With Trump Feud Still Simmering, Postal Service Announces Huge Growth in Package Delivery — And Widening Losses

The U.S. Postal Service announced its second quarter financial results on Friday, a normally ho-hum moment made a lot more significant thanks to continuing criticism of USPS’s relationship with Amazon by U.S. President Donald Trump.

USPS said that its revenue for shipping and packages shot up by 9.5%, or $445 million, since the second quarter of last year. Meanwhile, letter and other mail volume dropped by 2.1%, and mail revenue was down $181 million. Overall revenue grew 1.4%, but the USPS still lost $1.3 billion in the quarter, compared to a $562 million loss this time last year, thanks to a 5.7% increase in operating expenses. USPS said rising expenses included the cost of retiree health benefits, increased labor costs for shipping packages, and higher transportation expenses.

If that all sounds complicated, it is — and that complexity has helped enable Trump’s campaign against the USPS’s partnership with Amazon. Trump has accused Amazon of benefiting from preferential USPS rates, and last month created a task force to review USPS business practices. But a former postmaster general has said that the USPS agreement with Amazon had been profitable for the Postal Service, which must offer competitive package pricing with services like UPS and FedEx, but can’t legally price package delivery below its cost.

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That supports the idea that criticism of Amazon’s USPS payments as just one front in Trump’s larger fight with Amazon’s owner, Jeff Bezos. Bezos also owns the Washington Post, which is among Trump’s favorite targets to slam as “fake news.” Some see Trump’s claims that Amazon is cheating the USPS, then, as an indirect attack on opposition media. That would be ironic, since the founding principle of universal postal service was increased freedom of information.

USPS’s biggest losses have been fueled not by Amazon, or even by the rise of ecommerce, but by the drastic decline in first-class letters and other light mail, thanks largely to the rise of e-mail. USPS has a monopoly over letter mail which is intended to compensate for requirements that it provide universal service even to remote or less populated parts of America. But first-class mail volume has plummeted by nearly half since its peak in 2000.

In a statement, Postmaster General and CEO Megan J. Brennan blamed growing losses not only on those technological changes, but also on “an inflexible, legistlatively mandated business model that limits our ability to generate sufficient revenue and imposes costs upon us that we cannot afford.”

Brennan was referring in part to a legislative mandate that USPS pre-fund retiree benefits, a requirement not shared by most private-sector companies, or even other federal employees. Lawmakers have also stopped some proposals that would have reduced USPS operating costs, including reducing deliveries from six days a week to five.

If it were a typical business, USPS could have made those needed changes years ago. That might have left Trump less able to use the Postal Service as a weapon in his broader crusade.

Cyber Saturday—As Blockchain Week Kicks Off, Remember The DAO

Good afternoon, Cyber Saturday readers.

In honor of “blockchain week,” which is kicking off in New York City, I’ve been thinking about the security of smart contracts, self-executing computer programs designed to encode business relationships. A smart contract might codify, for example, an agreement like this: If Justify, a racehorse, wins the Kentucky Derby, pay $10 in Bitcoin to some lucky fellow’s digital wallet. The code eliminates the need for a bookie.

Now imagine a future in which such contracts automate tasks once relegated to lawyers, pencil-pushers, and other intermediary parties. Blockchain boosters dream of a day when they can route around middlemen with these sorts of self-driving computer programs, thereby making markets more efficient, so the thinking goes. There’s a snag though: Smart contracts are software applications, and software applications have bugs.

Sometimes, as with The DAO, an ill-fated, decentralized venture capital fund built on Ethereum, a popular cryptocurrency network, those bugs can be ruinous. Hackers stole $50 million in cryptocurrency from the project in 2016 thanks to a simple “reentrancy” flaw. The bug allowed an attacker, or group of attackers, to continually withdraw money from the smart contract-powered organization until its coffers had been thoroughly pilfered.

Similar flubs abound in the field of cryptocurrency. Chris Wysopal, cofounder and chief technologist at Veracode, an application security shop bought by CA Technologies for $614 million in cash last year, gave a keynote talk at Collision conference in New Orleans earlier this month in which he provided an overview of the security challenges posed by smart contracts. “The blockchain is really secure, but the things that have to interact with it, those things aren’t secure,” Wysopal told the audience. “It’s probably one of the toughest problems right now” in security, he said.

