DOJ files antitrust lawsuit challenging Visa’s $5.3 billion acquisition of Plaid

The Department of Justice has filed an antitrust lawsuit challenging Visa’s proposed $5.3 billion acquisition of Plaid .

News of the DOJ’s investigation first broke last month.

“By acquiring Plaid, Visa would eliminate a nascent competitive threat that would likely result in substantial savings and more innovative online debit services for merchants and consumers,” the DOJ wrote in its lawsuit.

The deal would violate Section 2 of the Sherman Act “and must be stopped,” the DOJ wrote in its filing, published by Bloomberg Law.

In a statement, Visa said it “strongly disagrees” with the DOJ’s “legally flawed” arguments.

“This action reflects a lack of understanding of Plaid’s business and the highly competitive payments landscape in which Visa operates,” the statement read. “The combination of Visa and Plaid will deliver substantial benefits for consumers seeking access to a broader range of financial-related services, and Visa intends to defend the transaction vigorously.”

“As we explained to the DOJ, Plaid is not a payments company. Visa’s business faces intense competition from a variety of players – but Plaid is not one of them. Plaid is a data network that enables individuals to connect their financial accounts to the apps and services they use to manage their financial lives, and its capabilities complement Visa’s. Together, Visa and Plaid will deliver better digital experiences and more choice for consumers in managing their money and financial data. Visa is confident that this transaction is good for consumers and good for competition,” the statement added.

Plaid co-founders William Hockey and Zach Perret. Image Credit: Plaid

As the Justice Department argues, Visa’s monopoly power in online debit is protected by barriers to entry and expansion. New challengers to Visa need connections with millions of consumers to attract merchants and need connections to thousands of merchants to attract new consumers, the DOJ said.

DOJ lawyers pointed to Mastercard’s inability to seize more than a quarter of the online debit market as a sign of Visa’s continued dominance. “Mastercard has neither gained significant share from Visa nor restrained Visa’s monopoly,” the lawyers wrote.

Visa also set up technical barriers by entering into restrictive agreements with merchants and banks to prevent competitors from growing their share of the online debit market.

“These entry barriers, coupled with Visa’s long-term restrictive contracts with banks, are nearly insurmountable, meaning Visa rarely faces any significant threats to its online debit monopoly. Plaid is such a threat,” according to the DOJ.

Companies like Venmo, Acorns, and Betterment are just some of the big startups that use Plaid to build their services.

“While Plaid’s existing technology does not compete directly with Visa today, Plaid is planning to leverage that technology, combined with its existing relationships with banks and consumers, to facilitate transactions between consumers and merchants in competition with Visa,” according to the DOJ.

And Visa was well aware of Plaid’s potential to disrupt its business. As early as March 2019, nearly nine months before the acquisition was announced, the vice president of corporate development and head of strategic opportunities expressed concerns about Plaid’s business.

“I don’t want to be IBM to their Microsoft,” the executive said, according to the lawsuit filed by DOJ. Visa’s chief executive also clearly acknowledged that Plaid was a threat.

The company estimated that Plaid could cost Visa’s debit business between $300 million and $500 million by 2024 if it were to continue operating as an independent company. It was, in the words of Visa’s executives an “[e]xistential risk” to its U.S. debit business and it could have forced Visa to accept lower margins — something that would be a boon to businesses and consumers.

Alibaba passes IBM in cloud infrastructure market with over $2B in revenue

When Alibaba entered the cloud infrastructure market in earnest in 2015 it had ambitious goals, and it has been growing steadily. Today, the Chinese ecommerce giant announced quarterly cloud revenue of $2.194 billion. With that number, it has passed IBM’s $1.65 billion revenue result (according to Synergy Research market share numbers), a significant milestone.

But while $2 billion is a large figure, it’s one worth keeping in perspective. For example, Amazon announced $11.6 billion in cloud infrastructure revenue for its most recent quarter, while Microsoft’s Azure came in second place with $5.9 billion.

Google Cloud has held onto third place, as it has for as long as we’ve been covering the cloud infrastructure market. In its most recent numbers, Synergy pegged Google at 9% market share, or approximately $2.9 billion in revenue.

