The OCC is facing calls to pull guidance allowing banks to conduct some crypto-related business.
Lawmakers including Sens. Elizabeth Warren and Bernie Sanders fear crypto could introduce systemic risk to banking without strict guardrails.
As efforts to pass federal crypto legislation are maybe, finally picking up steam in Washington, so, too, is the debate about how traditional banks should approach the sector.
A group of progressive senators including Elizabeth Warren and Bernie Sanders are calling on a federal banking regulator to pull Trump-era guidance that gives banks limited clearance to engage in crypto-related business.
In a Wednesday letter addressed to the Office of the Comptroller of the Currency, the senators pushed forward an ongoing debate over the role banks should play in the crypto ecosystem. Banking industry groups say the regulated institutions can bring stability to the volatile sector. But the lawmakers fear crypto could introduce systemic risk to the broader banking system without strict guardrails.
“In light of recent turmoil in the crypto market … we are concerned that the OCC’s actions on crypto may have exposed the banking system to unnecessary risk,” reads the letter, which was also signed by Sens. Sheldon Whitehouse and Dick Durbin.
Warren circulated a draft version of the letter within the Senate Banking Committee last week, as first reported by Bloomberg and American Banker. The letter calls on the regulator to withdraw previous guidance and start a more comprehensive process “that adequately protects consumers and the safety and soundness of the banking system.”
The OCC’s current guidance was published in late 2020 and early 2021. It gives federally chartered banks clearance to provide crypto custody service, hold cash reserves backing stablecoins and use blockchain technology and stablecoins to verify bank-to-bank payments.
When asked about news reports on the letter, an OCC spokesperson on Tuesday sent Protocol previous comments from acting OCC head Michael Hsu describing the agency’s “careful and cautious” approach to crypto.
Hsu defended the agency’s approach in a comment to Bloomberg when the outlet reported, on Aug. 3, that Warren was circulating a letter calling for the OCC to pull the guidance.
“I think we’re doing a pretty good job. See exhibit A: a whole bunch of stuff just happened, and the banking system is in pretty good shape, knock on wood. I think part of that is the actions we’ve taken,” Hsu told Bloomberg.
The senators cited the bankruptcies of firms Celsius and Voyager, which ran crypto-lending businesses that operated outside of the OCC’s purview. Still, the bankruptcies make “clear that stronger protections are necessary to mitigate crypto’s risks to the financial system and consumers,” the letter reads.
Hsu is a self-described crypto skeptic and promised to review the crypto-related guidance when he took leadership of the OCC in May 2021. The guidance was published under Hsu’s predecessor, Brian Brooks, who is now CEO of crypto company BitFury.
The agency said in November it would keep the provisions in place, with the added caveat that banks must apply to the OCC for a non-objection before engaging in any crypto activity.
But, in the senators’ view, that change does not go far enough.
A banking industry trade group recently argued that limiting banks’ participation in crypto is counterproductive to protecting consumers. A Monday letter from the American Bankers Association to the Treasury Department noted banks are facing restrictions that mostly keep them out of digital assets, while there is still little regulation for non-banks involved in crypto.
“The combination of these two approaches — inaction on the one hand to bring into the regulatory perimeter non-bank crypto companies, and limitation on the other of banks’ ability to engage responsibly in the digital asset market — creates an environment that makes it nearly impossible for responsible financial innovation to occur in this space,” wrote Brooke Ybarra, senior VP of innovation and strategy at the ABA.
The association was responding not to Warren and Sanders’ letter, but to a comment process the Treasury launched in July. The department sought input on, among other things, crypto’s potential impact on markets and major financial institutions, as directed by President Joe Biden’s executive order in March. Biden’s order is built around the idea that the U.S. needs to take a “whole-of-government” approach to regulating crypto.
Banks are not a monolith, and some are more skeptical of crypto than others. Some institutions have explored using blockchain technology for things like settling money transfers. Some are providing services holding custody of crypto assets or customer cash for crypto companies.
OCC-chartered crypto custodian Anchorage Digital said that lawmakers should be focused on bringing more crypto businesses within view of regulators, when asked about the letter.
“If we truly want to protect consumers, we need to pave a workable path forward for regulated institutions to provide crypto services, which was the very intent of the OCC’s guidance,” Anchorage general counsel Georgia Quinn told Protocol.
