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Facebook releases new privacy safeguards after ceding to pressure from advertisers

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By Joel Schectman

WASHINGTON (Reuters) – Facebook is installing new controls it says will better inform its members about the way companies are targeting them with advertising, the latest step to quell a public outcry over the company’s mishandling of user data.

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Starting on July 2, Facebook Inc <FB.O> for the first time will require advertisers to tell its users if a so-called data broker supplied information that led to them being served with an ad. Data brokers are firms that collect personal information about consumers and sell it to marketers and other businesses.

Facebook has also set up new procedures for the handling of names of potential customers supplied by data brokers. Advertisers seeking to upload lists of these prospects onto Facebook’s platform will first have to promise that the data vendor obtained any legally required consent from those consumers.

Facebook says the new policies will create more transparency for its users and require more accountability from advertisers.

“We are not taking a position on whether third-party data is inherently good or bad,” said Graham Mudd, a director of product marketing at Facebook. “We are taking a position on the importance of having the right to use the data and for it to have been sourced responsibly.”

The new policies are the second big push by Facebook this year to shore up its policy regarding data brokers.

On March 28, Facebook moved to banish data brokers from its platform as part of efforts to burnish its image. But the company quickly softened its stance after big marketers threatened to pull their ad dollars from Facebook, according to three people familiar with the decision. Advertisers said the restrictions on data brokers would hurt their ability to aim their ads at customers most likely to buy their products.

Details of advertisers’ pushback, and Facebook’s retreat, have not been previously reported.

A Facebook spokeswoman confirmed that the company shifted its position within days because of “feedback from advertisers.” She said sponsors will still be able to use information purchased from third-party vendors to target Facebook users with ads, albeit under stricter conditions than before.

REPAIRING A REPUTATION

Wednesday’s move is another effort by Facebook to repair its reputation amid a series of scandals. Among the most damaging was the revelation that political consulting firm Cambridge Analytica harvested private information from the Facebook profiles of 87 million people without permission.

In recent public appearances by executives and new television spots, Facebook has been promoting its efforts to keep its users safe and protect their personal information.

But the initiatives present the Menlo Park, CA company with a tricky balancing act. While it is touting greater protections for its users, its advertisers are demanding the ability to target potential customers with ever-greater precision.

“Facebook is caught between tremendous pressures from marketers, and privacy demands from policy makers and the public,” said Kathryn Montgomery, an American University communications professor, who specializes in media and privacy issues.

Data brokers are firms that have made billions of dollars gathering and selling Americans’ personal information, including how much money they earn, what they buy and how many children they have. They get their data from a variety of sources, including public records as well as transaction histories compiled by credit card companies, retailers and other merchants.

Many consumers have no idea they are being tracked in this way. And while the practice is legal in the United States, it has fueled concerns among privacy advocates about the accuracy of this highly personal information, as well as the methods by which it is collected, bought and sold.

HOW BANNING BROKERS FAILED

Since 2013, Facebook had collaborated with major data vendors including Experian Plc <EXPN.L> and Acxiom Corp <ACXM.O>. Using personal information about consumers provided by the brokers, Facebook built an ad-targeting tool on its site known as Partner Categories. Advertisers using the system could pinpoint their ads to Facebook users who met certain criteria, say, those who owned their own homes, just had a baby or drove luxury vehicles. Partner Categories was particularly powerful because it allowed marketers to direct their ads based on information that users may never have disclosed to their friends on Facebook.

Facebook announced March 28 it was shutting down Partner Categories. That same day, the company told ad agencies they would be prohibited from uploading lists of potential prospects acquired from data brokers into Facebook.

Together, those two steps would have effectively amounted to a total ban of data brokers from the site.

Facebook’s initial move was a blow to consumer-goods manufacturers that lack direct relationships with the people who buy their products, marketers said. Car makers, for example, often know little about consumers who walk into dealerships. Ditto for food manufacturers, which sell to supermarkets, not grocery shoppers.

