Wow, that 2017, though. Quite a year. Let's grab a Juicero and take a moment to reflect on the utter dumpster fires that we've witnessed over the past 12 months.
No, we're not talking about the political scene, though that certainly factors in here somewhere. But even in times with a somewhat upward economic trajectory, there are those in the tech industry that seemed to have existed solely to be a cautionary tale to others.
Some of the companies previously on Deathwatch radar didn't survive long enough to even make final 2018 list. Pour out one for Radio Shack, which died even faster the second time around after what looked like a brave reboot. Others have been circling the drain for some time and are by this time old friends of the 'Watch, comforting in their continual plummet despite all other forces of nature. And some… well, some just halted and caught fire this year in a way that promises to provide years of Schadenfreude to come. Now, before we introduce the candidates, it's time for the patented Deathwatch disclaimer.
"Deathwatch" is not a prediction of actual corporate demise. Corporations, technologies, and the like rarely expire quickly or completely (take Radio Shack, for instance, which is getting yet another reboot). Most failing companies—and even many failed products—limp on in some way through acquisition, integration, inertia, or the eternal zombie life of bankruptcy protection.
Instead, Deathwatch is a way of recognizing those entities in a different sort of mortal peril: technical, economic, and/or cultural irrelevance. To be a candidate for the Deathwatch, a company or product division of a company should have experienced at least one of the following:
We even have a special category for other sorts of things that we believe should be consigned to /dev/null in the following year that may not fit any of these above requirements. Call them "dishonorable mentions."
Last year's smoking dumpsters
To quickly catch up with the companies that we picked as least likely to succeed in 2017:
Of course, we're also adding a couple of big new names to the list this year. Many people suggested we put "the Internet" on the list because of the FCC's net neutrality rule reversal, but we're not ready to go down that road yet. Besides, there are so many other burning wrecks at every turn. So, without further adieu...here is your 2018 Deathwatch parade of shame.
2017 has been absolutely brutal for Uber. A year ago, the company's prospects looked good. It dominated ride-sharing in the United States and had strong positions around the world. It had recently acquired hot ride-sharing startup Otto and was even working on flying cars.
But over the last year, Uber has faced a string of embarrassing scandals and setbacks. Waymo sued Uber, arguing that Otto co-founder Anthony Levandowski had stolen secrets from Waymo—where he previously worked—and shared them with Uber engineers. The New York Times reported that the Uber app had a secret function called "Greyball" designed to mislead municipal officials and evade regulation. That triggered a federal criminal investigation—one of three Uber has faced in 2017. And a former Uber engineer named Susan Fowler wrote a bombshell Medium post depicting Uber as a company with rampant sexual harassment problems (a depiction that would be confirmed in an independent investigation by former Attorney General Eric Holder).
All of this was too much for Uber's board, which successfully pressured founder, CEO, and alleged world-class Wii Sports tennis player Travis Kalanick to resign in June. Kalanick was replaced by former Expedia CEO Dara Khosrowshahi, but months of turmoil have left Uber with a depleted corporate suite and a demoralized workforce.
None of the above is even Uber's biggest problem: the company is losing billions of dollars a year, with no clear strategy for getting to profitability. Uber lost $2.8 billion in 2016 and will lose even more than that in 2017. Uber had $6.6 billion cash on hand in mid-2017—money that might not last much beyond the end of 2018.
Uber faces two big challenges in 2018. The company needs to find a way to stem its losses and get on the path to profitability before investors get frustrated and close their checkbooks. At the same time, it needs to deal with the looming threat from driverless taxi services. Waymo has said the company plans to launch such a service in the Phoenix area within months. GM's Cruise has said it is "quarters, not years" away from reaching full autonomy.
With no drivers, a fully autonomous taxi service could be dramatically cheaper than human-driven rides. So Uber needs to get its own driverless car technology ready as quickly as possible. With a distracted executive team and the looming Waymo lawsuit, that won't be easy.
How could Twitter possibly be on Deathwatch? It has never been more relevant! The president of the United States is practically using Twitter as his official channel of rage against the world, offering a much less opaque view of the White House than journalists can get from the current press secretary. Plus, now, extra characters! And streaming football!
I love Twitter, because I absolutely need a full cup of rage before I can start my day—and all I need is five minutes in the morning on my smartphone to get a full daily allowance. But not everyone has a taste for bile like I do. And all that anger doesn't appear to be improving Twitter's bottom line all that much.
Last year, Sam Machkovech wrote about the service in Deathwatch:
Alas, Twitter is still a money-losing concern. In 2016, it lost a mere $456.9 million, and its losses have continued in 2017 (though at a slightly less hemorrhagic pace). Still, on paper, the company is burning through the equivalent of a third of its cash on hand per year. And profitability (or an acquisition) is nowhere in sight.