Warren has certainly voiced support for bringing stricter regulation to crypto as a whole. But consumer protection groups, which generally align with Warren, have flagged crypto’s entry into the traditional banking system as being of particular concern. They say there needs to be clarity beyond the current guidance.
“We don’t really know much about how exposed banks are to crypto risks or how regulators are weighing in,” said Mark Hays, a senior policy analyst on fintech at Americans for Financial Reform. “Given the recent crash, we should, and it would be better if regulators started from first principles and applied the full suite of banking regulations from the outset rather than take the ‘maybe, maybe not’ approach currently in play. “
The senators’ letter calls on the OCC to take up a new process with the Federal Deposit Insurance Corp. and Federal Reserve to clarify how the banks they oversee can engage with crypto. The letter also includes a series of questions about how many OCC-regulated banks are engaging in crypto activities.
The OCC, FDIC and Federal Reserve released a joint statement late last year promising further clarity would come for banks on crypto in 2022 — but guidance since then has been limited. The FDIC recently put out a statement warning banks they must monitor how the crypto firms they partner with advertise the availability of deposit insurance. That concern, plus Warren and Sanders’ attention, could be a signal of additional action coming.
Along with Biden’s executive order, there are several bills aimed at regulating various parts of the industry in the Senate, including one filed in early August that would give the Commodity Futures Trading Commission larger oversight of the industry. While the banking industry is not the focus of those bills, they could help influence how bank regulators approach crypto.
“Just having clarity between what’s a security token and a non-security token would be very helpful,” said Gary DeWaal, chair of Katten Muchin Rosenman LLP’s financial markets and regulation practice. “Over time, once you have a key regulator and in place at the federal level, you’ll have better standards on custody, better standards on cybersecurity — that will benefit the banking regulators, too.”
Plex’s new “Discover Together” feature adds a social feed to the popular streaming app.
The company is adding a social feed that lets people share and discuss their viewing activity, ratings and watch lists.
Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety’s first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.
Media center app maker Plex is giving its users a new way to talk to each other: The company is adding a social feed in its app that lets people share and discuss their viewing activity, ratings and watch lists with friends.
The new feature makes Plex just the latest company looking to add a social networking layer on top of its streaming platform. Doing so requires walking a fine line between appealing to people’s willingness to share and valuing their privacy, all while actually improving the core service. It’s something other services in both music and TV have struggled with before, but Plex has a few built-in advantages over some of its competitors.
Plex soft-launched its new “Discover Together” feature as an opt-in beta test on Wednesday. People who join the beta can automatically share their watch list, ratings and watch history with friends via a new social feed integrated into the app. Friends can use this feed to share movie recommendations with each other, start group chats and add any title that catches their interest to their own personal watch list.
The intention behind the new feature is to give people another way to find the streaming content they love, Plex chief product officer Scott Olechowski told Protocol. “It’s something that really doesn’t exist in these ecosystems at all,” he said.
That’s not for lack of trying. Roughly a decade ago, companies like Hulu and Spotify tapped Facebook to help them add a social layer to their streaming services. Automated activity feeds were supposed to help people find the content their friends loved, but ended up being more of a nuisance, if not a borderline-creepy act of oversharing.
Hulu and others have unceremoniously ditched their automated social activity feeds, but that hasn’t stopped others from trying to make entertainment more social. A number of social TV apps unsuccessfully tried to bring Foursquare-like check-ins to video viewing. Spotify has refocused its efforts around playlists as well as the creation of social moments like Wrapped, and allowing subscribers to share both on third-party platforms.
Facebook itself tried to use its social graph to turn Facebook Watch into a service with TV-worthy content — only to pull back on content investments soon after. And a number of new apps and services like ZinBin and Scener are trying to offer content discovery through a social lens.
Plex’s key differentiator is that it is already a social app — just one without profiles and feeds. Before adding ad-supported video, live TV feeds, Tidal subscriptions and more, Plex was primarily known for allowing people to run their own media servers, which they could share with small groups of friends. These servers were and are being used to stream all kinds of content, including DVR recordings, legally ripped CDs, home videos and, yes, also pirated movies and TV shows.
To launch its new social discovery feature, Plex is tapping into that core audience of server owners first. Once a Plex server owner opts into the test, they can automatically share their watch list, ratings and watch history with friends. If these friends find the feature useful, they can invite their own friends and grow the network organically.
