Game Makers Business Strategy: Taking Stock (07/16)

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July 16 (Bloomberg) -- On today's "Taking Stock," Pimm Fox helps you to think like a professional investor and discover the next "big thing." (Source: Bloomberg)

? this is "taking stock" for tuesday, july 16, 2013. i'm pimm fox.

It looks like marissa mayer's turnaround strategy at yahoo has had a bit of a speed bump.

Sales are lower than analysts estimated.

Also, we will bring you live coverage of the conference call with the chief executive in just a few moments.

Another company, another comeback story.

One of the world's largest toy makers is trying to put its business back together one block at a time.

And we will go gaming with the chief executive of paradox interactive.

The business of brand strategy games.

The 76 -- the nasdaq fell more than eight points.

Take a look at the 30-year . at some companies making headlines, let's go to my radio coast carol massar.

Drama for dell, the buyout plan could be delayed.

The company pose a committee might hold off.

The postponement would be about one week.

A coca-cola no match for the global economy.

Profit fell 4% last quarter, the second decline in a row hurt by economic weakness in china and europe.

Goldman sachs telling a different story, earnings double the estimates.

While we wait for word from the chief executive of yahoo, i am happy to be joined by cory johnson, joining us from san francisco.

Quarterly earnings per share, up 35 cents, the estimates were for 30 cents.

What is the business looking like right now.

Numbers, that is bad.

Profits were up despite of lower sales.

It is encouraging they get the mix a little bit right.

It might be one of the most disconcerting things.

They're falling at a double- digit rate year over year.

They will focus on search and there will focus on display advertising.

Again, nearly 14% decline.

I want to focus on the chief executive of yah hoo and she is speaking with analysts and shareholders now.

We continue to invest in our core business and launching new products.

It is the most productive in the history . we have made progress over the last year and a positive movement for cutting into q3. i have talked about chain reaction that will lead to growth.

The team can build inspiring products that can increase traffic.

It can ultimately translate into revenue.

People, products, traffic, revenue.

I discussed what will get us there.

The first was all about people and culture.

The second and current trend is all about executions around improving products and increasing traffic.

Let's come back to people at the moment.

Traffic has been in decline.

This is in 2012. seasonal peaks and valleys, there is a clear downward trend.

It became clear that the first milestone would be to get traffic going again.

Ideally reaching crossover from of previous year.

I am excited to announce we of done just that here is enhanced.

We achieved crossover in early june and are experiencing year over year growth.

Effectively erasing the declines of the last year.

This is pc and mobile traffic come by.

This has been a strong area of traffic growth for us.

This does not include tumblr or email users.

We simply count one page view despite the fact that the user may actually get multiple pages of information.

These measures are conservative.

To my knowledge, this growth is unprecedented.

We have achieved it just that.

I am proud of our team and we still have lots to go.

Achieving this was one of the hardest parts.

We did not know at had ever been done before.

We are just getting started.

Products are what drive traffic.

We have been increasing quality and speeding up the cadence of our releases.

At the end of q2, yahoo weather was the no.

1 ranked whether application in 23 countries with a 4.5 rating in the store, receiving the prestigious apple design award.

The visual beauty and ease of use that we are striving for and all of our products.

Since launch, daily users have increased by 150 present time.

-- 150%. following the december mail launches, we optimize mail for mobile and we launched the application for tablets.

This beautiful magazine-like reading experience has contributed to active users being up 120%. we are excited to announce an initiative to make more desirable addresses available.

Anyone can visit wishlist.yahoo.com see if the user name they want is available.

We have designed a yahoo app complete with integration for ios and android.

We sought a 55% increase in daily active users and 60% increase in time spent using the application.

Our engineering team integrated technology into the application with unprecedented speed.

Just four weeks following the acquisition.

At the beginning, we launched new products.

In both cases, it is early.

When i joined last year, the flickr community asked us to make it awesome again.

The new flickr puts photos front and center, bringing them to live in beautiful full resolution.

We also pulled off an engineering marvel, giving users one terabyte of space each.

You have been following marissa mayer's report on second quarter results as well as various products the company has introduced since she took over one year ago.

Cory johnson this from san francisco and from chicago, brian wong from the marketing services company.

Good to have you with us.

Let's start off talking about things like the weather and mail.

It is really clever, strategy she is going after, going after daily habits and making yahoo the forefront.

When you look at asia, they dominate the home page at the -- and the portal page.

By bringing something that you check every day, like the weather, they have the first moment of what you are checking in the morning and i find it very clever.

It is a beautiful application.

The first thing to check?

I look for email from you, pimm.

I think it is important to recognize that it looks like a different kind of conference call.

The optics are certainly better and you can see people, you can see the video that they want you to look at.

I know there are trying to spin me as opposed to the information i want to have.

There are good numbers and badge numbers.

