Responsibility calling him, one of its soldiers. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. Im Alisa Parenti, this is bloomberg. Bloomberg technology is next. Caroline im caroline hyde, this is Bloomberg Technology. Googles advertising crisis goes global. The u. S. Joins the u. K. In the backlash over terrorism. Fitbit turns 10, the ceo reflects on the early hypergrowth and the recent troubles facing the company in its turnaround efforts. The senate votes to nullify fcc broadband rules. That means for internet giants and your data. To create a lead googles advertising crisis goes global. It began with an investigation by the london times newspaper, which found, some ads ran with you to videos promoting terrorism and antisemitism. The Guardian Newspaper even the you pay government called u. K. Ads from googles display network and youtube. Then wednesday, the boycott spread across the atlantic, with at t, verizon, johnson johnson, halting spending on ads. Google tried to head off the backlash this week, but eric schmidt told people that google cannot guarantee that this will not appear. How big of a problem is this . Off of it was downgraded to hold on monday. The man behind this joins us on phone. Spinning as a whole, we have someone else joining us by skied. Us. Mark bergen joining mark, i want to kick things off with you. Mark why now . This is not a new problem, youtube has had this for years. There is a couple things. Climate, apolitical lot of sensitivity around fake news, hate speech, terrorism. Ofre has been this kind growing noise and the Advertising Industry about google and facebook and their control. Marketers have been pushing for more uniform measurement standards and thirdparty audits. They are seeing an opening and seizing it. Caroline jpmorgan also following on, taking ads off youtube. Mark correct. Caroline brian, first to you. Of course you downgraded alphabet to hold on the news that it affected the u. K. , the worry was that this could have global repercussions. It clearly does. How much you worry about the stocks performance Going Forward . Brian i think it is subject in small part to headline risk, from here namely, you will see demonstrating pullingncern, also their ads from youtube. Oes notgoogle d appear to understand the gravity of the situation. It is mindboggling, on the other hand it is not surprising it is very googleey. They will solve it eventually. One image that the repercussions would be global and would have an impact on their business, it is not about the boycott. We will never notice or see that in the numbers. That is a must have persisted for weeks on end. Is thatgoing to happen every advertiser is now going to have a conversation with google has not focused on what the strategy should be amusing searches to enhance brand building, what the strategy is on thinking about moving from tv put digital, not on how to spending into facebook from google or the other way. Conversation is around safety. Google is on the defensive for the next 36 months. Any conversation they have that will have an impact in terms of their ability to expand business at the pace that they would have with brands serviced by agencies. Caroline was taken out a step and look a little bit to the display cap business and youtube that it is affecting. This is not the search business of google. Major cash cow. How does this affect advertising spending generally . Surgeon ispective, googles bread and butter as you said. It represents three times what video on youtube. Certain the u. S. Is about 37 billion this 37 billion this year. 78 of that is on google. They are fought by far the dominant player. If you look at you advertising, billion. Bout 12. 5 again it is one third of what surge represents overall. U. S. E has 20 of the digital video advertising business. We are talking about big dollars , this comes at a critical time for google. As prime was saying, they are trying to expand the conversation, to draw those tv advertising dollars, to present themselves as more of a haven for tv style advertising. The search business is something they have been doing, they know how to do. It will continue. They know it better than an anybody else. There are a lot of other players who are buying for those same tv advertising dollars. The stakes are very high. Caroline mark, you have been nodding your head throughout. Brian called this rather the lack oferhaps reaction. We have heard from eric schmidt, the chief business officer. Why are they not reacting fast, or are they not taking it seriously enough . Fair, brian is probably the only analyst that has downgraded, others are shrugging this off trade to this point that this will not have a Material Impact on revenue. Maybe there is not an expectation that this might change the caliber of the conversation. Google has weathered this before. They are not panicking, maybe to brians point that they should be, i think we have to think about the fact that a lot of advertisers do not have a lot of other options. Where else are they going to go . They could go to facebook, snap, a new emerging advertising channel, verizon, aol, but google is the best bang for your buck. Caroline talk to us about the rivals. , who mightom verizon be the winners here . Some is interesting that of the companies that have pulled their advertising from youtube temporarily are ones that do stand to benefit, because they are in direct competition. I think though that when you look across