One reason to start with server owners was that Plex didn’t want to leave newcomers forced to rebuild their social graph from scratch, product management director Ricardo Castro told Protocol. “It’s very important for us to bring the entire network on together,” Castro said. “We wanted to start with a collection of features that would be immediately valuable to the people that already have friendships.”
Much of Plex’s new social features are being powered by people’s past ratings and viewing. The company’s apps have been collecting this type of data locally for years; Plex recently began to collect this data on an opt-in basis, and it has since gathered nearly half a billion related data points, according to Olechowski.
To get people to trust Plex with this data, the company is not storing any indication of where or how people may have consumed a particular movie or show. A Plex user may have streamed a title on Netflix and then marked it on their watchlist as played, streamed it from Plex’s ad-supported video library, seen it in a theater or streamed it from someone’s server — the resulting data looks the same to the company and anyone using Plex’s new social feed. People can also edit their watch history at any point or decide not to share it with anyone at all.
The company is also taking some cues from other social networks, both in terms of best practices and pitfalls. This includes a conscious decision against endless scrolling. “It shouldn’t feel like this endless stream of content that you can never finish,” Castro said. “We wanted it to feel more personal, and less like an endless fire hose of content coming at you.”
Plex does have plans to expand its social features over time, which could eventually include public profiles and the ability to follow celebrities on the platform. However, Olechowski stressed that the company sees these features as value-additive, and not revenue-generating on their own. “We’re not trying to build a social network to build a business around a social network,” he said. “It’s really designed to solve a problem, not just to consume your time.”
Update: This post was updated on Aug. 10 to clarify some of the Discover Together functionality.
Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety’s first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.
Blockbuster hacks are no longer the norm – causing problems for companies trying to track down small-scale crime
Chris Stokel-Walker is a freelance technology and culture journalist and author of “YouTubers: How YouTube Shook Up TV and Created a New Generation of Stars.” His work has been published in The New York Times, The Guardian and Wired.
Cybercrime is often thought of on a relatively large scale. Massive breaches lead to painful financial losses, bankrupting companies and causing untold embarrassment, splashed across the front pages of news websites worldwide. That’s unsurprising: cyber events typically cost businesses around $200,000, according to cybersecurity firm the Cyentia Institute. One in 10 of those victims suffer losses of more than $20 million, with some reaching $100 million or more.
That’s big money – but there’s plenty of loot out there for cybercriminals willing to aim lower. In 2021, the Internet Crime Complaint Center (IC3) received 847,376 complaints – reports by cybercrime victims – totaling losses of $6.9 billion. Averaged out, each victim lost $8,143.
Many identity thefts and online scams, however, net perpetrators even less: just a few hundred dollars. For just $25, cybercriminals can purchase a cloned VISA or Mastercard, plus its PIN. That card data opens a treasure trove for criminals, including locally purchasing gift cards, or other fencible commodities such as electronics and jewelry sold off at a discount.
“Criminals have two primary goals: making money and staying out of harm’s way,” says Nick Biasini, head of outreach at Cisco Talos. Cybercrime provides an attractive avenue for both. “The inherent risk associated with committing cybercrime-fueled fraud is far lower than selling drugs or other types of crime. Additionally, the margins are far better. A criminal can turn a small investment into big profits simply from buying stolen information and using it to commit some form of fraud. During the pandemic unemployment fraud has been a lucrative favorite of criminals. Plus by keeping the monetary values lower they are less likely to draw the attention of state and federal authorities.”
A growing problem for local law enforcement
Cyber criminals can attack virtually anyone from virtually anywhere, and cybercrime as a service, where the non-technically minded can hire tools to hack accounts without any specialist knowledge, has become commonplace. Even organized crime syndicates in Spain and Italy are getting into the game.
Federal authorities, usually alerted by IC3, put their scarce resources toward solving large-scale crimes. They work with financial institutions or corporations most impacted by specific breaches. This means the majority of crimes – with their far smaller paydays – tend to fly under the radar.
A look at the data
But some companies are tracking the rise of small-scale cybercrime. Cisco Talos analyzes data to spot trends that help its incident response team alert customers to potential cybersecurity attacks, and then respond and recover to breaches rapidly.
It has found while drug felonies over the last eight years dropped drastically, before stabilizing during the pandemic, cybercrime has shot up. From 2015 to 2021, the number of reported cybercrimes nearly tripled, and losses soared nearly fivefold.
