♪ ♪ emily: i am emily chang and this is "bloomberg technology." hundreds of millions of facebook passwords, visible to its employees. the social network admits to an egregious flaw dating all the way back to january. plus, amazon has been beta testing video apps on ios for months, the latest attempt to grab a bigger chunk of the $129 billion digital ad market dominated by google and

facebook. lyft's ipo roadshow kicks off this week, as the ride-hailer gets ready for what could be the biggest u.s. public debut so far this year. we will discuss the prospects with some early investors. first, our top story. another day, another facebook controversy. the social network admits the passwords of hundreds of millions of facebook users were visible to employees at the company from as early as january. the login credentials stored in a non-encrypted, readable format that any facebook employee could read. facebook disclose the flaw after the security blog krebs on security reported on it based on a so-called internal source, and thursday facebook said the problem has been resolved and "to be clear, the passwords were never visible to anyone outside facebook, and we found no evidence anyone improperly accessed them." joining us now. what? >> just another hit at the trust

people have for facebook. this follows the major breaches we talked about last year, when taken,s log-ins were getting personal information from their accounts, and then of course cambridge analytica, which we talked about a year ago to this day. firmolitical consulting that got data on millions of facebook users without permission. it just keeps coming. emily: facebook isn't giving specific numbers. they said hundreds of millions impacted.k users were millions of facebook users, most of those hundreds of millions of users were using the facebook lite app, which is for emerging markets. millions of user accounts, and thousands of instagram users also impacted. brian krebs says it could be up to 600 million accounts we are talking about. sarah: that is bigger than most apps we use.

that's a lot of passwords. facebook will be letting users know if their password was involved. emily: but they found out about this in january.they didn't admit to it until now. at least for four months, facebook has known about it. shouldn't they have told users four months ago? sarah: absolutely. they are clearly saying after krebs on security reported first. krebs was writing about it from the perspective of a source. it's unclear to me, if that source hadn't told him about it, would we ever find out about this breach? beenes back to what i've saying. facebook doesn't think of security in terms of security from itself. they think about security in terms of third parties, breaches, attempts to share personal information from, by developers. but when it comes to the information facebook is gathering and storing, for them it is all in the family. very transparent company, they can keep tabs on that stuff. emily: it has never happened as

far as we know at this scale, although there have been smaller incidents at twitter, github, of this happening. but talk about the irony, given that mark zuckerberg is trying to pivot to privacy and more encrypted messaging, when they can't even encrypt our passwords? sarah: he spoke a little about that, when he was making that. strategic transition. maybe people won't believe us, when we say we care about your privacy. i mean, this is another example of why people are concerned. it's not that they don't trust facebook when they say things. it is more about their actions. this stuff, it doesn't matter how much they say they care. emily: facebook says the issue has been resolved. for month later. sarah, i want to ask you about our next story as well. as we mentioned, facebook dominated the $129 billion digital ad market in the united states along with google. together they are expected to make up 60% of total digital ad

spend this year. but amazon has become a serious challenger, and is now selling video spots on its shopping app. i want to bring in spencer, in seattle. what do we know about what amazon has been testing here? spencer: we just know that they have been testing brief video ad spots on their shopping app on ios devices. that has been in beta for a couple months now. all indications are that they like what they are see, because they are trying to sell more of these spots to advertisers, and they plan to expand to android devices as well. the appustomers using on android devices could expect to see these advertisements as well. basically it is amazon reaching further into the digital ad market and providing another vehicle for advertising. whereas most of their advertising revenue now is from logoay ads, maybe a brand that links to their store, or

photos of their products and descriptions of their products, this adds another dimension to that, with mobile video. emily: now, by one estimate, amazon's digital and share will grow to 8.8% this year, and google's will slip to 37.2%. amazon tothreat is facebook when it comes to advertising? sarah: to facebook and google, they are "the" threat. there is really no one else players --the two challenging the two dominant players. advertisers want another option. they have seen problems, for example with the new zealand shooting last week that went viral on facebook and youtube. they want an alternative to the social networks, places where that kind of content can surface, and amazon is giving it to them. emily: you wonder, spencer, ads like this seem to be an obvious

