Google’s Winter Wonderlabs: Bloomberg West (11/18)

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Nov. 18 (Bloomberg) -- Full episode of "Bloomberg West." Guests: Chertoff Group Managing Director Brian White; China Market Research Managing Director Shaun Rein; Bloomberg Contributing Editor Paul Kedrosky and Bloomberg’s Ari Levy. (Source: Bloomberg)

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

I'm cory johnson, in for him only chang.

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

Let's get straight to the rundown.

Google opens six retail locations.

They are calling them winter wonderland -- winter wonderlab.


Ceo marissa mayer said her company will encrypt all the information that flows between its data centers.

Doesn't really mean your personal data will be safe from government snooping?

Bloomberg news has just learned that drop boxes looking for a new round of funding of and $8 billion valuation.

Is the cloud storage service actually worth that much?

There are apple stores, microsoft stores, now how about google showrooms?

They're opening retail location in six u.s. cities.

They are calling them winter wonderlabs.

They will feature plenty of games and a large snow globe where customers can take photos of themselves.

The one thing they won't feature is a cash register.

Customers will still have to buy the items online.

Joining us is paul could draw ski -- paul kedrosky.

I remember gateway stores, which was the end of the gateway computing line.

Is this a big mistake?

Does it even matter?

It doesn't even matter, because a bunch of things going on.

There is a show room phenomenon where for a while, the diversity of all this, we saw this at the beginning with the arrival of the apple stores and also things like best buy.

The reason for things like best buy disappearing is because increasingly, people would go in the show room and look at stuff, and then pull out their phone and buy it from amazon or whatever.

Now things are kind of turning around again.

I think this is the trend of the future, stores will selectively have a physical presence, and for the most part just be an electronic phenomenon.

For the most part it happens online.

I think it is inevitable.

I think the way google does this stuff is just weirdly embarrassing.

Is like an evil genius planning his next entry into paramus.

It's like they have some strange google survey they ran for jamming together as many cliches as possible.

The principle of having showrooms, especially in a world where doors like best buy or disappearing, it makes more sense than it did back in the day of the date way stores.

-- gateway stores.

Hh gregg moved into the old circuit city stores and has seen declining sales.

Manufacturers in the past seemed always unable to resist the temptation of flooding the channel with stuff they couldn't sell, and then offer ridiculous financing because nobody would buy the stuff.

It inevitably lead to big disasters because they were inclined to manage channel inventory.

Two-putted even more bluntly, there is an incredible temptation to treat it as your own little play toy that you can move toward the trailing end of a fiscal quarter.

One of the great things about having economic and ownership distance between you as a product manufacturer and you as a supplier was to go in and go so far to load the channel.

Now the temptation can become irresistible.

You have a new data point specifically with respect to google, but with lots of these other companies as well that will have to track.

They now have the ability to load a channel with inventory that they never had before.

I wonder if this might be a quarter of all quarters where we will see a lot of hijinks.

We really have declining hardware sales from ibm, others with declining sales in the quarter, oracle companies are doing tons of acquisitions.

I wonder if this is a quarter when people really want to keep an eye out on just how well the sellthrough is, just not the salience.

There is no question, we were talking about how the shutdown is having an impact on the employment data.

It had a huge impact on technology as evidenced by cisco.

I think you will see it from companies like google.

People forget how dependent the entire sector is on the marketplace.

Pull up google search, the main page on an iphone or android device and you will see the screens increasing.

More so than six months ago, populated by ads.

. they're trying to push revenues up in the current quarter.

Interesting stuff.

Thank you very much, paul kedrosky.

Coming up, our bitcoins a legitimate currency?

Congress asked that question today on capitol hill.

We will bring you both sides of the argument about this nonexistent digital currency.

? i'm cory johnson.

This is bloomberg west.

The third-quarter earnings are out and it shows the acquisition spree taking a big bite out of the bottom line.

A $24 million loss in the quarter.

The company's free cash flow is falling on a year-over-year basis.

Even as the company shells up more than $2.6 billion or acquisitions this year him a most notably the purchase of exact target in july.


Ceo marissa mayer will be one of the keynote speakers and she is speaking out about the effort to protect user data.

Today she announced yahoo!

Will encrypt all the data flowing between its data centers.

According to her blog post, yahoo!

Will encrypt all data flowing to and from yahoo!

By the end of 2014. the question, can the company really keep the data on the inside?

