Transcripts For BLOOMBERG Bloomberg Technology 20170724

Americans that someone has your back. Democrats also unveiled a new slogan, a better deal. Global news 24 hours a day. I am Alisa Parenti. This is bloomberg. Bloomberg technology is next. Emily i am emily chang and this is Bloomberg Technology. Coming up, hip hop looks seems to have blown the apocalypse seems to have blown over at google. Masayoshi sons multibilliondollar spending spree could affect another major market. We will discuss the softbank threat to google as rivals look to capitalize on the companys crises. Open talks with executives from time warner and at t as the 85 billion dollars deal continues to take shape. First to our lead, off shares dipping in afterhours trading. The Parent Company releasing secondquarter earnings which sent shares soaring but then turned south. Revenue came in at 26 billion, up 21 year over year. But aggregate costs per click dropped. These numbers include the effect of the 2. 7 billion fine from the European Competition commission. She told me it is so early in our analysis of the decision, this is an ongoing legal matter and they have not decided if they will appeal. Joining us from new york, Collin Colburn and cory johnson. What happened you with shares today. Why did that happen . Cory very fancy. Really interesting quarter. I think the reason the stock is down is because of traffic acquisition costs. The company has been morning as they ship away from ads on the website to ads on a mobile device and youtube not. Outube, but mobile apps adshe iphone, we are seeing on an app. They are making the sales calls bringing in the ads but selling them through apple. It is more expensive to acquire that traffic for google. Googles costs for the ads had been rising. Emily you think this is more about traffic acquisition costs been per click. Cory they have warned this is a big change in the business and it will cost more. This time, we saw it. Collin, what is your take . Ruth singled out the strength in mobile search. I think mobile is the big driver. That is kind of the headline. I think that is why you see increase in clicks and the cost them that decrease in aggregate decrease in aggregate cost per click. That has been a driver for google for some time. Emily what about what has been going on with youtube . The times did a big investigation into extremist content shown next to prominent advertising. A lot of advertisers pulled their campaigns. It seems the advertisers have returned. I did ask about this. She reiterated revenue was strong. Cory a lot of people have made noise about this. They also like the traffic google is giving them in terms of clicks from ads. The google ad is like nothing else in the history of advertising in that you can see the result from an ad as it runs. To the extent advertisers pulled the ads, it is probably good news for now because they fixed what little problems had been there. I dont know how big these add problems were for advertisers. It looks like theyre back and none stayed away for good. It might make the comparison numbers look better for google going forward. Emily collin, there are ongoing investigations in the e. U. We had this big fine. Google is trying to decide whether they will appeal. How concerned are you about future investigations . From an advertiser perspective, there is lots of concern. The youtube scandal earlier in the year and now the ruling from the e. U. , from the competitive commission, does not help an advertisers stomach when going to invest in advertising on google. How do you know your ad is not going to be placed in a position you do not want it to be in . How do you know when you are buying ads it is not being skewed against you . There are some issues. I agree with corey. I think this is a good thing for google in the long run with advertising pulling out and able to be to identify what to work on to instill better trust in advertising partners. Other quarters have been focused on moonshot bets. Revenue is increasing. The losses going down. It is also becoming a smaller part of the overall pie. Im wondering if google will be less focused on moonshots going forward. Cory i was struck by the capital intensiveness of the wasg has declined down about 60 this quarter. Lost last million year. Now 72 million. Isy i think a lot of it pulling back on google fiber. Ishink what is interesting that the virgins divergence. Ruth porat says we will make the business simpler to understand. We have alphabet as a Parent Company. Google is the biggest business, here is how it works. They have made google more complicated from a marketers perspective. There are more places the ads are going on in terms of mobile and programmatic. They have emphasized big growth in you time which youtube which is highly under monetized. They have numbers on youtube unbelievable. 1. 4 billion users on youtube, registered users logged in. This is not just people watching on a twitter feed or catching a video. Emily second only to facebook. Those are cory those are huge numbers. I think they have made the business more interesting and complicated with the number of ads and type of ads they sell even though the overall business looks simpler by description. Emily when it comes to other the lossestold me are coming down in part because of a pause when it comes to google fiber. The increasing simplicity of the overall business, does it make you more or less excited about the stock as a whole . From a marketing perspective, theres still a lot to be excited about from google. The counterpoint to what cory was saying is if i am an advertiser, i have more options with how i can interact with my , whether it is shopping ads or more will mobile paid search ads or display ads through other places. I think that is a good thing from an advertising perspective. Emily Collin Colburn, thank you so much. Cory johnson, editor at large. We are listening to the call beginning now with ruth porat saying revenues demonstrate ongoing momentum in the business. Tremendous performance in mobile, as we were discussing. We will be talking more about google later and listening into that call. Web m. D. Has agreed to sell its stock to kkr with a medical website agreeing to make it more private. That represents a 20 remy into fridays close. Coming up, softbank has placed a major that in the global ridesharing wars. How the become investment has the potential to threaten googles drive for local dominance. This is bloomberg. Watching,ebook we are blue apron shares jumped as much as 20 after receiving by 711 from 711 analysts analysts. Warned the 11 analysts it should not be valued at more than the 10 price. Risk of losing out on another big chunk of the global market. 