AOL's Big Bet on Ads: Bloomberg West (08/07)

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Aug. 7 (Bloomberg) -- On today's "Bloomberg West" the focus is on innovation, technology, media and the future of business. Hosted by Emily Chang with Editor-at-Large Cory Johnson and Senior Correspondent Jon Erlichman f31om Bloomberg's San Francisco studio, it showcases the personalities, companies and trends that are transforming the global economy. (Source: Bloomberg)

Live from pier 3 in san francisco, welcome to the early edition of "bloomberg west," where we cover the global technology and media companies that are reshaping our world.

I am emily chang.

Our focus is on innovation, technology and the future of business.

Tim armstrong makes its biggest acquisition to date, agreeing to buy video advertising start up.

We will hear from both ceos about what drove the deal.

Let san francisco in just 30 minutes?

Two elon musk, it is the goal of his next project.

He is already facing some competition.

The reviews are in for googles x. does it stand a chance against the iphone or the galaxy?

Aol is looking to video advertising to boost its business.

The company has agreed to acquire adapt tv for $405 million in cash and stock.

It is the biggest acquisition yet for aol ceo tim armstrong.

Even bigger than his 2011 of the huntington -- his 2011 purchase of the huffington post.

If you went back three years ago, most people thought aol would not be around.

The acquisition makes is the second-largest player in video.

The leader in programmatic video . if you have been following the changes in the media landscape, you know that video is a megatrend.

Aol also reported second- quarter earnings, reporting a two % gain in revenue.

We turn to our senior west coast correspondent jon erlichman nla.

It is a very competitive market for these ad dollars.

This is an interesting twist.

A lot of times people asked this question, what exactly is a oh well these days?

For the ceo, the message is a different one than we have heard with some of the other acquisitions.

Here is how you have to think of this business.

They still have a lot of money they generate through the dial- up business.

There are people who still have aol subscriptions.

That has been a dying business.

Tim armstrong has been taking money from that.

In the past, we have heard a lot about deals like the huffington post because the idea was let's focus on content that is compelling to advertisers, we can charge premium ads tied to that content.

This deal today seems a lot more similar to a deal we saw in 2004 , the purchase of advertising.com.

The idea of having networks or platforms at the end of the day, infrastructure that can help allow other publishers to sell their ad space.

Obviously, adap.

Tv is a different one and is tied to internet video.

It is a very different business concept than simply selling ad dollars tied to the media properties.

You have to distinguish between those two businesses.

What does it mean for the future of aol?

Tim armstrong spoke a lot today about how quickly this business is growing and where this potentially could go.

There is a big opportunity.

It does make you wonder if there are still -- there is still an excitement for that potential growth for the traditional a well business.

Does that mean that aol has to make a more concrete decision on which business it wants to be more closely tied to?

In the past, there was a focus on the aol media brands.

Do they need to spin it off?

You they need to choose which area will be more important?

Jon erlichman, thank you.

I want to bring in someone directly involved in this deal.

Ceo and founder of adap.tv.

Great to have you.

The biggest acquisition under tim armstrong to date him what is it about -- date, what is it about adap.tv that is so special?

The move from broadcast tv to online delivered video.

We consume more and more video content over the internet.

The second trend is equally powerful, but much less video -- visible.

Moving from manual trading to trading based on tools, just like e-commerce to do for everything else.

We are the leading programmatic platform for tv and video advertising.

You provide the technology for the premium publishers that allows them to connect and run their business.

When you think this in the context of the 240 billion dollar tv industry and is massive revolution, very similar to what we have seen in digital photography and music, it is easier to understand the impacts this deal can make.

This is something that we at "bloomberg west" feel every day as a technology television show that is streamed live online.

Aol is competing with ad dollars with google, facebook, twitter, yahoo.

How does aol compete with these kinds of giants?

We provide technology for buyers and sellers.

Our platform is inventory agnostic.

It provides buyers and sellers with the tools and information they need in order to make smart decisions.

Many of things are trivial when you take it to other products.

It is the ability to know exactly what you are buying and to what you are buying.

Everything that -- we are doing for video and tv advertising.

Why aol?

I am sure it was a huge decision for you to decide whether or not to sell to aol.

It is a great question.