Money isn't everything, but Twitter has a bigger problem that the company has only begun to deal with—one that it may never successfully address because of how it cuts to the core of what Twitter is. The company is still dealing with all forms of social media toxicity, and it's still reeling from the 2016 elections' fallout. Just this month, the company started enforcing new rules aimed at squelching hate speech. In October, its executives promised to end revenge porn posts. But it's still perfectly OK to post hate speech if you happen to be a notable political figure.
Twitter is also dealing with greater scrutiny from everywhere because of its popularity as a platform for dezinformatsiya. Co-founder and CEO Jack Dorsey even retweeted a Russian troll's Twitter post, inadvertently assisting a Russian influence campaign by amplifying the account and raising its visibility.
Twitter execs have acknowledged how badly it has been used by bots and trolls of all stripes, and the company promises changes. "Over the coming weeks and months, we’ll be rolling out several changes to the actions we take when we detect spammy or suspicious activity," a company spokesperson announced in a September blog post. Twitter's filters now "catch more than 3.2 million suspicious accounts globally per week," the company claims—a number double what Twitter processed in the run-up to the 2016 election (lessons learned!). The company also banned promoted "tweets" by Russian state-owned media outlets RT and Sputnik after taking almost a year to digest a US intelligence community assessment that the two were part of a broad campaign by Russia to influence the US presidential election.
The good news (or bad news, depending on how you look at it) is that Twitter wasn't alone. Facebook, Instagram, and other social media platforms have all been used as part of ongoing information operations and disinformation campaigns. Facebook was used to target divisive advertisements displayed based on some pretty ugly demographic data, and that service was even used by Russian provocateurs to incite "grass roots" protests.
Social media has been increasingly more focused on placing its users into increasingly customized boxes. The result is that we're all experiencing a different reality—different news, different views, different everything. This is not new in and of itself. But up until now, Facebook and Twitter have had the safe harbor of being "platforms" and not media companies. If anything, the fallout of the past year is going to undermine and eventually destroy that distinction, and Twitter, Facebook, et al will have to acknowledge they are media companies.
Facebook is in a better position to deal with this. Twitter, not so much. Extra characters aren't going to solve the problem.
The tale of Faraday Future looks ever more like one of those periodic lessons about the dangers of hubris and corporate excess. It was going to out-Tesla Tesla with a do-it-all electric vehicle for the one percent, the self-driving FF91 SUV. It brought in a head designer from BMW and another executive that once ran the Ferrari F1 team, all backed by the supposedly deep pockets of Jia Yueting. But rather than keep its head down and get on with the business of developing a really great car, Faraday Future got cocky.
Its big public reveal was at CES in 2016. But the car we saw that night was a complete flight of fancy called the FF Zero 1. Here's the thing: I have a well-known soft-spot for the 200mph electric hypercar, but if you promise you're going to show me a "Tesla-killer"—Faraday Future's words, not mine—then you better deliver. More big announcements followed, none of them about the car itself. First, a massive new factory in Nevada. Then a second, north of San Francisco. Next, it partnered with a Formula E racing team, promising tech-transfer benefits for the still-unseen FF91.
Meanwhile, dark clouds were already swirling around some of Yueting's other business dealings, and it wasn't long before Faraday's future started to look decidedly shaky. When the FF91 finally took a bow in January, it underwhelmed us. Others were less impressed—Alex Roy notably compared it to the Homer, then blanched at the proposed price: $290,000. There were stories about the design and engineering team being diverted to work on EVs for other projects funded by Yueting.
By this summer factory plans had been scaled way back. In the fall, staff began to hemorrhage. Here at year's end, things look grim for Faraday. The Formula E partnership is no more. There are no plans for a flashy event at CES, just a few short weeks away. And we're at the stage where long-form articles are being written—Ryan Felton's and Sean O'Kane's efforts are worth your time if the story of Faraday Future's unraveling has piqued your interest. But don't expect the company to die quietly—after rumors of a $900 million bailout by Tata went nowhere, yesterday we learned that Yueting claims to have just raised $1 billion.
Another Jia Yueting company, LeEco, has also been a spectacular failure in 2017. The electronics company tried to break into the US market making all sorts of promises, most of which have been canceled or walked back in an embarrassing, public fashion. We're starting to see a pattern here.
The core of Yueting's empire is Le.com, one of the largest online video companies in China. The company's setup is a lot like Alphabet/Google, where massive cash flow from one business—being the "Netflix" of China in Le.com's case and being the Internet's largest advertiser in Google's case—is used to fund expansions in other areas. LeTV is the video service, and there's also a film studio, Le Vision Pictures, which created the Matt Damon vehicle The Great Wall. LeMusic offers music videos, songs, radio, and live concerts. LeRan Investment Management is a private equity fund. LeVR invests in VR technology. If you want to buy any of this stuff, you do it through LeMall, an online shopping platform. There are a lot more subsidiaries, but you get the idea.