2b announced it has raised billion from japans softbank and china. The company is expected another 500 million from existing backers. This move is the latest hurdle for uber amidst a series of scandals. Joining me to discuss, brad stone. Why is this funding round so significant . The numbers are eyepopping for Southeast Asia. This is th biggest funding round of any company and asia in asia. Players grab is a major in the space. Hold on allrs these markets is tenuous. Emily how much pressure is this put on them to get out of Southeast Asia . I think china and russia are good benchmarks. From thoseithdrew markets, it was not necessarily a defeat. They got out taking major stakes in others. They are simplifying their business and cutting losses. It is not that bad for uber at a time of turmoil. Emily what about other markets . Potentially brazil, india. I dont think they want to sacrifice the whole chessboard. India is one place where they have significant competition. I think they will still try to make a major play. America,ost of south uber is strong. They can streamline business and it is not necessarily a defeat. We have come a long way from the early sentiment this could be a globe spanning platform. Clearly it is not. Emily what do you make of softbank supporting the antitumor antiuber alliance . Son has commitment a commitment to online payments. Softbank may be interested in taking a stake in uber buying shares from investors and investing more money into uber. Softbank has denied that publicly. We think there is still something to it. We could have a global peace treaty were all these companies taken ownership stake in each ofer and we reduce the level competition causing them to lose money. Emily softbank potentially taking shares of uber because investors seem to want to liquidate stock. Is that because they want to cash out or they are losing faith in the company . I think it is the former. It has now been 10 years. Early investors are impatient. That may orr an ipo may not, come next year. Uber has continued to perform well. While there might be anxiety, i think people are still bullish on the category. Emily is it performing well because of these markets . Is it better for uber to walk away from them . Do they lose Something Big by not having a stronghold . Singapore,ts like market is growing very fast. Grab is discounting and losing money. Is idea of the peace treaty to reduce competition, get rid of the discounting, allow prices to go up, and then you return to natural profitability. I think uber wants to get in more markets. Emily any updates on the uber c. E. O. Process . Do we know how long it will take . I have not heard anything. I have been asking and listening. They do not seem to be in a rush. They have a committee of executives inside uber. Think theyre waiting for the right candidate. Would be surprised if we hear about it tomorrow . Maybe not because they need to fill the spot. I think it will be a couple of more weeks if not months. Thanks sod stone, much for stopping by. As the white house announced its defense against the accusation of russia ties, it is pushing forward Massive Health care legislation. We will break down the latest in washington next. This is bloomberg. Emily it was another busy day in washington. Jared kushner appeared on capitol hill today talking to the Senate Committee on intelligence in closed session about his contacts with russians during the president ial campaign. After the meeting, he denied any collusion. Nor do i know of anyone else in the campaign who did so. I had no improper contacts. I have not relied on russian funds for my businesses. And i have been fully transparent in providing all requested information. They at the same time, white house is also trying to pass a health care overhaul. President trump turned up the pressure on republican lawmakers on twitter and this afternoon he said the senate will vote on a procedural vote tuesday. President trump the senate is very close to the votes it needs to pass a replacement. The problem is we have zero help from the democrats. They are obstructionists. That is all they are good at, obstruction. Emily before the speech, the president made a series of tweets where he said republicans have a last chance to do the right thing on repeal and replace after years of talking and campaigning about it. If republicans do not repeal and replace, repercussions will be far greater than any of them understand. President trump trying to throw around his weight, is more muscle to get what he wants when it comes when it comes to the health care bill. We are still watching headlines from the health of the Earnings Call with ruth porat speaking moments ago saying their strong momentum in the Second Quarter with the growth in mobile search and youtube. But stock in late trading also stock in late trading not reacting well to the report. We will also have more on google coming up. Emily we are back with Kevin Whitelaw to talk about washington. I want to start with what is going on with health care. What do you make of the president s speech and the likelihood republicans are going say . Ed what he had to it is coming down to the wire. They are claiming to go ahead with a vote tomorrow to debate the