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Jury selection kicks off in Los Angeles tomorrow for a trial that both friends and foes of social media are saying could be existential for the social media industry—broadly defined to include Google’s YouTube as well as Meta Platforms and TikTok. The trial centers on a 19-year-old girl from Chico, Calif. who says her social media addiction led to depression and suicidal thoughts. It will be the first of thousands of claims brought by families who say the companies built products designed to be addictive and harmful to young people’s mental health.
It’s a big deal. The legal proceedings offer tech’s critics the best shot they’ve ever had at holding the companies accountable for the harm they’ve allegedly caused young people. If the tech firms lose, the cases could also establish a new legal precedent some say could make it too risky to build internet services.
This won’t be a simple process, however, so don’t expect a quick resolution. The trials comprise two main proceedings—state trials filed by families and federal trials filed by families as well as school districts, state attorneys general and Native American tribes. Meta CEO Mark Zuckerberg and Instagram head Adam Mosseri are both expected to testify in the first trial. Snap CEO Evan Spiegel was also expected to testify in the trial starting tomorrow but Snap settled the case, although the Snapchat owner remains a defendant in other cases.
Both the state and federal cases rest on a fairly novel legal theory, at least as applied to social media companies. Plaintiffs are arguing that the designs of the platforms themselves—including features like infinite scroll, autoplaying videos and targeted notifications—are defective and are causing harm to users. Courts could order changes to those features as part of their verdicts, which is what the school districts and state attorneys general are seeking. Some changes to social media platforms are rolling out already. Last week, days after settling the first trial, Snap announced that it would give parents more information on how their kids are using Snapchat. Earlier this month YouTube announced new time limit controls that parents can use to manage their children’s viewing.
I should clarify that most of the thousands of cases won’t go to trial. Instead, both the companies and the plaintiffs will watch what happens in the first few trials, known as bellwether trials. They’re intended to give both sides an idea of the merits of their legal claims and of how juries might respond, including how large the damages might be. If the tech companies lose and a precedent is established, the parties could resolve the thousands of pending cases via a global settlement.
That probably wouldn’t be cheap, although it’s difficult to know yet how much money could be at stake if the social media companies lose, lawyers involved in the case told me. The big wild cards include how a jury would determine the cost of a victim’s pain and suffering. In cases where a family’s child died by suicide and they blame it on the platforms, the case is essentially asking the jury to put a dollar value on a life, as one plaintiff’s lawyer put it. The largest-ever global settlement, with the tobacco industry, resulted in those companies agreeing to pay $206 billion over 25 years, as well as make other changes to their marketing practices.
Of course, big tech companies have deep pockets. What’s arguably more far-reaching about these cases is that the plaintiffs are aiming to circumvent social media companies’ main legal defense: Section 230, which social media companies have used successfully to moderate third-party content on their platforms without being held responsible for the content themselves. Critics of social media, including researchers and lawyers, say social media companies have used Section 230 to skirt responsibility for the impact of their platforms.
However, defenders of Section 230 warn that a plaintiff victory could be an “existential result” opening social media companies to new areas of liability, especially newer companies that can’t marshall the army of lawyers and resources big tech companies can.
“You might see things like infinite scroll on a timeline or news feed is considered a dangerous design,” said Jess Miers, an assistant professor at the University of Akron School of Law who previously worked at Google and the industry group Chamber of Progress. “If these types of designs or features are considered to be negligent or dangerous, you will more than likely see these social media services change in significant ways.”
For plaintiffs, of course, that’s the entire point.
Zoom’s New Jet Fuel
Zoom Communications was left for dead, as far as the stock market goes, a few years ago. Having captured seemingly all its potential growth during the pandemic, the stock rocketed and then plunged back to earth. Since 2022 it has mostly bounced around in the $70 to $80 a share range—until Monday, when it suddenly jumped 11% to just above $95. According to a Barron’s write-up of a research report by Baird Equity Research, Monday’s jump was due to Baird pointing out that Zoom holds shares in Anthropic from a few years ago—and they could be worth quite a lot.
Zoom invested in Anthropic’s 2023 Series C round, which raised $450 million at a valuation, according to PitchBook, of $4.65 billion. We don’t know how much Zoom put into the round, but its financial statements for the first half of 2023 show it contributed $51 million to strategic investments—very likely the Anthropic investment (as Baird reportedly noted). Fast-forward to today: Anthropic is now in talks to raise money at a $350 billion valuation. Its valuation seems likely to rise further if it goes public, as some have speculated it will.
It’s little wonder Baird put out a report: Given Anthropic’s soaring value since 2023, Zoom’s stake in it seems likely to be now worth at least a couple billion dollars. For a company with an enterprise value of just $20 billion, that’s nothing to sneeze at!—Martin Peers
In Other News
• Nvidia invested another $2 billion in AI cloud startup CoreWeave as part of a broader deal in which CoreWeave committed to adopt “multiple generations” of Nvidia chips, including the upcoming Rubin graphics processing units. The investment more than doubled Nvidia’s stake in CoreWeave to 11.5%, according to a securities filing.
• The EU has opened a formal investigation into Elon Musk’s X over how the social media service has integrated xAI’s Grok AI chatbot. The investigation comes amid an outcry after users were able to prompt Grok to generate sexualized images of real people on X, including minors. X is owned by xAI.
Check out our latest episode of TITV in which we discuss OpenAI’s premium pricing strategy for its advertising rollout.
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