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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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Lenovo swings to forecast-beating first quarter profit; PC revenue jumps

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HONG KONG (Reuters) – Chinese PC maker Lenovo Group swung to a profit and beat estimates in the first quarter on Thursday, helped by a sharp jump in revenue.

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Net profit came in at $77 million for the three months ended in June, compared with a loss of $72.3 million in the same period a year earlier when it was hit by higher costs amid a shortage of components.

That was ahead of an average estimate of $59.37 million from six analysts polled by Thomson Reuters I/B/E/S.

Revenue rose 19 percent from a year earlier to $11.91 billion, its second straight quarter of double-digit revenue growth.

“The group remains confident in its core PC business, and aims to grow at a premium to the market in revenue without compromising on profitability,” Chairman Yang Yuanqing said in the statement.

Lenovo’s shares gained 3.4 percent in early trade on Thursday.

(Reporting by Sijia Jiang and Donny Kwok; Editing by Edwina Gibbs)

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Tencent shares slide as profit falls and regulatory outlook spooks investors

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HONG KONG (Reuters) – Shares of Chinese technology giant Tencent Holdings plunged on Thursday after it reported its first quarterly profit fall in nearly 13 years and said it did not know whether it would get Chinese approval for its most popular game.

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Chinese censors’ sometimes abrupt and haphazard regulatory measures have clouded the outlook for the world’s largest market for mobile games in a country where the government can make or break a business.

Tencent said late on Wednesday the biggest issue facing the company before it could return to rapid revenue growth was to gain regulatory approval to start charging for its PlayerUnknowns’ Battlegrounds (PUBG) video game in China.

While several brokerages cut their price target for Tencent after its earnings, analysts were broadly upbeat on the outlook.

“Fundamentally, the business is as strong as it has ever been, in our view, and management says that it is working on various initiatives to reinvigorate growth as soon as possible,” Renaissance Capital said in a research note.

Tencent’s shares, which have dropped 13.5 percent so far this week, fell as much as 5 percent in early trade to HK$319, their lowest level in a year. Shares of South Africa’s Naspers, which owns a 31 percent stake in Tencent, slid 8 percent after the results were announced on Wednesday.

Beijing’s move to halt approvals for game licenses has hit shares of video game companies across Asia and in the United States.

Tencent’s profit decline and caution over the gaming business further hit tech shares in Asia on Thursday.

Shares of chipmaker Samsung Electronics Co fell nearly 2 percent, SK Hynix dropped 3.4 percent, while Japan’s Capcom, which developed Tencent’s blockbuster game Monster Hunter:World, fell 3 percent.

(Reporting by Anne Marie Roantree; Editing by Edwina Gibbs and Stephen Coates)

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Apple accused of pressuring game rivals in Japan: Nikkei

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TOKYO (Reuters) – Japanese regulators are investigating Apple Inc over allegations it unfairly pressured Yahoo Japan Corp to slow the expansion of its online games platform, which competes with Apple’s App Store, Japanese media reported on Thursday.

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The Fair Trade Commission (FTC) is looking at whether Apple interfered in Yahoo Japan’s operations by pressuring it to cut back on developing its Game Plus web-based service which enables users to stream games without downloading apps, the Nikkei newspaper reported.

Apple did not immediately respond to requests for comment. A spokesman at Yahoo Japan, one of the country’s most successful internet companies, declined to comment on the report, but said that the site continued to add game titles.

Shares in Yahoo Japan fell around 2.5 percent in early trade, while the broader market slipped 0.5 percent.

Last month, the FTC said Apple could have breached antitrust rules by forcing Japanese mobile service providers to sell its iPhones cheaply and charge higher monthly fees, denying consumers a fair choice.

Game Plus offers free and fee-based games developed by Square Enix Holdings Co and other game publishers, some of which are also available on the App Store for Japan-registered users. Yahoo Japan’s gaming site has more than 60 million monthly users, which the company and game publishers can tap for usage history and other data.

According to the Nikkei, Yahoo slashed its budget for the platform last year, and has largely stopped promoting the service. Meanwhile, game publisher Square Enix in April removed a game that had been developed exclusively for the site, the newspaper added.

Yahoo Japan’s biggest shareholder is SoftBank Group Corp.

(Reporting by Naomi Tajitsu; Editing by Stephen Coates)

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SEC scrutiny of Tesla grows as Goldman hints at adviser role

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By Jan Wolfe

WASHINGTON (Reuters) – The U.S. Securities and Exchange Commission has sent subpoenas to Tesla Inc <TSLA.O> regarding Chief Executive Elon Musk’s plan to take the company private and his statement that funding was “secured,” Fox Business Network reported on Wednesday, citing sources.

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The electric carmaker’s shares fell as much as 4 percent but cut their losses after Goldman Sachs Group Inc <GS.N> said it was dropping equity coverage of Tesla because it is acting as a financial adviser on a matter related to the automaker.

Investors viewed the Goldman statement as confirming a tweet from Elon Musk on Monday about working with Goldman, even as the reported subpoenas indicated the SEC has opened a formal investigation into a matter.

The latest news extended the roller-coaster ride for Tesla investors in recent days, adding to uncertainty about the future course of the company and whether a deal can be done amid growing regulatory complications.

Tesla and the SEC declined to comment.

Musk stunned investors and sent Tesla’s shares soaring 11 percent when he tweeted early last week that he was considering taking Tesla private at $420 per share and that he had secured funding for the potential deal.

