Technology

Welcome back to This Week in Apps, the Extra Crunch series that recaps the latest OS news, the applications they support and the money that flows through it all.

The app industry saw a record 204 billion downloads and $120 billion in consumer spending in 2019, according to App Annie&State of Mobile& annual report. People are now spending 3 hours and 40 minutes per day using apps, rivaling TV. Apps aren&t just a way to pass idle hours — they&re a big business. In 2019, mobile-first companies had a combined $544 billion valuation, 6.5x higher than those without a mobile focus.

In this Extra Crunch series, we help you keep up with the latest news from the world of apps, delivered on a weekly basis.

This week, we&re continuing our special coverage of how the COVID-19 outbreak is impacting apps and the wider mobile app industry as more COVID-19 apps appear — including one from Apple built in partnership with the CDC, among others. We also take a look at the gains made by social and video apps in recent weeks as people struggle to stay connected while stuck at home in quarantine. In other headlines, we dig into Instagramco-watching feature, the Google for Games conference news, Applelatest releases and updates, Epic Games expansion into publishing and more.

Coronavirus Special Coverage

Social video apps are exploding due to the COVID-19 pandemic

Disclaimer: Most of the companies mentioned are clients of the author.

With the impact of COVID-19, sales of laptops & particularly Chromebooks for education & have been going vertical, and several OEMs are reporting shortages. But the most common clamshell design goes back to the early 1990s, well before recent advances in processor technology, GPUs, memory, storage, operating systems, displays and even battery formulations. We keep playing with different variants like the coming Microsoft Surface Neo, but they still fall well short of what you might have expected to evolve in the last 30 or so years.

To read this article in full, please click here

Netflix &Tiger King& is a docuseries focusing on the man who calls himself Joe Exotic — owner of a private park full of tigers and other big cats. We learn in the opening minutes of the first episode that hebeen accused of hiring a contract killer to murder an animal rights activist.

A documentary that was solely about Joe would be pretty memorable on its own, but hesurrounded by characters who are nearly as colorful, including the operators of several other big cat parks, as well as his nemesis, Carole Baskin.

On the latest episode of the Original Content podcast, we&re joined by Jason from the TechCrunch events team to review &Tiger King.& Itan incredibly addictive and bingeable show, with shocks and twists in virtually every episode.

At the same time, we debate whether the show treats its colorful subjects ethically, and whether anything was lost as the focus shifted from a &Blackfish&-style exposé of large cat owners into something more lurid.

You can listen in the player below, subscribe using Apple Podcastsor find us in your podcast player of choice. If you like the show, please let us know by leaving a review on Apple. You can also send us feedback directly. (Or suggest shows and movies for us to review!)

And if you&d like to skip ahead, herehow the episode breaks down: 0:00 Intro 0:29 &Tiger King& review 24:56 &Tiger King& spoilers

TechCrunch is out hunting for bright spots in the startup world as we all come to grips with the pandemic — particularly where checks are actually being written despite everything.

D2C is back to the future

First up this week, we surveyed top direct-to-consumer investors, and they seemed pretty optimistic despite the struggles of some sector leaders. HereLightspeed Venture Partners Nicole Quinn, for example, on investor activity versus current opportunity:

I would argue it is too weak as investors look at the unit economics of some of the recent IPOs and think that is true for all of D2C. In reality, there are sectors such as beauty where many companies have product margins >90% or true brands such as Rothywhere there is such a strong word-of-mouth effect and this gives them an unfair advantage with far better unit economics than the average.

Other respondents include: Ben Lerer and Caitlin Strandberg from Lerer Hippeau, Gareth Jefferies from Northzone, Matthew Hartman of Betaworks Ventures, Alexis Ohanian of Initialized Capital and Luca Bocchio of Accel.

Arman Tabatabai has the full investor survey on Extra Crunch, while Connie Loizos has a separate interview with Ohanian over on TechCrunch.