You want to advance your germane.

When you find a team that is aligned with the vision and people so great to work with and when you find real commitment to winning and the ability to put massive resources beyond it, you realize this can advance the limitation of our dream.

We are happy to do it and we will continue to operate independently within the aol network.

We expect to accelerate everything that we do in terms of product development and international expansion and sales.

The video ad lance cape is rapidly evolving.

Facebook is planning to launch video ads.

-- the video landscape is rapidly evolving.

Facebook is planning to launch video ads.

Tv and video advertising is the ideal format for the brand advertising.

The changes perception towards brand and product.

It is as powerful as searches for the right response.

This is why you see the shift from tv to over the internet, digital video.

When you take all of the great assets and the impacts of video advertising and you add the capabilities that one to one delivery provides, and get this very powerful medium.

I suspect this will only grow.

Advertising is still a small part of digital advertising overall.

Tim armstrong said this morning that part of the goal, part of what you will help with, is helping transfer tens of billions of dollars from tv advertising to video advertising.

How realistic is it has to mark how realistic is it to lock in deals, multimillions of dollars ahead of time?

As realistic it -- as it was too moving billions of dollars in film photography to digital photography.

It is absolutely going to happen for the there is no doubt that in the future the video content will come over the internet.

The advertising will be delivered that way as well.

All right, thank you so much for joining us.

The race for space travel on earth.

We will take a look at elon musk's next big transportation project.

? welcome back to "bloomberg west." zillow ceo is speaking with president obama in los angeles to talk about the u.s. housing market.

Users can submit questions to the president.

The interview is being live streamed online through the white house website.

Bloomberg television will be speaking with zillow ceo, 2:00 eastern.

Shares of disney are filing today after the entertainment giant revealed they may lose as much as $190 million on the rocks office flop the lone ranger.

The good news for disney, revenue from espn and other cable channels offset lower revenue from its abc broadcast business.

Theme parks were another bright spot with the expansion of the magic kingdom helping lift sales.

Tesla motors announces its quarterly results later today.

Elon musk will unveil his idea for a high-speed long-distance transportation system.

Willow looks at the competition it already has for high-speed transit.

The method of long-distance travel involves plummeting through the earth's core.

Elon musk has already established a root rot -- a reputation for revolutionizing travel.

It does not mean it is any less space-age.

His bold idea has been generating a lot of hype.

It is not the only idea out there.

A colorado company is developing a transportation system.

They are calling it space travel on earth, the top speed is 4000 miles per hour.

A british firm reaction engines is launching a cooling system powered by liquid hydrogen.

It could carry 300 passengers halfway around the world.

With no windows, the views leave a lot to be desired.

The uk government promised $19 million to the firm to continue development.

By 2019, billed as a fuel- efficient version of a fighter jet, maybe one more option for business executives wanting a rapid ride at 45,000 feet will stop the company is still looking for investors.

Elon musk is still looking, too.

Kessel reports earnings after the bell.

-- cash flow reports earnings after the bell.

We will have full coverage on a late addition of "bloomberg west ." motorola's first filed under google is coming to stores soon.

A first review of the moto x. you can watch a streaming on your tablet, phone, and bloomberg.com.

? this is the early edition of "bloomberg west." i am emily chang.

Nokia is considering job cuts.

It took full control of today.

The company may cut 8500 jobs by the end of next year.

Nokia may also sell factories in finland, india, and china.

Google is trying to grab a bigger piece of the smartphone pie.

Its new device is the first phone built entirely on the company's watch and will compete with phones from samsung and apple.

Motorola is ready to spend as much as $5 billion to market the device.

It sounds like a lot of money.

With us from new york is senior tech reporter sam grobart.

I know you have been using the phone for the last couple of years -- days.

Very exciting.

There is something about it that is really extraordinary.

A couple of interesting new theaters -- new features that are pretty nice.

You wrote in your review that it has all it is necessary and nothing objectionable.

That does not sound like a resounding endorsement.

How does it stack up to the competition?

When you start looking at specs, all these phone start to look very similar.

They are all smart phones.

What is going to make the motox stick out are a couple of things.

Deep integration with google services, including voice capabilities, where you can speak to the phone.

You can start to asking questions about your day, google searches, all of that is clever and pretty interesting.