“Criminals today have a far better technical understanding then they did five or ten years ago,” says Biasini. “Additionally, it shows how they really understand inherent risk, it’s just safer to commit fraud and cybercrime than it is to sell drugs. As an added bonus, they also have become proficient in cryptocurrencies, providing alternative avenues for purchasing illicit goods and money laundering.”
Source: New York Police Department
Source: IC3 2021 Internet Crime Report
An evolving challenge
If this trend continues, the emerging wave of cybercrime will look less like epic breaches and more like scamming citizens out of their tax return or signing them up for fraudulent unemployment benefits. Those two crimes already rank in the top five of identity theft types for 2021, with unemployment scams leading the pack.
How, then, can we expect local law enforcement to possibly keep up? After all, they’re already busy policing and prosecuting what most people consider ‘real world’ crimes. Cybercrime is an entirely different problem. It requires pouring over data both from the criminal themselves and the victims they target with their fraud, trying to somehow build a solid, forensically sound case.
“Cisco Talos has always worked closely with local, state, and federal law enforcement organizations to help them succeed in their tasks,” says Biasini. “We are always willing and able partners to help take cybercriminals off the streets. We provide law enforcement with information we uncover during our investigations and oftentimes lend our people, processes, and technologies to help investigations already underway.”
One solution is for local law enforcement to identify staffers in their ranks with an aptitude for online sleuthing. Cybercrime units are perfect for people who have a research bent, because digital detective work is a big part of the job.
Another alternative forces are pursuing is recruiting young people from computer science programs, or tasking high schools with helping train up a new generation of defenders with the mentality and skills to turn what today is a sideline for police into a mainline function. It’s already happening worldwide: in the UK, a $7 million government program led to the creation of cybercrime units in every police force in England and Wales.
And we’re seeing it here too in the United States. Several organizations have stepped up as resources for law enforcement. Every state has at least one agency devoted to helping police fight cybercrime. And the National Computer Forensics Institute offers courses, both in-person and virtual, to train basic and advanced examiners, first responders, and prosecutors and judges.
It’s all in the aim of trying to crack down on small time cybercrime, preventing the small leaks that turn into a torrent of losses that we know about from thousands of years of history.
People have been swindled since before man created monetary systems. These aren’t new crimes; just new ways to commit them. But as cybercrime increasingly goes small-time, those on the front lines will need new and more effective ways to fight it.
Read the detailed blog on the shifting trends in small time cybercrime in Nick’s blog here. Click here to get to know Cisco Talos, the industry-leading threat intelligence group fighting the good fight.
Chris Stokel-Walker is a freelance technology and culture journalist and author of “YouTubers: How YouTube Shook Up TV and Created a New Generation of Stars.” His work has been published in The New York Times, The Guardian and Wired.
In search of more excitement, purpose and impact, engineers and top talent from big tech companies like Apple and Google are quitting their jobs to join climate tech startups.
There’s a new kid in town luring away smart people looking for purpose and willing to take a chance on something new.
Michelle Ma (@himichellema) is a reporter at Protocol covering climate. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com.
When Jonathan Strauss attended the University of Pennsylvania, all the most ambitious kids in his classes wanted to be investment bankers.
Then came the Googles and Facebooks of the world, with their exciting promise of changing the world and making a meaningful impact — nap rooms and free gyms included. Wall Street suddenly found itself overshadowed by Silicon Valley as the place to be for top talent.
Today it’s a different story. Big Tech is no longer the young upstart, and there’s a new kid in town luring away smart people looking for purpose and willing to take a chance on something new: climate tech.
“Always in a maturing market, the innovation is incremental,” Strauss told Protocol. He’s made his rounds through Silicon Valley, first at Yahoo and then as the co-founder of a social media analytics company that was subsequently acquired. Last year, he co-founded Climate Draft, which connects top tech talent with venture-backed climate tech startups looking to grow.
“We’re in the first chapter of climate tech. Every opportunity to innovate is much more impactful and much bigger,” he said.
He’s not alone in this belief. Justin Hardin is the co-founder and CTO of Climatebase, a talent directory for climate jobs. He left a stable career as a senior software engineer at Slack to found the startup after he saw the sky turn orange during Bay Area wildfires.
In traditional tech, “all the cool and impressive things that are happening have already happened,” Hardin told Protocol. The Facebook of yore pioneered social media. Facebook today? “You’re constantly combating fake information, spam accounts … For engineers that I know, that’s not the most exciting problem space,” he said.
