Guest Host Roger McNamee: Bloomberg West (06/12)

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June 12 (Bloomberg) -- Full episode of "Bloomberg West." Guests: Elevation Partners Roger McNamee, MobileIron President and CEO Bob Tinker, Nintendo of America President Reggie Fils-Aime and Reverb's Erin McKean. (Source: Bloomberg)

Live from pier 3, welcome to "bloomberg west," where we cover innovation in the future of business.

Intel now says that annual sales will rise for the year for the first time since 2011. the chipmaker also boosting not only full-year forecast but current quarter revenue to $13.7 billion.

Demand for pcs has been stronger than expected.

One of the reason more businesses are replacing pcs is now that microsoft has phased out support for windows xp.

Resigning after a power struggle.

He managed to keep control--he wanted to keep control of more departments.

Twitter will not name a new coo.

Facebook making changes and how it shows ads to users will have a major impact on advertisers.

Users can decide just how they see the ads and what ads they see.

Facebook will allow users to view ad profiles based on facebook and internet activity.

We welcome our special guest host for this hour.

An early investor in facebook and yell.

Cofounder of silver lake partners, the first private equity fund focused on technology.

He's also doing a hundred shows with his band this year.

Every greenroom should have a few instruments.

We have a story that broke overnight.

A major executive change at twitter.

Rowghani resigns his position although he will remain a strategic advisor to dick costolo.

This comes after seven months after they go public.

We've seen a lot of pressure to boost growth and getting them to spend more on the service.

What do you make of this?

I think twitter remains an extraordinary opportunity lost and, i think, a bad user experience.

If i look at the embedding that twitter has done in the entertainment industry and broadly, it's amazing.

I was watching some covers of the hockey game last night.

The espn guys were using tweets as part of the dialogue about the game.

For certain.

In my mind, but they have accomplished there is extraordinary.

It places a lot of pressure to get the monetization strategy to be as good as the product idea and self.

-- itself.

The way the consumer interacts with the product just does not look.

You are trying to get information from a firehose.

That's very unpleasant.

The news of the coo change or removal.

Senior west coast correspondent jon erlichman has been covering it.

What can you tell us about this news in particular?

Ali was somebody charged with overseeing the product experienced team with the clear goal for twitter to grow its business.

You highlighted that there have been concerns about the ability to grow both the user base and the amount of time that people are spending on twitter every day.

You're up against some formidable competitors like facebook.

Recently they did a higher a guy from google who got a lot of kudos with the triumphant return of google maps to ios after the apple maps disaster.

Truly a product person and the know-how to get the team excited.

Once they've already had so many millions of people, that definitely does factor into where we are and the key players are keeping shaking out.

Looking at the user growth numbers, i look at it sequential ly.

You have done more models than i have.

With this state of growth, this is the one to look at.

They've seen a little bit of a turnaround.

The user base continues to get a little bit bigger.

The sequential growth is getting a little bit bigger.

Important, yes.

To me it's not the issue.

They have so many customers and it is so deeply embedded that the real opportunity is to do with facebook did in its own market, to get much more deeper engagement, much more interaction.

For that, the product has to change.

There are lots of other user experience alternatives.

It does in fact solve the problem by making everything topically based.

I don't think user growth per se is the issue.

The vast majority of users don't get that much value from interacting with the twitter application themselves.

Flex jon, in terms of hollywood, they seem to really embrace this site would be -- this platform.

If you are one of these power twitter users, there have been huge opportunities to get the word out or manage your message through something like twitter, it's all those other people who sign up for the service, as roger was alluding to, still trying to figure out -- take hollywood.

How do i get more hollywood news and less tech?

How do i streamline all of that?

Is a lot of fascinating stuff twitter has been working on especially with live sports coverage and almost having a google-like experience we you have to sift around and find sports scores they have looking.

It's where you lose people sometimes getting all of those boxes figured out.

I really look at this.

I would love to have twitters problem.

The thing they have accomplished are so valuable, so hard to replicate.

They just need to look at the product and recognize that a firehose is a lousy way to display ads.

It's like trying to follow wall street with a stock ticker going by.

You need other analytical tools.

They need to have 20 user interfaces.

Most people i know get their twitter news from watching television and watching it crawl through the show they are looking at.

That's an example of twitter done right.

I look at this and i go -- i don't know who's going to crack the code there.

I'm certain someone will.

It's interesting.

