♪ 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 people's log-ins were taken, getting personal information from their accounts, and then of course cambridge analytica, which we talked about a year ago to this day. the political consulting firm 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 of facebook users were impacted. 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? it goes back to what i've been 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 ersonal information from site 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 joked a little about 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. it matters what they do. 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 what they see. because they are trying to sell ore of these spots to advertisers and they plan to devices as droid well. amazon customers using the app 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 display ads, maybe a brand logo

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%. how big a threat is amazon to facebook when it comes to advertising? sarah: to facebook and google, they are "the" threat. there is really no one else two dominant e mobile advertising. 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 advertising for years. ramping up.owly ut we see they want to use it 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. 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 company 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 in information management took information and trade secrets with them to zeus. them leapfrog years of work, quote up quote. 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. a start-up win them over? closer look. >> 2019. the year that so many highly anticipated tech companies plan to go public. among them, two stand out. a race best described as focused versus frenzied. frenzy being uber, engaging in massive global expansion and retreat. food delivery, bike sharing, elf-driving cars and flying

axis, plus a valuation that bankers say could soar to $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 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 2018.to in ottawa city, in it is keeping up with its top scooters etting in on sharing, buying motivate which runs "the city" they are w york and

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. revenue jumped 541%, to $2.2 billion last year, from just under $343 million in 2016. an estimated valuation of $20 billion to $25 billion. despite losses increasing to $991 million in 2018. while lyft was second out of the gate to launch, it is first to aheadlic, weeks or months of uber. in an increasingly volatile tech market, the hope is investors will hail lyft's ride. emily: lyft's ipo roadshow went into new york today. demand es saying the exceeds available shares. 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 sorkin-esque interviews with executives. very heavy on culture, personality. we're going to upend the transportation industry. 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 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 prospective investors were very interested in a path to profitability. lyft assured investors 2019 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. i think there's always an argument that bigger scale allows you to operate more efficiently. this has been sort of a land grab period for lyft, while uber 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 will break down the results next. we are live on twitter. follow our global breaking news network, tictoc, on twitter. this is bloomberg. ♪ past fast

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. they 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. given the backlog, game releases 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 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? this game rough approve 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. fortnite and pubg, the world's 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. this comes after a september 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 giant asset that 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? next.talk to two of them 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. ♪ want more from your entertainment experience?

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emily: i am emily chang and this is "bloomberg technology." hundreds of millions of facebook one of the most persistent lyft is how it can losses. it's next year, ride hailing has yet to prove itself as a sustainable these concerns could impact uber which is expected to go public in the next couple of months. lyft is saying there is more supply.for shares than oins us to discuss is mike and ann. good to have you both here

together. very early, 2010 and this is right after you had joined the company, so they had chance on you and you took a chance on lyft. >> absolutely. >> what did you see? >> on the very first pitch they in, it's a pitch i still have and i like showing it to stanford students. they talked a lot about why ransportation was so critical to the fabric of the united states and they started off with went to railways and showed highways and how actually physical landscape of the country changed and the economy changed as a result. in a question that john and posed that i thought was really fascinating was what's hat next transportation revolution? and do you want to be a part of it. and my answer to that and mike's to that at that time was absolutely yes, there was nothing else on the market that transportation revolution.

emily: uber did not exist? ann: no. michael: it was a black car service at that time, not ride sharing. ann: uber taxi and then uber black. when they launched, there was still a pocket of time where the only comp that we actually could find in the market was zip car. that's what we were comparing it against and the market, is there bigger than that. emily: mike, what did you see? invest crazy too to y like we do, you have have an opinion in where is going. we had this idea that the lets you locate something that is unused and the smartphone would let you locate and hing that is unused moving. so we were just looking for network transportation and when john walk in the room and describe their vision for

how things could be, ok, those guys.ur emily: this is a company that is losing half as much money as it is making. in brought in $2 billion revenue last year. hey lost $900 million in heavy rue. how do you justify that to public market investors who are going to buy in now? ann: i think this is really about the long game. early stage urn as investors to the origin story why nine years ago we were complete buyers and why we are the vision of what is. i think the really unique nature this business is that this transportation revolution still hasn't played itself out. so much more to be done. there is so much more to go. think about the potential of network transportation as it, the abilityt for people to not just share the ride, but actually figure out the different ways in which they can get if point a to point

