Fab.com: Not So Fabulous After All?

Your next video will start in

Recommended Videos

  • Info

  • Comments


Oct. 11 (Bloomberg) –- Bloomberg Contributing Editor Paul Kedrosky discusses whether it is the beginning of the end for Fab.com. He speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

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

I'm emily chang.

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

Let's get straight to the rundown.

Let the roadshow began.

Twitter plans to ditch itself to potential investors in a couple of weeks.

We got details of the timing and how much twitter bankers are getting paid.

From facebook ceo to landlord, mark zuckerberg spent millions to buy his real estate in palo alto only to lease the house to its former owners.

And call it elon musk -- making a cameo.

It helped inspire the storyline.

We will have much more on twitter's ipo.

First, the latest developments on the government shutdown and debt ceiling negotiation.

President obama and house speaker boehner spoke by tv of the short-term proposal for an increase to the debt ceiling.

The white house has a number of concerns.

Phil mattingly joins us from washington.

What did the white house have to say about all of this?

It was very interesting.

Jay carney delayed the briefing today by about three hours.

There is a good reason why.

It was right after markets closed that they talked about concerns.

Republicans proposed increasing the debt ceiling for six weeks.

The white house is skeptical, but ok with that.

Time to budget for postal to reopen -- proposals to reopen the government.

They want the government to be open before negotiations begin.

However, there was a little bit of good news.

Talks are ongoing.

Not only did they say the talks would keep going, but they are not talking specific details about that call.

Stuff is not leaking.

That is a good sign things are on a good path.

There was some development on the senate side of things as well.

Are they on a parallel track?

This is the interesting thing that everyone is watching tonight and will start watching tomorrow.

Senate republicans had a trip to the white house.

The caucus met with the president again, just like house republican state.

There are house democrats working with them.

The white house is keeping an eye on it.

The lawmakers are ones that worked within the past.

Our house republicans willing to join together with this?

Or do they see this as a competing plan?

Some are skeptical of what the senate is doing.

They're not sure they can get that through the floor on their own.

They are worried they might be roque.

These are two plans on two separate tracks that people need to keep an ion.

Phil mattingly in washington, thank you for that update.

Twitter is getting ready to hit the road.

Bloomberg has learned that it will likely start the last week of this month.

He will of knowledge of the matter says that twitter plastic paid bankers a fee to handle its ipo.

It is much lower than the average for u.s. -- u.s. ipos this year.

They are leaning toward listing on the stock exchange -- new york stock exchange.

Jon erlichman has been working the story for us from l.a. what is the latest you have learned?

Twitter is home to one of the hottest brands these days.

When it comes to the business, this is still a young company.

The investor question that we will hear about and will be asked about on this ipo roadshow could be a little bit different than the ones tied to facebook.

The most obvious one is the products that are tied to twitter.

Promoted tweets in the way that twitter makes its money.

They will likely explain that in more detail.

He will explain, for example, the repeat business.

Our advertisers coming back every day?

Every week?

Longer than that?

They are spending a lot of money to ramp up their s-1 filing.

Where is that money going?

Those are the key areas to watch for this ipo roadshow.

Let's talk more about the bankers fees.

Twitter is paying less -- i'm sorry, more than facebook page.

What does that mean?

There are two sides to it.

Twitter is getting a better deal than a lot of companies going public right now because of the relative size of the deal, as well as the fact there is some cachet here.

This book was a much larger deal.

Let's not forget in the case of facebook, i felt like bankers were trying -- falling over each other to get this deal.

It doesn't feel that same way with twitter.

Maybe that is because of what happened with the facebook ipo.

Jon erlichman, our senior west coast or sponsoring, thank you.

For more on the pending ipo, i'm joined by paul kedrosky.

He is currently an early stage investor.

He is with me from san diego.

The roadshow will begin in a few weeks.

What is the number one important thing twitter needs to do?

Not say anything.

The hardest thing for young companies to do when they have not been through this process is to sort of learned the art of being artfully boring.

Answer questions in a way that seems genuine and forthright and missed wednesday and -- and mr.

Webster -- and in western and lovely, but you're not saying anything at all.

It is an art form doing that well.

My expectation is that it will either be particularly boring or will have breaking news.

As we know, facebook had technical issues on opening day of its ipo.

The stock fell.

It took several months to turn around and come back to its opening price.

How does twitter avoid that?

Facebook had technical issues that were out of its control.

Some say it was also too high.

I think it is all three.

One of the big factors is that it was last-minute, this expectation that there were sellers who decided to be part of a larger eve of the ipo expansion that caused it to explode.

That changed the calculus for a number of institutional investors.

If there are new sellers going up at the last minute -- and that change the structure of the book, as it book runners call it.

They were forced at the last minute to do this 11th hour stop through all kinds of channels.

I remember the morning of the ipo.

I was suddenly magically holding five times as many facebook ipo shares.

The reason was because it was blowing out these shares through the channel.

The lesson to be learned is less about technology, and more about the eve of the offering and being forced to blow out stocks that are a channel you were not expecting.

What does twitter need to make sure not to do?

The book that it builds now, the list of institutional investors it puts together, is a solid book.

It is a bunch of investors of large institutions who know what they are getting.

This is what the shape will look like.

There will not be an 11th hour expansion.

There will not be a tourist or a wrinkle.

-- not be a twist or a wrinkle.

They are not whimsically holding -- expecting to do a foot or change the structure.

It is being placid and boring and conservative and building a book of people who want that and will not disappear in the offering.

That way you have a, opening.

--a a calm opening.

When you look at the twitter business model, it relies on advertising.

