Facebook's Mobile Money: Bloomberg West (07/24)

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July 24 (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 from Bloomberg's San Francisco studio, it showcases the personalities, companies and trends that are transforming the global economy. (Source: Bloomberg)

Live from peer three in san francisco, welcome to the late edition of bloomberg west.

I am emily chang.

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

Let's get straight to the rundown.

Facebook for they can make money on mobile with more than 40% of its ad revenue in the last quarter coming from the small screen.

That is a strong validation.

The house except an amendment that could stop the national security agency's collection of phone records by cutting off funding.

Could this be the real snowdon effect?

Google unveils two new gadgets.

A tablet and a device meant to bring video from your mobile the vice to your big screen.

What does chrome cast mean for the competition?

Facebook says the number of active mobile users increased 51%. mobile also made up 41% of advertising revenue.

That is the important number up from 30% in the last period.

We spoke with the cfo after the earnings were released.

Take a listen to what he told us.

I see more executing really well against what we are trying to accomplish on mobile.

That is a big part of why we are able to parse the quarter that we were so pleased with.

I think -- a lot of the investors came together -- investments came together to pay off.

They showed big gains for the bottom line.

Sales totaled $1.8 billion in the quarter, up if you three percent while profit was $333 million up from a loss last year.

Facebook shares are surging in after-hours trading.

Jon erlichman is in los angeles with more on the facebook numbers.

Is it official, is facebook good and mobile advertising?

Rex mark zuckerberg in the last few minutes said some things that provide a little bit more context.

He said for the longest time inside the company, the rallying cry surrounded reaching that milestone of one billion users.

After getting above that level there is more focus on the other issues including the mobile experience which mark zuckerberg addressed as something he wanted to fix in terms of the user experience and the ability to get good ads that are relevant and people will a lot for.

There are two things i want to highlight.

First of all the number of people who are using facebook on and the percentage of advertising coming from their business.

Here are the active users -- more than 800 million around the globe.

That number was at 543 million last year.

Year-over-year, an increase of more than 50%. the total active users for facebook was up about 20%. mobile was up 50% while total use was up 20%. here is the total -- they went from 14 to 23 to 30 to 41%. facebook has a lot of control over where those advertisers put their money.

They are pushing a lot of it into the mobile product but that is was to create better products and the long-term.

How telling is that number?

Facebook is deciding whether it goes to mobile or desktop.

If advertisers had a problem with it, you would hear more about it.

Facebook has a good reason to be sharing that number for sure.

Let's talk about instagram . the question was raised when are you going to start monetizing instagram.

Mark zuckerberg says we have time -- we have plans to do so but not yet.

Why not?

He went on to say waiting for the right time.

The same reason that when facebook was in its massive early-stage growth, this is a business they acquired, it's now well north of 100 million.

They have a good thing going with instagram and they don't want to take care of that.

A lot of celebrities and marketers are finding ways to market themselves on instagram.

But we asked about that and they say that we've learned a lot about it.

Jon erlichman, breaking down the facebook numbers from los angeles.

For more on facebook's results, i want to bring into experts on the social network -- david kirkpatrick wrote the book on facebook and has spent a lot of time with mark zuckerberg.

He joins me from new york.

And the founder and ceo of spruce media, they help marketers manage ads on facebook.

Spruce media is one of fort team strategic marketing developers and just released a support -- a report on facebook advertising.

You heard me earlier speaking about the 41% number.

How good is that number and how telling is that number since facebook is the one deciding how high it really is?

I think it is astonishing.

The fact that facebook has 0 -- had zero mobile revenue a year ago when they went public and are now up 40% is an astonishing figure.

Facebook gives you the option to choose your placement.

There's a run of network options, so i don't think it is entirely true that facebook optimizes to it, but what we see from our advertisers is mobile inventory is the highest performing inventory on facebook.

Our advertisers want to be on mobile because it performs best with them.

You have been critical of facebook ads in the past.

What do you think of these latest numbers?

Has facebook officially figured out mobile?