Although I did not catch Wysopal’s talk in person (you can watch it here), I chatted with him afterward at B.B. King Blues Club and Grill and in between jazz sets at various bars along Frenchman Street. He said that if he were a thief, smart contracts are where he would focus the majority of his attention and energy today. Target the youngest projects with the worst quality assurance processes, the highest valuations, and the weakest defenses. It’s a recipe for success; in this world, baddies no longer have to worry about monetizing the data they steal. They can steal (virtual) money itself.

If you happen to be in New York for blockchain week, temper your enthusiasm with that alarum. It’s what the smartest folks will do.

Have a great weekend.

Robert Hackett

@rhhackett

[email protected]

Welcome to the Cyber Saturday edition of Data Sheet, Fortune’sdaily tech newsletter. Fortune reporter Robert Hackett here. You may reach Robert Hackett via Twitter, Cryptocat, Jabber (see OTR fingerprint on my about.me), PGP encrypted email (see public key on my Keybase.io), Wickr, Signal, or however you (securely) prefer. Feedback welcome.

Report: Apple and Pandora Join Spotify in Ending Promotion of R. Kelly Music

Apple Music and Pandora have removed certain songs by R. Kelly from promoted playlists, according to music news sites Pitchfork and The Blast, adding to the list of streaming music services that have made the hit artist’s music more difficult to find after allegations of sexual misconduct.

R. Kelly’s music no longer shows up in Apple Music’s ‘Best Slow Jams of the 90s, Vol. 1‘ and Vol. 2 playlists, Pitchfork reported. However, playlists titled ‘R. Kelly Essentials,’ ‘R. Kelly: Influences,’ and ‘Inspired by R. Kelly’ are still available.

Pandora did not confirm or deny that it was removing R. Kelly from playlists, however, the company said it will no longer “actively promote artists with certain demonstrable behavioral, ethical or criminal issues,” according to a statement. The music-streaming company has been working on updating its policies, including handling artist misconduct.

“We approach each of these scenarios on a case–by–case basis to ensure we address components true to Pandora’s principles while not overreaching and avoiding censorship,” Pandora said in the statement.

On Thursday, Spotify announced that it would no longer include Kelly’s music on its curated playlists, as part of a new policy.

“We are removing R. Kelly’s music from all Spotify owned and operated playlists and algorithmic recommendations such as Discover Weekly,” Spotify told Billboard. “His music will still be available on the service, but Spotify will not actively promote it.

“We don’t censor content because of an artist’s or creator’s behavior, but we want our editorial decisions — what we choose to program — to reflect our values. When an artist or creator does something that is especially harmful or hateful, it may affect the ways we work with or support that artist or creator.”

Apple Music’s removal of R. Kelly from playlists reportedly “pre-dates” Spotify’s recent similar decision, according to Pitchfork. Fortune contacted Apple for further information and will update as necessary.

R. Kelly has been accused of multiple counts of sexual misconduct dating back to the 1990s. He settled multiple lawsuits with women, and was acquitted by a jury on charges of possessing child pornography. Recently BuzzFeed and Rolling Stone have published pieces alleging abusive and controlling behavior.

Last month, members of the Time’s Up Women of Color committee joined the #MuteRKelly movement, and women including director Ava DuVernay and showrunner Shonda Rhimes called on women of color and companies—including Spotify, Apple Music, and Pandora—to boycott R. Kelly.

R. Kelly has denied the allegations made against him, providing the following statement to BuzzFeed following the Time’s Up call to #MuteRKelly:

Gadget Lab Podcast: Why Google’s Duplex Demo Didn’t Have Everyone at Hello

FEATURED-WIRED-Gear-logo.jpg

Google I/O, the company’s annual developer conference, is clearly no longer just about the newest version of Android. This year Google used the keynote stage to show off some of its advancements in artificial intelligence, including a demo of an eerily-human-like robot caller that can call the hair salon or a restaurant and make appointments on your behalf. We also learned more about Google’s vision for the future of visual search, saw glimpses of its new Material Design theme, and, as expected, learned more about Android P. But really, the bot-calling demo was the one that blew everyone away, and also happens to be the thing that is still the most fraught with unanswered questions.

Some notes: You can find all of our I/O coverage here, including this exclusive look at the new Google Lens, the questions Google still needs to answer about its Duplex technology, and the history of JOMO (AKA the Joy of Missing Out), as well as the research behind Google’s new features that encourage you to take breaks from technology.

Recommendations this week: Arielle recommends the Netflix series “Wild Wild Country,” Lauren suggests the new “Caliphate” podcast from The New York Times, and Mike is all about bike-sharing services this week.

