live from pier 3 in san francisco, welcome to the late edition of "bloomberg west," where we cover the global technology and media companies that are reshaping our world. i'm emily chang. our focus is on innovation, technology, and the future of business. let's get straight to the rundown. derek schmidt, marissa mayer, and other execs sit down with barack obama to discuss surveillance and what wrong with healthcare.gov. facebook is rolling out video ads in some newsfeeds as part of an effort to convince

advertisers that the social network can be more effective than television. fazes him a great customers after prices range -- faces some angry customers after prices surge during a snowstorm. some of the biggest names in technology were at the white house today, telling president obama about their views on hot button issues full among those in attendance, cook, yahoo! ceo marissa mayer, sheryl sandberg and reed hastings and a costello -- dick costolo. sent a letter to the white house and congress, urging them to reform surveillance practices. a judge says that the nsa collection of phone records is probably unconstitutional. phil mattingly joins us from

washington. i am dying to know what happened at this meeting. what happened? was almost all about surveillance. about two hours long. these executives met with the president. the key points were what came out in a joint statement last week. to thosee key point principles, they do not believe that bulk collection should be allowed anymore. what thet the core of nsa has been allowed to do. not only aboutd international low back, but the business implications of this. talking about billions of dollars lost for these companies because of mistrust that consumers running away. the president plans to make some changes and they wanted to be real, not just something that happens on the surface. that president obama wanted to meet these executives to talk about healthcare.gov. they said they would come, but only if they can talk about the

nsa as well. yesterday a federal judge ruled that the collection of phone records was probably unconstitutional. how do companies like google, facebook, fit into what is going through the legal system? interesting thing. there are a couple ways of looking at it. these companies have their own legal case is going on right now against the government. they are not looking at what the ise that court -- fisa court doing. trying to disclose more information and the justice department is saying no. case tothe first question what has been a cornerstone of the surveillance program. it does not violate the fourth amendment. as these companies push for more information to be released and for the u.s. government to put more curbs on it, looking at this case and breaking down the barrier here on the cornerstone of these programs, i think these companies and focus on this and

use it to plead their cases going forward. >> phil mattingly in washington, thanks so much. what exactly with-with the healthcare.gov troubles? compuware which provides management to companies like amazon and facebook conducted an independent study of what went wrong with the launch of the government health exchange. for more on that story and what they found, i am joined by michael smith, the vice president of engineering at compuware. you guys have done some of your own performance surveys. you found it is not working out that well. what exactly are you testing? tests fromunning different computers around the united states. we are measuring the response time that those computers are experiencing. seeing that there are still quite a few locations where the response time is unacceptable.

>> where are you seeing this? what particular geographical location? seems to be varying. it depends on perhaps the time of day or other factors. one of the things to note is that when we are testing these commuters, these are real computers over a wi-fi connection. they may be on a hard wire connection. the performance can actually change over the course of time. >> when you are looking at these problems, why are they happening? an initial analysis and we observed that there were some inefficiencies in the way the website was designed. componentsalso some that come from outside sources. a typical website today encompasses content and components from not just the main website, but third parties as we call them, such as a button. "like"

there were some third-party components in the healthcare.gov website that had some trouble early on, especially with performance response time. >> what sites are you talking about? i cannot name specific sites. but there were several of them involved. >> so the government has tried to fix the problem, but how much progress has the government made so far? >> from what i can tell, the focus has been heavily on certain systems where the integration to the states' exchanges has occurred. maybe with other federal databases. we are still seeing slower performance at the end-user computer because although some improvements have been made in , there isptimization

still room for krugman. vast improvement. -- improvement. >> look in white house do to improve this? what are some specific things they can do? testing from the end-user computer so they can get an understanding of what is the response time under different conditions and with different kinds of operating systems or browsers. then they can observe how some of the website design behaves under those conditions. or reduce theize number of objects that are transferred out to those end- users. importantly, they can work with those third parties to ensure that they can scale and handle the website. >> a former microsoft executive, who has been on this show during his time at microsoft, and will

now be in charge of this website, also president obama was meeting with those tech ceos in washington, how much do you think that their leadership is going to help in this kind of situation? >> certainly leadership with in implementing large e-commerce site is important. it is a different world when you are dealing with the consumer. responsect a quick time, and we call it the google effect, where we expect pages to load in less than two seconds. that we see with those end-users are experiencing an measure from this point of utilization. >> michael smith, compuware vice president of engineering. thank you for sharing your findings here on "louver glass." west."omberg

doing to appeal to marketers and keep advertisers happy? that is next on "louver west." -- "bloomberg west." ♪