Since Climatebase launched in 2020, over 500,000 people have used the site to find and apply for climate tech jobs. “There’s a huge migration happening,” Hardin said, with a lot of inbound interest from software engineers.
And it’s not just the rank and file. Even the big guys are ditching Big Tech for climate tech. Chris Sacca and Bill Gates have both started climate-geared investment initiatives. Mike Schroepfer recently made headlines for stepping down from his CTO role at Meta to pour his energies into the climate crisis. “These guys aren’t doing it for charity,” said Strauss. Climate tech also happens to be the most exciting space in tech right now.
“There’s a huge migration happening.”
Malak Abu Sharkh leads supply chain and operations at Charm Industrial, a carbon-removal startup. But before joining Charm this year, she was a senior supply chain manager at Apple.
“I didn’t find that exciting. I find carbon reduction work exciting,” Abu Sharkh told Protocol. At Charm, she’s focused on scaling the company’s technology to help remove carbon dioxide via a bio-oil sequestration process.
“I think every generation has a zeitgeist … For Gen X that mission imprint for a lot of folks was the internet. I think for Gen Z that mission imprint is increasingly climate,” Strauss said.
Strauss has talked to hundreds of people who are either considering or have made the career transition and “navigating how they reconcile this existential dread that they feel about the climate with how they’re spending their time and deploying their labor.”
When you’re working in climate tech, “you can be excited and proud of what you’re doing and not ashamed of it,” Strauss said.
The same can’t always be said for Big Tech, according to those who’ve left. Places like Meta “went from being a dream job to people thinking twice about working there based on perception,” Hardin said.
Besides the moral calculus, for some tech workers, it’s also about going where they feel they’ll have maximum impact.
Cassandra Xia quit her job as a software engineer at Google in the middle of the pandemic after realizing that while “Google will be just fine” without her, the impact she could make in climate tech is “much greater.”
At Google, where she worked on things like click-through-rate predictions, “the problems have already been picked over.” Climate, on the other hand, “is a problem that’s not figured out, and there isn’t really an iterative solution.”
About a year after quitting her job, Xia secured a position as the head of engineering at Evergrow, a climate fintech startup. She said she finds the kind of “shared urgency” that she feels now exciting and different. The company’s mission of aiding in the removal of one gigaton of carbon dioxide equivalents by 2030 is imprinted on the footer of every slide deck “just to keep us aware and accountable,” according to Xia.
It also doesn’t help that the missions of legacy tech companies are starting to feel a bit less awe-inspiring.
“You’re fed the idea that you can change the world, and then you end up working on ads,” Hardin said.
When Xia told Google that she wanted to leave to work on climate solutions, it was suggested that she stay and work on internal climate projects. But she didn’t think it was likely those projects were going to get very big, because, at the end of the day, they’re not part of Google’s core business model.
“It feels cynical to say, but it felt more like it was about boosting employee retention and morale,” she said of Google’s internal sustainability efforts.
The money is there, too. Those who’ve made the move say that the compensation at climate tech startups is on par with that at similarly staged tech companies, with valuable equity to boot. In fact, many of the jobs on Climatebase are matching FAANG salaries, according to Hardin.
Tech workers who have the risk appetite to join an early-stage climate tech startup also have the potential to one day cash in on a unicorn, advocates say. “The equity upside can be massive,” and potentially even more so than joining an early-stage startup in a more mature and saturated field like SaaS, according to Strauss.
“You’re fed the idea that you can change the world, and then you end up working on ads.”
“What I think is compelling to a lot of folks about the climate mission, in addition to it being more tangible and less contrived, is that it’s usually very much intertwined with and inextricable from the financial interests and incentives of the right climate tech company,” he said.
Abu Sharkh agrees. From her viewpoint, Apple was authentic in its climate commitments and genuine in its aspirations to decarbonize its supply chain, which was an effort she worked on in her two years at the company.
Despite its efforts, Abu Sharkh realized that “even places like Apple that are 100% doing the right things by working on reducing the carbon footprints of their own products will always have residual carbon emissions.” It was unavoidable, given the company’s business model centered on selling consumer electronics, she said.
Thankfully for Abu Sharkh, that’s not the case at Charm.
“I think Apple is doing the right thing with a lot of the environmental work, but ultimately their scorecard is ‘How many products did you sell?’” she said. “Our scorecard is ‘How much carbon dioxide did we remove?’”