They want to focus on product and maybe this helps.

Is this about an acquisition strategy?

They talk about people and have laid off 20% of the work force.

Not of the applications were anything recently acquired.

The billion dollars that have been spent in the last six months is worth seeing right now.

It probably ought to be at the heart of the strategy here.

We will see what they have to say in this call.

One of the things she was talking about is ad stream.

They have been warmly receiving it?

Dodge the future is going to be mobile advertising, and it is recorded that david is excited working with marissa.

The ability to monetize tumblr mobile traffic.

Instream is a step forward.

Looking ahead, again, her desire to own daily habits right now something really fascinating to me.

We look at the acquisitions that are smaller, i want to bring attention to those.

These are lesser-known acquisitions from the silicon valley community at the end of the founders personally.

The idea of being part of contact management and inbox stufff -- video content creation for families, she is bringing the brand that people would use every day.

We will continue the conversation with brian wong, we have more coming up at 6:00 pm eastern with cory johnson.

Coming up on taking stock, online gaming, what it means for advertisers and what it could mean for marissa mayer of yahoo.

That and more on "taking stock." ? ? making money on line, some know how to do with that some don't. yahoo has purchased 17 businesses cents marissa mayer to a over as chief executive.

What works and what does not?

We will talk to the founding of media leader and the executive of e-music.

Former president of ask jeeves.

And the digital executive of advertising marketing services company.

You heard a bit about marissa mayer'strategys for by businesses and products relevant to what the user wants, particularly on mobile.

It sounds easy, but how do you integrate new businesses into an existing company?

I think you have put your finger on one of the historic challenges.

They have made some great acquisitions in the past.

So many of them died on the vine and we have not known how to support them, integrate them, or leverage them.

The first thing she said is to leave them exactly as this.

That is the right thing to say, i suppose.

Potentially disgruntled users.

But why buy them if you are not going to work out how to leverage them?

Other acquisitions have been in mobile and community issues.

They are creating quite a nice buzz to attract interesting people.

This place is not really a has been any more, it might be going through the second corner.

A lot of the financial credit she is getting today has to do with decisions made a long time ago about the value of ali baba.

I would argue that the jury is out and she is talking about the right issues, but we have to see how you leverage those.

That has been their problem in the past.

Comment on the idea of advertising competitions.

There are many places advertisers can go on line.

What will make them different?

A lot of the money is usually spent in the top three with the bill have to take an irrelevance creating with a younger audience and bring that to the table.

Something they're able to sell.

There is other value that comes from one under and 25 million registered accounts.

The ability to cross pollinate user bases without affecting the product itself.

What you see her continue have to create products that own daily habits, their value proposition will have to be the ones coming after the fact, you see the mistakes face but is making along the way and he who doing something that is different that will catch the eye as an innovative product.

That is why they are attracting eyeballs from the media advertising company.

Dodge doesn't it cost less than advertising and in newspaper or magazine?

That is the allure of an advertiser.

If the margins collapsed because you were serving up ads and not making as much money, how is that a viable business strategy?

Subscriptions, if you can get them, are spectacular.

Your point about the declining price of inventory , particularly mobile, it started at a high level -- at a relatively low level.

The exciting work in advertising, i think, those looking at how we advertise across channels and platforms.

And we recognize the millennium lifestyle.

Tv is less important but still there.

You have the tablet completely changing the world.

You have to be on all the different platforms in an integrated fashion.

They have some of those pieces in who will see how effectively they can integrate into the lifestyle because that is where the power is.

Their advertising went up hundreds of%. the early days, just to see if they can really capture.

They are getting more traffic which is fantastic.

We will continue the conversation.

I want to thank brian for joining us, the executive from chicago.

Who will introduce you to the chief executive of one of the biggest video game makers, paradox interactive that lets you take on the world of demons.

? this is "taking stock" on bloomberg.

I'm pimm fox.

The saga of the oil continues, the company coming out with a statement after the close of trading today.

Cristina has the details.

This is the story that keeps on giving, doesn't it?

Some people hope it stops sometime soon, a special committee saying that their new shareholders can go for the transaction saying that the proposal which cannot be accepted by the committee because the financing around at a certain strings attached and they don't believe that he can ultimately pull the deal off.

They're not giving the special committee of alternative if his deal does get voted down, so it seems to be a statement from the special committee in support of michael and silver lake.

The vote that comes this thursday, this is on the deal that michael dell and silver lake have put together to take the company private.

It is not whether they want his proposal as opposed to the michael del proposal?

That is the point that the special committee is making.

First he has to vote his director in to the board and then they can consummate a transaction like the one he proposes.

I want to thank you, christina, and we will tell you about lego and how it came out of a financial hole.

? ? this is "taking stock" on bloomberg.

I'm pimm fox.

For a look at today's headlines, let's go to bottom line anchor mark crumpton.

