Monthly Archives: January 2018

A crypto company touted by rapper The Game just got hit with a lawsuit from investors who want their money back

Paragon was founded by Jessica Versteeg, left, seen here with Larry King.

Paragon was founded by Jessica Versteeg, left, seen here with Larry King.

  • A cryptocurrency project looking to transform the pot industry with blockchain is facing a lawsuit, according to a Bloomberg Law report.
  • The suit claims that the offering was not registered with authorities and that investors want their money back.
  • Paragon first drew attention to its initial coin offering when it got the celebrity endorsement of rapper the Game.

A cryptocurrency company looking to use blockchain technology to transform the pot industry has been hit with a lawsuit, according to a Bloomberg Law report.

Paragon, the blockchain company founded by former Miss Iowa Jessica Versteeg, did not register its initial coin offering with the regulators, according to a suit filed with a district court in California.

The startup raised more than $70 million in its ICO, a cryptocurrency fundraising method, “which investors now want back, according to the complaint,” Bloomberg Law reported.

“This suit is one of several brought by unhappy investors against ICOs in the last few months, although no federal court has yet held that ICOs are subject to securities laws,” the report adds.

A media contact who represented Versteeg in August did not immediately respond to Business Insider’s request for comment.

When Business Insider first reported on Paragon in August prior to its ICO, Versteeg said the firm would address “real problems in the cannabis industry.”

“This isn’t another Potcoin,” she said referring to another weed-focused cryptocurrency. “People will be pleasantly surprised with what we are doing.”

Celebrities such as rapper The Game drew attention to the ICO when they endorsed it over social media.

Regulators have been paying closer attention to the ICO market, which is known for its fair share of big dreams and fraud.

In December, SEC Chairman Jay Clayton had harsh words for ICOs after the agency shut down an offering. Clayton said in a blog post that despite claims of not being subject to regulation, many of the digital coins were in fact securities and thus subject to the agency’s authority.

“I believe that initial coin offerings – whether they represent offerings of securities or not – can be effective ways for entrepreneurs and others to raise funding, including for innovative projects,” he said.

“However, any such activity that involves an offering of securities must be accompanied by the important disclosures, processes and other investor protections that our securities laws require.”

The regulator’s concern is that ICOs provide a way for companies to solicit money from small-time investors without properly disclosing risk.

Graham Rapier contributed reporting.

Mueller just got another critical piece of evidence in the Russia investigation

Deputy U.S. Attorney General Rod Rosenstein testifies to the House Judiciary Committee hearing on oversight of the Justice Department on Capitol Hill in Washington, U.S., December 13, 2017.

Deputy U.S. Attorney General Rod Rosenstein testifies to the House Judiciary Committee hearing on oversight of the Justice Department on Capitol Hill in Washington, U.S., December 13, 2017.
REUTERS/Joshua Roberts

  • President Donald Trump reportedly asked Deputy Attorney General Rod Rosenstein whether he was “on my team” during a meeting in December.
  • The interaction is the third known instance during which Trump asked a top law-enforcement official where their loyalties lie.
  • Rosenstein is increasingly emerging as a crucial witness in the Russia investigation, and experts said the reported interaction is an important new piece of evidence for special counsel Robert Mueller as he examines whether Trump sought to obstruct justice.

The special counsel, Robert Mueller, may have been handed another key piece of the puzzle as he investigates Russia’s interference in the 2016 US election and whether President Donald Trump sought to obstruct justice.

CNN reported Wednesday that Trump asked Rod Rosenstein, the deputy attorney general, if he was “on my team” during a meeting at the White House in December.

Rosenstein reportedly replied, “Of course, we’re all on your team, Mr. President.”

Trump also asked Rosenstein about how the Russia investigation was coming along, which Rosenstein declined to comment on, according to the report. Their meeting came as Rosenstein was preparing to testify before the House Judiciary Committee.

Rosenstein reportedly went to the White House at the time to request Trump’s help in pushing back against document requests from embattled House Intelligence Committee chairman Devin Nunes, who has been conducting his own investigation into alleged bias at the Department of Justice and FBI.

Instead, Trump was said to have focused on Rosenstein’s upcoming House Judiciary Committee testimony, the report said.