whether that includes an aton nous vehicle or not. many ways we are adding and thinking about transportation that is actually going to start to change where live and how they make choices about where they go. and so we've just scratched the of what's possible here and that's my excitement about the future. not unusual for a tech company to go public and still not be making money, but never saying they may make money. they say in their risk factors, never be profitable. why should investors buy into that, given the extreme nature of this particular case? for: i don't want to speak lyft and their numbers too much, period.lly in a quiet emily: please do. mike: some markets, the product so compelling and the value proposition is so compelling, it will be satisfied. ride sharing was one of

these ideas, i don't know if you first time you ever ook a lyft, you knew instantly it was going to be a huge success. people throughout the world get to energized to places this way. when the market will be satisfied, sometimes the best is 20 move e value very quickly. so our belief is that ransportation is being reinvented and that it's a race o be the category king and so in the early days, value gets created by gaining market share, by satisfying the demand, that's not always the right strategy, but i think in this case, the that have been aggressive and moved quickly have won over the ones that didn't. emily: i free it is something that you want, something that i to use several times. that said, what is the value -- to say this isn't the next snap you go public in a year aluation and then a later it's worth a third of what

it was? there is a quiet period, there is very little that i can actually say about company specifically and the financials specifically. kind of return to that notion at the original pitch deck that john and logan at the you look founder's manifesto and then founders letter, there is this incredible why they built this business. and oftentimes, mike and i have at a company and we're we sting in businesses that believe will be here, not just 0 years from now, but 25, 50 years. we call these thunder lizards, we call them legendary whatever you want to call them, right. we want to see companies that length in ncredible terms of the story that they

have and one of the things that that seen consistently is these companies that have that haracteristic have this storyline to them that's consistent from not only day throughout the length of the story of the business. and when you compare these three i have seen, there is this incredible story f why this company needs to exist and why we believe that these founders, idea, ears ago was a good that story is so consistent and hat creates an authenticity that we absolutely love and founders that we invest. analysts said e arlier, there is not enough information -- on that.can't comment emily: you invest super early attention to ch the massive investments, you

invest so early that your returns are massive. you share or do some of the math for us in terms of how big are your returns in this case that sort of shed light on your model in general? ike: are you comfortable saying what the valuation is? $5 we invest indeed a million valuation so many, many times. good one for us. mily: mike, walk us through how the strategy has paid off for you. you were one of the first guests 10 years agoalmost now and this is kind of a new hing what you were doing, microinvesting. mike: i think there were a couple things. amounts that llar we want to do invest in these companies, we saw lean start-ups thing.ng a the other thing that we were eally excited about was democratizing innovation. i tried to talk ann into

joining, it took a while. you figured this out long before anyone else did. what is re is interesting and a good bit of karma. one of the companies that ann backed, your first even, task karma, and in a feat of lee introduced us to logan and john. worked its way around for both of us. emily: what trends are you about? mike: the main thing i'm interested in is what i call "iron man" suit on preneur. a lot of the -- thunder dd "iron man," lizard. lot of the hors, a commodityize to the person doing the delivery or the service. we think there will be a new service provider that we like to call on supply where

eating the robots jobs, a.i. and software are to g to allow individuals force multiply and find customers and serve customers nd have billing system in a back office. there are five million gig solo s, but 50 million preneurs in the united states. the next set of things we want for are things that empower those people and there is a little bit of a conceit, i valley that icon doesn't recognize that there is whole lot of people who have self-starter instincts and can make things happen and aren't just passive consumers. what do you think about the tech lash that is happening, against google and facebook and amazon and big ech, is that a lasting phenomenon? ann: we have seen this story roll out before. anytime there is a massive shift, a gigantic set of monopolies is created. processing about power, i.b.m. and dak were huge

that time period, but ultimately microprocessors along and disaggregate the power that they have and software becomes the huge thing. the web comes along and microsoft power ultimately that, ed and then out of emerges. of monopolies what you notice is in that that ine, every time that month moply power looks totally invincible, that's when the next set of incredible monopolies is created. emily: you were an early facebook, twitter, passwordsntroversies, were visible in facebook. social network that can -- is the scale too big? mike: no one replaced the