option for amazon. why has it taken them longer to ramp up their ad products? spencer: amazon has been wary of amazon for years, slowly ramping up, but we see they want more. the fear has been about compromising the customer experience. are we going to devalue our web store, by cluttering it with advertising in a manner that disappoints our customers? so what they have been doing is slowly adding it, and learning that a lot of customers supposedly find these advertisements helpful, so that is why they are adding more. on the video side, it addresses a shortcoming on amazon, where simply seeing a photograph of a product, or a description of it, or even a written customer review of it, is not the same as seeing a video of a product used or maybe assembled. what is happening, amazon loses some of that traffic to youtube, where maybe an influencer is doing a demonstration or

testimony about a product, amazon loses that. it's like a video is a weakness, and it needs to fill that -- its lack of video is a weakness, and it needs to fill that gap. emily: what are other levers amazon could pull? spencer: on the advertising side, in the prime video service, you could see more advertising there. you could see more tieups with influencers and affiliate marketing programs. like, if you go to youtube to watch an influencer use a product, they could have an affiliate link that goes directly to amazon or some other site, so amazon could try to lock in more that way. there's definitely more and more headroom for amazon in the advertising space. emily: we talked about instagram commerce yesterday. does facebook really have a strategy to take this on, even as it pivots to a more private company? that could also impact ad products, and amazon as well, that seems it could be a big

deal. sarah: i think facebook is really going through a tough strategic decision-making time right now. they are thinking,, how much do we have to pivot into encryption, how much do we pivot into stories? on instagram, it is very much the brand advertising, the aspirational, what you could be if you owned this product, which is very different from the more intent-based advertising you see on amazon. but certainly they are concerned about the rise of amazon, and that is one reason that they built other products, like their portal device that is supposed to compete with the amazon echo. these companies are getting more and more head-to-head. emily: bloomberg's sarah frier, spencer soper, thank you both. a race we will all continue to watch. tesla has filed two lawsuits against former employees who left to join startups in silicon

valley and china, accusing them of stealing confidential information. the government claimed -- comey claimed a former engineer on the autopilot team uploaded more than 300,000 files and directories, and copies of source code, to his personal cloud storage account before quitting the company in january and joining another company. in a separate suit, tesla claimed former employees working in warehouse and is to be asian management took information and trade secrets with them to zeus -- and in information management took information and trade secrets with them to zeus. lyft, what executives are telling investors next. and if you like bloomberg news, check us out on the radio, in the u.s. on sirius xm. this is bloomberg. ♪ ♪

emily: lyft is pitching itself as a fierce challenger to uber, and investors are taking a close look at america's second largest ride-hailing company before its debut next week. candy started win them over? we looked closer. >> 2019. the year that so many highly anticipated tech companies plan to go public. among them, two stand out. focusedest described as versus frenzied. frenzy being uber, engaging in massive global expansion and retreat. bike sharing, flying taxis, and

toaluation that could rise $120 billion. lyft on the other hand might best be described as focused. it grew out of the cofounders' 2007 startup that connected college students looking for brides, and has focused almost -- looking for rides, and has focused almost solely on growth, reaching 99% of the country in 2019. lyft now claims it controls 39% of the u.s. ride-hailing market, and is just starting to go international, launching in toronto in 2018. it is keeping up with its top rifle by getting in on scooters and bike sharing, buying motivate, which runs the citi bike in new york, and they are working on self driving cars. beefing up staff working on autonomous to 300 people. they have courted major

investors like rakuten and andreasen horowitz, but aiming to go public, they hope to double the ride count from 500 million in 2017 to one billion in less than one year. to $2.2jumped 541%, billion last year, from just under $343 million in 2016. an estimated valuation of $20 billion to $25 billion. topite losses increasing $991 million in 2018. while lyft was second out of the gate to launch, it is first to go public, four months ahead of uber. in an increasingly volatile tech market, the hope is investors will hail lyft's ride. ipoy:'s ipo road -- lyft's roadshow went into new york today. joining us to discuss, eric newcomer, who was at the event. you also saw the investor