The hearing, which took place on December 13 last year, was scheduled as part of the committee’s normal oversight functions. But Republicans spent most of their time grilling Rosenstein about whether what they characterized as bias by some former agents who worked on Mueller’s team had tainted the entire Russia investigation.

Donald Trump and James Comey

Donald Trump and James Comey
Getty Images

A consistent pattern

The interaction between Trump and Rosenstein marks the third known instance during which the president asked a top law-enforcement official where their loyalties lie.

The first occurred last year, shortly after Trump’s inauguration. Former FBI director James Comey said in his prepared remarks for the Senate Intelligence Committee in June 2017 that Trump asked him for his loyalty during a private dinner months earlier, in January.

Comey said he declined to pledge his loyalty to Trump, adding that the interaction “concerned” him “greatly” because he believed Trump was “trying to create some sort of patronage relationship,” in which Comey would keep his job as FBI director as long as he remained loyal to the president.

The next month, Trump asked Comey to let go of the FBI’s investigation into former national security adviser Michael Flynn, who had resigned one day before. Three months later, after Comey refused to drop the Flynn probe, Trump fired him.

The White House first said Comey had been fired because of how he handled the investigation into former Secretary of State Hillary Clinton’s use of a private email server, but Trump later told NBC’s Lester Holt that “this Russia thing” had been a factor in his decision.

The second instance during which Trump questioned a top official’s loyalty took place shortly after Comey’s firing. The Washington Post reported last week that following Comey’s ouster, Trump met with then-acting FBI director Andrew McCabe and asked him who he voted for during the 2016 presidential election. McCabe, who reportedly said he did not vote in the election that year, found the question to be “disturbing,” one official told The Post.

Though the White House tapped McCabe to be acting FBI director, Trump quickly soured on him as the Russia probe picked up steam last year. McCabe was finally forced out of the bureau earlier this week following months of sustained attacks on his credibility from Trump and his loyalists.

McCabe is one of three officials Comey apprised of his conversations with Trump, which are now being scrutinized by Mueller and congressional investigators. The other two, former FBI general counsel James Baker and Comey’s former chief of staff James Rybicki, were replaced or reassigned within the bureau.

FBI director Christopher Wray indicated that McCabe’s removal was the result of a Justice Department investigation into his handling of the Clinton email investigation. But the deputy director’s defenders questioned the timing of the move, given that it came amid Trump’s criticisms, as well as Attorney General Jeff Sessions’ reported request that Wray replace McCabe at the bureau.

Acting FBI Director Andrew McCabe waits for the beginning of a hearing before the Senate Intelligence Committee with the other heads of the U.S. intelligence agencies in the Hart Senate Office Building on Capitol Hill May 11, 2017 in Washington, DC. The intelligence officials were questioned by the committee during the annual hearing about world wide threats to United States' security.

Acting FBI Director Andrew McCabe waits for the beginning of a hearing before the Senate Intelligence Committee with the other heads of the U.S. intelligence agencies in the Hart Senate Office Building on Capitol Hill May 11, 2017 in Washington, DC. The intelligence officials were questioned by the committee during the annual hearing about world wide threats to United States’ security.
Alex Wong/Getty

Comey’s firing and Trump’s subsequent actions make up the basis of Mueller’s inquiry into whether he sought to obstruct justice in the Russia investigation. Obstruction of justice is broadly defined: it involves any conduct in which a person willfully interferes with the administration of justice.

That means influencing, obstructing, or impeding any kind of proceeding before a federal agency, department, court, or Congress, according to CNN legal analyst Danny Cevallos.

In order to prove obstruction of justice, prosecutors must establish that the defendant had “corrupt intent” when they made a particular decision, and experts said the Trump-Rosenstein meeting adds another piece of evidence to Mueller’s growing arsenal.

Former federal prosecutor Jeffrey Cramer said Wednesday that the report “seems consistent with numerous other interactions [Trump] has had with senior law enforcement.”

While asking for an update on the Russia investigation is not in itself relevant to criminal conduct, he said, “asking whether [Rosenstein] is on his team and connecting it to the Russia investigation by asking for a status update could, however, be relevant.”

While obstruction cases like this rarely have a singular watershed moment that proves a crime, “the Rosenstein interaction is one more piece of the puzzle,” Cramer added.