Brian, it's good to see you.

This is really interesting because in some ways this is becoming an arms race between american businesses and the government.

Do the american businesses have a chance?

Usually i would say does the government have a chance, but i wonder, who is the leader?

What they're trying to do is say are set up is more secure and you can trust us.

The second thing, they are dealing with the market pressure and they are seeing some real impact to foreign market sales based on alleged cooperation with the nsa.

The underlying thing that is being leaked, i don't think anyone has questioned the stuff that edward snowden has leaked, but the underlying information -- and mark zuckerberg talked about this at the tech conference.

Telling international users that only u.s. users are safe does not help them grow international business.

Is that a concern in the world of government security?

I think it is, but let's step back and look at what this is.

What has come out in the press is that the nsa has determined a way to take data in transit, data moving between centers and between the wire between me and the back end server.

What yahoo!

In google and others are announcing is that they are moving forward to secure those weak vulnerabilities.

For us, that is a net positive.

Right now we have law in this country that governs the distinction between the u.s. person and international person.

Is there a sense within -- i wonder even in the intelligence community if they factor in the concern of u.s. business in relation to making decisions about privacy or decisions about going after data.

This isn't going after data anymore.

It's about gathering data in the pool so later when you find out data you can look in the pool.

When data is produced, the nsa need that information to ascertain what may be a potential threat to the nation.

Now the issue is, what are we going to do about that?

Are we going to put more safeguards in place?

Congress may legislate.

It is important with what they do about procuring this information.

As it regards the nsa thinking about american business interest, that is not part of an intelligence analyst's job.

An important part of the job is to be conscious of the limits of what they can do.

There has always been a strong role for understanding u.s. global economy.

Does the nsa really think about or care about the impact on the u.s. business world?

What is alleged the u.s. does is not different than what other nations are doing to us and to our businesses.

So this is a two-way street.

Intelligence gathering happens on both sides.

You have talked about off- camera, the enormous effort toward building up the big data center in utah, that has its own cooling units and electrical facility, can any other country even come close to that?

That's what makes the u.s. defense industry the world's largest and provides the security umbrella that the rest of the world enjoys.

As a u.s. citizen, obviously my view is that i would like to see that continue.

I do think some on his questions are being raised and they deserve appropriate answers.

It is also important to determine what is truth and what is fiction here.

There is a lot of fiction coming out of this instead of the understanding that the nsa, of all agencies, takes the security of u.s. information very, very seriously.

Companies want to bill a say him and request they have gotten so they can give the impression it is not that big a deal.

I appreciate your time, brian white.

Now to washington, where lawmakers debated the legitimacy of bitcoin today.

The virtual currency has been increasing in value.

It is now the subject of a first-ever congressional hearing . megan hughes is following the action.

What are the takeaways in congress today on bitcoin?

This was a strange one.

It was really a hearing of contradictions.

You had two hearings in two days, so it is clear that bitcoin is on the agenda.

It is something that lawmakers can no longer ignore.

At the same time, the chairman was the only lawmaker to show up today.

Certainly a sign that bitcoin isn't necessarily at the top of the legislative agenda.

Contradiction number two came from bitcoin foundation council.

He argued the lack of central authority is one of the things that makes bitcoin what it is.

Here is his response to who and where is the bitcoin founder.

Take a listen.

It is the pseudonym for the creator who developed the bitcoin protocol and released the original white paper for the bitcoin protocol into the world, in addition to the original code base.

It was then open sourced to the entire community.

This person or group of people has since left the scene, as it were.

The committee chairman said they found the founder's anonymity strange.

At one point he speculated that it was al gore.

Certainly an indicator that we are in uncharted territory here in congress.

Not only did he invent the internet, he invented bitcoin.

Lawn for it -- as law- enforcement concerned about this?

We talk about it being used to buy drugs or steroids or other things you cannot buy it legally with cash?

That's exactly right.

There certainly concern, but i would not say that are anti- bitcoin.

Today we heard from the treasury department, department of justice, the secret service him and they do acknowledge bitcoin is being used by criminals, largely because of the anonymity we are talking about.

Last month, the government shut down the silk road website.

They aren't knowledge and the benefits.

One of the big questions is who is the regulator for bitcoin?

That really hasn't been answered.

There are about eight different agencies that have some different kind of impact from the sec to the irs.

That will be one of the things we are debating in washington for some time.

One quick question, is it like there is a new feed to my can go after?