roadshow video, which is getting a lot of praise. sounds like it is more of a short film. [laughter] what do they say? eric: super hip. a lot of walk and talk, aaron sque interviews with executives. very heavy on culture, personality. eventually they get to the numbers. very topline focused, with a little bit of a look at contribution margin. but upbeat, lots of music, we are quirky, fun lyft. emily: speaking of that, as i was watching that last story, i remembered my first interview with logan green, who came in with a giant pink mustache, on the original lyft cars. but let's get serious. there's a lot of questions here about the numbers. we spoke to an analyst that says that lyft hasn't given nearly enough financial information to build a decent financial model

whatsoever. take a listen to what he had to say. >> i think it gives uber the opportunity when they file, to competitively take it to lyft lyft and be more transparent than they have been. but what you get right now is what you get, and you can decide if you want to focus on the top line, not worry about the profitability the way had they -- the way they asked you to do. emily: are you hearing similar complaints from investors or analysts? eric: definitely my sense coming out of the saint regis was that perspective -- prospective investors were very interested in a path to profitability. lyft assured investors 20 would peak -- 2019 -- a would be a peak spending year, and money from the ipo would sustain them. but the idea that it will be hard to model out when lyft will be profitable, therefore justifying whatever valuation it reaches, is a persistent question. that will be true with both

companies. i think there's a level, investors will always complain, we wanted daily active users and you gave us monthly active users. there will be quibbles about whether there's enough data to provide the models. but i wouldn't be surprised if uber tries to take advantage there, and give investors what they want in terms of building out their models for these particular businesses. emily: now, lyft does make some jabs at uber in the presentation, saying we are only focused on consumer transportation, not food delivery or trucking. how are they going to get their costs down? eric: getting costs down would be partially reducing marketing spending. always anere's argument that bigger scale allows you to operate more efficiently. this has been sort of a land while uber for lyft, has been on the defensive, making sure they spend to gain territory, and once you have that territory, the hope would

be you don't have to maintain that level of marketing because you already have the customers, and you just reengage them. that is the theory. we will have to see if that will bear out. emily: eric newcomer on the road for us following lyft. thank you so much. coming up, tencent reported results that missed estimates amid changes in cloud computing and slowing games approval. we are live on twitter. follow our global breaking news network, tictoc, on twitter. this is bloomberg. ♪

emily: tencent reported the biggest decline in a decade, as the chinese internet giant increased spending on cloud computing, after game approvals resume after a month-long regulatory freeze. expect game releases to be slower as a result. >> monetization approval for new games resumed in december. seven new games for which we have publishing rights have received approvals. game releaseslog, for ourselves and the industry as a whole are likely to be slower than in previous years. emily: joining us to discuss tencent's results, selina wang. why the big surprise?

selina: investors weren't prepared for the big increase in spending, operating costs up as they try to diversify away from gaming. last year, tencent was really hurt by the freeze in regular terry approvals for -- regulatory approval for games. now they are investing in other areas, because they don't want to be bound to the whims of sensors and regulations, and they are expanding into these new areas. this is great in the longer term for investors, but in the short-term it is a lot of margin pressure. emily: is the worst over? already through the game approval issue? selina: the coast certainly is not clear. they are finally starting to get an early start of some approvals, but two of their biggest games still haven't received a green light to start monetizing. world's and pubg, the most popular smartphone game right now. gaming is one thing, but you also have to have to deal with regulation in entertainment and all the others.

they talked about chinese costume dramas, now being scrutinized by regulators, so they expect some decline in online advertising revenue because they can't monetize as many of those shows right now. emily: and a management shakeup? selina: interesting changes at tencent. we recently reported that they are asking 10% of the management to either step down or leave the company, so that they can make room for younger, fresh blood, new management to come through the ranks, trying to cut out a lot of inefficiencies. a septemberfter giant overhaul and restructuring of the company to shift towards what the management has called a shift from the consumer internet to the industrial internet, which is just a fancy way of talking about the emergence of 5g, connected devices. they want to capitalize on that, and do a better job servicing businesses. they are expanding in cloud computing, enterprise software services, something called wechat work. this will be painful, because

