tv Best of Bloomberg Technology Bloomberg March 25, 2017 6:00am-7:01am EDT
that is what arianna huffington promised to do. ibm is focusing big on growth in which makes up 17% of company revenue, or $13 billion worth of business. we caught up with the ibm ceo and asked what it is about ibm's cloud business that sets it apart from the competition. >> the ibm cloud is a new platform. three things. one, it is enterprise strong. you have to prepare them for the future. it is the data first architecture, and it is cognitive at its core. when i say enterprise strong,
one is its globalness. today we also announced blockchain on the ibm cloud, 10,000 transactions a second. dot is what you t need to with blockchain work. we are the first quantum computer available on the cloud. you can't do this on your premises. enterprise strong, you have to have security better than anything else. when it comes to being data first, very different than some of the consumer clouds out there. you have to be able to protect your clients insights, not distribute them. when you look at consumer guides, they take data and they distribute this.
some call that commoditizing or democratizing. we said the value of our client is in there inside. we can give them data control and tell them that data is not intermingled with the somebody else's. insightslated, and the are yours. we can show you how to protect it. that is data first. the third part that distinguishes us is watson. what is different from ai is industrys trained in and domain. of all the data in the world, 80% is not searchable. that is where the greatest value is. that is what watson has been trained to deal with. moment iscloud at the 17% of revenue. what do you want it to be? movingee lots of clients
their businesses onto the ibm cloud. banks,7% of the largest 80% of the airlines. if you look at all the telcos, telcos and credit card transactions come through us. the ibm cloud is about helping them bring that into a future world. caroline: it builds your revenue? in our globalt technologies business. many people say that business is running services for other people would go down, and it hasn't. we have built our backlog, and the work at the heart of that is around the cloud. customers will build many new things on the cloud, but they have data --they thin we have to build these hybrid cloud environments and the best
public cloud. we are living in both of those worlds. caroline: will the revenue drive revenue growth in the next couple of years for ibm. >> it will. you mentioned 70% of ibm revenue. $13.7 billion, growing 35%, so as you take a look come i'll cloud, analytics revenue, watson, mobility, security, those are what we call strategic imperatives. that has been growing at 14%. it is $33 billion, 41% of idm complemented by the work we do in our core franchises, which may not be growing, but are important businesses. together we are growing in the places we are investing to grow, and those other areas, we are moving with the market. caroline: you just got back from china yesterday. talk to me about the partnership
with wanda. will you always have to be a partner with someone in china? >> we will be a partner on the cloud, but we have a very large business in china. we were one of the first. we have been there well over 35 years. very well-established brand, respected brand. we are partnered to those banks there. they are some of the most sophisticated financial systems in the world. with the cloud, wanda is one of the most accessible private companies in china. great attitude about agility, skill, and they have a huge business that will also be on this cloud, so it will be both a customer and a partner with the cloud and a great footing, because they have a big ecosystem. with our ibm clients and the largest ecosystem around wanda
coming together, i look for to that being a successful partnership. caroline: marc benioff and king of the deal says the window for deals is closing. that extended conversation, next. a reminder that all episodes of bloomberg technology are loving on twitter. check us out at @bloombergtechtv , 5:00 p.m. new york, 2:00 p.m. san francisco. this is bloomberg. ♪
caroline: we continue our cloudge of ibm's made focused event called interconnect. partnersstomers and gathered in las vegas, and iv of discussed it is teaming up with salesforce to integrate artificial intelligence capabilities of their two software companies. thereby offering more advanced data analysis. we caught up with marc benioff and when i asked what watson is
providing salesforce that it did not have internally or through m&a. >> we have been able to find a work together. those crazyple is hailstorms we had last week. we manage five of the top five insurance companies. those companies want to know when that hailstorm is about to happen, and they want to notify their customers to put their customers in the garage. the combination of ibm and salesforce let's us do that. watson let's us know the hail is going to come and we can notify the customers to get their cars in the garage. caroline: you are a company , was itinternal r&d easy low hanging fruit to go
after watson? we have some incredible ai technology, but it is integrated into our platform. it is called salesforce einstein 150,000 of ourl customers around the world. watson brings a general purpose ai platform that is programmatic to extend our solutions. caroline: where else in your product line, where is the low hanging fruit? where is the demand coming from for your ai product? >> you can see a must every industry can be smarter, and you find employees able to extend capabilities through artificial withligence, and salesforce einstein, we are seeing salespeople more productive than ever before. they know who to call, when to call, how to call in a prioritized way. that is all done by einstein.