I think it is a historic day.

I've been on this network repeatedly and extremely optimistic about facebook's long-term potential as a business.

I think they've indicated themselves today.

They have cash flow that is a little bit anomalous because of the cash rebate but this company is blowing it out today.

More than half their users are looking at facebook on mobile rather than computers.

That is huge stuff.

They are shifting the ads toward mobile, but they are keeping the usage and instagram is not even a business.

This is a very important day for a company that has had to struggle to prove itself as a legitimate business since the ipo and that's why the stock is up so much after hours.

In your report, you talked about how ad prices are fluctuating and rates are down by quite a lot.

Is that concern you?

Not really.

I think really what the story is behind that is these ad units are relatively new.

Anytime you have added ad unit like the newsfeed placement, you see a temporary spike in engagement rates.

I think what we are seeing now is that number starting to normalize and the more important figure here is the fact that facebook advertisers are buying more and paying more for it.

In the end, it is working for facebook advertisers and that's what matters.

What about engagement?

Piper jaffray put out a report saying teenagers are getting tired of facebook.

There's too much drama there.

Are you worried about snatch up or -- are you worried about snap chat or instagram being easier to use?

They are worried about it.

They refuted the idea today that teenagers and young people are using it less, so i don't think that's happening in any kind of macro way.

If it is happening, it's happening in the most developed economies and the places where facebook remains rightist is in the rest of the world.

Even though the ad markets there are relatively small, if you look at it as a long-term play, it is humongous.

I want to go back to the issue of the ad quality.

The ads that i see on facebook generally stink, but they seem to be improving their ability to hit the right ads to show the right people at the right time during the progress is clearly evident in these numbers.

How would you respond that the ads still stink?

I know you looking are -- you are looking for improvement on that front.

I think facebook has done a tremendous job launching major ad product announcements in the last 12 months and enhancements.

I think the market is still adapting to those.

Things like look-alike modeling and targeting and optimization enhancements, i think you will see that pay off over time.

You will see the ad improved -- you will see the ads approved because of it very to did not come up today because the numbers were good, but seeing sheryl sandberg becoming more active outside of facebook and mark zuckerberg with forward u.s., any concern these other activities could become a distraction?

I think a lot of people watching the company are asking themselves that question great is it the right time for the two top officers of the company to be engaging in these activities?

I don't think a lot of mark zuckerberg's time has been focused on forward.

As long as the results keep getting better, people are going to care.

I don't think it's a problem right now.

There were some raised eyebrows but i want to repeat this is a historic moment for a company really coming into its own and proving it's a real growth is long-term and it is worth having faith in these people, which i have had for some time.

David kirkpatrick, you were there following them early on.

Thank you both for joining us today.

Still to come, is congress about to cut off funding for the nsa 's phone records collection program?

You can watch us streaming on your tablet, phone and at bloomberg.com.

? lex i'm emily chang.

This is "bloomberg west" on bloomberg television.

Streaming live on any windows phone as well.

Edward snowden's next move may be unclear, but the debate he hope to trigger over government surveillance programs is playing out in congress at this hour.

Our chief washington correspondent, peter cook for my has more from d.c.. high drama on the floor today.

Is this what edward snowden always wanted?

You may be able to make the case that this is what he wanted and it come somewhat as a surprise here.

There is a debate playing out as we speak on the house floor and it has to do with a defense spending bill.

But there is an amendment offered by a republican that would restrict the government's ability to conduct the all collection of americans phones records.

He and an unlikely alliance of liberal democrats and conservative republicans have gotten together to support this amendment and push it as part of this legislation and it would restrict the nsa's ability to collect those records on all americans and limited to only those suspected of engaging in terrorism.

The debate has been pretty intense trade nokia outcome as to how this vote is going to go.

Let's listen to the debate as it played out on the house floor just a short time ago.

We are here to answer one question for the people we represent -- new we oppose the collection of every american's phone records?

This amendment goes too far, too fast on the wrong legislative vehicle.

