Zuckerberg on Earnings: Taking Stock (07/24)

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July 24 (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 wednesday, july 20 4, 2013. facebook the ultimate social networking site hosting earnings, besting analyst estimates.

We will talk to the person behind the movie that chronicled mark zuckerberg's success.

And we will talk to the chief executive about connecting travelers across the country and now across the board.

We will also gather around the dinner table with the editor-in- chief of food and wine magazine.

We will find out what the latest customer trends are in the industry.

All that and more over the next hour.

Let's take stock of today's market action.

The dow jones industrial average losing 25 points.

A drop of .1 of 1%. the s&p loses and the nasdaq a sickly unchanged.

Let's take a look at the on market.

The 10-year, 2.5. the long bond at 6.5%. now for closer of -- look at individual companies let's go to olivia sterns.

Facebook shares are surging.

The company reporting profit that exceeded estimates.

It lured more advertisers to mumble services.

Visa posted a fiscal third- quarter profit that beat analyst rejections.

The world's largest in card network saw a decline in global spending on credit and debit cards.

On the downside the stands posted second-quarter results.

Wenning said singapore and macau came in lower than projected.

Those are the top stories for this hour.

Back to you.

Thank you very much, olivia sterns.

Facebook's airship and how how the leading brands are using facebook.

From boston we have ben meserich.

-- mezrich.

And i am joined by the chief executive of the company whose clients include aol, microsoft, and pepsi.

He is also the cofounder of simply measured.

A report on facebook activity, among the top 100 brands in the world.

We have jon erlichman.

I want to begin with you, jon.

Why do you think these surges -- shares are surging question g? they were in a position to say i told you so.

One of the realities is over the last year especially since the ipo, they have spent time working on different ad products.

They are -- there are a bunch of ways that you can find more effective at.

Whether they come right in front of you or more relevant to you and they spend a lot of time working on that.

They have spent a lot of time shifting the advertising focus from traditional pc's to phones and tablets.

You see that reflected in these numbers.

At the right trend for them -- that is the right trend for them to beef following.

Their active users on the mobile version of facebook were up more than 50% or is the overall usage of facebook users -- the user numbers was up 20% year-over- year.

That is the big heart of the story.

I'm wondering if you could give us an anecdote or story that highlights mark zuckerberg 's credibility at the company -- now that the company has posted these results.

At 19 cents a share.

He is not sweating as much anymore.

He has grown up and i feel like he is steering it in the right direction.

He has aimed directly at mobile and the whole instagram thing was a brilliant move and it will move in that direction with video.

He is definitely a different guy than when i wrote about him.

He is not the sweaty, dirty guide trying to make girls -- nerdy guy trying to meet girls.

He is the cofounder of facebook and speaking about the social network's earnings on the conference call.

And achieved great results is well.

One of the big changes we want to make in the world over the next five or 10 years?

Now that we have connected a billion people, what are the next ambitions question mark there are three main goals.

Connect everyone, understand the world, and help build a knowledge economy.

Connecting everyone is about growing our community and reaching the next 5 billion people.

Our mission is to give all people the power to share and make the world more open and connected and that means everyone, not just people in developed countries.

Most people do not have smartphones or data access but they want to be connected connected.

We are focused on making this possible while also strengthening engagement within our committee.

Understanding the world is about helping people share not just day-to-day updates but also billing up long-term knowledge about the world and what people are interested in and which restaurants are good and which hotels your friends have stayed at.

We should be able to build intelligence services that help your user network to answer questions that no other service can.

I want to lead our community to power this intelligence.

Building the knowledge economy is about helping people create companies and jobs using information.

The way i see our product we are not just ringing a strong modernization engine, we are creating tools to enable new growth and jobs and businesses.

With the larger economic shift based on knowledge and information.

I'm proud of the work we are doing here to help create apps and help local businesses find customers and help great brands tell their stories create let's talk about the area -- the progress we have made.

The facebook community has grown steadily this quarter adding 45 million new monthly active and the number of monthly active is steady or increasing across demographics.