Proptech will be going (more) remote

Arman also ran a popular investor survey on real estate and proptech a few months back, so a virus update edition was warranted given the existential questions facing the future of physical space. Hereone clarifying explanation from Andrew Ackerman of Dreamit Ventures:

Startups targeting residential landlords and property managers could be big winners. Anything that makes tenants more comfortable like residential tenant amenity platforms (e.g.Amenify) or automates maintenance requests (e.g.Travtus,Aptly), simplifies maintenance itself (e.gNestEgg) or eases operations like package receiving (e.g.Luxer One) are suddenly top of mind.

VC investors have a saying, &Don&t make me think,& and right now, we are thinking hard about what COVID-19 means for our portfolio, so don&t be surprised if we are a little slower than normal to write checks. That said, we are acutely aware of the fact that some of our best returns came from investments made during difficult times. Fortunately, we think quickly.

Read the full thing on Extra Crunch.

A new era for consumer tech

Itno surprise that SaaS companies are seeing new growth from millions staying at home. But what else is going on besides work? Josh Constine pulls together the rebirth of Houseparty, the integration of Zoom into popular social networks and other trends today to elegantly explain the big picture: social tools actually being used like everyone had hoped(!).

What is social media when therenothing to brag about? Many of us are discovering ita lot more fun. We had turned social media into a sport but spent the whole time staring at the scoreboard rather than embracing the joy of play. But thankfully, there are no Like counts on Zoom. Nothing permanent remains. Thatfreed us from the external validation that too often rules our decision-making. Itstopped being about how this looks and started being about how this feels. Does it put me at peace, make me laugh, or abate the loneliness? Then do it. Thereno more FOMO because therenothing to miss by staying home to read, take a bath, or play board games. You do you.

Check it out on TechCrunch, then be sure to check out our ongoing coverage of where this is headed: virtual worlds(!?). Eric Peckham analyzed the sprawling topic in an eight-part series last month, then sat down for an in-house TechCrunch interview this week to explain how he sees the pandemic impacting the existing trends.

More than two billion people play video games in the context of a year. Thereincredible market penetration in that sense. But, at least for the data I&ve seen for the U.S., the percent of the population who play games on a given day is still much lower than the percent of the population who use social media on a given day.

The more that games become virtual worlds for socializing and hanging out beyond just the mission of the gameplay, the more who will turn to virtual worlds as a social and entertainment outlet when they have five minutes free to do something on their phone. Social media fills these small moments in life. MMO games right now don&t because they are so oriented around the gameplay, which takes time and uninterrupted focus. Virtual worlds in the vein of those on Roblox where you just hang out and explore with friends compete for that time with Instagram more directly.

Some SEM prices are going down due to the pandemic

Danny Crichton put on his data scientist hat for Extra Crunch and analyzed more than 100 unicorns across tech sectors and looked how how the pricing of their keywords has changed due to the pandemic/recession.

The results aren&t surprising — there has been a collapse in prices for almost all ads (with some very interesting exceptions we will get to in a bit). But the variations across startups in their online ad performance says a lot about industries like food delivery and enterprise software, and also the long-term revenue performance ofGoogle, Facebook and other digital advertising networks.

Big tech should do more to help startups now

Besides offering wily developer platforms, I mean. Josh argued on TechCrunch that hosting costs and associated expenses should be spared or delayed by the dominant companies to be nice, and to avoid crushing their own ecosystems.

Google, Amazon and Microsoft are the landlords. Amidst the coronavirus economic crisis, startups need a break from paying rent. They&re in a cash crunch. Revenue has stopped flowing in, capital markets like venture debt are hesitant and startups and small-to-medium sized businesses are at risk of either having to lay off huge numbers of employees and/or shut down. Meanwhile, the tech giants are cash rich. Their success this decade means they&re able to weather the storm for a few months. Their customers cannot.

On the other hand, now is also a good time for mid-sized startups to try to take market share from incumbents who don&t act friendly enough to the rest of the startup world…..

