tv Bloomberg West Bloomberg December 22, 2013 4:00am-5:01am EST
>> i'm emily chang. this is "bloomberg west" on bloomberg television, streaming on your phone, your tablet and at bloomberg.com. facebook is getting into video ads as the company looks for new ways to make money. this week facebook launced a limited test program for the videos. select users will select ads for the new film divergent. the ads will play without sound just like videos from friends do now. the sound will only be turned on
if the users clicks on the sound. the sound will only be turned on if the user clicks on the ad or makes it a full screen. our editor at large, cory johnson, drilled down into how this could change facebook's advertising business. >> let's talk about how this is going to work. they think they can sell this for a higher price than they have in the price. these ads could generate up to $2.5 million in one day. these would be short ads, 15 seconds. the audio only happens when you click on the ad. the hope is this would be this would be another tool in the facebook quiver of advertising tools. >> let's take a look at how facebook ad revenue has grown since its i.p.o. mobile has become a bigger piece of the pie, but what else? >> we have seen some consistent growth. the numbers at facebook are big. it is hard, in conversation, we'll lump this in with other things like 2013 but it is nothing like it of the kind. the company did $1.8 billion just in advertising revenue in the most recent quarter, 13 weeks.
this is a huge business. the growth, you can see working with mobile advertising. the year-over-year growth in this segment, also impressive and really growing at a faster and faster rate. so it is big and getting bigger at a faster rate. >> now how could video ads impact the growth that we have seen? >> fundamentally, the notion is to get a higher revenue per user, more ads and more consumption of ads and a higher revenue that costs more for advertiser to run them or marketer. seeing that value increase. that is one of the metrix that has continued to get better for this company, including on mobile. >> that was our editor at large, cory johnson. i spoke more about their ads with shawn amos, the c.e.o. and founder of fresh wire, which provides realtime premium content for brands worldwide, with big name clients including hershey, aarp, hallmark and esurance. i began by asking him if
facebook can do this right without getting any backlash. >> they know their users are a number one priority. unlike other platforms, facebook users take the experience personally. it is very immersive and personal and they know they have to get it right. they have been testing in rolling it out. they are touting the fact that users can scroll past these things quickly if they don't like them in their feed. the audio is off. the bigger issue is will fans and users engage with them? not will they be upset by them. >> will they? do you think they will? >> it depends how brands treat the video content. if they are going to throw up a tv ad, probably game over. if they are looking for a unique content that works on the platform, you can't treat every platform the same. a tv ad is not a 15-second spot on facebook. they are willing to take chances and risks. if they are willing to play with the platform, it can be a
winner. >> by taking risks, what do you mean? what should brands do? what kind of things work? >> all things work. look at what g.e. did with their vine videos? just a simple task and tip. not necessarily ground-breaking but it is pretty useful and cool and innovative. the trick is just really reading the audience and platform and stepping outside the comfort zone a little bit to use the tools that facebook has given them to try something that may be a little bit new territory for them. >> now the tv advertising market is almost $70 billion. how much could facebook conceivably steal? >> they want all of it. >> of course they do. >> this is a message that every digital platform is seeing now. no different than youtube, smaller platforms. they all want brands to believe that tv is dead and over. all the dollars should come to digital, where the engagement is. facebook does a really good job of targeting their audiences. but tv is still a massive
juggernaut and to say it is dead is a little misleading, i think. >> shawn amos, the c.e.o. and founder of fresh wire. uber made some riders very angry last weekend after surge pricing made for some expensive rides. is surge pricing a smart strategy? we have an uber investor next on "bloomberg west." ♪
>> welcome back to "bloomberg west." i'm emily chang. this is "bloomberg west" on bloomberg television, streaming on your phone, tablet and bloomberg.com as well as apple tv. uber caught some heat this week from riders after some of them on the east coast paid as much as three to four times the normal rate last weekend for rides during the snowstorm. this is because of uber's surge pricing policy where users pay
