By Bloomberg
The founders of Instagram are leaving Facebook Inc. after growing tensions with Chief Executive Officer Mark Zuckerberg over the direction of the photo-sharing app, people familiar with the matter said. The stock dropped 2 percent in pre-market trading Tuesday.
Kevin Systrom and Mike Krieger, who have been at the company since Instagram’s acquisition by Facebook in 2012, had been able to keep the brand and product independent while relying on Facebook’s infrastructure and resources to grow. Lately, they were frustrated with an uptick in day-to-day involvement by Zuckerberg, who has become more reliant on Instagram in planning for Facebook’s future, said the people, who asked not to be identified sharing internal details.
Without the founders around, Instagram is likely to become more tightly integrated with Facebook, making it more of a product division within the larger company than an independent operation, the people said.
For years, Systrom and Krieger were able to amicably resist certain Facebook product initiatives that they felt went against their vision, while leaning on Facebook for resources, infrastructure and engineering talent. A new leader may not be able to keep the same balance, or may be more willing to make changes that help the overall company at the expense of some of Instagram’s unique qualities.
The New York Times earlier reported Systrom and Krieger’s departure. The founders confirmed their decision in a blog post, although Facebook didn’t have a comment on the tension.
“Kevin and Mike are extraordinary product leaders and Instagram reflects their combined creative talents,” Zuckerberg said in a statement. “I’ve learned a lot working with them for the past six years and have really enjoyed it.”
Krieger and Systrom built Instagram and sold it to Facebook for $715 million six years ago. When the deal was announced, the company had only 13 employees and 30 million registered users. Now more than 1 billion people use the app monthly, and it is the main source of advertising revenue for Facebook outside the social network’s main news feed. A Bloomberg Intelligence analysis in June said Instagram is worth more than $100 billion.
“We’re planning on taking some time off to explore our curiosity and creativity again,” Systrom said in a statement on the Instagram blog. “Building new things requires that we step back, understand what inspires us and match that with what the world needs; that’s what we plan to do.”
While Facebook has weathered scandals on privacy, fake news and election interference, Instagram’s brand has remained mostly untarnished, and continued to quickly add users. With more than 2.2 billion users, Facebook is running out of people in the world to sign up for its social network, and can only push so many advertisements into its news feed. That means it has become increasingly dependent on the standalone photo-sharing app for its future.
Instagram attracts a younger cohort of users who are critical to Facebook’s growth. Facebook users also have been flocking to Instagram as an escape, tired of the political bickering and privacy scandals that plague the parent company. Users averaged 53 minutes a day on Instagram in June, just five minutes less than on Facebook, according to Android data from analytics company SimilarWeb.
Instagram is on track to provide Facebook with $20 billion in revenue by 2020, about a quarter of Facebook’s total, Ken Sena, an analyst at Wells Fargo Securities, wrote to investors earlier this year.
The company recently launched Facebook Watch, a television-like platform that it’s spent hundreds of millions of dollars on, mostly for content. That was followed by the rollout of Instagram’s IGTV, an app that allows anyone to produce and post longer-form videos. Instagram has a more natural relationship with influencers, who have built up huge followings on the platform, so it hasn’t had to pay for them to use the new feature.
In a July earnings call, company executives explained that revenue growth would slow in the coming years, and that Facebook would have to spend more to expand. That announcement caused the biggest one-day stock market wipeout in American history. Menlo Park, California-based Facebook is still a drag on technology stocks, which overall have propelled the U.S. stock market to record highs. FAANG shares — for Facebook, Apple, Amazon, Netflix and Google — soared about 58 percent last year.
Facebook shares are down more than 6 percent this year after rising in every one of the previous five years. The Instagram departures may put further pressure on the stock.
The company has started mentioning Instagram more frequently on its earnings calls and taking credit for its success. In the most recent call, Zuckerberg explained that Instagram grew twice as fast being part of Facebook as it could have on its own, a statement that many Instagram insiders felt was unnecessary and unprovable.
The departure of Instagram’s founders comes just weeks after Facebook decided to bring the photo app’s chief operating officer, Marne Levine, back to Facebook to become its global head of business development. While at Instagram, Levine had helped maintain a harmonious relationship with the parent company. Nicole Jackson Colaco, Instagram’s head of public policy, also left earlier this year.
Adam Mosseri, who formerly ran Facebook’s news feed, was brought to Instagram to be head of product earlier this year. He’s the most likely successor for the founders, people familiar with the matter have said, though Facebook declined to comment on who might take over.
In the past year or so, Facebook has lost several top executives at its biggest acquired properties. Brian Acton and Jan Koum, the founders of WhatsApp, announced their departures after disagreements with Zuckerberg over the messaging application’s business model. Chris Daniels, an executive close with Zuckerberg who formerly ran the troubled Internet.org project to connect emerging markets to the internet, replaced them at the app.