Odds and ends

1. Eliot Peper, author of a variety of popular sci-fi and tech fiction stories (and occasional TechCrunch contributor), has a new book out called &Uncommon Stock: Version 1.0& about a small startup that accidentally crosses paths with a drug cartel. Current subscribers to this newsletter will find that the link above takes them to a free download (that ends Sunday).
2. I had been planning to moderate a panel at SXSW on the topic of remote work, but other events flipped that on its head. The panel, featuring Katrina Wong, VP of Marketing at Hired, Darren Murph, Head of Remote at Gitlab, and Nate McGuire, Founder of Buildstack, happened on Zoom. And now the video is available here — check out to get key tips on going remote-first from these experts.

Across the week

TechCrunch

Now might be the perfect time to rethink your fundraising approach

How child care startups in the U.S. are helping families cope with the COVID-19 crisis

Private tech companies mobilize to address shortages for medical supplies, masks and sanitizer

One neat plug-in to join a Zoom call from your browser

Extra Crunch

When is it time to stop fundraising?

Slackslowing growth turns around as remote work booms

A look inside one startupwork-from-home playbook

Limevaluation, variable costs and diverging categories of on-demand companies

#EquityPod

From Alex:

The three of us were back today —Natasha,DannyandAlex— to dig our way through a host ofstartup-focused topics. Sure, the world is stuffedfull of COVID-19 news— and, to be clear, the topic did come up some — but Equity decided to circle back to its roots and talks startups and accelerators and how many pieces of luggage does an urban-living person really need?

The answer, as far as we can work it out, is either one piece or seven. Regardless, herewhat we got through this week:

• Bignews from 500 Startups, andour favorite companies from the acceleratorlatest demo day. Y Combinator is not the only game in town, so TechCrunch spent part of the day peekin& at 500 andits latest batch of companies. We got into some of the startups that stuck out, tackling problems within the influencer market, trash pickup and esports.
• Plastiq raised $75 millionto help people and businesses use their credit card anywhere they want. And no, it wasn&t closed after the pandemic hit.
• We also talked throughFastlatest $20 million round led by Stripe. Stripe, as everyone recalls, was most recently a topic on the show thanks to a venture whoopsie in the form of a check from Sequoia to Finix.¹But all thatbehind us. Fast is building a new login and checkout service for the internet that is supposed to be both speedy and independent.
• All the Stripe talk reminded us of one of the startups that launched so it could beat it out: Brex. The startup, which has amassed over $300 million in known venture capital to date,recently acquired three companies.
• We chatted through thehighlights of our D2C venture survey, focused on rising CAC costs in select channels, the importance of solid gross margins and why Casper wasn&t really a bellwether for its industry.

Listen here!

The relationship between the United Kingdom and Australia is not usually a flashpoint in international relations. After all, the two allies share a common language, ancestry, and monarch. So what caused a dustup recently that saw a senior Australian parliamentarian rebuke the British foreign secretary, and for a group of Australian MPs to then cancel a trip to London in protest?

The answer is fears over Huawei, the Chinese telecom giant at the center of the 5G next-generation wireless debate.Australian officials were miffed when the British government recommended that the company be allowed to play a limited role in the U.K.5G deployment despite calling it a &high risk& supplier due to its close ties to the Chinese government (the companyfounder, Ren Zhengfei, served for many years as an engineer in the PeopleLiberation Army). The Australian government, a fellow member of the Five Eyes intelligence alliance (which includes the two countries plus the United States, Canada, and New Zealand), disagreed back in 2017 when it barred Huawei on national security grounds.

Now, two close allies are at cross purposes about the very future of the internet. Whatat stake is not just who equips the future of telecom infrastructure, but the very values that the internet itself holds.

