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tv   Bloomberg Technology  Bloomberg  September 26, 2017 11:00pm-12:00am EDT

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alisa: i am a alisa parenti in new york, and you are watching "bloomberg technology" the senate will not advance a vote on the graham-cassidy health care bill. the legislation to replace obamacare would cost millions and cause a 100 $33 billion deficit reduction by federal 2026. prosecutors unveiled criminal charges against university coaches, financial advisors, and representatives for sportswear companies accused of mutilating -- manipulating young athletes and steering nba-destined college stars towards certain sports agents and managers. president trump plans to visit puerto rico next week. it comes after the administration came under blistering criticism for its response to the damage on the
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island. president trump says it is the earliest he can visit without disrupting recovery operations. hillary clinton says there is more than meets the eye regarding the relationship between presidents trump and vladimir putin. ms. clinton: i believe he has something on donald trump, or trump thinks that putin helped him so much that he is not going to turn on putin. either is horrifying. alisa: you can watch the charlie rose interview at 10:00 p.m. eastern. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i am alisa parenti. this is bloomberg. "bloomberg technology" is next.
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♪ emily: i am emily chang. this is "bloomberg technology," live from new york. coming up, google searches its search and shop playbook with less than 24 hours before the e.u. deadline. the tech giant faces an ultimatum to level the playing field for rivals or risk fines with 5% of revenue every day. we will discuss the big decision. plus, the massive data breach at equifax forces and exit at the top this week. ceo richard smith is stepping down and is not walking away empty-handed. facebook scores an nfl touchdown, but is it playing catch-up with other big tech players in the league? what this multi-year deal means for the social media giant's content strategy, coming up. google has taken a big step to comply with e.u. orders by the end of the week. it will create a standalone unit for its shopping service and require it to bid against rivals as shown at the top of the search page. bloomberg spoke to the chief for competition and asked about
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google's responsibility to make changes to the service. >> it is not for us to approve. it is for google to live up to the decision, and this is important. if google does not live up to the decision, then we will start investigating. emily: for more on the story, we are joined by mark gurman. and david kirkpatrick, ceo of techonomy. what do we know about how this is going to work? >> google's is to create a new division just in the e.u. basically competing with every , other comparative shopping service. google. they pull from e-commerce and retailers and puts them at the top bar of search results when you search for a product, and now they are saying that we will bid for the option just like everybody else.
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emily: this means that amazon could be as competitive in google as its shopping results. mark: exactly. amazon and ebay had much bigger market share in e-commerce than we do. is starting to take a lot more of its search dollars. it is searching, and then paid advertising, as well. emily: david, does this is some like something that would appease the e.u.? david: it strikes me that we are entering into a battle of ideas between regulators and companies, and this is the first shot across the bow. because of that gigantic find the google got. but this kind of thing will be happening all over the world, not just for google, but for amazon, facebook, but probably apple and microsoft. i think it is very creative. i think it is a creative effort on google's part. whether it will appease the commission and the competitors who brought the complaint remains to be seen, but it shows that they are trying hard. emily: 5% of global revenue is no joke.
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we have any idea how much this will cost google? mark: there are rough estimates. in europe, it is probably 5%. that may be high. it is not a huge hit. they will lose some of that revenue, it is probably not even going to show up in your quarter. but it has been a growing category for them, as more retailers are using it and many are getting stronger turn system it is one of the best-performing ad products. emily: there is the record $2.8 billion fine. you made an interesting point, seems to bethe e.u. forcing change via fines, but perhaps it might result in creative collusion. david: even as google stock went up when it was announced, it is something you notice when you get find -- fined $2.8 billion.
