Facebook, the $100B Company: Bloomberg West (08/26)

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Aug. 26 (Bloomberg) -- Full epsiode of "Bloomberg West." Guests: ShutterStock's David Fraga, Adage.com's Michael Learmonth, Bloomberg's Jon Erlichman and Cory Johnson. (Source: Bloomberg)

. . live in san francisco, welcome to the early edition of "bloomberg west." i'm emily chang.

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

Let's get to the rundown.

Investors find a friend in facebook as the company reaches $100 billion in market value, but this comes at the same time that they throw in the towel on a product.

San francisco, welcome to the early edition of "bloomberg west." i'm emily chang.

Our focus is onamazon helps to power some of technology's biggest names, but some realize this weekend the relationship does not come without some on wanted down time.

And the tesla model s sedan one the top safety ratings, but have they gone too far in talking about their performance?

Facebook is now a $100 billion company again.

That was the company we've got the win their business against in the lead it to its ipo and now the social network market cap has topped it.

Shares are rising again today.

Their success in mobile advertising may be driving the rally, but it also comes as facebook is shifting one of its strategies.

Less than a year after announcing its program, facebook is doing away with physical gifts.

They had big-name partners to power some like starbucks and others, allowing france to send their friends physical merchandise for special occasions.

In a statement, they say -- since launching gives in december, 80% of guests have been gift cards, so now we are adding more digital codes.

For more, i want to bring in jon erlichman, who is with us from l.a. how big of a deal is this, given the fact that there was talk that facebook could revolutionize the-commerce yes of -- e-commerce?

People are on facebook all day, they say happy birthday to their friends, congratulating them on the birth of their children, but there are a couple of issues when it comes to the actual business practice that facebook may have been up against.

Just because you congratulate someone on facebook does not necessarily mean you want to buy them a gift.

The second factor is, it if you want a wider array of actual, physical gifts, even though facebook launched with a bunch of different partners, you are one click away from, say, amazon, where you can get virtually everything.

To make the focus on gift cards allows them to stay in this game and maybe benefits them in the way that it can avoid the potentially costly, messy way of delivering physical goods to other people, which is obviously not its business.

You would think your closest friends and relatives, you are not necessarily going to get them a gift on facebook.

You would try to search for a special gift.

In some ways, that gets to the privacy issues that facebook has been focused on for the past couple of years.

Facebook knows a lot about you, emily chang, they gather data and intelligence on you.

If they are suggesting the absolute perfect gift for me to buy you, you could be creeped down by that.

You might not be, but the concept of gift cards is, the hope is it is close enough to what you want but not exactly what you want, and maybe that keeps the privacy police away.

Certainly, there are a lot of issues that come up when you launch into a new business.

Facebook has been trying to figure out some of these new business areas.

Jon erlichman, thank you.

Technical problems hit amazon over the weekend.

Their clout service which powers many of the most popular sites on the web from netflix to instagram.

The problem was traced to amazon's northern virginia datacenter involving a partial failure of the networking device.

It is just the latest in a string of technical devices.

For more, i want to bring in cory johnson.

Amazon web services shut down.

Is this just another example of how reliant the web and others are on amazon?

First of all, web searches a big business.

They will not tell us how big their revenues are.

We can get a sense of it from their conferences and other things, but it is huge.

Thousands and thousands of their business on top of this service.

Piper jaffray tide -- try to come up with sales estimates one time.

They think it is growing at better than a 50% clip.

We know that in is in 190 countries.

Specifically, we know the business offers lots of different things, not just storage or processing power.

It includes databases and all sorts of web analytics tools and things that companies will use to run their businesses.

As a result, it has become one of the dominant companies in this world of providing services to other companies to build on.

How big of an outage was this, how serious was this, compared to previous outages?

You have to think about, in terms of how serious it is, we are not just talking about uber and air bnb.

We are talking about importing companies like ibm, sap.

There is a tool that puts these things in context and looks at the effects of the outages.

There was an outage that happened today, 31 domains affected.

77 domains on august 25, 4 minutes.

One week ago, 43 domains affected by three hours.

This happens all the time and use continue to deal with it, because with all of the price cuts that amazon has trumpeted, it seems to offer them the best service.

