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UK’s competition regulator asks for views on breaking up Google

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The U.K.’s competition regulator has raised concerns about the market power of digital ad platform giants Google and Facebook in an interim report published today, opening up a consultation on a range of potential inventions — from breaking up platform giants to limiting their ability to set self-serving defaults and enforcing data sharing and/or feature interoperability to help rivals compete.

Breaking up Google by forcing it to separate its ad server arm from the rest of the business is one of a number of possible interventions it’s eyeing, along with enforcing choice screens for search engines and browsers that use non-monetary criteria to allocate slots — versus Google’s plan for a pay-to-play offering for EU Android users (which rivals argue does not offer relief for the antitrust abuse the European Commission sanctioned last year).

The U.K. regulator is also considering whether to require Facebook to interoperate specific features of its current network so they can be accessed by competitors — as a fix for what it describes as “strong network effects” which work against “new entrant and challenger social media platforms.”

The Competition and Markets Authority (CMA) launched the market study in July — a couple of weeks after the U.K.’s data watchdog published its own damning report setting out major privacy and other concerns around programmatic advertising.

It is due to issue a final report next summer — which will set out conclusions and recommendations for interventions — and is now consulting on suggestions in its interim report, inviting contributions before February 12.

Since beginning the study, the CMA says it has received several requests to open a full-blown market investigation, which means it has a statutory duty to consult on making such a reference.

Based on initial findings from the study, it says there are “reasonable grounds” for suspecting serious impediments to competition in the online platforms and digital advertising market.

The report specifically flags three areas where it suspects harm — namely:

  • the open display advertising market — with a focus on “the conflicts of interest Google faces at several parts of its vertically integrated chain of intermediaries”;
  • general search and search advertising — with a focus on “Google’s market power and the barriers to expansion faced by rival search engines”;
  • social media and display advertising — with a focus on “Facebook’s market power and the lack of interoperability between Facebook and rival services”;

Other concerns raised in the report include problems flowing from a lack of transparency in the digital advertising market; and the difficulty or lack of choice for consumers to opt out of behavioral advertising.

However, the regulator is not making a market investigation reference at this stage — a step which would open access to the order making powers which could be used to enforce the sorts of interventions discussed in the report. Instead, the CMA says it favors making recommendations to government to feed into a planned “comprehensive regulatory framework” to govern the behaviour of online platforms.

Earlier this year the U.K. government set out a wide-ranging proposal to regulate a range of online harms. Although it remains to be seen how much of that program prime minister Boris Johnson’s newly elected Conservative government will now push ahead with.

“Although it is a finely balanced judgement, we remain of the view that a comprehensive suite of recommendations to government is currently the best way forward and are therefore consulting on not making a market investigation reference at this stage,” the CMA writes, saying it feels it has further investigation work to do and also does not wish to “cut across” the government’s plans around regulating platforms.

“The concerns we have identified regarding online platforms such as Google and Facebook are a truly global antitrust challenge facing governments and regulators. Therefore, in relation to some of the potential interventions we may consider in a market investigation, and in particular any significant structural remedies such as those involving ownership separation, we need to be pragmatic about what changes could efficiently be pursued unilaterally by the UK,” it adds, saying it will “continue to work as closely as we can with our international counterparts to develop a coordinated position on these issues in the second half of the study.”

Antitrust regulators in a number of countries have been turning their attention to platform giants in recent years — including Australia and the U.S.

The new European Commission has also talked tough on platform power, suggesting it will further dial up scrutiny of tech giants and seek to accelerate its own interventions where it finds competitive harms.

Responding to the CMA report in a statement, Ronan Harris, VP, Google U.K. and Ireland, told us:

The digital advertising industry helps British businesses of all sizes find customers in the UK and across the world, and supports the websites that people know and love with revenue and reach. We’ve built easy-to-use controls that enable people to manage their data in Google’s services — such as the ability to turn off personalised advertising and to automatically delete their search history.  We’ll continue to work constructively with the CMA and the government on these important areas so that everyone can make the most of the web.

A Facebook spokesperson also sent us this statement:

We are fully committed to engaging in the consultation process around the CMA’s preliminary report, and continuing to deliver the benefits of technology and relevant advertising to the millions of people and small businesses in the UK who use our services.

We agree with the CMA that people should have control over their data and transparency around how it is used. In fact, for every ad we show, we give people the option to find out why they are seeing that ad and an option to turn off ads from that advertiser entirely.  We also provide industry-leading tools to help people control their data, like “Off Facebook Activity”, and to transfer it to other services through our Data Transfer tools.  We look forward to further engagement with the CMA on these topics.

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Where Will Meta Stock Be in 1 Year?

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Meta Platforms (META -3.08%) had an awful 2022. Revenue growth stalled at just the wrong time for the social media business, leading to collapsing earnings in the nine months that ended in late September. The company will close out 2022 with its Q4 earnings announcement in early February that’s expected to show a 3% sales drop.

Wall Street isn’t optimistic about the year ahead, either. Most Wall Street pros forecast that revenue will rise in the low-single-digit-percentage range as annual earnings decline for a second straight year.

Let’s look behind those headline projections for clues to where the stock might be headed as management works to turn the Facebook owner around.

Meta is growing faster

The immediate challenge for CEO Mark Zuckerberg and his team is to get the business back on a growth footing. The good news is that this goal is more achievable than you might think after a glance at the company’s 4% year-over-year sales decline in Q3. Strip out currency exchange rate shifts and that figure becomes a 2% increase, after all.

