theme for a lot better price >> you got 15 seconds. >> visa rolls out into mastercard mastercard got more momentum i love to see these companies move away from signatures. i am in there with you >> great conversations thank you so much for watching "power lunch" begins right now >> i am sara eisen, here is what's on the menu mark zuckerberg is facing his biggest test yet as ceo. he's set to testify just an hour from now of the scandal. is this a water shed moment for facebook and silicon valley. leaders taking major steps to ease trade war fears is it a green light for the bulls? >> it is a equal payday, women on average pays 20% than men corporations what you can do to change the gap

"power lunch" starts right now all right, everybody, welcome to "power lunch," i am tyler mathisen, glad you are with us, what a busy two hours we have in store the bulls are in charge right now. we are off session highs the dow was up more than 350 points at its high today exx exxonmob exxonmobil and caterpillar and the nasdaq at 100. let's take a look at the fang stocks how about facebook higher, yes, ahead of mark zuckerberg's testimony >> i am michelle caruso-cabrera. >> walmart is partnering with post meate. >> volkswagon is planning to

replace the ceo the german automaker is struggling to put its name behind it >> carl icahn is striking a deal, he's selling federa federal mogul to tenneco for $5.4 billion >> let's get to bob pisani >> we have held those gains. we had a koucouple of self progm coming through around 11:45 eastern time you see two sharp dips, each time we have recovered here. the one little part of the market that's solo for a little bit. technology stock take a look at the etf, that's the xlk moving to the downside starting to recover already.

faang stock you heard from tyler, they're up and netflix is up a little bit more earlier in the day. those stocks are still in the green most of them almost 1% sector, i like energy has become a market leader but it has been very late in the last few days we got a nice move up in oil today. tech is still up and financials and industrials, these are all the right growth stocks leading the market i want to highlight energy, we have been waiting a long time to show any leadership. these stocks under dramatically perform the rest of the markets. conoco and phillips, the only s&p stocks at a 52-week high it is rare to see these guys move 4% of the day s&p 500 is starting to stick its head up in the last few days >> interesting change to watch bob, thank you we are an hour away from mark zuckerberg testifying on capitol hill

our reporters have all the angles have this one covered let's begin with julia boorstin. >> reporter: in just an hour, mark zuckerberg will testify in the hearing room right here in the senate building. there is folks lined up here all day and they're all waiting to see the ceo of facebook get grilled by 43 senators each of those senators will get five minutes to ask a question of zuckerberg. we are waiting for his staffers heading here as they get ready for the testimony. zuckerberg did meet with a handful of senators yesterday. today he has been focused on preparing his big four hours in front of those 43 senators we hear that he's very much focused on stressing his and facebook's accountabilities as

well as all changes they are implementing to make sure this does not happen again and they are protecting users he'll highlight changes using safe guarding and limiting information that developers can access and building better controls for both users and facebook facebook announced another initiative this one is a data abuse bounty program, facebook will reward people who'll report any misuse of data by app developers. if it finds data, users will shut down the app and take legal action now, legislatures inside here, they are likely to talk about the potential regulatory protests including the proposed on the ads to regulate political ads. twitter tweeted out that it absolutely supports the honest ads act. it is interesting to see how facebook rival is trying to get ahead and think about how they could be called here on capitol hill

guys, back over to you >> thank you very much dierdra bosa what's the mood right there? >> it feels like business as usual. full of facebook employees entering and exiting it is hard to know because we are across from a busy street from headquarters. they won't let us onto the property we approached some employees who tell us they are not allowed to talk to media. it feels like a fortress right now hunkering down there is a sense of silicon valley that facebook is a catalyst for more over sight and regulation at the tech industry at large we have seen what happens with the social media stock in the wake of the cambridge analytica and twitter and snap there is the sense that regulation is becoming inevitable and it is on the way. that's going to affect the big tech giants like google, alphabet google and amazon and

apple despite tim cook's confidence that he would not be in this position nor his company. regulation is of course is what's on every one's lips right now. one called this a seminole moment for the industry. >> yeah, something that investors are paying attention as well. >> what can we expect for zuckerberg and what will the impact be on facebook's business model going forward. let's go to our formal head global business marketing for the company working with mark zuckerberg and sara sandberg he's the author of "becoming facebook," the ten challenges that's disrupping the worldisrug marc, great to have you here >> i expect to be opened and engaged. q&a is his preferred format.

i think we have seen that internal of facebook and outside. he has an unusual debris of control over facebook so he's going to have to helicoptcontin show an unusual degree of responsibilities of what happens there. we'll continue to see and this surprises people a little bit that he's going to focus on what's good for people and not what's good for profit for the simple reason that without people, he does not have a mission and eventually a company. >> we know from prepared testimonies that was released yesterday that he'll tell lawmakers, quote, "that the company did not take a broad enough view of responsibilities over the years of building this platform of connecting 2.1 billion users globally," is that true based on your experience there up to 2015? >> well, it is when you are trying to innovate at this scale, what happens is you have to have a ridiculous amount of optimism to get up in the morning and build the world that did not exist when you do that, you begin to

discover that to be truly successful in the long-term, you have to be very vigilant and i think what we have seen and heard it now clearly for a few weeks that there is been an enormous amount of innovation and it is undeniable and that's the debt that mark is going to try to work off and he'll tell us of game plan today. >> this seems like a case that's disrupted to me. how do they get their trust and footing back >> i think you have to get out of this exactly the same way you got into it. you have to keep building. i use the word, andy grove, the ceo of intel and he would always say you can never build yourself out of a debt or save yourself out of a downturn, you have to build yourself out of it and the spe regulation, history suggests especially consumer technology is not controlled by regulation

like blockbuster and yahoo did not fail their market forces, we have to all remember are controlled by us and the choices that we make by which products we prefer and which products are meeting our expectations that's what mark has to do, step up to that bar of expectations that we have of him taking care of how we feel when we use of this product taking care of this data he has to work out of the hole and back to it >> how did facebook get here what decisions were made, did mark zuckerberg not worry about privacy or -- what was the thinking of the company that would allow to get to this point where suddenly we are finding out that millions of millions of people have had their data stooped. >> the other thing that's so hard of innovation when you are building something new that have not existed before is to know what will happen, you are able

to be successful and to increasingly spending more time planning and not attempt to be successful but planning for what you are going to do if you are to think about what the bad guy will do if we are successful if you attract 1.4 billion a day, some are not great people the process of using the product is not joyful as it used to be you need to swing an over ly correct for that vigilance instead of the session of writing the next line of code. the maturation is something that we see in all great consumer technology leaders it happens to reid hastings and andy grove and steve jobs. >> is this a case where facebook did not see the potential danger in allowing an developer to do with what they did of the data

or were they blind to it because they're going to make money off of it. where does culpability lie here? >> i think it is not enough anticipation i have seen surk zuckerberg walked away from opportunities that would not met with the public -- it is my strong believe having seen mark and cheryl in acti cheryl that this is not a matter of being blind or optimistic or profiteering it is a matter of not anticipating well enough which by the way should be an expectation that we have of him and one he has to rise to. it is just as big of a deal as

willfully making the mistake >> i am having trouble of what the fix is it seems their business model at the center of it is that people go on for free and release their data ill wiwillingly and facebok sells or uses the data how does facebook go forward where a world of that model is under scrutiny and people are objected to it >> they are very clear it is important for all of us to understand that they don't take your identifiable information and sell it on the way out the door to someone else i mean the case with both hogan and cambridge analytica was a matter of that information coming out through an api and not personally identifiable and going through those companies and not being sold to those companies. what fundamentally what facebook is trying to do is build a

relationship between businesses and consumers through advertising. consumer abilities connect to businesses that are meaningful to them and understanding who this person is and access is what advertisers pay for they never pay for receiving data from facebook so of course what they have to concentrate on is an experience that's positive to consumers first and for most without them, you have absolutely nothing and to business secondarily >> mike, i am still waiting for an answer to sara's question if the data cannot be monetized in the future, depending on what kind of regulation and i don't know what institution out of washington or attorney general, it seems that their ability to

monetize will be less. again, how does this get fixed >> make sure you are building something that people want to use everyday but back to your question -- >> it means you don't want to give up the information that makes it free to you you see that trade off >> yeah, i like using but i don't like it if you are going to be giving my data to people and therefore, it is not the experience that i want, right? it seems like they're in a tough place here >> well, understanding people is absolutely the business of facebook you know to the extent that gets restricted by regulation or preferences that people have i think facebook have to work harder and allow them to have a relationship with business when it come to monetizing. >> does it hurt their revenue and ability to make money?