Is this a warning?

The interesting thing about the web, when you go to the average web page, there are about a dozen different services putting that page together, add servers, data feeds, and a bunch of companies being cobbled together to put this web site together.

The web is more relied on multiple sources of data, so we could see more of these outages in the future.

Thank you.

Still ahead, the ads you see on facebook could become much more attractive.

We will have that story coming next.

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

? welcome back.

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

I'm emily chang.

Gives is getting a major redesign and facebook level and the sale of fiscal give us.

-- is ending the sale of physical gifts.

The partnership with shutterstock will let advertisers access to high- quality pictures for free for their advertising tools.

Joining me now is the vp of corporate development where he leads the corporate partnership efforts.

How this partnership, about?

Did facebook come to you, or did you go to them?

Facebook knows that businesses need high-quality, engaging images to reach customers.

It was a natural fit to work with facebook to create facebook adds.

So did they come to you or you go to them?

We approached them about the deal, was something that they had on their mind, it was the right time for both of us.

Give me an example of how it works, from an advertiser's perspective, what can they get them?

Let's say you are a small business, may be a coffee shop.

In the past, when you created an advertisement on facebook, you might need to upload your own image.

Now you can do a surge, find shutterstock images, find the right one for your ad, and place it in.

You mentioned small businesses have the most to gain from this, why?

Typically, they do not have the same teams for graphic designers or creative types.

This could be used by businesses of all sizes, but small businesses will especially appreciate it.

Other than putting your images out there, what does shutterstock get in return?

Each time facebook users and images, both receive a royalty, us and the contributor.

This gives us an opportunity to reach an even larger audience.

Your business has improved dramatically with the advent of digital.

Tell me how your business has evolved and now you have developed own library of these images.

All businesses need images to communicate.

Shutterstock is an online marketplace where customers can find those images, and we are a marketplace where artists from around the world, photographers, illustrators, videographers, can have their content distributed to these customers.

As folks use more and more images, we continue to satisfy that need and provide an opportunity for our artists.

Facebook has done a lot to improve its ads, especially in mobile.

Today, passing the $100 billion market cap.

From our perspective, what else needs to be done?

Things can always be easier and more accessible online.

That is something that this partnership continues to demonstrate.

Before, it would be difficult for folks to get up and running, but now is easier than ever.

As facebook moves into more areas, we are excited to work with them and make it easier for folks to reach customers online.

David, thank you for joining us today.

Microsoft needs a new ceo, but who will actually want the job?

We'll look at the challenges steve ballmer leaves behind.

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

This is the early edition of "bloomberg west." i'm emily chang.

After friday's announcement that steve ballmer would be retiring, at microsoft's ceo, within the next 12 months, many wondered who would take his place.

We bring down the company's recent failures, leaving us with a new question, will anyone even want the job?

Steve ballmer!

Who wants a new ceo of microsoft!

Get on your feet!

Whoever the new ceo is, they will not need to be asking many questions.

The answers are pretty clear what they need to do.

Smartphones.

Their mobile os is kind of growing.

It seems to be doing well in latin america, but in the u.s., sales remained incredibly sluggish.

The problem is not a software, which is actually pretty great, nor is it the hardware.

The problem is app developers are treating it like a stepchild.

How can you solve the problem of not having enough market share because you do not have enough apps, but then you do not have enough apps because of your tiny market share.

When was the last time you saw somebody use a microsoft surfaced tablet?

Me neither.

It was supposed to be the perfect marriage of harvard and software.

Except, it came in two different versions and one could not run regular windows applications but the other one was really expensive and power-hungry and really heavy.

In the meantime, sales of tablets from apple and samsung have been going like hotcakes.

No.

3, windows.

Even windows, the fortress of profitability, is under siege.

After releasing windows 8 last year, sales have been slow.

Many people freaked out with the new interface and stub to traditional versions like windows 7 and windows xp.

In the meantime, pc sales are sinking because people are clearly using smartphones and tablets a whole lot more so all microsoft has to do is build smartphones and tablets -- with a second.

Good luck, future ceo.