they are far behind alibaba, especially when it comes to cloud computing, and it will take a lot of investment. emily: that was my next question. comparing how tencent is performing to alibaba, baidu? selina: they have this giantw asset thate is very important. wechat has over one billion users, and the advertising ad load is still low compared to facebook. in the enterprise space, alibaba has spent much more time developing advanced capabilities in cloud computing and other business-to-business services, but it's not just alibaba they have to deal with. there's also companies, whose users are vying for attention. the short video apps are incredibly popular in china. so users in china are being split between all these tech giants, and tencent has to keep outspending them to convince them to return with fresh new content. emily: all right.

selina wang for us. thank you so much for that reporting. coming up, it is the first big tech ipo in the united states for 2019. how are lyft's investors reacting to the roadshow, and what do early investors have to say? and later in the show, an experimental drug to cure alzheimer's is a failure. we discussed where the fight stands in the biotech space, as biogen loses 30% of its value. this is bloomberg. ♪

emily: this is "bloomberg technology." one of the most persistent questions for lyft is how it can reverse losses. they told a room of potential shareholders to expect a decline next year. it has yet to prove itself as a sustainable business and these concerns could also affect over -- uber, which is expected to go public in the next few months. of lyfte is an investor

and is on the board. you invested very early, 2010. this was right after you had joined the company, so they took a chance on you and you took a chance on lyft. what did you say -- see? their very first pitch i still half and i like sharing it with stanford students, but they talked about why transportation is so critical to the fabric of the united states. they started with canals and went to railways and showed highways and how actually the physical landscape of the country changed and the economy changed as a result. the question they posed was what transportation revolution and do you want to be part of it? my answer to that was absolutely yes. there was nothing else in the market that was a transportation

revolution. existed at already this point, though, right? alexa know, did not. >> i think it was a black car service at the time, not rideshare. -- >> no, it did not. even when they launched, there was still a pocket of time where the only competition we could find in the market was zip car. mily: what did you see? >> when you invest as crazy to early aswe do -- too we do, you have to have an impression of where the company is going to we had the idea that the internet lets you locate something that is unused and the smartphone would let you locate something that is unused and moving, so we were just looking for network transportation. when logan and john walk into the room and describe their

vision for how things could be, we are like, "those are our guys." emily: this is a company losing almost half as much money as it is making. how do you justify that to public market investors who are going to buy in now? >> i think this is really about the long game. we always return as early stage investors to the origin story and why nine years ago, we were complete buyers and why we are still buyers of what the vision is. i think the really unique nature of this business is that this transportation revolution still has not played itself out. there is so much more to be done and so much more to go. if you think about the potential of network transportation as mike talked about it, the ability for people to not just share rides but figure out all the different ways in which they

can get from point a to point b, -- if thatlues includes an autonomous vehicle or not, there are so many ways in which we will be adding and think about transportation that where people live and how they make choices about where they go. we have just scratched the surface about what is possible and that is my excitement for the future. for a it is not uncommon tech company to go public and still not be making money, but nevers saying they may make money. why should investors buy into that? >> i don't really want to speak for lyft or their numbers too much, especially in a quiet period -- emily: oh, please do. >> a way i look at some markets, the product is so compelling and -- the way i look at some markets, the product is so

compelling and the dark evaluation is so compelling, it will be satisfied. the first time you took a lyft, you knew instantly it was going to be a success. when the market will be satisfied, sometimes the best way to create value is to move very quickly. our belief is that transportation is being reinvented and that it is a race to be a category came. in the early days, value gets created by gaining market share, by satisfying demand. that's not always the right strategy, but i think in this case, the companies that have been aggressive and moved quickly have won over the ones that did not. emily: i agree it is something that users want. it is something i want. i have used lyft several times. that said, what is the value of it? who is to say this is not the next snap where you go public and a year later, it is worth

