he >> live from pier three in san francisco, welcome to the early edition of "bloomberg west," where we cover the companies shaping our world. i'm emily chang. at&t is the death star. that is t-mobile's latest jab at the competition. the carriers have been making a

lot of aggressive moves to steal each other's customers. at&t offering 450 dollars for t- mobile customers to switch over. t-mobile saying they are going to pay early termination fees and then offering customers a free checking account. this began at the consumer electronics show. john leger at a concert in l.a. last night. no coincidence, it was literally right down the street from at&t. take a listen to my exclusive interview. >> anybody that knows me knows i am a huge macklemore fan and i am going to be right in the front row, hopefully when he dives out and body surfs on top of me and i throw him back. it will be a big night. >> favorite song? >> white walls. i've got a whole list. yours?

>> sure shot. for sure. >> i don't want to say anything, but it fits. >> i am not going to take that personally. ok, so we are right down the street from at&t's offices. >> i think three floors might be empty because times are tough -- i am shocked. ran my mouth off? >> on twitter. >> it is a big day for us. mothership is a big competitor of ours and so far it is going pretty well for our customers. has randy reached out to you at all? >> i do not think i am on the top five list, and frankly, i

don't aspire to be. i have no personal issues with at&t. >> i was going to ask that. it has gotten a little dirtier lately. >> dirty? look at me. is this a price war or a long-term commitment? >> it is not a price war for us. are using consumers to drive your profitability -- i am very clear about what i am doing. this is a profitable, growth business for us. i can drive it profitably. i stand by my commitments about growth and revenue. what i can't tell you is what does this do to these guys. that's their issue. you areritics say pulling the price lever at everyone's expense, including your own. >> price is an issue relative to them.

and the issue is that customers have been getting screwed. in november when i announced free international data roaming, i made it very clear. it was a 90% gross margin. i can't help it if somebody has artificially used a duopoly to drive artificial margins. is being forced to react, that is not a price war, that is a healthy competition. more can you do? how much lower can you go? >> i am not going lower. i am going higher. we have made it clear that the only artificial declaration for us was the movement to 100% value plans. we took away the artificial environment from the revenue stream. outside of that, we are growing. we moved into mobile banking. it is a real movement.

we are aggressively pursuing it. -banked.he un customers have a great cash flow but don't have an entrance to the card economy. we are going to give them that. >> are you going to do loans? >> we are going to do things to help customers that the other guys won't do. so far, it's working. my attitude hasn't changed. our company's attitude hasn't changed. the other guys are being looked at. all of these conversations and questions are coming from them. things are going very well. i have been very clear that everyone needs specter. everyone needs more capacity,

more specter. megahertz, very good for us. we got it in a transaction with verizon, very helpful for us. we are looking forward to several auctions, the broadcast auctions in particular. for us, it is multiple paths to success. one is to successfully move forward. if the government wants us to have a competitive environment, you're going to have to make sure that the doo-wop elite does not use their palace to crush uopoly doesguys -- doo-wop not use their palace to crush the little guys. he is a very smart guy. a lot of people look to see where he is investing. i was very happy to see him on a list of people who believe in t- mobile. >> is a sprint-t-mobile merger a

smart thing? >> ike i said, there are paths to success. from the standpoint of companies consolidating to get better scale, i am looking at options. ?> what does that say the regulars have made it clear that they want more competition. >> they've got it. emily, it's a long game. we are the number four carrier, moving very quickly. we are all going to need better scaling capability. do question starts to be how you take a maverick and supercharge it? we need more spectrum incapability, a lot more investment, and consolidation. you want to fuel what is happening in t-mobile and there are a lot of ways to do it. >> is there a chance you could be doing your job so well that a

merger happens and then you don't have a job? >> i am so good at my job. i am sort of like you. can you imagine if bloomberg would decide to do something with another company and leave cori in charge? i am not worried about that. i am good at what i do and i do it well. >> how about microsoft? have they come knocking on your door? >> can you even picture bill gates and i sitting in the same room? they are a great company. they have a lot of work ahead of them. i hope whoever they bring in they empowered to take aggressive actions like i was allowed to do it t-mobile. >> have they approached you? >> i can't talk about that. >> john leger at the macklemore concert in l.a.. cory, what you make of that? >> do you think i am not in charge now? seriously? one of the big issues for wall street right now is is sprint going to buy this company?

