The Social Reckoning

**Julia Alexander** (0:02)
The teens who are smarter than anybody working at these companies because they're teenagers and they understand technology better will find ways to get around it.

**Peter Hamby** (0:13)
Welcome to The Powers That Be Daily, Pucks podcast focused on the intersection of Wall Street, Washington, Silicon Valley, and Hollywood, and the players who run it all. I'm Peter Hamby.
It's Friday, August 28th. Today, I'm joined by Julia Alexander with a look at Meta's landmark legal settlement with Mark Zuckerberg's tech giant agreeing to pay billions of dollars in fines and change core features of Instagram and Facebook after being accused of harming teenagers and addicting young users. But as Julia explains, implementing these changes will be a lot harder than it seems. We also look at Kalshi, the prediction markets app getting into bed with the Athletic and by extension, The New York Times and how this sports integration will actually work. We'll discuss all of that and much more on today's episode of The Powers That Be.
Happy Friday everybody and welcome to The Powers That Be. I'm joined today by my colleague Julia Alexander. Meta agreed to settle with a bunch of US states this week for about $7 billion dollars over allegations that they were harming children, creating features that were addictive, and based on some of these settlement terms, it could really change the way that Americans and American youth use social media. I'm going to ask Julia if she thinks it's for the better. We're also going to discuss Kalshi, the very aggressive prediction markets platform, talking to The Athletic about some partnership. Julia, we'll get into that. But first, Julia Meta did not say that they did anything wrong as part of this settlement, but they are paying out billions of dollars. Meta, which obviously owns Facebook and Instagram, is going to make a slew of changes for teen users. They will interrupt endless scrolling. They'll impose two-hour daily time limits on Instagram and Facebook. They won't have the ability to get notifications during school hours. They won't be able to use these products between midnight and 6 AM. They will also limit features like beauty filters and like buttons, et cetera. I saw a lot of people on X basically saying, wow, can you apply these to adults too? This would be one of the greatest things. Anyway, I want you to take on this. They said if YouTube, TikTok and Snap also agree to these changes, they'll pay out even more money. So that's putting pressure on their rivals.
By the way, all of those companies are facing individual lawsuits and class action lawsuits that are reminding a lot of people of the tobacco legal wars of the 90s. What's your take on how this is going to affect how Americans use social media? I guess start with Teens.

**Julia Alexander** (2:59)
Yeah. Let me do the awkward ethical thing and say my husband works at Meta, but it has no influence over my thought because I'm an independent human.
What I will say is I think you can break this down into two separate categories. There's the category that impacts Meta, and then there's the category that impacts how the rest of us interact with our phones and social media. On the Meta side, there is the obvious question about how this impacts the ad business. Remember that the ad business is more important than ever, to the point that if you would like to go through past earnings calls, you can actually see the point where Susan Lee, the company's CFO has pushed Zuckerberg to say that he cares about advertisers, because he went for a while saying he did not care.
This company makes 98% of its revenue on ads. This is a segment that although Meta would never say we actively court and use with our advertising in terms of targeted ads is being targeted. They're about to say, listen, we're not going to target that. That's going to have an impact on the ad business. The impact on the ad business then may distract from Meta's platform shift.
This is a company that's going from social and still social media company to thinking about being an AI company. The comparison would be Microsoft and the antitrust suit back in the late 90s, early 2000s, that Bill Gates and everyone there basically says prevented them from becoming what Google became because they were so focused on paying the $100 billion, $100 million, I can't remember which one it is, lawsuit that the antitrust board brought against them that they lost out in that race. That's the Meta component. How we interact with our phones and social media is the second part. There's the thing that Meta's teams have basically pointed out which is in order for us to confirm that you are older than 18 or you're younger than 18, we'd need some way of verifiably confirming that. This gets into the question around what Apple and Google do at the operating system level. Do you implement an age gate where people upload driver's licenses or people upload IDs and basically say, this is how old I am and now Facebook or Meta and X and YouTube now have access to your government identification. This is an ongoing debate inside Congress and the Senate. As you know, it's a huge thing that people, like internet activists are fighting against. And now Meta's willingness to say like, we're willing to do it if the operators are willing to do it that pushes that into a potentially dangerous predicament. And that is why they're also saying like, if TikTok and YouTube now do it and we have to pay, we get to pay like $5.9 billion less if we get them to agree to it, which is huge for the company, then you get into a world where age gating, this really concerning topic around Washington, around Silicon Valley, around different parts of the kind of AI and social media and tech universes becomes a much more prominent threat. And so I think the Meta case is actually a domino effect for a much bigger situation.