-- a new fiefdom i can go after?

They did not say they were pushing for any new rules.

They say what we have on the books already in terms of money laundering and going after criminal activities, they feel like they have the latitude within the laws that are hurriedly on the books.

Right now we are not seeing any -- that are already on the books.

Thank you very much.

Are you ready for some football?

We will go behind the scenes of espn, next.

? welcome back.

I'm cory johnson.

Catch the early edition at 1:00 on the east coast.

Dropbox plans to raise $250 million in a new round of funding.

It values the company at $8 billion, according to two people with knowledge of the company.

It has already raised $67 million.

First of all, what is dropbox?

The easiest way to think about it is, it is a way for you to store documents and access them anywhere else through the cloud.

Whether it is a word document or an xl spreadsheet or a folio rv -- a photo or video, you don't have to save it to a flash right.

You can just save it up in the cloud.

$8 billion for these guys?

What makes anyone think they are worth that?

A lot of people have been trying to do this forever, and there was just no one that actually broke out.

There was no good service for this so the founder created one that was super easy to work and -- super easy to use and it works.

A lot of companies have tried this.

I am thinking of apple's famous struggles with, and now with icloud.

Drew has talked about apple and google, both have expressed interest, and with both those companies, you're talking about silos.

There have been historically, there has been interest, but they were valued at $4 billion two years ago.

You think about the number of companies who could afford to pay for them, and certainly now at $8 billion, and you put a multiple on that if you are an investor, there are not that many companies out there that have that kind of cash.

They are painting themselves into a go public strategy because there might not be another exit out there unless someone like microsoft or google or apple would come in and want to buy them.

In the recent history of companies going oblique in the double-digit billion, you had google back in 2004. then you had facebook, which was not such a success.

You had google, you had facebook, groupon and zynga were in theirre, somewhere between $7 billion and $12 billion.

After google there was a long time when no one could go public in double-digit value and have the value increase.

So someone say dropbox is the next big ipo.

If you were to be bullish at this valuation, you have to believe that, or the investment makes no sense.

What does this say to the competitors?

There is a land grab going on right now.

The issue is you have to get into the enterprise and get mass usage.

Getting i.t. people into this am for them to have their entire workforce use it, that is really where the prize is.

Companies are raising tons of money to try to get that.

As aly baba gets closer to its ipo, it could be bigger than facebook.

We will look at the ceo's rise from hotel desk clerk to ceo, next on "bloomberg west." ? you're watching bloomberg west, where we focus on innovation, technology, and the future of business.

Let's get straight to your bloomberg top headlines.

Twitter's ability to add more users could be giving pause to investors.

There is concern that twitter does not have the same potential to disband its user base as rivals like facebook and linkedin.

Google and microsoft have agreed to change their search our rhythm to's help stop the spread of online child pornography.

Chairman eric schmidt said the company will roll out the changes in 150 languages and will show warnings to people searching for a illegal material.

Apple will get another chance to win a permanent sales ban on some samsung products.

A federal appeals court reversed decision of a lower court judge in oregon to consider imposing a permanent ban on older samsung devices that were found to infringe on apple's patents.

Such as multitouch technology that makes the product you need.

Now to alibaba.

It broke a sales record last week selling $5.5 billion in a single day for china's holiday.

The man at the helm was once at the helm of a holiday inn check- in desk.

For more on his history, the managing director of china market research joins us.

The story of alibaba is wonderful and weird.

Tell us about the guy who is running the company now.

Alibaba is one of the best run companies in the world, extremely innovative and working in a very difficult environment where the government really cracked down on a lot of the e- commerce and other regulatory issues.

The ceo started a company over 10 years ago that was actually acquired by alibaba and he was there from the early days.

Now it is a company that some people think could be worth $190 billion when it ipo's, because it has about the same revenue as facebook, but double the income.

It is a very popular company and will continue to grow.

I'm reading the wonderful book about amazon.

Jeff bezos in the early days said there is a big storm coming and we have to ride it.

I wonder if that is what the aly balboaalibaba story is.

It's not about just being smart, it's about being lucky.

Right now, alibaba has been capturing the shift from chinese consumers from high savings rates to wanting to go out and buy.

Over $1 billion of u.s. sales in the first hour that alibaba when online.

We expect e-commerce to continue to grow 50% year on year.

It is being driven not just because consumers want cheap products and better selection than what is in brick-and-mortar stores, but it is being driven by pollution.