Two countries, ocean(s) apart

Itnot just Australia and Britain that find themselves separated by an ocean (or two). In America, Huawei has become the Trump Administrationfavorite company to hate. In a speech at this yearMunich Security Conference, Defense Secretary Mark Esper called the company &todayposter child& for &nefarious activity& while another White House official compared the company to &the Mafia.&It should come as no surprise that the company is the target of trade restrictions, a criminal action against its CFO, and a concerted diplomatic campaign.

Americaconcerns are twofold. First, that critical infrastructure provided by a Chinese company with such close ties to the countrycentral leadership is an unacceptable security risk. Second, that arresting Huaweiincreasing dominance risks surrendering any chance for American leadership in 5G technology.

National security considerations have predominantly driven policymakers in Australia. More alert by geography to the strategic risks posed by China, Canberra moved early and decisively to bar Huawei from participating in its 5G networks at all. &The fundamental issue is one of trust between nations in cyberspace,& writes Simeon Gilding, until recently the head of the Australian Signals Directoratesignals intelligence and offensive cyber missions.

That lack of trust between China and Australia is compounded by the difficult geopolitics of the Asia-Pacific. &Itnot hard to imagine a time when the U.S. and China end up in some sort of conflict,& says Tom Uren of the Australian Strategic Policy Institute (ASPI). &If there was a shooting war, it is almost inevitable that the U.S. would ask Australia for assistance and then we&d be in this uncomfortable situation if we had Huawei in our networks that our critical telecommunicationsnetworks would literally be run by an adversary we were at war with.&

Gilding warned, &Itsimply not reasonable to expect that Huawei would refuse a direction from the Chinese Communist Party.& And no matter what reassurances Huawei executives have given, they just simply haven&t been able to ally those concerns. Beijing didn&t help Huaweicase when it passed its 2017 Intelligence Law, which obliges all Chinese companies and individuals to assist with intelligence efforts if asked. &People were always afraid [that might happen],& adds Uren, &and having it in writing really solidified those concerns.&

As a result, Canberrapolicy to ban Huawei has been largely uncontroversial. With the exception of some of the countrytelecom companies, &the decision [to ban Huawei] has bipartisan backing,& says Simon Jackman, CEO of the US Studies Centre at the University of Sydney.

Calling out London

American officials wish their British counterparts shared Australiaoutlook & and haven&t been shy about saying so. Secretary of State Mike Pompeo urged the UK to &relook& at the decision and lobbied Prime Minister Boris Johnson on the issue on a recent trip to London. Meanwhile, Defense Secretary Esper has made clear that electing to use Huawei could threaten allies& access to American intelligence. &If countries choose to go the Huawei route,& Mr. Esper told reporters on the sidelines of the Munich Security Conference, &it could well jeopardize all the information sharing and intelligence sharing we have been talking about, and that could undermine the alliance, or at least our relationship with that country.&

U.S. Secretary of State Mike Pompeo leaves 10 Downing Street after a meeting with British Prime Minister Boris Johnson on 30 January 2020 in London, England. (Photo by WIktor Szymanowicz/NurPhoto via Getty Images)

British officials not only believe this to be a bluff & the Five Eyes intelligence alliance is much too strong in their view & but have a different assessment of the risk Huawei poses. &Everyoneperception of the Huawei risk is particular to them,& says Nigel Inkster, a former deputy chief of MI6 now at the London-based International Institute for Strategic Studies (IISS).

The U.K. goes even further though. Experts in the British government, which started using Huawei in its 3G and 4G networks back in 2003, believe that not only can the risks be mitigated, but they are being overstated in the first place. &The Australian approach is driven by the kind of worst-case analysis of the risk 5G could pose in effect on the brink of war,& says Inkster. &I don&t think the U.K. envisages going to war with China any time soon.&

Inkster and other top officials remain confident in the Huawei Cyber Security Evaluation Centre (HCSEC), which was established by the National Cyber Security Centre (NCSC) back when Huawei was first introduced into Britaintelecom networks. &We&ve never ‘trusted& Huawei,& wrote NCSC Technical Director Dr. Ian Levy in a January 2020 blogpost. As a result, the U.K. has &always treated them as a ‘high risk vendor& and worked to limit their use in the UK and put extra mitigations around their equipment and services.&