Send the hosts feedback on their personal Twitter feeds. Arielle Pardes is @pardesoteric, Lauren Goode is @laurengoode, and Michael Calore is @snackfight. Bling the main hotline at @GadgetLab. Our theme song is by Solar Keys.

How to Listen

You can always listen to this week’s podcast through the audio player on this page, but if you want to subscribe for free to get every episode, here’s how:

If you’re on an iPhone or iPad, open the app called Podcasts, or just tap this link. You can also download an app like Overcast or Pocket Casts, and search for Gadget Lab. And in case you really need it, here’s the RSS feed.

If you use Android, you can find us in the Google Play Music app just by tapping here. You can also download an app like Pocket Casts or Radio Public, and search for Gadget Lab. And in case you really need it, here’s the RSS feed.

We’re also on Soundcloud, and every episode gets posted to wired.com as soon as it’s released. If you still can’t figure it out, or there’s another platform you use that we’re not on, let us know.

Dropbox tops estimates in first results since IPO

(Reuters) – File sharing and storage company Dropbox Inc (DBX.O) beat Wall Street expectations for quarterly results and topped estimates for paying subscribers in its first financial report as a publicly traded company.

FILE PHOTO: The Dropbox app logo seen on a mobile phone in this illustration photo October 16, 2017. REUTERS/Thomas White/Illustration/File Photo

However, the company’s shares, which had gained 10 percent this week ahead of the earnings, slipped 4 percent in extended trading on Thursday.

The San Francisco-based company said the number of paying subscribers surged 23.7 percent to 11.5 million at the end of March, topping analysts’ average estimate of 11.3 million, according to Thomson Reuters I/B/E/S.

The company, which started as a free service to share and store photos, music and other large files, has worked to build up its enterprise software offering.

Dropbox reported average revenue per user (ARPU) of $114.3 in the first quarter, beating analysts’ estimate of $110.

“(ARPU growth) does suggest Dropbox is having success converting individual paid users to business paid users,” D.A. Davidson analyst Rishi Jaluria said.

The company, which competes with Alphabet Inc’s (GOOGL.O) Google, Microsoft Corp (MSFT.O) and Amazon.com Inc (AMZN.O) as well as Box Inc (BOX.N), forecast current-quarter revenue in the range of $328 million and $331 million.

Analysts were expecting revenue of $324.9 million.

“Today’s earnings also bode well for existing investors that are still in their lock up period,” said Minal Hasan, investor at K2 Global, a Silicon Valley-based venture capital firm that invests in startup companies.

Dropbox’s quarterly loss widened to $465.5 million, as the company accounted for IPO-related expenses.

The company had a blockbuster debut on March 23 as investors bought into the biggest technology initial public offering in more than a year, with shares closing up more than 35 percent in their first day of trading.

On an adjusted basis, the company earned 8 cents per share, beating estimates of 5 cents.

Total revenue rose 28 percent to $316.3 million, above estimates of $309.2 million.

Reporting by Munsif Vengattil in Bengaluru; Editing by Sriraj Kalluvila

Google to Buy Startup Velostrata as It Builds Cloud Computing Business

Google plans to buy the small enterprise startup Velostrata as the search giant continues growing its cloud computing business.

Google said Wednesday that it would acquire Israel-based Velostrata, which specializes in helping companies move their internal corporate infrastructure to cloud providers. Terms of the Google-Velostrata deal were not disclosed, but Google (goog) said that Velostrata’s employees would join the company’s office in Tel Aviv.

Velostrata has 25 employees and has raised about $31.5 million since it debuted in 2014, according to deal-tracking service PitchBook.

When Velostrata first formed, it pitched its service as a way for companies to more efficiently manage their IT operations across both their internal data centers and public cloud providers like Amazon Web Services (amzn) and Microsoft’s (msft) Azure business unit.

Since then, Velostrata added Google and its cloud computing service as another company it will help businesses migrate their infrastructure to.

“We are proud to join forces and help pave the way for enterprise customers to transform their most demanding enterprise workloads on Google Cloud Platform,” Velostrata Issy Ben-Shaul said in a statement.

Now that Velostrata will be part of Google, it’s likely that the company will no longer offer services that help companies move to competing cloud computing services like AWS or Azure.

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“This acquisition, subject to closing conditions, will add to our broad portfolio of migration tools to support enterprises in their journey to the cloud,” Google Cloud vice president of engineering Eyal Manor said in a statement. “That way, businesses can simplify their onboarding process to Google Cloud Platform, and easily migrate workloads to Google Compute Engine.”