more when demand is higher. in reaction to the complaint, uber tells "bloomberg west" surge pricing helps to get more cars on the road quickly when demand outstrips supply, helping to guarantee the uber reliability that users count on. users are clearly notified and must acknowledge the elevated pricing within the app before they can request a car. for more, i spoke with cory johnson and the managing director at menlo ventures, an investor in uber. i asked whether paying $35 a mile is fair. >> fair is not the right question. it is more important to make sure that you have a car to take you home than what it costs. what uber is trying to do with surge pricing is to make sure that the car is on the road. what is worse than paying $35 is not getting home in a snowstorm. >> right, but i'm not asking about surge pricing in general. i'm asking if $35 a mile is fair. >> i think it is -- the question is that enough demand for
drivers to get on the road. is it fair to ask someone to go and drive, put themselves and the car at risk? well, you need to give people an economic incentive to be out there and to be sure that the drivers are out there so that you can get home safe. >> is it fair to ask is it fair when it comes to a small business? should we be talking about the ethics of it? >> your questions are so unfair, emily. it is funny that you mention the safety of the driver. i was a taxi driver in new york a long, long time ago. i was telling a driver, i was in the back of an uber car. i told the driver the story of the day i left the house in a snowstorm taking a cab to my taxi garage. the cab got out on 5th avenue, did a complete 360 spinning out in the snow. i said i'm not driving in this. i think that is a reasonable question. on some level, the fare is whatever is legal and what your
customers will pay for. i think there is a bigger question here about what a developing brand chooses to do. if a developing brand says to its customers, we're going to take how much money have you got? that is what this thing costs. that creates a different relationship with the brand. uber is making a calculated decision that they will not alienate people with these things. what we saw this weekend, there are people up and down the eastern seaboard and were dedicated users were urked about this and i'm sure uber lost some customers because of this surge or gouge-like pricing. >> you know, it is one thing to make sure there are enough cars on the road and then it is another thing to make sure that your customers trust you. how important is trust and does surge pricing as high as $35 a mile undermine trust in the company? >> trust is super important. anyone who has been in an uber car knows how great it is, how courteous the drivers are and how safe you feel.
you ask the question about fairness. let me ask you, one of the cancer drugs out there is $200,000 a year for recovery. now is that fair, or is it more important to make sure that $200,000 drug is there so you can get better? for relatives it of mine who take that drug, that is a lifesaver. they don't think about how much it costs. they think about the fact that they can live an extra year. same way, when i think about the $35, i think about the fact that i can go home, be with my kids, not what it costs. >> ok, i had the c.e.o. of uber on the show recently. we talked about how much they take. let's take a listen to a little bit of that interview. >> it depends on the percent on the particular product. it is generally 20%. >> you take about a 20% cut? >> that's right. it depends on the product. higher end products might have higher margins. that is essentially the margin that most of the trips happen on. >> so it takes about a 20% cut.
what about capping surge pricing? just going two, three times higher than usual, rather than four, five, seven? >> i don't know. that is a decision that management makes and they have been very careful about making sure they do it at the right level. they are trying to make sure there are enough drivers available. the whole idea of capping the surge means they could limit the number of drivers. when this is going on, you want to get as many cabs on the road so that people can go home and the surge pricing allows you to get drivers back on the road. >> why can't uber pay drivers more? why don't they take a smaller cut when there is a snowstorm? >> why doesn't they charge me less for new year's eve? why does the pharmaceutical company charging me $200,00 for this drug. they should give it away for free. if they give it away for free, nobody builds the next drug. we need to have a mechanism to
drive the behavior. >> cory, jump in here. i totally think that drivers and passengers should be completely safe and that, you know, going out on the road and putting their lives at risk, they should be compensated for it. is there a better way than this? >> i don't care about people, i just care about businesses. you know -- i think this is an interesting choice for the business to make here. if customers -- it is not about affordability. let me bridge in an example of someone who can afford it. jessica seinfeld, wife to jerry seinfeld, someone i do care about. she paid $450 to take her kids to a bar mitzvah and drop them off. her friends -- she sent a picture on instagram and her friends were saying things like o.m.g., these people are crooks. that is a calculated risk that the business is taking. if they are going present something to their customers at a fixed price.