the competitive landscape, what is interesting to me is that all of the really alllayers have the same risk level. What just happened is not necessarily a youtube problem, it is a Programmatic Advertising problem. It is a problem that happens when advertising is propagated through an Automated System throughout a very, very, rod network of websites and Digital Properties without necessarily being able to control and affect everysingle one vet single one. Facebook has had advertising issues, snapchat has and probably will continue to. As long as advertising is bought and sold this way, it will remain a risk. Google has said that they cannot guarantee 100 brand safety. Maybe the issue here is, can they go from 98 , to 99 . They need to do no more but i do not know how much more they can do. Competitors are facing the same basic problem. Caroline frank, fish finish it off for us. He downgraded it to a whole. That would take it from the off a bit alphabet, what moves would you like to seem to move a backup move it back up to a by . What would worsen it, what would have to the key catalyst there. . Brian the downgrade was in part because the stock has risen since the last time i published a note on google. The prices are down a little bit. Necessarily becomes a whole. Lowhe price had been a lot already, it would be been a buy. I think what happens next, it is going to be a little bit of time. The right answer is not 98 , 99 . The right answer is zero. Think hard large print advertiser expectations are that , google is a company that can up for some driving cars, balloons in new zealand to excess company that can have robots running down the street. They can have 100 brand Safety Environment even if they do not get there completely. One screenshot of a brand sponsoring a beheading is one too many. Plan. Ne they need to great to have your opinions, thank you for joining us. Now, a story we are watching, wikileaks has released new documents that reportedly contain seat techniques the caa uses to infect apple devices. There were several cia projects devoted to infecting Apple Mac Computers firmware, meaning the infection remains even if the operating system is reinstalled. The documents also disclosed tools to infect iphones. Julian assange said, he is going to work with temp Tech Companies to close security gaps. The cia has said, it does not confirm the legitimacy of such leaks. News, the iphone company has finalized a deal to acquire a start up workflow, and an act that allows users to put together apps using a string of commands. Workflows threeperson teams being hired by apple who will continue to develop it financially. Coming up, a major milestone, we will hear from the ceo from a companys 10 Year Anniversary for fitbit, then what is next in their turnaround strategy. All episodes of Bloomberg Technology are now Live Streaming on twitter, check us bergtechtv. This is bloomberg. Caroline fitbit is turning 10. The last decade has been anything but a walk in the park. Five years ago, cory johnson took a walk with the thin private startup ceo. Years, one ipo and over 60 million products so later, they took another walk on the streets of San Francisco. Cory only talked five years ago, he said we are Software Guys making hardware. I do not think we thought about the challenges we would encounter. He just went and did it. My cofounder eric and i are Software Guys. Weve never done hardware. Y countries later, ceo james park is sticking to the claim, even though it is the hardware that makes it that household name. Ames it is really about the combination of the two working well together that creates the magic. I do not know i dont think we can strictly classify ourselves. Cory hypergrowth might be a hard thing to manage, but growing sales more slowly. Ames you had a rocket ship of the company for quite a long time. We shipped our first product in 2009, 5000 units. Last year we shipped over 20 million. It is been pretty stratospheric growth. Now the challenges, we are moving into a slightly different environment. It is a new set of issues that myself and the company has to tackle. Cory which are what . James 2010 to an environment where we have to be more fixing a and focus on lot of the things that we have ignored in the past because of our growth profile. I think that is a good thing for the company. It is time for us to reflect, look at the things that are working, not working, make your make the right fixes. Cory their firstever contraction has been painful to employees and wall street. 2015, theiripo in shares have plummeted over 71 . Some a companies have stay private for longer periods of time, i wonder if written rick byrd retrospect, if you if the negatives would outweigh the positives. James there are always positive in negatives. The positives for us is that for the longest time, we were not very well capitalized as a company. We had hypergrowth, but our Balance Sheet was pretty light. Well his feud the ipo primarily as a financing event. Public, welug raced hundreds of millions of dollars, it was the Largest Consumer electronics ipo in history. That was a huge event. To put a lot of cash in our Balance Sheet. In the end of december we had approximately 700 million in cash. That gives a think a lot of confidence for us to operate the business Going Forward. , rmb, m and a, its a lot of security to the business. Cory when you look at the stock price, stock price is stock price, but i wonder what that means in