We need to debate the scope of this program and we are, but this is an extreme, knee-jerk reaction to the situation.

It is not entirely clear how this will play out.

He says he has significant support for this legislation and it's not clear where this legislation goes from here, but this is the biggest test yet of these surveillance programs since this story first made news and it's one that's being very closely watched at the white house and beyond.

There is a big bipartisan effort to defeat this amendment.

How often does that happen?

There are some very strange political bedfellows on this legislation.

In support of this legislation, you have conservative republicans as well as liberal democrats concerned about this program.

On the other side coming you have the white house opposed to this, the director of national intelligence issuing a statement urging lawmakers not to support this amendment.

You have bush administration officials, including heads of the cia in the bush years, all sending messages and statements to members of congress urging them not to support this amendment, saying this is a critical tool and limiting them this way would do harm to national security.

Very strange alliances on this legislation.

This vote should happen shortly.

Thank you so much, peter cook.

Debate over this nearly $600 billion defense spending bill extends are beyond washington.

Reductions to the nsa surveillance program could mean big losses to silicon valley companies as well.

We have more on how federal funding limits could hit high- tech in today's drill down.

The discussion about this, i listened to the house debate and the press around this has been about civil liberties aspects and they are certainly the most important thing.

But this is a really big business.

That is a fence tens of billions of dollars every year on technology and equipment to do this spying domestic and otherwise.

Those big amounts of money are often flowing into companies as well as right here in silicon valley.

How much spending?

We don't know because it is secret.

But we have an understanding -- the office of the director of national intelligence says a 53 billion dollar budget for spending in 2012, classified information technology budget, up 21% over the previous year.

That increase comes at the same time we've seen lots of other military spending, whether it's on conventional true -- conventional troops, or on arms.

At the same time, we are spending more on cybersecurity.

That can change during our broadcast tonight.

Tell me about einstein three.

This is an nsa program that came after einstein.

It came as a way to gather internet security information, but it changed in the bush administration to analyze person-to-person contact.

That's the heart of those likely these nsa programs we have been hearing about.

They have active sensors installed that allows them to suck up information as it is crossing the cables of the internet, the series of tim's bash series of tubes, as they say in congress.

What kinds of companies?

These companies don't exactly break out how they are doing it.

Sourcefire is a good example, the company acquired by cisco yesterday.

For almost $3 billion.

An israeli company tri-dubai at three years years ago and were not allowed to do so.

Some analysts have written they were supposed to benefit very specifically from increased spending in einstein three.

As well as companies like cray supercomputers that create digital signal processing and things that suck information right from the telecommunications lines.

All of these companies could lose sales if these programs get shut down today.

We will be watching for that.

It is decision day for dell, but michael dell and silverlake have sweeten their offer.

We go live to dell headquarters, next.

? welcome back.

We have some breaking news to tell you about.

Michael dell has just released an letter to shareholders saying he believes taking the company private is the right thing to do for the company, but he will live with whatever shareholders decide.

Dell today postponed a shareholder vote on the plans to take the company private.

Dell and silverlake are offering $13 and $.75 a share, $.10 a share boost over their previous offer.

What they call their best and final offer.


tina g is life outside of dell headquarters in round rock, texas.

The deadline was supposed to be 6:00 today, but they pushed it back to next week.

What happens next?

They just wrapped up a very brief shareholder meeting and not too many shareholders showed up.

A very different outcome from last week when we had a lot of angry shareholders.

By postponing this and announcing the this moment earlier today, they avoided that circus.

So what's next is we can expect a shareholder vote next week and it remains to be seen what shareholders are going to vote on.

Michael dell and the special committee are still at an impasse.

Remember michael dell is offering $.10 more, but that comes with strings attached.

In order for the offer to become it, he's saying the special committee has to relax some boating restrictions, predominately what that means is that shareholders who have not voted count as no votes and he wants that to change.

He wants those extension -- he wants those extensions to not count at all and we will have to see have a special committee response to that.

We are hearing it won't come to the table for at least $14 a share at this point.

