Technology set the new industry for the standard . Amazon delivery testing out a feature that would allow deliveries even while you are not at home. First, and is on has mentioned wanting has mentioned wanting to sell more Products Online and managing expenses. For the first time, amazon is incorporating whole foods into their mix. James and our bloomberg tech reporter elizabeth join me to discuss the results. Caps off to jeff bezos. What you are seeing is acceleration. Even when you strip out whole foods, you see a threepoint acceleration. Everything is growing and growing faster than it was before. There is a lot of scrutiny over what the margins were going to look like, and north america did dip a little bit, but, at the same time, you saw an uptick in the aws market where there was some concern about pricing pressure. All in all, goldstar. Emily lets look at whole foods. What are we seeing there . We saw an increase for whole foods which relates to about one month of sales. Investors are curious about how oods is doing within the amazon brand. Is it really sustainable within the brand . Is it really just rubbernecking as there is a whole lot of eliciting around whole foods a lot of publicity around whole foods. Emily lets switch to talking about the Cloud Business. It is on track to multiply as well over the next decade. Take a look at what had to be said over growth in aws. It is certainly growing very fast. I do not think any of us had the audacity to predict that it would grow as fast as it has, but we always felt it had a chance to be a significant is miss. Emily what do you expect to see when it comes to Cloud Business . Amazon had originally built aws for themselves for turning it into a product. You are seeing the success of that translate into other parts of their business as well. When you look at the cloud, there are a couple of horsemen but, atading the pack, the end of the day, when it comes to which company is putting out the number of features that amazon is putting out, there is only one company. They are putting out new features every year and listening to exactly what the customers want. Aws will continue to be a source of funds for the company to subsidize other assets of their business which makes them so dangerous. Generates 21oods billion in operating income. Tell me what else they discussed in this report. They really focused on consumer electronics. And that was really fascinating. It focused on devices like alexa which would you to order groceries in your own home. I think they have showed that is a key strategy Going Forward. All of these products and services are really integrated. It reminds me of when apple was really hot a few use ago with their various devices which all spoke with each other to create an ecosystem where you did not want to go outside of the apple experience. I think we are starting to see that now with amazon. Hardware efforts have not always been massive successes. You look at the amazon phone for example. The kindle got off to a rocky start, too. What do you think of this new service, amazon key . It is not so much about the hardware device as it is on alexa. What amazon is doing is taking a page out of googles playbook and making alexa completely ubiquitous across their devices and thirdparty devices which forces massive partnerships with the likes of bmw. I think that ubiquity will open up new opportunities to gather and collect data, and to also open up commerce opportunities not just related to the offerings may have on the site, but also getting you hooked on what the next iteration will be to create a daily habit of ordering from amazon. At the there is a lot of market to Market Opportunity that the company has yet to unlock. Thison this Quarter Company is very, very dangerous. Sleep with one eye open. Emily obviously, the amazon primes instruction service is subscription prime service is key. Yes, we have releasing the subscription numbers grow, and they will continue to grow as well. Emily shares of twitter gained the most in a year after adding 4 million monthly users and reporting betterthanexpected revenue for the third quarter. Thattry watchers caution continued trend growth is needed to prove that twitters growth is sustainable. Expectations is an art, and twitter seems to have manage that as well. Twitter has been miscounting its users for the last three years. Even though there has been an increase in users, there really only was a growth of 2 million users. They miscalculated for several years, and only now are they realizing that they had this mistake. It was only a couple million per year. Overes show a bigger gain some years, and it shows that actually between two quarters. When it looked like they were stagnant, the number of users actually few. It is not a good time to be testing trust with investors and analysts about the quality of their numbers. Emily does this miscount concerning . Concern you . I am less concerned about the actual numbers themselves. They were not huge errors in calculation. Trusts raise questions of in the validity of numbers. I should point out, they have very large competitors who have also had to come back to the market and say that they miss measured or miscounted. Depending on the company you are talking about, these things tend to matter more. Moreitter can show sustained earnings, i think that would have a bigger impact on them than some of their competitors. Emily twitter has been highlighting a number has be en piloting a number of new, different projects. Are any having more