Since the WhatsApp shuffle, Instagram employees became nervous about something similar happening to their group, according to people familiar with the matter.

By Bloomberg
Even for Chinese authorities, who have long tried to limit the influence of foreign media and ideas, last week marked an escalation. In the span of a few days, authorities blocked access to Twitch, the video-game live-streaming platform owned by Amazon.com Inc.; ordered a purge of foreign content from school textbooks; and proposed restricting foreign programming — especially current-events shows — from television and online streaming sites.
One might take the clampdown as yet more evidence of the government’s hold over what Chinese can see and read. In fact, such restrictions are only further dividing China into a society of information haves and have-nots — of cosmopolitans and everyone else. Chinese with money, especially in cities, can circumvent official controls via technology and travel. Meanwhile, rural and less-affluent Chinese are left to consume what censors deem appropriate. It’s a chronic condition that underlines existing economic and social divisions, and it’s sure to get worse.
The urban-rural divide has been a source of social and political tension throughout Chinese history. That’s not news to the current government, which has recently doubled down on efforts to spur rural growth. Yet by almost any measure, the divide persists. According to a recent working paper from the International Monetary Fund, income inequality has widened more in China than in any other developing region since 1990. Among the contributing factors are a lack of educational opportunities in rural China and the resulting lower incomes. For more than a decade, average disposable incomes in cities have been more than double those enjoyed in the countryside.
A yawning digital divide only exacerbates the problem. According to the government, the population of Chinese internet users swelled to 802 million in the summer of 2018. As impressive as that number sounds, it leaves out almost two in every five Chinese, for an internet penetration rate of only 57.7 percent. That’s well behind rates in most G-20 countries and far behind the government’s own aspirations.
This plays out in ways that are more and less obvious. For example, the 42.3 percent of Chinese who aren’t connected to the internet are subjected to the most stringent levels of censorship that China exacts. Traditional media — films, television, radio, newspapers and books (including textbooks) — are strictly vetted for messages that don’t conform to the government’s core priorities.
The world of information expands greatly when a citizen can afford to purchase a smartphone — even one that’s subject to China’s savvy and evolving online censorship systems. The ceiling rises even further as incomes grow. China’s university campuses, for instance, have long been hubs for the piracy of music, films and television. If you want to watch “Crazy Rich Asians” — a movie that hasn’t been released in China — on your phone, the quickest way is to ask a college student for directions to the nearest pirate streaming site.
Meanwhile, wealthier Chinese can afford to set up virtual private networks [VPNs] and other means of leaping China’s internet controls (China’s announced spring 2018 crackdown on VPNs hasn’t been implemented fully). Decoder boxes that evade censorship and copyright controls are increasingly popular. Foreign visitors to China (including myself) are often surprised to find that twentysomething Chinese are more up-to-date on U.S. films and television shows than many young Americans.
Wealth also provides access to information beyond China. Over the last 40 years, 5.2 million Chinese have studied in overseas educational institutions, using uncensored textbooks and with access to an uncensored internet. That’s a small percentage of China’s population, and many of them remain overseas. But those who return form a kind of information elite.
They’re also far from alone in developing a cosmopolitan outlook. In 2017, Chinese tourists took 129 million overseas trips, making China the largest source of overseas travel in the world. Shopping, beachgoing, and sightseeing — not information evasion — motivate most of these journeys. Nonetheless, exposure to places beyond China’s borders only further widens the gap between China’s information haves and have-nots.
For now, economic growth, upward mobility and nationalism have blunted discontent among China’s elites about increasing censorship, while a desire to join their ranks has taken the edge off rural discontent. Long-term, however, the information gap only serves to worsen an income gap that remains among China’s most serious and chronic problems. If China is really serious about becoming an information economy, it’s going to have to let all of its citizens see the same information.

By Bloomberg
As impending U.S. sanctions squeeze Iranian oil supplies, top OPEC member Saudi Arabia is changing its own crude diet to meet customer demand for alternative cargoes.
The trading arm of state-run producer Saudi Aramco is said to be offering an ultra-light oil known as Khuff condensate, a rarely traded grade that’s typically processed in the nation’s domestic refineries. To free up this more valuable supply for export, the Middle East country is diverting its Extra Light crude to units that split it into raw materials for petrochemicals and fuels.
Saudi Khuff supplies are entering the market at a time of growing demand for condensate, as operators of purpose-built splitters in countries such as South Korea and Japan scramble for alternative feedstock following a halt in purchases of Iran’s South Pars variety. The countries have turned to cargoes from Norway and the U.S., as well as the oil-product known as naphtha, to make up for the shortfall.
Spot supplies of Khuff are valued at about $2 a barrel over the official selling price for Arab Extra Light crude for the month of October, according to a Bloomberg survey of three traders who participate in the market. Unlike crude exports from the kingdom, condensates can be traded in the spot market and come without destination restrictions.