Edward snowden is said to have agreed to russia oppose the temporary asylum.

The lawyer said that he confirmed to me personally that he will accept the conditions of stopping anti-u.s. state your.

It does not provide the government with the ability to break encryption or the actual encryption keys to enable agencies to view user data and communications.

The guardian reported microsoft helped the nsa get around the company's's inscriptions, citing documents obtained by the newspaper.

I will be speaking with the equity and policy strategist.

Bottom line is at 7:00 p.m. eastern at 4:00 p.m. pacific.

Will to see you then.

Results of the 1-year anniversary of the chief executive.

For more on how major media companies can profit, i'm joined by the chief executive of paradox interactive joining us from loss angeles.

Adam is the chief executive.

Explain for people, what is a paradox interactive?

What has your challenged ben?

-- challenge been?

A swedish publisher active with hard-core games, the challenge has been 2 for the visit from traditional retail distribution to a complete model.

People actually buying the game's hottest of playing them on line against each other or themselves?

Going to the store and picking up a copy which is turning into something that people just did five or six years ago.

It is probably 95% digital with pc gaming.

The transformation were you buy a piece of software or loaded particular game as opposed to everything meeting a service on demand, is that something that game companies as well as certain businesses are doing?

If you loaded the data showing that pc sales are down dramatically, but mobil and have live sales are up dramatically, it tells you this migration away from physical product where i have a discount, that is winning rapidly.

Access anywhere is not an expected experience.

I think is happening very quickly.

What are you doing at paradox interactive to take advantage of this?

Some games are very rich in detail, grand strategy games.

One of the things is that we have been a very focused company with a very dedicated audiences across the world.

It has not necessarily been a big thing because retail was previously dominated by ea and activision.

People that like our games can find and apply them.

A number of games that can be presented online is bigger, it is much richer than guy -- games to find in retail.

We can find our target audience while the retail channel can be dominated by the giants.

You get to mold of the games based on feedback you get from users?

Yes, we can see within 24 hours what games are working and what games are not working.

Other channels, for example.

We gather customer data based on the feedback that we get.

We make the games in conjunction with what the customer expects them to be.

You're talking about acquisitions, $1.1 billion.

The feedback you get from users, is that what is going to guide someone likes marissa mayer?

Even the product that has been developed and some of the buzz, i come back to why i would go there again and again.

I know why i go to google.

We are very focused and we have one experienced.

We know them.

I do not know who their audience is.

It is hard to learn from an amorphous audience how you're going to take their experience or leverage that.

What do they tell you?

Academy, he i started using the engines very early.

To me, it means more ads on the front page than anything else.

Trying to be a media channel instead of a search engine.

I am not really sure where they're heading.

Does this mean advertisers are not going to be sure where they're heading?

Absolutely.

You see that in the numbers.

There is a huge increase, a number of people coming to the site.

Advertisers are very smart about where their audience is, you were expecting $30 million worth of sales this year?

That's right.

Do you know who is using your game?

We know fairly well and who was playing our games.

We have a wide variety of games in the portfolio as well.

We have an idea of who is playing one game and why.

Our growth comes from customers we already know and from new games trying to reach a new audience.

We will continue the conversation about the world of online businesses and how to make money with mr.

Wester and adam klein.

This is "taking stock" on bloomberg.

? ? lego is one of the biggest toymakers and one of the best known.

It was on the brink of bankruptcy.

So how did they turn bricks and a box while building an online franchise?

David robertson detailed the transformation in his new book called a brick by brick.

He joins us now and we have the paradox interactive chief executive joining us from l.a.. and we have atom, the founder and chief executive, the chief operating officer of asked jesus.

Why did you write this book?

What was going on?

I study innovation management, how to allow companies to become more consistently innovative.

It was going to be illustrated by a case study from a different company.

And i saw a company that was so sophisticated with the way they managed innovation that i could say everything i wanted to say.

I could use a different toy for each chapter.

Based in denmark and family alone, it may all the pieces.

But in the world changed, this thing called the internet.

There is a bad time in 1999 where they began to wonder if it was over.

They began to innovate and from 1999 to 2002, they tried everything they could think of.

Innovation kind of went too far.

It almost put them out of business.

They were this close to going bankrupt.

An individual strategy?

It was a number of things.

There were so busy thinking outside the box, it almost put them out of business.

Inside the box, there was a lot of money there.

They went to the traditional police stations and fire trucks and began to make a lot of money.

You were challenged to come in and create a great play experience.

Your challenged to come and create a great police station and fire truck and not to use any peace that you want, but a reduced pallet where they can reduce lots of different toy sets.

Comment on the topic of the online franchise and how the challenge is to turn something that is the physical to something that is digital.

I can only say that the franchise obviously has gained a lot from going into the gaming world as well.

A look at the lego star wars games and other franchises that you see on different platforms and different franchises.