Shockingly entertaining impersonation of steve ballmer.

With such a rocky road ahead for microsoft, who could be up for the challenge?

Cory johnson is back with more on steve ballmer's legacy and who could be stepping into his shoes.

Sam did a pretty good job.

Maybe they should talk to him.

Our friend was talking to me, someone had suggested him.

I said, are you interested?

He said, i think you would be better for the job.

I am not in the running.

Before we bury steve ballmer, -- developers.

I love this.

There are so many iconic ballmer moments.

Developers, developers, developers, developers.

He did a lot for this company in ticket to fantastic places after gates left.

The ticket from 31,000 employees to 90,000 employees.

He took sales from under $20 billion tia $70 billion.

Free cash flow nearly doubled every year.

He did some fantastic things for the company, kept the company from going by the waste land, like others in similar transition, but as sam points out, there are a lot of places where they are failing.

People have called it their lost decade.

That is pretty extreme.

If you own account numbers, it is easy to say that.

They have run the business pretty well and have done things well in places like the clouds.

What about internal candidates echo microsoft has identified four potential candidates.

The person who runs skype, the one who runs their clout business, and the senior apps guy.

Interestingly, all men, the internal candidates the company is mentioning.

How about the external names?

The names i have heard from analysts -- of course, john donahoe did a great job turn around ebay.

Extraordinary candidates.

Vic had spent a lot of time.

Someone had mentioned elon.

That would be very interesting.

There are so many guesses going on.

You have got to imagine it is someone who can -- who has shown they can manage a really big operation with lots of people who are going in and grinding it out every day, not just a handful of visionaries.

I cannot imagine a start up ceo being the person.

How important is the charisma steve had it in state -- spades.

Steve was a salesman of corporate i.t., which cover microsoft had been.

I think a lot of reporters look at them and see failure because they do not see what they do on the business side.

Someone who can walk into a procter and gamble and seldom 20,000 units, that is the kind of person that will be necessary for their challenge.

This will be one of the most hotly debated topics over the next few months.

Thank you.

It is time for on the markets.

A time to look at what is happening in the market's 26 minutes past the hour.

The markets are up across the board, not huge gains, but the s&p is up a quarter of 1%. the dow jones adding about 30 points.

The nasdaq is up, the biggest gain, up 0.6%. i want to highlight a couple of stocks.

Amgen, the pharmaceutical company is for -- purchasing onyx to expand its exposure to the cancer drug market.

By the way, this 9% gain is the strongest percentage gain in the s&p 500 today.

Tyson foods has been downgraded at bank of america and merrill lynch on concerns increased industry production and lower chicken prices could hurt shares.

They are one of the biggest losers in the s&p index today.

We will be updating you every 30 minutes on the markets.

We have a lot of tech shares that we will fill you in on as the nasdaq rally is hard.

? this is the early addition of " bloomberg west." secretary of state john kerry is scheduled to make a statement on syria in half an hour.

This comes as world leaders urge action against the syrian president for allegedly using chemical weapons against his own people.

Un inspectors investigating the claim came under sniper fire in syria.

New questions about the strength of the u.s. economy, orders for durable goods fell more than seven percent in july according to the commerce department.

That is the first drop in four months on the biggest decrease in one year.

Economists says it shows business investment was off to a slow start in the third quarter.

The major wildfire in yosemite national park shows no sign of slowing down.

The rim fire has reached 234 square miles and is threatening thousands of buildings.

It has prompted a state of emergency in san francisco as the fire moves closer to the reservoir that supplies millions in the bay area with water and hydroelectric power.

Google was recently granted a patent for new technology called pay per gaze which means that could be used for google glass with ads.

Google has patented something called a gaze tracking system which contractor i've movements.

Google also hinted at something called pay per gaze which allows advertisers they stomp looking at ads and how long they look at it.

It describes a way in which google can tell the emotional response people are having.

Pricing could potentially very of the added some weeks -- makes someone happier, they could charge more.

In the future, as google continues to develop glass in this format, imagine you're walking down the street and you look at the sign and look inside.

What could happen with augmented reality is you could see a menu detailing the items available as well as coupons and specials inside the store.