Robert Mueller.

Robert Mueller.
Thomson Reuters

Rosenstein emerges as a critical witness in the Russia probe

Rosenstein’s reported interaction with the president indicates that he is becoming an increasingly crucial witness for Mueller and congressional investigators.

The December conversation represents the “same pattern of behavior that Trump engaged in with Comey,” former federal prosecutor Renato Mariotti wrote on Twitter. “At this point, there can be little question that Rosenstein will be a witness for Mueller. It’s hard to see how he can continue to oversee the Mueller investigation.”

The possibility of Rosenstein’s recusal is not new. The deputy attorney general attracted scrutiny last year when Trump said he had authored a memo that played a pivotal role in Comey’s firing. Questions were raised at the time about whether Rosenstein should recuse himself from the Russia probe, but Cramer said Wednesday that the latest revelations indicated that they may soon reach fever pitch.

Cornell Law School vice dean and criminal law expert Jens David Ohlin agreed, saying Rosenstein’s failure to recuse himself has long been a source of speculation in the legal community, and that recent developments would only accelerate that speculation.

He added that there are several theories that could account for Rosenstein’s apparent lack of willingness to recuse himself. “Bottom line: this is a mystery that probably won’t get resolved until the Mueller investigation is over,” he said.

Mariotti said Rosenstein is now a potentially critical witness for two key reasons:

  1. The December meeting “shows that Trump engaged in the same behavior even after he knew he was under investigation for obstruction of justice and viewed analysis showing that his actions towards Comey were problematic,” which represents strong evidence of his intent and mindset.
  2. If the Trump-Rosenstein interaction did take place, it would likely corroborate Comey’s testimony and therefore undercut Trump’s claims that Comey misinterpreted his statements about loyalty and the Flynn investigation.

If Rosenstein recuses himself, the associate attorney general, Rachel Brand, would be next in line to oversee Mueller’s investigation. Trump could seek to appoint a new deputy attorney general, Cramer said, but the confirmation would likely be difficult under current circumstances.

Gisele Bundchen tried to get one of Tom Brady’s former teammates to persuade him to retire — and it appeared to backfire

  • Gisele Bundchen apparently told Jay Feely, a former teammate and long-time friend of Tom Brady’s, to persuade Brady to retire.
  • Though Gisele was “dead serious,” Feely instead told Brady to play as long as he can.
  • Brady has said he’d like to play into his mid-40s.

Tom Brady is set to play in his eighth Super Bowl, but from the sound of it, there’s pressure on him to make it one of his last.

According to Sports Illustrated’s Greg Bishop, over the summer Brady and his wife, Gisele Bundchen, vacationed with former NFL kicker Jay Feely, who was one of Brady’s teammates at Michigan.

According to Feely, Gisele spent the vacation trying to get Feely to persuade Brady, 40, to retire.

“She was dead serious,” Feely told Bishop.

This may not be such a big surprise. In an interview with CBS in 2017, Gisele said Brady has had concussions, but that they do not talk about it. Though Brady, the New England Patriots, and the NFL denied Brady suffering any concussions in 2016, it still was clear that Gisele was mindful of the dangers of her husband’s sport.

In a recent interview with the “Kirk and Callahan” radio show, Brady said his family asks him all the time how long he plans to keep playing. Asked if he tells them to stay patient and let him play and then he will be around more, Brady said: “It’s like you have a microphone in my house. That’s a daily conversation.”

Gisele’s methods may not have worked, though. According to Bishop, Feely told Brady, “play as long as you can,” to which Brady smiled and winked.

Brady has said he would like to play into his mid-40s, and has not ruled out playing even longer. With the way he carved up the Jacksonville Jaguars in the AFC Championship, it’s tough to imagine his retirement coming any time soon.

The cost of lower EU migration will be greater than the benefits of a US trade deal, leaked Brexit analysis says

British Prime Minister Theresa May speaks at a press conference in the Great Hall of the People on January 31, 2018 in Beijing, China.