bill. A lot of senators do not know what the bill is and which bill is the one they are intending to try to put forward. There is an option to do a repeal only that would be delayed repeal. They have been talking about a version of a replacement bill revised several times by Mitch Mcconnell that is still a work in progress. It is an unusually fluid situation for a senate usually seen as much more of a deliberative body. Emily what do you make a Jared Kushners appearance today on , confirming contact and calling these unmemorable . This is sort of the beginning of what is likely to be a long process of public statements, not just from Jared Kushner, but other members of the Trump Administration and those associated with the campaign. Pressure it Jared Kushner will be back on the hill tomorrow morning meeting behind closed doors with the House Intelligence Committee where members will get a chance to ask questions. There also might be public appearances down the line. A number of democrats and some republicans have said they want to see Jared Kushner show up in public to answer questions in front of everybody. That is one thing. Instill have other hearings the future. The Senate Judiciary has made it clear it wants to hear from donald trump, jr. , and Paul Manafort at some point. Originally scheduled possibly for wednesday. It will likely happen at a later date now. There will be a lot of these appearances coming up in the coming weeks and months. Emily there has been a lot of controversy swirling around ideas of things that could happen, whether it is President Trump pardoning himself or firing bob mueller. Obviously, the president has shown himself to be fairly unpredictable. A first could we see step . At this point, who knows . We know President Trump does tweet a lot. He is an impulsive tweeter. I believe he debates things amongst his staff that way, too. As far as actions, it is clear there are a lot of republicans nervous. Many of them are happy with the choice of bob mueller. That was someone who has a lot of respect from both sides of the aisle. I think theres a certain amount of nervousness about what might happen about jeff sessions, given some of the tweets we have seen trump give about the attorney general. Emily i know you are continuing to follow all of that. Thanks for the update. Talkings have started to at t and time warner about approval conditions. We will discuss. This is bloomberg. These days families want to be connected 24 7. Thats why at comcast were continuing to make our services more reliable than ever. Like technology that can update itself. An advanced fibernetwork infrustructure. New, more Reliable Equipment for your home. And a new culture built around customer service. It all adds up to our most Reliable Network ever. One that keeps you connected to what matters most. Alisa i am Alisa Parenti and washington and you are watching Bloomberg Technology. Secretary says exiting the bloc does not mean the end of economic ties between britain and the european union. We spoke today to begin preliminary talks for a postbrexit trade deal with the u. S. This will not come at the expense of our european partners. Britain was the e. U. To succeed. There will be no closing off of relations, economic or otherwise. And no abdication of our responsibilities. Prime minister is criticizing the Prime Minister for his decision to veto bills. The e. U. Has threatened sanctions over the issue. He said the proposed changes gave too many politicians too much power over the judiciary. Chanceenvoy sees little cyprus will start soon. A key sticking point, a disagreement about the 35,000 turkish troops stationed in cyprus since 1974. Turkeys president is urging and and to the crisis between qatar and its arab neighbors. He wrapped up a twoday tour in guitar where he voiced support for mediation issues talks led by kuwait. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I am Alisa Parenti. This is bloomberg. It is just after 5 30 in washington. We are joined by paul allen. He has a look at the markets from sydney. Good morning. Good morning. We are looking for a positive start. A couple of stocks to keep an eye on, the copper and gold producers. Rio tinto under investigation for alleged corruption for one of its iron or projects a few years back. Nikkei futures looking next. Both releasing earnings today. The bank of japan minutes will be out. The reiterated its commitment to stimulus and emphasized the Downside Risks for activity and inflation. In south korea, the government will be releasing the economic plan for the next five years. I am paul allen in sydney. More from Bloomberg Technology next. Emily this is Bloomberg Technology. I am emily chang. Alphabet shares are still down. The ad model is shifting to a mobile dominant space. Also hammering down profit was the antitrust fine from the european union. Was it all bad news . Take a listen to ruth porat, the c. F. O. Of alphabet, on the investor call. Google revenues were 18 four 4 billion 18 port 4 billion in the quarter. The biggest growth was in mobile search and youtube. , the bloombergme senior analyst. You can see the spike afterhours. What is going on . If you look at the underlying demand, demand is strong. The traffic acquisition costs, because they are making more money from mobile advertising, the acquisition cost is higher on those platforms. That is why the net revenue came in line with estimates were missed the bullish estimates. That is why you saw the reaction. Emily we have been talking about what has been going on with other bets, this is what ruth porat was brought in to do. Losses are narrowing. Revenues are increasing. It ruthat would for porat had to say about the other bets. We are pleased with our progress. Couple of updates. Nest continues to drive expansion such as the indoor Security Camera as well as geographic expansion, both of which support its position as the leading brand in the connected home. Emily when i spoke with her on a