While Alibaba is still a fair bit behind Google, today’s numbers puts the company firmly in fourth place now, well ahead of IBM. It’s doubtful it could catch Google anytime soon, especially as the company has become more focused under CEO Thomas Kurian, but it is still fairly remarkable that it managed to pass IBM, a stalwart of enterprise computing for decades, as a relative newcomer to the space.

The 60% growth represented a slight increase from the previous quarter’s 59%, but basically means it held steady, something that’s not easy to do as a company reaches a certain revenue plateau. In its earnings call today, Daniel Zhang, chairman and CEO at Alibaba Group said that in China, which remains the company’s primary market, digital transformation driven by the pandemic was a primary factor in keeping growth steady.

“Cloud is a fast-growing business. If you look at our revenue breakdown, obviously, cloud is enjoying a very, very fast growth. And what we see is that all the industries are in the process of digital transformation. And moving to the cloud is a very important step for the industries,” Zhang said in the call.

He believes eventually that most business will be done in the cloud, and the growth could continue for the medium term as there are still many companies who haven’t made the switch yet, but will do so over time.

Calm’s hilarious CNN ad campaign sent the meditation app flying up App Store charts

Meditation app Calm’s brilliant and hilarious marketing campaign that saw it sponsoring CNN’s coverage of the 2020 U.S. Presidential Election results this week seems to have paid off for the business. The app, which today offers mindful meditations, peaceful sounds and sleep stories, had flashed on screen during CNN’s “Key Race Alert” coverage, reminding users of the need to relax during this stressful time.

According to data from third-party app store analytics and marketing firms, Sensor Tower and App Annie, these CNN advertisements appear to have helped substantially boost Calm’s downloads (as determined by the app’s chart rankings.)

On iPhone in the U.S., App Annie says Calm moved up 20 ranks from the day before Election Day to reach No. 79 Overall across both apps and games in the U.S. It also reached No. 1 in the U.S. Health & Fitness category.

Image Credits: App Annie

Meanwhile, Sensor Tower found that the app moved up again on Nov. 4, climbing 51 spots to reach No. 68 among the top free iPhone apps on the U.S. App Store.

The firm notes this is the highest the app has ranked since July 21, when it hit No. 60 — a jump that was likely boosted by the release of the Harry Styles’ Sleep Story. While Calm did add another new Sleep Story on Oct. 30, it didn’t appear to have an impact the way that Styles’ Story had, Sensor Tower said.

A spokesperson for Calm explained the company’s decision to run the CNN ad campaign was about associating its brand with the anxiety that its meditations and relaxing sounds help to address.

“We understand the uncertainty of this election cycle can be a source of anxiety for many of us, especially as it coincides with an ongoing pandemic,” the spokesperson said. “Our goal during CNN’s Key Race Alerts was to provide viewers a moment of Calm, and a reminder to take a deep breath during a stressful night,” they added.

The company declined to confirm the third-party estimates, however.

Overall, the CNN ad campaign worked for Calm because it was almost a troll on how stressed people have been this week as election results poured in — and particularly by CNN’s “Key Race Alert” music that plays when there’s an important update.

Simply put, most people found Calm’s ad funny.

In addition to running ads on CNN, Calm launched a refreshed resource hub with free mindfulness tools, including Sleep Stories, meditations, music and other mindfulness content ahead of the elections.

And just ahead of Nov. 3, it partnered with mobile news organization NowThis to create a soothing livestream that ran on NowThis’ Facebook and YouTube pages on Nov. 3 through Nov. 4.

Outside of its CNN sponsorship, Calm has been working to capitalize on increased TV viewing around the election to gain attention for its anxiety-reducing resources, as well.

According to data from iSpot.tv, reported by AdAge, Calm’s app saw 66 million total impressions from Oct. 31 through Nov. 3, with 11 million on Election Day alone. And over the last 30 days, Calm saw 241.7 million TV ad impressions, valued at $1.4 million.

In addition to CNN, the company ran Election Day ads on MSNBC, E!, HGTV, IFC, Freeform, the Discovery Family Channel and the Discovery Life Channel, the report said.