>> welcome back, i'm emily chang. facebook is about to start testing video ads. and will be 15 seconds long they will play automatically in the newsfeed. they will play without sound, just like videos from friends play now. the sound comes on if you play -- click on the add. cory johnson is in new york with more on my facebook is making this move. this is a long-awaited move. we have been talking about this for months, why now? >> there are 44 billion reasons facebook is doing that.

they want that video advertising. if you look at everything that has gone on a facebook over the last year, with a stock chart really reflects is optimism that they will figure out new ways to gain revenue at their user growth slows down. fundamentally, the way these video ads will work, i think they will seldom is a high ticket item. one day possible so that will garner as much as $1 million-$2 million in revenue for faith. it is a $15 million -- 15 second ad. get a much more measured response than television ads typically received. they will know who is looking at the ads and they will know something about that user. >> let's take a look at how facebook's ad revenue has grown since its ipo. mobile has become a bigger piece of the pipe. how does this change things? ad revenue was $1.8

million in the last quarter. that is an incredibly big number. there has been aggressive growth in revenue over the adoption of mobile. that has happened in the last year. the notion that they will further their growth -- they are are a growing at 60% year-over- year. they have to do it in a way that the user will not get alienated or turned off by using it on a mobile device because they get annoyed by the feature. >> a television ad market is more than $66 billion, so how much of that could facebook's night? our advertisers going to consider it the same thing? >> in the early days, it will be a tiny piece of that $44 billion. it will help you get to its ultimate goal which is higher revenue per user. as facebook starts to re-sync and reach the outer boundaries of how many people they could have on the internet, the only

way they can grow is by charging more for the ads. to get more revenue opportunities for their users. now they want additional things like payments for games and video ads could be a way to jumpstart growth once again. >> cory johnson, our editor-at- large, thank you. people familiar with the matter told bloomberg that mark zuckerberg pushed back the start of video ads twice. facebook says it will continue to refine this new wave of brands to tell stories about facebook to ensure the best experience. a ceo of aring in platform for advertisers to bid on digital advertising in real time. sony pictures and mlb.com. we also have a facebook exchange partner who helps advertisers reach potential customers on the social network. let's talk about the user experience.

it found like they're trying to make it as smooth as possible. it has to be absolutely perfect for this to not be annoying. video online live every day, can they do that? >> they can do that. we are trying to figure with the right format is. the team works incredibly hard to get it right. they will be able to find that over time. it, will be distracted by and it will be used to it, and they will get it right. at what twitter just did, they did a fundamental change to all of twitter. they added photos to the feed. lex i'm still getting used to it. ask people got used to it very quickly. it made it more interesting and exciting. changes good false facebook playing videos in their feed is something comparable. they will make a lot of money. >> how does the video as compared to other ads on facebook? will it be gold for them?

>> the idea of motion to tell a story, to communicate an emotional component, narrative, it is so powerful. if you add sound to that when you click on it, you can build amazing brands. > how much of the ad pie is going to steal from other video advertisers? >> most of our clients are major broadcasters. they have true video content and their ads are video in video. it is a td-like experience. facebook, it is video ads within tax. ishink what separates them the display of the advertising. banner advertising will continue . advertisers will move to this new environment. >> do you expect to see this kind of pressure? videoertisers can target advertising to exactly who they want to reach.

i was watching monday night football last night and watching out for pickup trucks. i am looking to buy a pickup truck. shown ads for a pickup truck? going to watch them? they can just scroll past. i television, it is more difficult. >> we will wait and see. >> one of the first video ads that they're going to show is for "divergent." is not a sign of things to come? >> i think it will be relevant to their users. they want content that will be geared towards their users. it may skew a little younger. is movie trailer environment mixing the line between content and advertising. trailers have always done that. people watch them for length. >> why are there video ads on instagram yet? >> instagram is growing incredibly fast.