mobile? the value of t- >> or t-mobile could buy sprint. is that even possible? >> fundamentally, it would be a buy out of sprint buying t- mobile if it were to happen. >> but he made it clear he wants to be in charge and that he is a maverick. >> a lot of guys on wall street say to leave these guys in charge and let them make the changes they want to do and they will run with it. all of the spectrum buying that could happen in the middle of this year could give them a lot of room. that has been the big issue for manycompany, not just how subscribers they can get, but subscribers?ly add >> they did add 4.4 million. >> but that is not as many as they could get. t-mobile could be a different company depending how much spectrum they can put to use. aboutn i asked him

revenue per user, how low can you go, how sustainable is it, do you buy the idea that he can run the company profitably and make all of these decisions? >> historically, that has been the problem with t-mobile. when they added subscribers, they were kind of the leftover subscribers. they were the people who are not paying as much. the acquisition of metro made a big difference in terms of over the long term, are they going to get the valuable subscribers, the people who spend more on long-term plans with at&t and verizon? >> what do you think of his microsoft comment? >> first of all -- >> he definitely avoided the question. >> look at microsoft, t-mobile, and macklemore. >> he would not have to move too far. >> this is all about the puget

sound area. up there, this company and these people have a closer bond. it is hard to imagine down here where we have a much broader patent companies to look at. -- spate of companies to look at. concert was fun. i am a big mac moore fan. i had obviously heard his music. but now i really appreciate it. claims 50% of all digital video ads are never viewed. could fraud be to blame? that is next. ♪

>> welcome back to "bloomberg west." i'm emily chang. fraud is a huge problem for the $4 billion digital ad industry. as the online video market grows, money is being spent on

digital videos that nobody may actually watch. how bad is this problem? cory johnson is back for more. >> it is interesting, especially when you think about how much money is moving toward online and video. was just an extensive report on fraudulent video ads online. 50% of video views are fraudulent. 50%. brett wilson joins me now to talk about this marketing blackhole. lotsep hearing and seeing of news and video that people like video on the web. what are you finding? >> 50% of advertising is wasted but marketers don't know which half. that's an old saying. now we know which half. marketers know exactly which

half is wasted and what is happening. on average, about 50% of video ads are not watched. some of that is what you would expect, consumers ignoring ads like we do in other mediums, like television. video, and add starts to play and they open up another browser and come back once the ad is over. we measure that. industry if this was happening, lawsuits would be flying. >> if the marketers know the ads are not getting clicked on and the sites know the ads are not getting clicked on, why do they keep paying the sites to run these ads? >> recently, we've launched something called beauty of video visibility where a marketer could see if the ad playing was actually in a browser and being viewed.

going to bee ad seen? how long the ad is, if the window is active and if the volume is on -- you can measure all of that? >> yes. and we can see if the ad is actually viewable. sometimes what we have seen is that video ads are often on autoplay. we call it fake pre-roll. viewer getsens is a to a webpage and the video ad you would not expect to be there is auto playing off to the side or above the fold. these are often on small players . that is not what advertisers think they are buying. >> fake pre-roll is a video added a viewer has no intention , often played below the fold. how prevalent is fake pre-roll? >> it could be as much as five percent of all of the digital

video market. a two hundred million dollar problem. it stems from publishers that are trying to get into the , but they don't have content. so they try to simulate it in a banner that autoclaves. plays,r never -- auto where a viewer never actually sees it. are bot nets.ere what are bot nets? >> a collection of computers that have been hijacked by viruses, essentially. and then hackers use those computers to send fake traffic s, and often it is websites playing autoclave pre- roll. -- autoplay pre-roll. buys intoe kind of the system, but when i look at this, i look at companies that

do this right before ipos or corporate bonuses are paid. these companies, the ceos of these companies have a tremendous multimillion dollar financial incentive to pull off these scams. >> i don't know if there is proof of that. publishers may buy cheap traffic and they don't ask questions, so they may be complicit in the process, but they are not generating the traffic themselves. does this sort of regular shuffle and they change their algorithm results, we see things like we saw last week with expedia were suddenly the traffic they are getting from thingsis a result of people were not actually searching for. >> i don't know if it is premeditated, but it is a big problem, so that is why we decided to do something about it. >> really interesting, and it will be one to watch. thank you very much.

