, its business model and slim margins will be threatened if it loses this fight.
  • Related Briefs:
    • Mar 26 2020: Grocery delivery, ecommerce & the renewal of Walmart
    • Jan 10 2020: Uber & the gig economy are facing headwinds
3. Facebook's New Product Experimentation team launches an early-stage venture arm
  • This week also saw reports that Facebook, through its New Product Experimentation (NPE) group, has hired a head of investments for a new "multi-million dollar" fund to invest in startups. In addition to the unnamed head of investments, Facebook also brought on an executive with prior experience at Gradient Ventures (Alphabet’s AI-focused venture arm) and Kleiner Perkins to help manage the fund.
  • Facebook’s NPE Team was launched Jul 2019 under a separate LLC to focus on experimental consumer apps outside its core platform that would offer “entirely new experiences for building community.” NPE is intentionally differentiated from the Facebook brand to allow for experimentation and set expectations that apps may change quickly and/or be shut down. Since 2019, it has launched 9 consumer apps (7 since just Apr 2020) ranging from group audio-calls to live-event interactions, two of which have been discontinued so far. Facebook is framing the new NPE fund as experimental – “in the same spirit” as the group’s product experimentation but focused on ways to stay close to the startup ecosystem and support startups.
  • Industry watchers have suggested the fund may be a way for Facebook to get an early view into the “next big social app.” Facebook, which is facing antitrust probes for its acquisitions of WhatsApp, Instagram and most recently Giphy, may find it more challenging to do large acquisitions going forward. Through this lens, the capital backing afforded by a sizable early-stage fund could be a useful weapon for Facebook in getting closer to strategically meaningful startups. It’s not clear, however, whether targeting smaller acquisitions would help Facebook fly under the radar – even deals under the $94M threshold for mandatory antitrust reporting are getting scrutiny these days.
  • NPE serves an important role for Facebook, which faces the persistent threat of younger users being drawn to newer rival platforms such as TikTok. NPE, and its new venture fund, can help Facebook find its next engine for discontinuous growth – either through new products built in-house or through investment in outside startups. It also becomes a pathway for entrepreneurial talent, such as helping retain founders of acquired companies (two co-founders of Facebook-acquired companies work at NPE), which it has struggled with in the past.
  • Related Briefs:
    • Nov 9 2019: Facebook News & the current wave of news aggregators
    • Oct 31 2019: TikTok’s rapid rise to 1.5B installs – and the global reaction
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