terms of a Business Plan and keeping behind margins that you have kept and other decision to have made there. You can certainly goose earnings a goose sales, i would think if you lower prices and cut margins, but you have chosen not to do that. Why is that . James pricing is something you cannot reverse from. We want to make sure that people value our products. Maintaining pricing discipline is an important part of that. We invest a lot, significant amount in research and development. That is something we want to continue. The stock price and public investors, that is so very important considerations and how we run our business. It is also one input. I what shareholders would like us to see is properly managing some of the shortterm interests, but also look at the longterm. I hope we are able to do that. Cost fake customer demands caused their fourthquarter revenue to fall for 19 . Reannouncing announcing a restructuring plan, taking 4 million from 110 employees. How do they plan to turn around . James streamline our product portfolio. We have way too many trackers. A real focus on software, publishing, guidance, personalization. The later adopters in this category want a solution rather than just a touch and tracking. We want to move into adjacencies. Ike smart watches the acquisition of pebble, factor, and coin, all play into that strategy. We have announced we are entering that category. It is an move it will immediately double our addressable markets, a huge area of growth. There are factors beyond the risk that we are looking at as well. Wepart of our restructuring, are looking at the business into perspectives. One consumer, but more importantly what we call Enterprise Health as well, where we want targets we have early targeted employers, but starting to target insurers and other partners in health care. Cory you are running a hundred thousand units at a time. James there will be Incredible Opportunity for both recurring sales tied to health plans. Cory it comes down to inspiring sales to getting customers on their feet. What he wished someone wouldve told you five years younger . James sure challenges today that wouldve been easier to manage a big cash as a private company because you are less visible, not being judged on a daytoday based basis. Toot of the things you have do to chart a path back to growth and profitability are definitely a lot harder in a public spot. And what i think about on a daily business basis is how we transform fitbit into a product that is nice to have, to something that is some a must have. Fitbit ceo james park and bloombergs cory johnson. Coming up will hear from one of the biggest players in online lending. Ceo greg gibbs on his outlook for china and the tech industry. Attentioning to your our interactive tv fun fortune. You can find it on tv go on the bloomberg are you you can watch his life and see interviews and dive into any securities or bloomberg functions we talk about. You can become part of the function conversation. Send us messages. This is for bloomberg subscribers only. Check it out at tv. This is bloomberg. Caroline greg gibbs, ceo, of one of the largest players of the online lending industry, says their company has benefited from regulation growing. The number of players in the industry, lease to talk about 2000, 3000. Talking about 1000. The top 20 have got 50 of the market, the other 980 have the other 50 . We have seen in our case, our market share double roughly over the last year. Facts this value at 18. 5is valued million. Goldman sachs upgraded the company to a buy from celebrating, and increased its price target to 15. The goldman note says, the introduction of analytic facts, will address many of the firms previous challenges. To make it now, the online Publishing Companies ed williams will unveil new business models, a five dollar per month subscription service. Earlier this year, williams swore off advertising on the medium platform come and cut one third of its staff. Few details about the benefits have been released. It will include exclusive content and early access to new experiences. The site will remain free to those who are not members. Is stickingger around at disney. They have agreed to a contract extension that will keep them at the top of the company until july 2019. He would he said he would not extend his contract afterwards. His salary will remain unchanged, but youll get 5 million for agreeing to the new contract. This settles who were run the company for the immediate future as the board of directors continues to search for his replacement. The move also gives him the time to address possible business. Coming up,etwork as google works directed by its growing at controversy, more analysts are weighing in. Well break it up down next. If you like Bloomberg Bloomberg news check us out on the radio, you can listen on the Bloomberg Radio app, bloomberg. Com, and in the u. S. On sirius xm. This is bloomberg. Im Alisa Parenti you were watching Bloomberg Technology. Heres your first word news, the Congressional Budget Office says proposed changes changes to will republican book votes to repeal and replace obamacare will the cbo says the tweets would increase federal spending to raise the size of tax credits offer to older people to buy health care. That would help reduce the deficit by 150 billion over a decade, down from 337 billion. Belgium is tightened security in antwerp asked after a frenchman drove his car at high speed through