traction than others . Advertising as well as their data licensing business is growing at a doubledigit rate. They have been increasing about 14 which is acceleration, but they have not reported the base of daily active users, so it is rard for investors to wrap thei minds around what does this mean. The meantime, twitter has been making some changes in they and how they talk about the Online Harassment policy. We know that twitter along with facebook and google will testify before Congress Regarding fake news and russian infiltration of their platform. How concerning are all of these issues combined . For twitter, these issues are quite concerning. It is a matter of trust not just Investor Trust and confidence, but also marketed and user trust and confidence. They have to show that they are creating a face comfortable environment in which to engage. All of the press around andtionable advertising testifying before congress is not going to do anything to increase user confidence. Think we also need to see some more concrete answers about what exactly the steps being taken are to protect consumers from things like bullying and harassment. Emily that was melissa and selina. Globalrg is developing a breaking news network for the twitter service. A move allows cisco to expand their presence in software and the cloud which has been a huge priority for the company. Of big caps off a year deal making. Coming up, a member of congress has strong words for Silicon Valley. Is proposing a new service which could change the game for delivery and expand their offerings for users. We will explain. This is bloomberg. Host emily on november 1, three of the Top Tech Companies will appear before congress to testify about russian use of their platforms during the election. A stirring oped was written in the Washington Post entitled, trump beat Silicon Valley at their own game. Now, he must they must prove themselves. He used passionate messaging to get his message out. A lot of the platforms were abused. Voices, often extreme voices, with pretended to be more than just one person. Help figure out how to solve some of these issues. We know how it can empower individuals in extraordinary ways, but we need to fix the ss wes we saw the exce saw in the 2016 election cycle. Emily some would argue that social media has dramatically increased the number of voices being heard. Camtek Companies Really be responsible for all of this . Technology has been playing a positive rise over all. It helped give rise to the voices of president obama and bernie sanders. Sometimes, people can accomplish more with a single twitter post than i can accomplish on a accomplish with an hour long speech on the floor of congress. However, they need to have some basic differentiation between fact and opinion. Agenciess and news have thirdparty verification that independently checks facts. There should be thirdparty verification on some of the posts. They shall look at providing some sort of alternative perspective for ewers who want it. For viewers who want it. They need to look at what their journalistic responsibility is while not suppressing the freedom of expression. I am encouraged that that dialogue has begun. Emily you want to know how far these companies can go in distinguishing between fact and opinion when our own president might have a different opinion of the facts than the facts. Issue,ree that it is an but the are some independent organizations which can rate the information. They can have some sort of rating or verification just like newspapers and television stations do. They can provide a link to some alternative perspectives if you so choose. I think Tech Companies and social media is different from television. Television is not as interactive. Tech is a person to person communication, so tech cannot be responsible for every single post or the content of every single post, but they do need to adopt some sort of journalistic standards of thirdparty verification so that they give users an informed perspective. Emily how much can we rely on companies to do the right thing . For societyerests rather than the best interests for their business . How much of the government be involved in determining if there was russian interference on these platforms . Should there be government regulation . Silicon k it was valleys tradition where, they spoke about Building Technology which would help empower society and people. Thatlk with tech leaders, is what they say they often h ope. That it would create a more connected world and create more opportunities for jobs. One of them recently announced a billiondollar initiative to repair fol to prepare folks for tech jobs of the future. I think there is an ongoing interest with tech giants and the responsibility to help people prepare for the future. Given that they are some of the Largest Companies in the nation, and some of them have great many responsibilities to their viewers. On the russian issue, i think we need better intelligence sharing between Tech Companies in the government so that they can get advanced notice of suspicious activity. And Tech Companies need to help adopt processing to look at false accoutns or bad accounts. Even if they hire thousands of new people, they probably need investments in Machine Learning and Artificial Intelligence to do a lot of that work. There will probably be a role for congress and lawmakers as well to have constructive rules for tech to follow. Emily you spoke about the importance of increasing diversity at these companies. Is this something that companies can do on their own . We know that the representation of women and minorities in Tech Companies is low. Is this something the government should regulate . I think Tech Companies on their own it should increase their imagination when it comes to recruiting. 