a mcdonald's value meal, it is 99 cents. you know what you're going to get. we're not going to change the price if you're more hungry. you can depend on us to have that. that is one choice a business can make. i think it is really interesting that the use of this technology allows uber to scale production instantly in a time like a big snowstorm or something like that, but there is an interesting risk on the backend of that. uber is feeling the wrath of that. thank you to defend the company and of capitalism on the backs of -- >> cory, that it is choice that uber made last weekend. is that really the right choice? >> i don't want to comment on a specific situation because i don't know. >> that is not the only person that, you know, was upset. there were many, many people. >> i have no doubt that there are people who took that journey and didn't realize what the surge pricing was and i'm sorry they didn't have a good experience, but am i super glad that there is someone out there willing to get drivers out so that she can get to a bar mitzvah so that i could get
home. the alternative is nobody is out there to get you home. >> you don't think there is an upper limit to how much it should cost? >> every time you pull the uber app, you have a choice. you could say not for me today. i don't want to pay those prices. >> right. people can't do the math in their head like that. it doesn't say from point a to point b is this many miles. >> that is a key feature in the app to tell you how much it is going to cost. look, i'm with everybody. i want to have everything cheap. in fact, i wish the government could put a law that everyone could be rich. that would be great. unfortunately that is not how the capital system works. >> this happened to me yesterday. i take uber many times. i use it for work a lot. i use it for other things. yesterday i was going from san francisco to the valley which is a longer ride than usual. i called uber taxi because i thought it would be cheaper. >> sure. >> what they don't tell you, and it is not advertised anywhere, if you use it to go more than 15 miles outside of san francisco, it is 1 1/2 times surge pricing.
the driver told me he would not charge me because he knew i would have no idea that that was the case. is that fair? >> it is not fair ever for someone to be charged something that they didn't know what the charge was. i don't think that is. lots of times user error. i think the company is trying to do a better and better job of making sure. are there mistakes? sure. am i sorry that you didn't have a good appearance? i definitely am. what i feel the company has done a better job of is try to make sure in situations there are no cabs available. there have been plenty of times in new york and san francisco when i walk on a rainy night. there is no options, there is an option to get me home. >> that is the managing director at menlo ventures and our editor at large, cory johnson. google is expanding its arsenal of robots with a new acquisition. find out why boston dynamics and its wildcat robot is a smart target for the search giant next on "bloomberg west." ♪
>> welcome back to bloomberg west. i am emily chang. google is grabbing another company for robotics arsenal. it acquired boston dynamics. themednown for animal machines that care run and walk like the real thing. this is the eighth acquisition that have completed in the last six months. i spoke with it with jon erlichman and a robotics engineer professor at m.i.t. how boston dynamics got started. boston dynamics was founded by a m.i.t. professor who gave up his tenure and left to create
some of the coolest robots in the world. and locomotion. how a robot moves. amazing robots like robot cheetah and wild cat. i know when i showed a video to my students it captures of their imaginations. it is right at the cutting edge of what you can do with a robot in a challenging dynamic environment today. >> we are looking at how they move. what are the practical applications of? it looks like something the military should be buying not necessarily google. boston dynamics have done a number of contracts for the military. they are building a robot that is being used and the robotics challenge that is helping -- happening in florida. meeting toes are build a robot that can use tolls
and climb up ladders and drive ae vehicles and respond to disaster scenario. these are robots that can interact with the physical world in a powerful and capable way. yes, that would be relevant to the military. there are a range of civilian applications. anything that involves going into the field, disaster response situations. >> interesting. i want to bring in jon erlichman. john cummings is google's head of acquisitions. you spoke about what they could be working toward, a long-term global manufacturing supply chain. what is looking most likely at this point? >> some people joke that they can track down some of those amazon drones. i think what is really important here is there are a couple things to highlight. google does make a lot of acquisitions.
they make them in a lot of areas. we should not be trying to tie this to what google has been traditionally. many of the deals that google was doing were built in a moat around its advertising business. things like doubleclick and youtube. the deals they do now are coupled with some of the things we talk about like driverless cars. google fiber, google glass, all of these are google looking for its next leg of growth. a lot of times a conversation of what google is becoming is more like a new version of general electric. they're looking for new legs of growth. this is opposed to the exact way to tie this to what they have been in the past. the answer is, we do not know yet. they have made a lot of robotics deals. they are ambitious and always have been. they're trying to figure out where its future is going to take it tied to the technology that they can buy.