>> i think it is not clear that it will. i do think there is this general notion that if they have less data that it is directly and irreplaceable impact to revenue. it is not clear to me of the particular person is going to have a fundamental impact on whether or not facebook can have great business >> how many data points are there? 517 or a thousand? you would know actually now you are telling me >> depending on person to person 517 is a random number the data point of facebook beyond the core of the people you are connected to and the things you enjoy reading on facebook has marginal benefits to enhancing the advertising business of facebook so you know back to tyler's question, it is not immediately obvious to you that a reduction, a tightening of the amount of data that's being worked with in

acco accordance to regulation and it is going to hit overtime you have to keep working and innovating and it is so much less of regulation where this particular transparency is otherwise. consumers forget that we are really in charge of the product a and services >> michael, leave it there thank you so much for joining us >> mark zuckerberg is about to face capitol hill. >> the bond report mr. rick santelli. tell us about it, rick >> all right, tyler, let's start out with a couple of historic references last time we had 30 billion for a three year was april 14. last time a bigger automobile accident was september of 2014 2.45 right in the middle of the one issue market but it was kind

of messy if we look at the under hood here and what we find is 2.85 covering september and november 2017, here is the biggie 47.6 in directs of the weakest since september of 16. there was one strong spot here, direct bidders, 11.6, best since july of 2016 this yields the highest in an auction since may of 2007. i give it a c-minus, it could have gone d-plus not a great way to start an action series. it is the long maturity that should give us more issues in both directions. let's see how they go. melissa lee and michelle, back to you >> we'll bedeparture we are learning more on the fbi raid of the president's lawyers.

eam eamon javers. >> the reason for the raid was that officials were looking for information having to do with two women who have said they had affairs with president trump in the past decade. one is karen mcdougal and the other one is stephanie clifford who's the porn star who goes by the name stormy daniels. it is not clear what they were looking for within that sub areare subject area it is not clear if they found anything if they were looking at something in michael cohen's office, the president's attorney, they would have had a strong suspicion going en. it is not clear what specific crime they are looking for nbc news is reporting at this hour that the search warrants that were used in this case were signed off personally by the deputy attorney general rosenstein that raises the stakes a little bit going up to the highest

level of the department of justice and not recused from all of this. jeff sessions is recused no comments from the white house on that revelation this afternoon. they are commenting on the big news of the day and that's the departure of the homeland security this morning, tom bossert resigned this morning. here is what sara huckabee sanders said "tom led the white house's efforts to protect the homeland from terrorist threats and strenen our cybstre strengthen our national defense. bolton wants his own people around him in the security

council. >> back to you >> i thought a good relationship, i was surprised to see him go >> reporter: a lot of people were surprised, too. this is surprising given that bossert was one of the most effective person >> this time china boasting the markets. boeing and caterpillar are leading the way. a live report from beijing comes up after this break. hey, what are you guys doing here? we're voya. we stay with you to and through retirement. so you'll still be here to help me make smart choices? well, with your finances that is. we had nothing to do with that tie. voya. helping you to and through retirement.

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uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party. president xi pledging to open his economy how is this message being received in china? live in beijing eunice yoon. >> michelle. the new measures would be put in place sooner rather than later he said that china would lift caps on foreign ownership and securities and lower autotariffs and ease foreign restrictions and manufacturing and empower new state agency to enforce ip

protection jp morgan can benefit because they are looking to expand business here. metlife would be one that you should watch also, in terms of the biggest winner, tesla, was seen as that one because tesla depends on imports and does not manufacture here and the tariffs on tesla cars here is 25%, if that drops significantly and analysts have been telling me that could be a game changer a word of caution, even though the markets were quite excited by xi jinping's speech and thought the softer tone were better for this brewing trade war with the united states, most of the people i have been speaking here believed that xi jinping's speech was und

underwhelming. out of 5.2 million u.s. cars sold in china, only 1% imported and for manufacturing and the new ip agency. few details and some vague time lines and most importantly people here have been telling me that the issue that the speech really does not address the main issue for the u.s. and that's china's industrial policies. we'll have to see warrahether oo the trump administration is apiece by this ty >> let's talk more of where the market is heading next and bringing in our northwestern mutual management with private capital at u.s. bank first, brent, where can i make money for money for the

remainder of this year what's my best investment? >> the equity market still has room to run even though volatility is taking higher. i would not bail on any political news, i think investor tend to over react on all tweets and anything else that happens on the political side. the second part that i want to be clear is commodities because i still believe the boogy man of the market is inflations and not trade wars i think commodities have the ability to make money and diverse portfolios against stocks and bonds moving in the same direction which is what we saw early in the year. >> i have not heard many people talk so favorably about commodities recently, so it is a fre breath of fresh air. tom. >> we would like to say the degree of difficulties have

increased. we think investors should have a balance approach at this point >> when you talk about investing in commodities it is hard for people to buy the copper curd if you are a stay-at-homeinvestor do you have any recommendations for someone managing their own money. >> for the most part, they'll give you what you need i will look into some of those different funds and that's the best way for an individual investor to act. >> you buy the core commodity and you would not say a stock that's leveraged to commodities. you would not say copper en exploration company. you would go straight for the under lining asset >> tom, you think the markets going up as does brad. do you think the fang lead is higher mark zuckerberg is about to testify and the tweet storm. can this still be the leadership group?

>> we see leadership in two areas, one is growth and e technology we see a cyclical uplift key is going to be the earning reports of what we hear. >> gentlemen, thank you very municipal. appreciate much the stock is down, mark zuckerberg says fixing the problem can hurt facebook. we'll ask one analyst as we get ready for mark zuckerbg styi on capitol hill, don't go anywhere, we are all over it right here on "power lunch.

hello everyone, i am sue herrera. russian foreign minister sir guy larov says he has agreed to visit north korea. lavrov added there is no word on a possible sit down with kim jong-un. kim jong-un held a party meetin yesterday to discuss his upcoming meeting with president trump. on monday, the two will meet either next month or early june. production company behind "i love lucy" is now the subject of

a lawsuit against cbs. a southern california sued cbs for the right to obtain trademark. scientists classified alzheimer's disease based on biological marker in the brain rather than symptoms biological signs can show 15 or 20 years before symptoms do. that's the news update at this hour i will send it back to you, ty >> sue, thank you very much. mark zuckerberg will appear shortly, he'll face more than 40 senators whose got questions of facebook privacies and tomorrow he has to do it again. we'll talk to two members on that committee of what they want to hear from facebook's ceo, "power lunch" returns after this

