>> live from pier 3 in san francisco, welcome to "bloomberg west," where we cover innovation, technology, and the future of business. i'm emily chang. first, to the headlines. the pier to pier landing site connects bar with landers on the internet, lending club says it has extended $5 billion in personal loans on the platform. a sales ban on certain samsung smartphones is rejected again. a ruling says it did not inflict substantial harm. and pat issues -- patent issues surrounding beats.

the international trade commission says it will investigate a trade on both. it was filed just days before apple's acquisition was completed. to our lead story, russian hackers strike again, this time targeting the u.s. financial system. the hackers broke into the system of ap morgan chase and at least one other bank earlier this month, swiping gigabytes of sensitive data. two people familiar with the at -- with the matter say the fbi is investigating whether this was retaliation for sanctions against russia. cory johnson is in the studio. and joining us from washington, michael riley, the reporter who broke the story. angela must, the ceo of cyber

spot. michael, i will start with you. what do we know and what kind of information is stolen? >> what we know is that in the mid august, jpmorgan and at least one other big banks were breached in what appears to be a very sophisticated attack. in at least one of the cases, they went through basically, the bank's front door through a web app. and this is really hard to do. in terms of what was hard -- what was taken, it looks like there was a lot of consumer information that could be used in the right hands to try to liquidate accounts. we do not have any information that accounts have been liquidated, but a bank that did receive a briefing from the fbi was not one of the victims, but was told that, in fact, what was

taken was consumer data that can be used to liquidate accounts, which is a pretty startling thing to have to deal with for any bank. >> is the public and warned? what are they doing to prevent these accounts from being liquidated, or any additional action? >> the banks are trying to figure out what needs to be done. they didn't tell us or give us any extensive comment on whether they have been dealing with the breach and how they are dealing with the loss of data. right now, we do not know what the banks are doing in terms of trying to warn customers or clients. if it is commercial customers, they could be trying to do that directly. this is a really big amount of data. my guess is that if they are warning people, they've got a lot of people to warn. >> joe, as michael mentioned, this appears to be a very sophisticated attack. what can you tell me about how they did this? obviously, a company like

jpmorgan have certain controls against these kinds of things, but they were able to find a way in. >> human error will always be our biggest down -- downfall. as we put people in charge of technology, and clearly, there was an oversight of some sort or vulnerability that might have taken place where they were not able to be prepared. you don't know what you do not know. that is what vulnerability is. it's almost like having a window open in your house, or not knowing that you have an open window, or even that you have a window installed. with that mindset, you cannot plug a hole you do not know exist. it is much more prevalent in the industry, as well as the economy, as we move forward in this underground cyber warfare. it will become more like a day to day occurrence, because of the dependency on the cyber technology that we have today. >> michael, let me ask you, the sanctions against russia,

specifically targeting the bank accounts of certain russians, oligarchs in the inner circle, is the reason they attacked jpmorgan because of this, or because they had the weakest defense? or because they had the biggest defense? >> i don't think it's because they had the weakest defense. jpmorgan specifically stopped a transfer to a russian citizen. the russian foreign ministry stepped in and called the decision stupid. it is an example of the ridiculousness and justice of the sanctions. to the extent that there is a potential link between the sanctions and jpmorgan as a target, that is one of them.

>> joe, as far as you can tell, does this appear to be retaliation for some of the u.s. government sanctions against russia, and what kind of thing your pent mike the hackers have left behind where we can track them down? >> that is the thing about the economy and culture of russia. even if it's not a government-backed or endorsed action, there are many groups that are operating in russia that will do it for the pride and retaliations their own personal beliefs. no different than someone in america might take an organization or position that you don't agree with. they are expressing a dislike with what our government has done, not necessarily what the russian government has endorsed. and russian fingerprints, that is a tricky thing. some actors actually perform and leave figure prints behind because of the way the exploit the actual vulnerability. it might be the ip connections

they've made, the method they have performed in, or maybe sometimes leave behind clues just to do that. >> we will continue to follow the story. joe loomis, the ceo of cyber response. and michael riley, the reporter who broke the story. thank you both. alibaba is making its record-breaking ipo. that is coming up next. ♪

>> welcome back. i'm emily chang. alibaba chairman jack ma is now the richest man in china. he is more than $5 billion richer than the second richest chinese of $.10. meanwhile, the buzz about ali baba's upcoming ipo is getting even hotter. third-quarter profit nearly tripled. leslie picker covered ipos and

is on the phone. >> i think they're really good numbers. if you look at the numbers as the company is transitioning from the mobile take rate, we saw it improve to 1.49% this quarter. that is a tremendous improvement on a quarter on quarter basis. >> leslie, were these numbers expected? every time we see new numbers from ali baba, they are quite impressive. >> they are. fourth-quarter numbers were a little bit of a disappointment. if you look at yahoos shares, they are trending up only slightly. it would appear that it is kind of a broader for any kind of news coming out of ali baba, because they are a significant shareholder. shares are not moving to lehigh to the upside, which indicates it's not as much of a surprise.