The other thing is the phone is going to be very configurable.

At&t customers at first.

They will be able to change the color of the back of the phone, the accent colors.

Motorola is looking at including other materials.

What about marketing?

$500 million sounds like a lot, but it really pales in competition to what apple spends to market the iphone and samsung.

You are absolutely right and you need to look at the whole picture.

Last year, apple spent one billion dollars on advertising.

Samsung spent $4 billion on advertising.

That is not even the half of it.

Besides taking ads out on television, they spent an additional $5.4 billion on marketing.

If you roll it all together, samsung spent about $11 billion last year in advertising.

A lot of that money goes into stores.

One you walk into a wireless store, you see the samsung display.

Although the phones on that display are on and they are work -- they all work and they are in demo mode.

That plus commissions and incentives to the salespeople is going to move more phones in the stores, which is where most people do buy their phones.

Under the google umbrella, motorola and google will be putting some more muscle behind this.

Are they just waiting?

The advertising budget.

There is another number out here that will support all about that marketing and sales promotion.

We do not know how big that will be, but there is a fundamental problem.

The customization that you will be able to do has to happen online.

When you go into a store, you will not be able to do that.

A little bit of a disconnect between the phone's main selling point and the sales channel, which is most important to its success.

What is the verdict?

How do you see smart phone market share is shaking out or changing?

I am reluctant to make any definitive predictions.

There is a lot of inertia among customers.

Manufacturers count on that.

Apple and samsung are likely to hold on to the people they already have.

Sam grobart, thank you so much for sharing your thoughts.

It is time for -- olivia sterns is in new york.

Let's take a look at how markets are trading right now.

The dow, the nasdaq, and the s&p are all trading in the red.

The dow is down 52 points.

The nasdaq is off by about 15 points.

In terms of sectors, financials are the worst performing industry group today and the s&p. consumer discretionary and technology also weighing on the index.

Let's start with first solar, shares dropping 13 five percent.

-- 13.5%. they posted a decline in second- quarter profits.

On the flipside, computer sciences is rallying, shares climbing up 6.2%. the company raised its earnings forecast.

It is now one of the top performers in the estimate -- in the s&p 500. he is a political leader for the state of california, but also a leader for tech entrepreneurs.

Governor gavin newsom on how he is using technology to engage his constituency.

That is next on "bloomberg west ." ? you can also catch is that are later time at 6 p.m. eastern.

President obama has canceled his one-on-one meeting with the russian president vladimir putin, which had been planned for next month.

Jay carney says the decision to grant temporary asylum to edward snowden factored into the decision.

Present obama will head to sweden before meeting prudent and other leaders at the g 20 summit.

-- vladimir putin and other leaders at the g 20 summit.

The ntsb says the captain took control from the first officer seconds before it touchdown.

It has not found any evidence of mechanical failure.

Nine people suffered minor injuries.

There are signs of progress and the fight against childhood obesity.

A new report found small but significant declines in obesity rates among low income children between 2008 and 2011. 18 states and the u.s. virgin islands saw declines.

Amazon is one of the biggest lobbying spenders among high- tech companies and now that amazon's founder has the washington post, that could create some conflict.

Everybody in d.c. is talking about this.

What is the potential conflict customer lacks now you have bezos owning the hometown paper that is exposed -- what is the potential conflict?

You have bezos owning the hometown paper that is supposed to cover politics.

They spent 1.7 million dollars on lobbying.

They have some power players working on their issues.

You have the former u.s. senator trent lott and you also have a former louisiana democrat.

A are fighting on a number of battles, everything from internet sales taxes, privacy patent laws, cybersecurity, even online wine sales.

The washington post company also had its clinical interest.

-- political interest.

Who says this will be a problem?

Watchdog groups have said it is hard to see where bezos does not have a conflict.

Or will be competing loyalties.

It all depends on how he handles this.

It will be up to him to maintain a journalistic integrity of the paper.

Tell us more about the money.

Would it be possible for amazon to remove itself from the lobbying game?

It would be tough.

We have been seeing the company mostly going in the opposite direction.

31% higher than the 1.3 million spent during the same period last year.

If you take a look at the bigger picture, when the company started lobbying, they spent $246,000. tremendous growth.