Facebook Undergoes a Major Internal Reorganization. Here’s What’s Changing

Under intense user and government scrutiny of over user privacy and election meddling, Facebook is reorganizing its product and engineering efforts into three buckets, according to a new report.

The new structure includes separate teams for the company’s apps, new platforms and infrastructure, and central product services.

The changes are intended partly to improve communication and create bigger teams dedicated to user privacy, tech news site Recode said in a report on Tuesday.

Here’s what is happening:

Family of apps

Leader: Chief product officer Chris Cox

What’s new? As the name suggests, this division includes Facebook’s core apps: Facebook, WhatsApp, and Messenger. Although Instagram is also part of the new team, it will continue to be managed by Instagram CEO Kevin Systrom. Chris Daniels, vice president of Facebook’s Internet.org, will take over WhatsApp (after the former CEO and cofounder Jan Koum departed), Stan Chudnovsky, previously the head of product for Messenger, will take over Messenger, and Will Cathcart, a longtime Facebooker who works on product, will head the Facebook team (which includes the not-yet-launched dating app, according to Recode).

While tech news site TechCrunch points out that this could mean less autonomy for Instagram and WhatsApp, this restructuring is reportedly aimed at improving communication between the executives managing core apps.

New platforms and infrastructure

Leader: Chief technology officer Mike Schroepfer

What’s new? This division focus on new products and technology including blockchain, artificial intelligence, augmented and virtual reality, and Workplace (a social network for work that competes with Slack), and privacy-focused product.

For users, privacy may be the most interesting aspect of the reshuffling. Another Recode report from Tuesday says that David Baser, a product director who was working on GDPR privacy policies, will head up a privacy product division of around 300 engineers and other product developers. Their first product may well be the “clear history” function, which would allow users to control and clear their Facebook browsing history, that Facebook founder and CEO Mark Zuckerberg announced last week at F8, Facebook’s developers conference.

Additionally, Erin Egan, Facebook’s chief privacy officer, will work closely with Baser to make sure these products work. Her team is expected to grow to 120 people from 40.

Central product services

Leader: Javier Olivan, who formerly ran Facebook’s growth team.

What’s new? This team will oversee other essential products including ads, security, and data/growth, according to Recode.

Fortune contacted Facebook for more information on the reorganization about the changes. We’ll update as necessary.

Google eases tech stress with app controls, table-booking assistant

MOUNTAIN VIEW, Calif.(Reuters) – Google on Tuesday showed how its virtual assistant can now call restaurants and salons to book appointments, navigating complex conversations, as the Alphabet Inc (GOOGL.O) unit acknowledged that a technological onslaught was leaving users frazzled and needing a cure.

Google CEO Sundar Pichai speaks on stage during the annual Google I/O developers conference in Mountain View, California, May 8, 2018. REUTERS/Stephen Lam

The demonstrations at Google I/O, an annual event for creators of Google-compatible products, showed how big technology companies are positioning themselves for a lucrative artificial intelligence revolution while grappling with heightened scrutiny about their societal influence.

Chief Executive Sundar Pichai and other officials said Google should find ways to reduce stress from technology and improve customers’ “digital well-being.”

“We can’t just be wide-eyed about the innovations technology creates,” he added.

Google showed how its email program can suggest sentences and how Google Assistant can call a salon or restaurant to make an appointment or reservation.

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A new tool in its Android software, which runs most of the world’s mobile phones, will notify users how much they are using apps and let them set limits for themselves and family members.

Google, Facebook Inc (FB.O), Amazon.com Inc (AMZN.O), Microsoft Corp (MSFT.O) and other technology leaders are vying to keep users in their apps to maintain booming businesses of selling ads, goods or online computing services.

Offloading tasks to virtual assistants to manage photos, emails and schedules is part of the companies’ remedy for decreasing screen time.

Shares of Alphabet closed at $1,058.59, down almost 0.1 percent.

Google and its rivals have faced unprecedented criticism from former employees and U.S. lawmakers over the last year.

Critics have urged the companies to halt the spread of misinformation and extremist propaganda, improve data privacy protections and play a greater role in combating app addiction. How artificial intelligence may replace human work or be infected with human prejudices is a growing concern.

Still, Google is infusing more services with artificial intelligence, which has become more powerful in recent years because of software breakthroughs and decreasing hardware costs.

Google Maps will make more dining suggestions by learning user habits and be able to pinpoint users’ locations by using smartphone cameras to analyze their surroundings, the company added.

LG Electronics Inc (066570.KS), Xiaomi Technology Co (IPO-XMGP.HK) and other smartphone makers will begin integrating artificial intelligence into devices so that users can pull up reviews for a piece of clothing by holding their cameras up to it.