We know jack dorsey was one of the cofounders of twitter and so very involved.

He was focused on the steve jobsian influence wanting a single, elegant interface.

Flex that would work.

Unfortunately it is an ine legant interface.

It is a utility.

People have different needs.

Let them have different views.

Let them recognize that if you are an executive at twitter, all you need is a good nights sleep and tomorrow is a new day.

You get to reinvent the company with all of those assets.

It's a great unrealized opportunity.

Even though they are telling us not to look at this number, our first instinct is to look at it.

I think the number looks pretty good.

On a sequential basis, you see people clicking on more and more timeline and revenue per timeline getting higher and higher.

That says to me they are starting to figure it out.

To me, twitter is an extraordinarily valuable product for someone in the investment or news business.

I'm cheering for them to get it right.

If they ever call me up, i will take days.

Let's figure this thing out.

Jon erlichman, thank you.

Roger mcnamee will sit with me for a while.

We have a lot of other cool story to talk about, not the least facebook changing the way they are targeting ads at users and what this means for advertisers next on "bloomberg west." ? this is "bloomberg west." i'm cory johnson.

Two big changes to the face began strategies.

In the past, they would target ads to users based on brands and products that they like.

They're looking at what sites they visit.

Also, they will now be able to control the ads they see.

If they are not interested, they can try to tune those out.

Roger mcnamee, early investor in facebook, joins me.

This is the great promise of facebook in the revenue side and maybe the fear from some users?

Giving control is a big deal.

That is the one is we should really being attention to as a consumer.

If you want to opt out of that kind of targeting, you can do so.

Sensitivity to user privacy concerns has been rising very radically in a last 12 months.

I view that is very positive.

It's clear advertising on facebook works.

I bought a guitar last week -- how many have you bought this year?

It's the only one i've bought this year.

I saw an ad on facebook and i bought it.

They are now telling you they will also show you why you were targeted, what it was about your behavior.

I think that's interesting.

My experience as an advertiser in the consumer is ads really work.

The more you know about the why, the more effective they will be.

What you are saying is when the user turns off the things they find annoying, the ads will become more effective.

Although i may have clicked on a bunch of sites about athletes foot, i'm good now?

People who buy vintage guitars or read "vogue," people buy them from the ads.

The context of those ads is what they're looking for.

They pay money to see ads.

With facebook is doing is making a baby step towards making the advertising really contextually relevant to the facebook members.

In my mind, if someone assuring me the opportunity to buy a really good guitar, that's a positive thing in my stream.

If i had nothing but guitar ads, i would probably buy more than one guitar in the first six months of the year.

How does facebook know what i'm doing on the web?

You are using to connect to sign into lots of other sites.

From that, the authentication process gives them data and gives you security, gives you all of these other things.

I actually think this notion here that if i'm on a site that i know i like and they know i like, is it ok if we show you stuff relevant to that?

I can turn it off if i don't like it?

That is part of facebook maturing.

Fiu are going to say they are becoming a utility.

-- i thought you were going to say they are becoming a utility.

A are the way adults communicate.

Now with snapchat and instagram, they are also the way that kids communicate.

Thanks i think facebook connect is still fully --stealthily one of the most important things they've done.

They've gone to other companies and said we will take over your userid, password, authentication problems and we will give you statistics about how users are using your website if you let us be the ones to gather that information.

I think that's fundamentally correct.

It's a great value on both sides.

In my mind, over time facebook's ability to give a better online experience was really, really helped by facebook connect.

It made it really easy to sign on to sites.

You did not have to have 100 passwords.

The quid pro quo of that, if the advertising is relevant, it will feel like a good deal.

When you have as many members as they have, the number of ads is remarkably low particularly if you compare it to terrestrial radio or newspapers where advertising dominates the experience.

The more accurately targeted the ad, the fewer of them you have to do to make your numbers.

What kind of guitar did you get?

Gretch 6118, anniversary.

If you look at the video from last night, i played on it last night.

Early phase investor roger rowghani mcnamee.

Making its wall street debut today but what does this tell us about the fate of wireless and enterprise software?

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

? welcome back to "bloomberg west." mobile iron is now a publicly traded company.

They began trading on the nasdaq this morning hoping to raise about $100 million after delaying plans to go public.

Interesting choice.

Joined right now from the nasdaq market site by the ceo of the company, bob tinker, along with my special guest host, roger mcnamee.