Meta is still gaining users, too, even on its most mature platform, Facebook. It’s not hard to see how a sustained focus on engaging videos in the Reels service can contribute to improving sales trends in 2023. “The fundamentals are there for a return to stronger revenue growth,” Zuckerberg told investors in late October. Ideally, executives will back up those words with more concrete signs of a rebound in the early February update.

Meta has been slashing costs

Meta entered the 2022 year with some of the best finances in the tech industry. But the scale of its negative turn here has been hard to watch.

META Operating Margin (TTM) Chart

META Operating Margin (TTM) data by YCharts

Operating income through the first three quarters of the year dropped to $22.5 billion from $34.2 billion. Net income in that period fell by more than $10 billion to $18.5 billion.

Watch for Meta to be brutal in slashing costs this year so it can end this profitability slide. The company already got the ball rolling here as it closed offices and announced layoffs in some areas. Yet these moves likely won’t start affecting the bottom line in a big way until future years, perhaps when sales growth is accelerating again.

The big questions Meta needs to answer

Meta isn’t skimping on the investments that management thinks will drive growth over the next several years. The Reality Labs division, home to the Quest VR brand, is projecting accelerating losses in 2023 as spending ramps up in areas like hardware and the metaverse. The company should add more context about these projects when it closes out fiscal 2022 and issues its first detailed projection for the new year ahead.

The stock’s path in 2023 will depend in part on things that are outside Meta’s control, including the pace of advertising spending and consumers’ discretionary tech budgets.

Yet there’s still plenty the company can do to improve sales and profitability trends over the next several quarters. And if both metrics have started rebounding, Meta shares have a good chance at outperforming the market in 2023 after posting their worst year yet last year.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Demitri Kalogeropoulos has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.

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Facebook Could Be Messing With Your Phone. Here’s What We Know

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Facebook Could Be Messing With Your Phone. Here's What We Know

Battery life is one of the most important aspects of smartphone usage — without solid battery life, a phone becomes far less useful. Even worse are instances when a phone’s battery drains faster than expected for no apparent reason, which may result in the user being caught off guard with a dead battery while away from a charger.

That’s the issue that prompted Hayward’s complaint, according to The New York Post, which quotes the data scientist as saying, “I said to the manager, ‘This can harm somebody,’ and she said by harming a few we can help the greater masses.” Hayward was allegedly fired in November 2022 after refusing to engage in the negative testing practices, leading to the lawsuit soon after. The big question is whether this practice — assuming the allegations are accurate — is widespread at Meta. 

If so, what other kinds of negative testing may be taking place without a user’s knowledge, and how might those tests impact their experiences with the company’s products? Hayward claimed that during his time working for the company, Meta gave him a training document that allegedly described types of negative tests that may be conducted — the document was reportedly titled, “How to run thoughtful negative tests.” Unfortunately, specific examples of those tests weren’t provided, and Meta hasn’t commented on the allegations to clarify how its testing practices may impact users, if at all.

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Meta awarded researcher a $27,200 bug bounty for glitch that bypassed Facebook 2FA

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Meta awarded researcher a $27,200 bug bounty for glitch that bypassed Facebook 2FA

Facepalm: Meta recently implemented a centralized login system to make it easier for Instagram, Facebook, and Meta (VR) users to manage their accounts. Unfortunately, in setting up the 2FA system, engineers overlooked a glaring failure regarding attempt limitation.

A freshman security researcher named Gtm Mänôz noticed the bug in July 2022. While looking for his first bug bounty to present at BountyCon 2022, Mänôz started playing around with the Meta Accounts Center interface, which manages all Meta accounts, adding similar functionality as Google’s one-stop login for its various services (YouTube, Gmail, Docs, etc).

He noted that the page allowed users to associate a phone number with their accounts when linking them. Users simply enter their phone number and then the six-digit 2FA code the system sends them. However, Mänôz discovered that if the wrong code is entered, the Account Center just asks the user to reinput it instead of sending a new code.

Furthermore, there was no limit on how many failed attempts one could enter into the verification box. This oversight allowed Mänôz to brute force the 2FA on his own account to associate his phone number with another Facebook profile. The only warning comes after the phone number is stolen in an email from Meta to the victim informing them that it has been linked to another user’s account.

While the harmfulness of this exploit is mainly limited to a bothersome re-establishing of the owner’s phone number, it effectively disables 2FA on the victim’s account, albeit temporarily. Until the target takes action, they are open to password phishing attacks.

“Basically, the highest impact here was revoking anyone’s SMS-based 2FA just knowing the phone number,” Mänôz told TechCrunch.

Mänôz notified Meta of the bug in September, and it patched the vulnerability immediately. A spokesperson said that when Mänôz found the problem, the Meta Accounts Center was still in beta and only available to a small number of users. The representative also noted that Meta’s investigation revealed no spikes in the usage of that feature, indicating that hackers hadn’t exploited it.

Despite the relatively low-treat of the glitch, Meta awarded Mänôz a $27,200 bug bounty. Not too shabby for his first bug hunt.

Meta has stumbled a few times in the last couple of years regarding the login features of its various accounts. In 2021, it caused a mild panic when it logged everyone out of Facebook when reconfiguring the website. Last year, it purposefully locked many users out of their accounts for not enabling “Facebook Protect” by a deadline set by an official Meta email that looked suspiciously like a phishing scam.

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