Facebook's Mood Experiments: Bloomberg West (06/30)

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June 30 (Bloomberg) -- Full episode of "Bloomberg West." Guests: Electronic Privacy Information Center President Marc Rotenberg, SoftTech's Jeff Clavier and Saper Law Offices Attorney Daliah Saper. (Source: Bloomberg)

Live from pier 3 in san he live from pier 3 in san francisco, welcome to "bloomberg west," where we cover the global and media companies that are reshaping our world.

I am emily chang.

Sales force has named a new ceo.

Hawkisnns helped manage the transition to selling more subscription software.

Twitter is expanding its suite of advertising reaching a deal to buy tapcommerce.

It helps to convince customers to reopen apps they've downloaded.

And taking in $300 million globally in its opening weekend.

In the u.s. it took over $100 million.

The biggest mastech me the debut of the year.

It pulled enough in china which would make it the biggest opening ever for a foreign movie in china.

Google will have to face a class-action salt -- lawsuit.

The supreme court refused to consider the appeal of living -- allowing the privacy lawsuits go forward.

Google has said it was a mistake but insists the actions did not violate federal wiretapping law.

Our editor-at-large cory johnson is with me in the studio and joining me is an electronic -- our guest.

What is the liability here, how bad do you think this is?

It is a serious decision.

The supreme court left in place the decision which found that the company had violated the federal wiretap act with its street view vehicles that were supposed to be taking pictures of houses were also capturing wi-fi communication.

When people learned about that they charge the company was violating federal wiretap law.

What was google doing here, some of the things sound awfully ominous.

Images and documents all unencrypted.

In doing it as they would have cars patrolling the streets not just of the u.s. but of the world.

They have these street view cars taking pictures of everything around them am everyone walking in the street in everyone's homes.

They were also secretly gathering wi-fi hotspots and not just locations but the actual ip addresses of some of the devices.

They wanted to know what computer you're using, your home writer -- router's ip address and where it looked on the map.

And in some cases they were able to determine usernames of the actual devices and who was running them.

Courts on both sides of the atlantic have declared this act to be illegal.

Face it was a mistake.

Does it mean it was an accident?

They did not say it was an accident.

This was a very planful thing.

There have been some instances where google has been involved in gathering information and sharing that information with the world.

Think of the original mission statement.

Every google employee and person has been on a mission.

It was to gather and organize the world of information and make it universally successful.

Some of that does not want to be gathered.

If their personal mission statement is to go out and do this thing they're going to run into these problems and they might have to address that.

What are the consequences here?

A lower court will hear this class-action suit.

What are the consequences, what punishment could google face?

Mexico be quite substantial.

The action that was brought under the federal wiretap act was a class-action lawsuit which means that many people have been brought together to bring this claim.

The supreme court has left the legal basis for the claim which means that google could be looking at substantial monetary fines.

It is not likely they will go to trial in a case like this.

It would be easy for the plaintiffs to show that the wiretapping activity that was alleged had in fact occurred and with the legal basis for the claim well in place they would almost certainly prevail in child.

Which means you will likely see a settlement.

The parties will sit down and try to figure out what a reasonable amount is to dispose of the various claims now pending against the company.

When you look at the acquisitions that google has done, acquiring satellites that can send signals, find people, drones, military robots, audiovisual surveillance through drop him.

What does this mean for other google projects and does this change, this result make the acquisitions perhaps less valuable or make them -- on use -- unable to use them in ways that they had been inclined.

There are some boundary lines out there for google that they really cannot cross.

A lot of the data collection they are able to do as long as it is internal but when they are violating the wiretap act by collective information through wire transmission then clearly they are creating a business model that is going to subject them to liability.

I think you will cause the company to pull back a little bit and look more closely at what limitations travesty laws are -- do impose.

From the user's and does perspective that is not necessarily a bad thing.

Presumably those laws are protecting important interests.

We want to use routers without worrying that others will be intercepting our private to medications.

Companies should be free to innovate so we should find a way to have companies innovate while respecting these important privacy safeguards.

We will follow this lawsuit as it heads to a lower court.

Do not miss my interview with reid hoffman.

We discussed everything from his new book to his upbringing in berkeley.

He talks about the legend he -- legendary paypal mafia.

Macroeconomic, financial, bold model, the intersection of interesting is this models or business technology, things like big data.

More of my interview with reid hoffman coming up later on the first installment of studio 1.0. i am emily chang and this is "bloomberg west." suspending operations after the ruling that by the supreme court.

They are mapping out their next step.

Our guest has weighed these risks and cory johnson just -- is with us.

How do you make these choices when it comes to a company like aereo or uber or airbnb running into these issues?

Yin the case of aereo they must have chosen to go after the cable providers thinking there was a shot.

In the case of commercial drones we have service called the red cap.

You basically figure out what is the risk and hope that the regulatory one will be addressed it one point in your favor.

Is the notion that there are different types of -- certain industries, those are federal.

Things like finance, health care, communications that is one sort of federal and with municipalities they are dealing with a lot of regulations but they can take them one at a time . that is a way to split the challenge.