45 of africanamericans with stem degrees go to a historically black college or university. 45 . In Tech Companies want to expand weather is talent, they should form partnerships with some of black orhistorically African American universities in the country and recruit from there. The Oakland Raiders did that. They started recruiting at these universities, and it gave them a huge competitive advantage over all the other teams in the nfl. At times when we have such scarcity of quality talent, expanding the pool will make a huge difference. Emily the question is whether or not they should. The question is whether or not the government should force them to do so. To legislate requirements for women or minorities in their ranks. I am not for government regulating that, but i do think the government can make lsvestments in womens schoo in providing greater opportunities and pathways and corporate membership mentorship. I think the government can incentivize those pathways, but i do not think they should regulate that a number should regulate a number of seats that Tech Companies have to fill. I think that would be going too far. Bear isoming up, looking to break into the next phase of farming technology. Plus, accusations of gender discrimination in Silicon Valley is nothing new, but the latest case could have an interesting difference. This is bloomberg. Emily with its proposed acquisition of monsanto, bayer has focused on a shift to life science technology. We visited a new unit of the company in massachusetts focused on agricultural technology. Take a look. Something is growing at bayer. The company is making a big bet that they can have plants fertilize and sounds fertilize themselves. According to the head of the Biolife Center is a focus on helping crops grow to help farmers respond to a growing population. You have to feed more people, and that is why we believe the demand for self fertilizing plants is the demand for the future. Science center is teaming up with a boston aims to take which genomes found in peanuts which automatically supply nitrogen to crops with out that capability corn, wn, wehat, heat, and rice. We are taking that genetic design, and we are migrating them over. The idea that we can use less nitrogen fertilizer to save farmers money and give consumers a more environmentally friendly food. Nitrogen fertilizer is often one of the most costly inputs for farmers and has raised concerns about dilution. There is an enormous expense in getting fertilizer bought and out on the field. The bloomberg agriculture index has lost half of its value over the last five years. That andit declines in land have boosted interest in these bio works companies. Could be worth billions of dollars in 2050. They need an entirely different approach. They need 10 times the money and 10 times the patient the pa tience and 10 times the guts. The effort to reduce fertilizer waste comes as bayer awaits approval for its takeover of monsanto, the Worlds Largest seed company. We would benefit from having , because it would certainly fit into the chemicals and seeds we would potentially have. Bayer is giving it five years to see if their technology will make it to the crops in california for future testing. Itsy uber is expanding operations in europe. It will open a new right Operations Center in lisbon to provide rides to users in france, spain, and portugal. In the meantime, in london, uber is still seeking an appeal for its license ban. Coming up, we will break down alphabets results. All episodes of bloomberg are streaming on twitter. Check us out. This is bloomberg. Who knew that phones would start doing everything . Entertaining us, getting us back on track, and finding us dates. Phones really have changed. So why hasnt the way we pay for them . Introducing xfinity mobile. You only pay for data and can easily switch between pay per gig and unlimited. No one else lets you do that. See how much you can save. Choose by the gig or unlimited. Xfinity mobile. A new kind of network designed to save you money. Call, visit or go to xfinitymobile. Com. Emily; welcome back to the best of Bloomberg Technology. Im emily chang. Tech earnings were in full swing. Alphabet reported revenue of over 22 million sending shares to an all time high. We had the opportunity to speak with their c. E. O. After the . S were released and discussed their relationship with the e. U. , m a and political pressure. I spoke with the c. E. O. Of ad parlor and former c. E. O. Of Google Europe about the numbers. A lot of mobile companies, their products are increasingly commoditized. They are looking for the maximum they can squeeze out of those revenue shares from google. I think it will go up. There are probably others where there is a lot of upward pressure for google in areas like display, revenue shares, as well. I think it is something that to a large extent we have to get used to. There will be a trend upwards. Clearly google is doing what they can to slow the growth. But i do not think it will reverse any time soon. Emily when you look at the numbers, it seems like most things are otherwise going in the right direction. What are the main highlights to you . Ben so obviously, there is the overall growth rate expectation. They have not really broken out where that has come from, but my bet is a lot of that will be coming from youtube. Youtube has been doing really well. There are a lot of questions about youtube recovering from a whole brand safety scare earlier in the year. The evidence suggests they are. We have seen meaningful price increases. We have seen almost every single advertiser back on youtube, so that is certainly a highlight. Beyond that, i think it is Overall Health in the ad business. Clearly, there are a lot of other bets out there. The revenue is growing. A lot is continuing. At least when i have seen so far, there is no real standout success. But clearly Revenue Growth is a good sign. To start being meaningfully prosperous, we will need a lot more growth yet. Emily alphabet now totaling 3. 