a busy shopping area. 30 sound knives, a shotgun, and a gas can and an unknown liquid in his car bomb squad was called in, this comes one day after the brussels attacks, which killed 32 people one year ago. Drawing defendant is criticism from his party to their support behind his candidate and election frontrunner manual macron. And i havent the primary in january, but he has slipped in the polls. A new poll has macron tied with Marine Le Pen for leftwing voters. The first round is equal 23rd. The Trump Administration will keystone improve the pipeline as early as tomorrow according to multiple reports. It would shift to the court rooms, where environmental activists are plotting ways to block construction. Global news 24 hours a day powered by with a 2600 journalists and analysts in more than 120 countries. Im Alisa Parenti, this is bloomberg. Here andt after 5 30 new york, i am joined by paul allen with a look of the markets. Amarin to you. good morning. Trading has been underway for 30 minutes and new zealand, flat, barely two points right now. A quite finish to the week around the region. Futures are slightly off, and sex futures up by just five points. Still could be a few things to watch today in about 10 minutes time new zealand, it will release its trade balance for february, expected to come in one hundred 26 million u. S. Dollars. Currency met with there. That will keep an eye in evolution, it is being reported that the city is seeking bids for block trade in the gold miner treated price ordered a reasonable discount to this. Elsewhere plenty of press earnings post press conferences from china mobile and cnooc and samsung 80 him since the original jay y. Lee trade that could be a lively one. Im paul allen in sydney, or from Bloomberg Technology next. Caroline this is Bloomberg Technology, i am caroline hyde. As we mentioned at the top of the hour, alphabet shares have been under pressure since their advertising crisis. Gives morelittle reaction as well as markets. This focus on u. S. Stocks. What is behind this . Abigail the dow and s p 500 at the highs were up nearly. 5 percent. Around three clock, it started to turn lower. This came as the house delayed voting on that health care bill. That has uncertainty. This is around weather gets past and what it will mean for obamacare. But does it mean for the reflation trade . Investors are banking on the possibility that trumps policies could reinflate the economy. That is unlikely to happen if this bill is not pass. That is what was behind that small extension of the selloff on tuesday. Take a look at those dips and gains. Here is a chart of the nasdaq. You can see that it was a bit of a volatile session on intradatabases. Down a bit, the reason being what you were talking about with google, alphabet was one of the biggest drags on the tech sector. On the nasdaq and s p 500, we had apple, microsoft, nvidia trading lower. That reversal yesterday when tech was these top sector. Bit of a down day for tech. Caroline when you are looking at alphabet, it is down four , 22 billionw dollars. Some analysts are not all going much lower. Investors seem to care. Why . This is interesting. J and j pulled its advertising for google. You to based on objectionable content was recently within the last hour, hour and half, jpmorgan followed suit. These companies do not want their apps next to content that could be objectionable. Him,crisci, i reach up to he said he thinks this is a he thinks these huge advertisers cannot ignore a one billion user platform. Also any agreed. We helped into the bloomberg to get a better scope for google, but rich. This is g btv 2366, it represents advertising revenue. That is been in the high teens, huge growth on a 90 billion revenue company. Bloomberg Intelligence Analyst paul sweeney says you do not see that anywhere else. This is a reputational issue for alphabet. If they do not stop it out , it could turn into a business issue. They want to prevent that from happening. Relative they stock in the nearterm, it appears that there could be a little more pain ahead. If we hopped into the bloomberg , this isat g btv 7070 alphabet over the last six months in relation to its 50 Day Moving Average and blue, which has been support. And its 200 Day Moving Average theellow, the port on election selloff. We see that on todays move down , but 50 Day Moving Average. The last time it happened alphabet moves right down to the 200 a moving average. That could suggest that there could be more shaky trading action ahead for alphabet that investors are really going to be taking a little bit of caution as these advertisers perhaps move away from that youtube platform for now. Brilliant analysis from abigail doolittle, thank you. Lets continue our discussion of google cory johnson. We are hearing that the stock is sold off to some extent. The stock was downgraded to a hold. This is her petition up to a certain extent and does the new area of growth and video . Cory while the have this fantastic profitable business, the places where growth was supposed to happen was and video. That is why this is an actual concern for investors. Caroline it is fascinating is what we heard that jpmorgan is doing it. Verizon is interesting, because they could they went out. Cory verizon is not just an , verizon is a direct competitor with their acquisition of yahoo . Ath aol and yahoo , there was big focus on the technology around video ads. One of their Technology Acquisition