The pollution numbers in china have been so bad that consumers don't want to go outside to go shopping anymore.

That is why department store sales are quite down.

People want to buy e-commerce.

That is why we are very bullish on e-commerce in china.

They have been able to build trust with consumers and become the place for retail companies to sell their products.

Pollution is driving e- commerce sales?

That is crazy.

I hadn't heard that.

It is important for investors to know that in january of this year, the pollution numbers in beijing were like nothing i have ever seen.

20 times more toxic than what the world health organization says is livable.

Last year we saw the chinese handset maker and lenovo all start selling cheap, portable smartphones.

Middle-class chinese started downloading pollution apps.

For the first time ever they were able to quantify just how bad the pollution is.

I am here visiting in new york and i feel like it is crystal leader blue sky.

The pollution is so bad, it is driving people to buy online.

As you go around, today a lot of news is coming out of china, and i wonder if the notion of the prospects for chinese business have changed with the relaxation of the one child policy.

The one child policy, that is a great point.

I don't think that will increase as many babies.

They say the cost of raising a child in china is too expensive.

As china moves from heavy investment to more services, women are getting the better jobs.

There are more women than men getting a university education in china.

A lot of them have told us they don't want to leave the workforce to have two kids.

We expect there will be about 5 million new births in that next couple of years in china.

That will be really good for someone like the chinese domestic diaper chain.

Some of the facial washes.

It is something the consumer should look at, definitely the consumption story and the children's story will continue to grow because of the forms we have seen from the third plenum in china.

Thank you very much.

When we return, we will take you behind the scenes at espn's monday night football.

You can watch a streaming on your tablet, your phone, and at

? welcome back to bloomberg west.

I'm cory johnson.

Sales of the playstation for all to a fast start.

The company says more than one million of the updated consoles will be sold in the first 24 hours.

Earlier i spoke with the founder and ceo of digital world research.

He is an expert on the videogame business.

I started by asking about the playstation sale numbers.

I think it pretty much went to plan for sony.

A are happy that all the pre- orders were there.

The million units went out the door ahead of the launch of the xbox one later this week.

Did you have expectations around the numbers?

Is it a function of the sales, or is it not that simple?

The talked about over a million pre-orders this summer, so coming in with a million units the first weekend is generally expected.

It is a strong number.

We have not seen this historically on the first day or two of a console launch.

It is off to a good start.

Now one of the keys is to keep the shipments flowing.

Only through black friday but through the rest of the holiday season and into 2014. xbox one launches thursday night.

What are you looking for their, and does it give you a different kind of context?

I think it is scripted as plan for now.

With the microsoft launch thursday night, it is mainly up pr and marketing war right now, trying to position the box to the core gaming market now.

Microsoft is coming out talking about gaming.

Down the road we will see differentiation with things like using skype on xbox one.

No surprises yet so for this week.

It is intriguing the way microsoft is looking at their device as a lot more than a gaming console.

The way they announced it when they first announced the product, they talked about all the things he could do without a big focus on gaming.

Then at the gaming conference, they said it is hard-core gamer.

Have we seen this in the past?

When the first playstation launch, it was with a dvd player.

The playstation four is shaping up to be a gaming device that does entertainment, and the xbox one longer-term will be an entertainment device that does do gaming.

Gaming is in the heart of this, and when you build your marketing pyramid for your user base, you have to get the gaming group first.

By now it is games, games, games, but it will get broader after the holiday season.

What do you make of the game makers and where they stack their bets?

I don't know if someone is reporting more chips on one side of things.

I was in vegas this week so i am thinking about it bets.

Why not?

We're talking about an install base of 10 million by next year.

It could be in the high teens by the end of next year.

We have seen the major publishers make gains from both lat forms.

There have not been a lot of big checks written for platform exclusive games yet.

For example grand theft auto would only be on the sony console for many years.

If you are a game publisher, you have to think about other platforms, too.

It is not just emily making it for microsoft or sony.

-- not simply making it for microsoft or sony.

I wonder how hard it is to write a cross lat forms.

Has that gotten easier, or has the complexity of the consoles made it harder?

It is a complex question.

I think the answer is fairly straightforward.

The architecture of the playstation four has been widely hailed as being much easier to create games for.

The xbox one is a little more complex, from what we have heard from developers.

Going a cross-platform means taking core code.

You can make one set of the game and spit out different versions for the playstation four and the xbox one.