Gaming company Capcom hit by cyberattack

The developer of popular video game franchises took swift action to prevent the attack from spreading further across its systems

Japanese video game developer Capcom has disclosed that it was the victim of a cyberattack that affected some of its systems. The publisher of a long list of popular franchises, including Street Fighter and Resident Evil, first noticed signs of the intrusion on Monday before apparently taking swift action to prevent the attack from spreading across its systems.

“Beginning in the early morning hours of November 2, 2020 some of the Capcom Group networks experienced issues that affected access to certain systems, including email and file servers,” reads the notice on the company’s website.

While the company did not disclose the culprit behind the attack or the method through which its systems were breached, it did confirm that an unknown third-party gaining unauthorized access to its systems, which led Capcom to suspend some of its operations on its internal networks.

The game developer claimed that currently there is no evidence to suggest that any that customer information was compromised. Having said that, it may be too early to make any conclusions as the investigation is still ongoing.

The company went on to assure players that the incident had no bearing on the connections used to play the studio’s games online, nor did it hinder access to its websites. However, Capcom did issue an apology to any of its stakeholders who were inconvenienced by the situation.

The Japanese game publisher also shared an announcement warning that it won’t be responding to contact requests made through its investor relations form.

“We are currently unable to reply to inquiries and/or to fulfill requests for documents via this form following the network issues that began November 2, 2020,” said Capcom. In the meantime, the company is working with the police and authorities to investigate the incident, as well as to restore its systems to normal running order.

While the intruders don’t seem to have got their hands on people’s personally identifiable information, data harvested from security breaches is often used for phishing attacks. So if you have a Capcom account, you’d be well advised to remain vigilant.

With the gaming industry projected to be worth US$200 billion by 2023, it’s no wonder that both companies and players prove to be an attractive target for threat actors. Content delivery network provider Akamai stated that it observed over 10 billion credential-stuffing attacks within the industry over a two year period between July 2018 and June 2020, and over 3,000 distinct Distributed Denial-of-Service (DDoS) attacks targeting the gaming industry between July 2019 and June 2020.

WhatsApp receives approval to expand its payments service in India

WhatsApp, which began testing its payments service in India with 1 million users in early 2018, can finally start to expand the feature to more users in the world’s second largest internet market.

National Payments Corporation of India (NPCI), the body that operates the widely popular UPI payments infrastructure, said on Thursday evening that it has granted approval to WhatsApp to roll out UPI-powered payments in India.

Like Google, Samsung, and a number of other firms, WhatsApp has built its payments service atop UPI, a payments infrastructure built by a coalition of large banks in India. NPCI said WhatsApp can expand payments to its users in a “graded manner” and to start with, it can only roll out the payments service to 20 million users and has to work with multiple banking partners.

A WhatsApp spokesperson in India did not immediately respond to a request for comment.

More to follow…

Ayar raises $35M for optical interconnect tech to overcome computing bottlenecks in the CPU

The race is on to build more efficient chip technology for faster and less power-intensive computing, and today an innovative startup that’s built one solution based on in-package optical interconnect (optical I/O) technology is announcing a round of growth funding from a number of strategic investors that speaks to how its approach is getting traction.

Ayar Labs, which makes chip solutions based on optical networking principals — architecture that promises both faster computing speeds and far less power consumption (and heat) in the process — has picked up $35 million in a Series B round of funding. Co-led by Downing Ventures and BlueSky Capital, the round also includes Applied Ventures (the VC arm of Applied Materials), Castor Ventures and SGInnovate (the Singaporean government’s deep tech fund), with participation also from existing investors BlueSky Capital, Founders Fund, GLOBALFOUNDRIES, Intel Capital, Lockheed Martin Ventures, and Playground Global.

Charles Wuischpard, CEO of Ayar Labs said that the funding will be used to continue developing its product as well as working on further commercialization. “The main application area for our technology is next-generation computing, anywhere that there is massive movement of data,” he said.