Michelle Ma (@himichellema) is a reporter at Protocol covering climate. Previously, she was a news editor of live journalism and special coverage for The Wall Street Journal. Prior to that, she worked as a staff writer at Wirecutter. She can be reached at mma@protocol.com.
BeReal is zeroing in on close friends just as Facebook and Instagram have decided to bury them. Can it hold on to its success by keeping that vision?
Although BeReal fills a valuable niche now, it will likely need to iterate on its vision for long-term success.
Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She’s a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school’s independent newspaper. She’s based in D.C., and can be reached at llawrence@protocol.com.
Sarah (Sarahroach_) writes for Source Code at Protocol. She’s based in Boston and can be reached at sroach@protocol.com
When Protocol wrote about BeReal in March, the photo-sharing app was just starting to enter the American mainstream. Now, the app is so popular that it’s getting memed across the internet.
Here’s what it would look like if Bella Swan took a BeReal when Edward smells her in “Twilight.” Here’s a girl desperately trying to take her BeReal in the front row of a Harry Styles concert. People are even finding love on this app.
BeReal is the No. 1 social networking app on the Apple App Store, and ninth in “free social apps” on Google Play. Between March and July, BeReal saw 85% of its total lifetime downloads at 20.2 million, according to data from data.ai. The platform has found popularity beyond the college students it originally attracted, following the trajectory of Snapchat, Facebook and others.
But BeReal is zeroing in on close friends just as Facebook and Instagram have decided to bury them. The global success of TikTok, which vehemently calls itself an entertainment app rather than social media, is pulling social media companies away from friends and toward curated content. BeReal doesn’t want to be like any of them. But what if it has to in order to survive?
BeReal declined to comment for this story, so it’s unclear what its plans are. In a response to an interview request, one investor told Protocol that CEO Alexis Barreyat “asked us not to share anything related to the company,” then sent a screenshot of BeReal’s position in the App Store. Another person close to the BeReal team said the company is trying to keep a cool head, staying laser-focused on the product rather than broadcasting its plans too publicly.
With plans obfuscated, it’s hard to know what features, if any, BeReal will introduce as it grows. But social media experts told Protocol that although BeReal fills a valuable niche now, it will likely need to iterate on its vision for long-term success.
“In a way, asking what I think will happen with BeReal is kind of like asking how much longevity do I think a certain icebreaker will have at the start of every meeting,” said Coye Cheshire, a social psychologist at the University of California, Berkeley. “Eventually, people are going to get tired of it.”
At its core, social media is about connection, and there are endless ways to connect. With BeReal, people connect by posting a front and back photo once a day at a random time chosen by the app, within a two-minute time limit. Users can’t see their friends’ photos until they take one themselves. Cheshire calls it the “gamification of how to be social.” Humans have a genuine need to be social, to share information and form emotional connections. Social media companies serve that need, but they’ve also found ways to make money from it.
“Why are we building social media in the first place?” Cheshire said. “It’s largely because companies, and this is not a nefarious thing, see a financial interest in capitalizing on people’s need to be social.”
The future of social media, from the perspective of social media companies, is more about what will keep users coming back to their platforms than about what will help people socialize in better, easier and maybe even more meaningful ways. That’s why Meta, Instagram and Snapchat have pivoted so many times. TikTok, the most downloaded app in the world, is quickly gobbling up users with a highly addictive algorithm full of content from creators they don’t know. Instagram is heading in this direction as well, despite a temporary reduction of recommended posts after pressure from high-profile users like Kylie Jenner. A video from Instagram CEO Adam Mosseri last month shows the company’s dedication to the recommendation algorithm.
“We want to do our best by creators, particularly small creators,” Mosseri said. “We see recommendations as one of the best ways to help them reach a new audience and grow their following.”
Not all social media companies are abandoning close friends in favor of creators and algorithms, however. Clubhouse, though it’s faded in popularity since its 2020 launch, thinks small social communities are its next big thing. Clubhouse is rolling out a new feature called “Houses”: smaller audio rooms that are like “private hallways just for your favorite people.” In a tweet about “Houses,” Clubhouse CEO Paul Davison said the best social experiences are “small and curated.”
Another new social platform, Niche, allows people to connect based on their shared interests. “If you connect people that have some hobbies or interests or something in common, that actually could lead to a better social media experience than just connecting people who went to school together or are family members,” co-founder Zaven Nahapetyan told Protocol in a previous interview.