LeEco is the electronics wing of this Chinese conglomerate, and it regularly releases smartphones, TVs, and other devices in China. LeEco has been desperate to break into the US market, and it started popping up on US radars when it announced in 2016 it was merging with TV maker Vizio for $2 billion dollars. It bought land for a Silicon Valley headquarters from Yahoo for $250 million, saying it would build an "EcoCity" that would eventually house 12,000 employees. In October 2016, the company formally announced itself to US consumers with a splashy launch event. It flew out tons of tech journalists to an event in San Francisco, where it announced two Android-powered smartphones, a line of 4K smart TVs, a set-top box, an online video store, VR goggles, a "smart bike," and a self-driving concept car were all coming to the US market.
Then LeEco started to collapse. Just a few days after the big launch event, Yueting sent out an internal memo admitting LeEco had bit off more than it could chew. The CEO said his company had "over-extended in global strategy" and that "capital and resources were in fact limited." The $2 billion deal with Vizio was cancelled. LeEco refused to pay a $100 million buyer termination fee to Vizio, leading to a lawsuit. The lawsuit also alleges LeEco executives lied about the company's financials and that the purchase was partly a scheme from LeEco to collect information on Vizio's customers. LeEco was forced to sell the Silicon Valley land in order to pay debts, and 85 percent of the US workforce was fired. Yueting was forced to cede control of LeEco, and a few months later a court froze $182 million of Yueting's personal assets after missing loan payments.
Is anything left of LeEco's US wing today? In September, the company's US website was down for a whole week, and as of this writing, it still fails to load any images at all. After firing most of the staff, a CNBC report claimed the remaining 60 people at the company's US wing would be tasked with "encouraging Chinese-American consumers to watch LeEco's Chinese content library." With such a large backing in China, it's hard to say whether or not the whole "Le" conglomerate will go belly-up, but the US plans certainly seem dead.
It's not a company, but it's on deathwatch anyway. Ajit Pai's Federal Communications Commission ended the year by repealing net neutrality rules that prohibit ISPs from blocking, throttling, or prioritizing Internet services in exchange for payment.
Net neutrality has been an important policy for both Republican and Democratic FCC chairs, going back to Bush-era FCC actions in 2005 against a DSL provider that blocked Voice over Internet Protocol phone calls and in 2008 against Comcast after the cable company throttled BitTorrent. Strong rules against blocking, throttling, and paid prioritization were imposed under Obama, but Pai's repeal will allow ISPs to block, throttle, and prioritize as long as they disclose it publicly.
State attorneys general plan to sue the FCC in an attempt to reinstate the rules, and Democratic lawmakers are trying to reverse the repeal. But while a Republican net neutrality proposal would outlaw blocking and throttling, the two parties don't appear close to a compromise.
The rules will officially die 60 days after the repeal order is published in the Federal Register, which could happen in January. Barring any changes, net neutrality rules and several related consumer protections won't exist in the US throughout the rest of 2018 and beyond.
Deathwatch hall-of-famer HTC is somehow still a solvent company in 2017. This year we saw the company get a lot more solvent by selling a big chunk of its phone division to Google for $1.1 billion. Google and HTC collaborated on the Pixel 1 and Pixel 2 smartphone (but not the bigger, more flagship-y Pixel 2 XL), and the deal basically saw Google pay to bring this team in-house (it accounted for about 2,000 people). Of HTC's 10,000 strong workforce, these employees reportedly represent about half of HTC's phone R&D team.
HTC usually posts a net loss of about $75 million per quarter, so Google's $1.1 billion payout will let HTC burn through cash for about 3.5 years at the current rate. What will the company's future look like, though? No one ever claimed the Pixels were best sellers, but with the loss of Google as a customer, HTC will have even less business in the future. The company says it will continue to sell smartphones, but we can't imagine the loss of 2,000 employees won't have some effect on the phone division.
This year, HTC's revenue continued to plummet, with January to November revenue down 19 percent from the same time period last year. The company's flagship smartphone, the HTC U11, launched in June and seemed way behind the competition, as it was the only 2017 flagship that didn't adopt a modern, slim bezel design. HTC finally got on the slim-bezel train with its second half of 2017 flagship, the HTC U11 Plus, but the company chose to not launch that product in the US.