spending so much money on this talking to every conference call, theyll well as a separate company and yahoo in for as wireless were talking about Verizon Wireless talking about spending money on technology and video ads. What kind question mark exactly the kind to make sure ads show up in places they are meant to show up. Theirn announcing throwing gasoline into the fire of this story and wanting to fuel this because they want to advertise this, they can put a video online. They know advertisers continue to go there. Stay with google, look at yahoo , they are already looking at facebook and google. What is happening on advertising online is a two horse race with facebook and google gobbling up so much of the real estate. Or advertisers going to butter mother to go to twitter, look at snapchat . I knew leaving yahoo to go to those nor form new formats devil wants to keep what it is gotten, verizon is a dog in that fight. I love the analogy. When we looking at overall advertising, this might not just be googles only problem. Only googles problem that is. Spread,is actually could people turn their away from this and jump onto other video providers . Cory that is exactly the argument other providers will have to make. Will is an effective place for advertising. Someone searches for boat engine propeller, there is a high likelihood theyre trying to buy a vote boat engine propeller. Video advertising is different. The people at yahoo and verizon yahoo , aol, Tim Armstrong think they are a better brand and google. They want to emphasize that. They want to emphasize videos place where they can lead. Mobile video is even more of their focus, where the ultimate winners have yet to be chosen. Caroline well see if anyone else is tainted with this. Again, coryne johnson, great to have you on again cory johnson. On todays funding board, soundcloud says it has received 70 million in debt to fund growth. Service warned it may not run out of money if it cannot attract more paying customers. Since i have secured a credit from davidson technology. The company said the credit would be used to develop technology. Comes after the company proceeded raising initial funds for investors and considered a potential sale. Coming up, would Companies Think twice about automation if it comes with it tax for robots . Well talk to an m. I. T. Professor next. This is bloomberg. Caroline the story we are watching, sap plans to capitalize on president trumps efforts to encourage u. S. Companies to repatriate cash held overseas. That could boost business son spending. Announced nuts and allocate 35 would Million Dollars for investments in software companies. In San Francisco and berlin were announced. Automation is disgracing more and more American Workers and freezing pay for others. Humanin fear is not all workers will become obsolete, but that automation will increase inequality among humans. One suggestion to avoid this text the robots joining us now professor and ceo. Eric, what do you think about . His bill gates thought that maybe texting robots would be the right thing to do. A very smart guy. To clearate him trying up this issue. Texting robots is not the right way to go about this. Of a has been stagnating jobsf wages and a lot of have disappeared. There is a question about how to go about this. The bestbots is not approach. We should encourage people to use robots in a more creative shared prosperity and not just automate existing jobs. Caroline this is fascinating. To that point you have Just Launched a 1 million price for Tech Companies that increase job potential for middleweight earners, lowwage earners, hightech that helps this. This is on the same day that the World Economic forum is coming here to San Francisco to focus on the Fourth Industrial Revolution, and how we can have practices and best ways ensuring it for the public good as well. How can these things be for the public good . The technology are you envisioning . Here at m. I. T. , we recognize that technology is a tool, and robots are tools. They can be used in a lot of different ways. They can automate work, lower make work more productive and creative and increase wages. The trick is to steer people in the right direction. There are a number of companies that are working on that, one of the reasons we created the 1 million inclusive innovation challenge you mentioned is to recognize and reward companies doing that. There is a Tech Companies here in lowell, massachusetts, that machinery that allows textile manufacturing to be more flexible and personalized, customized. As a result is more valuable, they can pay their workers more than they are paid in other countries it creates more value for customers. I just mention the Fourth Industrial Revolution there. This is the second machine age as well, brilliant read that was. This is not the first Industrial Revolution or machine age weve had. Erik right. Caroline does the pace of disruption faster . How quickly should the government respond . Erik we have all heard of moores law, the doubling of computer power every eight 1418 months. Engine also improved, doubling times once every 70 years. It is a whole different skill improvement in speed. Jobs, thecting more whole information economy, which most of us to information work these days. It is an important change we are seeing. I think if we handle it right it will be one of the best things that ever happened to us. It depends on not just Government Policies but also