To target customers on social media, these companies rely on data brokers to guide them to the best prospects, according to interviews with current and former data broker executives.

Ad agencies besieged Facebook to reconsider, according to three people familiar with the situation.

One executive conveyed a blunt message to Facebook: “’Dollars would go to other places if we can’t find suitable alternatives,’” she recounted to Reuters.

On March 30, just two days later, advertiser complaints persuaded Facebook to allow them to continue to target Facebook users with ads based on uploaded customers lists purchased from data brokers. The company told Reuters its Partner Categories tool will still be phased out by October.

Arkansas-based Acxiom, one of the nation’s largest data brokers, told Reuters it researches the sources of its consumer information carefully, using methods that are “not only legal, but also just and fair to the individual.”

Experian, another major vendor based in Dublin, Ireland, did not respond to multiple requests for comment on their privacy policies.

Many Americans are mistrustful of data brokers. A Reuters/Ipsos poll of 1,780 people in the United States found that, of those who were familiar with the brokers, 68 percent said they were opposed to social media firms working with those information vendors. The poll found 59 percent of those who were familiar with the data brokers said they would use a social media site less if they knew the tech firm was partnering with them. The poll: (https://tmsnrt.rs/2JzLui4)

The poll conducted between May 15-21 found 751 were “somewhat” or “very” familiar with data brokerages. The poll has a credibility interval, a measure of the poll’s precision, of 4 percentage points.

(This story corrects spelling of Acxiom Corp, instead of Axciom, paragraph 18.)

(Reporting by Joel Schectman in Washington; Additional reporting by David Ingram in San Francisco; Editing by Damon Darlin and Marla Dickerson)

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South Korea’s Bithumb loses $32 million in digital money heist, bitcoin falls

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By Cynthia Kim and Joyce Lee

SEOUL (Reuters) – South Korean cryptocurrency exchange Bithumb said 35 billion won ($31.5 million) worth of virtual coins were stolen by hackers, the second local exchange targeted in just over a week as cyber thieves exposed the high risks of trading the digital asset.

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Bithumb said in a notice on its website on Wednesday that it had stopped all trading after ascertaining “some cryptocurrencies worth about 35 billion won were seized between late yesterday and early morning today.”

The exchange, the sixth busiest in the world according to Coinmarketcap.com, said it had stored “all clients’ assets in safe cold wallets,” which operate on platforms not directly connected to the internet.

It added that the company would fully compensate customers.

The Bithumb theft highlights the security risks and the weak regulation of global cryptocurrency markets. Global policymakers have warned investors to be cautious in trading the digital currency given the lack of broad regulatory oversight.

In Ho, a professor at Korea University’s Blockchain Research Institute, said the stolen coins were most likely to be from the more insecure ‘hot wallets.’

“Since coins in the cold wallets are not at all wired to the internet, it would have been impossible for hackers to steal those in cold wallets unless they physically broke in,” said In, a blockchain expert at the research center.

Bithumb did not immediately respond to Reuters’ request for comments, and its statement did not say whether the stolen coins were stored in its ‘hot wallets’.

Mun Chong-hyun, chief analyst at ESTsecurity, said digital coins would continue to be juicy targets for hackers around the world.

“No security measures or regulations can 100 percent guarantee safety of virtual coins. It is held anonymously and in lightly-secured systems, which makes them an irresistible target,” Mun said.

On the Luxembourg-based Bitstamp, bitcoin <BTC=BTSP> was down 1.8 percent at $6,612.92 by 0351 GMT, extending losses as a series of intrusions on cryptocurrency exchanges in recent weeks sparked concerns over security.

It has fallen roughly 70 percent from its all-time peak hit around mid-December 2017.

On June 11, another South Korean cryptocurrency exchange Coinrail said it was hacked. The cyber attacks come after a high-profile theft of over half a billion dollars worth of digital currency at Japan’s exchange Coincheck earlier this year.