but as you mentioned, it's very impressive. >> what is your take? >> there are some a great business is growing so fast. there is over 700 pages to this ipo. ipo and it the last couple of hours. profits really did triple, but the business, what is really going on is some changes in great gains and investment income. >> they also saw a big jump in mobile users. 188 million up from 136 million. that was just six months ago. one third of transactions are coming from mobile. >> the most dramatic thing in terms of how the business is changing is how much is going to mobile. we have seen a handful of companies successfully deal with a change in mobile. but for them as a first-time computer user, the first time

online shopper using this but from on a mobile basis, they are generating business from people not just looking, but actually shopping online. >> chinese internet users have grown from 632 million and that number could jump to 858 million by 2015. the e-commerce market could go to potentially $400 billion. leslie, where do you see growth coming from in the future and what are investors looking at? >> what is interesting is the market share on mobile actually surpasses the market share on desktops. and the adjusted ebitda margins have come down. that is largely due to getting people on mobile. it is clear they see the future, the growth in china as mobile users. >> how about you? is it all as positive as it

looks? >> i think there are some tremendous positives. i think the mobile pay grade is significant. and the reason why we have not seen a huge reaction in yahoo! shares is that the ebitda has come down as they get more people up and running on the mobile side. but additionally, the product development site has been ramping up dramatically, too. what does that mean for future growth? does that mean that they will expand into other areas? they have made a huge push into the entertainment side, which allowed acquisitions for users on development content. could we see them in the future also ruling out an entertainment type product as well? that could be something that could ignite shares higher and something that will be talked about during the roadshow. >> they do have a vision called alibaba pictures.

a were concerned that area might have financial issues. they said it will not make a big impact on the company. cory, what do you think? >> i don't know yet. it's a pretty hard company to model, too, because of the calculations. they've literally got monthly changes in currency comparisons, which makes it a little tricky to model out. i still constantly worry about this variable interest entity where the shareholders do not have control of the company. it's not like companies that have preferred shares in facebook or berkshire hathaway, for that matter, where they do not have equal voting rights for the shares that they own. that is where things can start to go bad for companies. but with 26% year-over-year income growth, it looks pretty good for investors. >> do you think they are looking more confuse? >> the sources i've spoken with have said that the number one

question is about after the acquisition. investors want to know what it might mean for the stock trading a year from now. that is what they are investing in. they are looking at the share price as being where the stock is a year from now. how do these acquisitions become integrated into the company and how do they impact the bottom line? >> leslie picker. bloomberg's ipo reporter. how popular is snapchat? that is next. ♪

>> i'm emily chang. this is "bloomberg west." snapchat could soon be part of the $10 billion valuation club.

the company is said to be nearing a funding round from kleiner perkins buyers. this would value snapchat at three times what mark zuckerberg offer to pay for it last year when the ceo turned him down. snapchat is the third most popular app among millennial's width 33% of 18-24-year-old using it. what makes snapchat so attractive to teams? and what does that mean for the company echo -- what makes snapchat so attractive to teenagers? and what does that mean for the company? i asked our guests. we do not really know what is going on. we have to ask the teenagers how this is all shaking out. ryan, i was curious, how much are your friend still using snapchat these days?

>> the usage i'm seeing with snapchat with myself and my friend is changing a lot. it first exploded winter break of 2012, beginning of 2013. that is what i thought at my school. i see a lot more behavior of kids using stories and less direct snaps. >> it is a way to share photos through the day and people can view those photos as a story rather than simply communicating one-on-one with one another. >> yes, some of the novelty of direct one-on-one has worn off, but would really like stories. it is like, what happened in that class today? it is a window into your life, that kind of thing. >> how are you using it and how are your friend using it? >> he's right, stories are being used. but there is this interesting behavior being developed on

snapchat. you see people not interacting as much. it is turning more into something to use actively. i see a lot of my friends posting stories now and i don't get as many snaps as i saw before on a daily basis. this is something that i saw with facebook early on and then it suddenly became a consumption experience. >> you see across the country about how teenagers and young people are using social networks, from facebook to twitter. what is your take on snapchat usage and what you've seen from your research? >> typically between about 8000 to 10,000 students in the u.s., and in the spring survey, the interest level in snapchat went from zero to about 4% as the primary social form. it is still relatively small. we did ask if it was a primary platform. it is the fastest growing with