British Prime Minister Theresa May speaks at a press conference in the Great Hall of the People on January 31, 2018 in Beijing, China.
Lintao Zhang/Getty Images

  • The cost of reduced EU migration to the UK will cancel out any economic benefit of a UK-US trade deal, according to a leaked Whitehall analysis.
  • BuzzFeed News has obtained a secret government report examining the economic impact of Brexit.
  • The findings have sparked an economic firestorm, and also predict that Brexit will leave the UK worse off economically.

The cost to the British economy of lower EU migration after Brexit will be greater than any gains made by a US-UK trade deal, according to a leaked Whitehall report.

On Monday, BuzzFeed News published details from a secretive Whitehall analysis examining the economic impact of Britain leaving the European Union. On Wednesday, it followed it up with a second story – outlining the leaked report’s conclusions on the impact of potential post-Brexit migration policies on the economy.

It estimates that while a US-UK trade deal would provide a 0.2% boost to growth – but the economic cost of a strict immigration policy (“replacing free movements with arrangements in lien with those for non-EU citizens”) would be much greater. Meanwhile, a more “flexible” policy would still “cancel out” any economic benefits from the trade deal.

BuzzFeed News’ report doesn’t cite precise figures for the cost of the various potential immigration policies.

The Whitehall report’s contents have sparked a political firestorm. It predicts that Britain will be worse off outside of the EU under each of the most likely scenarios it modelled – from continued membership of the European Economic Area to crashing out without a deal.

Government ministers have downplayed its findings as potentially unreliable, while pro-European campaigners have seized on the news as evidence of the purported dangers of Brexit. After pressure from Parliament, Theresa May has agreed to provide the assessment to MPs – though it still won’t be made public.

Whole Foods is creating a crisis that’s choking its business

A Whole Foods store in San Francisco.

A Whole Foods store in San Francisco.
Tommy Wiles

  • Barclays analysts say out-of-stock problems at Whole Foods are hurting the grocery chain’s sales and making it less of a threat to other grocers.
  • “Until execution issues are resolved and broader price cuts are implemented – we believe traction on sales will stall, so for now the pressure on the industry has abated,” analysts wrote in a research note.
  • Whole Foods employees have told Business Insider that the out-of-stocks are the result of a new inventory management system called order-to-shelf.

Whole Foods is having problems keeping shelves stocked at stores across the US, and sales are likely suffering as a result, according to Barclays analysts.

“Until execution issues are resolved and broader price cuts are implemented – we believe traction on sales will stall, so for now the pressure on the industry has abated,” analysts wrote in a note published Wednesday.

Barclays analysts have been visiting various Whole Foods stores on a weekly basis since Amazon acquired the grocery chain last year for $13.7 billion.

The analysts’ most recent store checks revealed “many noticeable out of stocks in the grocery category,” they wrote.

“Specifically, within just one store, we observed major out of stocks in cookies, crackers, popcorn, canned beans, canned peaches, seltzer, and water,” they added. “In addition, we noticed employees utilizing facing to make shelves appear more stocked than they actually were – so, the out of stocks could have been more pervasive than we were able to notice. We also note that frozen seafood out of stocks have persisted for many weeks at one store we routinely check.”

“Facing” is used when stores run out of a specific item, and replace the empty spot with another item.For example, if a store runs out of romaine lettuce, employees might fill the empty spot with spinach.

Whole Foods employees have told Business Insider that the out-of-stocks are the result of a new inventory management system called order-to-shelf. The system allows for a very small amount of storage, so any unexpected increase in demand can result in out-of-stocks.

Whole Foods has not responded to requests for comment on the new system.

Powerful New York Times commercial highlights concussion reporting on the eve of the Super Bowl

The New York Times / YouTube

  • A powerful new commercial from the New York Times highlights the effects reporting can have on the real world by highlighting the paper’s coverage of concussions.
  • The minimalist ad uses headlines to tell the story of Junior Seau, from his rookie year to his tragic suicide, and concludes on the NFL’s changing of the concussion protocol.
  • The ad comes just days before the biggest day for both football and commercials of the year – Super Bowl Sunday.

A new commercial from the New York Times aims to highlight the power of reporting by reminding its audience of the progress that has been made in the NFL with regard to how the league treats concussions now that the effects of CTE are more widely known.

With a minimalist layout that’s reminiscent of previous ads from the Times’ “The Truth is Hard” campaign, the ad begins by showing headlines that highlight the start of Junior Seau’s career, soundtracked by a cheering crowd. The ad flips through headlines as Seau continues his career, making a Super Bowl and coming back from injury for his 18th season.