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welcome back to "power lunch" everybody

cayla tausche is live in d.c., high cayla >> reporter: the line for the hearing have been growing throughout the morning since 7:30 i checked of 300 people lined up to get into the hearing. it is going to be a few minutes after 2:15 there is a senate floor vote happening on the nomination national labor relations board once senators vote, they'll trickle into this hearing right behind me at this door, hopefully we'll be able to catch some of them here is who you may want to watch. two democrats and two republicans, this is the group who are unofficially or officially requested mark zuckerberg's presence here you have klobachar who's one of the cosponsors on the bill that's on the table to regulate social media and senator diane feinstein who's critical of the company after the cambridge

analytica breach it needs regulation from congress and you have lindsey graham who told hughes hewitt, he does not like facebook privacy and you have kennedy, he's known for his colorful language and known for holding the feet to the fire of various tru trump appointees to high ranking positions. he has no qualms of grilling people who are on the other side of the table from him. those are some of the lawmakers that you want to watch today when that hearing gets under way. i will let you know when we have specific timing. it will happen just a couple of minutes later than 2:15. guys, back to you. >> got it, cayla, thank you for the run down mark zuckerberg testifies today in front seat of those two

senate committee on the house side he'll testify and joining usare member of that house commerce committee. representative of maryland gentlemen, good to have you here >> good to be here >> representer johnson, do you go into this hearing of proposition already of whether or not there needs to be regulations on facebook? >> no, i am keeping an open mind facebook is an american success story, it enhanced the way americans connect with their loved ones and friends there are serious concerns here and i am hoping that we'll hear from mr. zuckerberg on how to address those concerns is facebook a content provider or are they an informational channel for distributor and if they are a content provider, how

do they go about setting the rules for what kind of content they're going to display and who makes those kinds of decisions within the company those are the kinds of things i am looking for >> representative sarbanes how about you? >> what we know, there has to be some regulations i am going into the hearing wanting to hear what zuckerberg says of the great responsibility that facebook has. they have tremendous amount of power on two million americans on facebook. to make sure they are not selling data on the open market in ways that compromise the integrity of that data and of the platform and they also have to be paying attention to the add advantavant could be taken of facebook by

advi advisers and political advisers and far and interest they need to find ways to protect of that kind of experience and meddling. those are the kinds of issues we'll be asking. >> either one of you define facebook as a media company? >> facebook is many things and it is not just a harmless hang out or a clubhouse for your friends. it is one of the largest data brokerage firms in the world it is a political ad blaplatform and it is a communication company in many respects it needs to understand that there is going to be scrutiny when you have that kind of power. >> i will go so far to say that there are a media company and they have made those decisions themselves to become a media company. they determine what kind of news feeds or which news feeds of a

particular facebook customer might see. they define what kind of content can go on a particular facebook page, i don't know if you are aware of this or not in my home district, the sixth district of ohio, the francisco university have a facebook page and they put up advertisement that had a depiction of christ hanging on the cross this is an image that's shown in churches and catholic and protestant throughout america. facebook decided on its own that ad violated their violence policy and they forced it to be taken down now, they came back later and put it backup but only after the university made an an issue out of it. we got to understand who's making the decision of content and how do they make those decisions and as my colleague

representative sarbanes said, how do a political organization and advertisers factor into this privacy and pruitruth and fairns is what this is all about. >> do either of you use facebook in your personal lives as oppose to having a facebook page for your congressional office? if so, how do you use it and were you worried in your personal life, how worried were you if at all about privacy concerns before all of this surfaced >> my family certainly uses facebook platform and we use it professionally as member of congress >> do you use it personally? >> i don't use it personally on a regular basis but i am familiar with the privacy settings discussion and that's an important thing how are you equipping the users of facebook to make sure that

they can set those privacy concerns in a place where they feel protected the fact the matter on the back end and the engine room of facebook, if you want to put it that way all this data is being collected by facebook. it is not enough to just sort of tinker with things on the front end of the platform. we need to know on the data on the back end of the cambridge analytica issue came in and zuckerberg has to respond to that tomorrow. >> congressman johnson, do you use it and if so, are you using it less now in light of disclosure >> representative sarbanes and i are in the same boat i don't use it lightly my family does and my friends do i have a political and an official facebook page to communicate with my constituents i agree with my colleague that

the devil is in tata is in the how it is shared in the engine room as he described it. that's very, very important to know i hold two degrees in computer science and i know how complex these algorithms are these are developed by human engineers with a set of criteria for how that data is going to be mi mined and shared and how it is going to be stored there are some very, very deep technical questions that mr. zuckerberg will have to answer >> gentlemen, thank you very much for your time we appreciate it and we'll see you tomorrow >> thank you very much >> interesting we saw the politic political divide the republicans are concerned of contents and how is it monitored. >> this is a company that spent $11.5 million on lobbying and it

gives to house speaker ryan and minority leader pelosi. that'll be interesting if we get new laws as a result >> good argument maybe they should have been spending that a lot more a long time ago >> they're planning to add more people we do want to talk about equal payday how to close the gap between men and women. we'll tell you how bad the problem is and what corporate america is doing about it. >> take a look at the market, off the best level of the day. a broad base rally 1.5% gain of the dow and 357 and s&p is strong at 1.4%. stay with us people don't invest in stocks and bonds. they don't invest in alternatives or municipal strategies. what people really invest in is what they hope to get out of life. but helping them get there means you can't approach investing

from just one point of view. because it's only when you collaborate and cross-pollinate many points of view that something wonderful can happen. those people might just get what they want out of life. or they could get even more. we've been preparing for this day. over the years, paul and i have met regularly with our ameriprise advisor. we plan for everything from retirement to college savings. giving us the ability to add on for an important member of our family. welcome home mom. with the right financial advisor, life can be brilliant.

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because it signifies the day women have to make as much as men did. what is being done to close this gap. >> the number to keep in mind is 20%. women make about 20% less than men. that's recently as 2017. while the gap has been trending in the right direction at the current rate women's pay won't be a parody with men until the year 2119 that's more than a century from now. a large explanation for the gender gap is due to occupational gender segregation. p predominantly male fields garnered higher wages. another reason is the so-called motherhood penalty employers have been found and this is according to studies that they are less likely to hire mothers than fathers, even those who never left the work force.

researchers have also found over gender biassed that cannot be explained by other controllable factors. companies have taken action by investigating their own work force to see exactly where those pay gaps on pay has been shown to close the gap as well. a sustainable investing firm published a gender pay scorecard today grading companies on their disclosures and commitments and the findings might surprise you. those receiving as were bank of america and apple. those receiving fs, goldman-sachs and facebook this is surprising given that cheryl sandberg has been at the forefront of the movement. >> any explanation as to why facebook with her at the helm would have such a gap? >> they said it was all about disclosure and this idea that their employees don't have as

much transparency into what men are making versus women are making and -- >> i think what they would also say, maybe, is that they don't have as many females in higher positions. >> yes >> and once they sort of break down those numbers, then they can adjust it's very hard to define what equal work is when you're talking about equal pay and i think that's where the challenge is it's also hard to figure out what can be done about it. do you want a government regular lace, quotas they do work >> right right, and that's the distinction that's important to be made here is equal work for equal pay is different than an equal wage gap >> so the numbers on facebook, then, am i to understand that that is actually not controlled for positions held by a woman doing the same job as a man gets paid the same or doesn't get paid the same? we don't know? >> women in general at facebook make x percent less than men >> i don't understand the underlying pool that we're looking at there >> the scorecard they laid out was essentially focused on disclosure and commitment to parity so, that's something that they

say facebook deserves an "f" for that apple has done a much better job, for example, just to highlight another silicon valley company. so it doesn't necessarily -- they didn't have the insight into the actual -- >> so it's not a money measure >> exactly >> it's a grade based on their perception of facebook's disclosure of pay. >> and from an investor standpoint, what they can know about this company >> and their commitment to pay parity >> and also the uk did this when they required business to disclose this, they found that facebook on average, men make 10% higher than women when it comes to facebook uk and that wasn't the worst of all the tech companies. i think it was 17% at amazon the question is, are we talking about equal roles? >> what are you controlling for? are you controlling for an exactly comparable role with comparable experience? >> and how do you define the role because of experience factor, age factor it's complicated, but something needs to be done >> thank you, leslie we are less than half an hour away from mark zuckerberg

testifying at a senate hearing he's expected to detail the company's efforts to protect your data. so that's going to cost money. he says it will hurt earnings and what does that mean for the stock in "power lunch" will be right back [phone ringing] need a change of scenery? the kayak price forecast tool tells you whether to wait or book your flight now. so you can be confident you're getting the best price. giddyup! kayak. search one and done.