Do they need to diversify their revenue stream?

We have heard about commerce.

How can twitter diversify in the future?

It is the same comments we had leading into the facebook offering.

What have you done for me lately?

You build a fantastically fast growing business.

Do something else.

Twitter -- this has been an incredibly vast growing company.

What are you trying to do by making is going to other areas?

You will see three things.

One, a move toward self-serving advertising.

Smaller advertisers can be more actively involved.

Two, march more of a connection to transactions.

It will be easier to track what is being sold and to whom.

There will be post purchase analytics.

Three, more data flowing out of the service.

You will see more of this aftermarket data.

It is the reverse of what you see happen with the traditional financial markets.

A company like bloomberg, you start in the dayta.

Stick around.

Is fab.com not so fab after all?

We look at numbers behind the e- commerce start up next.

? this is "bloomberg west." i'm emily chang.

Alibaba and american express is investing in an e-commerce company.

They gave alibaba a bigger footprint in the u.s. as the chinese company prepares for a possible ipo listing here.

Join me for more is a bluebird reporter.

What is the strategy for alibaba?

They are a big investor.

Alibaba has been making a few investments in the u.s. recently.

They have their talks with the hong kong exchange breakdown.

They are looking to list their stock in the united states.

They are in negotiations with u.s. markets to do that, but they also seem to be increasing their footprint by investing in e-commerce companies here.

Ali baba is the biggest e- commerce company in china.

This would give them a huge foothold.

The biggest e-commerce company here is amazon.

Are they trying to take on amazon?

It has a model that is supposed to compete with amazon prime.

There is two-day delivery.

They have a partnership with retailers to make that happen.

It could be something of that nature.

This ceo is scott thompson, yahoo!'s former ceo.

Do we think the relationship he had with ali baba when he was at yahoo!

-- scott thompson was at yahoo!

When ali baba and yahoo!

Negotiated to a $7 billion deal to give ali baba their stake in the company.

He deftly has a relationship with ali baba's ceo.

We have not heard much from him after he left and missed a cloud of issues.


This trust from the community.

-- distrust from the community.

Thank you.

Tough times for e-commerce start up, fab.com.

Traffic is down.

Job cuts hitting at least 20%. now the ceo is for going his salary.

My next guest says fab.com is not so fab after all.

Back with us is paul kedrosky in san diego.

This is a company that has managed to raise so much money and yet it is having a massive pivot down the line.

Why were investors putting so much money into the company in the first place?

It is one of those things where how did the company go roque slowly or all that once?

-- broke slowly or all at once?

It is accumulation of capital.

It is in large part driven by the seductive notion that they had traffic.

They had something like 4 million.

There is this thing that happens to investors.

There must be a pony in there problem.

There must be something there.

The reality was it was a pile of traffic that was predicated not -- i'm not much else.

-- on not much else.

Now you got this problem.

Traffic collapses.

It is obvious there is no pony in there.

It is dying a slow death.

Is this beginning of the inevitable end?

I think so.

It is a great domain name.

My guess is that is what is happening here.

There where nash there were a series of -- there were a series of pivots.

They are at the end of the road.

Marketing is down.

They are winding -- china find a way to be cash flow positive.

They are trying to justify it all.

-- they are trying to find a way to be cash flow positive.

They are trying new is to fight it all.

You cannot build a business like that.

Is this a sign of a bubble?


it is a sign of too much capital chasing bad ideas.

All right.

We will be watching for it to pop.

Talk augusta, thank you.

Have a wonderful weekend.

Paul kedrosky, thank you.

Have a wonderful weekend.

Find out how mark zuckerberg's move could be a way to protect his privacy.

? this is "bloomberg west." i'm emily chang.

From facebook ceo to real estate mogul, he spent money biting four homes in -- buying four homes in palo alto.

He is leasing them to the former owners.

Is this all for his security?


My colleagues out bloomberg news reported that zuckerberg started this $30 million purchase in december of these four homes around his home and he heard a rumor that a developer would comment in and buy one of them and market it as hey, come live next to mark zuckerberg.

He wanted to maintain his privacy.

It is a really nice house.

It is not a palace and it is not even in the best neighborhood in palo alto.


It is pretty modest for a multimillionaire like mark zuckerberg.

The late steve jobs lived in the same zip code.

Add -- as did larry page.

They can take walks around the neighborhood.

When he bought the house, didn't he negotiate this insane interest rate?


He got a $6 million mortgage on his home.

1% rate over the years.

It is unheard of.

I did not even know banks could do that.


When they are pretty confident you are a multibillionaire who will pay off the loan, they will get it.

The average on a 30 year mortgage is something 3.5%. 1% loan is unheard of.

Interesting stuff.

Going from ceo to landlord.

We will see how that works out.

Thank you.

Thanks to his success with electric cars and his spacex exploration, elon musk as captured hollywood's attention.

You might have remembered his cameo in "iron man 2." we are on the verge of a major breakthrough.

Elon musk often talks shop on the small screen and occasionally makes cameos on the big screen, like this one in "iron man 2." ready for this?

Rodriguez was toying the idea of sending his new character to space when he ran into musk.

Elon musk walks in and starts talking about space.

We will go to mars.

He showed me one of his rockets called the falcon.

Why do they call it the falcon?

It is the millennium falcon.

I'm a "star wars" fan.

[laughter] it seem like a fun thing to do.

Even let barbara guys -- as for his cameo, it is near the end when machete board the spaceship.

We have got to go.

That was jon erlichman.

We will be back with more on "bloomberg west" after this quick break.


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


BTV Channel Finder


ZIP is required for U.S. locations

Bloomberg Television in   change