>> you mentioned that the founder must be very passionate about this company. he gave up his tenure at m.i.t. to work in this. what do you imagine compelled them to sell to google? >> i can't imagine. m.i.t. faculty want to have an impact on the world. my best guess is it would help create a bigger impact. i view this as a long-term investment in hard technology and robotics. if i use the analogy of the self-driving vehicle, that has been a big success for google. procedures that project is the best people in the world to lead that effort. today, with this acquisition and so many other recent acquisitions, they have so the top superstar talent in the world.
i don't know where it might lead in terms of the very short-term. in the long term, it is an investment in core fundamental technology. i have to think that has a value. >> that was john leonard of m.i.t. in a bid to get more people involved in computers, everyone from athletes to tech leaders sat down for an hour of coding. we have the founders behind the initiative and we will see how successful it has been. ♪
from chris bosh to ashton kutcher, tech giants dedicated one hour to learning or teaching computer science last week. it was the hour of code initiative. even president obama urged kids to take part. >> learning the skills isn't just important for your future, it is important for our country's future. if we want were to stay on the cutting edge, we need young people like you to master the tools of technology that will change the way we do everything. >> the nonprofit organization got 15 million students in 170 countries to sit down for an hour coding lesson. one in five students in the united states participated. will one hour of code translate to many more hours of computer science education? i spoke about this to the co- founders. >> one week ago, i was at the team and we had 25,000 classrooms signed up.
and all i could think of was what if the servers can't handle this? no website in history had done this. >> i love that you had more girls participate in this hour of code than in the last 70 years. >> more girls experienced computer science last week than in the history of computer science in the united states. >> are you encouraging boys and girls to code? how do you get teachers to do that, going forward? >> one of the things we do is we do not recruit the students, we recruited teachers. teachers in the classroom have an even number of boys and girls. we do not have to go after the girls. they brought in and equal ratio. this experience has given us renewed optimism and the potential of the american teacher. >> other people you recruited personally, mark zuckerberg, bill gates, jack dorsey. have they given you any feedback about this process?
i know zuckerberg has been there from the beginning. you are identical twins. everybody we have asked has had such open arms embracing it. it is good for america and it is good for our children and good for jobs and the economy. very few people think this is a bad idea. who was against teaching technology to kids? >> how do you get their continued support? how do you get them to keep coming back and helping you? do you need that? >> we have a long-term plan. it started about a year ago. we went to start a summit to change the computer science in america. this is not an easy task. schools do not have to teach it. there are not enough teachers to teach it. the kids don't want to take it.
state education centers don't recognize it. we have a long-term plan where we have to change the schools and make it cool. the hardest part of that is how to make it cool. >> is it like a class they don't want to take? or are they excited about it? >> teachers have been getting calls from parents saying that the girls have been doing it all weekend long. >> how you turn one hour of code into many hours of code? how do you do this over many years? >> we partner with school districts. we do this in the chicago and new york. we announced a program to give classroom awards to teachers, $1000 for every teacher that takes a critical man puts it in the classroom. with the support of many tech companies plus the support of bill gates and mark zuckerberg. >> how many schools are open to this?
>> school district always have this -- the bureaucracy and red tape. there have been others are not very easy. seattle and oakland have said this sounds interesting, but they're not necessarily interested. >> those were the code.org co- founders. they are taking orders for a 3g smart phone that looks like the iphone 5s. china mobile says it has no deal with apple just yet. we dig into what is taking so long next. ♪
talks are ongoing to add the iphone to china mobile's service. the deal with china mobile will add 750 million customers. it could mean billions of dollars to apple. i started by asking why is this taking so long? >> certainly, there has been a technology factor, 4g is not available in china until recently. >> but they just got a license. >> users can take full advantage of the iphone service.
speculation is that china mobile is the world's largest carrier. they are the largest carrier in china by far. they might've been in portable to deal with. you have a clash of two titans. they're trying to get at this agreement. eventually, the deal will happen. it is a matter of getting to the details. >> what are the details? >> this has to do with the economics. we've seen china mobile let other handset providers use 4g. we have to believe the deal is imminent. >> you set up google in china. how is the chinese government to work with? when it comes to a major u.s. corporation, how does this work? >> there are a couple of things that are interesting about china. everybody is fascinated by this. china is so large that it is an ecosystem within itself.
the government has a set of policies and practices to a non- chinese businessperson would seem different. it is like japan was in the 1980's. having been in business there, you have to appreciate that china has its own ecosystem. you have a different set of partnerships and protocols. you have different integrations you have to do. you can't walk into a set up shop. >> the other two major carriers already do sell the iphone. this is the beijing website. this is for china mobile. it is taking orders for a phone and there are pictures of this phone on the website and it looks exactly like the iphone 5 s. it is in the five colors that it comes in. what are they doing? >> is almost like a silhouette. it is like before performer goes
on stage. the codename means a star, or bright star. what they're saying is we have a star that is about to be unveiled. here is a silhouette. place your orders now. >> this seems a little dangerous if the deal hasn't been done? >> which is why people think it would be announced today. >> what is the timeframe? is this a matter of when and not if? >> i don't have any information on that. everybody believes it is imminent. i think from us, we certainly think a large amount of -- sales of got up in the last month or so because the other two carriers are carrying it. we think this will stimulate apple's echo system in china and globally.