[fbi agent] you're a brave man, your testimony will save lives. mr. stevens? this is your new name. this is your new house. and a perfectly inconspicuous suv. you must become invisible. [hero] i'll take my chances.

you know what's not awesome? gig-speed internet. when only certain people can get it. let's fix that. let's give this guy gig- really? and these kids, and these guys, him, ah. oh hello. that lady, these houses! yes, yes and yes. and don't forget about them. uh huh, sure. still yes! xfinity delivers gig speed to more homes than anyone. now you can get it, too. welcome to the party.

welcome back just now, president trump tweeting about the leader of china, xi jinping's speech that happened overnight where he said he was going to lower tariffs on cars going into the united states, the president saying very thankful for president xi of china's kind words on tariffs and automobile barriers. also, his enlightenment on intellectual property and technology transfers we will make great progress together, exclamation point, as he likes to use. >> so, things are friendlier it seems. >> everything's better today >> well, certainly, that's the market's take. we are monitoring this rally for you. triggered in part by president xi overnight and his conciliatory tone as market participants are talking about the dow is up 400 points s&p up 1.6%. nasdaq doing the best of the three, up 1.8% we are off session highs but this is a strong broad based rally led by energy, telecom, and materials. only two red sectors are actually defensives like real estate and utilities topping the dow right now, dow

dupont, verizon, boeing, exxonmobil and we are monitoring facebook that stock is higher by more than 2% today ahead of zuckerberg's testimony, which we are expecting in the next is the monolithic ofe tren, driving specific sectors of out performance. where a rising middle class powers a booming auto industry. a leap into the digital era draws youthful populations to mobile banking and e-commerce. trade and travel surge between emerging markets. profes around the world search out opportunities for alpha. partner with pgim, businesses of prudential.

welcome to a special edition of "power lunch. we are counting down to facebook ceo mark zuckerberg's testimony on capitol hill. it is a watershed moment for the technology industry. and it could have far-reaching implications for silicon valley. >> senators called on mark zuckerberg to testify following the cambridge analytica scandal that impacted at least 87 million facebook users, more than 40 senators from both the judiciary and commerce committee will be there to question mr. zuckerberg >> and a reminder, facebook's reach is far and wide across the globe. aside from its main platform, the company owns instagram and what'sapp. facebook itself boasts more than 2.2 billi 2.2 billion users and instagram has 800 million of its own since the ipo in may of 2012, facebook's stock has rallied 320% and reported more than $40 billion in revenue just last year >> we have team coverage on capitol hill julia borsen and kayla are standing by with the latest and

we begin with julia and what we can expect to hear from mark zuckerberg today. >> reporter: hi. just spoke to some sources at facebook who gave me more insight into what zuckerberg is looking to focus on in his testimony. he'll take the stand in about 15 minutes and when he's grilled by those 43 senators, he will really focus on how facebook got here he will say that facebook was too focused on building tools and figuring out cool uses for those tools and not focused enough on investing sufficiently in building safeguards and preventing abuse of those tools. he will also be looking at -- to correct the misconception that facebook sells data and also to talk about all the ways facebook is now working to protect data and go beyond the current legal requirements to beat what they say is to be a responsible steward of the community he'll also talk about all the ways they're accelerating their efforts and really investing in protecting data and preventing it from leaking. now, last fall, zuckerberg started talking about this idea

of investing more in security. we're going to hear a lot about that today he's going to say explicitly that in his testimony that companies growing investment and security will significantly impact profitability moving forward, really looking to talk to these senators here about how the they're prioritizing investing in their users and security more than they are prioritizing their profitability. and this is, as they invest in having 20,000 employees just focused on security by the end of the year. now the big question is, how mark zuckerberg holds up when he's grilled by these 43 senators each will get five minutes and the hear is set to last about four hours >> julia, thank you. and as julia just said, more than 40 senators getting an opportunity here to question mark zuckerberg. kayla joins us with what we can expect to hear from the lawmakers. kayla? >> reporter: sara, oftentimes, these hearings are opportunities for lawmakers to air their grievances in addition to asking

questions of the vip who is sitting in front of them remember, lawmakers have been asking for zuckerberg by name ever since october when the intelligence committees in each chamber had the general counsels of each of facebook, twitter, and google, and at that point, they were what satisfied but as the issues kept mounting, the rally cries kept mounting as well to have the chief executives of these companies in the hot seat here on capitol hill the focus on and scrutiny of companies like facebook and more broadly social media is akin to and potentially even approaching the criticism of banks in the wake of the financial crisis and what happened at that point resulted in dodd-frank regulation that significantly crimped the profits of that industry and only about a decade later began to be dismantled by the trump administration and while it's understood that the dynamic in congress right now won't allow regulation that onerous to pass, there is the specter of that in the future and the question is how far the

pendulum could swing on regulation and whether lawmakers are satisfied enough with zuckerberg's responses with this mea culpa and what facebook is doing to potentially hold off on that >> all right we're expecting some fireworks kayla, thank you very much we have a lot to talk about with our facebook panel in just a moment, but first, want to keep you apprised of what is going on with this market stocks are surging, and this is a broad-based rally check in on some of the sectors here we've got energy in the lead, followed by telecom, materials, and technology, which is outperforming on this day that mark zuckerberg goes to the hill the defensive sectors like utilities and real estate are lower. stocks now, guys, are actually in the green for the month of april. this has all been triggered by some easing of the trade tensions led by president xi's speech in china last night >> and we've learned from our team in capitol hill that mark zuckerberg has arrived for the hearing. don't forget that gets started roughly 2:15 this afternoon. as we mentioned, we're just

minutes away and we think it's going to be a landmark hearing for the entire technology industry, not just for facebook, as mark zuckerberg gets ready to testify. here's a look at facebook's shares they have been down roughly 13% since the cambridge analytica scandal first broke, but they're up roughly 3.5% for the week is this a moment today when he testifies for investors to sell or is this an ideal buying opportunity? our next guest says, friends don't let friends leave facebook brent till joins us on the phone. to what degree does mark zuckerberg's testifying today present risk to the stock? >> i think as adam, the editor of fortune said this morning, it's unlakeikely to make issues wor worse. he's going to admit they were wrong and he'll be open to working with new laws and we think that ultimately out of this, there's potentially more regulation that comes, but we think they will be open to

embracing this, so we think, clearly, there's an expense hit. we did lower our earnings numbers this week on this. we don't think it will be as big a revenue hit. so far, our survey work through our partners in the data world has suggested that there's really been no major deterioration to users we surveyed users last week and they still say the dominant platform they use is facebook with instagram and 60% use a platform more than they did a year ago. so, this is fresh data we've also talked to gdp experts in europe, and they don't expect as big an impact, maybe, as wall street thinks. so, right now, if users aren't leaving en masse, the advertisers won't leave. there are very few platforms like this. >> but didn't you say you cut earnings estimates, though so why did you cut them? is it an inability to monetize as much or is it because he said they're going to spend so much more in terms of employees to build safeguards and protections? >> yeah, the increase in

investments in our model is driven off of security, driven off of, obviously, additional legal fees, new procedures and policies i think mark was very clear on the last call that they have 14,000 people working in this business that's been -- that's doubled a year ago so, the primary fear on wall street is revenue growth and margins are going to deteriorate materially we think they will deteriorate but they won't maybe see the type of downfall that everyone's expecting. >> so what level of increase in expense are you modeling >> we took numbers down from over $9 a share to $8.58 so we did take our earnings down we're still 20 cents below the street we still think that, you know, incrementally, there could be, you know, potentially multiple billions if they do this correct in terms of what he's saying if you look at the actual

guidance that they're guiding for, they effectively have incremental op ex, going up by $10 billion in 2018 implied in their guidance >> $10 billion in 2018 >> that was $5 billion >> $10 billion in more expense >> in incremental op ex. >> what about the way they've communicated this, brent it feels like every time facebook warns on profitability, the stock make takes a little bit of a lower and then goes right back up is it that investors don't really believe it >> yeah, investors haven't i mean, if you look at the capx guide this year, in 2017, on incremental opx, they spent $5 billion to get high into their guide, you'd have to spend $11 billion and we think that's a lot of money and so we think, again, there's going to be more expense we have already modeled revenue growth deceleration from 47%