if you are facebook, you want to let them keep growing. >> but they started video ads. >> slowly. they are not taking -- they are not in a rush. they are taking their time. >> how is facebook now compared to the other options out there? are theook and twitter future. everyone recognizes that. 20 years ago, we all watched the same tv show at the same time and saw the same commercial. in the future, we consume content when we want to watch it on whatever device we have. the ad should be the same. they should be delivered on a personal level. interestinghat is is that advertisers are seeing the value of video advertising to tell rich stories. >> didn't they know that already? >> you get that targeting on top. they have not had that combination. >> is it worth it? it is expensive. >> i don't think so.

compared to television advertising, it is a good value. for one day, it is very hard to reach that many people. one billion users, you cannot reach that many people. you cannot reach 70 users in one day. next we will be watching to see how it plays out. weighing inth for having this conversation with us today. still ahead, the breaking bad is ," isbetter call saul coming to amc, but first we catch up with that sleazy lawyer himself. he will tell us alive all about it coming up on this hour. ♪ >> who can i do? ♪

>> welcome back. i'm emily chang. now to a major deal in hollywood. silver lake management has agreed to pay $2.3 billion to acquire talent agency img. they are doing the deal on behalf of world -- william morris endeavor entertainment. why are william morris and silver lake making this deal?

>> i have some exciting news. this has a lot to do with professional sports. this is a business that represent pop music talent. you just awesome images of taylor swift. but you are also seeing images of peyton manning, an img client. there is a real battle to being big in sports and hollywood. caa, one of the rival agencies, rd has a big sports arm. they were in bidding for the silver lake business. -- the img business. real relativity also has a big sports arm. sports is when of the biggest names on television. that is why people keep watching television. it has a lot to do with wmd expanding -- wme expanding its empire. >> are emmanuelle runs william

morris endeavor, what can you tell us about him? a show like entourage know the character of ari gold. it is based in part on emanuel. he sees the opportunity to expand the reach of what william morris endeavor is. there is a little bit of crossover between these two worlds already. the price tag has been a little rich for some. his firm has financial backing from an influential name and private equity, silver lake. right, jon erlichman in los angeles. thank you. some writers were made very angry this weekend. --riders were made very angry this weekend. uber investor next.

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>> welcome back to "bloomberg west." uber is catching some heat from riders. some on the east coast paid more than 3-4 times the normal rate when in east coast storm -- when a storm battered east coast. riders pay more when the weather is bad. this pricing helps get more cars on the road when demand outstrips supply, helping to reliability. uber

surge,e on the pricing cory johnson is joining us here in san francisco. menlo ventures is an investor in uber. it may become a little feisty. high, at oneas so point it was $35 a mile, is that fair? >> fair is not the right question. it is more important to make sure you have a car to take you home, then what it cost. uber pricing is to make sure that the car is on the road. not getting home in a snowstorm is worse. >> i am asking is $35 a mile fair? thatthink the question is demand for drivers is to get on the road. if you need someone to tell and drive, it puts them and their car at risk. you have to give people an incentive to be out there. the drivers are out there so you can get home safe.

is it fair to ask if it is fair when it comes to a business? should we be talking about the ethics of it? >> your questions or so went there, emily. unfair, emily. i was a taxi driver a long time ago in new york. uber in the back of an car. i left the house in a snowstorm and took a cab to my taxi. the cap got out on fifth avenue out onto 360, spinning the snow. i said, you know what, i am not driving in this. it is a reasonable question. capitalism is fair, and it is whatever your customers will pay for. there's a bigger question here about what a developing branch chooses to do. if a developing brand says that he will take however much money what thisand that is

cost, that reads a different relationship with the brand. luber is making a calculated decision that they will not alienate people with these things. we saw the people up and down the eastern seaboard who were dedicated to bring users were really brought up about this. i am sure that they permanently lost some customers because of this pricing. to make surething that there are enough cars on the road, but it is enough -- another thing to make sure that your customers trust you. how important is trust, and does surge pricing as high as $35 a mile? -- undermine trust in the company? >> anyone who has ever been in on uber car knows how great it is. you have a question of fairness, there ise ask you,

$200,000 going towards drugs. is that fair? you do not think about how much it cost, you think about the fact the you can live the next are your. the $35, ik about think about the fact that i can be home with my kids, not what it costs. luber on theceo of show recently. let's listen to that interview. >> it depends on the particular product. generally, it is like 20%. >> you take about a 20% cut? >> it depends on the product. that is essentially the margin. >> overtakes about a 20% cut. what about capping search pricing? times higher than usual, rather than 4, 5, 7. ? >> i don't know about pricing.