It is the start of what many people are calling the internet of things.

That has some interesting implications for different types of devices.

Insurance companies could look how active you are using a device like this that monitors your health and activity and adjust insurance premiums accordingly.

There are devices that monitor your sleeping pattern so you can imagine a scenario in which an energy drink company targets people who are not sleeping enough.

Advertisers want to pay directly for engagement.

Advertisers are paying for things like likes.

When google first announced google glass, they said it there would be no advertising but pay per gaze makes it more interesting.

For more on this newpay per gaze technology -- you must think this is really far out.

What is your take on the implications of this for advertisers?

It's a very interesting patent and it shows you how long a gmae google is playing.

The holy grail is advertisers would know who has seen and added what they did after.

Did it cause someone to change their mind?

Did they buy something?

It is also an attempt by google which is dominant in search ads -- they have a small beachhead display with brand advertising but they want to port their research model over to display and i think this is an attempt to do that.

Is this the next a disruption in advertising?

This is a big disruption happening in advertising and it think it will happen sooner than you think.

I don't think google will be the main player.

It is the device makers in the living room.

Microsoft connect, samsung television -- you cannot buy a television today without a front facing camera.

Before google glass, advertisers want to know who is in the living room and who was paying attention.

You say the devices on your television set could make these same sort of measurements?

Absolutely, not today, but i would guess within a few years that will happen.

There is a hornets nest of privacy implications about that.

Advertisers really don't care who you are.

They just want to know if someone in the room saw the ad.

What about gauging emotions and whether someone is happy or sad when they look at an advertisement?

That's really interesting.

The biggest thing up -- technological problem is attribution.

What had caused a behavior?

Knowing if the ad delighted somebody would give an additional sign.

Knowing if they saw it would be the first up and then knowing if it impacted them and did it make them more likely to buy something or more inches did in an idea, that is the next big thing.

What about a step farther beyond -- augmented realities.

These devices like google last offer incredible opportunities -- google glass and you could walk down the street and have deals sent to you.

That is already happening with mobile phones.

There are 10,000 users of google glass but there has to be millions in the market.

It is an open question whether wearables are something that marketers are going to be interested in.

May be google glass is not widely deployed but when you talk about the internet of things in general, we are seeing things like wristbands becoming more mainstream.

What about innovations in advertising from some of these things we where in other ways?

I think advertisers are interested in data.

These things generate data and tell them something about these people.

It is very interesting to marketers.

The other thing marketers want to do is reach people with the white at at the right time.

-- with the right at the right time.

They leave a data stream or make it easier to raise their hand and i want information about this.

That is interesting to marketers.

Isn't it a little creepy or are these things inevitably going to happen some day?

I'm sure you can remember when people thought facebook was creepy.

You almost never hear that anymore.

I think those concerns can be overblown.

Marketers need to be sensitive and they have a port track record doing this to not overstep and make sure that their products add value to people's lives.

Michael, thank you for joining us today.

This is exactly where your interests intersect.

Tesla has been touting the perfect model s sedan but the ratings may have been slightly overstated for safety.

We will bring you that story next.

? this is the early edition of " bloomberg west." the emware has hired tony scott to be as chief information officer.

He left microsoft in may after five years at the company and previously worked at disney and general motors.

Vmware is one of microsoft's main rivals.

As football fans gear up for the start of the nfl, electronic arts is betting on one of its biggest franchises, madeen.

The latest version of the game goes on sale tonight.

Jon erlichman is back from la with more on the game plan for the new release.

How important is the madden franchise for ea?

It is usually important.

It is a business that has decided they will make bigger bets on some of their best-known brands.

It is not unlike what we see from movie studios.

Some would argue these days that other games are more important properties because they sell more copies.

After 25 years, this is a franchise that has -- that is still estimated to sell between five and 6 million copies over the next few months.

For a game that will retailer and 60 dollars in wholesale for 48 dollars, you are talking about the possibility of a quarter of a billion dollars of revenue in the next few months.

It is important because they are competing with more social games.

We are seeing a new transition to a new xbox and playstation and it is tough deuce get people to buy when you see a transition to other consoles.

Ea teamed up with directv and amazon to boost sales.