Then, the cheers stop, as the next headline reveals the news of Seau’s suicide, with subsequent stories revealing that Seau had suffered from CTE. The final headline lands on the NFL changing its concussion protocol, signaling a shift in the seriousness with which the league takes concussions, and how they come as a direct result of reporting.

The ad comes just days before the biggest day for both football and commercials of the year – Super Bowl Sunday.

Republicans have left the most powerful chairmanship in the House twice in one year

Jason Chaffetz and Trey Gowdy.

Jason Chaffetz and Trey Gowdy.
Alex Wong/Getty Images

  • One of the most high-profile chairmanships in Congress is of the House Committee on Oversight and Government Reform.
  • But within a year, two Republican chairman have left the post.
  • It’s part of an unprecedented trend of retirements for the Republican conference ahead of the 2018 midterms.

One of the most desirable chairmanship positions in Congress comes on the House Committee on Oversight and Government Reform.

Yet, within the span of just one year, two Republicans who have had the opportunity to chair the powerful committee have left the position.

The latest was Rep. Trey Gowdy, who announced Wednesday he would retire and seek a return to the justice system. Less than 10 months earlier, former Republican Rep. Jason Chaffetz of Utah announced his retirement and later joined Fox News. They are two of the nine Republican chairmen who have said they plan to retire ahead of or after the 2018 elections.

Though many experts are predicting a large Democratic swing in the 2018 midterms, both Chaffetz and Gowdy hailed from safe Republican districts. Losing the seat was not much of a threat.

So why leave such a powerful post?

For Chaffetz, some speculated that the job just wouldn’t be quite as interesting with Republicans in control of all levers of government. The Utah Republican made a name for himself leading high-profile congressional investigations of President Barack Obama’s administration, but critics said he took his foot off the gas once President Donald Trump assumed office.

Additionally, Trump found himself under scrutiny from the House and Senate Intelligence Committees, as well as the Senate Judiciary Committee, most prominently in their parallel investigations of Russian interference in the 2016 election. So Chaffetz’s avenue to investigate Trump had become slightly more narrow.

Though he hasn’t dipped back into politics since leaving Congress last April and subsequently joining Fox News, Chaffetz left the door open to a future run.

“I may run again for public office, but not in 2018,” he said in his Facebook post announcing his retirement. He didn’t respond to a request for comment Wednesday.

A possible fit could be the Utah governorship, where Republican Gov. Gary Herbert said he would not seek a third term.

Meanwhile, Gowdy announced that he would retire at the end of his current term to return to the justice system and leave politics altogether.

“I will not be filing for re-election to Congress nor seeking any other political or elected office; instead I will be returning to the justice system,” Gowdy said. “Whatever skills I may have are better utilized in a courtroom than in Congress, and I enjoy our justice system more than our political system. As I look back on my career, it is the jobs that both seek and reward fairness that are most rewarding.”

There was quick speculation over what possible job Gowdy could have in his sights: US attorney for South Carolina, a federal judgeship on the US Fourth Circuit Court of Appeals, or a high-ranking job in the Justice Department.

But Gowdy may just opt to go back into private practice. Politico reported Wednesday that Gowdy, a former federal prosecutor, turned down the Fourth Circuit opportunity when approached recently by White House counsel Donald McGahn.

“There is more civility in a death penalty case than there is in some congressional hearings,” Gowdy, who’s won seven such cases, told Politico.

In total, more than 40 Republican members of the House and Senate have announced retirements, resigned, or announced bids for other office since the session began in early 2017.

Trump supporters on Twitter were falsely accusing a Huffington Post reporter of making up an FBI statement on the Nunes memo

  • A Huffington Post reporter was accused of misreporting an FBI statement on the release of a memo authored by Rep. Devin Nunes.
  • A number of influential Twitter users pressed the reporter to provide information about his sources for the statement, even though many other news outlets had also published the statement.
  • Eventually, the FBI put the statement up on their website, ending the debate.

Upon reports that the FBI had issued a statement criticizing the accuracy of a memo authored by House Intelligence Committee chairman Devin Nunes, Huffington Post reporter Ryan Reilly found himself under fire on Twitter from users who accused him of either mischaracterizing the statement or making it up entirely.