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they will do their best to avoid things like that in the future. in reality, none of these countries know what to do any more than the regulators know what to do about them. that is where it gets so interesting. emily: what are the next steps here? mark: from what we have been told, there are two other cases the e.u. has about android. there is one around display advertising. from what we understand google , is freaking out about android. this is a much bigger deal. they are putting more emphasis on that. emily: biggest operating system in the world. mark: and if you unbundle, that is all their services -- youtube, mobile advertising, maps, gmail. they would have to start paying more traffic acquisition costs to handset makers and carriers. last quarter we saw the earnings took a hit because costs have been going up. david: this issue of bundling is such an interesting one. somebody was making the point to me recently that amazon prime is just like microsoft putting
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internet explorer along with the browser. reducing costs for the consumer and making it more convenient at the cost of other competitors. effectively, google with android does the same thing. google with shopping in the search bar does the same thing. wow, but really, do we -- look, i'm as scared of these companies as anybody, but i also know that people love the way they work. we don't want to see them in -- impaired and become less useful. that is for the balancing act is so tough. emily: certainly a delicate balance. executor chairman eric schmidt has been to europe. sunder pichai has been there. negotiating does not seem to have worked at all. mark: they have been on the offensive. they have these publisher agreements in europe, they've talked to publishers like one that was once a very big foe, from what we understand. a lot of the telcos in europe that were aggressive have in this case on quite. -- have gone quiet.
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google in general has tried to be more horizontal and have partnerships. they know they are the 800-pound gorilla in the room often. they are aware of their size. that said, they are nervous. i am here for advertising week, a big show. and the first thing a lot of advertising folks are telling me is amazon. google and facebook are taking all the money, but one place we are getting all of our clients -- they're saying, what is our amazon strategy? emily: amazon as a threat. mark: amazon as an advertising platform, because they have tons of consumer data, a lot of reach, everything an advertiser wants. they are not moving slowly. they have not flipped the switch, so to speak. they are probably the biggest threat to google and facebook. emily: yet another iron in the fire that amazon may have. there are many. mark bergen, thanks so much. david kirkpatrick, you are sticking with me.
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uber is suffering yet another legal blow in the united kingdom. a female driver is suing the ridesharing giant for sexual discrimination claiming the , company practices unfairly discriminate against women. the suit claims the company failed to provide sufficient security to female drivers. more specifically, it says that a driver doesn't know the destination until the passenger is already in the car and has no ability to cancel the trip. uber says the app offers protections to drivers. it said they did not have to require them to take trips they did not want to. this comes days after the city of london revoked uber's license to operate there. coming up, after helming the company at the center of one of the worst cyberattacks in history, the ceo of equifax is stepping down. and "bloomberg technology" is live streaming on twitter. this is bloomberg. ♪ emily: venture firm ivp says it
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raised a new $1.5 billion fund is after it closed the first one. it will not start investing until next year because it still has plenty of cash left in the last fund. ivp plans to stick with its strategy of investing about $10 million to $100 million in each company it decides to invest in. equifax's ceo is resigning
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nearly three weeks after it lost -- afterward it expose the private financial data of 143 million americans in a hack attack. richard smith will be replaced by a seven-year equifax employee. since the hack, equifax stock has plunged as much as 34%. smith will likely leave with a $6.2 million bonus, on top of the $52 million he has in stocks and other retirement benefits he accrued in his run as ceo. smith will still testified before congress next week. joining us as nate fink, the ceo of endgame. resignation, did this have to happen? nate: i like to think back to a message that dwight eisenhower had in his pocket during the d-day landing, and it was a message he was going to deliver if the invasion failed. the last sentence says, if any blame or fault happens in the
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attempt, it is mine alone. it is not about fault or blame, but about responsibility. ceos and boards have to be responsible for data breaches. yes, richard smith had to go. emily: there are still questions about the timeline and who knew what when. you have senators calling this a travesty, some saying that the resignation is not enough. our data is still out there for everyone to see. how do we prevent something like this in the future? nate: it takes a layered approach, emily. and unfortunately, we are in an -- live in an era of mass-targeted attacks. nationstate level resources are leveled across companies. we will see more of this. we need companies to start treating the threat differently. we need the government to make sure that deterrence extends to the cyber domain. we need corporate accountability. emily: what can government do to force companies to be more vigilant? nate: we need to see a change in culture, change in expectation.