4 billion, and spending has dropped dramatically over the year. Million last year, this year 77 million. Ruth porat says they are really spending less on google fire, focused on developing the technology before expanding it. She also spoke specifically about how they decide where to continue to invest in other bets. She said we are looking to create valuable businesses over the longer term. What we do is a multiyear financial model. It is really a multiyear look at creating what we believe are multiyear opportunities, and she singled out waymo, the self driving car unit. She said they are pleased with the progress they have made for safety and self driving ars. Ways that they can help cities. There is the sense that they are thinning out their investments in other bets. Ben, what do you make of that . Ben i think they have to. They have to be disciplined. The reality is for google or for alphabet to build something that will meaningfully change their results or change the world, they need to focus on bets that can generate 10 billion in revenue. And meaningful profit. Very few bets any company can make have a reasonable chance of building a 10 billion, 20 billion dollar, 30 billion business. They need to think through the things i can really change the world, generate a lot of revenue. Alphabet has a meaningful, a good chance of being one of the winners. Clearly Driverless Cars is a massive opportunity. It seems like alphabet is one of the front runners in that rea. I think they are right to focus there. As far as a lot of other bets in alphabet where they say this is too small or we are too far behind. Emily; that was c. E. O. Of ad arlor. A former engineer at twitter filed the suit two years ago alleging the company thwarts the advancement of female engineers. She believes she can prove that twitter stacked the deck. By early next year, she plans to ask a state judge for mer permission to represent 122 female engineers at Twitter Twitter has rejected these claims in court filings. What makes this case different is the plaintiff is miss wong herself. She is willing to take this case to trial. Emily; how do we know she was denied these things based on her gender and not her performance . This is a class action case. In many of these cases, discrimination cases are individual cases. In this case, she is seeking to represent all of the women engineers at twitter. The case is based on a theory called desperate impact. While the media wasnt advised to discriminating against women, the impact affects women. To put it simply, it took women longer to get promotions and fewer women had promotions that we might expect. Emily; ellen powell felt passionately about heras case too. Joel, what do you think makes this case different . Ellen powells case was about ellen powell. That was lot of harassment. More focused on harm and focused on ellen powell. As jason was explaining, this systematicsystemic bias against women at twitter. Emily; twitter said they are committed to a diverse workplace and we believe the facts will show miss wong was treated fairly. What do you think is the likelihood this gets certified as a class action . There is no precedent for this. This is not the the data that tina is able to turn up, extract from 2013 and marshall in her favor. If she is able to extract numbers and data that make that support her case, i think it seems like there is a good chance, i think it all depends on that. Ive seen some of those numbers and they initially filed in the lawsuit, they have changed. There is disputes between tina and twitter about those numbers that are going to be resolved, taken up in court this week on thursday. Emily; jason, what can you tell us about these numbers and what they show . Im hesitant to get into the nittygritty of this case. The data is going to be really important for us. What were going to have to show is that fewer women were promoted than statistically we would think should happen. Thats to say more men are being promoted than women and were still working with twitter to get that data. There are some bumped in the road but im confident that is what the data will show. Emily; we have seen many Sexual Harassment allegations, especially in the last year. We have seen men get fired. We have seen the c. E. O. Of uber resign. Some people said if ellen powell filed her suit today maybe she would have won. I think the environment matters in terms of decisions. I think it matters for judges, what cases came before. I dont think that the climate matters for judges. Juries, you know, maybe jason is probably the better person to ask about that but i think the way the climate really shapes these kind of suits are in temples of encouraging and motivating other women to come forward. You begin to see more of these