The online sales tax issue, you have amazon pitting itself against ebay, supporting the bill allowing states to collect sales tax.

Even if they do not have a physical presence in that state.

It makes sense the company would stand with brick-and-mortar stores.

The editorial board supported the senate bill on that issue as well.

Megan hughes in washington, thank you.

From lobbying in washington to a washington hopeful, startups can be sexy, but making a breakthrough can be cast.

-- todd.

Cory booker is the chairman of a start up that lets users select videos from the web and share them with friends.

The new york times questions the business of the startups.

What exactly is way why awire.

What do you make of all of this?

The story is a reminder of why startups are startups, even if you have powerful, passionate people behind them.

The concept cory booker had put forward was a relatively simple one him a pandora for video.

You hear a lot about video to ration, go to youtube and you look for a lot of stuff on the same subject.

It is hard to filter through that.

We have seen russell simmons recently launch a business that is tied to helping to better curates some of that music talent you find on youtube.

Waywire's goal was to take it a step further.

There are a lot of voices you do not hear from him especially on cable news.

Even if you go to waywire, you will see a lot of stuff that is on all sorts of topics.

Top 10 video lists tied to celebrities sports were all sorts of subjects.

It is very difficult to own a specific area if it is trying to appeal to a large group.

The story is shining some light on the high-profile connections that cory booker has , his relationship with eric schmidt.

Whether it is eric schmidt or mark zuckerberg, i was speaking to a source earlier about mark zuckerberg fundraiser for cory booker that was held this summer.

Or were a few dozen silicon valley executives.

A lot of folks from facebook in attendance with their facebook.

-- with their check books.

The stanford football coach was there as well.

For anybody who thinks this is somebody who has thought about silicon valley in the age of twitter, it predates that.

His focus on connections to silicon valley is at least a decade old.

I was told about a story of him making a trip to yahoo back in 2006. this is someone who has not only seen an opportunity to use the technology and use social media, but has been cultivating a lot of these relationships for a very long time.

Jon erlichman, thank you so much for giving us some more background.

California lieutenant governor gavin newsom on technology and the importance of startups and whether he wants to be governor.

You can also watch a streaming on your tablet, phone, and bloomberg.com.

? this is the early edition of "bloomberg west." i am emily chang.

When it comes to finding success in silicon valley, it is not as much about who you know than what you know.

The company service uses geolocation technology to alert you when your business contacts are nearby.

They just launched an influencer of the month rogue room to give users a chance to be mentors by high-profile players.

Gavin newsom has signed on to be one of the mentors.

I spoke to him about it on the late edition of "bloomberg west ." take a listen.

I am looking for different ways to connect to people.

At the end of the day, you have this filter of special-interest, the way things have been done that determine the hierarchy and the pecking order of how you spend time with people.

The opportunity to connect with a different network is a little more decentralized from that traditional network that exists within the formal infrastructure of politics.

That is why i got excited about this and was happy to participate.

How do you decide who wins?

I am about to find out.

There is the menu and you open it up at the bottom.

Whoever the influencer of the month is and you click on that person and pull up their i/o. there is a -- their bio.

From there, we give them a list and a look through and see what they will do and who they are.

That would be fun to meet with them.

I do not want to belabor the point.

I moved out of the state building, the california state building, eight stories high, security on the bottom and the usual suspects walking the hall.

I will not learn anything new.

That is an old industrial model and i wrote a book about the fact that government is on a collision course with the future in terms of the way we approach our day to day lives.

Literally sitting in an atmosphere not unlike this.

The opportunity to form new connections.

I think it is profoundly important.

Not just for me, but for other elected officials who get caught up in inside the beltway thinking.

You are lending your influence to some other projects as well.

Tell me about the work you are doing.

I have always tried to lean in on these things.

I remember years ago when evan williams knocked on my door.

They had something called twitter.

I said, you got a be kidding.

Over a million followers as a consequence of being there early on.

I have always been willing to try new things.

It is making it visible.

The biggest challenge is the design orientation.

I love magazines.

I still love magazines.

You get lost in the experience.

The ease to which the intuitive nature, you are able to design your own magazine.

I longed for magazines on clipboard on areas of interest.