One thing that surprised me is i have expected our ratio of daily actives to monthly actives to decrease.

The office -- opposite has been true.

61% of monthly actives ordered daily actives.

The most penetrating markets like the u.s., more than 70% of our monthly actives use our services daily.

More than 700 million people worldwide use this book daily as of today.

As more social services get created, one question is how that affects the sharing time that people spend on facebook.

You could naiàvely assume that more new services means people spend less time but that is not happening.

People on average are spending more time on facebook than ever before.

It is possible because of the market expanding due to mobile, as time for person increases, matt -- maybe our market share could decrease.

According to third-party metrics, share and time spent in the u.s. is steady or increasing.

It is steady or increasing everywhere else as well, we believe.

This makes sense to me because facebook helps maintain your real identity and relationships which are universal needs.

If we execute well we have a shot at growing the amount of time that people use on facebook.

One specific demographic i want to address is u.s. teens.

There has been a lot of speculation and reporting that fewer teens are using facebook.

They stun our data that is not true.

It is difficult to measure this perfectly because some people live out their age but based on the best data we have, we have been close to fully penetrating the u.s. teen market and the number of teens using face book daily or monthly has been steady over the past year and a half.

Teens remained highly engaged using facebook.

It is worth mentioning that the stats are for facebook only.

Instagram is growing quickly as well.

If the are combined -- if they are combined we believe our share will grow quickly.

Let's talk about using -- building more useful systems.

The newest product i am excited about is instagram video.

Adding video flights -- fits naturally with the mission.

It is off to a great start.

People are uploading hours of video every minute.

I am proud of the team and they have done a great job with this product.

When i first talked to kevin about this, he had an insight.

They are capturing moments in a way that they are proud of.

When the instagram started most phone cameras were not good enough to take high-quality photos but lack of filters is not what is holding back videos from being great.

It is that they are shaky and feel unprofessional.

If we could deliver a product that would produce stable videos it would change the landscape and i think it already is.

Others like rap search and home will take longer to develop.

It is the right strategy with a balance of new product and feeding media demand.

We are committed to building the products.

Let's talk about building the knowledge economy and what that means for our core business.

This quarter has been a strong time for us.

A lot of new businesses have signed up to advertise and we have more than one active million advertisers.

Our products are working well.

One of the things i watched most closely is the quality of our ads.

Right now adds an average make five percent or -- 5% or one in 20 stories and news feed.

We asked evil about their experience in nice -- facebook.

In recent studies, people have told us they have noticed the ads more so we will invest more in improving quality.

Our top priority is to expand the number of markets rather than -- marketers rather than increasing the number of ads.

This will help us improve the ads -- quality of ads.

It will yield the best results for us.

That is our update for this quarter.

We have made a lot of success and we have generated strong financial results.

This marks the end of our first year as a public company.

We have good foundations for the future.

I want to thank everyone who works for facebook.

You have been listening to mark zuckerberg come out the cofounder of facebook.

He has been giving details about the company's latest quarterly results.

Coming up, we will take a look at the details of monthly average users, engagement, advertising, and why facebook works for some companies and not for others.

This is "taking stock" on bloomberg.

I am pimm fox.

The company exceeded sales and profit estimates.

We have ben mezrich joining us from boston.

We broadcast on bloomberg 1200 and on hd 94.5, hd 2 in boston.

And adam schoenfeld from simply measured.

What characterizes a company that uses facebook well?

We actually did a study and we found that companies posting visual content and that his photos and videos are having the most success.

Photo content accounts for the -- 90 five percent of the engagement.

So brands that are posting photos and visual type content that consumers can engage with.

What would be an example, disney, for ari, intel, those are the leaders?

Those are some of the leaders.

They are posting video and photo around f-1 events . their posting pictures of cars and consumers with their cars and engaging.

They are doing that eight times a day.

They are putting out a lot of content where their consumers can interact with them on their facebook page.