The shares fell 2.6 percent to $338.69 on Wednesday, below $341.99, their closing price the day before Musk tweeted his plan to take Tesla private.

The Tesla CEO provided no details of his funding until Monday, when he said in a blog on Tesla’s website that he was in discussions with Saudi Arabia’s sovereign wealth fund and other potential backers but that financing was not yet nailed down.

Musk also tweeted late Monday night he was working with Goldman Sachs and private equity firm Silver Lake as financial advisers. However, as of Tuesday, Goldman was still negotiating its terms of engagement with Musk, according to a person familiar with the matter.

The 47-year old billionaire’s tweet about secured funding may have violated U.S. securities law if he misled investors. On Monday, lawyers told Reuters Musk’s statement indicated he had good reason to believe he had funding but seemed to have overstated its status by saying it was secured.

The SEC has opened an inquiry into Musk’s tweets, according to one person with direct knowledge of the matter. Reuters was not immediately able to ascertain if this had escalated into a full-blown investigation on Wednesday.

This source said Tesla’s independent board members had hired law firm Paul, Weiss, Rifkind, Wharton & Garrison LLP to help handle the SEC inquiry and other fiduciary duties with respect to a potential deal.

The Wall Street Journal said the SEC was seeking information from each Tesla director.

(Reporting by Sonam Rai, Michelle Price and Supantha Mukherjee; Editing by Anil D’Silva, Nick Zieminski and Cynthia Osterman)

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U.S. investor sues AT&T for $224 million over loss of cryptocurrency

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By Gertrude Chavez-Dreyfuss

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NEW YORK (Reuters) – U.S. entrepreneur and cryptocurrency investor Michael Terpin filed a $224 million lawsuit on Wednesday against telecommunications company AT&T <T.N>, accusing it of fraud and gross negligence in connection with the theft of digital currency tokens from his personal account.

In a 69-page complaint filed with the U.S. District Court in Los Angeles, Terpin alleged that on January 7, 2018, the tokens were stolen from him through what he alleged was a “digital identity theft” of his cellphone account. In the complaint, he said AT&T was his service provider.

In an emailed response, an AT&T spokesman said: “We dispute these allegations and look forward to presenting our case in court.”

At the time of the theft, the three million stolen tokens were worth $23.8 million, the complaint said. Terpin is also seeking $200 million in punitive damages.

The complaint said that AT&T had been previously contacted by law enforcement authorities about such frauds.

Cryptocurrencies have a market capitalization of about $200 billion, according to data from virtual coin tracker coinmarketcap.com. Nine years after bitcoin came into existence, the market has seen the emergence of more than 1,800 digital currencies.

Terpin, represented by Los Angeles litigation firm Greenberg Glusker, claimed in the lawsuit that after the theft of the digital currency, his cellphone account was transferred to an international criminal gang.

Terpin co-founded the first angel group for bitcoin investors, BitAngels, in early 2013, and the first digital currency fund, the BitAngels/Dapps Fund, in March 2014. He is a senior advisor to Alphabit Fund, one of the world’s largest digital currency hedge funds.

The complaint claimed that the theft of the tokens occurred through what is called a SIM swap fraud. SIM stands for subscriber identification module, and SIM cards are used to authenticate subscribers on mobile phones.

SIM swapping consists of tricking a provider into transferring a subscriber’s phone number to a SIM card controlled by someone else. Once that person gets the phone number, it can be used to reset the subscriber’s passwords and access online accounts.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Toni Reinhold and Nick Zieminski)

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Cisco’s software push fuels quarterly beat, strong forecast

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(Reuters) – Cisco Systems Inc <CSCO.O> topped Wall Street targets for quarterly revenue and profit and forecast first-quarter sales above estimates on Wednesday, as the network gear maker’s transition to a software-focused company gains traction.

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Shares rose 6.1 percent to $46.53 in extended trading as the company also highlighted improving subscription-based revenue.

Cisco, like other legacy technology companies, has been launching new products focused on high-growth areas such as cyber security and Internet of Things to cushion sluggish demand in its traditional routers and switches business.

“We’re seeing the returns on the investments we are making in innovation and driving the shift to more software and subscriptions,” Chief Financial Officer Kelly Kramer told analysts on a post-earnings call.

The company forecast first-quarter revenue growth of between 5 percent and 7 percent, implying $12.86 billion at the mid-point, and adjusted profit of between 70 cents and 72 cents per share.

Analysts were expecting a profit of 69 cents and revenue of $12.61 billion, according to Thomson Reuters I/B/E/S.

Subscriptions, which provide a more steady revenue stream, represented 56 percent of total software revenue in the reported quarter, the company said.

Revenue in the security business, which offers firewall protection and breach detection systems, rose 12 percent to $627 million, beating estimates of $615.8 million. Deferred revenue in the business jumped 23 percent.

Cisco said in August it would buy cyber security provider Duo Security for $2.35 billion, the latest in a series of acquisitions by Chief Executive Officer Chuck Robbins as he builds out the company’s newer businesses.

CFO Kramer told Reuters Cisco is looking at more acquisitions in the security space.

Revenue in its infrastructure platform division, which houses the company’s traditional business of supplying switches and routers, rose 7 percent to $7.44 billion. Analysts had expected revenue of $7.32 billion.

On an adjusted basis, the company earned 70 cents per share, beating analysts expectation by 1 cent.

Total revenue rose 6 percent to $12.84 billion, topping average estimate of $12.77 billion.

(Reporting by Munsif Vengattil in Bengaluru; Editing by Sriraj Kalluvila)

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