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it is not ok to simply allow a ceo to retire and take home a golden parachute after the sort of breach that leaves close to million americans vulnerable. 150we need to see much greater accountability. the expectation has to be set. that is by oversight or even if you are doing everything right, the responsibility stops with the ceo. it stops on his or her desk. we will see corporate behavior and corporate culture change only if there is the expectation of accountability. emily: your firm counts the air force as a client, and in some ways, you say the government is ahead of the private sector when it comes to security and security technology. of course, the government itself has suffered its own hack attacks -- the office of personnel management a couple of years ago. how would you say the government is doing this better than the private sector? nate: the government is not a monolithic entity, let's remember. i think the intelligence community and defense department are at the cutting edge of
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cybersecurity. they are at the cutting edge of developing defensive methodology. they are at the cutting edge of product development and deployment. i could put them in different categories. but all of us, including parts of the economy like wall street banks, can learn a lot from that nsa and the air force. there is a reason why we see talent from places like the nsa and the air force being hired on to the commercial security team -- teams. working with places like the air force is a great validator for a company like endgame and a product. emily: deloit also revealing it suffered a hack attack. it says very few clients were impacted, but it seems like one of these things is happening every week. you say this is an unsophisticated attack. what can you tell us about it? nate: so there is an old joke that the difference between a male and true love is that email last forever.
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between email and true love is that email last forever. anyone at this time who has sensitive customer data compromise in an email attack frankly should have learned the lesson a long time ago. just because an attack has significant ramifications is a -- doesn't mean it was a sophisticated attack. i think there is a through line connecting the deloit attack, the equifax attack, the sec attack, and that is that we will see a lot more of these. this is the new normal, and we need to change our procedures to account for it. emily: the sec suffered a hack of its online database. what can be done to prevent this? why does it seem that companies are so far behind, or that this is not priority number one? nate: companies are behind because they are facing nationstate adversaries. we live in this era of mass-targeted attacks, where tip cyber offense capabilities developed with the resources and expertise of nationstates are in the wild.
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they are being used against companies. there is a huge asymmetry. we need our government to do what only it can do, make sure thedeterrents extend into cyberspace domain. since the end of the second world war, we have amassed a lot of american military, diplomatic, and economic power, but all of that power stops at the keyboard. it is not deterring our adversaries in the cyber world and that has to stop. ,emily: ceo of endgame, thank you for stopping by. facebook has partnered with the nfl for content that other tech giants already have. is the social giant too late to the game? this is bloomberg. ♪ emily: a story we are watching
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-- facebook will be shutdown in russia next year if it fails to comply with requirements to store user data locally. that is according to the head of
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communications russian state watchdog. president vladimir putin signed a law in 2014 that requires global internet firms to store personal data of russian clients on local servers. companies ranging from alphabet-google to alibaba have complied. while others have asked for extra time to evaluate the economic viability of doing so. sticking with facebook, the social network has acquired rights to host highlights from the national football league. which is searching for new ways viewers fans as fewer tune in to life games. it seems like a game of catch-up for the tech giant. other competitors already hope to have the footage. so is facebook late to the game, and will the social network become the video content provider it intends to be? joining us from l.a., lucas shaw, and still with us from our guest host for the hour, david kirkpatrick. what do you make of this? david: it continues just like me as somebody with an hanging around on facebook since 2008 --
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emily: david wrote the book on facebook. david: thank you -- they always said that we are just a neutral platform for content created by others. what it suggests to me maybe that user behaviors, tweeting and facebooking about our families, brushing our teeth and notorious things that used to characterize it, maybe that is happening less. maybe they have to boost traffic with traditional means, and maybe they are slowly becoming a regular media company. emily: lucas, what is in it for them? if others have the rights to those clips? there is no programming more valuable in the united states than the nfl. they tried to get the thursday night football rights, but they lost to amazon. this is like a consolation prize, but still, if you are facebook and you want to tell
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all your users that you havethey this new video section to watch and it is not a bunch of your friends posting or your uncle sharing a photo, it is good video, getting highlights from the nfl is one way to try to bring them in. but it is also one way to signal the advertisers that what you are offering is really high-quality and not maybe a cat video. emily: viewership is down when it comes to the live games. david: facebook's targetability is so good when it comes to advertising. but when it comes to content, they can target people that will be a service to the user. if you are interested in one team only when it plays another team -- yankees and red sox being a classic example, the only time i watch the yankees -- i would want facebook to tell me that. that is good. emily: lucas, give me a progress update on facebook's broader video plans, there original content plans, and obviously, there are other players in this race as well. facebook has its own unique approach.
