Live from pier three in san francisco welcome to the late edition of global west.
I'm cory johnson in for emily chang.
Let's get to the rundown.
Facebook flying high when it comes to mobile advertising with a new report that the social networks share is soaring and gaining.
Quote, if they really want to we should let them.
That's what they have to say about the latest tv audience.
We'll look at it as the role of netflix and huge time for football fans . jerry rice will talk a bout the rise of fantasy sports.
But first, to the lead.
More signs that base book mobile business is taking off as th ey cut into googles lead in mobile advertising.
Worldwide ad revenue reached 15.8% this year.
Last year they started injecting ads into mobile apps.
53% share and more than $16 billion and the entire global market -- less than 1% growth for mace book and that come as facebook shares rose again, 68% in the last three months because the mobile business is working for them.
Doug mcmillan joins me now.
These numbers seem to indicate an impo rtant trend here.
Yeah, they seem to bear out some of the things that people are talking about over the past year.
One that mobile ad sales are starting to cut into desktop ad sales and facebook is making gains really qu ickly.
They went public a little more than a year ago and soon after started getting beat up by wall street analysts and investors over their lack of mobile modernization.
They've double downed on the effort and mark zuckerberg has said that this is a mobile first company and now we're starting to see the realization of the efforts.
They're starting to cut into the pie and steak out an enviable position in mobile ads which is huge.
This is the most impressive.
This market is growing by leaps and bounds.
Do we have a sense of that?
Really when you look at who is growing, google kept about an even share from year to year from 2012 to 2013. facebook gained ten% of the market.
How do they do that?
As posed to google who is getting mobile searches, facebook is insraeuting and coming up with new mobile ad forms which is putting them in your news feed.
You're seeing this copy by a number of other companies including twitter.
It will be interesting to see if google can continue to compete with facebook by maybe coming up with innovations on its own.
What's its effect on desk as an art mobile?
They're taking a hit.
The growth is falling.
Everybody is focused on mobile right now.
I think investors sort of caught on to the trend when facebook went public and advertisers are starting to realize all the eyeballs are going to mobile.
Yeah, desktop ad sales are closing down.
It's w orrisome for business which is dependant upon advertising because mobile ad rates are less than desktop ad rates which are less than print ad rates.
Seems like we're moving to a world where there's more advertising but of less value to the advertiser.
It is, but we'll to have see how people come up with new solutions in mobile.
Obviously you can't just stick a graphic rectangle banner advertisement on mobile phones.
You have come up with something new that people engage with when people hold it in their hands.
There is a lot of pot ential there.
People are constantly looking at them all day and tells them things about their personal life.
There is a lot of potential for targeted advertisement but we'll see who gets it and who doesn't. great stuff, doug mcmillan, thank you very much.
How is facebook's mobile ad strategy working in the real world?
Zack is joining us.
What's going on in this business?
Because it's really interesting the way -- we spend so much time looking at the facebook ipo and their admissions of inaptitude and now they're killing it.
What's going on?
It's early days for mobile.
Facebook is continuing to spread its wings in terms of mobile as an ap and advertising platform.
The advances they're making are going to be leaps and bounds over the coming year s because there is just so far for them to go.
What do they figure out?
They're not a lot smarter this year than they were two years ago.
What do they figure out?
I don't know if that's necessarily true.
I think they're learning about what works and what doesn't and mobile advertising in particular, the user's attention is riveted to their phone and ads are useful for the user.
It's a ha rd problem.
I know you do analysis of ads but who are your customers?
We work for big large advertisers, booking.com, orbits, expedia, travelosity.
What do you help them do?
We help them find use who are interested in products and show them ads and track them all the way through the end.
They hire you even though you wear that t-shirt?
I have worn a red t-shirt every day for eight years.
What is the chief learning that makes mobile different?
There's some obvious things but i wonder what are some of the best practices that are starting it emerge?
Usefulness to the user.
When you show an ad that is n ot useful like for hugse hug hugi es diapers it's not useful.
It's useful in engaging and both parties win and facebook is learning how to match them really well.
Is facebook able to use their enormous trove of personal information?
Are they truly tailoring ads and is that giving them in a position to get higher rates because it's more targeted?
When you go to google and type in the white box they take that data and show you ads what it knows about you.
Facebook does the s ame thing.
Are they really doing that?
You would think if that were the case they should be getting 2 or 3 or 4 times more per ad than other sites?
It's early for facebook.
It takes time for them to ramp up.
They're so huge -- i remember having thes e conversations with tim when he was c eo of yahoo how targeted advertising can b e so much more value.