Levy and the governmentother cybersecurity experts believe that their system will continue to work. &The basic cyber security measures that have been used for 3/4G also apply to 5G,& argues Marcus Willett, who also served as the first Director of Cyber at GCHQ, Britainsignals-intelligence agency. &If Huawei had been playing games, we would have discovered it by now,& says Pauline Neville-Jones, a Conservative member of the House of Lords, and previously security minister and cybersecurity advisor in former British Prime Minister David Camerongovernment.

British regulations already restrict Huawei and other high-risk vendors in several ways, including capping their market share at 35% and ensuring their equipment is continuously evaluated by HCSEC. In addition, by preventing Huawei5G kit from being used near sensitive sites and limiting it to the periphery of the network (as opposed to the core), British officials are confident that they can contain any additional risk.

Thatnot to say Huawei doesn&t face stiff opposition from some corners. Even if you mitigated the risk, it&quite a leap to allow the Chinese to be intimately involved in something as sensitive as this,& one U.K. retired diplomat, who spoke on condition of anonymity due to the sensitivity of the topic, told me. And the company is no onefirst choice. &If the U.K. didn&t have Huawei in its system, it wouldn&t choose to have Huawei now,& Lady Neville-Jones told me. &But we are in a different place [than Australia] and we have set up a system which we believe enables us to manage the risk. And by God, we will be on alert. We&re not stupid. [But] you say to yourself, at the end of the day, do you trust your technical people or not? And therenever been a complaint on backdoors or traps.& Indeed, government experts have often caught coding errors she adds. &I suspect the result of [British inspections] is that technically Huawei is a better company than it might otherwise have been.&

The British position is also rooted in game theory. &Even if you could [bring down the network], when would you do it?& asks Willett, formerly of GCHQ. &It is effectively a ‘one shot& capability &if used by China, it would undermine the position of all Chinese companies in the world tech market. China would therefore presumably save the ‘one shot& for war or near-war, in which case it would need to be sure it would work. That is not easy.&

Australian experts are skeptical, though. &I think [the British] are overconfident in their ability to mitigate [the risk],& Uren, the ASPI expert, told me. His view & widely shared in Australia &is that defenders always think they can defend a system until they can&t, and giving a Chinese company access to the network is already a concession too far. &Cybersecurity is all about raising the costs for the attacker,& writes Gildling, the former Australian official. &Network access through vendors — which need to be all over 5G networks to maintain their equipment — effectively reduces the access cost to zero.&

The economic equation in Europe

Ithard to understate the difference geography makes, though. In America and Australia — Pacific powers — China is physically present. For Europeans — including Britain — the risks of a rising China don&t carry the same emotional weight.

&The idea of China being a direct security threat is still somewhat abstract,& says Dr. Janka Oertel of the European Council on Foreign Relations. With the exception of countries like Poland and Estonia which are reliant on U.S. military support and thus more willing to toe Washingtonline, &European governments have just begun to assess the risk China can pose in the cyber realm.& Partly to allay those rising concerns, Huawei about a year agoestablished a a Cyber Security Transparency Centre in Brussels, the de facto capital of the European Union. Unlike BritainHCSEC, however, it is not an independent evaluation center and it is not designed to carry out the same functions.

Economics dominate the conversation on the continent more than national security concerns. The fragmented telecom market in Europe (105 mobile operators versus just four in America), has also proven beneficial to Huawei. In a competitive environment where cost has become everything, the state-subsidized Huawei is often able to underprice its competitors. Even in Britain, security concerns were weighed against the fact that &stripping out [the Huawei components already in the system] and starting again would carry enormous costs,& Inkster told me.