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lucas: very early days now. they rolled out watch a couple weeks ago. they had one with the ball family, lonzo ball the basketball player. we have not seen a push to promote original series. the story that caught my attention the most is that facebook bid millions of dollars for the streaming rights to a -- cricket matches in india competing with the likes of fox , and sony for that one. they put up more money than i have seen them bid for anything that's far, which suggests to me that sports rights are expensive. be tens of may millions of dollars. but if you are bidding for first-run sports rights against the biggest media companies in the world, that is a sign that you see high-quality programming as marketing but expensive marketing. emily: they are willing to pay up. i have to ask you this, as facebook is embroiled in a completely separate scandal dealing with the ads bought by parties and russia. -- in russia.
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now we know that president obama implored zuckerberg himself about the danger of fake news. this is something that zuck told you was a crazy idea, that facebook could influence the election. david: he said the day after the election that it was a crazy idea that facebook could have affected the outcome. let's face it. if the president pulls you aside to week later and said, you know what, think again that is going , to get your attention. he has done a complete 180 on this in the interim, which i credit him a lot for. the things she said last week were dramatic changes from his attitude in the past. the president -- past president must have had a big impact on him. emily: this "washington post" story the detailed the encounter between the president and mark zuckerberg went into detail that in june of facebook first 2016 noticed this could have been happening from you wonder why wasn't anything done sooner. david: a lot of things happen on facebook. that is the problem.
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when you have 2 billion users doing 2 billion people's worth of things every day, it is hard to know everything that happened. they probably let down their guard, no question. they now say they are going to raise their guard, they are hiring tons of new people. i don't know whether it is going to be enough. i don't know whether you can have enough people and even enough software to prevent bad stuff from happening from 2 -- among 2 billion users connected to the rest of the world in your system. but they are trying, and he has changed his attitude a lot. emily: david kirkpatrick, you are sticking with me. lucas shaw, bloomberg reporter in hollywood. happy birthday, lucas. i hear it is celebration for you today, so enjoy. coming up, twitter is experimenting with one of the biggest product changes yet, expanding the character limits on tweets. finally. we will discuss why this might be key to getting more users. if you like bloomberg news, check us out on the radio. from new york, this is bloomberg. ♪
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so new touch screens... and biometrics. in 574 branches. all done by... yesterday. ♪ ♪ banks aren't just undergoing a face lift. they're undergoing a transformation. a data fueled, security driven shift in applications and customer experience. which is why comcast business delivers consistent network performance and speed across all your locations. hello, mr. deets. every branch running like headquarters. that's how you outmaneuver. >> it is 11:29 a.m. in hong kong
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and 12: turner nine -- 12:29 p.m. in tokyo. rising prices and lower costs. early indicators for september signal growth continuing to moderate. down by drive to curb debt risks. the index has weakened. u.s. commerce secretary wilbur ross has repeated his view that his trip to china this week went well. speaking in hong kong after talks with premier li keqiang and other chinese officials, he says things are looking good for
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president trump's visit to beijing later this year. >> if you look at our trade deficit, there is one geographic source in china. and there is one big product source, and that is automotive and automotive parts. essentially, if you can resolve you innd automotive, theory could resolve the whole trade deficit. the commerce department says the commerce department says canada is unfairly subsidizing a company and wants a 220% duty taken off of those imported into the u.s. it was a victory from boeing, sellssaid bombardier jetted artificially low prices. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries.