1/3 of what it was? >> again, it's a quiet period and there's very little i can say about the company specifically and the financials specifically, but i kind of return to the notion of when you , youat the original pitch look at the founders' manifesto letter, therers' is this incredible consistency to why they built this business. often times, mike and i are looking at a company and we are investing in businesses that we believe will be here not just 10 50 yearsm now, but 25, from now. we call these thunder lizards, legendary businesses, whatever you want to call that. we want to see companies that have this incredible length in

terms of story that they have and one of the things we have seen consistently is these companies that have that characteristic have this storyline to them that is consistent from not only day one, but it goes throughout the length of the story of the business. when you compare these documents i've seen, there is this incredible story of why this company needs to exist and why we believe that investing into these founders -- you know, nine good idea.as a that story is so consistent, and that creates an authenticity that we absolutely love. emily: with the analyst said earlier -- there's not enough information, they cannot build a model -- that does not concern you? -- what the analysts said earlier? you invest super earlier and we -- you invest super early, so

early that your returns are massive. thisig are your returns in case, and how does that shed light on your model in general? >> are you comfortable saying with the valuation was? >> we invested at $5 million valuation. many, many times. >> basically, yeah. emily: walk us through how the strategy has paid off for you. you were one of the first guests almost 10 yearsd ago, and this was kind of a new thing you were doing, micro investing. becoming lean startups a thing, but the other thing we were excited about was democratizing innovation and that anybody could be an entrepreneur. i decided it was an incomplete firm if we were not gender

diverse, so i tried to talk ann into joining. emily: you figured this out before anyone else did. >> one of the early companies think it was i taskrabbit, may have been your first even -- in a feat of karma, leah bresky was who introduced us to logan and john. emily: where do you see the biggest opportunities right now? what trend are you excited about? >> the main thing i am interested in is what i call on the an ironman suit solar printer. a lot of the early on-demand commoditize the person doing the delivery or the person doing the service, and we think there will be a new type of service provider that we like to call on supply, where rather

than robots getting the jobs, ai and software will allow individuals to force multiplier and find and serve customers and have billing system in a back office, so there's 5 million gig workers but 50 million solopreneurs in the united states and what we look for are the things that empower those people. there's a little bit a vacancy in silicon valley that does not recognize that there's a whole lot of people who have self-starter instincts and can make things happen and are not just passive consumers -- there's a little bit of a conceit in silicon valley. emily: what you think about the ch?klash against big te >> every time there is a massive technical shift, a gigantic set of monopolies is created. if you think about processing

companybm was a huge that ultimately microprocessors come along and disaggregate the power they have an microsoft becomes this huge thing. then the web comes along and decreases. power out of that, a new set of monopolies emerges. every time that that monopoly power looks totally invincible, that is when the next set of incredible monopolies is created. in the way -- italy: you were in early investor in twitter. we talk about problems at facebook. -- emily: you were an early investor in twitter. we talk about problems at facebook. disrupted? >> i look at it differently.

nobody really replaced the mainframe or windows. i think there is usually a new thing that emerges where a lot of energy and investment goes too, so that is what we are really interested in, what will be the next set of companies that perhaps leverage decentralized data or democratize things that those companies are aggregating or creating monopolies around? i know it is about to happen because every time the government starts to potentially go after "monopolies," the next great thing is about to happen. when ibm was in the middle of a lawsuit with the government, that is when microsoft happened. when microsoft was in the middle of a lawsuit with the government, that is when google happened. it is ironic how the government action never really remedies the current monopoly, but it never ends up mattering because the technology industry is just so regenerative that new architectures emerge and make it irrelevant. emily: do you agree that the

power of facebook and apple and amazon will decrease? >> i have to. right now, their power comes from their ability to aggregate so much data. what will disaggregate that is the technology that allows you to completely venerate your information to the edge of the network and apply intelligence. at kinds of things i look today i called federated intelligence where all the things that happened around mutating models happen around the edges. : federated intelligence -- i'm going to add that to iron -- what did you say? >> putting an ironman suit. emily: great to have you on the show. coming up, the price of failure. research on an experimental .lzheimer's drug we look at biogen next.

this is bloomberg. ♪

-- that isbillion how much of biogen's value was wiped out after it admitted it experimental -- admitted its experimental alzheimer's drug was unlikely to be effective.