that is the power of ai. caroline: you just announced a intnership with aws australia, significant growth in europe and asia, where geographically is eating up the desire to get into artificial intelligence? >> software is eating the world. we know that. ai is starting to percolate into that software across the world. i inside these different jobs and work streams, and the advances in ai have exceeded our industry over the last several years, and now vendors like salesforce and ibm can extend and complement solutions with this technology, not just machine intelligence, machine learning, but deep learning as well. thatcola announced with us they will be building these coolers that have cameras in them, and the cameras can do real-time inventory management,
so you know what is happening inside the cooler so as people take those coax out of the cooler, trucks are automatically rolled to the stores knowing they have to replenish supplies. you mentioned disruption and jobs will be significant. what does it mean for your topline revenue growth? einstein ors watson, what does ai built into that? topalesforce is one of the five software companies in terms of growth. we just delivered a phenomenal quarter. our deferred revenue hit $14.5 billion and 28% for the quarter, and a lot of that is driven by ai and other major cloud, including the social networking, mobility because our customers are moving
to those four trends and we need to align salesforce with those four trends to get growth to happen. that is how we have created extraordinary growth. caroline: crm is where it remains? is the fastest growing segment and will be the number one segment by 2020, and we are the number one vendor in crm, sales, service, marketing, community, analytics, commerce as well. caroline: you mentioned how ai will be affecting jobs, does -- >> i am focused on that issue. the workforce will dramatically change over the next 1-2 decades and it will be driven by artificial intelligence, and that is why we need to start re-training and new types of job
development before this technology hits. moonshot, 5 a million apprenticeships in the united states based on the things we learned from countries like germany, switzerland. we can bring that to the united states and improve the quality of our workforce, and i hope the u.s. government creates that loan shop. caroline: do think everyone can be retrained at the end of the day? >> absolutely. there are so many vehicles to educate people. there are phenomenal opportunities, community colleges, universities, k-12 systems. there are so many people who are ready for these next-generation jobs. i look at the things we are doing with veterans using salesforce. salesforce will create 2 million billion dollars to the gdp by 2020, so we are really focused on creating these
new jobs and getting people ready for salesforce jobs and creating platforms for that is so important. apprenticeships are the key, also automation and one-on-one. caroline: you are looking at hiring and growing an awful lot. you have been an acquisitive company. last year, i was super clear i thought there was a window that was really open for m&a activity, and we bought a phenomenal company, demand ware. billionill do one dollars to $2 billion in e-commerce on the salesforce platform, and we have amazing p, which isike qui this amazing productivity tool. worrying, so the m&a windows have narrowed and i
don't see us doing a lot of m&a this year. that was salesforce ceo marc benioff. coming up, uber held a conference call after a string of scandals and arianna huffington says changes must start at the top. all the details, next. tech giants around the world are doing everything to avoid being hacked. that includes china's baidu. this is bloomberg. ♪
high-level employees. of course, the sexual-harassment scandal. >> they advertised it as we are not going to make any news. they said they would have a diversity report by the end of the month. eric holder's report on their sexual-harassment problems would be out by april. they made commitments to work on the organization. their hr said they had the cold of an individual and needed to change that. >> they referred to their own organization as a colt? ult? andhat becomes excessive creates this culture where one superstar is more important and the team. problems.anies have
some might be unusual, but this dirty of the laundry does not seem like the cooper we know. >> it is a company consumers have a close relationship with, so there is an obligation to own up to their customers. it is a ride people are taking every day and need to explain to riders and drivers what they are trying to do. riders were a big game on the call, trying to say they are going to improve the product to make their lives easier. cory: when you have an asset-less business, where you don't own the stuff, you're demanding the attention of customers and providers of the service. , these guys are leaving cars every day. people forget uber wanted to
start this year of says twitter brand, and that is why jeff jones was a marketer. it was supposed to be all about brand, and obviously it has been destroyed the first three months of the year. rachel holt -- cory: we have a quote from the call. this is jeff jones. the approach to leadership the guided my career are inconsistent with what i saw and experienced at uber. it wasemed like referring to something that went down. thelearly he disagreed with .eo on a lot of issues one was this tipping issue. he supported tipping drivers. the other was safety on the platform. encouragedng program less safe drivers to join uber,
so there were debates within the company in which they seem to be taking different sides. caroline: now to a company out with earnings this week. tencent posted profit that estimates, and tencent faces competition in the mobile gaming market. the company is revving up its battle with alibaba. with our bloomberg technology reporter. of revenue jumped 60% from a year before. ok to take a hit on profit margins at this point he comes they are seeing growth in other revenue streams. they have been expanding into cloud computing, mobile payments, new content, and the video business as well.