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this is bloomberg. ♪ >> i am sophie kamaruddin with a check on the markets. asian stocks are looking mixed with shares in tokyo the biggest drag. you take japan out of the equation, asian stocks are rising for the first time in five days. the nikkei 225 continuing down 0.33%. you take japan out ofthe topice the softer yen we have today. this is more than half of the company. the dollar-yen is back above 112. with a lift from yellen and trump's reform plan. we have the firmer dollar weighing on asian policy. getting ahead of the central bank decision expected from thailand today. despite having advanced 8% this year against the dollar. wonkorean yen -- the korean
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down. we are seeing stocks in taipei leading the region higher. that is the market snapshot as we had for the day here in hong kong. emily: this is "bloomberg technology." i am emily chang. in a bid to expand its a sluggish user base, twitter is testing out a big change, having to do with its famous 140-character limit. in a statement, the company explained, "we want every person in the world to be able to express themselves on twitter, so we are doing something new, we will try out a longer limit -- 180 characters." we're now joined by selina wang and still with me in new york, david kirkpatrick. a limited test with a small number of users. how is this going to work? selina: with a small percentage of users globally, they will let them use up to 280 characters,
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twice as much as the current 140 characters allowed. this is a big deal. a lot of heavy twitter users see the 140-character limit as the defining characteristic of the platform. i've been monitoring twitter very closely and there is already a lot of backlash, a lot of emotional response to this change. people saying this might have an impact on the brevity, the concise nature of the platform. at the same time, twitter faces a problem where they simply are not growing users, and by making it easier to send tweets from where you don't have to think about condensing it to 140 characters, they hope that more people will come back to the platform day after day. emily: david, the idea of lengthening tweets has been bandied about. another way to think about it is 140 more characters for president trump. david: yeah, well -- emily: [laughter] david: they invented a tweet storm because you do not have enough space to say something in detail. i think it is a good move.
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there are virtues in concision. the power users, the real insiders who think they helped create twitter, are going to be disappointed. but if they want to be a mass service and grow considerably beyond where they are today they , have to make it easier to use and this is a step. emily: remind us about user growth and ad revenue, both struggling. selina: yes, they're having trouble gaining advertiser revenue, and the monthly active users were stagnant over the past few quarters. that is a huge red flag to investors, who hope that an uptick means that there is a long-term sustainable path for , the company going forward. you made a good point earlier, this is going to allow donald trump to have twice as much room to give his tweets. donald trump has been a good boost to twitter's usage, but it has not been enough to move that number of even after the election. emily: i wonder what doubling the number of characters will do. is it that significant a change?
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david: well, i know that there are many times when i find it isn't enough space. double that space would be enough to say something in english -- it is still enough to have a real sentence or two. i think it is a good move. i think it will make it easier. emily: what also does twitter need to do? is this a silver bullet? david: so many of us have been flummoxed trying to figure out what twitter should do. it is the weirdest situation -- the best-known company, the best-known product, that cannot seem to become a commercial success in a big way. it is clearly not going to go away. there have been many companies said to be interested in buying it -- disney, salesforce, among others. it is possible something like that could make sense. i would hope -- it is almost like a global or national treasure. we cannot let it go away. the president's use is emb
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lematic that every political leader uses it to make a statement. it is critical to use it in a crisis, like a hurricane or flood. maybe they should start charging us, i don't know. emily: the people who love twitter love twitter. what do we know about how long this will last and when the company might make an actual decision? selina: we don't know all the details yet. i expect it will last several weeks, and if it goes well, they will announce to other users. when i spoke to the company, they are doing this test based on previous research they have done. an interesting detail about this test is that it is excluding certain languages like japanese and chinese, because those are languages where you can expose a -- express a lot more in fewer characters. they had an interesting data point that almost 10% of tweets in english reach the 140-character maximum, while only about .4% of tweets in japanese reach that maximum point.
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they are seeing that it is much -- in certainly which is it is much easier to tweet lengthier conversations, and they hope it will be the same thing in english, too. emily: interesting to see how it plays out. selina wang in san francisco, david kirkpatrick with me in new york. mike novogratz used to be one of the best-known fund managers in wall street, now he is reinventing himself as the king of bitcoin. novogratz is starting a cryptocurrency hedge fund in a comeback to money management. he sat down with erik schatzker and discussed why bitcoin is appealing to macro traders. >> in a lot of ways, this is a market like any other market, and you see the psychology of fear and greed, the same way you see them on the charts of dollar-yen, treasuries.