Ben mezrich, it sounds like mark zuckerberg is on a mission.

He has always been on a mission.

He sees space out as a reservoir -- revolution where we are all going to live in the future and i think he has always felt that way.

That is his goal and he is realizing it.

The more we use it and it sounds that people are using it more and more, not less and less.

The closer he is getting to that vision of a one world, all of us on facebook all the time.

Ben mezrich, is that his earnestness, is that genuine?

He keeps talking about this monetization engine.

I do not think mark really cares about money but now that he is the head of a public company, he has to care.

The revolution is more important to him than the money.

But it is lining up.

He is creating this certification to make money out of time suck w -- this time suck that we use all day long.

It is definitely a different world that we are going to be living in because of facebook.

Jon erlichman, you spend time on facebook every day?

I spent some time on facebook during the day.

On my phone, not on my pc.

It is important staying with what ben was talking about, we have seen changes in mark's and the role of different people in the company.

The subjects of money and advertising did not get the same kind of attention.

Maybe this people were not necessarily in the inner circle.

After the initial public offering, the story widely goes that zuckerberg went to a lot of top people in advertising and said what are your best ideas and gave the go-ahead to a lot of those ideas which is why we have seen a bunch of programs facebook -- bunch of programs, facebook exchanges one of them.

Setting them up to reporter quarter like this.

As mark zuckerberg said, instead of throwing up a bunch of different ads, they are making sure that the ads are better.

They want better rices on those ads, not necessarily more.

Pictures and video from marketers, that is why you're seeing those changes to the newsfeed.

They want people to be looking at their newsfeed and scrolling through, find cool video from both their friends and from our critters because it becomes that much more organic and makes you more likely to click on an ad and for everyone to be making money from it.

We will continue the conversation.

More on video and instagram.

They paid more than $1 billion for it.

We will find how it is paying off.

We have more with ben mezerich, adam schoenfled, and . ? president obama is set to take the stage to deliver his economic message.

This time the president will be speaking at the university of central missouri.

You can watch the speech live on bloomberg.com/tv.

This is "taking stock" on bloomberg.

I am him faxpimm fox.

I want to bring in the author of "the accidental billionaires." tell us about sheryl sandberg and her role at making facebook the success that it is.

I think cheryl is very smart.

She is a class -- was a class mate of mine.

She has led a lot of the changes that have happened since it became an important company and a public company.

I think that definitely it -- they're taking advantage of the cash they have and they have been smart about moving into mobile.

Can you share a story that might illustrate the kind of executive she is?

I only know personally how she felt, i ran into her at a college reunion after "the social network" and i expected her to hit me or be mad.

In the end the embrace with a -- they embraced what they could not change and that is the way they have looked at it.

She is very smart and she has done a good job there.

I can only say good things about her.

Anand srinivasan dam schoenfeld.

What kinds of videos, what kind of promotion, and how much money does this cost customer the cost comes when they want to amplify that content but the first step is getting content out there and getting it out there.

The best rams are doing it in a way that personalizes their brand.

You look at it in jerry's, it is very personal.

The content they are creating is relatable for the end consumer.

They have to be media companies in themselves.


The buzz word content marketing is getting big in the states.

They're responsible for having the best content that will appeal to their audiences.

If you're looking for a job in the technet -- technology industry, if you create this title of a chief content officer, that could apply to any consumer product or service company out there?


Chief digital officer is a common trend.

Companies are dedicating large teams to this and thinking about what to put out and getting out and experiencing events and making the brands more personal.

This idea of below to rate a service or product using waste book, that gets the feedback loop going.

Is that something that will be monetized by facebook?

It is highly valuable but it is tricky when it comes to being tangible.

You know i think this goes back to the huge conversation everyone was having before they spoke went public which is we know they have an enormous number of users and that gives you all stars of data.

A marketing also it's of data.

As an advertiser, is marketing with the end goal of selling a product, it starts to get a little bit hazy.

Right now we are in a new world of advertising and you do have different for our -- approaches.