I think yahoo was very different.
Facebook started at a fraction and can only go up.
During the commercial break i was complaining about the phrase social network because there are many, because is it in fact possible that facebook is already giving a le ad -- obviously doing is a much bigger market -- but faceb ook is getting a lead no one else can touch.
They're in a very powerful place.
I would not bet against them.
He have up to go from here.
It's early days for a lot of that.
What about twitter?
Because it's the same kind of thing.
Targeted people are showing interest and advertising medium it's largely -- twitter is different.
Facebook is where i go to engage my wife, my family and everyone i know.
Twitter is where i go to find out what's hap pening right now.
They solve different problems for people and -- from the back end they're looking at it from the same way.
Can't they say, we're learning about the user, marketer and we can get to this person.
I think that's the world that marketers will be faced with.
You can't go to nbc and buy the superbowl.
You need to work with all these play forms that are out there and getting user's attention and you need to do that in targeted ways.
Zack, thank you very much.
New york times is back online and for everyone after more than 20 hours off the web.
A hacking group is taking responsible.
What can the paper do to prevent that?
What does it mean for other businesses?
Can you watch it i'm cory johnson and this is blood-alcohol contentberg west and streaming on your phone, tablet at bloomberg.com.
The new york times website finally online for more than 20 hours the sy rian electronic army took credit for the hack.
The websites themselves weren't how they got in.
It was an australian domain registrars that routes the service.
Joining us now is jordan robertson.
This is disturbing.
It wasn't just that the journalism but an american business was the target o f a foreign military.
One of the interesting parts about this attack is that it relied on this really expansive network of third parties, so y ou can be a syrian advocate and be overseas and still execute an effective attack on an american company and never have to st ep foot on american soil and in fact never have to hack that american company at all.
They hacked an australian company.
One of the things that stuck out to me was the fact there are so many of these -- the system which kind of enabled this attack is messed u p. there are tens of thousands of companies -- is it?
Really messed up.
They've been at it for a long time there are tens of thousands of companies that manage the registries for companies like google and new york times and twitter and there are so many.
If any of them are hacked and records are altered you can sink hole the website and send it to a domain that doesn't exit or send twitter to another page that is either -- is there any does tray that industry that is figuring this out?
Finance, commerce, any industry that has a strong financial stake and a lot of financial data that they can product.
They are aggressive to manage their domain names.
There are services where you pay extra fo r additional security.
It requires around the clock i.t. people and have to call in to make changes.
There is a lot of administrative overhead in managing a domain name system securely.
A lot of companies say, forget it.
We're not interested and th at's lot of headache.
If i were to make a list of country that's can do this i wouldn't have put syria in my top five.
Is this the tip of the iceberg on what we cou ld see if it were another country.
Sadly, almost any country can do this because there are so many companies that manage the domain name infrastructure.
Any country can do that that's the scary part.
Thank you very much.
We're staying with syria for the moment.
President obama said he has not made a decision on action.
Syria's government waged a chemical attack and direct u.s. involvement won't help the civil war there.
If an attack goes forward what would it look like?
Contributor edit or and security advisor gives us his take on four precision missiles most likely to be used.
When the president orders an air strike he has two priorities, one to hit the target and two to protect the pilot.
We have an enormous missiles budget to give the president a wide variety.
Here are the four precision guided weapons most likely to be used.
Let's start with protecting the pilot.
Dismissal has a highly p recision to shoot down pilots.
It flies at twice the speed of sound.
The next two ar e similar and related.
It takes a dumb bomb and makes it a smart bo mb by retrofitting it with a sophisticated gps system and makes it highly accurate in any system.
It falls more or less straight to the ground.
The and the other one is a glide weapon that can be released by aircraft much further away creating a safer environment for pilots.
Both are equipment with laser guide and honing system.
The most famous is the tom a hawk.
It's two way communications system allows it to be retargeted in flight and accuracy is 30 feet, precision is what unifies these weapons.
For any president contemplating an air strike non combatant casualties are the great nightmares.
That was bloomberg contributing editor.
Still ahead, we'll hear from kevin stacey about binge watching and his role in house of cards and you can watch it streaming on your welcome to bloomberg west and i'm cory johnson.
The stock at least in tesla is certainly paid off, although they sold most of its shares.
But the stock is up 600% in the year.
And several hoft wear companies as well, all companies we'll be hearing a lot about, i think.
We focus on these investments and are people t aking over the world?
In what way?