Why wait?

Why stop waiting?

The enterprise mobility market is a massive market that is happening right now.

Mobile iron execution adding 6000 customers in four years growing over the last four years, the company was ready.

Fundamentally, we don't look entering as a short-term trade.

It's a strategic decision to develop a whole new set of investors.

The business and the market was ready.

I sort of fundamentally lost respect for everyone who trades stock.

I care about the company behind it.

When you are trying to time a deal, yet to report one quarter and get out before a hassle which may delay or change things or force you to change some plans?

We put it in a fast-growing market.

When you fitness the registration, -- when you finish the registration, it's time to become a public company.

Roger mcnamee here.

Congratulations on the ipo.

Help us understand the corporations you are doing business with.

They are wanting their employees to have access to corporate data using smart phones and tablets.

Tell us what the apps are they are most focused on now and how it will evolve over the next year.

In the early days of enterprise mobility, the primary app was frankly e-mail.

They wanted google, windows, but it was really just about e-mail.

It has become rolling about mobile apps or accessing corporate documents so people can be hidden the way they want to be productive on a mobile device of their choice.

These are now apps related to crm, customer relationship management, erp applications that help businesses run better.

We actually have one large swiss company.

I recognize this is a huge opportunity.

One thing i'm confused by is a cost you about $.65 of sales and marketing to generate a dollar of revenue.

I would have thought margins would be a lot more favorable because of the urgency companies feel to get mobile first.

If you look at the mobile iron business, we have added over 6000 customers in the last four years.

We have a very high gross margin business.

Gross margins were over 80%. as we reported in our s-1 documents, early customers have now expanded to become very profitable for us.

Business runs in a land expand upsell business where customers start small but we make them successful and they grow.

Typically, they expand five acts over a three-year.

And that is what drives profitability in the long run.

Is that marketing costs going to come down soon?

We do not provide forward-looking statements on things like that.

When you have a large, fast-growing market like this, our business is in good shape.

A couple hours into the market and he talks like a ceo of a public company like a pro.

Bob tinker, thank you.

Roger will stay with me.

We will also look at goober and the latest round valued at $17 million -- we will also look at uber.

What they need to do to increase the value.

More on that when "bloomberg west" returns.

Time now for "on the markets." i'm matt miller.

Let's get you caught up on where stocks finished the day.

Down for a third day in a row.

The s&p 500 falling 0.7%. the dow jones off by more than 100 at 16,734. the nasdaq down 0.8% at 4297. ? you are watching "bloomberg west" were recover business, technology, and innovation.

Tesla is making all of its patents available for public use some other car companies can use its technology.

Ceo elon musk says it's necessary to advance electric vehicles.

He views gas powered rise as the true competition.

Tesla will not file lawsuits against anyone who uses any of their several hundred patents in good faith.

Amazon, the latest company to get into the streaming music business launching prime music.

It's available for amazon prime members.

Missing are artists from universal.

Amazon and universal could not reach a deal.

They were in conflict with warner bros.. china's increased restrictions on google in the run-up to the anniversary of the tiananmen square but now some restricted content is available.

A mirror website has been created to search for restricted content including video from the 1980 nine protest.

They have received more than money under thousand visitors today alone.

This year, we've seen numerous multimillion dollar tech deals.

Airbnb, $10 billion.


We have talked about bubbles and billion, but i'm on a talk about the business and what makes them worth these billions.

Elevation foundation partner roger mcnamee offended you with these numbers for a long time.

The entire conversation about valuation when it is unattached.

I get interest rates are low.

They will pursue growth wherever they can find it across the market.

I think that point really matters.

The companies going public or these extreme valuations, for the most part at least in the public market and the upper end of the private market, they have really substantial businesses.

Come on.

The company that was just on here has $105 million revenue.

It's clear that companies like gopro are substantial.

I would throw out an electric battery maker, a 3-d printing company.

I don't think that's what we should vocus on.

-- focus on.

The news that eric cantor lost his seat in virginia sets back immigration policy.

When immigration stops in the united states, as it appears to stop at the next three years, economic growth suffers especially when you have china restricting the u.s. ability to sell in those markets.

Right now, growth will be very hard come by.

Investors will naturally go where they find it, which is the tech market.

Oracle, cisco, ibm, hewlett-packard, in norma's companies and technology seeing falling revenues despite billions of dollars -- in norma's companies seeing falling revenue.