atoline: when you look profit up 40%, most people would die for that number. give us your sense of video and cloud. >> on the earnings call, wind videoreiterated is so important. there are significant losses in that business, but they are putting in billions of dollars to acquire and make content because they relies taking a loss in the short term is worth it. video is such a way to make advertising dollars, get honeription dollars, and people into their ecosystem. good content tries users, and like amazon, they know content will drive more people to their platform. caroline: i am fascinated by the i-programs, and app within the app to order cars, food. how much is this catching on for
wechat? >> the rollout got a lot of attention because it seems to be apple andl threat to the app store. they did not give a ton of details. they did say the purpose is not to monetize it, but make it easier for users. they use the bicycle sharing program in china as an example. they say that this type of ecosystem building has created more downloads within the app store as well as within the mini-app. this way someone can access something without leaving wechat . caroline: with companies facing increasing security threats, most tech giants are taking increased measures to prevent a data breach.
this includes baidu. the company has revealed the steps it is taking to combat hackers. tom mackenzie has the story from beijing. head ofdu's cybersecurity no c has a fight on his hands. he says hackers test baidu's defenses every minute of every day. the most serious case was again put together to steal i do's prized automated driving technology. whot is difficult to know hired them to do that, but we know someone tried to hire someone on the ground to steal it. baidu has responded by boosting its security team and backing what might be called ethical hackers. , like the blue lotus team.
they showed me how they can open up my phone. i will test out one website. see hacked by blue lotus. supporting these guys is one way linesp china's best it on side. weaknessesbe for that can be dangerous and then report them to companies like apple and google. baidu has teamed up with tencent and alibaba to go on the offensive. industry is getting bigger and stronger, so we must help each other. we are not the enemy. they are the enemy. tom: the threats are only expected to increase, and china's tech giants are gearing up for the long haul.
wow, watchathon has netflix? hey, drop a beat... [ beatboxing throughout ] show me orange is the new black. wait, no bloodline. how about bojack? luke cage. oh, dj tanner. maybe show me lilyhammer. mmm, show me last chance u. on second thought, maybe pompidou. narcos, fearless, cooked, the crown. marco polo, lost & found. grace and frankie, hemlock grove. season one of... show me house of cards. xfinity watchathon week starts april 3. get unlimited access to all of netflix and more, free with xfinity on demand. the dinosaurs' extinction... got you outnumbered. don't listen to them. not appropriate. now i'm mashing these potatoes with my stick of butter... why don't you sit over here.
something for everyone is awesome. find your awesome with the xfinity stream app. more to stream to every screen. caroline: welcome back to the "best of bloomberg technology". i am caroline hyde. google's advertising crisis has gone global after the biggest marketers halted spending on youtube and the company's display network. the controversy around it after the london times reported some as were running with youtube videos that promoted terrorism or anti-semitism. institutions including the u.k. government and the guardian newspaper took down ads. this week, the crisis went
global after marketers including at&t, johnson & johnson halted spending on youtube as well. google tried to head off the backlash by implementing new tools and policies and many advertisers were waiting to see details or results before placing ads again. >> there are a couple of things. one is the political climate. around fakesitivity news, hate speech, and terrorism. there has been this growing noise about google and facebook and the control they have. are pushing for uniform measurement standards and third-party audits. opening and are seizing it. continues to spread. brian come into you. you downgraded alphabet to hold on the news. you worry was this could have global repercussions.
he clearly does. how much do you worry about the stock performance going forward? it is subject in small part if not a major part two headline risks. brandsl see more demonstrating their concern and announcing they will be pulling their ads from youtube. not appeargle does to understand the gravity of the situation. some levels mind-boggling, but also not surprising because it is google-ly. this will continue for a while. they will solve it eventually. when i meant the repercussions would be global and have an impact on their business, it is not about the boycott. we will never see it in the persistunless this did for weeks on end.
what will happen to us every advertiser will have a conversation with google that is not focused on what the strategy should be using search to enhance brand building, how to think about moving money from tvt youtube. the conversation is about brand safety. google is on the defensive for the next 3-6 months for any conversation they will have. that will have meaningful impact to expand their business at the pace they would have by the large brands serviced by agencies. theline: let's look at display ad business and youtube it is affecting. this is not the search business. this is not the major cash cow. affects this advertising spend generally? search is google's bread and
butter. it represents three times what it spent on video on youtube, so search in the u.s. is about $37 billion this year. of that is on google, so by far the dominant player. is $12.5ertising billion, so again a third of what search represents over all, and google has about 20% of the u.s. digital video advertising business, so we are talking about big dollars. this does come at a critical time for google. to expand theg conversation, draw those tv advertising dollars, trying to present themselves as more of a haven for tv-style advertising. the search business is something they have been doing and know how to do. it will continue.