phone call before the Earnings Call, she said nest and fiber are driving the revenue. It is taking a backseat to the overall google business. The meaningful contribution is still a couple of years away. That is why they classify that in other bets. What is interesting is the cost control. There is more focused coming to other bets helping the bottom line. Dont expect Revenue Growth to accelerate away from the other bets anytime soon. You will see acceleration in other revenues such as cloud services. That is where they are doubling down. Emily a huge opportunity for them with amazon and microsoft. They also named the c. E. O. Of google to the board. It is interesting because he is the fifth alphabet employee on the board. There are some questions about whether that is too many people from one company on a board. Were is just market mark zuckerberg. Amazon is just just days us jeff bezos. Literally betting the farm on Machine Learning and ai. This allows them to apply that to the core alphabet group. There is more focused coming to alphabet because of this. As we have seen, it has been working. With the focus, i think it will help in the long run. Emily thanks so much for breaking it down. We will continue to listen to the call and bring you headlines as they happen. At t and time warner are said to be an early talks with antitrust officials for approval conditions. Lawmakers have been pressuring the Justice Department to stop the 85 billion deal on fears it may lead to higher prices and fewer choices for consumers. , theer possible challenge department chief awaits senate confirmation. Joining us is gerry smith. What is the latest . The latest is at t and time warner are in talks with the Justice Department about how this deal could go through with conditions. Signis an encouraging because there have been questions for a while about whether the Justice Department might try to block the deal. President trump has criticized cnn which is owned by time warner and said during the campaign he might try to block the deal. We know now the companies are in talks with Justice Department lawyers about the deal going through and having certain conditions they have to follow after the deal goes through. Emily talk to us about other Television Channel owners and what they are concerned about. Owners,um channel rivals to hbo, Companies Like showtime, they are very hbo,rned at t could use hbo is ownedause by time warner, they would favor hbo over there channel. They are asking the Justice Department for conditions that protect them and make sure they get the same kind of marketing and packaging, equal footing on online distribution that hbo is getting when it is part of at t. Emily if the deal goes through, what conditions might we see imposed on at t . That would be one of the conditions that might be imposed, that at t would have to treat hbos rivals the same way it treats hbo. One thing that has been an issue and is being looked that is the idea of what is called zero rating. If you are an at t wireless subscriber, there is the potential streaming hbo might not count towards your monthly data, whereas other channels would count towards data. That is something hbos rivals are concerned about and Justice Department lawyers are looking at as well. Emily gerry smith, thanks so much for joining us. We will keep watching. Report is putting a is theast executive chief marketing officer. Position Bleacher Report is a viable alternative to facebook and google for marketers looking to reach young audiences. He will work on new Advertising Opportunities for brands like at t and gatorade starting august 14. Competition in the augmented reality space is showing size of heating up. How blippar plans to carve out a space in the field. That is next. This is bloomberg. Emily a report we are watching. The monthly Internet User data. Or 26 2017 june pinterest continues to stall, highlighting the risk it may struggle to sustain user growth. Amazon, pandora, and facebook continue to see visitor challenges in june. Phonebased augmented reality is on track to become a major trend in coming years with tech titans launching their own new ar platforms. It is not his major tech giants making a play in the field. We are going to Caroline Hyde in london who spoke with a longtime player in augmented reality. What have you got . Isoline the longtime player blippar. It is one of yours socalled europes socalled unicorns with the valuation of more than 1 billion. The company is known for its visual discovery apps which boast 65 million active users. It recently launched a facial recognition feature which claims accuracy. E than 95 i recently caught up with the c. O. O. , danny lopez, in london. Aboutted about asking application for the latest feature. It is fun, social. We want people to play around with it and learn from the experience. The key for us is the accuracy of the recognition. Ar facial recognition has 99. 67 percent accuracy rate. When it is working well, you can take that and use it in a host of sectors. Think Global Banking with facial recognition as a way to transact, Building Access where there is a camera lens that recognizes you as an employee. ,o many smart networking things trying to for your out who might be relevant to you, having the ability to scan a photograph and get that information is exciting. Caroline Security Issues or worries about that as well in terms of being able to scan a picture and know the details about them . How does that scale . Security is a key area. Not something we are working on now. At the end of the day, if you acknowledge facial recognition issue the ability to find where the bad guys are, that is a positive development. People think about privacy issues. About someone in a foreign city who falls down, the ability to find nationality and the next of kin saves lives. There is a debate about privacy but also so much value added. When blippar first launched five years ago, it was very much about branding and andp is