Editing by Peter Henderson and Richard Chang

Drive.ai Launches a Self-Driving Car Service in Frisco, Texas

In the evolving geographic distribution of self-driving cars, the go-to getaway is Arizona, where good weather and minimal government interference make testing two-ton robots something like fun in the sun. But as with all such places, the more crowded it gets, the less people want to go there any more. Maybe that’s why Mountain View–based startup Drive.ai isn’t taking its robo-cars to the land of the Grand Canyon, but to the wilds of the Lone Star State.

Starting in July, the company will run a fleet of driverless vehicles around Frisco, Texas, a city of 164,000 people on the northern edge of the Dallas-Fort Worth metro area. Announced today, the six-month pilot—which will keep human safety operators behind the wheel, ready to grab control if the car gets confused or misbehaves—marks Drive.ai’s first large-scale effort to put people in its cars, and the first such deployment in Texas. Waymo has done some testing in Austin, but this service will provide regular rides to the public.

The Drive.ai setup will look like more like an airport shuttle than a taxi service. The company’s easily recognizable orange and blue Nissan NV200 vans will run only in a tightly geofenced area, along fixed routes.

Drive.ai hasn’t divulged much in the way of details, but says one such route will serve employees at an office park in the southern bit of the city, taking them between buildings and to a nearby stadium and apartment complex, at no charge. It will use fixed pickup and drop-off locations, so the cars don’t have to worry about finding a safe space to pull over.

“By choosing geofenced regions and working with partners, we can take advantage of self-driving cars’ strengths while diminishing their weaknesses,” says Andrew Ng, a member of Drive.ai’s board, and a leading artificial intelligence expert.

For the foreseeable future, this is how everyone will manage their fleets. Making a car that can handle any conceivable situation is just too hard; the world is too complex. By limiting a vehicle to fixed routes, or at least a limited area, you can be sure you’ve got fully updated maps, you can keep track of conditions like construction that might make things tricky, and you can stick to the simplest situations. As your technology proves itself and everyone starts to feel more confident, you can expand.

Drive.ai’s vans will use exterior screens to communicate with people on the street.

Drive.ai

Indeed, in later stages of this project, Drive.ai hopes to dump the human backup driver and fill the passenger seat with a human “chaperone,” to help guide passengers through the service. And, like just about every company working on autonomous operations, it will have ready-to-help humans sitting in a remote location, monitoring the vehicles and issuing instructions as needed.

Drive.ai stands out among the host of companies in this space for its consideration of how its vehicles talk to the world around them. Because, when you put a computer in charge, you lose the human ability to wave a pedestrian ahead, or make the eye contact that lets that cyclist know you see her.

“We need to be able to communicate in all directions, and we need to be able to show intention and have a conversation with the other players on the road,” Drive.ai co-founder and president Carol Reiley told WIRED back in 2016, when the company was starting to test with roof-mounted “billboards” that could display messages. For the Frisco pilot, the Nissan vans will have panels mounted on all sides to say things like “Waiting for you to cross,” “pulling over,” and “passengers entering.”

And now, maybe, “Welcome to Texas, home of the robo-revolution.”


Robo-Revolution

Snap names Amazon's Tim Stone as CFO

(Reuters) – Snapchat-owner Snap Inc (SNAP.N) said Tim Stone, an Amazon.com Inc (AMZN.O) veteran who had led the integration of Whole Foods acquisition, would replace Andrew Vollero as chief financial officer.

FILE PHOTO: The Snapchat messaging application is seen on a phone screen August 3, 2017. REUTERS/Thomas White/File Photo

Stone, 51, has been with Amazon since March 1998 and led the online giant’s physical stores until February 2018, according to a regulatory filing from Snap. (bit.ly/2JX36jy)

Stone will take charge on May 16, while Vollero will remain as an adviser until August 15.

“He (Vollero) has done an amazing job as Snap’s first CFO, building a strong team and helping to guide us through our transition to becoming a public company,” Snap Chief Executive Officer Evan Spiegel said.

Stone will have an annual salary of $500,000, according to the filing.

The appointment comes a week after Snap’s quarterly results failed to enthuse Wall Street. A recent redesign of its Snapchat messaging app had turned off some long-time fans and advertisers.

Snap’s shares were up nearly 1.6 percent at $10.91 in extended trading on Monday.

Reporting by Laharee Chatterjee and Munsif Vengattil in Bengaluru; Editing by Sriraj Kalluvila and Shounak Dasgupta