In its statement, the FBI had criticized the lack of crucial details in Nunes’s memo, which alleges misconduct by the FBI and Department of Justice (DOJ) with regard to surveilling former members of President Donald Trump’s campaign team after he took office.

“With regard to the House Intelligence Committee’s memorandum, the FBI was provided a limited opportunity to review this memo the day before the committee voted to release it,” the statement said. “As expressed during our initial review, we have grave concerns about material omissions of fact that fundamentally impact the memo’s accuracy.”

Trump and others in the Republican Party have called for the memo’s release, despite the deputy attorney general of the DOJ calling a release “extraordinarily reckless.”

A Twitter account called @TheLastRefuge, which has over 65,000 followers, began tweeting at Reilly and accusing him of violating journalistic ethics.

“This is really terrible journalistic ethics. Worst ever seen. @ryanreilly is pushing a claim the FBI has released an official statement,” the account tweeted. “They haven’t. This claim is akin to taking an opinion from a McDonalds worker and selling it as the official Corporate Release. #Fake News.”

Other Twitter users piled on to the account’s assertion, claiming that because the FBI had not posted an official statement on their website, Reilly’s reporting could not be accurate.

But Reilly, along with numerous other publications like CNN and Fox News, all received the same statement from the FBI via email.

“The FBI issued an official statement that is attributable to the bureau. It was emailed to reporters by the FBI’s National Press Office,” Reilly tweeted.

Various users including @TheLastRefuge demanded to know the name of the individual who sent them the statement.

“By who?” the user asked. “This is not a difficult question. The organization itself is being accused of massive corruption. As such, all within the organization have a vested interest in shaping coverage of investigation therein. Not difficult to see. So again, WHO is making this claim?”

Often when giving official statements, government agencies, departments, and bureaus have a spokesperson speak for the entire organization, and request the body as a whole be quoted.

After hundreds of tweets though, the FBI put up a link to the statement on Reilly wasted no time clearing the air.

“ATTENTION TWITTER: THE FBI STATEMENT ON THE NUNES MEMO IS NOW ON http://FBI.GOV ,” he wrote. “That was fun, though. Good job everyone.”

Pandora lays off 5% of its staff and shifts its focus away from California because it’s too expensive

Pandora CEO Roger Lynch laid off 5% of his workforce Wednesday.

Pandora CEO Roger Lynch laid off 5% of his workforce Wednesday.

  • Pandora laid off 5% of its workforce Wednesday as part of cost-cutting efforts to boost the slumping company.
  • The music streaming service, which is headquartered in Oakland, California, is looking to expand its presence in Atlanta, Georgia due to a lower cost of living.
  • The company expects this reorganization to save $45 million annually.

The $1.2 billion internet radio company Pandora laid off 5% of its employees on Wednesday in order to “prioritize its strategic growth initiatives and optimize overall business performance,” according to a federal filing by the company.

It’s not immediately clear how many jobs these layoffs will affect. The last time Pandora disclosed an official headcount was December 2016, when it had 2,488 employees. We’ve reached out for clarification from Pandora and will update if we hear back.

Wall Street responded favorably to the announcement, however, with Pandora shares up nearly 4% to $4.78 in after-hours trading at the time of writing.As part of this restructuring, the company will shift away from investments in its Oakland, California headquarters, and expand its workforce in Atlanta, Georgia, where the cost of living is lower. The layoffs, however, are company-wide and will impact employees across its six main offices, as well as regional sales and support staff throughout the US.

“Atlanta is a city with a rich history in music and a large pool of diverse tech talent that we can tap into as we scale,” Pandora CEO Roger Lynch said in a statement. “While we are committed to having Oakland remain our headquarters, we’re excited to build on the great foundation of our awesome team there and expand our presence in Atlanta over time.”

Lynch took over as CEO of Pandora in August 2017, replacing company cofounder Tim Westergren.

Pandora said in a press release that it expects the job cuts and “other cost-savings measures” to save the company $45 million annually in adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA).

The reduction plan, which was approved by the board of January 11 and shared with the impacted employees on Wednesday, will cost the company $6.5 million to $8.5 million in severance and benefit costs, according to the form.