HTC also has a VR division, where it created the HTC Vive in partnership with Valve. While the Vive is HTC branded, and HTC describes the product as a "collaboration" with Valve, it doesn't seem like HTC actually owns any of the technology behind the Vive. The "lighthouse" tracking technology was created by Valve, and Valve is giving the technology away for free. The displays inside the Vive are made by Samsung, and the lenses were developed by Valve. Valve is doing lots of work to offer all this technology to anyone that wants to build a SteamVR headset, all of which makes Valve and the SteamVR platform less reliant on HTC. Companies are signing up, too—LG has a prototype in the works, and with Windows Mixed Reality compatibility, PC companies like Asus and Acer are making SteamVR headsets, too.
HTC did launch "Vive Studios," a "development and publishing initiative" for VR content, but we haven't heard a peep from HTC about a followup to the Vive. The company was originally going to release a standalone VR headset on Google's Daydream VR platform, but plans for that were canceled. The company showed off a standalone headset called the "Vive Focus," which is coming to China in 2018, but there is nothing official about a wider launch.
Meanwhile, its closest competitor, Facebook's Oculus, has announced a whole roadmap of headsets. There's the $199 Oculus Go, a standalone VR headset that is shipping in early 2018. Then there's the next generation "Santa Cruz" prototype, which uses "inside-out" tracking, meaning you get room-scale tracking without needing to set up clunky tracking boxes around the room. Oculus is also a technology partner with Samsung, which is steadily pumping out new versions of the smartphone-powered Gear VR. Both the Vive and the Oculus Rift have seen a price cut this year, but Oculus' bucketloads of Facebook money allows it to aggressively cut prices and buy market share. The Rift is available with touch controllers for $399, making it $200 cheaper than the Vive.
A report from Bloomberg said the company was considering selling off the Vive unit. HTC reorganized the Vive unit into a wholly owned subsidiary of HTC, which would make a sale or spin-off easier. It's unclear if a split is still on the table after the Google deal, though. For now, HTC has the cash to survive, but can it build a viable future with Google's money?
The piranha tank that is the music and audio streaming business appears poised to claim yet another victim: Germany-based SoundCloud. The company that made a name for itself as a way for just about anyone to push streamable content to the world scrubbed 40 percent of its workforce in June as executives struggled to create a business model for the service that actually made money (apparently, recordings of Comcast customer service calls do not generate much by way of revenue). Morale was so low, employees were secretly using Spotify.
SoundCloud has been running on the edge for some time, having never achieved profitability and subsisting largely on cash infusions from investors (including Twitter) and credit lines to keep the wolves at bay. In August, the company had to make an emergency ask to investors to dilute their stakes in SoundCloud by nearly half in order to get an emergency cash infusion. In exchange for this act of grace, SoundCloud kicked its co-founder Alex Ljung upstairs to chairman and brought in professional help—in the form of new CEO Kerry Trainor, late of Vimeo.
Trainor is steering SoundCloud out of direct competition with Spotify and Apple, moving toward a model that extracts money from the supply side (charging creators for tools to publish their content) sort of like a Vimeo for sound. The arrows have been heading in the right direction on the charts, but the question is whether they'll push into the black (or whether somebody will buy SoundCloud) before the money runs out.
Patreon, the creator-funding service that has fueled a renaissance in content creation of all sorts over the past years—giving webcomic makers, independent writers, and other creatives a way to mine a steady and reliable income from their fans—has generally had a good reputation amongst both the artists and their patrons. But the company created a dumpster fire this fall with a stunt that enraged its core customers. It wasn't a big enough dumpster fire to earn a Deathwatch designation, but it was certainly large enough to get notice.
In early December, Patreon announced that the fee model would change, slapping an additional charge on contributors up-front before taking a cut from artists. This resulted in a revolt by creators and patrons alike—particularly among the creators who are Patreon's core customers, who were angered that the company acted without consulting them. There's no telling how many creators lost income as fans pulled their monthly contributions because of the pending fee change, which would have tagged more onto the recurring charges on their credit cards.
Patreon executives soon backed away from the new fee scheme, apologizing.
But the failure to read the crowdfunding could not have come at a worse time. That other crowdfunding company, Kickstarter, launched a competing service to Patreon called Drip in November. We'll be keeping half an eye on Patreon to see how this all plays out.
Bitcoin may or may not be a bubble. But Initial Coin Offerings—the rush to cash in on Bitcoin's coattails with other blockchain-based offerings—has already hit peak insanity, and the results are Schadenfreude-worthy. Some will survive, some will thrive. But many will be toast by the end of 2018, particularly as governments move to regulate (or outright ban) cryptocurrency trading.
In part, that's because of the infrastructure of the markets created for them—they're so immature and unstable that somebody could, say, lock vast sums of ethereum down by deleting one "wallet." But it's also because these markets are now getting much closer regulatory (and legal) attention thanks to bitcoin's insane rise.