What i mean by that is i think you have seen people who come with a background in technology and especially consumer technology focus taking over traditional industries, enterprise sophomore or m ore basic enterprises.
Give me an example.
I think they're bringing a new approach and radical new thinking to the se industries.
If you look at what elan did with tesla, someonehe brought the concept of radical reusability.
As a sof wear person -- he was at paypal but an online bank that he sold to paypal ask then left.
The online bank, you think of that as a sof wear business?
Yeah, i think there are a certain set of principals and values that people from the technology industry have embraced.
When nasa was building rockets they had custom pa rts for everything.
Sof wear people say, use the same bolt over and over.
Reusability and just frankly modern skiing the whole thing.
You mentioned box and sugar and i think specifically with enterprise software you're seeing the next generation.
The market actually ca res about things that weren't fully incorporating.
The y ou mean the market cares -- i'll give you an example.
Enterprise software was sold to i.t. and the end users were an afterthought.
You built the software to make their lives easy they were $10 million sales for a 500-person company and free year installation.
The software was not a lot of fun to use.
You flash forward ten years now and people who have grown up using facebook or having used the ipa d they don't want to go back, they want to use something easy to use.
You don't have to have a manual to be trained, you can just sit down and use.
A lot of firms exit when you sold the businesses.
I wonder when you look at these, do you look for everyone of these to be megaopportunities or do you recognize some of these are great solutions that are big enough to make money on?
I think you have to look for opportunities and for people you think can go the distance.
If they get taken out early that's going to happen sometimes.
But i think you want to try to take market opportunities and have the potential to be large companies.
The caveat would be sometimes you don't know when you're getting involved.
Box started out as a consumer focus company.
Two years after we backed them they pivoted to enterprise.
Enterprise most of us working on the show are not business people so we don't interact with the products.
What's your key to staying on top of what companies are doing and how it's change something we try and talk a lot to the companies in our portfolio in terms of what they're using and have cio's that we consult with.
We bring 50 every year to our annual meeting and ask them about the things they're caring about.
Getting out there and seeing what people are using.
Always interesting results.
Josh stein, thank you very much.
How can big data help you beat your friends at fantasy football.
We ask a big guy, former 49er jerry rice next.
Watch you're watching bloomberg west where we focus on technology, invasion and the future of business.
I'm cory johnson.
Apple planing to open a new store in tokyo according to a person familiar with those plans.
Construction finishes in february in one of the city's up scale shopping d istricts.
This is the first new store in the world's 13th largest city in 2005. british betting house is out with the odds.
The favorite, get your bets ready, former expect, 5-1 odds.
And window's chief 8-1. steve cook at 100-1. you wonder why bookies make so much money.
Are the federals getting involved with the on going battle with time warner and cbs.
The fcc is talking to both partys to get the fee dispute resolved.
This waoeubg week it will be huge for football fans . over 25 million people expected the draft players to their fantasy football teams that's according to the tpapbltssy sports trade association.
Yes, there is a fantasy sports trade association.
Many will turn to the sites that use analytics and all the best tools to show the best picks for the dream teams.
One of the best football player hall of failure and 49er jerry rice.
We talked to him earlier today and it was cool.
We got to talk to him about the big game and how big the big game of fantasy football has become so huge.
When i played not that -- that was a long time ago they would talk about fantasy football and they say i have you on my fantasy team.
At that time i didn't know the background it.
But now fantasy football went to a whole different level.
You have over 30 million people playing fantasy football and $1.1 billion industry and 75% of fantasy football players, they want the real stats at that moment.
While they watch t he game.
While they watch the game.
We hardly get to talk about football at all.
But we talk about the way people's viewing has changed and they're watching with their ipad.
Hd television, the sights and the sounds, the crystal c lear detail, you can watch this in the convenience of your home or go to the local starbuck's and watch it on your laptop computer.
You can be anywhere.
You can pull up that information on your smart phones and also your tablets.
So there's a lot of technology going on and that's why i partnered up with intel and they're like one of the leading brands.
Football -- i don't know if it's because i think of football a lot.
But i feel like it's one of the most intellectually challenging sports to understand what's happening, not just with the players but with the plays.
But also with the players.
The fan when they're in fantasy football there is so much data being co nsumed.
There is so much data and now you can breakdown see if this guy functions well in cold weather, if he plays better in a dome or if he might have some personal issues or something like that, that might impact your decision on bringing this guy on your team, so like i said, intel is doing a fantastic job.
It's all in that data.
As a player over the course oh,he because you played for a long time.
I wonder if the data that you would get even as a player changed a lot during that time?