however, they will be working on other treatments for the disease that affects 5.5 million americans and is the sixth leading cause of death in the united states. i want to bring in our senior health reporter. what was so promising here that did not work out? drugmakers for many years plaques inargeting the brain that are found when you do an autopsy of a person with alzheimer's. they have been pursuing this theory for many years. the problem is there has never been any proof that the plaques actually cause the disease as opposed to being a consequence of the disease. over the last number of years, there has been failure after failure after failure among drugs among many of the big drug companies, and biogen has had some of the most invested in

this area and they thought that the drug was a little bit better . people were hoping it was more potent. they had an early stage to trial -- stage 2 trial where there were signs it could have some affect on cognitive processes, but when they went ahead into a very expensive trial, it just showed nothing. no hint of efficacy at all. emily: and this is a year before the results of this late stage trial were even do. out thereny hope elsewhere at any other company? their reporting today does have some of the critics questioning why because there has been a vocal minority of scientists asking why the drug industry is so heavily focused ofthis one theory alzheimer's disease when quite a number of drugs have failed now. they say we have been too .arrowly invested in one area

there are some other theories, some other approaches starting to emerge. working onompanies another protein found in patients with alzheimer's disease, but people i talked to tell me drugmakers have gotten so invested in this theory and the potential size of the market, billions upon billions been very, it has hard to stop. these programs have a momentum of their own. biogenwhat else does have going for it? i know they are also working on multiple sclerosis. >> alzheimer's was one of the biggest late stage things in their pipeline. they are still in advanced trials. it is also an analyte targeted drug.

promisinge produced but murky results, so i do nothing people will be waiting with bated breath. you never know -- something could work out of that. after that, they have a good selling drug for spinal muscular atrophy and that has been one of the best successes in recent years, but they are about to face competition. novartis is coming out with a gene therapy drug very soon. holdingsings -- roche is also working on a competitive drug for that. they're very strong on multiple sclerosis, or that is kind of a mature market. people are asking what they are going to do now. are they going to have to look to m&a? this was one of the big things in their future. not only did it not work, it had

so little efficacy, and they stopped it a full year early. : interesting and certainly disappointing. thank you so much for your reporting today. coming up, apple has been on a hardware spree this week and analysts are taking notice. what analysts are expecting to go into the iphone maker's upcoming streaming event next. this is bloomberg. ♪

emily: apple has announced four new products this week including new ipads, imacs, and airpods. the stock has gained in the last -- in nine of the last 10 trading days.

what is making analysts so optimistic? >> i think it is this new reinvention that apple is trying . it used to be a hardware company . for more than four decades, it has mostly been a hardware company. it is almost uncharted territory, but analysts, as usual, are getting bullish and modeling in a lot of future revenue. emily: the information reporting ofle could offer bundles streaming services for one discounted price. what is the significance of that? >> if you cannot amazon prime, the one everyone talks about, free shipping and layer in music and everything else, and suddenly it becomes something you cannot live without. apple could put together video streaming, apple music, icloud, stories, everything it has got in one bundle and charge you --

i don't know what it might be. revenue for apple. it might be an attractive service for apple users. to -- alsoe is also a newed to unveil subscription service. the ceo has said they are holding back some articles from apple news. >> this is one of the challenges of doing an online services business. tim cook is an expert at dealing with component manufacturers in asia who are really keen on getting into the iphone. now he will have to go into newspaper publishers, movie stars, directors. they are more wary dealing with tech giants. emily: what are we going to be watching for? >> i think the bundle will be a big deal for sure and one extra seriousuld show how

apple is -- is it going to the services to apple devices, or will they be available on android devices, too? that would be a big deal. emily: that would be a big shift. thank you. that does it for this edition of "bloomberg technology." we are, as always, livestreaming on twitter. this is bloomberg. ♪

welcome to "daybreak australia." sophie: we are counting down to asia's major market open. paul: here are the top stories we are covering in the next hour -- wall street closed higher. wall street welcomed the dovish look at the fed. sterling had its worst day in two months as a no deal brexit loom