that is a decision that management makes. they're trying to make sure that enough drivers are available stop the whole idea of capping could limit the number of drivers. on, you want to there is a get as many cars on the roads that people can go home. the search pricing allows drivers to get back on the road. ex-wife can't uber pay drivers more? why don't they take a smaller cut? >> why doesn't the rates charged me less for new year's eve on december 31? >> they are not charging seven times more. charginghy are they $200,000 for a drug? class cory johnson, jump inr here. i think drivers and passengers should be completely safe and not going out on the road and putting their lives at risk.

is there a better way than this? >> this is what everyone is saying off the air, i do not care about people, i only care about business. that on air.aying but i think this is an interesting choice for the business to make. let me bring an example of uberne who could afford on right. jessica seinfeld, the wife of jerry seinfeld, she paid $415 in an uber fair to bring her case to a bar mitzvah and drop her caps off. her kids were saying things like, oh my god, these people are crooks. it is a calculated risk that the business is taking. are presenting a fixed price, and you know what this is false. a mcdonald's value meal is $.99 and you know you are getting. we will not change the price if you are more hungry. that is one enjoys a business can make. the use of this technology allows uber to scale production

instantly in a time like a big snowstorm. there is a risk on the backend. uber may incur some wrath. >> obviously, that is the choice that luber made last weekend. is that the right choice? a i do not want to comment on specific situation, because i do not know. person is not the only who was upset. there were many people. >> there were people who took their journey and did not realize what the search pricing was. they were not comfortable to pricing. i am sorry they did not have a good experience. someone am i glad that can get a driver out there? the alternative is that nobody is out there to get you home. >> you don't think there is an upper limit to how much it should cost? isi think the upper limit decided. every time you go to the app you

have a choice. you can say, not for me today. >> people cannot do the math in her head like that. todoes not say from point a point b, it is a certain number of miles. ask if you put in the actors were you want to go, it will tell you how much it cost. have everything cheap. i think the government should have a law that says everyone should be rich, but that is not how the capitalistic system works. many timesaken uber and they use it for work and other things. yesterday i was going from san francisco to the valley, which is a longer ride than usual. what they do not tell you, and this is not advertised anywhere, is that if you use luber taxied to go more than 50 miles outside of severed cisco, it is 1.5% -- morerancisco, it is 1.5% expensive. that is not advertised anywhere. is it fair? >> it is not fair for someone to

be charged for something they do not know the charge for. a lot of times, there is user error and people do not realize it. the company is trying to do a better job of making sure. or their mistakes? sure. am i sorry you did not have a good experience? yes. but i'm trying to make sure that in situations where there are available, and there've been plenty of times in new york or san francisco were there no useon to get me home, i can this as an option to get me home. >> luber has make in my life easier in a lot of ways. but there have been times when i have run into problems. >> i am a big uber user as well. it has made my wallet thinner. these are the kind of problems that were possible even a couple --years ago when prediction production of physical things, or the supply of physical things was greatly changed on a real-

time basis. businesses are struggling like this in trying to figure out how to provide the consumer -- if there are a lot of buyers for the stock price, it goes up. i think this reaction people had to these prices in some way shows how much their affection for uber is. >> cory johnson, our editor at large. thank you for coming in and defending your company. happy to hear your side of the story. we will be right back with more of "bloomberg west." ♪

>> welcome back. i'm emily chang. microsoft updated us on in search for a replacement for steve ballmer. the company identified 100 people and focused intently on 20. they have narrowed the group down even more. they said they are moving ahead well and they will complete

their work in the early part of 2014. cory johnson, our editor at large, has been following this story very closely. do we know how far they have narrowed this down? 100 is a lot of people. >> i nominate you. >> sources say that i was nominated. of knowledge of the matter have been an important part of the story. steve ballmer's tenure at the company has been so lengthy, he has put his stamp on things over his course of the time there. the stock price has not been that high. he had the misfortune of taking under a big asset bubble in 2000. the stock performance of his tenure never looks that good because of where he started off with his job. gone through ay

number of different things. fromally, what we heard the source with knowledge of the situation, it has given us an indication that it was going fast, but it has slowed down a bit. be onadline was going to august 23, 2014. a year from the time steve ballmer first announced it. then we heard they were trying to get a deal done before the calendar year. gives themormation some wiggle room. early 2014 could be june 2014. we will see what they early, -- what they actually come with. this gives them some wiggle room. they have not been able to get a decision out and get everyone on board. if a couple of weeks ago, a board ceo seemed to be the front runner. and weller talk to him