Still, Oertel thinks the debate in Europe is being debated on the wrong grounds. &Itreally hard to say Huawei is cheaper than Ericsson or Nokia. No one has the numbers because these are all contracts between private companies. We&re talking a lot of hypotheticals.& Her concern is that while Huawei might seem cheaper now, that might change if itable to squeeze out competitors and raise prices.

The battle isn&t over yet, though. Ericsson and Nokia maintain that they are competitive on technology and cost. Indeed, Ericsson is already running 27 5G networks in 15 countries and was just selected by the Danish government to build the country5G network, displacing existing Huawei equipment. Meanwhile in Germany, the governmentmove toward using Huawei has run into sharp opposition in the Bundestag, the German federal parliament. Norbert Röttgen, a prominent member of Chancellor Angela Merkelown party, helped draft a billthat would bar any &untrustworthy& company from &both the core and peripheral networks.&

Norbert Roettgen, CDU at the Bundespressekonferenz the occasion of the candidacy for the CDU chairmanship, on February 18, 2020 in Berlin, Germany. (Photo by Felix Zahn/Photothek via Getty Images)

The Trump Administration is still concerned enough about Huaweipotential ability to dominate 5G worldwide that it is actively campaigning for a Western alternative. &We are encouraging allied and U.S. tech companies to develop alternative 5G solutions,& Defense Secretary Esper said in Munich, where he also exhorted fellow security officials to &develop our own secure 5G network … so we don&t regret our decisions later.&

Other American officials have suggested even more extraordinary measures. Declaring in a February speech that nothing less than &our economic future is at stake,& Attorney General William Barr (who also served formerly as a long-time lawyer for U.S. telecom and TechCrunch parent company Verizon) bluntly called on the U.S. and its allies to &actively consider& a proposal for the government and U.S. companies to take a controlling stake in Nokia and Ericsson. &Putting our large market and financial muscle behind one or both of these firms would make it a far more formidable competitor.&

Ericsson dismisses these comments. &Personally, I find it odd that Barr is even thinking like this really,& Gabriel Solomon, a senior Ericsson executive in Europe, told me. &We were first to commercial deployment in four continents. We are in a very competitive market.&

Indeed, that echoes a common view in Europe: that the goal of American policy on Huawei is less about security and more about market share & and making sure America, not China, owns the future of 5G. And that has its own risks. &Cutting out Huawei altogether potentially moves us toward a kind of bipolar, bifurcated internet, which if taken to logical extreme would have some very serious adverse implications for everyone in terms of cost, a slowdown in innovation, and general reduction in intellectual and technical interchange,& says Inkster, the former MI6 official.

Things would be easier, Europeans say, if America presented an obvious alternative. Without one, Americaallies feel they have little choice but to use Huawei if they don&t want to fall behind technologically. &The West has got itself in a mess,& says the retired British diplomat. &It is a striking failure of political cooperation and coordination that we should find ourselves in this position.&

There is still optimism on both sides of the Atlantic that a Western solution can be found. As Röttgen of Germany wrote in a tweet in February:

Rather than pick a champion, another solution would be to level the playing field. &Telecoms security doesn&t pay,&concedes Dr. Levy of HCSEC. And &externalising the security costs of particular choices (including vendor) will help operators make better security risk management decisions.& Another option: better national screening investment mechanisms that would limit the ability of state-owned enterprises to operate unfairly.

But to get there requires coordination and cooperation & and that isn&t necessarily as forthcoming as you might expect. Germans still remember that the NSA hacked Chancellor Merkelphone & and the Trump Administrationtrade war has targeted Europe almost as much as it has China. Röttgen cautioned that cooperation on 5G was connected: &[W]e must know that tariffs against Brussels are off the table,& he said in the same tweet. &Partners don&t threaten one another.& Meanwhile, Huawei is earning goodwill by sending medical equipment to Europe to help combat the COVID-19 pandemic.

&Technology was supposed to unite us,& laments Jackman, the Australian professor; &instead itdriving us apart not just from our rivals, but our allies, too.&