What's that implant all about?

For the people who like colette doubles, there is a higher-end version of this game available through amazon.

You have to go through the fine print but some cases, you can get some goodies from directv.

Depending on who you are and where you are coming you might be able to get the nfl sunday ticket or mobile devices.

Directv gives you access to all sorts of football games out of your network through the pay-tv service and you can also get it on your phone and tablet if you pay a little bit more.

This space more to the fact that direct tv which pays $1 billion per year for the rights to sunday ticket is looking for ways to keep subscribers excited and interested.

Plus, the obvious point is that when it comes to finding good retail partners for ea gamestop is one but amazon is king of the hill when you want to move products.

That is probably a good combination.

Thank you very much.

On the heels of earning a top safety rating for its model s sedan, tesla is now out some luxury vehicles in california.

That is next.

? this is" bloomberg west," streaming on your phone, your tablet, and bloomberg.com.

Tesla touted its star safety rating last recalling the electric vehicle the safest car on the road but the national highway tracy -- traffic administration said not so fast.

Here are the facts behind the safety test.

What is the real story?

The stock price of tesla is going crazy.

It is hitting a new high today.

It has been flying as the company has come out with all sorts of different metrics.

It is up 471% in this year.

For those who think i cannot say a good thing about tesla, a group called polk does a study of vehicle registrations in california and in the category of luxury sports cars, tesla came up number three behind the mercedes and the bmw will above the lexus and that's for the first half of this year.

The previous year, i think they sold dozen cars.

The percentage increase is not a fair comparison.

How much does that matter?

There are a bunch of other classes.

There are 16 different classes in the report i read today.

That is just one of those classes.

If you look at overall vehicle registrations for the state of california as a percentage of vehicles, tesla is less than one percent.

Bmw has four percent and toyota is the leader at 14%. -- 19%. break the safety rating situation.

Tesla came out and elon musk did interviews where he said this was a safe car.

And he said it was important to him.

They put out a press release that said the model ace achieves the best safety rating of any car ever tested.

They went on to say in that release that the national highway transportation safety administration does not publish a rating above five.

In the ratings, they got a 5.4. the national highway transportation safety administration came out with a release the same day with a picture of a tesla.

They went on to say that they strongly discouraged the use of potentially misleading words.

Isn't part of the problem also that the other luxury cars don't have the same equivalent ratings?

Any car that is driven on the u.s. highways made by a major manufacturer is tested and the ratings are available online.

There are many cars that have achieved a perfect five star rating.

In their analysis of the different kind of rating, they got to a 5.4. i talk to tesla today and they said they will send me the data to back this up.

They said they stand by their earlier statement.

Aren't crash test safety ratings different than general safety ratings?

The tesla is clearly a safe car.

It is not safer than a lot of other cars.

They don't like dealers or manufacturers just saying things using those phrases that tesla used.

Thank you.

We will be right back.

? welcome back.

Coming up on the late addition of " bloomberg west concha what are some of the biggest stars of of silicon valley doing to bring diversity to the tech world that is at 3:00 p.m. pacific and 6:00 p.m. eastern.

Bloomberg television is on the markets." let's get caught up on the markets.

We are looking at games across- the-board with the nasdaq far outperforming the s&p 500 and the dow jones industrial average.

I want to highlight third systems, the 3-d printer maker has been labeled a new buy at citigroup which forecast to billion dollar market will triple triple in the next 3.5 years.

Tms international, the pritzer family will by the steve miller debt will by the steve rejigged the steel mill for $3 billion in cash.

Amgen upped its head in the pursuit of cancer drugmaker onyx who agreed to the deal worth $10 billion.

Olivia sterns joins us with details.

It is not often you make -- you see a company make a $10 billion purchase on the stocks rise.

Amgen is the best performing stock in the s&p 500. they are securing their long- term growth because look at the portfolio.

This is a strong cancer portfolio and they've got this one drug for blood cancer that analysts think will be a block buster.

Analysts think you could bring in $3 billion by 2021. that is a huge amount of money for a drug that just got approved last year and they are checking it for other indicators.

Amgen is already got a fairly deep pipeline itself.

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

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