primary usage. there are about 100 million users right now. whatsapp is about 600 million users. the trend is in the right direction. >> what is the coolest social network out there? is it snapchat or something else? >> i think snapchat, instagram, and especially among girls there is this shot that's taking off. in terms of coolest, it is really up there between snapchat and instagram. i'm hearing about some others, but for the most part, everyone is using snapchat and instagram. and twitter is just occasional. >> interesting. how about you? >> it is interesting to see this shift away from public

identities to more ephemeral ones. you see students getting somewhat disheartened by how much we really have to put themselves out there for sub you will notice on facebook, every post become something everyone has to judge and see. it moves to something more intimate, like snapchat, and others. >> people are becoming more concerned about being more public. snapchat doesn't even have a business model. there is no advertising on snapchat. they don't make money that we know of. is there something we don't know about the business story here? >> no, it's still just building users and getting big valuations. it is rumored to be a $10 billion. you could argue that the bargain when you compare it to 18 billion dollars for whatsapp. but the business model has not

been defined. >> snapchat has something like 100 million users every month. and you have whatsapp with something like 600 million monthly users. ryan, is snapchat something that could pump out the other contenders? is it getting more popular or less? especially with all of the competition that you mentioned. >> yeah, i think that what gene just mentioned with his research makes a lot of sense to me. i'm even surprised it's that high of a percentage. i think he said it was 4% or 5%. being used as a primary social network. i do not see snapchat as being a primary mode of communication. maybe it's because i'm in the u.s., and so much what that user writes about his abroad. i don't see much with competitors. snapchat's philosophy is much more about the ephemerality and the fun of a conversation and

you don't need a filter as much on snapchat. >> something that is worth $10 billion. thank you all. we really appreciate you giving us the real story on the popularity of snapchat. he is a former chief of staff to president obama and now mayor of chicago. why is rahm emanuel installing data centers on the city's traffic poles? details on that, next. >> time now for bloomberg television "on the markets." i'm julie hyman. it looks like we barely, barely into the day higher. it says unchanged. i think we were up just a 10th of a point. in the s&p 500.

technically, another record close, but stocks having trouble making much progress after yesterday's move to that record. ♪

>> you are watching "bloomberg west." the city of chicago is betting big on the data. mayor rahm emanuel has given the green light on sensors. the goal is to collect data on air quality and the weather. sam grobart explains. >> chicago may be the second today, but it is the first to launch a permanent infrastructure to collect big data. this will measure temperature,

humidity, light, sound, and cell phone signals. the project is being dubbed chicago's array of things. >> the city of chicago is quite large. we will have much more precise temperature data. >> cities always have the data. i am not sure they always used it to figure out how to govern enter. >> the first plan will be this fall. >> we advertise certain data. we can do things on a proactive basis. how you get ahead of it is a problem. >> it was very important we put up something aesthetically

pleasing. >> the goal is to make it a safer place to live. >> sometimes the record of government trying to work with technology isn't always sterling. how do you wind up in a situation like that? >> we set the requirements that allow the experts in the field to do the technology.

>> this system does have privacy watchdogs concerned. the data will be open to the public, and the software and hardware will be open source, too. what is the city's take on those concerns? >> you have got to balance those. chicago has historic bent. >> the second city is doing more than just gathering data. it is looking to silicon valley or job creation. rahm emanuel has agreed to double down by recruiting jobs and companies. he has launched a startup incubator. an exclusive interview with sam grobart.

>> what can you tell me about 1871? >> is an innovative space, and what happens in tart up companies is you need not only density. you need a sense of community. it has had 500 companies going through it. it has expanded. my best example of the ecosystem, we are from the public side putting up tremendous reams of data so allowing apps to use that data. this young man holds up a hand battery. i say, what is that? he says, it's a new battery i developed. i say, where did you get that?

it is part of the grant from the department of energy. i say, where are you? he says to 71. we are trying to put together basic research. not yet ready for a storefront or an office and yet have that shared space where he could work with other like-minded people and take the concept to business. to just grab a cup of coffee and try to get to the next round of funding. that is what we are doing is the flagship. we set up others in london and tel aviv. we have our own foreign policy. when i became the mayor, the innovation spaces was zero.