I think the star wars franchise itself is over 30 million copies.

That has definitely helped build of the franchise bigger than it used to be when it was only the physical bricks.

The idea of turning a toy from something that is physical and tangible to our brand and expanding on line.

The intellectual property behind it, they have an interesting dilemma going on line.

They had no guns or tanks, and nothing that shoots or kills, anything of that nature.

A lot of games on-line are things of that nature to have had to create a different creative experience that allows you to have a story at the back story and a sense of intellectual property.

They have been able to find their footing on that increasingly.

They have to remain in back, and going back to what they know, the properties that they know, that is a strong place to go.

But they did lose their footing for quite awhile.

How much success can be tied to new markets?

Some, but i think the same toys are doing so well in the traditional markets, -- what about the customers?

Age groups, parents, so on.

It is more of a boy toy, although the lego stuff like the pearly pink and purple bricks have sold twice what they expected.

They also have movies.

This is interesting because they were convinced it was going to replace the brick.

They found that increased the demand for the plastic brick.

When people saw the games, when they wanted the physical toll is more, not less.

There was no destruction going on at all.

Was there an internal confrontation to change the manufacturing sites?

There was a big controversy over that because when they suffer the financial crisis in or close to bankruptcy, they outsourced production and moved out of denmark to the czech republic.

They had to bring that back in house and are still making bricks, but also making them in the czech republic and mexico and other places.

How they rewrote the rules of innovation and conquered the global toy industry.

I want to thank you, friedrichs from paradox interactive and the founder and chief executive of media leader.

For a look at what wall street has on the agenda for tomorrow, we have the bloomberg three reports.

Ben bernanke examines the policy report before the house financial services committee has their release the book.

There will hold a hearing on the voting rights act, the senate judiciary committee will talk about how to respond to the ruling which struck down a core part of a law protecting minority voters.

To get u.s. housing starts for a second month in june.

And we'll get earnings from bank of america, and more.

Back to you.

What you need to know ahead of tomorrow's trading, including earnings and the trip to capitol hill.

Details a had a. ? my next guest says the market is adapting to paper riotous.

-- paper-itis.

Helping to manage about $175 billion and from irving california, the global market strategist for jpmorgan asset manager and global market managing for under billion dollars and helping every day to figure out what is going on in the world.

You don't manage anything.

Not even close.

Besides giving you an x for ruining the english language, what is a paper?

-- paper-itis?

The end of the discussion.

We're calling quantitative easing for perpetuity and it could go on forever.

What he did was send the test charge of the modern -- through the water.

Setting up giving what i think would be to the next chairperson of the fed so they can respond, the data is mixed.

We might see the fed will back a little bit but it is premature to say that it is going to happen.

Is it still up in the air?

Walking a very fine line, telling everybody that economic momentum has picked up.

You're seeing the labour market improve at the margin, and the housing data is getting better and better.

It justifies pulling back.

We are not a place yet were it justifies tightening the interest rates.

Who here more that message.

We need to separate those discussions.

They will be hitting -- they have floored it.

They go from 85 billion come on.

-- a month.

Raising rates would be hitting the brakes and that will be the second half of 2015. what asset class does well?

I think the bond market overreacted, and we think in normalization, two and half or 2.8 ha makes sense.

But they are done hitting be accelerator.

What is a good asset class?

If you look at the small cap space, the market right now, it is roughly 1000. very defensive.

Even in equity, favoring more bond-like dividend yields and assets.

But look at u.s. equities and if you have a little bit more risk appetite, that might be more.

Do agree that is fairly valued?

I think markets are approaching fair value and we are getting closer to that.

Stocks are incredibly cheap and obviously valuations have moved from where we were last year.

In a rising rate environment, understanding that we are pulling back because the economy is improving, i suspect equimark its and u.s. equities are probably going to continue to thrive.

They're saying that they might start to taper or ease off on the gas.

If inflation is the cause of rising rate environment, that would be a negative.

If a sign of health is dialing back the medication, that may not be such a bad thing.

He there are a couple reasons.

The economy is doing better in europe is doing quite well.

Not just the least of lee, we might be getting a little good looking in this environment.

What about buying emerging markets?

You can't ignore the metrics trading above 1.4, which has historically been very attractive.

When you got a little bit deeper, valuations across the different countries are over the place.

China and russia are weighing down the emerging market index.

And you have indonesia and mexico.

Of think we can paint a emerging markets with the same brush.

He of the be very selective with where your allocating capital.

Joining us from jpmorgan asset management.

And of course, my thanks to my coast.

56 minutes past the hour, time for on the market where we look at trading activity.

The s&p 500 posting a decline today, and we will tell you about baidu moving higher today, on prospects of the $2 billion acquisition.

Tomorrow, three former nfl players who made a career on wall street.

? .

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

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