The ones that are really substantial are few in number.

Naturally, you get this bidding war.

To me, and thin the thing that was amazing about uber was fidelity was the largest investor.

There was a time when they started a private car business, boston coach.

They had that category really well.

I'm sitting here thinking to myself they think this thing is worth $18 billion, whatever the number is.

I'm just scratching my head thinking there may be something going on that's different.

What i see at uber today is the next ordinary opportunity but with big changes required.

At the next big things conference on monday, or tuesday morning, i sit down with a bunch of big venture capitalists and investment bankers.

They were saying fidelity and t. rowe price, where you worked once upon a time -- i remember it fondly.

They have analysts who really know these businesses and they bring the analyst to these private companies saying here is what me know about the business, here's where we might be able to help you.

It's not a passive investment that all.

Definitely not.

When i was at t. rowe price, i had the insight that you could not be a successful public investor without knowing what was going on in the private.

It fidelity is doing the same thing.

Bringing amounts of money you cannot bring anywhere else.

In some ways, this is a healthy development.

$18 billion for a company that is not only private but still very small.

Whether they are losing money or not, a reservation system, i don't care what you are it four, is hard to grow to an $18 billion valuation.

This is to roll up car-based transportation.

You want a taxi or a black card to come pick you up, that's way more interesting if they own all the cars.

You think because of their ability to raise money, do something they would not do and they should buy a fleet of cars?

Their target should be to own 10% of all the cars in the marketplace operate in so that they have the equivalent of zipcar, uber, lyft.

10% of all of the cars driving on the street?

Google is talking about driverless cars.

They are thinking about these cars being on the street in using your iphone to check them when you need them.

Why should uber not be a main player?

The cost of capital is zero.

If you think about their ability -- this is not relative to car loans.

Relative to the cost of capital.

They are still really high.

Ubveer could give you a much better deal, buyer loyalty, and thus the savings of a few which would be profitable to them and the driver.

They have already voted for uber in that model.

They have been overwhelmed by them.

They become the mta.

For every bus you see, they on the reservation, part of the payment system, and the vehicle itself.

Then you get unlimited amounts.

You need a business plan you can grow into.

Then you could be as big as general motors.

Without doing that plan, it's really hard for me to justify $18 billion.

To justify 10% of that would be hard.

It starts to look like a priceline except inventory is very different when it comes to hotels as our appreciation.

When we look at the marketplace today, this growth may turn out to be a huge problem for investors.

The u.s. equity markets right now are better positioned in the economy as a whole.

They get a better rate of return.

It may only be 3% to 5% but compounding overtime in a zero growth environment, that is actually return good return.

Stretching to get 40% growth may result in huge values in your portfolio.

You do not have time to be stretching for growth.

Is going to be bad news -- it is going to be bad news for those getting these valuations.

If you are a retail investor, you're used to being the victim of all of these games.

It feels like we were early and is likely to end up orally.

We are not yet seeing type things.

I'm sure we will see them.

Some of them, like gopro, are really magnificent.

Roger mcnamee staying with me.

How nintendo is relying on old friends to turn around.

You can watch a streaming on your tablet, your phone, and on apple tv.

? will come back to "bloomberg west." e3 wraps up today later in los angeles.

Jon erlichman is there interviewing, the biggest games in gaming to the ceo of electronic arts with highlights from the show.

Quite, to talk about nintendo.

There's been a general consensus that the nintendo wii u has not solved as well.

We caught up with reggie given that they threw a lot of games at the market, we asked about the overall strategy.

Our strategy this year is about invention and reinvention.

Invention in terms of all new styles of play in terms of what we are doing with smash brothers for wii u and 3ds.

This was a part of super mario 3-d world.

This is what we are trying to do and certainly there has been a reaction.

People like to monitor console sales and headlines get written based on that.

Some of the common arguments is that wii u have to catch up to sony and microsoft.

Do you do that with the game?

We do.

The first thing they really understand is what the true state of the business is.

You look at like sales for sony and microsoft, it is all in a very tight circle.

There is no winner or loser at this time.

In particular, the exclusive games.

We have our own development studios to create world-class content that can only be found on the nintendo platform.

You think of games like mario party and that's a major.

How big of a game do you think that could be because of overall sales?

When you talk about of an impact a game like mario party 8, especially over the weekend, you have to look at the impact on hardware.

