Google will pay 170 million as part of an agreement with the ftc for violating childrens privacy on youtube. Critics say its not enough. And slack. Stock shares plunge after clear one. A anyone that has manufacturing in china is there. What is potentially more interesting is it is it is starting to spill over to other industries. Was an example. Everyone thinks about being defensive. Toy are actually starting see and outlook as a result of the ongoing trade war now the tariff has kicked in in our reality. I think we are going to see a lot of that go through and the companies say, is this going to impact some of those . What are the second derivatives like . That would involve anyone outsourcing that. It may not be obvious. You mention individual companies. Asonder if it is as simple qualcomm by salesforce. Or is there something idiosyncratic within those companies you need to look at . To be specific about the individual companies, not just the sector. Of asw it is thought being more defensive. About zoomsk you video, that wouldnt come to mind as being an obvious one impacted by this. Product the r d and Development Comes out of china. And that is how they have been able to be so profitable. Now, we have to wonder, do these tariffs maybe chip away at that advantage they have on the r d side relative to other Software Companies . It is very much company specific, not necessarily sector by sector. Taylor we have been within the trade fight. Lets call it march 2018, we are 18 months in it. Have companies been pressured on the margin side, the bottom line . You mentioned maybe they would cut back with r d, but tech spending is still strong. Are you seeing margin pressure show up . Rishi not really. Tech spending at the business level tends to be very strong. Outside of an actual macro event that impacts the economy and overall business spending, i dont see that slowing down. If i think about what sector i would want to be invested in and have more peacefulness around factors like brexit and the tariffs, i think technology and specifically software is the place to be. Taylor that was d. A. Davidsons rishi jaluria. Sticking with tariffs, some are saying investors are looking to software as opposed to hardware as trade tensions escalate. The idc president says tariffs are having less impact on i. T. Spending than originally predicted. We spoke to him on tuesday for more details. Tech spending has not been that significantly affected as a function of the tariff talk. A lot of that has to do with where we were in the tech cycle. You have to remember that tech is infused in the economy now, infused in our work lives, in the infrastructure and how we entertain ourselves. So what we saw was that there was a huge data center buildout. Server spending, Storage Spending was really high. If you look at Infrastructure Spending last year, it was over 20 . If we had gone back three years and said it would be over 20 as a buildout function of the cloud, nobody would have taken that seriously. So it really muted overall spending impact associated with tariffs. What we saw last year was about 9 growth overall, which was very high. Taylor where are we in that cycle now . As we look forward, are we in the cycle where we could still start to see tech spending, or are we starting to see some uncertainty really start to play in . Crawford taylor, its interesting. We are starting to see that shift now. We are starting to see customers take a pause, lock up a little bit, saying we cannot run our business by these little bits of information that come out. We have to be able to understand the longterm impact of imposed tariffs Going Forward. What we have seen is that we are starting to see a deceleration, and we are seeing a deceleration in spending overall, but its primarily that we are seeing the customer start to take a pause, but we are also starting to see that that infrastructure buildout, companies are starting to take a step back from that and starting to slow down their overall spending. So our expectation for spending this year is somewhere between 4 and 5 for overall tech spending. Taylor when you talk about customers, there is hardware and software. So far, it appears software for a little bit has been relatively insulated compared to hardware. Is that accurate . Absolutely. Its really interesting and we have to kind of remember this as a Service Economy and what the longterm impact of the azure Service Economy is. It really becomes something that impacts are much more muted. Companies do not really move away from their salesforce. Com subscription over time, but you can definitely say to your employees, we are going to make you have your pcs for five years instead of four years. We are going to push infrastructure out another year before we do an upgrade. Were definitely seeing hardware is the first stuff that gets muted. Really, smartphones are something that really gets muted. Its not that hard for consumers to say, im going to wait another year before i buy another smartphone. Taylor that was crawford del prete, president of idc. Coming up, 170 million. Thats what google will have to pay as part of an agreement with the ftc for violating childrens privacy on youtube. But does that really make a dent for the tech behemoth . And if you like bloomberg news, check us out on the radio. You can listen on the bloomberg gap, bloomberg. Com, and in the u. S. On sirius xm. This is bloomberg. Taylor apple is returning to the bond market after an absence of almost two years. It borrowed 7 billion. Taylor apple is returning to the bond market after an absence of almost two years. It borrowed 7 billion. Apple is joining a slew of companies that are rushing the investmentgrade market after the labor day holiday. The company has more than 200 billion in cash and securities on its books. Apple is developing inscreen Fingerprint Technology for its iphones. Bloomberg has learned the feature could be available next year. Apple has had fingerprint scanning since 2013, but it is integrated in the home button. The new technology would allow them to screen fingerprints on the large portion of the display. It would work with the current face id system. And another fine for google. This time, youtube has agreed to pay a record 170 million to settle claims it violated childrens privacy laws. Most of the money will go to the federal trade commission. 