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they are exaggerated because of less liquidity and there is not a real good way to short. when they fall, jamie dimon makes a comment, china bans the exchanges, the trendline rates. they fall a lot farther than they would in other markets. there is not a short base to cover. they go in and they reach a new level of support and rebuild your base. erik: how do you know when to buy and sell? how do you trade this thing? mike: there are multiple ways to trade. one is, it is just macro. it is the ballet of the charts, ballet of the prices. i tell people i need a story and a chart. there is a lot of information. part of it is event-driven. and access to information. one of the things i keep trying to do is put myself in the center of the ecosystem. it is still a relatively small world and you know what is happening.
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so when the ethereum alliance got announced it was well , telegraphed. you knew it was going to get announced. then it gets announced and the price goes way, way up. i call that an event-driven trade. the broad trading of it is macro. you will see many the enough -- and euphorias, sold some bitcoin, and then three weeks later you buy it the low three thousands. if you are good at that and you are a trading junkie, it is a lot of fun. it does increase your tax bill. for some people, that is a different strategy. erik: you are trading, what, bitcoin? jesus coin? mike: i've taken the approach to participate in all sides of the ecosystem. i have mining --
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erik: to create new coins. mike: that is an interesting business. it has been a money loser for us in local currency terms, but i spent bitcoins to buy the bitcoin mine. if i spent dollars, i could've made a lot of money, but you were better off just owning the bitcoins. erik: where are you trading? what platforms? mike: we are fairly large and trade at lots of different exchanges. one of the risks in the business right now is, the riskiest money love in the system is being left on the exchanges. erik: central clearing there. mike: and they are not that well-capitalized. you don't leave that much money on the exchanges. we trade lots of them. gemini in new york. one of our go to places -- that got regulated. you feel better about it. when something really bad happens, i go down and get my
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shot. emily: galaxy investment partners founder mike novogratz there. coming up, the competition in live streaming heating up. the latest company to join, vimeo. this is bloomberg. ♪ emily: dyson, best known as a
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manufacturer of vacuum cleaners, will build an electric car by 2020. the company is investing $1.3 billion to develop a car and the same amount to create solid state batteries to power it. thiessen said its electric car would be "radically different" than those designed by other carmakers, including tesla. there is a new player in the live streaming market.
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has added live streaming tools to the platform for the first time. customers will be able to stream and live videos will be automatically archived. it will come at a cost, $75 a month. in addition to launching the live streaming feature, has -- they have agreed to acquire a live stream technology company. joining us, anjali sud, vimeo's ceo, and still with us is david kirkpatrick. how would this work? anjali: it allows any professional or business can -- or anyone broadcasting an event to use technology to do that. streamll be able to live . they can get analytics back, and then they take the recorded videos and host them on vimeo and do all the things that
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vimeo tonals do on share monetize. , david: why would somebody want to use your platform instead of facebook live? emily: for free. anjali: facebook live is a great solution for consumers who are broadcasting on their phone to a single platform. but what we heard loud and clear from vimeo's user base, this is the number one request of the year, live streaming, that they are looking for a professional level solution. and that means not only professional level quality, but they want to be able to broadcast everywhere, simultaneously broadcast facebook live, youtube live. imbed on websites and apps. it is consistent with vimeo's focus on quality at a professional level solution. david: it is the kind of thing my conference company could use. i understand the language you speak. emily: we will see techonomy on vimeo, perhaps.
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it is interesting, because earlier we were talking about facebook buying the rights to nfl footage. i am curious how you see this fitting into the broader live-streaming battle. anjali: there is absolutely a battle around content. but at vimeo we are not invested in owning content ourselves. we are investing in others to -- empowering others to create content and distribute it anywhere. for us it is about providing tools for others. i think that as the battle continues, that is sort of a good thing for creators. it allows more creators to put content out there. david: you don't see yourself competing with facebook per se? anjali: no, what we are really interested in doing is helping creators succeed on and off vimeo, and part of that is on facebook. we are building tools to enable distribution everywhere. emily: what about youtube? anjali: same with youtube. we want to enable distribution to facebook, amazon, anywhere.