Faa are changing and you hope that progress will actually win.

Hope is not a plan.

There's a lot of luck making a companies -- a company a success.

In the case of regulation you look at the risk and talk to the council and say this is what has happened.

This is the way the agencies are looking at that sort of progress and hope for the best.

We have been talking about valuations.

Do you think any of these regulatory issues could truly slow them down and become their fatal flaw?

Excited not think so.

In the case of those companies they have reached a scale where they can go to the local government and they can go to the federal institutions and make their case.

In the case of aereo, they were slaughtered by the cable industry.

You passed on airbnb.

Is there a reason?

They were called air bed and breakfast.

To go to a conference somewhere in the u.s. and to get in there bed and stay with someone to have a cheaper way to have accommodation.

-- get in an air bed.

You could feel the [inaudible] where everyone who passed [inaudible] what is that feeling like when you know that you past on something you could have made some money on?

That is our job.

That is to see everything that is interestingbb and make a decision.

Hopefully will -- we will make the right decision.

And in the case of linkedin, it is like -- airbnb and uber are profits on paper.

Linkedin is real.

You can look at those in go well.

If you just raise more money and we have been talking about valuations and how money rushing into the market -- when you're seeing us talking about rushing into market you have raised a bunch of money or commitments to money.

What was the fundraising process like, how is the rest of the world investors seeing early-stage stage investing in silicon valley now?

Rex and spite the market when you have 135 funds that are out there investing, when i started there was one.

And so it has a different landscape.

People look at the portfolio, this by passing on them.

We have made a bit of progress and we have a lot of winners in what we have invested which will make a lot of money for investors.

They -- it was never easy to get money from people but it is much easier.

Do you think it will not end well, all the capital that is chasing tales now, all the prices going up?

Rex you have a lot of capital chasing deals.

There is a lot more discipline.

Prices have gone up in crazy ways.

There's a finite amount of capital and that is where the regulation is happening.

Even though some companies get very high valuations, they have not moved that much.

After raising his fourth fund.

Thanks for joining us.

They spoke is under fire after conducting a psychological experiment on its users.

That is next.

? welcome back.

Sunday marked the seventh anniversary of the first iphone ain't released and how far we have come since 2007. there have been eight models and sales past the $500 million mark create apple is rolling out a new ad called parenthood.

Looking at all the ways that iphones help parents.

Iphone is expected to release the next iphone in september.

Google has gone to cuba.

They traveled to havana over the weekend for a push for a free and open internet -. he blogged about his trip calling the internet of cuba trapped in the 1990 plus.

Turning now to facebook.

Social -- the conducted a social psychology experiment.

They altered and operate them on 700,000 of its accounts to determine whether they could alter their emotional state by omitting positive or negative post in each newsfeed.

What about the legal and ethical issues of this study?

A business attorney is here with us.

How does this strike you?

Google is running experiments at any one time.

Is this different?

There is substantive comparative advertising.

How can we manipulate users and data to get what we need.

What is distasteful is the covert nature of it.

It seems like an experiment that is on such a grand scale and it was not disclosed.

It does not smell good or taste good but there is no real overt legal problems.

The terms of use allow for them.

The notion that facebook is boasting of its ability to be a mood altering drug even if users sign up for it is disturbing.

One of the things we note is that they tend to shift their policies and their practices based on the user backlash.

This is a 2012 study.

They have done a poor job of managing the publication and the results of that study.

If they see that users do not like being manipulated or their newsfeed is not authentic, it is being screened to disclose certain posts or others, you might see a departure from facebook to sites like instagram.

Another new or novel media platform.

Would be better if they did this and did not tell us?

The terms of use permit this but can't they just as easily run these kinds of experiments and do this kind of research for an internal benefit?

Absolutely.

For every one of the studies there are a million others that we simply do not know about.

If the studies and their ramifications are offensive enough one would the and amazon pricing structure.

Amazon offer different prices for the same goods based on demographics and consumers found out and there was a backlash and amazon.

Not to do that again.

Users saying negative stuff without anymore interaction with other people from themselves posting more negative stuff.

Now i know i'll was in a bad mood for six months.

There are books and psychological studies independent of facebook's own that demonstrates the impact that social media has on moods and their daily interaction.

Some people have facebook addiction and other people feel the need to get affirmation about their own lives.

Social media does permeate a lot of what we do depending on what the giant wants to do with that data.

The ramifications can be quite profound and interesting.

We have to be vigilant with what the site doesn't read the terms of use.

If there are major changes we do not like we might have to think about leaving the network and finding another one.

Thanks for sharing your thoughts with us.

My interview with lincoln co.

Finder -- cofounder of linkedin.

The way think about it is how do you have a life that you are proud about having lived my that you think that what you did in the world was worth it, that it was worth hard work, sweat, blood, tears.

These are challenging, these are not easy things to do.

More of my interview with reid hoffman next.

? let's take a look at where stocks are trading.

The s&p 500 did flirt with the record level.

We did have better than estimated pending home sales data but worse than estimated data on manufacturing in the u.s..

This text has been automatically generated. It may not be 100% accurate.

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