34 million will go to new york state. Youtube has been accused of failing to obtain parental consent in collecting data on kids under 13. We spoke with the Vice President of net choice and Bloomberg Technologys ben brodie on wednesday to discuss. Net choice is a lobbying group that counts google as a member. Ben it is certainly easy for google to pay. It is a drop in the bucket compared to their annual revenue. It is, however, a very large fine by the standards of childrens privacy, 30 times larger than the previous record, which came in february with tiktok, similar issue, collecting email addresses and names without parental consent on the popular teen video app. You have a lot of people who are saying this is not going to make a dent in googles Business Practices, but it is setting a record for this space. Taylor carl, you are taking the flip side of this. Give me your breakdown. What do you make of the fine and the ruling to limit some of the ads and commenting on childrens videos . Thanks for asking. As ben laid out, the fine is 30 times larger than any prior fine. What surprised me so much was the fact that the ftc was even able to extract this fine, given the fact that i think the ftc has gone well beyond the statutory limits of what the copa law allows. Essentially, youtube is a general audience website. Every user on youtube says that they are over the age of 13. The terms of service say if you are under the age of 13, dont use youtube, you cant use youtube. There is really no there, there for the ftc to bring the action. I think it sets a really dangerous precedent Going Forward by suggesting that a general audience website is going to be decided by the ftc to be a childdirected website and subject to copa. I would say for anyone who operates a website talking about harry potter or the avengers or anything related to children needs to be worried that the ftc may be coming for them next. Taylor to be fair, weve gotten a lot of pushback from members of congress. We have a tweet from a senator and i will read it to you. Senator ed markey saying that youtube knowingly broke federal laws. They are tracking kids to rake in advertising dollars without permission from parents, but the ftc let google off the hook with a dropinthebucket fine. Not a single google executive or investor will bat an eye. Carl, what do you make of that and the reaction from senators . Carl senator markey should know very clearly what the law does and does not allow, since he helped write it back in 1998. Under the law, there are two ways you are subject to being under copa. You are a child directed website or you knowingly collect from people under the age of 13. Youtube did neither of these in this case. So, i think for a lot of people who are saying it is not enough, i think for a lot of those individuals, it will never be enough. Whether the fine was 170 million or 170 billion, it will never be enough for a lot of people who fundamentally dislike these platforms and their right to give us free services. Taylor as for all of the antitrust issues surrounding google and other technology giants, we caught up with the former acting chairwoman of the ftc thursday, who weighed in on the issues at work. The fine is only one part of the remedy in any of these cases, the facebook case, the google case. There are extensive provisions in the settlement orders that require google to go above and beyond what the childrens online protection act requires. Now they are having to screen content to see if it is childdirected and to go ahead and impose the parental notification and consent provisions on that kind of content. I think that the fine is only one part of the equation. You really have to look at the conduct obligations that are being imposed going ahead. Caroline the u. S. Led the charge in this respect. Do you think other geographies might look into the child part of the equation, whether there are any other laws being broken or not abided by in quite the way they would like in other parts of the world . It is certainly possible. Each country might have a different approach to childrens privacy. The way congress struck the balance of the childrens Online Privacy protection act is to have parents make the decision whether information about their children could be collected through online sites and services. In that way, what they are trying to balance is the incentive to create childdirected content against the desire to make sure children are being protected, and that is the way we have struck the balance in the u. S. , through Congress Making that decision. Caroline some lawmakers are not always thrilled with policies enacted by the ftc, as we heard. He mentioned the sweetheart deal for facebook. That sweetheart deal was a 5 billion fine, so a significant chunk of change, even though it pales in comparison of facebooks overall revenue. But what did you make of that ruling when it comes to privacy and how it changes the mode of conduct and the way that Business Practices will unfold for the businesses Going Forward . The facebook order, the settlement is quite extensive, and it requires facebook to create new types of oversight and monitoring and reporting, having obligations going up to the board level. It is quite extensive, and of course, a 5 billion fine dwarfs any other privacy fine that has been imposed really anywhere, so i would not call it a sweetheart deal. I think it was a rather strong message. Caroline do you think Tech Companies are getting the message that, rather than having to respond to such accusations coming from regulators, they can in some part start to get ahead of the curve and ensure that they are abiding by the letter of the law and the general meaning of the law before they are hounded by you, for example . I think you are right about that. I think they are paying even