got this nondenial denial which made it seem like he would be more likely. what happened? >> he was under consideration. there was a conversation with him. said, hell no, i won't go. but some members of the board of looked at his experience and said that while he has a polished resume, when he doesn't .ave experience in technology that could be holding him back. we will see what can in the board of directors had to say. >> we will be watching in early 2014, all six months of it. now to today's new hollywood. if you have been missing "breaking bad get ready for the return of attorney-at-law, saul goodman. they are bringing him back to the and off -- to the small screen next year for a spinoff show. saul."

bob has had a pretty cool year. "breaking bad" you probably know him as saul goodman. >> i have actually written the show that i am on. i have channeled some of that negative energy. it has been a whole new career for me and really exciting. just to show up and get this all,cter, who is not me at -- >> did you think the world was going to fall in love with a sleazy lawyer? >> i did not think that everyone would love the sleaze ball with a comb-over. but they love him because he is inside the tv. >> once a plate on netflix and you could really be watching it,

and you could see it from one moment to the next, it snowballed in such a big way. we are done, when i say we are done. >> so we are coming back as "better call saul." >> 2014? >> that is when it is slated to run on amc. we will shoot in may. what you will find with the saul goodman show is that it will not be breaking bad to point out. 2.0."breaking bad >> they wanted to ask three things we wanted to know about saul goodman. >> i would not be surprised if there is money in there.

he has never seen the inside of a core room, which is pretty good for a lawyer. he writes all his own commercials. >> so john, it is not going to " 2.0, so whatad is it going to be? >> i am not going to give any spoilers here, but it is a fresh start for the lawyer. ais is a show that has had lot of success because of new media, because of platforms like netflix, it is in the early days, the audience was not that strong and then people started binge watching it. that got people excited about the show. that is one reason why netflix announced that they would have this show available right after it airs on and the. >> thank you. looking forward to it. ," being of "breaking bad

amc hit was one of the most tweeted-about shows of the 2014 s 2013 season. " the walking dead" was in second place. the super bowl was the overall most tweeted tv event, generating 24 million tweets. how are artists using technology to get fans to concert arenas? --t is next on "breaking bad "bloomberg west." ♪

>> welcome back. i'm emily chang. the music industry is going through tremendous change, deemphasizing the sale of recorded music, and relying more on live performances. they are using technology to draw large crowds to concert arenas. cory johnson has a look at the musical arms race.

>> 1, 2, 3, 4. isthe concert business setting up for germanic technological change. means thehow often best stage. it is an arms race, and the leading arms dealer is a company .alled take towers they are based in the heart of amish country and world pennsylvania. as you build your relationship with your customers in the lime experience. -- alive experience. >> all of these artists have construct thisto experience. >> we have architects, engineers, people who would you trade school for cabinetry design. >> the process starts with 3-d modeling and software. pieces are shipped from all over the world and slapped

together for a day, then disassembled just as quickly and off to the next gig. all is jamesd it "winky" ferrell. tait dominates the concert industry. >> we have to do it financially responsibly. everyone has champagne wishes and caviar dreams, but they do not have the budget. putting on a big show is necessary, often more so than recorded music. turned to tait towers for his biggest worry yet. >> people spend $100 on a ticket and a see you in a 16,000 seat arena. they fit a football field away from you. this is something that is necessary. >> performance magic is a modern necessity.

>> ♪ [applause] >> it is time for the bwest byte. we focus on one number to tell the whole lot. jon erlichman is a must and list. cory johnson, would you have for it? >> i have the average take of michael lay's concert tour stops. that is the seventh most successful concert of all the concerts during this fall. >> it certainly goes to show way art is going to her these days? keeps ending the show with these music users. i hope we get one little lake before the end of the show. >> maybe i am the music teaser? >> you guys could talk more about this off the air and what le is like.

thank you for joining us on this episode of " bloomberg west." we will see you tomorrow. ♪

>> i am mark crumpton. the is "bottom line," intersection of business and economics. tonight the u.s. senate takes a big step toward passing the budget deal. then the drone that is designed to look like a bird in flight. and we will take you on board a super luxury private plane where a flight to london could cost $80,000. to our viewers in the united states and to those of you around the world, welcome. we have full coverage of the stocks and