That includes aerospace and government applications, artificial intelligence and high-performance computing, telecoms and cloud applications, and LIDAR for self-driving car and other autonomous systems. Currently Wuischpard said that most of Ayar’s work is in the areas of AI and HPC — it’s a key partner of Intel’s in its work on AI computers for Darpa (see here and here) — and in telecoms/cloud.

Ayar’s focus on optical technology — specifically using silicon photonics and processing to build an optical communication device that can be built into a CPU — is emerging as a key area for chipmakers. Just last week, Marvell announced that it would buy Inphi, an optical networking specialist, for $10 billion.

As Wuischpard describes it, the big breakthrough that Ayar has brought to bear has been bringing down the size and scale of the technology to work within a computer’s core chip architecture, its CPU, which impacts and controls memory, control unit, and processing/logic, helping to speed up computing for the most demanding applications.

(The company was co-founded by Mark Wade, Chen Sun, Vladimir Stojanovic, and Alexandra Wright-Gladstein based on work at MIT, and they brought in Wuischpard, an engineer by training and also a veteran exec from Intel, to help figure out how to build a commercialised business around that.)

“Optics has been around for a long time,” he points out, first in subsea cabling, then between data centers and then inside the data center. “We think of ourselves as the last or first mile, bringing optical tech into the CPU.”

As he describes it, the company has devised a new type of modulator to turn electrons into photons, a “mirroring modulator” as he calls it. “There have been 1,000 research papers on this, but it’s typically difficult to manufacture and operate over a wide range of temperatures, and this is where a lot of our patents come in, to develop that into a single chiplet” he said. The amount of bandwidth the tech can handle, 2 terabits/second, “would fill a whole server, but we are doing it in 5×9 millimeters.”

He adds that the opportunities here are such that there are others also working on the same kind of technology. “There are bigger companies and one or two smaller ones, but they are all still a couple of years behind us in commercialization,” he said. “It’s one thing to build one, versus a million.” Having GLOBALFOUNDRIES as an investor — it’s also fabricating hardware for Ayar — is key in this regard.

The company seems like it would be a key acquisition target, I pointed out, not least because of the race for having ownership of technology that can give a company a leading edge over another, but also because of the trend of consolidation in the chip industry. (Intel’s acquisition of Habana Labs also underscores the interest it has in optical tech.)

Wuischpard laughs a little ironically and says that Covid-19 has been a “help” in this regard: acquisitions have slowed down, giving the startup more time and less pressure to sell up.

“Ayar Labs represents the future of interconnects which have eventual applicability to every electronic device on earth”, said Warren Rogers, Partner and Head of Ventures at Downing Ventures, in a statement. “We have the highest confidence that when their optical I/O technology is applied to computing, the industry will finally break away from Moore’s Law and redefine the boundaries of computing.”

“We’ve been an investor in Ayar Labs since the beginning and have been looking for opportunities to increase our ownership in the company” added Madison Hamman, Managing Director of Blue Sky Capital. “We are very excited about Ayar Labs and believe in their patented technology and execution of a plan that makes it a core building block of future computing systems.”

Google and Walmart face growth hurdles as India caps payments transactions

Google and Walmart have a new challenge ahead of them as they race to expand the reach of their payments apps in India: They won’t be permitted to grow beyond a limit.

National Payments Corporation of India (NPCI), the body that operates the widely popular UPI payments infrastructure, said Thursday evening that it will enforce a cap to ensure that no single payments app processes more than 30% of UPI transactions in a month.

The payments body said the move is aimed at addressing the “risks” and “protecting the UPI ecosystem as it further scales up.” The change goes into effect in January 2021.

UPI is a payments infrastructure built by large banks in India and is backed by the Indian government. It has become the most popular digital payments method in the country in recent years.

The cap of 30% will be calculated based on total volume of UPI transactions processed in the preceding three months, it added.

The move, described by an industry executive as the most absurd thing they have heard in months in India, will severely impact Google and Walmart, whose respective apps already process more than 35% of UPI transactions each.

In fact, Walmart’s PhonePe processed more than 40% of about 2 billion transactions on UPI network last month.

It remains unclear how any payments app will comply with this limit.

More to follow…