more attention to some of these issues. A lot of the companies have paid close attention to these issues, but i think it has really become a boardlevel issue in a lot of companies because theres not just the impact, you know, from an investigation and a fine, whatever the fine may be or what the obligations Going Forward are. There is also a reputational impact on these companies, and i think they care about that. But i also think it highlights the fact that the privacy laws that we have in the u. S. The federal trade commission has done a good job with the law that has been given, and congress did pass the childrens Online Privacy protection act, but i think it is highlighting the desire to have maybe an additional federal privacy law that would give Additional Guidance to consumers and enforcers and industry itself. Taylor coming up, slack slumps. Shares tumbled this week after the company disappointed with its first report as a public company. Why sales are slowing. Plus, taking on tesla. Porsche powers up its electric sports car, but will it be enough to charge past the model 3 . This is bloomberg. Taylor slack gave its first Earnings Report wednesday and investors were not impressed. While the company beat analyst expectations for revenue and earnings, it projected slower sales growth for the second half of the year. Slack said revenue will be 154 million in the thirdquarter quarter, signaling strong competition against their rapid rise. We caught up with our correspondent and a Research Director on wednesday right after the results were announced. It is pretty stiff competition, but what microsoft is trying to do is push Microsoft Teams and this type of collaboration into the infrastructure, so it becomes this horizontal service that everyone in the company has access to. We can tell you based on our surveys this past year that office 365 is increasingly being attributed to collaboration, enterprise collaboration, where in previous years, it was more associated as an email outsourcing service. In my opinion, as microsoft has succeeded with teams, it has also succeeded in building awareness of the need for collaboration and the ability to collaborate more effectively in the cloud, which should indirectly help slack and increase interest in the market overall. Taylor i want to bring in our reporter covering slack for us at Bloomberg Technology. Nico, give me your top takeaways. What happened to Topline Revenue growth . This is an instance in which slacks best was not good enough. We had seen for years that slack was one of the most hyped unicorns in silicon valley. It raised at least 1. 3 billion because of that anticipation and the stock went down 15 . The stock went down about 20 after the first pop when it went public in june. The reason why is the company is decelerating. Whether we consider the revenue forecast for fiscal 2020, which was just short of the consensus estimate of wall street analysts, or if we consider the growth in the number of paid customers and large customers, but for many metrics, slack is not growing as quickly as it once did. Of course, there is a law of gravity when it comes to these cloud applications companies. The larger that you get, the more difficult it is to continue growing at the same rate, but slack is a moneylosing company. And so, from an investor perspective, if you arent making money, you need to be growing. And if you are not making money and youre not growing as quickly as we want you to, then we are a little bit concerned. Taylor you not only got the investor perspective, but you just got off the phone with the ceo. What did he have to say to defend top and bottomline growth . Nico i just spoke on the phone with stewart butterfield, the ceo and cofounder, as well as the cfo. Butterfield said, basically, this is very strong growth for our business. The cfo echoed that sentiment. They said that when you consider the amount of customers who are spending more than 100,000 each year with slack, so think of this as the largest businesses in the world, that number increased by 75 to 720. But that is still a slower pace of growth, and they are looking forward to a current product that they have coming out right now, which they think will continue to improve things, but they are going to focus and tell investors on the earnings call, which has just started, about the customer stories, basically. Tell them what companies are using slack. They have seen lots of growth in europe, including germany. They are also seeing growth in the u. S. , they say. But essentially, they are sticking to their line of this is good enough, even as investors clearly are not happy right now. Taylor i want to bring in larry back into the conversation, because larry talked about the future of slack and part of that is bringing in some security tools. Is that a future growth area for them . How does that can compare with others . When we talk about slack, we have to realize there are two different levels, two different families of products. One is slack teams, which you may be familiar with. The free version of slack. Then there is a pay version of that where you buy that on a workspace by workspace basis. Then there is the slack enterprise grid. That is the enterprise license product, where you can get all you can consume teams and workspaces. Thats who i talk to our clients about most often. That is where they are investing a lot into the security products, as well. They recently released a new desktop client, which handles more effectively a larger number of workspaces, so they are expecting some growth there. They are also building in native mobile security features to kind of very similar to what intune does with microsoft, to control how the application behaves on a mobile device and to control the content that slack uses on the device. That is all good stuff to help them compete and build credibility with the i. T. Professionals i talk with. Taylor that was bloombergs nico grant and gartner researchs director. Just a reminder, bloomberg lp is an investor in slack. 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