In January, South Korea banned the use of anonymous bank accounts for virtual coin trading to stop cryptocurrencies being used in money laundering and other crimes. But the government said it does not intend to go as far as shutting down domestic exchanges.

Bithumb trades more than 37 different virtual coins, according to Coinmarketcap.com

(Editing by Shri Navaratnam and Jacqueline Wong)

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Verizon to stop selling phone location data to third parties

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By Sheila Dang

(Reuters) – Verizon Communications Inc will stop selling its customers’ phone location data to third parties after an investigation by a U.S. Senator found law enforcement agencies were able to use the data to track people without their consent.

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The move by Verizon comes as consumers and lawmakers are increasingly concerned about privacy and security amid data breaches by tech firms, including Facebook Inc..

In a letter to Senator Ron Wyden of Oregon dated June 15 and released by Wyden’s office on Tuesday, Verizon said it was beginning the process to stop selling customer location data to vendors that aggregate the data.

Wyden contacted the major carriers after his probe found that a prison phone company called Securus Technologies with access to such data had allowed law enforcement to use it to track people.

A Securus spokesman said the company was authorized to give law enforcement the location of a phone in certain circumstances, under Securus’ contract with the third party data aggregator.

“We believe that ending the ability of law enforcement to use these critical tools will hurt public safety and put Americans at risk,” the spokesman said.

AT&T Inc and T-Mobile US Inc said in letters to Wyden that they have blocked the prison phone company from accessing customer data, but stopped short of saying they would stop selling the location data to others. Sprint Corp in its letter to Wyden said it would end access to its customers’ location data if a breach was found.

Shares of Verizon were up 2.2 percent at $48.49 in afternoon trading.

(Reporting by Munsif Vengattil in Bengaluru and Sheila Dang in New York; Editing Bill Berkrot and Sandra Maler)

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Amazon’s Alexa will now butler at Marriott hotels

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(Reuters) – Amazon.com Inc said on Tuesday that it has partnered with Marriott International Inc to help increase guest access to amenities with Alexa, through its voice-controlled device Echo, in an attempt to expand its presence in the hospitality industry.

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Alexa for hospitality would assist in providing services ranging from ordering room service to requesting housekeeping or calling the concierge for dinner recommendations without picking up the phone.

The company said the partnership will start this summer at Marriott’s select properties and the service will be available by invitation to other hotel chains.

Several media reports had said that Marriott had tested both Apple Inc’s Siri and Amazon’s Alexa to select what was best suited for its hotels.

On whether Alexa was chosen over Siri, Marriott said “this was not a direct comparison with Siri. We work with a number of partners in order to test emerging technology so we can learn and leverage what we believe will enhance the guest experience.”

Amazon has never disclosed the exact sales figure for its Echo devices. However, the company in January said it sold “millions” of Amazon devices and that the Echo Dot device was the best-selling product among Prime members.

The company’s move to tie-up with hotels is another strategy to woo more users for its Echo devices.Amazon Echo owners spend an average of $1,700 a year on Amazon, more than the $1,300 Amazon Prime members are estimated to be spending a year on the e-commerce site, CNBC reported earlier this year, citing a report by Consumer Intelligence Research Partners.

(Reporting by Vibhuti Sharma and Arunima Banerjee in Bengaluru; Editing by Shailesh Kuber)

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Walt Disney names creative heads of animation studios

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(Reuters) – Walt Disney Co on Tuesday split the role of its outgoing creative head John Lasseter and appointed two Academy award winners to spearhead its two animation studios.

Jennifer Lee will be the Chief Creative Officer of Walt Disney Animation Studios and Pete Docter will take over the same role at Pixar Animation Studios.

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Lasseter will leave at the end of the year, the company had said earlier this month.

Lasseter, the creative force behind movie hits like “Toy Story,” “Frozen,” and “Finding Nemo,” was on a six-month leave of absence after what he called “missteps,” including unwanted hugs that made employees uncomfortable.