“The redesign shifts resources to focus on ad-tech and audience development efforts while positioning the company for improved operating leverage over time. It also simplifies the organization into a flatter structure for smarter, faster execution,” the company wrote.

Pandora’s last major layoffs were in January 2017, with a restructuring that affected 7% of its workforce.

The media industry has officially broken up with Facebook

Getty Images/Brian Ach

  • Vox Media is the latest media company to call out Facebook for not providing a great way for publishers to earn money.
  • In a memo, CEO Jim Bankoff said that Vox has been out in front of Facebook’s big algorithm changed, and is less dependent on the platform overall.
  • Bankoff called Facebook’s News Feed a solid “promotional platform,” but sees far more potential in earning significant revenue from streaming outlets.

Vox Media is the latest media company to tell Facebook: “You can’t break up with me. I already broke up with you.”

The company’s CEO Jim Bankoff issued a memo on Wednesday touting Vox’s performance in 2017, during which it met some unnamed financial goals and saw traffic for its properties grow across the board.

And in the memo, he made it clear that Vox isn’t panicking over Facebook’s algorithm overhaul, and pretty much knew it was coming. In fact, Vox says it had already been preparing to wean itself off of Facebook.

“We are not dependent on any particular partner, including Facebook,” Bankoff wrote. “As I mentioned in our all-hands in December, well before their announcement about algorithm changes, we had already made a decision to scale back our native programming on Facebook.”

Bankoff’s comments on Facebook’s relationship with the media business were also eye-opening, drawing a distinction between Facebook’s position as a “promotional platform,” and that of a “programming platform.” Bankoff strongly implied that Facebook is not a place to make any real money, particularly for quality content producers.

He said (emphasis added):

“Content in the Facebook newsfeed is generally consumed through serendipity, not intent, making it less natural to grow loyal audiences to any given media brand. A programming platform also enables rich and predictable ways to make money to support quality journalism and storytelling. As of now, Facebook does not offer a viable path to monetize our in-depth video work.”

Vox has joined a growing list of media companies doing something that had been quite rare in recent years – actually speaking out against Facebook.

Many traditional and digital media companies had becoming increasingly reliant on Facebook to deliver audiences. For example, at one point the Washington Post published every story directly to Facebook. Other publishers like Elite Daily or BuzzFeed’s Tasty had at one point existed almost exclusively on Facebook (before eventually diversifying their distribution).

But upon the recent algorithm tweak, a growing number of strange media bedfellows have emerged, calling out Facebook for not better supporting media companies. News Corp chairman Rupert Murdoch called for both Facebook and Google to pay for quality journalism while BuzzFeed CEO Jonah Peretti said that Google and Facebook are “paying content creators far too little for the value they deliver to users.”

Now Vox, publisher of SB Nation, Eater, The Verge and Curbed, is jumping into the fray. Essentially, Bankoff is telling Facebook, you’re not a ‘real programmer,’ a not-so-subtle media burn.

“This construct of understanding the difference between true programming platforms and promotional platforms will be an important part of how we work with partners, serve audiences and make investment decisions going forward,” he wrote.

Among the partners Bankoff listed as helping Vox make money from its content were Netflix, PBS and MSNBC – another slight dig at Facebook. In fact, Netflix just green lit a series that’s being executive produced by prominent Vox columnist Ezra Klein, which probably isn’t hurting Bankoff’s confidence.

Whether Facebook is moved by these sorts of memos is unclear. There are lots of reasons why Facebook is unlikely to start media companies (which former Chartbeat CEO Tony Haile outlined here).

Executives like Bankoff may feel like the public – and maybe even regulators – are on their side. Whether Facebook is bad for society has become a much discussed topic. Even Facebook has acknowledged that the product doesn’t always make people feel great, which is part of why it’s tweaking the algorithm and trying to get back to its friends and family roots.

In fact, Facebook’s ability to change users behavior on a large scale was already on display Wednesday. During its earnings announcement, the company said that people are collectively spending 50 million fewer hours a day on the platform.

Part of that user dip was driven by Facebook weeding out viral videos and suspect news stories, CEO Mark Zuckerberg said. Or as Bankoff put it, “fake news and fake views are out.”