policies by ceos and decision. Akers by all of us as workers there are a lot of dimensions that need to be made. Caroline certainly this is something ibm and the government are potentially retraining. Two race to finish your second machine and because you have another book coming out coauthored with same author. This one is, machine platform crowd, harnessing the digital resolute revolution. You say you must rethink the emigration of mind is and machines. Another man who thinks about this integration is elon musk. Do you view that his view is right, that it will potentially will come some sort of cyborgs, the only way humans can remain relevant . Erik our generation, we are more focused on Artificial Intelligence and other tools that allow human and machine decisionmakers to work and coordinate, and divided problems in ways they can be more effective. Sunday eventually we will have on our brainsxt that allows us to communicate with machines. I did not think that is anything we will be buying in 2017. Caroline professor of Information Technology at m. I. T. , good luck with the competition and thank you very much for joining us. Coming up, friday on bloomberg television, noted short seller carson block will join daybreak americus to talk about his latest position in the market. Catch the government conversation 8 00am eastern time, 12 00pm in london. The u. S. Senate sent a big message to Internet Service providers, what it means for your data. This is bloomberg. Caroline to the stock where watching, bitcoin has sold a lot of stock. Had a strong trading day, the currency was up almost 3 in more than 1000 per coin. This after the aggressive selling on wednesday slammed it below the 1000 level for the second time. The 17 has been volatile for fit bitcoin. 35 , crackdown on trading by china. It rallied another 75 in march, hitting a record high. The u. S. Senate has put it to overturn the fcc privacy rule. Wouldve finalized prevented internet providers from sharing her the browsing history. The final tally was 5040 it. Joining us is litigation and government analyst matchup the home. Great to have you with us. The u. S. Senate took up the fcc privacy government Internet Service providers. That was this afternoon, it went against it. Remind us exactly what the privacy rules wouldve done to ifc. Issue is art of this how your Internet Service provider can use data about how you use your smartphone, how you. Rowse the internet what the fccs rules from request your basically did is they said that before your Internet Service provider, at t, verizon, comcast, before they can use that data, they have to ask your permission. Why that bother the companies, cable companies, is because the companies that dominate this online ad revenue market, facebook google, they do not have to do that, ask for your permission at the front end. The isps came along and said, this is burdensome, unfair. Caroline fcc has a different view on things. It seems as though this could be on the agenda for the isps. It now has to get to the house, willis become law . Matt its a very good bet to become law. Most legislation is harder past. Hrough the u. S. Senate republicans have an even larger edge in the u. S. House of representatives. They passed this today on a partyline basis strictly, 50 48ublicans voting for, democrats voting against. They will have an easier time in the house, i do not think there is any doubt that donald trump will sign it. Oline thats what was this was particularly against Net Neutrality. This is something that the new head of the fcc does has loaded against previously. Can we make a leap year from the fact that the privacy laws are being undone, that this could be the same case for the overall Net Neutrality rules as well . Think that neutrality is the elephant in the room. That is the next big fight that is coming. It is important to note that it is going to be much harder to undo in congress as i said this past by the narrowest margin. It did so with the republicans using a rarely used measure that state not require them to duck a filibuster. They only needed 50 boat votes, they do not need 60 votes. With Net Neutrality it will not be that easy. They might need to do more compromising, it might be something that congress cannot tackle, defined fcc the fcc can look at it. Interesting, the lorenz in the fcc. Arguably, one of the aspects of using this filibuster , skipping law is that it prevents the fcc from adopting substantially similar rules in the future. It is not clear what that means, this provision has never been used before. Fcc is likely is the likely to step back and is likely to look to the fcc and two states to step in to fill in the privacy regulation. Caroline checking home, thank you very much. Complexstory a story. That is it for Bloomberg Technology. All episodes are now Live Streaming on twitter. Check us out qbl bloombergtechtv. Thats all for now, this is bloomberg. From our studios in new york city, this is charlie rose. Steve cole is here, the dean of columbia journalism school, also a staff writer for the new yorker magazine. His latest shoe is called, Rex Tillerson still acting like a ceo. It looks at tillersons relationship with the press, the secretarys trip to asia last week he came controversial when he announced that he would not be traveling with the diplomatic press corps. He is also come under fire for his media silence, neglecting what many view as an integral part of his secretary of state