Lee joined Walt Disney Animation Studios in 2011 as co-writer of “Wreck-It Ralph” and writer of “Frozen.” Docter joined Pixar in 1990 and directed animated films such as “Up” and “Inside Out.”

(Reporting by Supantha Mukherjee in Bengaluru; Editing by Arun Koyyur)

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ZTE and U.S. still working on escrow agreement: U.S. official

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(Reuters) – ZTE Corp and the U.S. government are still working on an escrow agreement that must be completed and funded with $400 million before a ban on the Chinese company can be lifted, a U.S. official told Reuters on Tuesday.

The Commerce Department official, who declined to be identified, emphasized that working out the escrow agreement was part of a “normal process.”

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ZTE agreed to pay a $1 billion penalty and put the $400 million in an escrow account in a U.S. bank as part of a settlement agreement reached on June 7 to allow it to once again do business with U.S. suppliers.

The escrow account is designed to allow the United States to obtain the money in case ZTE violates the settlement. An escrow agreement would define the terms by which the company deposits the money and the conditions under which it could be released.

ZTE paid the $1 billion civil penalty last week, according to people familiar with the matter.

Spokespeople for ZTE did not immediately respond to requests for comment.

ZTE, China’s second-largest telecommunications equipment maker, said last month it had ceased major operations after the Commerce Department issued an order banning U.S. companies from supplying goods for ZTE’s smart phones and networking gear.

The Commerce Department ordered the ban after finding that ZTE made false statements about disciplining 35 employees involved in illegally shipping U.S. goods to Iran and a cover-up that led to a March 2017 deal.

ZTE last year paid $892 million in civil and criminal penalties and pleaded guilty in a Texas federal court in connection with the illegal activity.

Shenzhen-based ZTE has a subsidiary in Richardson, Texas.

(Reporting by Karen Freifeld; Editing by Meredith Mazzilli)

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CEO Musk emails staff alleging employee ‘sabotage’

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By Salvador Rodriguez

SAN FRANCISCO (Reuters) – Tesla Inc <TSLA.O> Chief Executive Elon Musk said on Monday in an email to staff that an unnamed Tesla employee had conducted “extensive and damaging sabotage” to the company’s operations including allegedly making unspecified code changes to its manufacturing operating system and sending what the email said was sensitive Tesla data to unnamed third parties.

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Company spokeswoman Gina Antonini declined to comment on the email.

Musk said in the email, which was seen by Reuters, that he learned about this alleged behavior over the weekend.

“The full extent of his actions are not yet clear, but what he has admitted to so far is pretty bad,” Musk wrote. “His stated motivation is that he wanted a promotion that he did not receive.” Musk did not specify to whom he was referring.

Reuters could not independently confirm any of the claims in the email.

Musk wrote that the company would be investigating the matter this week, adding that Tesla needed to determine if the person was acting alone or in concert with “any outside organizations.”

“As you know, there are a long list of organizations that want Tesla to die,” Musk wrote, saying they included Wall Street short-sellers, oil and gas companies, and car company rivals but naming none.

Earlier on Monday, Musk sent a separate email to employees informing them of a “small fire” on Sunday at a company facility. The email was seen by Reuters.

Tesla said in an email that on Sunday night there had been a “smoldering in an air filter in the welding area of the body line. The smoldering was extinguished in a matter of seconds. There were no injuries or significant equipment damage, and production is back online.” The company did not specify the location of the fire, which Reuters was unable to independently confirm.

Musk said in the email that while the fire could have been a random event, “Please be on the alert for anything that’s not in the best interests of our company.”

Last week, Musk announced that nine percent of the company’s workforce was being laid off, without specifying an exact number.

Musk said the reorganization did not affect hourly assembly-line employees and was not expected to delay manufacturing targets.

Tesla’s future long-term profitability hinges on ramping up Model 3 output, which is intended for mass production.

Tesla’s stock price slipped 53 cents to $370.30 in after-hours trading on Monday.

(Reporting by Salvador Rodriguez; Additional reporting by Kristina Cooke; Editing by Bill Berkrot)

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