Good morning. When the Erin Brockovich-style movie is made about the lawsuits that reined in the social media companies, you can bet that one of the dramatic moments will be the expressions of shock and disbelief on the faces of Meta’s lawyers and executives as the verdict is read aloud.
Sure, they’ll be upset at losing the case. But the scene’s real poignancy will come from their sudden realization of how completely wrong their assumptions have been about the public’s attitude towards their products. Meta could have settled this case, as Snapchat and TikTok did. Instead, Meta (along with YouTube) decided to go to trial, no doubt convinced that its 3.6 billion daily users and $1.5 trillion market cap were proof enough that people love them and that a jury would naturally side with the company. “If people feel like they’re not having a good experience, why would they keep using the product?” Zuckerberg responded to a question during the trial.
In two back-to-back courtroom losses this week, Meta has been slapped in the face with a harsh reality check: Billions of people may use social media every day, but that doesn’t mean they like it. Parents don’t like seeing their kids obsessively staring at screens all day, or getting cyberbullied, or exposed to toxic and dangerous influences. Voters don’t like the hyper-partisanship and the breakdown in civility that now passes for public discourse, even if they sometimes can’t help but get sucked into it themselves.
Maybe Meta is just a convenient scapegoat for deeper problems in our society. But the company’s blindness to the public’s sentiment is a sign of being out of touch—and that’s never a good thing for a company, no matter what business it’s in.
Alexei Oreskovic
@lexnfx
alexei.oreskovic@fortune.com
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Meta and YouTube lose teen addiction trial
A Los Angeles jury has sided with a young woman known as Kaley or KGM in a landmark case, ruling that the “addictive design” of Instagram, Facebook, and YouTube helped fuel her serious mental health problems. The closely watched bellwether case against the platforms’ parents, Alphabet’s Google and Meta, could set a precedent in thousands of similar lawsuits and force Silicon Valley to rethink the features that keep users endlessly scrolling.
After more than 40 hours of deliberation across nine days—including testimony from KGM as well as from Meta CEO Mark Zuckerberg and other tech leaders—California jurors decided Meta and YouTube were negligent in the design or operation of their platforms, and awarded the plaintiff, a 20-year-old woman who says her social media addiction exacerbated her mental health struggles, $3 million in damages. The jury also recommended an additional $3 million in punitive damages.
Some watching the Los Angeles and other lawsuits move forward have anticipated a “Big Tobacco moment”—a reference to the 1990s lawsuits against tobacco companies that proved they were aware of the addictive nature of nicotine and the health dangers of smoking, and led to massive damages paid.
The decision puts legal weight behind a term Big Tech has spent years trying to dismiss: tech addiction. As I reported in Fortune this week, and for the upcoming issue of Fortune Magazine, the intense debate about how harmfully addictive modern tech can be has escalated lately thanks to a slew of landmark legal cases against Meta, YouTube, TikTok, and Snap.—Kristin Stoller
X pauses creator payout change after backlash
X, the platform formerly known as Twitter, has walked back a planned overhaul to its creator revenue-sharing program within hours of announcing it. Head of Product Nikita Bier said Tuesday that the platform would begin weighting payouts toward impressions from the poster's region—framing the shift as a way to discourage creators from chasing larger audiences in the U.S. and Japan. However, critics, many of them creators in countries with small X userbases who rely on international audiences, warned that the policy would penalize them for posting in English or covering topics with global appeal.
Musk stepped in hours later, saying the company would "pause moving forward with this until further consideration." It's the latest source of tension between X's monetization ambitions and the creators it hosts on the platform. The company has previously barred creators from payouts for 90 days for posting AI-generated war content without disclosures, saying it would use Community Notes, metadata, and internal detection systems to enforce the rule.—Beatrice Nolan
Bernie and AOC move to pause data center buildout
Two high-profile progressive lawmakers are introducing a bill Wednesday that would pause new data centers in the United States until national safeguards are in place to protect workers and consumers and ensure the technologies don’t harm the environment.
More tech
—Trump taps Zuck and Jensen—but snubs Elon and Sam Altman, for tech advisory council.
—Layoffs at Meta's Reality Labs. 700 souls affected.
—Google prepares for quantum to break crypto in 2029. Q day is approaching!
—White House welcomes first humanoid robot. First lady Melania Trump escorted the droid.
—Legal startup Harvey now worth $11 billion. Sequoia and Singapore's GIC led funding round.
—Normal Computing is using AI to design energy-efficient chips. It just raised $50M in a round led by Samsung.
AI Playbook: The future of software development
Will software developers become obsolete? AI is increasingly competent at writing code, allowing non-coders to enter the software game and rendering some junior coders obsolete. But as Fortune AI Editor Jeremy Kahn explains, AI still hallucinates and makes mistakes, making experienced coders essential for quality control and reliability. Watch the playbook.