But we announced this morning in an analyst meeting is that mario kart broke by a factor of 4. 4 times hardware sold since it's launch.

It is a system seller because you can only buy it on the wii u. collectibles, figurines, it all comes to life.

This is what we have seen with the likes of infinity and skyland are.

Do you feel you're taking from their playbook -- like infinity and skylander?

Amiibo is something you can only have through our platform.

You will be able to play these figures across a range of software.

For super smash brothers wii u, mario kart 8, a number of games you will be able to use these figures at the start of the next few months.

This is important and makes a difference.

Obviously nintendo i.p. is very important.

Not necessarily part of what's going on at e3 right now and somehow making them more readily available in this new world of mobile devices on tablet and smartphone.

What to you say to that?

What drives our business is our i.p. you can only find it on our platforms.

What we will be doing is finding creative ways to leverage smart phones, tablets, pcs to drive awareness and drive the compelling interest in our games.

We are doing that right now with mario kart 8. we launched something called mario kart tv.

You can get content that consumers post from mario kart 8. a series of memes has come out.

We are driving awareness for the game and that's just one thing we're doing from a marketing standpoint utilize all the other devices to drive interest to wii u and 3ds.

Nintendo america president and chief operating officer reggie fils-aime.

A one-stop shop for news junkies, the news discovery app reverb.

It's a good change the game for judas the media next.

Watch a streaming on your phone, tablet tom amazon fire tv, apple tv.

You name it, we are there.

? welcome back to "bloomberg west." traditional media outlets fight to stay relevant but a new news discovery app going to back roots of language itself to cater to its readers.

The former editor of the oxford dictionary, it personalizes content based on extensive word graphs.

Every guest we ever have comes talking their own book.

I'm also the executive chairman.

Tell me why this is such a smart investment.

I got involved because i saw her give a talk at the ted conference in which he got up and said the internet should be the world's largest data store.

It's in english.

The problem is computer science techniques are never going to work.

I know this because i edit the oxford dictionary and i'm thinking -- you can fix this?

Not only could she fix it but she could do it herself?

I'm in.

I'm an investor.

I'm dying because newspapers are dying.

We've talked about this before.

I did not know you are a lexicographer.

How did this lead you to this news app.

Whence you really believe that words are data.

They are not literary objects with actual points you can use to determine the aboutness of something, the more you know about the words, the more you can understand the aboutness.


It de-literarizes it.

Not a word.

Totally a word.

My definition of whether it is a word or not would be to go to webster's 10th.

11th now.

It goes to 11 now just like "spinal tap." you say this is the direction, the entry point to go somewhere.

You basically have gps once you map the language.

I can give you direction from something else you just read it to something else that will surprise and delight you.

We are trying to reduce the english language which would make sense given the computer technology of the day.

Find one word they used to describe a bunch of things.

It has proved not to work very well.

They were trying to take 1% of the english language and figure out what it means.

Erin's notion was to make a one-to-one model of the home language and operate from the real thing.

When we started, there was that a database to do that.

Fortunately, one appeared.



It takes the idea that everyone is different and everyone's usage of a word might be very different.

That turned out to be incredibly valuable.

Right now, anyone in the advertising business knows what about their people?

Male, female, name, address, serial number.

They know next to nothing about what you really like or care about.

If they knew that, that would be immensely powerful.

The thing that erin has created will allow every publisher in the world to see what people actually care about.

They're very promising him a very excited.

We have an enormous amount of interest.

The thesis is not what you are but who you are but matters.

I am a middle-aged mom but my interests are robots, legos, minecraft.

Anyone that would market to me based on my middle-aged momness would miss those interests.

Everyone should download it.

Reverb, the upside down r. it really matters.

When you go there, if you are an investor or just a news junkie or anything, this is transformational.

Fascinating with an interesting background.

Reverb founder erin mckean.

Now it's time for the bwest byte.

Roger mcnamee is with me as well as johnn erlichman.

The percentage of 19-year-olds in america who do not have a drivers license, 30 one percent.

When you and i were 19 -- 31%. 90% of our peer group at it within hours of their 16th birthday.

Younger people are choosing not to drive.

I just got my license so i spent a lot of time at the dmv recently.

A lot of it remains scary.

Roger, thanks for being with us.

Fantastic as always.

You can find us everywhere on the web, on your phone, on apple tv.

We are back with where bloomberg tomorrow.


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