cases. But how they the outcomes depend on precedent and the legal issues i think. Emily; have you been talking to other engineers at 2013 and what do they say . We have the folks spoken with say clearly there is a problem. If you look at the statistics from when we filed the case in 2015, 35 of the employees were women. If you look at the technical positions, engineers, less than 10 of those folks were women. Everyone we have spoken to seems to agree that is impacting the work environment. Just the fact that the population there is skewed so heavily towards males. Emily; next step, when will we know for sure . So the next step in our case is class certification. Wering that the class will be certified or at least have a decision as early as march of next year. Once that is done, assuming we are able to proceed as a class action then we can get the provers what we are saying is happening over there. Emily; a quick disclosure. Bloomberg llp is developing a network for the twitter service. Coming up, apple has struggled to solve technical issues. Well break down what is going on behind the scenes at the company. This is bloomberg. Emily interest in the iphone 10 is mounting. This is one of the most ambitious device apple has ever brought to market. The technology posed several challenges from facial recognition to 3d sensors. We have been covering what has been going on behind closed doors at apple and into whether they will get the smart phone into the hands of consumers next week. The margin of error in that is tiny. In order to make it possible for their suppliers and component makers and mod yumeyule asemblers to take them and ship them, they have to reduce some of the specifications to make it able to be shfed in the quantities they need i dont think anybody will be able to tell any difference frankly. The the difference they were talking about for the touch i. D. One in 1,000 people could spoof your fingerprint. They it is it is one in a million. The likelihood is it is still going to be better than touch i. D. Emily apples statement on your reporting said bloombergs claim is completely false and we expect face i. D. To be the main Gold Standard for arable awe hentification. That perhaps suggested it might have happened before they released that number. Emily what do you make of this . I think this is about the tolerance of where apple potentially started versus what they will live up to when they shift. The fact is, if they live up to that one in a million, then they have not reduced it, and the consumer will never know. If there is a reliability roblem, if people experience situations in low light, in ways that do not necessarily recognize it, that would be an issue. We dont believe that will be the case. Apple is standing by this technology. We have said we think they ill be somewhere between three million and four million devices. We have no reason to believe it will not be a successful launch. Emily walk us through how apples facial technology is expected to work. There are three components that matter. The illuminator, which is like a torch which sees a face. It passes on the action to what they call the dot projector, which is computationally intense. This flashes 30,000 dots at your face. The infrared camera then detects that, puts that through the algorithms and recognizes this is the person that i should allow or not allow to unlock the phone. Emily how difficult would you say is it to manufacture this kind of technology at scale . Crawford it is very difficult. These are precision products. We have heard a lot of rumor and innuendo that yield has een a problem. There have been manufacturing ield numbers thrown out of 50 , 60 . Those are unacceptable when you think about a highvolume manufacture product. Those yields have to come up to the 90, even 70 over time. I think they will get better. This is a very expensive product. This product has a premium price point. There is going to be followed fallout around some of those components. Emily are there other components causing issues . Alex it seems they have broken the back of that. The flood projector as well, this enfra red laser, they had some issues with that. The yield on the dot projector was about 20 at one stage, 40 for the illuminator. It is still a long way from the 90 . Crawford i would just say, we believe apple will ship optimistically 37 million. We are now feeling that is at the highend. Not only based on the components we are talking about today but also based on oled availability. Samsung has the absolute lions share of these screens locked up. They take a significant amount themselves. We are not going to say it is not going to be a constraint Going Forward and certainly into next year. Emily that is shipping, what about demand . Are you expecting demand to be higher than ever despite this 1000 price tag . Crawford our expectation is there will be unsatisfied demand. This is going to be a very hot product. When people are lining up for it, trying to get it, they will not be able to meet initial demand in q 4, we believe. Alex also wanting to take away, this is one detail of the story which apple has not been happy with. We go into great depth with the supply chain. The takeaway is they have broken the back of a lot of the problems they have had with a 3d sensors. This is one of the ways they did it. There are other ways as well. Please read our story. Emily crawford what do you expect . Preorders start on friday. Crawford yes. Emily you can go to the store and buy it the following friday, if you stand in line, presumably. How do you expect the demand and supply curve to unfold . Crawford i think they are going to be fairly supply constrained. Our expectation is around four million at law firm. They probably ship optimistically 37 million, probably more realistically 30 million range for q4. And then our expectation is, as you get out into next year, we are looking at 50 of phones highend. 