mainframe or windows. there is usually anew thing that emerges where a lot of energy to. investment goes that's what we're really interested in is what will be that xt set of companies perhaps leverage decentralized democratizing the things that those companies are creating g and monopolies around. i know it's about to happen. every time the government starts potentially do after monopolies, quote, unquote, the thing is going to happen. i.b.m. was in a lawsuit with the government, that's when microsoft happened, when microsoft was in a lawsuit with he government, that's when google happened. it's ironic how the government the n never remedies urrent monopoly, it doesn't matter, new architectures emerge and makes it irrelevant. -- te

the power will increase and the power comes from the much y to aggregate so data. monopolies, data hat will deaggregate that, the echnology to the edges of the network and apply intelligence to them. of rated intelligence, all the incredible things that models round mutating happen at the edges. emily: federated putting an "iron man" suit on people. good to have you here on the show. thank you so much. coming up, the price of failure, on an experimental alzheimer's drug is halted and is in a freefall. e'll look at the future of

biogen, this is bloomberg. ♪

emily: $18 billion after the its experimental unlikely todrug was be effective. they are halting research on this particular drug.

on ver, they'll be working other treatments for the disease that affects 5.5 million sixth leading he cause of death in the united states. to discuss, i want to bring now senior health reporter, robert, what was so promising didn't work that out? robert: so they have been leading theory of lzheimer's disease targeting plaques in the brain that are found in a person's brain during autopsy. they have been pursuing the theories for many years. never blem is, there has been any proof that the plaque disease as being a mere consequence of the disease. what has happened over the last there has been failure after failure after amyloid targeted drugs. ao gen thought their drug was

little bit better, more potent, early stage trial where there signs of some hints effects on some cognitive processes. when they went ahead and did a expensive trial and it just showed nothing in the there was no hint of efficacy at all. mily: a year before the results of the late stage trial were even due. any help out there elsewhere or any other companies? obert: we have been reporting on this today, this does have he critics questioning why, there has been a vocal minority of scientists, why is the drug focused on heavily this one theory of alzheimer's disease when quite a number of have failed. we have been too narrowly expand in one area and the horizons and focus on other

things. that are other approaches are earlier stages starting to emerge. they are working on another in ein as it's found patients of alzheimer's disease. i think what people have been the drug companies have got so invested in this the potential side of the molecule, billions upon nothing outdollars, there, and nothing for patients, it's been very hard to stop. momentum of have a their own. biogen what else does have going for it? on multiple can shrero sis. robert: they still have another drug, still in advanced trials. it's also an amyloid targeted

promising, but very murky results. i don't think people are going waiting with bated breath for that one. it's still going ahead. they're not the same, you never know. something could work out of that. they have a good atrophy,rug for spinal one of the biggest successes, but the problem is they're about to face competition, another has for spinal py drug muscular atrophy and another is drug g on a competitive that could come out in a while. they're facing competition with that. hey won't have that alone anymore. they're strong or multiple they going hat are to do now? and a, looking to m this was the, one of the big things in their future. not only did it not work, it had

it a tle -- they stopped year early saying this is totally futile. we're not going to keep going. emily: interesting and certainly disappointing. thank you for your reporting on this today. up, apple has been on a hardware spree this week and analysts are taking notice. what analysts are expecting to o into the iphone makers upcoming streaming event next. this is bloomberg. ♪

emily: apple has announced four new products this week including new ipads, imacs, and airpods. bullish. are turning the stock has gained in the nine trading days. we asked when they are expected

introduce a new streaming service. what is making analysts so optimistic? >> i think it is this new reinvention that apple is trying is a sign it's working. it used to be a hardware company. this is almost uncharted territory. analysts as usual are getting bullish ahead of it and modeling in a lot of future revenue from the new streams. emily: the information reporting apple could offer bundles of streaming services for one discounted price. what is the significance of that? >> if you think about amazon that everyone talks about. you start with 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, all of the things it has into one bundle and charl might don't know what it

be. maybe spend $100 a month on it. it's a lot of revenue for apple. it might be an attractive service for apple users. "new interesting, the york times" is reporting that the apple news service is a new d to unveil subscription service would include the "wall street journal." coming from the "new york times" and the c.e.o. has some hey are holding back 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. they're not so keen as component manufacturers. emily: what are we going to be watching for? >> i think the bundle will be a. >> this is one of the challenges of doing an online services business. big deal for sure and one extra thing would show how serious apple is -- is it going to justify 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. we'll be watching for that. that does it for this edition of "bloomberg technology." we are, as always, livestreaming on twitter. you can check us out there on follow tictoc on twitter. this is bloomberg. ♪ >> the following is a paid

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