Cristina alesci from dell headquarters in round rock texas.

Coming up, google has developed a new way to watch tv with small gadgets that can be an internet video from your computer or phone to your television.

? you are watching "bloomberg west." i'm emily chang.

A company that -- a company that makes chips jim to just over $6 billion and profit went up -- qualcomm -- just like -- despite the number, qualcomm says the market has been in a local as the world waits for new smartphones from apple and others.

Kevin johnson is retiring.

He grew juniper to a revenue of $4.4 billion.

Juniper has seen a surge in growth as telecom companies upgrade networks to accommodate a surge in demand for mobile data.

And sprint says it will offer mobile phone coverage in all of new york city half 270 seven subway stations.

The company signed a deal with transit wireless for the deal -- at&t and t-mobile reached deals that say they intend to cover the subway.

Verizon still does not have complete coverage.

Google is going after the apple tv crowd.

Earlier today, google unveiled a device about the size of a usb drive and streams video from youtube and netflix to your television.

And at $35, it has been priced below similar hardware.

Jon erlichman back from l.a.. google is keeping apple on its toes with this.

This is one of those times i like to say well played, well played, google.

At a time we are talking about apple and their role in the future of television, google has been making interesting moves, may be based on some of its early forays into television.

They have google fiber, so they are trying to wire your home.

We were talking about the possibility of a pay-tv service.

At $35 , when you throw in the three months of netflix they are providing, it's almost like they are giving it away.

It's another way for google to get in front of your face wherever they are.

Here is more on why google is doing this.

There is an explosion in the consumption of online video, and phones and tablets.

But online video has not really arrived with the same type of scale on tv.

We felt like it was important for us to find the easiest way to bring the online video you are consuming on these devices and consumption is growing exponentially, to your television.

How does it strike you that we see netflix as a key partner with google on this?

On one level, i find it really interesting.

When you think about one of the companies netflix was close to , reed hastings and mark zuckerberg are good buddies, but on so many levels, this makes a lot of sense for netflix, which is riding high with its recent at me nominations.

Netflix does not care about which hardware you are using to get it nervous.

Day one a lot of subscribers.

I will say that on the content side, while it is great for google to have netflix, they probably have to price this device at a lower level just because the content offerings that roque who and apple tv have been working on are a lot more extensive.

-- that roku and apple television have been working on are a lot more extensive.

Jon erlichman, our senior west coast correspondent, in the lay -- in l.a.. the new texas seven tablet was unveiled today.

It has the same screen and runs on the android operating system.

It indexes is lighter and the us play is clear.

The tablet goes on sale on july 30 and the rice tag will range depending on memory and wi-fi capabilities.

-- the price tag will range depending on capabilities.

Nicholas thompson joins me from new york to talk about this.

There is some cool stuff about this like virtual surround sound and parental controls and it's faster.

Is it cool?

It is cool and it shows google is figuring out hardware.

It has a long way to catch up to apple but this is a good device.

The screen resolution is terrific.

The size is good.

The price has gone up a little bit which seems like a reasonable choice.

I think a pretty good day for google overall.

More importantly, how will it live up to the ipad?

Will people buy it?


I did -- ipad has a stranglehold on the tablet market but it is possible for competitors to match the set up here it they caught up against what seemed like an insurmountable lead.

But what google's strategy is is to partly sell these devices and show what can be done to compete with apple.

Google cares less about selling its own tablet than it does about creating diversity inside the tablet competition so that there is room and expectations for others to build and build -- to build android tablets.

What really wants is the future to be on android tablets, whether it's it's on the nexus seven or not grade what will you be looking for in the update?

We had an update today and it doesn't seem to be that exciting.

Parental controls are great for those of us who have children, but people weren't really excited about the android update.

The key thing for android, they -- the key thing will be the ability to continue to get apps and have it operate smoothly.

The perennial question for android is the trade-off in the bargain they made at the beginning -- can you have an operating system that works effectively on phones of all different sizes and capabilities?

They are getting better and better at having this smooth experience.