they know it better than anybody , certainlyideo google and youtube have a major presence, but there are other players who are fine for those same advertising dollars, so the stakes are high. caroline: you have been nodding your head through out. brian called this google-ly. we have heard from eric schmidt and the chief business officer. why are they not reacting faster? fair, brian is the only analyst who has downgraded this. there are not expectations this will change that caliber of the conversations, but google has weathered this before. we have to think about the fact that a lot of advertisers don't have a lot of other options. ,hey may go to facebook, snap
uronet made ane offer. it is likely ant will make a down to ring offer. instagram is expanding into booking and reservations. it will allow users to set appointments with bars and restaurants by clicking a button. will giveng feature advertisers a direct way to measure the power of the app and could pose a challenge to companies like opentable and yelp. now to snap. its highly anticipated ipo came with fanfare, it also brought a lot of scrutiny to snap, which has been slowing its user growth. one analyst was the first to initiate coverage with a buy
rating and $25 price target. analyst followed suit and shares gained 9%. we caught up with him on monday after he casts this outlier view along with cory johnson. to ist it boils down three things. innovation on the camera. we have not seen that much innovation since the actual invention of the digital camera and 1975 aside from pixel quality. as they push on hardware and software, it they will be an a position to take over the camera app over your phone. that is the hook. the money will come from premium content deals where they offer a differentiated mobile optimized experience, where with competing platforms it is plug-and-play. if you have a differentiated
separate your self from the pack. lastly, incentives. if they move towards a tv-type affiliate model, the financial incentives of the content producers will drive letter with the experience and interest that the in do users are looking to face, and when you have that balance, you will be in a position where the rpu revenue will grow at a 60% rate. ory,line: coty, respond for that. what's going on is the question is how much revenue can the user support is an interesting one?
how many ads have they not yet put on? can they sell that inventory? that is an unknown question. is this head issue to head competition with instagram. the geneticories, growth snapchat had seen fell off a cliff, and cameras will not make up for that. ads toll have to sell get the platform to grow, and it looks like instagram stories is happening.that from we will know in a couple of quarters that they can grow this business or not. caroline: james, respond to that in terms of the competition out there. modelapped create a new and get content that has not
been designed for other users at the same time as facebook and the like? >> i will have to fundamentally disagree. cory: what? how dare you. >> what facebook is trying to do and doing well at it is direct response, getting the conversion right there. how do they do that? it is based off of what is called click bait. sharing model. the more clicks, the more revenue you generate. what snapchat is trying to do is replicate television, where it is about brand dollars and affinity. facebook is about 30% of the ad market for digital and direct response.
the television dollars or 40% of the 600 billion dollar ad market and they have not moved over to digital at all. why haven't they moved? the ad products and experiences on mobile do not jive with the marketing goals these companies have appeared they are not building affinity for crest, coca-cola, so if you can create tv-like experiences with premium content that facebook is not willing to pay for in a curated way, those dollars come in in a much more meaningful way. it is about winning new dollars stuck in television. technology business is we have seen the big companies are bigger than the number two players. intel is bigger than amd.
they are fighting over peanuts because they don't get that network affect. fundamentally, they have to change their user growth number, and it has not happened. >> the user growth has only moderated in the second half of the year. down,nstagram did slow it but ultimately where are the users growing? most affluent, dominant, tear when markets in the world. facebook is growing from around the world and lower value users are the incremental users coming to the platform. if you can start to shift ad dollars over, you can move it in a meaningful way.