I think it changed a lot and the thing is -- what was it like when you first came into the league?
When i first came into the league, the thing about me it was hard work and dedication.
I think players can be a little smarter now with all the data that's out there.
You have wearable technology where you can -- that can monitor your heart and see the distance that you're going, all those things to factor into a fitness program where it can be beneficial to you.
There's all these -- first of all, when i first cam e to the bay area in '98 i introduced this interview with barry bonds.
I asked him about worko uts with you.
He's famous for his time at the gym.
He said jerry the way that guy works.
Barry used to give me a hard time.
He would say, look, jerry, i only have to be able to run to third base.
I had it to a whole different level because i wanted to be able to excel in the fourth quarter.
I wonder if it's what you would see on the sidelines later on your career and i wo nder if it was that sort of same kind of quality of data?
Well, yes, it's going to give you accurate analysis of player's speed and their vertical leap and potential to injury.
You would know that?
All that is going on.
Then you got the coaches also using the new technology, the multiview cameras and all that, that can measure -- what would they look for?
The coaches are looking for certain tent tendencies.
That's going to help them prepare for the next game or the team that they're playing.
What would you look for, like what kind of data would you look for in a wide receiver n-a position you would know something about?
Probably how he comes off the line of scrimmage, you know, even if it's a run.
I always wanted to make everything look the same.
They couldn't tell it was coming your way or not yeah.
I was always working the defensive back on the backside just in case to get a feel for what i could -- so last question.
If you got to pick three w ide receivers to speak -- come on.
Andre johnson, larry fitzgerald.
Hall of famer numb er 80 jerry rice.
Tune in for the bottom line.
Denver broncos peyton manning, one of the two best peytons to join the game will join us later.
Maryland, interesting invasions like 3-d printing are being used to test the designs of huge battleships.
Watch us streaming on your tablet phone at i'm corey johnson and this is bloomberg west.
Have off line retails been fibbing.
Some recently correspondence between retail commissions and exchanges talk about number of goods they're selling online.
They're asking them to be more specific about their online businesses because they've told investors they're seeing big gains in online sales but the truth in the numbers is not all that great.
We reach out to wal-mart and target and neither have responded.
But joining us from san diego , paul, i love scc filings like no one else, but there is great stuff in these letters that have claimed success selling online and trying tonot to an swer what success is.
Oh by the way, we're doubling and actually it's a really, really small number and it doesn't show up.
It's a classic example how can you get high growth rates on inconsequential numbers.
I want to give them credit they did a nice story.
Amazon has sales 12 times than competitors combined including staples and walmart.
I was surprised.
They're crushing t hem and similar story with target.
There are two interesting angles on.
This i was talking to people about this earlier today who do a lot of investing on the private company side on early stage retail and the optimistic side i suppose people make in defending walmart and target it's early and the transition from off line sales to online sales is early on in terms of the mass market.
I think it's missing the important point and the important point is there are inflection points in people's lives when they change their buying habits in terms of brands and patterns of how they buy.
When you have kids and when you get married and when you get divorced or buy a horse, these are points in your life that are major inflections that change how and what you buy.
When you go online and first start buying that way that is one of those inflection points.
What we have is a whole series of patterns that have been put in place and as a generation of buyers who have no idea they're supposed to be driving to large parking lots sitting in traffic jams it doesn't cross their mind and it seems like a funny thing to do.
You're right . when i think about it my amazon prime thing is -- there are things i don't think about going to the store for.
Do you think that's multigenerational because i'm much younger than you -- well, maybe not.
I wonder if it's generational.
Yeah, n o, exactly.
I think that's the important point here that people are missing is t hat brand loyalty is a funny thing but even stranger is patterns of how people buy.
When you put them together and take away no l onger am i loyal to those brands i'm not loyal to the pattern of purchasing where i get into that sort of internal combustion fuelled machine and drive somewhere far away and go through all these lines where i can set up a schedule and i get all the goods showing up at the door and i don't have to go through this archaic ritual.
Dismissing what we're seeing here, a bunch of companies that are doing fairly poor job transitioning to digital.
I wonder, i'm surprised again that walmart and target haven't figured this out.
They're the smartest retailers maybe ever.
Why haven't they gotten the web right?
I think it's a couple of things.
One, they're optimizing on some different variables.
They're optimizing can be efficient in their current logistic chain which is to get stuff in these large box stores and spread all across the country and they do an unbeatable job doing that.
They have this web presence they use their existing logistic chain to deliver stuff through on the best effort basis.