While Aramco sells most of its output via long-term contracts, its trading unit is increasingly leveraging the parent’s global network in procurement and refining. It’s dealing in non-Saudi crude, and made a sale of U.S. Mars oil to Taiwan’s Formosa Petrochemical Corp. in July this year. It’s also leaning on domestic refining operations to absorb restricted barrels in order to cash in on demand for more valuable and freely traded grades.
Its strategy is playing out just as the Organization of Petroleum Exporting Countries rebuffs demands from U.S. President Donald Trump that it take action to reduce prices. The group and its allies signaled less urgency and stopped short of promising specific extra volumes of crude, saying output would be boosted only if customers requested it.

By Bloomberg
Nike Inc.’s controversial ad campaign starring Colin Kaepernick debuted three days after the end of the company’s first quarter, but that didn’t stop executives from discussing the impact of the campaign during a first-quarter earnings call.
“We feel very good and proud of the work that we’re doing,” Chief Executive Mark Parker said. His comments were some of his first public remarks on the campaign, and he didn’t mention Kaepernick by name. “It’s driving a real uptick in traffic and engagement, both socially and commercially.”
Nike reported mixed results Tuesday, and shares dropped as much as 4.6 percent in after-hours trading. The company fell short of consensus estimates on gross margin and some overseas revenue, while overall revenue posted double-digit growth to $9.9 billion. North American sales, which had stalled in recent years, grew 6 percent to $4.14 billion.
Nike’s first quarter ended Aug. 31, so the underlying numbers don’t include any fallout from the Kaepernick advertisement, which went public on Sept. 3. Shares dipped following the ad’s release, but Nike quickly erased those losses. Last week shares traded at an all-time high $86.04.
The campaign drew wide praise from Wall Street analysts, who saw the the ad as a clever way to cater to Nike’s main U.S. customers — young, diverse city-dwellers who are more likely to agree with Kaepernick’s position on police brutality and racism in America.
Research from Edison Trends, which scans receipt data from more than 200 online retailers (including Nike.com) also suggests that the company’s online sales have been tracking ahead of last year in the new quarter.
The ad campaign also drew an outpouring of support, both from the professional athlete community and from other consumers. Actress Jenifer Lewis wore a Nike sweatshirt on the red carpet at the Emmy Awards and praised both Kaepernick and the company.
Kaepernick, 30, hasn’t played in the NFL since 2016. He’s currently suing the league for collusion.

By Bloomberg
One of the most renowned voices in the world of meat production says there’s a battle taking place for the future of the livestock industry.
On the one hand, there are people including Tom Hayes, the outgoing chief executive officer of Tyson Foods Inc., who represents a side of the meat industry that may be considered more “progressive,” according to Temple Grandin, a professor of animal science at Colorado State University. Hayes and others are working to change livestock production to account more for animal welfare.
On the other side are veterans of the industry, Grandin said. They have produced meat for decades with time-tested methods and don’t see why things have to change. Some feel that their integrity is being questioned when ideas for new methods are discussed, she said Monday at a press briefing at the Women in Agribusiness Summit in Denver.
Who will prevail? That may be partially driven by consumers, Grandin said.
If animal science had rock stars, Grandin would be Bob Dylan. In her four decades in the industry, she developed innovative equipment and analysis techniques that redesigned slaughterhouses to reduce stress on animals. She worked with Cargill Inc. and other major meat producers and helped manage supplies for buyers including McDonald’s Corp. She has written bestsellers and was named one of Time magazine’s 100 most-influential people in 2010. Also an autism advocate, Grandin was the subject of a 2010 biopic that starred Claire Danes.
Meat production in the U.S. may go the way of beer, Grandin said, referring to the thriving microbrewery industry in Fort Collins, where Colorado State University is based. Niche markets, such as pasture-raised chickens, will become more prominent and expand alongside large-scale commercial operations.
“What’s going to drive things in the future is going to be that consumers will drive buyers,” she said, citing giant meat purchasers such fast-food companies.
Changing consumer tastes are starting to transform traditional commodity meat production rapidly as more people express concerns over the environment, animal welfare and healthy eating.
Some of the largest food companies have taken steps to meet those demands. McDonald’s, one of the world’s biggest buyers of beef, plans to source more than 20 million of its Angus burgers in Canada over the next year from farms and ranches that have been certified sustainable. Tyson Foods, the top U.S. meat company, bought organic chicken producer Tecumseh Poultry earlier this year. Alternatives to meat, whether from plants or grown in labs, have emerged as hot trends.
“There’s a fight going on between the people that know we’ve got to move the industry forward and the people that just are living in the box,” Grandin said. “The industry’s got to let the more progressive people win, or they’re going to be in trouble.”