growth in '17 to 35% in the street somewhere in the mid 30s. so historically, they've been very conservative. i think everyone's fear is that they're actually going to do what they say and there's no reason for zuckerberg to get on the earnings call in the end of april and try to support the stock, given what's gone on. you've seen it run back up and again we just go back to past situations over the last 20 years in tech. wi when steve jobs was alive, he bashed adobe flash everybody thought it was dead at $30 and now we have a stock at over $200. there's many examples and we think this could be another example. long-term, we think, again, even if earnings goes to $8 next year, you put a 15 to 30 multiple range and this company will grow earnings 25% >> wait. >> you're still looking at a range of 120 to 140 on the stock. >> where do you come down on that range because it's pretty wide 15 to 30 is pretty wide, and i

get why you do that. you still think you get a higher price tag here, but based on the uncertainty we now face, when it comes to regulation, and what they're going to do in terms of whether or not they're going to be able to monetize their data, what multiple does this stock deserve? a lot of people think it just simply needs to be lower because of all the uncertainty >> i think that's fair and i think that the internet peer group right now is trained as 30 times. if you effectively take out the higher multiple names that skew that on the up, you could go back to 25 times this company will ultimately grow earnings by 25% over the next couple years. >> and right now, i see it trading at 22 times next 12 months, right? so, slightly below that. >> yeah. and look, i agree with the lower multiple in the short-term we don't think this is as big of an impact and again, even if you put an 18 multiple on it on a revised number that's 78 cents below the street right now, you would get to $144, even if you went to that very low end.

so, from our view, you know, that's -- there's clearly an upside and downside but when you start to think about this company's capable over the next two to three years to get to $10 of earnings power, you don't have to put big multiples to get upside from where the stock's at so short-term, yes, we've been very clear these events that you can trade sideways to down for several months, for several quarters, but for long-term investors, you know, we think this is a great opportunity. it has been for all the other platforms in tech over the last 20 years microsoft, same thing. when balmer was running the company and they had the investigation, we're talking about a stock that is effectively tripled since that point. >> that's a good point >> adobe has gone up >> very quickly in the last minute, i haven't heard you use instagram yet. instagram has almost 1 billion users on its own, continues to grow to me, i mean, i use instagram more than facebook is this -- what kind of lever is this that they can pull and is it part of your bullish thesis

>> it is, absolutely, a part of the bullish thesis even if the users left the facebook platform, we do think they're going towards instagram, and i think sheryl sandberg has been very clear that there are 2 million advertisers on that platform, 6 million on facebook so we think this is a platform that they're increasingly finding better monetization. there's strong affinity. i've asked -- you know, we've done many panels and i think you're even finding the younger audience, you know, that the older audience may be on facebook, the younger audience is finding instagram to be very compelling and even though snap came along and stole some thunder, instagram is stealing a bit of that thunder back we haven't even talked about how they monetize whatsapp and messenger. there's an additional thing they talked about around subscription if you don't opt in as a user, you could effectively add a subscription model they could potentially avoid giving service to someone if they didn't opt in on these new rules and that could potentially

point them to a stronger subscription model over a period of time. >> okay. >> there are multiple levers instagram is probably one of the biggest. >> all right we'll leave it there thank you, brent brent thill jeffries, equity analyst. >> as mark zuckerberg gets ready to testify, let's talk about real regulation what can congress do to regulate a company like facebook, if anything let's bring in our panel stephanie miller is senior analyst with height capital markets, a d.c. research firm. jimmy is an economic policy analyst with aei as well as a cnbc contributor and john is cnbc's technology correspondent. good to be sitting next to you my neighbor, john. what can congress do to regulate this company i guess it depends michelle asked a very good question a few minutes ago how do you define facebook is it a media company or something different? >> i would define facebook as an advertising revenue company but what congress can do is pretty

broad if they want to. i just don't think they're going to be capable of doing very much abroad, what folks in the industry refer to as an omnibus data security or privacy legislation, it's going to take a long time to get this congress kind of coalesced around some ideas. we'll start to see hints at what some different members might be thinking right now, but in terms of real agreement around a broad package here, it's hard to imagine. >> which party would be more inclined to regulate a company like facebook? the democrats or the republicans, stefanie? >> the democrats are less worried about bigger government and they tend to like regulations more, but they're actually very close with silicon valley, and silicon valley is a nice source of fund-raising dollars for democrats so they're also kind of torn here but right now, i think one of the things that will be harmful to their cause is i assume or and expect they will focus today a lot on the russia meddling in

the 2016 investigation, and they are still bitter about clinton's loss, so i suspect that a lot of this will be more about russia and less about the silicon valley technology companies. >> for those people who are listening and maybe on the radio or weren't looking at their screen and you can't see it either, there were protesters in the audience already that were holding up signs that said, protect our privacy, stop corporate spying, so you get a sense of why there's so much interest look at all of those people who are in that hearing. it's like standing room only >> john, chime in. >> well, i think what we might be missing here is that the fundamental things that are important to facebook are not yet really at risk, even in this hearing. and i would it's people, platform, and prediction the social graph is really important to facebook. so, anything that kept them from being able to have free reign over knowing who you're connected to and in what way platform is the like button. a few years ago, they did an amazing thing. they got all the major properties on the internet to

put security cameras, the equivalent of security cameras in their shop and let facebook look in. they can see wherever you go around the internet as long as you're still logged into facebook and then their ability to find similar people they can see all that data, who your friends are, what you're going on the internet and they're able to match you with people who are like you and then send advertisers to the right people none of that is really at risk in this unless facebook takes some other leg down and loses people's trust mark zuckerberg's task is to staunch the bleeding it's less that there's going to be regulation. the worst it looks like is to do the equivalent of what the eu has done with gdpr and facebook's already ready for this in a sense, this isn't a big deal >> gdpr is general data protection rules out of europe >> which actually is a big deal.

goldman-sachs says that could shave rucevenues. >> i don't know if i believe that's really true right now, facebook is the delivery mechanism for so much of the digital economy right now. sure, you've got google search, amazon is its own ecosystem, but it's not as if just regulating who owns the data and who's able to have recourse if something goes wrong with the data really prevents facebook from making money, necessarily, because as you says, they've got instagram. they've got whatsapp and facebook messenger and all these other ways to triangulate. >> jimmy, i have a question for you about facebook's relationship with lawmakers in washington we talked about the $11.5 million they pespent lobbying last year, the somewhat cozy relationship they seemed to have with the obama administration and where that stands right now and who you'll be watching today on that front. >> listen, this is -- i know how it would be easy to see this as

sort of a kind of a democrat issue, they like regulation. that was mentioned earlier, but there are groups in both parties right now which are very hostile toward technology for different reasons. we have democrats who are still very angry about the election and russia we have republicans who think these companies have, you know, picked a side in the culture war so they're very worried about that but to me, i think, like, the real audience here is really not even any of these 40 senators. the audience here is the 2 billion users and it was mentioned earlier, if those 2 billion users stick, then i just don't think there's a lot of risk here because i think these -- i think they're not close to imposing regulation in congress and even if it was something like this general data protection regulation, that is only going to cement facebook's place as an incumbent. they have the data telling them to lock it down more inside their walled garden of a company, that's fine. they can deal with that. and that's likely where any of the regulation is going to be. >> jimmy, you've been in

washington, d.c., a long time. you know how much regulators love good theater. i mean, if you could see the video of this thing, i mean, this is unbelievable >> i know. >> how many people -- >> boy king on trial i get it theater. >> they love it. they're waiting for him. >> they got an audience. that's nice. >> julia is there in that hearing room we're showing the lines out the door, julia. i mean, it's insane. >> it's definitely very, very crowded, and the room behind me here is packed you see the photographers crowded around that desk where zuckerberg will be sitting when he's grilled by those 43 senators we're expecting him to arrive any minute it's our understanding that he arrived through the garage and then an elevator upstairs, and he avoided all of the cameras that were trying to stake him out outside. but we expect him to enter from the back of the hearing room we've seen a lot of his staffers here, senior facebook executives and some of his communications staff who are already seated in this room behind me, but a lot of interest in how he's going to

