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. Dolla