Apple has an operating system made for one phone controlled by the same company.

Google has an operating system made for a zillion phones.

As you manage the operating system, that's the key thing to keep in mind.

What about this chrome cast dongle?

Is this a well played by google?

I don't think it's going to sell a ton, but it's interesting device.

It is you a fraction of the features of apple tv for a fraction of the price.

$35 is a good price.

It is sold in a wire and you would hope they would go to price power in another way.

It doesn't have anything revolutionary, but for $35, it does something pretty cool.

If you like watching tv on your computer or phone, now you can watch it on your television.

It's great for cord cutters.

There will be some mark it, but identity will go down in the annals of history as a revolutionary device carried -- revolutionary device.

Nicholas thompson, thank you for joining us.

Cisco makes a nearly $3 billion of that -- nearly $3 billion that on cybersecurity.

How will it pay off?

That's next.

? i'm emily chang.

This is "bloomberg west" on bloomberg television and streaming live on your tablet or any windows phone.

Cory johnson has more on the story on cisco agreeing to buy sourcefire.

Sourcefire helps protect hack attacks and should help cisco get more business from customers helping to beef up security against hack attacks area -- attacks.

What do you guys see in sourcefire that you don't have at cisco already?

Thank you for inviting me.

At cisco, we have a three-part strategy.

We look at building and innovating an hour company.

We partner aggressively and buy companies were we feel like they can add value to us.

Insecurity -- in security, there's a systemwide problem.

When we look at what we can build and how we are partnering and the kinds of companies that are great to be part of cisco, we saw sourcefire's innovation and what they are doing in advanced malware protection and their deep security expertise and open source community that they have founded, it's a great fit with cisco and our strategy and where we are taking our portfolio to help customers solve their most difficult security challenges.

Let's drill down a little bit on some of that.

I don't want to get too geeked out.

When a customer walks in the door and says i need this thing -- is there a particular way it's going and sourcefire has a product that you don't have now?

One of the top issues for companies right now is advanced threat detection.

You've seen a lot in the news about malware and advanced attacks.

This has become an issue not only for government agencies, but for enterprises of all sizes and across all countries around the world.

This is a key issue for customers and we look at the innovation sourcefire has done not only in their crucial business that in developing new technologies and new approaches to finding and stopping malware in a continuous way across the infrastructure.

We thought what they brought to the table was super special and we expect to be a will to that across cisco.

Maybe if you could define that a little bit and talk about how it plays in government.

As we speak right now, the house is debating spending -- they're talking about a civil liberties issue, but 25% of the revenue for sourcefire came from government spending increasing year-over-year at 60%. why is it a government spending issue?

If you look at advanced malware, it is the next evolution of the security problems that customers are trying to deal with.

It's not just governments, it is enterprises as well.

As governments prioritize how they're going to spend money and orient their defenses, we expect a lot more of their effort and energy will be focused in this area.

Last question -- if there is a government slowdown in spending at the nsa, how much will that affect sourcefire?

We expect government and private sector organizations will prioritize the kind of spending they are doing with companies like sourcefire, companies that are pioneering and at the cutting-edge of helping governments find the most advanced, hardest to and hardest to deal with threats that are out there.

We expect while all the trade- offs are being made, this kind of technology and the kind of expertise sourcefire and cisco will be able to bring together are going to be at the top of list of priorities for government and private sector alike.

It interesting to note that sourcefire could not be acquired by an israeli company just a few months ago.

Thank you very much.

A california court has ruled in favor of the dish ad skipping feature.

We will tell you what impact that has on fox and other broadcasters, next.

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

? welcome back.

I'm emily chang.

This is "bloomberg west" on bloomberg television and streaming on your tablet or phone.

Fox elevation lost its second bid to stop dish network from offering its hopper ad skipping feature.

A california federal appeals court refused to overturn a lower court ruling allowing the service to continue.

Jon erlichman joins us from l.a. to explain.

On the one side, you have fox, which wants to charge advertisers lots of money during its shows.