Twitter and facebook and google'se are all different.

Thank you for joining us.

Also my thanks to ben mezrich.

It is 26 minutes after the hour.

Time to take a check on the markets.

The s&p 500 lower by six points today.

16.85 on the close.

The nasdaq is unchanged.

Shares of caterpillar more than -- down more than two percent.

The company posting profit that trailed estimates.

Coming up, we will talk about soaring away with spirit airlines.

That is next.

? this is "taking stock quote quote on bloomberg.

The billionaire investor taking his latest jab at the pc maker 's founder.

This comes after michael dell increased his shares.

Here to help us sort out the details are cristina alesci from dell headquarters and we have anand srinivasan of bloomberg industries.

Christinaristina, the special committee reacting to the increased offer from michael dell?

We are you at yet another -- we are at another impasse.

Basic they what happened was michael dell and silverlake increased their deal but are requiring or saying that is contingent on a special committee relaxing certain shareholder protections.

The one that is in question that we are talking about is the requirement for all on an as -- uninterested shareholders, other than michael dell to vote.

One of the biggest hurdles for michael dell and silverlake has been the fact that there is 20 seven percent of shareholders are not voting.

What that means is under the current structure of this deal those votes count is no vote.

Michael dell would like for those votes not to count it all and they're telling the special committee that they are willing to increase their offer cents if they relax that requirement.

That is what elicited such a strong reaction from carl icahn . we are less than half an hour away from the shareholder meeting and we expect to be very -- it to be very brief.

They would postpone the shareholder meeting and it was quite effective on their part because there are few shareholders that are showing up for this very brief meeting.

It is a different scene as it was last week when we had a lot of angry shareholders show up and voice their discontent with the way that this process is being handled.

There was an old movie called "casino royale," when we are standing we are bidding and when we are not we are not bidding.

The votes do count but they do not count.

The bottom line is that you have to be present or have a proxy for your vote to count.

That is the way that michael dell and silverlake wanted.

The way it was structured earlier is it did not matter if you were present as long as you voted no.

You have to be present and raise your hand" for the vote to be counted.

What is the reason he is doing this?

Are they afraid that the votes they would get with the 27% that will not vote -- we have to make a way to get the result we want.

And absent vote was a no vote.

Or they did not show up or they did not care.

It was excellently counted as a no vote.

That is what michael dell and silverlake do not want to have happen.

They're saying if you are that interested and you want to vote for this transaction to go through, show up.

If you are that interested and you do not want the transaction to go through, show up.

There is both sides of the arguments.

We have been saying from the onset that this is a dramatic distraction and it will take a long time.

In the meanwhile the pc business is to put it mildly, not doing so well.

Will this keep going until michael dell and silverlake at the result they want or what happens next with carl icahn?

That is the criticism that will be leveled at the special committee.

Not only from carl icahn, potentially others as they will this -- delay this thing until it goes in michael dell and silverlake's favor.

This could go on forever.

Shareholders are going to want a resolution.

It looks like we might get it next week when the meeting is adjourned to august 2. at that point, the shareholders will have to vote on web -- whatever the special committee recommends to them.

Right now the special committee is saying it is not willing to take the increased offer with those additional demands that silverlake and michael dell are -- would like.

We are still really an impasse.

Way more negotiations to go.

You will be in round rock texas for while.

Another ongoing story.

It has been an important day at the sec.

Fabruceice torre took the stand and the sec try to prove that he misled investors.

Sue keenan has the -- su keenan has the story.

The case could turn on the testimony of the 34-year-old trader who arrived confident and ready to testify.

In his first hour on the stand, the sec's top attorneys got him to admit that a document he put together on the deal was not accurate.

And then got him to admit that he had forwarded an e-mail and had a meeting and an e-mail he admitted he did not read.

It was from a big investor.

Questioning the role of billionaire john paulson.

A management executives to -- who said that they believed paulson was an investor.

Paulson was betting $1 billion the deal would fail.