a showcase of the technology. Thatde the clear decision you need to be good at computer vision. When you have a perfect marriage between augmented reality with recognition and cognition, you have the perfect marriage that will allow a are to scale. We provide people the ability to get more from the world in front of them. The technology we have built can be taken outside the app and used by companies in other sectors to capitalize. Caroline you said you have been investing heavily. What does that mean in terms of money . Are you looking toward profitability or breakeven . How can you make sure this is a revenue driver as well . We already generate significant revenue from the brands we work with. We take a longterm view which is that we are building something. Where indexing the entire world. To do that, you need the best engineers in the field. We have a lot of those here in london. We have a lot of those on the west coast of the u. S. We want to become a Profitable Company in the future. I take the longterm view think it is important to spend money to have technology you are proud of. Along the way, meeting significant milestones. Caroline have you got a need to be fundraising anytime soon . We raised just over 100 million in the last five years. We have incredibly supportive shareholders who are very comfortable with the progress we are making from a commercial standpoint. We are a private company. Who is to say what happens in the future . Right now, feeling good about where we are going. Caroline there is talk in the press of burning for cash. It sounds like you are heavily investing in the area you are in. Fundamentally it comes to whether the board is comfortable with the money you are spending and the progress you are making. If the answers to those is yes, that is where we want to be. Caroline what about the road to exit . Driven . En, m a all those options in a few more are on the horizon. It is a very exciting time for the space. Since 2011 come you had people say is next year the year when ar becomes mainstream . This is the year when people are starting to take it more seriously because a lot of the big players, facebook, apple, google, they sense it is here and happening now or they are investing heavily in computer vision. Both of those are areas we have been working on for 5. 5 years. The next 18 months will be crucial for the space. Nobody has the answers. That is the key. It is not like the big players or ourselves can map out what will happen in the next 12 months. It will be exciting to follow every single step. Caroline optimistic c. E. O. Danny lopez. Emily thanks so much, Caroline Hyde in london. We turn our attention to Southeast Asia and india. Alibaba and amazon said to be pouring millions of dollars in fees regions. We will discuss the latest negotiation. We continue to monitor the alphabet conference call. Shares still down about 3 in afterhours trading. This is bloomberg. Alibaba is said to be in negotiations to lead a funding round in the known these are indonesias Largest Online marketplace. Joining me now from new york, selina wang, who has been following the story. Talk to us about the strategy behind the potential investment. Alibaba is incredibly aggressive in Southeast Asia. We know they want to dominate this area while there is still green space and no clear winner. Big start up in indonesia. Alibaba recently upped their state by another 1 billion to have full control of this singaporebased company. Tokopedia is a National Extension of them wanting to dominate the space. Emily what does it mean for alibabas competitor which had been in talks to buy tokopedia . This is a big blow. Alibaba is the much larger competitor and has much more cash and impetus to win over tokopedia with more money and a higher valuation. He was looking to invest in the hundreds of millions of dollars. It does make more sense for alibaba because the Business Model is more similar to alibaba in that it matches buyers and sellers rather than selling from its own shares. Jd has tended to only entire chain from their warehouses and delivering to the customer. Emily staying on that side of the globe, in india, amazon making a bid for the indian payment business. Tell us what is behind this. Nothing is going to stop jeff bezos to win over india. Another missed market with more than one billion people. He needs to have a strong Digital Payment system to make ecommerce as easy as possible. He has big ambitions in ecommerce and payments. One ofal competitors, them has their own large payment service. Amazon needs that as well. Freecharge is a good extension of that. Emily what does this mean for local competitors . Amazon would be buying a struggling smaller competitor. For the smaller local competitors, they need to up their game. In the midst of the potential larger localthe competitors are in talks for a merger. This would mean there would be a stronger domestic behemoth to compete with amazon and jeff bezos. Jeff bezos has said he wants to invest 5 billion in india so nothing is going to stop him. He will havege, better Brand Recognition and another channel to acquire new users. Definitely something for local competitors to keep an eye on. Emily selina wang covering the other side of the globe. Thanks so much for joining us. That does it for this edition of Bloomberg Technology. We are Live Streaming on twitter. Check us out weekdays, 5 00 in new york, 2 00 in san francisco. That is all for now. This is bloomberg. From our studios in new york city, this is charlie rose. Good evening. We begin tonight with politics. This weekend marks the sixmonth anniversary of President Trumps inauguration. Though six months have been marked by what seems like a nonstop flow of news from the west wing. With more on the latest developments, we are joined by shannon pettypiece. She covers the white house for bloomberg news. And in washington, dan balz, chief correspondent for the washington post. Im pleased to welcome them both to