The arena for a just-close-friends social media platform is wide open, especially if Instagram and TikTok are deserting friends in favor of creator-based algorithmic feeds. BeReal’s next step could offer a clue as to whether sharing with close friends is something users think they want or something they actually want. Herd, for example, bet that users wanted a “less toxic” social media experience. But it’s struggling to get funding and stopped developing its app as a result.
“Where are teens or college students seeing their friends?” asked Nikita Bier, founder of the now-defunct app called tbh and an investor in BeReal. “I think we’re at an inflection point for another app to own that vertical.”
Maybe BeReal doesn’t need to take over the world to remain popular. Lee Rainie, the director of internet and technology research at the Pew Research Center, said the next generation of social media users aren’t sticking to one platform. They’re adding to the number of platforms they use, and each network tends to take on its own purpose. In that case, BeReal could remain an addition to the list of platforms people use every day.
“Sometimes they draw back from things that they used to do, or just sort of drop things that they used to do,” Rainie said of user habits. “But in more cases than not, they let that stuff stay out there, and they move on or add to their repertoire.”
Adam Blacker, director of content and communications at Apptopia, agreed that BeReal could thrive as part of the usual social media diet. Achieving a TikTok level of success is “insane and requires gaming the human brain,” Blacker said. But BeReal might be satisfied, and still be able to monetize through ads or in-app purchases, with a less-addicted user base.
Sierra Moore, creative director of influencer marketing company Open Influence, said that as BeReal grows and expands beyond college-aged users, the platform will need to adapt accordingly. She said as users’ audiences grow by adding more friends or sharing their BeReal posts to other platforms, they may start to move away from posting “raw and real” content to attract even more eyeballs.
BeReal users are already running out of close friends to add and are starting to add loose acquaintances, Bier said. But he insists that it’s possible to build a sustainable app for close friends. He’s also an investor in Locket, a sort of competitor to BeReal where people send pictures to friends that automatically update in an iPhone widget. It’s primarily meant for couples, but Bier acknowledged that expanding to other kinds of relationships is crucial to attract more engagement and users. He likened it to Snapchat’s launch of Stories: Rather than sending photos directly to close friends, people were able to post updates for their wider social networks.
“I’d be curious to see what is the second act, the ‘Stories’ of BeReal,” Bier said. “Right now, your photos are broadcast to your entire social graph. So perhaps they go the other direction and focus on messaging or sending to individuals or things like that.”
If BeReal ends up going the mega-platform route, it could start attracting big-name brands, too. Open Influence’s Moore said that brands’ attitudes toward BeReal are similar to their initial approach to TikTok: hesitant and wary, then urgent and necessary. Brands had to learn that it’s OK to post unpolished content on TikTok, and they might need to learn the same on BeReal.
“I feel like it could be a similar evolution [on BeReal],” she said. “We’re definitely open and hoping that we can find a brand to partner with to try it out.”
BeReal faces the same threats as any fledgling social platform: Its death knell might come from one of the bigger platforms. Instagram has already incorporated BeReal’s signature front-back photo format, and Twitter launched Circle for users to share tweets with a smaller crowd. But Bier, who worked at Facebook after the company acquired (and promptly discontinued) tbh, said he was skeptical of true copycat features appearing anytime soon.
Though users won’t know how BeReal weathers the current landscape for some time, UC Berkeley’s Cheshire encourages people to think bigger when it comes to the future of social media. Platforms are naturally leading the charge by shaping the way people interact on the internet. But really, what that looks like is up to the users themselves.
“Why do we have individual companies or platforms versus, say, a protocol?” Cheshire asked. “We’re constrained in our imagination by the development of the technologies that we already have.”
Lizzy Lawrence ( @LizzyLaw_) is a reporter at Protocol, covering tools and productivity in the workplace. She’s a recent graduate of the University of Michigan, where she studied sociology and international studies. She served as editor in chief of The Michigan Daily, her school’s independent newspaper. She’s based in D.C., and can be reached at llawrence@protocol.com.
Kathy Hannun had the support of Alphabet’s X innovation lab, but decided to strike out on her own when it became clear that her idea wasn’t a moon shot.
“[I]t seemed like this great opportunity where the financial interests of homeowners were very well aligned with the most environmentally friendly solution,” says Hannun.
Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com). 