240 Million Units next year. Not all iphone x. Half of those will be the larger size, which the x will be included. Emily iphone 8 . Crawford our expectation is pretty strong. Our expectation for this quarter, about 15 million. Alex one interesting idea, it will be important to have the iphone x in stores. There are probably a lot of iphone 8 buyers waiting to hold the two sidebyside and say do i really want to spend 300 more on this . Emily meantime android creator andrew ruben is feeling the heat of a crowded smart phone market. His latest cragse creation the central phone is getting a price cut of 200. It is now 499. It originally cost 699. The launch of other new devices from the likes of apple and google also could have hurt the company. Customers who already bought the device are being offered a 200 credit. Coming up, the lathes on amazons steps to make sure you never miss a package. If you like bloomberg news, check us out on the radio. You can listen on the bloomberg app. This is bloomberg. Emily as we have been reporting, more than 200 cities are bidding to secure the location of amazons second headquarters. The c. E. O. Spoke to bloombergs eric schatz kerr and said he is betting on one city in particular. Create so much demand. So far youre not bidding your own building . They own their own distribution center. Not clear why. Cant do everything although it looks like they are trying to do everything. Boston has a good shot at that, given the technology, the infrastructure and the exa. M. Base. Ell see how that turns out. The other places they might go are the southeast, atlanta, raleigh, durham. Atlanta is affordable. Emily and other amazon news, the retail giant would like to make missed deliveries a thing of the past. The new service dubbed amazon key will let amazon deliver packages into your home and it will let selected Services Like house cleaners and dog walkers in while you are away. The Service Works with an electronic walk and the the person s film entering your home. Joining me to discuss is mark gurman. How does this fit into the hardware strategy . It is a hot space now. Nest came out with theirs. This is amazons approach. They are tying it to how they make money, packages. This is another tool amazon is selling to help people get their stuff. Emily this would literally be the delivery person entering your home . What about security concerns . We have not heard back if amazon has an insurance program, liability, terms of service. Are you waiving your right to sue amazon or file a complaint if something goes wrong . Im sure that the people are vetted. The reality is that letting a person into your home is not an easy thing. Emily how do they convince people this is worth it . There is two things. In terms of buying the hardware, it is a nobrainer purchase. If you look at the specs, the video quality, the app integration, it is 120. Which is a really good price. That is about half the price from nest and other smart home camera make rs. In terms of the amazon key, it is a tougher sell. Emily how does this fit in with all of the other does it fit in with the echo and other homebased devices . All the devices are designed to sell you more stuff. This is another conduit of that system. People buying things and aving a security camera. They will also be selling a cloud subcrippings service. That is another way to make money. Emily how does this fit into the broader delivery efforts . Amazon is trying to take on more of the Delivery Logistics problem. Taking it away from ups and fedex. There is another element to it. Amazon is getting more competition lately. There was a time when you could not think of anyone other than amazon, now there is walmart. They have a Similar Service and amazon is fighting back with a more integrated approach. The integration with smart locks and cloud camera tech as well. Emily what will you be watching as you head into the holidays . And all of this stuff converges at once . It will be interesting to see how the Different Companies create their platforms as a way to lock people into their ecosystem. It is going to be interesting to see if there will be people who buy apple devices, google, next, amazon. Pick up additional heat up and you will see everybody try to get a piece of every different device. Emily what is the hottest speaker on the market . Stay tuned to gadgets with gurman, my blog. We will be comparing everything down the road. I have been listening to the sonos 1 at home. It is the sonos speaker with alexa. Emily that does it for this edition of best of Bloomberg Technology. We will bring you all the latest in tech throughout the week. Remember, all episodes of Bloomberg Technology are screaming live on twitter. You can check us out weekdays. That is all for now. This is bloomberg. Carol welcome to bloomberg businessweek. Were inside the magazine s headquarters. In this weeks issue, how side to what may be the most valuable supply chain in the truck business, how snapchat resists propaganda, and rollsroyce shows us how the wealthy love to drive. All that ahead on bloomberg businessweek. Carol we are here with the editorinchief, megan murphy