handle this kind of a crowd and also there are some protesters who i just have to say are here. there were some signs. there were -- there was a big sort of police security presence that came up to them and took away their signs, but definitely could be a lively audience here and certainly a packed one, but we'll keep you posted. >> i don't mean to put you on the spot but we were showing a guy with some blue hair that looked like -- i don't know if it was the likes -- any idea what that is related to? >> i'm not sure exactly who he is, but there are a couple of people with "delete facebook" t-shirts, #deletefacebook. we spoke to some of them and a number of different people in line with different agendas. a lot of people upset about the data that facebook is collecting on them. some of them haven't necessarily deleted facebook but one woman told me she's wearing the t-shirt, she's here today and learn and see what zuckerberg has to say and if she doesn't feel satisfied, she will delete facebook >> it's so hard to actually delete facebook, and i think

this is the key thing, not that it's hard to delete facebook, but what happens with the users. isn't that what it all comes down to for investors and for the business, for zuckerberg, for sandberg, yes, this is a lot of noise and probably unpleasant, but as long as they can keep the billions of people on facebook, that's their bread and butter e >> that is their bread and butter and they don't even have to keep all the people if a few people leave, especially if they leave for a while, i mean, there are always those friends, people who don't really use facebook that much anyway and if they drop out -- >> you said fringe people, not french people. i thought you said french people those french people. >> they go to instagram. yeah i meant fringe people. so, i don't think that's so much the danger, but it is people not trusting facebook, logging out as they go around the internet, so facebook doesn't have the same amount of intelligence about what people are doing, how they're engaging commercially. anything that shuts them off, particularly in emerging markets, from communications and

commerce networks that are just beginning to form, if this kind of hearing environment in the u.s. and eventually in europe gives other countries an excuse to be more hostile to facebook, that would be bad for him. so i think he's more on a diplomatic mission here as others were saying to the users and a broader audience >> we're going to continue with our panel after a two-minute break -- oh, we're going to keep going? i beg your pardon. stefanie, how big a problem, sort of kexistentially, do you think this is for facebook the history of data breaches, as was pointed out in "the new york times," is that people walk away for a little bit and then come back or they don't walk away at all. they tut tut and huff and stomp but generally, they continue to shop at target or they continue to go to home depot or they continue to use yahoo. >> or they wear a delete facebook shirt but haven't quite deleted facebook yet i love that data point

i mean, i think that one of the biggest problems for facebook and google, for that matter, and some of these other kind of conglomerate technology companies is going to be if any government prohibits them from sharing data across their different platforms and so all these things we've been talking about here, not on the table right now, especially in the u.s., but even in europe, where it's not in a regulatory environment where facebook can't use my data on instagram and my data on whatsapp and build a comprehensive profile and that is very valuable data to companies and that's how facebook makes its advertising revenue so even if we maintain the users but start seeing regulations that creep in and constrain the way that facebook can put together a picture of me, that is also something that facebook should be worried about. i will be surprised if i hear much of that today at today's hearing in the line of questioning >> do you use facebook, stefanie >> i do. >> are you less inclined to use

it today than you were two months ago >> let me tell you something special about me i got an alert from facebook that i'm one of the people in this cambridge analytica breach this morning i was -- when i opened this morning -- >> that was your data i was reading. >> it was. i know did you see my likes >> i liked you yeah i liked you back i don't use facebook so i don't know >> how many more cambridge analyticas are there because cnbc found one and then facebook had to suspend it there could be more of those kind of apps >> there almost certainly are more of those. i mean, you probably have that one friend -- i know you're not on facebook much so maybe you don't know >> i use it to check people's birthdays. >> but people who are doing quizzes all the time i have an ex-girlfriend from high school who's doing quizzes all the time >> by the way, that's really what you use facebook for is to stalk ex-girlfriends >> dude, you got to get off facebook >> you got to let go >> the damage has been done. >> i hope your wife isn't watching >> but everybody's connected to

one of those people, and so in that sense, the danger is pretty broad. all of these companies that are collecting this information, particularly from before facebook shut down the ability to collect information from friends, could potentially be selling that i think that's part of the reason why facebook put out this bounty this morning saying, hey, if you know anybody who's selling our data, let us know. we'll pay you for it it's going to be really hard for them to track down >> and we're watching all the senators come in, getting ready for this big event for them as much as it is for mark zuckerberg jimmy p. -- >> how many of those guys use facebook, how many of those people on the panel? doesn't that give zuckerberg a huge advantage he has a huge edge this is not a technologically super literate group that's a real -- >> that's two members of congress an hour ago and they said they had them for their congressional offices but they themselves either didn't uses it or used it very, very sparingly.

>> their wives and kids did. >> their wives and families did. yeah >> but jimmy, shouldn't one of his messages be, hey, i built a great american corporation here? i mean, many of you may be mad at me, but hello, this is an amazing thing that facebook has become >> and i'm a job creator >> yeah. it's an amazing -- for this crowd, american company. and he is a great american entrepreneur we shouldn't forget that mark zuckerberg has built something amazing, wonderful hires lots of people, lots of high-paying jobs and especially in the whole sort of make america great thing, this is an american company and trust me, there are competitors overseas, maybe in a country called china, that would love facebook to be ham strung >> we're going to take a quick pause here in our panel discussion and go down to bob who's going to bring us up to date on what is a very rapidly percolating market the dow up 460 points. bob? >> and tyler, it is not dropping at all the important thing is it was china that moved this.

i want to show you the s&p and maybe we'll keep that up and keep the hearing up here but we moved up 30 points overnight when president xi of china said he was going to be opening up his markets a little bit more stocks stayed up throughout the early morning, and essentially are up right near their high today so the s&p is up 44 points dow moourvers, the big three ofe stocks that are the sort of poster child for movement in the industrial space, all up rather dramatically and holding up throughout the day the other big story is move up in oil, exxonmobil and chevron in the dow also moving things forward here energy stocks have been very strong for the last several days and finally stocks like conoco phillips, 52-week high so those sectors showing leadership groups president xi of china was talking about opening up the markets to financial firms so we see firms today like jpmorgan,

goldman-sachs, blackrock, those are firms that would potentially benefit from any opening in china. he also talked act lower auto tariffs as well and not only stocks here in the united states, your ford and gm, obvious choices but even over in europe we saw companies like daimler, bmw all moving up as well to and of course they closed over in europe. as for mark zuckerberg, we're waiting for him to come on the important thing is, all the bank stocks up about 1% but facebook's doing a lot better, sitting right near the highs today. >> bob, thank you very much. does anybody know, john, you might be the likeliest, does anybody know whether i can watch this hearing on facebook >> i don't know that, but i can check it out i do know that -- >> why would you need to >> i don't know why you would need to, but mark zuckerberg was trending on twitter this morning, but not on facebook which made me wonder -- >> he's trending on twitter but not on 2018. >> are people really not talking

about this on facebook i'm not sure if facebook wants to broadcast this. >> this is a john -- you can tackle this question, sort of deep and up for interpretation he's built an amazing business and an amaze profit machine as well, but with that comes responsibility what is facebook's responsibility this is not a public utility so how does he answer that question >> i think what he has to do, i'll try to answer this the best way i can, which is probably not complete >> i think mr. zuckerberg is entering the room here if not right now. >> that's definitely him >> there he is as we watch him, i can see the lens is trained on him as he comes in as expected, with a neat haircut and a snappy suit. >> a suit, not hoodie. >> he has gotten good in the past five years of dressing for the occasion, defying people's expectations to some extent because he got known so much for the hoodie and eventually for

the t-shirt his vision for facebook, the way he's articulated it in the past has been very pollyanna-ish about the overall good in connecting people and the use of technology >> joe, i don't remember, did you cover the whole ipo rollout here i'm wondering if he's ever seen this many cameras stared in his face at one time maybe when on the road show but this has got to be -- look, he's an important person, big guy, but that's got to be intimidating to have all of those people in your face right now just clicking away as you get ready to testify >> this seems like his absolute worst nightmare. we've seen him avoid this for his entire time as head of facebook the reason why we probably have not seen facebook do enough on the regulatory side is because its ceo is so passionate about its technological developments and its connectivity as we talked about and you know, there's not time to regulate yourself when you're moving forward, barrelling forward. >> he should be passionate here.