now fast food giants have placed big bets on technology with the aim of getting a competitive edge. bloomberg has more on the story. >> the automation wave has it has whetted the appetite of your lunchtime favorites. mcdonald's is the latest company to take advantage. they have begun testing mobile payment in u.s.emen cities. it says all its restaurants will be equipped to handle mobile orders later this year. the creator of the big mack is late to the party. chains haveood adopted this technology to boost sales. domino's is the leader here. the company has been emphasizing all the ways you can order pizza with minimal human contact and maximum digital contact. it has introduced ordering
methods through facebook, twitter, emojis, and the apple watch. is a sing financial results. since 2008, domino's the share price has increased 60 fold. the company is now worth $9 billion. .tarbucks also an early adopter in the u.s., mobile ordering is 7% of all company-owned store transactions. the company may be a victim of its own success. customers who order drinks and food on their phones to pick up in-store are seeing longer lines, resulting in traffic and lower sales. one san francisco chain may offer a glimpse of the fast food future. it is a highly automated food chain where ordering takes place on ipads or mobile. for cashiers or servers, just a few human hands
working behind the scenes. the core premise is maximizing efficiency. all the evidence is showing we are marching towards a fast food world where human intervention is optional. caroline: coming up, we catch up with the fitbit ceo james park as the country rings in its 10th anniversary. if you like bloomberg news, check us out on the radio. you can now listen on the bloomberg radio app, bloomberg.com, and in the u.s. on sirius xm. this is bloomberg. ♪
, you said we are software guys making hardware. >> when we started, we did not think about the challenges we would encounter. we just did it. we are really software guys. years later, james park is sticking to that claim, even though it is the companies hardware. >> two thirds of our engineers it hardware engineers, but is about the combination of the team working well together that creates the magic. think we can quickly classify ourselves as a hardware or software company. cory: growing sales more slowly is difficult. rocket ship of a company for quite some time. we shipped our first product in 2009. over 20r, we shipped million, so we have been
stretched for growth, so now we are moving to a different environment, so it is a new set of issues that myself and the company face. cory: which are what? an environment of hypergrowth to one where we have to be efficient and focused on fixing a lot of the things that we had ignored in the past because of our growth profile. i think that is a good thing for the company. it is time for us to reflect come at look at the things that are working, and make the right fixes. cory: fit to first ever contraction has been painful to employees and wall street. since 2015, shares have plummeted 71%. cory: are you glad you did the offering? backder if when you look to the ipo, the negatives
outweigh the positives? negativesre always and positives. the positives for us are the that for the longest time we weren't well-capitalized as a company. we had hypergrowth, but our balance sheet was always pretty light, so we viewed the ipo as a financing event. of means ofndreds dollars and it was the largest consumer electronics ipo in history, so a huge event, but a lot of cash on our balance sheet to in december we had $700 and that gives, a lot of confidence for us to operate the business going for it. cory: working capital? capital, sleep at night money, r&d, m&a, they give flexibility to the business. cory: when you look at the stock price, stock prices stock price, but what does that mean for you
and the business plan in keeping the high margins and the other decision to have made their? if you lower prices and cut margins, but you chosen not to do that, why is that? >> pricing is something you cannot reverse from, so we want to make sure people really value our products, and maintaining pricing discipline is an important part of that. we do invest a lot in significant, innovative, and original research and development, and that is something we want to continue. the stock price and public investors, that is all very important in terms of how we run the business, but also what shareholders would like us to say is to properly manage short-term interest, but also look at the long-term. i hope we are able to do that as a business. cory: fading customer demand caused fourth-quarter revenue to
fall 19%. a $4 million charge and laid off 110 employees, so how does fitbit plan to turn it around? >> we are going to streamline our product portfolio. importanceantly an on coaching, guidance, personalization. the later adopters want solutions rather than data and tracking. into adjacencies like smart watches. the acquisition of pebble him a vector increased that capability. huge vector of growth. there are form factors beyond the risk as well, and as part of our restructuring, we are looking at the business in two
perspectives, consumer, but more importantly enterprise health and the where we want to target -- we have already targeted employers, but to target and a focused way insurers and other partners in the health care echo ecosystem. there will be incredible opportunity for bulk, recurring sales tied to health plans. it comes downly to inspiring sales and getting customers on their feet. what would you have told a five year younger you? arehere are things that easier to manage as a private company because you are less visible and not being judged on a day-to-day basis, and so a lot of the things you have to do to chart the path to growth and profitability are definitely harder in the spotlight.
what i think about on a daily basis is how we transform fit it into a product that is kind of nice to have into something that is a must-have, and a lot of that will come into how we integrate into the health care ecosystem. was fitbit ceo james park and bloomberg's cory johnson. in this edition of out of this world, elon musk is no fan of the new federal law that authorizes 19 point $5 billion for nasa. president trump signed the bill and it included for the first time human exploration of mars, something elon musk has publicly champion, yet elon musk pointed out the law does not include additional funding from ours. bewrote "perhaps there will some future bill that makes it different from ours, but this is not it." on monday, we hear from bill knight on his recommendations to president trump's national
carol: welcome to "bloomberg businessweek". i am carol massar. oliver: i am oliver renick. one day trader who loves wearing a wire for the fbi. creator hasert strange and controversial viewpoints. carol: the shockingly bad safety record for auto-parts makers in the south. oliver: all that ahead on "bloomberg businessweek". ♪ we are with the editor in chief megan murphy. you look at china, specifically