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this is a slightly different strategy than vimeo has taken in the past. but it is important. when we look at the market, we feel like there are a lot of players battling for audience attention and eyeballs. but there is not really an independent home for creators where their content can start and where it can be put out into the world. that is the place where vimeo can differentiate. emily: how will the live streaming integration work? anjali: we will immediately, following the close of the integration integrating the , livestream features into vimeo lives. not only that, we have a suite of products and services to help live-streaming. we offer a live event camera, and editing software to edit in real time, as well as production services. we will be able to bring all of that -- emily: and why buy live-stream if you don't want to buy your own content? anjali: it is the best in class
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for innovators, best in class for 10 years. i not only solve the problem of streaming, but how to set up an event, how to capture an event. what we are trying to do is build this end to end workflow for creators. being able to leverage expertise and knowledge in this area is important for us. its for live streaming and video. emily: fascinating. anjali sud, thank you for joining us today. david, are you sticking with me? i am saying goodbye. thank you for joining us. good to see you in person. alisa: -- david: thank you. emily: coming up, alibaba is getting deeper into the delivery business, but the company is taking control of the sec probe. this is bloomberg. ♪
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emily: china's most popular netflix-style streaming service is said to be seeking an ipo of at least $8 billion. ite is targeting a u.s. initial public offering as early as 2018. parent company baidu wants to retain control post-ipo, according to people familiar with the situation. ite, the only chinese service that licenses shows from netflix, is competing with platforms run by alibaba and tencent. alibaba is taking control of a -- an unprofitable delivery business for $800 million. china's largest web marketplace agreed to increase its stake to 51%. alibaba will consolidate the financials under its own books and is committing another $50 -- billion over the next five $15 years to further expand the
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network. back in may of last year, the sec began probing why the company wasn't consolidated into alibaba's accounts. at the time, alibaba owned 47% of it. i want to get straight to hong kong, where stephen engle is standing by. make sense of this for us. stephen: keep in mind that alibaba has grown so big, this -- the sheer percentage of e-commerce in china, they have issues with procurement and delivery, and of course, alibaba hasn't owned those delivery companies and the logistics companies outright. they have more than a dozen partners throughout china, including this one. they have a 47% stake, now increasing that to 51%. it is a controlling stake. they will get one more seat on the board and fold the financials into alibaba. you rightfully said about the sec probe, that was one of the biggest issues with the accounting allegations.
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it is not fraud allegations. there were bookkeeping issues, the sec has wanted to know about folding this in. they have this equity method that they use. where they just count on their books a percentage of their ownership and then they offset that with investment gains they got from their valuation through the latest funding round. it was a bit murky. i will not get into the wonkiness of the equity method of the accounting but this would , perhaps circumvent the sec probe. emily: what does it mean with -- when it comes to the bigger picture plans to scale globally , and build out the logistics part of the alibaba operation? stephen: it is very interesting -- when i was talking with the ceo, the vice-chairman, and was -- with chairman jack ma, we talked a big percentage of the hour-long interview about logistics and data and going to a more asset-heavy model,
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because he has always said that we are not amazon, we don't have a big warehouse. we are a platform for others to do something. we don't own inventory. but you know what, they are moving into that. on september 9, this is what jack ma had to say when we talked directly about the logistics mission. jack: for today's alibaba size, you should not leave the heavy model to others. if there is something, you have to do it. you have to invest. stephen: on november 11 we are coming up to single day -- single's day, and the big shopping extravaganza. they tell me they are handling about 55 million packages a day on the alibaba platform. the goal, the realistic goal, he says, is a billion packages a day on the various alibaba platforms over the next few years. emily: alright, we have 30
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seconds or so left. what is your take on the potential a valuation for ite? billion dollars stephen: well, baidu, all investing heavily. they call this the netflix of china. a bit of a misnomer. it is having revenue, but it is not profitable by any stretch, because they are investing heavily in content. there is a race for content in china by the big companies. it is losing money hand over fist. until it can turn that around, it is going to be a long struggle. emily: stephen engle with us from hong kong. always great to have you. that does it for this edition of "bloomberg technology." from new york, a reminder that we are live-streaming on twitter, 5:00 p.m. in new york, 2:00 p.m. in san francisco. this is bloomberg. ♪
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