>> they're gaveling the hearing to order there the scrum of photographers disrupt. let's watch and listen to what happens next the money shot will come up here in just a moment i assume he will be sworn in and raise his right hand julia is there >> we hear he may have actually been sworn in behind the scenes already. we're seeing all the photographers scatter. he was facing dozens of cameras right then that must have been a pretty intense situation for anybody, but there he is. he's pouring himself a cup of water and getting ready. and it sounds like it's starting right now. >> science and transportation will come to order we welcome everyone to today's hearing on facebook's social media privacy and the use and dish -- and abuse of data. although not unprecedented, this is a unique hearing. the issues we will consider

range from data privacy and security to consumer protection and the federal trade commission enforcement touching on jurisdictions of these two committees we have 44 members between our two committees that may not seem like a large group by facebook standards, but it is significant here for a hearing in the united states senate we will do our best to keep things moving efficiently given our circumstances. we will begin with opening statements from the chairman and ranking members of each committee, starting with chairman thune and then proceed with mr. zuckerberg's opening statement. we will then move on to questioning. each member will have five minutes to question witnesses. i'd like to remind the members

of both committees that time limits will be and must be strictly enforced, given the numbers that we have here today. if you're over your time, chairman thune and i will make sure to let you know there will not be a second round as well. of course, there will be the usual follow-up written questions for the record questioning will alternate between majority and minority and between committees we will proceed in order based on respective committee seniority. we will anticipate a couple short breaks later in the afternoon, and so it's my pleasure to recognize the chairman of the commerce committee, chairman thune, for his opening statement. >> thank you, chairman grassley. today's hearing is extraordinary. it's extraordinary to hold a

joint committee hearing and also extraordinary to have a single ceo testify before nearly half of the united states senate. but then, facebook is pretty extraordinary. more than 2 billion people use facebook every month 1.4 billion people use it every day. more than the population of any country on earth except china, and more than four times the population of the united states. it's also more than 1,500 times the population of my home state of south dakota. plus, roughly 45% of american adults report getting at least some of their news from facebook in many respects, facebook's incredible reach is why we're here today we're here because of what you, mr. zuckerberg, have described as a breach of trust a quiz app used by approximately 300,000 people led to information about 87 million facebook users being obtained by the company cambridge analytica. there are plenty of questions

about the behavior of cambridge analytica, and we expect to hold a future hearing on cambridge and similar firms. but as you've said, this is not likely to be an isolated incident a fact demonstrated by facebook's suspension of another firm just this weekend you've promised that when facebook discovers other apps that had access to large amounts of user data, you will ban them and tell those affected and that's appropriate but it's unlikely to be enough for the 2 billion facebook users. one reason that so many people are worried about this incident is what it says about how facebook works the idea that for every person who decided to try an app, information about nearly 300 other people was scraped from your services, to put it mildly, disturbing and the fact that those 87 million people may have technically consented to making their data available doesn't

make most people feel any better the recent revelation that malicious actors were able to utilize facebook's default privacy settings to match e-mail addresses and phone numbers found on the so-called dark web to public facebook profiles potentially affecting all facebook users only adds fuel to the fire what binds these two incidents is that they don't appear to be caused by the kind of negligence that allows typical bat breacdaa breaches to happen instead, they both appear to be the result of people exploiting the very tools that you've created to manipulate users' information. i know facebook has taken several steps and intends to take more to address these issues nevertheless, some have warned that the actions facebook is taking to ensure that third parties don't obtain data from unsuspecting users while necessary will actually serve to enhance facebook's own ability to market such data exclusively .

most of us understand that whether you're using facebook or google or some other online services, we are trading certain information about ourselves for free or low cost services but for this model to persist, both sides of the bargain need to know the stakes that are involved right now, i'm not convinced that facebook's users have the information that they need to make meaningful choices. in the past, many of my colleagues on both sides of the aisle have been willing to defer to tech companies' efforts to regulate themselves. but this may be changing just last month, an overwhelming bipartisan fashion, congress voted to make it easier for prosecutors and victims to go after websites that knowingly facilitate sex trafficking this should be a wake-up call for the tech community we want to hear more, without delay, about what facebook and

other companies plan to do to take greater responsibility for what happens on their platforms. how will you protect users' data how will you inform users about the changes that you are making? and how do you intend to proactively stop harmful conduct instead of being forced to respond to it months or years later. mr. zuckerberg, in many ways, you and the company that you have created, the story that you have created, represent the american dream many are incredibly inspired by what you've done at the same time, you have an obligation, and it's up to you to ensure that that dream doesn't become a privacy nightmare for the scores of people who use facebook. this hearing is an opportunity to speak to those who believe in facebook and those who are deeply skeptical about it. we are listening america is listening and quite possibly, the world is listening.

>> thank you now ranking member feinstein >> thank you very much, mr. chairman chairman grassley, chairman thune, thank you both for holding this hearing mr. zuckerberg, thank you for being here you have a real opportunity this afternoon to lead the industry and demonstrate a meaningful commitment to protecting individual privacy we have learned over the past few months, and we've learned a great deal that's alarming we've seen how foreign actors are abusing social media platforms like facebook to interfere in elections and take millions of americans' personal information without their knowledge. in order to manipulate public opinion and target individual voters specifically, on february 16th, special counsel mueller issued an indictment against the

russia-based internet research agency and 13 of its employees for interfering operations targeting the united states. through this 37-page indictment, we learned that the ira ran a coordinated campaign through 470 facebook accounts and pages. the campaign included ads and false information to create discord and harm secretary clinton's campaign and the content was seen by an estimated 157 million americans. a month later, on march 17th, news broke that cambridge analytica exploited the personal information of approximately 50 million facebook users without their knowledge or permission. and last week, we learned that

number was even higher 87 million facebook users who had their private information taken without their consent. specifically, using a personality quiz he created, professor koegen collected the personal information of 300,000 facebook users and then collected data on millions of their friends. it appears the information collected included everything these individuals had on their facebook pages and according to some reports, even included private direct messages between users he is said to have taken data from over 70 million americans it has also been reported that he sold this data to cambridge analytica for $800,000 cambridge analytica then took this data and created a

psychological welfare tool to influence united states elections. in fact, the ceo, alexander nicks, declared that cambridge analytica ran all the digital campaign, the television campaign, and its data, informed all the strategy for the trump campaign the reporting has also speculated that cambridge analytica worked with the internet research agency to help russia identify which american voters to target with its propaganda i'm concerned that press reports indicate facebook learned about this breach in 2015 but appears not to have taken significant steps to address it until this year so, this hearing is important, and i appreciate the conversation we had yesterday,

and i believe that facebook, through your presence here today, and the words you're about to tell us, will indicate how strongly your industry will regulate and/or reform the platforms that they control. i believe this is extraordinarily important. you lead a big company with 27,000 employees and we very much look forward to your comments. thank you, mr. chairman. >> thank you, senator feinstein. the history and growth of facebook mirrors that of many of our technological giants founded by mr. zuckerberg in 2004, facebook has exploded over the past 14 years. facebook currently has over 2 billion monthly active users across the world, over 25,000 employees, and offices in 13 u.s. cities and various other countries. like their expanding user base,

the data collected on facebook users has also skyrocketed they have moved on from schools, likes, and relationship statuses today, facebook has access to dozens of data points ranging from ads that you've clicked on, events you've attended, and your location based upon your mobile device it is no secret that facebook makes money off this data through advertising revenue, although many seem confused by or altogether unaware of this fact facebook generates -- generated $40 billion in revenue in 2017 with about 98% coming from advertising across facebook and instagram. significant data collection is also occurring at google, twitter, apple, and amazon and even an ever-expanding