we are now at 11. what is also interest in and unique about chicago, you have these young companies that are more nimble. and then try to figure out technology. unlike new york where something happens to the financial sector and new york drives off the side of the road that is also true about l.a. and the entertainment side. in chicago no part of our economy is other than 13% of employment. whether it is tourism, professional services, none of them have more than 13%. it is a tremendous debt. second, because of our research

institution and all of the medical capacities we have five of the top 10 teaching facilities right here. it makes sense the institutional support. in harvest due to chanel players. >> san francisco has in dealing with this issue of gentrification brought about by the tech or. there is a side that says, wait a minute. we are losing the character of the city. how do you continue to try to attract jobs and the people they are trying to employ while

managing diversity and not losing that? >> i think it is a challenge. one of them is the third of san francisco. our housing stock is much deeper. tremendous difference. third, very important, we have a tremendous park system. i have added 1000 acres. our library system was rated number one. san francisco has a different typography. it's a work in progress. i think we have balanced the growth happening in the triangle

and up the river where groupon is. it has grown by a third, and i think in the next three years we can get to 80,000 jobs. i would say in the next decade -- i speak for chicago. silicon valley has run its course. i think the next is for places like in an chicago and new york that you are going to see innovation. >> see part two of our interview with rahm emanuel. we are talking about immigration reform and whether he can persuade his old boss president obama to do anything about it. ♪

>> welcome back. immigration reform is a hot button issue. chicago mayor rahm emanuel has opinions about it. what is he hearing from the leaders, and what are they looking for in chicago? >> we are talking to the tech industry often. what are they looking for from a

place like chicago? >> talent, quality of life. they're looking for strategic advances. one of the big problems them some of the established locations in america in textbased. the cost of living is out of proportion with what they can pay. number two, the inability to hold onto their workforce. we have a workforce that is the best in the united states. the workforce is tremendously loyal. there is a depth of talent. there is a depth of research capacity, and the quality of life is affordable and livable. chicago is rated number one. companies are in a massive race

worldwide for talent, and given the depth of our universities, that is a huge strategic advantage. >> when it comes to talent i want to ask about immigration. how can that help play a role? >> it's interesting. >> my grandfather came to this country in 1917. he was 13 years old. not a word of english. his parents put him on a boat to get away from the pogroms. they had horrible pogroms. in two generations his grandson

is a mayor of the city of chicago. it is the story of america but more importantly the story of chicago. chicago is the most american of american cities. new york looks to europe. l.a. looks to itself. all of the world looks to chicago because that is where people come to create. if the american story is about giving your children the next leg up, people from around the world and the united states beat a path here. immigration is essential to america but essential to chicago, whether it is a young mexican couple who wants to give their children a chance and start the business. most of our new businesses are started by immigrants. you cannot be pro-small business and be anti-immigrant.

it's impossible. every corner, every librarian has a citizenship corner where we do stuff for new immigrants. you have to come downtown. we are the first city to allow dreamers to get internships and apply for a summer jobs program. we helped on the drivers license reforms in illinois for new immigrants, and we set up our own account and raise money to help that to help kids go to college. i think the united states has a self-evident self-interest. it will take a while to get the political systems to react. i hope they take steps this fall. >> how would you describe yourself technologically?

are you late 20th century? >> i would say somewhere between gas people joke i still have a flip phone. i do it because of how many e-mails i get. i am always checking on that. i would say i am comfortable with technology. i read the papers. i read books on it. download information, constantly. and my always downloading a new app? no. >> you mentioned libraries. it seems like the library can serve as more than a place to get a book. >> libraries have along history overseas.

public libraries are as close to education as the public school and can be as important. it is important because it is the next-generation you want to be emphasizing. >> up next, one number that tells a whole lot. ♪

>> welcome back to ". humbert west -- bloomberg west." a nationwide internet outage hit millions of time warner cable customers. internet access has been restored. they blamed it on the internet backbone. this could cause problems for the acquisition of time warner cable. the new york governor directed the state to investigate as part of the review over the deal. it is time for one number that tells a lot. what have you got? >> the number is 1,005,946,000. it is the amount the lending did in loan origination in june. it is 125 percent more than last year's second quarter.

the red herring dropped just a few minutes ago. >> this is an alternative to bank loans. it surpassed some of the older competitors. people really like this company. >> if i put down alibaba so i can go through this, it is really interesting. we have had the ceo on. the business is really growing. $5 billion in loan. next they have had loan growth every year they have been around. >> the kind of loads they are offering are potentially sizes tanks will not offer. -- banks will not offer. average.rates like 14% >> one thing they are saying is they are able to offer regular investors the opportunity to get these kinds of small business loans as low as $25 and sometimes as large as $100,000. that opportunity of hard living is something the platform

allows. >> they have gotten all-star board. morgan danley, mary meeker, the former internet analyst. what about risk associated? >> they have been vetted for a while. they have vetted a lot of things and plunged us into a financial crisis a few years ago. there is the risk of lending people. this model has not been around. they talk about extra fees added to the financiers that will happen if the loan doesn't go through. if they have to seek a third party lenders are going to have to pay more money and create a transaction fee. >> so some of the customers,

small businesses, people who want to get elective surgery -- things that banks will not cover. >> can they make me shorter? maybe they can borrow money for that. >> we will continue to follow this. lemley club has just filed for an ipo. thank you for watching. all the headlines all the time on bloomberg.com. ♪

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