Bloomberg clients are beginning to question how they use the company's financial data terminals after revelations that its news division used them to monitor log-on activity, say IR and corporate communications experts.
Thomas Rozycki, MD at Prosek Partners, says the admission has spooked the financial community, which had come to believe the terminals were highly secure, particularly given that trading information was shared over them.
“Now the question of those I've spoken with both inside companies and consultants is this: ‘What else was monitored that we don't know about? What did I type in my machine that if someone else knew about it would be detrimental to me or my organization?'” says Rozycki. “People had such a degree of comfort that the terminal was this magic bullet for their business that I don't think anyone spent a lot of time wondering whether it was safe from prying eyes.”
“If there is a loss of market share, and there may not be if this is the extent of the story, it will be driven by the what-else-we-don't-know mentality,” he adds.
Investment institutions and commercial banks are the primary clients on Bloomberg terminals, but government agencies and IR units also use them. The annual cost to lease a Bloomberg terminal is about $20,000, far higher than that of rival platforms. Several sources tell PRWeek that Bloomberg rarely negotiates on the rate, though the company may temper the hard-line stance given recent headlines.
PR agencies are also among Bloomberg's clients. Of the firms that PRWeek spoke with, Edelman has two terminals, one each in New York and Chicago. KCSA Strategic Communications has a terminal that is shared by its staff.
“It is a tool we use voraciously – to find out the latest financial news, 13F [institutional investment] filings, the analysts covering which companies, research on IPOs, news features, you name it,” says Jeffrey Goldberger, managing partner at KCSA. “Bloomberg has dominated the space – and not just among financial services companies.”
The issue came to light after Bloomberg reporters called Goldman Sachs about possible employee firings, citing traders' terminals going dark as evidence. Reports have also stated that confidential client messages exchanged over terminals were posted online, which is the biggest worry of the financial community, adds Goldberger.
“Traders are going to want to understand that those chats have been kept confidential and that they remain well protected,” he explains.
PRWeek reached out to a number of financial services companies, all of which declined to talk about the issue. “We're still looking into this,” explained one corporate communications executive at a major financial institution. Goldman Sachs is reportedly considering whether to develop its own instant-messaging service to reduce its reliance on Bloomberg terminals.
As for the IR community, corporate communications professionals say they are less concerned about spying on Bloomberg terminals because they use them primarily for research rather than chat features.
“Most IR people don't tend to have private conversations of any kind of public platform about material non-public information, as that would be selective disclosure,” says Jeff Zilka, EVP and GM of Edelman's Chicago financial communications team.
However, he says IR professionals are concerned about the impact the scandal will have on the quality of Bloomberg's financial news coverage because its reporters may have lost the trust of sources.
“Their news service has been hugely influential and an important feature of the terminals in the IR world,” adds Zilka.
While it is believed the news division represents a small portion of the company's overall business, it is a key marketing and selling point. Still, Zilka says the response from Bloomberg indicates “they understand how damaging this is to both the financial and news sides of their business, and they've taken serious steps to correct it.”
The corporate communications pros interviewed by PRWeek agree that Bloomberg has duly noted that there needs to be more space between its financial and news divisions, which they say is an appropriate response.
Last Friday evening, Bloomberg posted an apologetic letter on its corporate blog from CEO and president Daniel Doctoroff, and it uploaded the letter onto its terminals so clients could read it as soon as they logged on. Two days later, the company also published an op-ed from Bloomberg News editor-in-chief Matthew Winkler, who said the practice was “inexcusable.” On Monday, the company launched a CEO blog, on which Doctoroff will address client concerns about the issue.
Ty Trippet, head of communications for Bloomberg News and Bloomberg Media Group, declined to comment.
A public- and private-sector problem
The Bloomberg story wasn't the only snooping episode in the news this week. The Obama Administration came under fire for secretly seizing the phone records of reporters and editors at the Associated Press. The Justice Department reportedly took two months of records from more than 20 AP telephone lines as part of an investigation into leaks of classified information about a May 2012 terrorism plot.
Gene Grabowski, SVP and chair of the crisis and litigation practice at Levick Strategic Communications, says the two cases reflect a societal and business climate where privacy seems to be a thing of the past. The communications industry needs to take note that “Big Brother-like” abuses of power and information are no longer restricted to government, he adds.
“The takeaway for PR pros is this: our industry needs to understand we live in age of ultra-transparency,” he says. “Every email, computer stroke, and phone call is possibly open to observation by others.”
This story was updated on May 17 to correct Jeff Zilka's title. He is EVP and GM of Edelman's Chicago financial communications team.