portfolio of products and services offered by these companies grant endless opportunities to collect increasing amounts of information on their customers as we get more free or extremely low-cost services, the tradeoff for the american consumer is to provide more personal data the potential for further growth and innovation based on collection of data is unlimited. however, the potential for abuse is also significant. while the condors of the cambridge analytica situation are still coming to light, there was clearly a breach of consumer trust and a likely improper transfer of data the judiciary committee will hold a separate hearing exploring cambridge and other data privacy issues. more importantly, though, these events have ignited a larger

discussion on consumers' expectations and the future of data privacy in our society. it has exposed that consumers may not fully understand or appreciate the extent to which their data is collected, protected, transferred, used, and misused. data has been used in advertising and political campaigns for decades. the amount and type of data obtained, however, has seen a very dramatic change campaigns, including presidents bush, obama, and trump, all used these increasing amounts of data to focus on micro-targeting and personalization over numerous social media platforms and especially facebook. in fact, presidents obama's campaign developed an app

utilizing the same facebook feature as cambridge analytica to capture the information of not just the app's users but millions of their friends. the digital director for that campaign for 2012 described the data scraping app as something that would, quote, wind up being the most groundbreaking piece of technology developed for this campaign, end quote. so, the effectiveness of these social media tactics can be debated, but their use over the past years across the political spectrum and their increased significance cannot be ignored our policy towards data privacy and security must keep pace with these changes. data privacy should be tethered to consumer needs and expectations now, at a minimum, consumers

must have the transparency necessary to make an informed decision about whether to share their data and how it can be used consumers ought to have clearer information, not opaque policies and complex click-through consent pages. the tech industry has an obligation to respond to widespread and growing concerns over data privacy and security and to restore the public's trust. the status quo no longer works moreover, congress must determine if and how we need to strengthen privacy standards to ensure transparency and understanding for the billions of consumers who utilize these products senator nelson >> thank you, mr. chairman mr. zuckerberg, good afternoon let me just cut to the chase if you and other social media

companies do not get your act in order, none of us are going to have any privacy anymore that's what we're facing we're talking about personally identifiable information that, if not kept by the social media companies from theft, a value that we have in america being our personal privacy, we won't have it anymore. it's the advent of technology and of course all of us are part of it. from the moment that we wake up in the morning until we go to bed, we're on those hand held tablets, and online companies like facebook are tracking our activities and collecting information.

facebook has a responsibility to protect this personal information. personal information. we had a good discussion yesterday. we went over all of this you told me that the company had failed to do so. it's not the first time that facebook mishandled its users' information. the ftc found that facebook's privacy policies had deceived users in the past, and in the present case, we recognize that cambridge analytica and an app developer lied to consumers and lied to you, lied to facebook, but did facebook watch over the operations we want to know that why didn't facebook notify 87 million users that their personally identifiable

information had been taken and it was being also used, why were they not informed or unauthorized political purposes. so only now, and i appreciate our conversation, only now facebook has pledged to inform those consumers whose accounts were compromised i think you are genuine. i got that sense in conversing with you you want to do the right thing you want to enact reforms. we want to know if it's going to be enough. and i hope that will be in the answers today. now, we still don't know what cambridge analytica has done with the data. you heard chairman thune say as

we have discussed, we want to haul cambridge analytica in to answer these questions in a separate hearing i thank chairman thune for working with all of us in scheduling a hearing there was obviously a great deal of interest in this subject. i hope we can get to the bottom of this. if facebook and other online companies will not or cannot fix the privacy invasions, then we are going to have to we, the congress how can american consumers trust folks like your company to be caretakers of their most personal and identifiable information? that's the question. thank you. >> thank you, my colleagues and senator nelson

our witness today is mark zuckerberg, founder, chairman, chief executive officer of facebook mr. zuckerberg launched facebook february 4th, 2004 at the age of 19 at that time, he was a student at harvard university. as i mentioned previously, his company now has over 40 billion of annual revenue and over 2 billion monthly active users mr. zuckerberg, along with his wife, established the chan-zuckerberg initiative for further philanthropic causes i turn to you. welcome to the committee whatever your statement is orally, if you have a longer one, it'll be included in the record so proceed, sir. >> chairman grassley, chairman thune, ranking member nelson,

and members of the committee, we face a number of important issues around privacy, safety, and democracy. you will rightfully have hard questions for me to answer before i talk about the steps we're taking to address them, i want to talk about how we got here facebook is an idealistic and optimistic company for most of our existence, we focused on all of the good that connecting people can do as facebook asgrown, people everywhere have gotten a powerful new tool for staying connected to the people they love, for making their voices heard, and for building communities and businesses just recently, we've seen the me too movement and the march for our lives organized at least in part on facebook after hurricane harvey, people came together to raise more than $20 million for relief and more than 70 million small businesses use facebook to create jobs and grow

but it's clear now that we didn't do enough to prevent these tools from being used for harm as well, and that goes for fake news, foreign interference in elections, hate speech, and data developers and privacy. we did not take the responsibility, and that was a big mistake, and it was my mistake, and i'm sorry i started facebook i run it i'm responsible for what happens here so now, we have to go through our relationships with people, make sure that we're taking a broad enough view of our responsibility it's not enough to just connect people we have to make sure that those connections are positive it's not enough to just give people a voice we need to make sure that people are not using it to harm other people or spread misinformation. it's not enough just to give people control over their information. we need to make sure that the developers they share it with protect their information too.

across the board, we have a responsibility to not just build tools, but to make sure that they are used for good it will take some time to work through all the changes we need to make across the company, but i'm committed to getting this right. this includes the basic responsibility of protecting people's information, which he failed toot with cambridge analytica. here's a few things we are doing to address this and to prevent it from happening again. first, we're getting to the bottom of exactly what cambridge analytica did and telling everyone affected. what we know now is that cambridge analytica improperly accessed information about millions of facebook members by buying it from an app developer. that information -- this was information that people generally shared publicly on their facebook pages like names, their profile picture, and the pages they follow. when we first contacted

cambridge analytica, they said they deleted the data. a month ago, we heard new reports that suggested that was not true and now we are working with governments in the u.s., the u.k., and around the world to do a full audit of what they've done and to make sure they get rid of any data they may still have second, to make sure no other app developers out there are misusing data, we are investigating every single app that had access to a large amount of information in the past if we find that someone improperly used data, we're going to ban them from facebook and tell everyone affected third, to prevent this from ever happening again going forward, we are making sure that developers can't access information now. the good news here is that we already made big changes to the platform in 2014 that would have prevented this specific situation with cambridge analytica from occurring again today. there's more to do and there's more details on steps we are taking in the written statement.

my top priority has always been our social mission of connecting people, building community, and bringing the world closer together advertisers and developers will never take priority over that as long as i'm running facebook i started facebook when i was in college. we've come a long way since then we now serve more than 2 million people around the world, and every day, people use our services to stay connected with the people that matter to them most i believe deeply in what we are doing, and i know that when we address these challenges, we'll look back and view helping people connect and giving more people a voice as a positive force in the world i realize the issues we are talking about today are not just issues for facebook and our community, but they are issues and challenges for all of us as americans. thank you for having me here today. i'm ready to take your questions. >> i'll remind members who were

not here when i had my opening comments that we are operating under the five minute rule that applies to the five minute rule, and that applies to those of us who are chairing the committee as well. start with you facebook handles extensive amounts the personal data for billions of users. a significant amount of that data is shared with third party developers who utilize your platform as early this year, you did not actively monitor whether that data was transferred by such developers to other parties. moreover, your policies only prohibit transfers by developers to parties seeking to profit from such data no. 1, besides professor hogan's transfer and now potentially pew

view, do you know any instances information was transferred to third parties in breach of facebook's terms if so, how many times has that happened, and was facebook only made aware of that transfer by some third party >> mr. chairman, thank you as i mentioned, we're now conducting a full investigation into every single app that had access to a large amount of information. before we locked down platforms to prevent developers from accessing this information in 2014 we believe that we are going to be investigating many apps, tens of thousands of apps, and if there's suspicious activity, we conduct a full audit of the apps and see how they use the