Testimony continues tomorrow.

Thank you.

Su keenan in lower manhattan.

The shares of spirit airlines have been taking off this year.

They reported second-quarter sales and earnings that topped analyst desks current -- analyst estimates.

Good to have you with here -- with us here.

How did you do it last quarter?

Thank you.

The way we do it is we keep our costs really low.

We keep fares really low for customers and so that stimulates a lot of it is this.

Most he we focus all of our kind -- companies positions on the bottom line.

We read spirit airlines as a business, not like a public utility.

That has kept this nicely in the black for while.

It is about fees and add-on fees.

If you want anything extra other than the seat on the plane you're going to pay for it.

I would not call them fees.

I would call them options.

Customers can spirit airlines as a business, not like a public utility.

That has kept this nicely clearly avoid those if they just change their behavior in ways that save the money.

Just like a v-8 engine energy cherokee costs more than a b-6. you do not think of that is a fee.

That is the way we see it at spirit.

You choose what is important to you from a set of options and the total price customers pay, fair plus fees is in almost every case lower in total than they would hey another airlines and that is what keeps our airplanes flying.

We keep looking at other options to expand and we always choose hours -- our places to expand.

We keep our investors at the forefront.

What is the strategy in dallas fort worth -- dallas-fort worth.

We are serving with 35 today.

Most cases we fly once a day to other big cities.

We are creating an option for travelers who could not afford or chose not to pay the higher fear, higher service options that are offered by the other airlines who serve dfw airport.

What we are doing is bringing back to the market a price- sensitive segment of the travel segment and in that process, doing very well.

We are carrying one million passengers in dallas and that is terrific for us.

We have given dallas area passengers a new option if they want to save some money.

What about the new aircraft?

I know that you fly airbus exclusively.

What are your plans to expand the fleet?

We have a fairly robust fleet order that will have us expanding by 15 to 20% per year between now and the end of the decade and that will be with the fleet.

We placed an order for 20 new airbus 821' -- a 21's. airline safety has been in the headlines.

What can you do to reassure travelers that traveling on an airline like spirit is safe?

We have an impeccable safety record at spirit.

We are overseen and governed by the exact same rules of the faa as any other major u.s. airline.

So we take safety at the core of everything we do.

Safety always at spirit.

The way we keep our costs low is i running -- by running a safe airline.

We do not compromise safety and anything we do.

We know that as a shortcut to hurting the business.

We are about making money for our investors.

I want to thank you very much, ben baldanza, joining us from florida.

And what the mergers and acquisitions market needs to beat last year's numbers.

It will require half $1 billion worth of deals between now and the end of the year.

More on "taking stock." ? there is work to be done in the deals market.

Half of trillion dollars work in mergers and acquisitions need to be done.

I am welcoming vito sperdulo . his firm helped advise on $50 billion of deals.

It is a pleasure.

I will explain the background about why you're sitting in front of something that looks like a bunch of athletes in a moment but tell me about the athletics right now of mergers and acquisitions.

What is strong, what is weak ? some of the traditional sectors are strong so we have health care, technology are leading the way along with real estate.

And then you also have year to date volume is up about 19% in the united states.

When people think about the m&a market being slow the number of transactions are off about 22% year to date so you have these large mega-deals that have driven the volume.

That is in the first quarter.

When you look at first quarter volume that was up incredibly.

The second quarter is down versus last year.

The fourth quarter of last year was one of the biggest quarters in quite some time given that everyone was trying to get money off the table just in case the tax laws were going to change which they did.

We need half $1 trillion for the remaining quarters of the year in order to hit last year's volume.

Isn't also an issue of the comps?

-- is it also an issue of the comps?

How are you going to match that this year?

It will be unfair in comparison.

It is a difficult comparison.

You need 250 billion dollars per quarter.

Generally, the last couple of years, last three years have run at 235 billion dollars per quarter or so it has to be stronger number.

The rationale is that it will be down year-over-year.

I appreciate you helping me by mentioning the word run.