>> what does it mean for the other smartphone makers? if this does actually happen, how does it affect samsung or xiaomi? >> android has a huge market share in china. the competition and the game will be on. china mobile is the biggest carrier in the world and the largest in china by far. this gives you a sense of how big they are. analysts would say that doing this deal would give apple 17 million new users next year. how big is 17 million? the entire country of spain has about 19 million smartphone users. that is like adding the country of spain to their ecosystem. >> that is the managing
some of the biggest companies in technology are embracing defining themselves through ambitious new corporate headquarters. amazon, apple, facebook are all planning new projects. what does that say about technology? paul goldberger has written a piece in the january of vanity fair, he speaks with cory johnson. >> the most amazing thing about silicon valley is it looks like any other place. you have stanford andn the mountains are nice. most of it is a buttoned down suburb. you expect magic, but it isn't there. >> it is kind of amazing. i was a money manager for a while. companies would never make headlines. inevitably they were in stripmall's or little places where you could park your car and there would be 30 people inside. >> these are ordinary office parks and stripmall type places. silicon valley is opportunistic. they started in garages and with a move to the next level, took what office space they could find. it was random for a while. >> one of the things that your
piece missed is intel's influence. they have a corporate culture around being cheap and not flashy in any way. >> i think you're right there. that set the tone. some of the big companies, once they grew big like intel did not do anything except expand the boring big buildings they had. >> there was taking advantage of what grand rapids was offering in terms of furniture. these were cubicles and more cubicles. now we have the situation where it is highlighted in your story at steve jobs final appearance presenting this incredible design. i say incredible because it is hard to imagine. >> it's set the tone for everything. he knew had to up the ante.
he upped the ante in technology and the design of objects. he wanted to do it in architecture as well. apple's headquarters are a little bit different from most of the others. it is a little bit sleeker. not much, but he wanted to build something that would transcend the setting into an architectural scale. >> the plans are on an old hp site. it is probably not ironic. he admired hewlet and packard. i wonder, this is a hard building to imagine working in. >> i love it's going to be so great. i admire the ambition of it. i am pleased that steve jobs wanted to raise the level of architectural ambition in silicon valley. i don't think he fully understood that a building is not a gargantuan thing. it is not object.
it is more complicated and involves more inconsistency. and a certain amount of mass. it is a huge, enormous donut. it is bigger than the pentagon. i don't think it is going to do so much to encourage interaction, which is what he and the architect say it is designed to do. >> what we have frank gehry working on a facebook project and we have an amazon project that you are not fond of, i thought it was interesting that you looked at twitter as the most interesting and important future of architecture and technology. >> what twitter is doing as a work environment is really good, but not that different in itself. a lot of the other companies have designed loose, lively, pleasant somewhat unstructured work environments for themselves. the real thing that makes twitter significant is they took over three floors of an old furniture mart.
it is an old industrial warehouse type building in downtown san francisco. >> it is urban. silicon valley hates people outside of san francisco. >> the old silicon valley hated the city and what it represented. all the workers who are under 30 all want to live in the city. they don't want to live in the valley. a huge number of the startups today are in the city and not in the valley. we are at the beginning of a seismic shift. >> that was paul goldberger. a that does it for this best of bloomberg west. you can watch bloomberg west mondayhrough friday at 1:00 p.m. eastern. you can always catch bloomberg
>> baby steps in the right direction. >> this week on "political capital," rob portman. bloomberg news talk nsa and president obama. and margaret carlson and lanhee chen debate paul ryan's ultimatum. >> we begin the program with senator rob portman of ohio. senator, thank you for being with us. you were one of the republicans who voted for the small compromise on the budget, although you said it wasn't nearly sufficient. let me ask you this to start. was this a one-off marriage of convenience? or is this the start of maybe something -- some kind of collaboration? >>