On the other side, you have dish, the pay-tv provider worried about the choice consumers have and how that affects subscriptions.

I had a chance to talk about the hopper with the ceo and here is his justification for what they are doing.

I think there are three things we know about the american consumer.

One, they want their content affordable, easy to use, and anywhere.

They are not just satisfied staying at home watching their content today.

They want on the go and at home if they choose to read we believe this is a big idea and will be embraced by the buying public.

Coming back to the fox side, when nielsen rates a show these days, it is based on who actually watched the ads, whether they watch them live or watch them on dvr within three days.

That's the only way you get the proper measurement of ratings.

That's why cbs, which sold the rights to "under the dome" which amazon could only show four days after it aired.

It was the only way to see how ads could be measured.

Those are the two sides of the long battle.

Turning now to real estate listing site some bird trying to connect renters with the perfect home in every u.s. city.

The company announced today its service is nationwide after having launched in new york, san francisco and chicago.

Instead of scraping listings from other sites, they get brokers and landlords to post rentals directly online.

It has big backers including entries in horowitz.

I sat down with the ceo earlier today and asked him what sense the company apart from its rivals.

-- what sets the company apart from its rivals.

One thing is where the data come from -- where the data comes from.

It was the first ever app for rocher's to post directly.

We have listings that have just come to markets trade and lord come directly to you?


How do you make sure you have enough inventory customer we supplement it with agreements with brokerages and analyst at give us tens of thousands of listing every week and we supplement that with the listings get through this iphone app where people are posting to us before craigslist and zillow gets it.

How does it separate you from craigslist and zillow?

We get the data first.

They will see stuff not being posted on other sites yet.

On the demand side, we have a product centered around neighborhoods so when someone moves to san francisco, if they want to live in a popular neighborhood, they campolo -- they can follow them on our site and we will send them only information on those neighborhoods.

How much do you think it is the user designed that sets you apart?

When we started it, we have a beautiful iphone app about to launch, as a tech company, we thought it was everything.

What we learned was the most important thing was the response rate.

When renters want to move, they just want to know if the apartment is available and if they're going to hear back from the landlord or broker.

You are backed by three of the highest row file venture firms.

Has anyone in particular been the most helpful?

That is it interest question to answer.

They have all been fantastic.

It's humbling how much you can learn from people who have seen this a dozen times before.

Why take money from all three of them?

It was a seed round and we raise 1.7 million.

It was a humbling experience that closed very quickly.

Greylock and crunch funds all followed within the same weekend we had good data to show them.

What do you want to do when you want to raise series a and you have all these people who have invested?

We take data, we have conversations about what we see as the future and what we have is a nationwide platform where we have any years time something that looks very different.

It's not just search, it might help renters close the apartment from their iphone.

We have a vision that's very different from the vanilla play we have today.

That is the secret no one has been able to crack.

I agree.

We see renting in san francisco and new york writing applications against the refrigerator.

Do we believe that will exist in five years, probably not.

That's the bet we are making.

The series aa will be made around people that shared a vision that real estate won't just be about search.

You used to write for david cameron, the british politician and people in his campaign.

How do you make that transition?

I used to write speeches for one of his economic guys.

It's a different world, equally fast-paced.

A lot of the things i learned about delivery and deadlines is they are equally applicable when you have customers asking for something you promised yesterday.

It is a good skill to learn.

We do have some breaking news now out of washington dc, where as we mentioned the house is voting on an amendment to limit ending for the national security agency.

Some of its surveillance programs, peter cook joins us now with more.

What is the up date?

Not sure if you can hear me in san francisco, but the house has just voted to defeat the amendment which would have limited the government surveillance program, specifically the bulk collection of phone records.

The preliminary vote, the first big test of this program in the wake of the edward snowden going down to defeat, but this will not be the last test of this program.

What sort of precedent does this set if any?

-- all right.

We will leave it there.

Peter cook, our chief washington correspondent with the latest on the nsa and house vote today.

Thank you for watching this edition of "bloomberg west." we'll see you back here tomorrow.


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