It's the prime focus so it becomes an overstock kind of phenomenon where they push stuff out in that way.
It has to do with the variables and i think in a sen se we can take it right back to the microsoft discussions last week.
What we see is a classic innovator's dilemma.
We need t o manage these costs and they've got competitors who are coming at it in a completely different way that seems inconsequenceal and yet very quickly will come consequenceal and they risk of being a microsoft now or ten years ago.
I -- last question, it shows us the scc which i feel like led so many horrible crimes get away with, they're catching these guys and doing their jobs.
I was impressed when i saw the story.
Kudos as you s aid for the journal picking it up.
It's important that you catch these people on this.
What we're really seeing are these kinds of transitions and people -- maybe white lies or lies of exaggeration but it's important to see the numbers underlying the claims because they don't match up.
Thank you very much.
If you want to know the future of navy war ships will look head to the superbs of maryland, that's where the largest ship testing facilities is, the navele surface warfare center.
Where the navy puts its ships to test before they hit the wa ter.
Peter cook got an inside look.
Every navy ship and submarine has had its design tested here.
Enjeers recreate to scale hazards and conditions the ship could face at sea and high sp eed cameras capture underwater explosions a nd 3-d printers have been used and enormo us wave pool to test maneuver ability and sea worthiness.
We're basically a technical advisor for the navy for mechanical and electrical engineering for the navy's ships, submarines and unmanned vehicles.
3200-foot long basin, one of the largest of its kind in the world.
The craft was trimed with weights to give it the right bounce.
It opened if 1940 after find it had the solid bedrock and close proximity to the offices.
The key ingredient is government partnership.
We work with our partners to develop different aspects to develop computer models of ships and in addition we develop physical models of ships.
Lockheed martin, general dynamics, hunting ton and raytheon use the facility and it's specialized consultants we have these agreements in which industry can work with our engineers in order to conduct different types of testing or experimentation t hat is required to advance on navy ship design.
Every two years the basin hosts the international human powered submarine races to inspire high school kids.
They had t o look at hydrodynamics and buoyancy and weight and systems engineering a whole myriad different types of design challenges.
Those students may not come up with the ship of the future every time, the chan ces are the navy's next war ship will sail here in the maryland suburbs before it reaches the sea.
Kevin spacey has played any number of roles but the latest is a pitch man.
Here how the house of cards star is going clearly the success of the netflix model releasing the entire season o f house of cards at once proved one thing, the audience wants the control.
They want the freedom.
If they want a binge as they have been doing on house of cards then we should let them binge.
Binge advocate actor kevin spacey speaking at the ed inberg festival.
He'll be heading to the emmies next month, they're nominated for nine categories.
But spacey the next new pitchman netflix could ho pe for.
Yeah, i mean he's not officially, cory, a pitch man, but i'm sure he's happy to do it.
People come up to him all the time and say thanks letting me lose three-day ofs of my life watching your show.
He's got a popular 12-hour movie essentially for those people who binge.
It's a movie star go ing not tv but going to a new tv platform.
Was he taking a financial risk given the deal that fincher and kevin spacey got doing this show?
But there were a lot of people in hollywood, the traditional media who were hoping house of cards wouldn't necessarily take off because that would allow them to say, nice try tphret tphreufpl but go back to what you do best which is buy our stuff for the second window when we're ready to sell it to you.
And people will talk a lot about this in the lead up to the emmies in sep tember.
You say it took off.
Do we really know?
Netflix hasn't given us any hard numbers or ratings, because ate on netflix we don't know.
Ratings, do those matter?
You're absolutely right.
There has been some grumbling in hollywood about that not just from the networks but even from hbo, which has over the years started to give more data on how its shows do which has left us knowing that shows like curve your enthusiasm might be more critically acclaimed than rating powerhouses.
What are ratings right now at the time when there is time shifted viewing and online viewing and one some of the most popular shows like breaking bad don't get nearly the same kind of audience numbers that you would have historically seen on networks.
So all new ways of measuring who actually is watching and when.
Well, john don't go anywhere, now it's time for the byte, one number that tells us a whole lot.
What do you got?
The bite today is five.
According to trender, they do an lit analytics on what's happening on social activity, there is five time more activity during the popular tv periods on facebook than on twitter.
Interesting to see that twitter today bought trender.
I don't know if they were angry about that data but there you go.
Stop saying that we'll buy you, interesting stuff.
Thank you very much.
Fascinating stuff about twitter.
You get the latest headlines bloomberg.com/technology.
We'll be back with more boomberg west tomorrow.
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