Different technology is helping unify all the different platforms to make it easier for the developers.

Otherwise the cost would skyrocket if you wanted to make units for all the different platforms.

Now to our series "act in the game or co--- >"tech in the game." 105 billion dollars to showcase each monday night game.

The question remains, what goes into such a production?

Jon erlichman went behind the scenes with espn.

Check this out.

It's nearly game time at new jersey's metlife stadium.

Week seven of the nfl season and the espn crew has rolled into town.

Monday night football is a big deal.

Everybody is watching.

The monday night football coach handles everything from control room strategy to keeping the show stars linked.

Why don't you guys call the plays?

Monday night football may be the crown jewel of the espn empire.

The network pays a whopping $1.8 billion a year for the rights to the weekly broadcast.

That works out to more than $105 million per game.

To get bank for its box come in espn lines up in him he wording -- in me were the -- emmy worthy production.

By the season plus end, i will travel nearly 20,000 miles, crisscrossing the country.

Even with lackluster on-field performance in week seven, the game attracted an audience of 13.2 million viewers.

A reminder of how valuable primetime games can be.

We recognize that we are the current caretakers of a 44 year property.

One day it will be gone.

We never lose sight of that.

Jon erlichman, bloomberg.

Coming up tomorrow, italy chang hasn't inside look at the new high-tech stadium being built right in the heart of silicon valley.

Every day this week on bloomberg west.

Survey monkey is getting in the cloud business.

Up next, we talk to the ceo about how the company is integrating surveys and enterprise.

You can also watch a streaming on your tablet, foam, -- phone and at

? on cory johnson.

This is "bloomberg west." survey monkey has launch an enterprise version of its software.

The goal is to help businesses get more data to their audiences.

Survey monkey will provide a centralized way for enterprise business customers like aetna, the new york giants, to help manage and analyze surveys and consumer responses.

I spoke with the ceo, dave goldberg, about how survey monkey is attracting customers to join the push to big business.

We have a bunch of customers that came to us and signed up.

We signed up salesforce as well as a customer and we are launching the product today.

We have always had lots of customers inside, but they have all been individual consumers.

Today we are allowing people to sign up as organizations, universities, schools, etc.

What do they want from a survey that they were not getting before?

They want to control features , control of the data, consolidate billing, a lot of those things, and they want collaboration among the people who have accounts.

They were not really able to talk to each other, so it is control of collaboration at the corporate level.

Is there data that might work cross survey?

What you want is, you might want to group -- group of people to run the same survey questions and then they want their own questions.

Each individual in marketing or hr could run their survey and you want to aggregate some of that data back.

Questions across the whole group , like maybe an employee survey, but then some questions might be specific to employees in a particular department or region of the company, etc.

So you want to have control of the end-user.

This is partly about giving control at the end-user level but having some of the data be able to flow back to a centralized base.

Why do this now?

We had planned to do this for a long time.

We had to rebuild our technology architecture.

To be able to support -- we have about 280 people now.

At first we had 12. is there something about -- it is not so much competition.

It is more like the customers were asking us for this.

It would make it a lot easier for us to use it more broadly inside the organization if we had these features and were able to have corporate control of the data.

Right now they sign up and i on the data, even if they're using it for work purposes.

It is more comfortable having an enterprise account and finance one bill as opposed to on everyone's expense report.

A lot of those pain points for the end-user, this should make it easier for them to do their job.

Not to be's to suite two survey monkey, -- not to be to sweet.

It is changing the way people understand business.

We talked about big data.

People generally think about a lot of explicit data, things that are being collected as you do things.

Surveys give you the why.

Implicit data is the what, but it doesn't explain why.

It combines the questions and answers in scale with the implicit data.

That was the survey monkey ceo, dave goldberg.

Now it is time for the bwest byte.

I have no idea what it is.

I like a surprise.

13. are you going to tell us what it means?

13 is the number of countries that microsoft is going to be launching the xbox one in on friday, compared to sony, how many countries?

Two, canada and the u.s.. but they will be doing a european launch on the 29, which is our black friday.

They will do 21 more countries and expand to 32 by the end of the year.

Japan was so important in the launch of the original playstation.

The cost of a playstation was less than the cost of a dvd player.

It also shows that microsoft is not superstitious.

You can get the latest headlines at the top of the hour on

We will see you tomorrow right here on "bloomberg west." ? .

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


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