-- i launched four magazines on clipboard on areas of interest.

This is the next iteration of the web.

You recently wrapped up a two-week stint as at in governor.

There was no bad news.

Did you learn anything that you would like to do differently?

We have to move away from top-down thinking.

It is all about bottom-up thinking, network thinking.

The opportunity to connect with people like nick and the work that is being done in the private sector, it is alive and well.

Contrast that with what can only be analogous of the flintstones that exists in the technological era on the cutting edge of 1973 in government.

That is what i would want to flip upside down.

I feel very passionately about this that government is on a collision course with the future.

The industrial economy is running out of gas.

The media industry has been leveled by technology.

The music industry has been leveled by technology.

Government is still holding on to the way things have been done.

Do you want the job full- time?

I hate when politicians equivocate.

Yes.

It does not mean i am anxious and overly ambitious.

Governor brown is doing an exceptional job.

He will be overwhelmingly reelect it.

You said you're still trying to figure out what a lieutenant governor does.

I make fun of that.

I have some fun at my own expense.

This is long-standing, the joke about lieutenant governors is all they do is wake up and read the obituaries every morning hoping that perhaps the governor has moved on.

That is a horrible thing and i do not subscribe to that point of view.

I want to make it more meaningful and more purposeful.

I want to be more entrepreneurial.

I want to experiment with new things.

That was california lieutenant governor gavin newsom.

You can catch the full interview on your phone and tablet and bloomberg.com.

Coming up, more of "bloomberg west" in just a moment.

? this is "bloomberg west." i am emily chang.

The daily deals company groupon reports earnings after the bell today.

Shares of groupon are up more than 75%. the rally coming after rube on salt shares -- groupon shares plummet after going public in 2011. the daily deals business is in decline.

What is going on?

What is going on?

Stock charts always important context.

What is going on is that the company is coming off a quarter that was seen as encouraging from investors.

That leads to three things that people want to keep an eye on.

One is the sale story, number two is what is happening with mobile.

On the sale story, you are not seeing the same kind of revenue growth at groupon that we have seen in the past.

The estimates on wall street are for 6.5% growth.

It is a different growth story, but what people seem to enjoy when they reported their last results was the fact that something like 45% of the activity was coming through mobile traffic in north america.

This trend we talked about with all of the tech names highlighted of being able to shift the business to mobile is seen as an important step.

This idea that they are moving into other businesses.

Taking heavily discounted staff that other -- stuff that other retail brands are trying to sell and finding ways for groupon to sell it, it is a low margin business, but it has created a growth opportunity for groupon.

We know that the interim cea -- ceo, they do not plan on doing that job forever.

They will definitely have to dress it today as they had with some of the past quarterly results.

We are within a few weeks of the six-month mark of andrew mason being shown the door at greece on -- at groupon.

These are two people who feel comfortable running the show for now.

The key is -- are they still going through the process?

Jon erlichman, thank you.

"bloomberg west" will be right back in just a moment.

? welcome back.

Coming up on the late addition, we will speak with twitter vice president about the recent nielsen study that links twitter activity and tv viewership.

It is time for the -- on the markets.

Olivia sterns is in new york.

Let's take a look at how markets are trading right now.

We still have a selloff underway.

Equities have climbed back a little bit.

The s&p down now by about seven points.

The dow jones is off by about 60 points.

And the nasdaq is lower by 15 points.

Once.

Leading the laggards is first solar.

Shares are tumbling after they/their outlook.

They also announced a deal today with general electric.

But there are some questions about the valuable of the partnership to each of the parties.

General electric has been trying to get into the solar panel manufacturing business.

This is a sign that it is pulling back from that business.

It is selling in exchange for shares.

Ge will be taking a stake of almost 1.8% in first solar.

It is a relatively small stake in first solar.

First solar is touting this as a partnership.

I did speak with one analyst who said not necessarily a partnership as it is ge selling the thing to first solar.

First solar says they will get the benefits of general electric sales people and its relationship with utility companies.

It seems like investors are somewhat skeptical.

Also unhappy about the earnings report.

There are questions about its revenue growth potential going forward.

You think the world's largest power company will be backing solar panels.

Solar city reports earnings

This text has been automatically generated. It may not be 100% accurate.

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