Executives at the financial information company Bloomberg have known about journalists using the company's terminals to spy on clients at least since September 2011 — more than a year before the practice turned into a scandal that threatens the company's relationships with its clients.
That month, Erik Schatzker, an anchor at Bloomberg TV and host of "Market Makers," was reprimanded for making on-air comments about using terminal data to track the activities of at least one story subject, according to two sources with knowledge of the situation.
One source said the matter was a very big deal internally but was handled quietly.
"All the terminal guys freaked out," said this source, referring to Bloomberg's army of salespeople who sell its $20,000 signature product. Bloomberg's 315,000 terminal subscribers, not its news operation, make up the vast majority of its revenue, which last year totaled $7.9 billion.
Schatzker declined comment, as did a Bloomberg representative, and a clip of Schatzker making the comment couldn't immediately be located.
Though no one outside Bloomberg's Manhattan headquarters complained about Schatzker's slip, executives at the time said they would disable the function that allowed journalists to access certain client data, said one source. But apparently that didn't happen until recently, and it only came to light after the New York Post reported that Goldman Sachs executives complained to Bloomberg about the ability of reporters to keep tabs on its bankers via the terminal. The Post also reported that JP Morgan Chase also believes that Bloomberg reporters tracked its employees.
The New York Times followed up the Post's report on Saturday with its own story saying that banking regulators at the Federal Reserve were concerned that they also were tracked by Bloomberg reporters. The Times story said that a preliminary investigation at Bloomberg revealed that "several hundred" reporters used a technique on the terminal, known as the "Z function," to monitor client activities.
Part of the reason why nothing changed two years ago is because, while exposure of the practice shocked many outside observers, any Bloomberg terminal user with a moderate level of understanding knows that this kind of data is not only readily available, but also one reason why the company's terminals are so popular.
It is widely known, for instance, that every Bloomberg client has a profile page template and a company assigned email address. So, clients and Bloomberg employees can see how many times the profile of, say, Goldman Sachs CEO Lloyd Blankfein (presuming he is a client) was looked up, but they can't see who precisely was checking him out. They can email him at his Bloomberg address, but odds are that he doesn't use it and would never see the message. Green, yellow, and red colored dots indicate whether someone is actively logged onto a terminal (green), logged on but inactive (yellow), or logged out/inactive (red).
Also visible were statistics over the previous week on what functions clients used the most — news, bonds, equities for instance — but not which actual stories or stocks were looked at. Reporters never had access to such information as trades, stock purchases, client messages, Bloomberg wrote in a blog post on its website.
This type of information has always been used by the terminal salespeople as a way to better serve client needs — knowing what features they are using and what stories they are reading helps them tailor products and services.
Editorially, this information was seen as so benign that surfacing it was an open practice, if not openly encouraged. Internally, reporters are taught to "harness the power of the terminal" to mine for stories, one former newsroom source said. Bloomberg reporters can see the aggregate number of readers for a specific story, but cannot identify the individual readers.
Indeed, not unlike at some other digital media companies, sources said half of the annual bonus for Bloomberg reporters is based in part on story views, so seeing which stories are gaining traction among readers is valuable in helping reporters determine what to chase. According to the former newsroom source, reporters pitch a lot of what Bloomberg calls "people movers" stories (i.e., a Morgan Stanley banker being hired by UBS) because they get a lot of traction among clients.
"I'm not sure what benefit you get out of exploiting this function other than to see if someone is logged in or not," said one current newsroom source. "LinkedIn Pro is more useful and has better information for finding sources and helping to break news."
Bloomberg moved quickly to put out the fire, saying in a blog post on its website titled "Safeguarding Customer Data" that it made a mistake and that last month it changed its policy "so that all reporters only have access to the same customer relationship data available to our clients." The company also appointed Steve Ross, who was responsible for management of the terminal business, to the new position of Client Data Compliance Officer to ensure that "our news operations never have access to confidential customer data."
Bloomberg News' editor-in-chief, Matthew Winkler, has yet to speak publicly on the issue — Dan Doctoroff, the CEO of parent company Bloomberg LP, wrote the blog post. Known as Bloomberg's standards enforcer, Winkler is famous for his bow ties, fierce temper and his high ethical standards, which include weekly internal memos expounding on the proper use of the words "but" or "announce." Sources said he was in London on Friday but addressed the issue during the Friday morning global editors call by simply reminding everyone of the company's policy regarding client information.
These sources unanimously described Winkler as untouchable and said he likely would not suffer any repercussions from the revelations. Whether the newsroom's relationship with its clients and sources is equally ironclad remains to be seen.