The tech industry has a love for moon shot ideas that are unproven but could be transformative if they work.
Alphabet’s X innovation lab is home to some of the industry’s biggest moon shots. That’s where Kathy Hannun was working when she came across a relatively untapped opportunity in the U.S.: drilling into the Earth’s crust to access thermal energy for home use.
However, the idea didn’t quite fit the definition of moon shot, given that geothermal technology already existed and was widely used in countries like Sweden. So Hannun left behind the Big Tech support that X provided and spun Dandelion Energy off in 2017.
Five years later, Hannun says, the company is growing as fast as can be. But it wasn’t initially clear that it would be the success it has become. When Hannun was weighing her options in 2016, it was long before the heat pumps that Dandelion sells to homeowners had made any dent in the HVAC market, and the climate tech market was tepid at best. The fact that Dandelion made it work despite these headwinds illustrates that everyday innovation is just as crucial to combating climate change as moon shots are. Here’s how Hannun decided to make the leap.
Hannun’s story, as told to Protocol, has been edited for clarity and brevity.
I think the X innovation lab was a very unique place. Even though I was fairly junior at that time in my career, I was given a lot of freedom to explore potential opportunities to create new technologies and new business models and apply them to meaningful problems. It allowed for a lot of creativity, and my personal interest has always been energy.
Home energy use really stood out to me. It turns out that, especially in the regions of the U.S. that use the most energy in the home, a lot of homes are still using very dirty, expensive and outdated heating fuels. I had firsthand experience with this because I grew up in New Hampshire in a house that used fuel oil. And at the same time, I learned a lot about heat pumps. The thing that’s really special about geothermal heat pumps is that, because they’re thermally connected to the ground and the ground doesn’t really change temperature over the course of the year, they’re able to deliver heating and cooling more efficiently to the home than any other type of system.
We did an analysis of how much money people could save if they hypothetically switched from these expensive fossil heating fuels to geothermal heat pumps, and it was just astronomical. So it seemed like this great opportunity where the financial interests of homeowners were very well aligned with the most environmentally friendly solution.
One of my colleagues recommended I reach out to James Quazi, who had a lot of expertise in home energy efficiency and had also worked at SolarCity during some of their greatest years of growth. So I reached out to James and hired him as a consultant to help me really understand the geothermal opportunity. James ended up joining X and then later becoming my co-founder of Dandelion.
I started to think that a spinout might be a good option when it became clear that we actually had to start installing thermal heat pumps. The work we had done on the market analysis had made it clear that New York was the best state to start this business in.
There were countless questions to answer: How do we price these? How do we market them? Where in New York should we get started? What partner should we use for installing them?
Alphabet is a very famous and very strong brand, and we recognized that we needed to be very careful doing things like drilling 500-foot holes in customers’ yards under the then-Google brand. There’s just a lot of risk there. It became increasingly clear that the reality of Alphabet as an amazing company was not necessarily compatible with the need to prove out our idea on the ground.
We didn’t need that much money to get started. There was probably going to be a lot of benefit to being a little bit financially constrained, because it forces you to really prioritize and focus. For all those reasons, it seemed like a startup made sense theoretically.
That said, I had a lot of personal trepidation. I did not feel like I knew how to start a business; I had only really ever professionally worked at Google, so it was a very daunting idea. I was not a person who had ever sold anything, let alone a heating and cooling system for home. I was not a homeowner. I did not have a background in HVAC. I remember the day that it dawned on me that this had to be a spinout to work. And I knew that either I would make it happen by committing to spin it out myself or else I would have to drop the idea and stay at Google, in a job I really loved.
I was so stressed that day — literally shaking with anxiety — because I knew I was going to spin it out, even though a very large part of myself really didn’t want to because I knew it would be way outside of my comfort zone. (And I was ultimately right. It ended up being just as uncomfortable and difficult and lonely at times as I thought it would be.) But it was so rare to find an opportunity like that: where it will be so meaningful to me and will help so much on these issues that I care about if it works. I wanted to be the type of person that would seize that type of opportunity.
Wednesday, June 29
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Lisa Martine Jenkins is a senior reporter at Protocol covering climate. Lisa previously wrote for Morning Consult, Chemical Watch and the Associated Press. Lisa is currently based in Brooklyn, and is originally from the Bay Area. Find her on Twitter ( @l_m_j_) or reach out via email (ljenkins@protocol.com).
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