Tommy what you're going to be doing that involves running and strength.

This coming weekend is the rbc decathlon.

We have the wall street mile on saturday.

This is all to benefit pediatric cancer research at memorial sloan kettering cancer center.

We have 70 athletes competing.

It will be at columbia's wayne stadium.

Starts at 8 a.m. on sunday.

Basically there is 10 events and starts off on the writing side, it is an 800 meter, 40 yard dash.

On the weight side we have the edge press and pull-ups and we have dips.

We have an agility test with is a 20 yard shuttle run.

What is vito sperdulo going to do?

People can make a flat donation on a target or -- as to whether you are going to hit the target or you can make a donation.

I am doing 22 repetitions at 175 pounds.

I do not think we would bet against you.

I do not think so, either.

Thanks very much, vito sperdulo.

Coming up, we will talk to the editor-in-chief of "food & wine" magazine.

Next on "taking stock." ? i do not know how to make summer vegetable cervice, but my next guest does.

They're so rating their 35th anniversary this year and joining me now.

This does not know that i will be challenged because there is a lot of stuff to make.

You can make the ceviche.

You can shop and buy some peaches and celery and vegetables and chop them up and toss them in the type of dressing you would have for ceviche.

Tell me about this idea of buying local ingredients.

We were talking before the segment, if you look at the list of the top chefs of 2013 , they are all over the united states but there is a new kind of regionalism going on.

What is so exciting right now is you can get extraordinary food in houston, memphis, in places where they were a restaurant desert.

Not necessarily a food desert.

What they show you, the winners in houston, -- the chef at underbelly takes different influences and he wants to reflect back his exact place.

Local food is not just like the asparagus was grown down the road but who is coming to my community and change the way i cook in the way i feel and the way that ie?

That is an exciting part of local.

When you think of local you might think about the vegetable stand but you should think about more than that.

Who else is living around you and how does it influence your food?

The other was west bridge in boston.

You have these influences you never would have thought of before.

He is a great example.

Or if you go to -- this is a different kind of regionalism.

You go to memphis and there are these two boys there.

They are doing italian food but it is from the south.

You merge their -- where they are from but you have all these other things because that is what is grown right there.

Everyone should try to do that.

And look to the market, what is right there.

Tell me about the influence of hate -- cajun when it comes to lemonade.

Only for you.

We did pimm's cup, and that has some tabasco and simple syrup and lemonade and seven up and you put that together with some vodka and you have a spicy, delicious drink.

We could try that later on.

Also in 2014 you have a book coming out.

This is -- do you make mistakes in the kitchen?

I make all the time.

I have made them from the beginning of time because i am am not a trained cook.

Every time i cook my do something wrong.

It surprises even me, i have to admit.

I went to make the enemies can melt chicken and the directions were so specific, i knew that could not not make a mistake.

And just as the terror mail -- caramel was glistening, it seized up and it looked ike a brown frog.

It does not sound good.

It made it difficult to continue.

I know it was -- mastering your mistakes in the kitchen.

You had some help.

I am getting experts to tell me what i did wrong.

How do you make sure that you never have a frog in your caramel?

That is what i wanted.

Experts would say what you did wrong as you stirred the caramel and you should never do that.

That is what i learned.

I cannot let you go without a discussion of technology.

What kind of reception have you gotten from the audience because i notice that you have 166,000 followers on twitter.

I love twitter.

I love telling people where i am eating and i love telling them what i am drinking.

Every once in a while i make a mistake like what i earned toast and i had to -- burned toast and i had to throw it in the snow.

Rexwhat was great is the tomatoe and peaches and lobster was in large chunks and dressed in basil seasoning and cheese.

I want to thank you very much.

Dana corwin , editor-in-chief of "food & wine" magazine.

The us is dow was down and the nasdaq basically unchanged.

Shares of apple rising after the company posted earnings.

Iphone sales coming in stronger than estimated.

Thanks for "taking stock." i am pimm fox.

Good night.


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