>> the grammys coming up this weekend. find out how social media is trying new viewers to music's biggest night. ♪

ofthis is the early edition "bloomberg west." i'm emily chang. the grammy awards are coming to cbs this sunday night and the network is hoping to blow ratings out of the park. had their second largest audience since 1993 with more than 20 million viewers. what is driving viewers to turn on live tv? we are talking about all things grammys with jon erlichman. john, what kind of audience is the grammys going to get this

year? what makes this year different from years past? >> i think they are always going to the music lover. the team behind the grammys is very marketing savvy, social media smart. you always hear about how they get big tv audience. maybe they won't get the same audience they got after the death of brittany houston, but a lot of that is because there is a large -- whitney houston, but a lot of that is in part because there is a very engaged audience. we have big performers. but the grammys team is all about engaging with music and performers through the year, buildup to this one event. they do cool stuff in the lead up, too. let's not just do nominations, let's do a concert for the nominations. it's very different than what they do in the movie business. that is some of the stuff that really plays well with them and

it's why they get great social media traffic, similar to the super bowl. >> who are the favorites? i know who my favorites are, but who is actually going to win? >> i'm going to say album of the .ear, macklemore i am not their fan, no offense, claims, they stunned the number of times -- based on the number of times that album lookeen shazamed, they like the winner. >> i am going for macklemore. what about you, cory? >> macklemore is going to win. >> you say that is if they shouldn't. >> i am not a big fan.

>> they took a stand with this album. they put themselves out there. >> i am all for it. to john's point, one of the points of the grammys is music discovery, people finding new artists. >> well, we will be watching. thank you. it is time now for on the markets. alix steel. >> thanks so much. it has been a pretty ugly day here on wall street. we are taking a look at where stocks are trading right now. the nasdaq is down by the most. down over one point five percent. the s&p is below its 50 day moving average of 1812, breaking below that today. monthse to go back three since the s&p closed below that medium trendline. it does not necessarily mean selloff is imminent.

is this a correction and how bad will it be acco? you are looking at a dow heading for a second week of losses, work we've -- worst week possibly since 2002. ♪

>> this is the early edition of "bloomberg west." i'm emily chang. you can also catch us at noon pacific, three p.m. eastern. jamie dimon received a 74% increase in total compensation last year. 21 million was worth dollars. he did not get a cash bonus so his pay was still lower than it was before the $6 billion london whale trading loss. the obama administration says 3 million people have now enrolled in the health care exchange under the affordable care act. that number is still well short

of the 7 million sign-up goal set for the end of march. nextmonth when to her -- month's winter olympics in so she may attract the fewest mayican visitors -- sochi attract the fewest american visitors in decades. at last check, about 330,000 tickets are still available, according to the olympic committee. amazon wants to deliver your packages by drone in the coming years, but there are plenty of personal drones already available for you to use. they can give you everything and everything from taking an aerial picture of the game to surveying a large farm. 3-d robotics helps develop and cory isnes, outside playing with some of them. what if you got? this drown businesses interesting. what could it be e we don't

know. a senior development engineer joins me now to show us how these drones work. first of all, you can't use drones for commercial enterprise in the u.s. right now. buys one of our products buys it under the commercial use exception. if you are a regular individual who wants to take photos of your kids soccer game, you can buy one of these. >> how big is your organization and what are you guys doing? >> we are about 120 employees in san diego and tijuana where we manufacture. we sell to consumers largely, but more and more to industry. as long as you're operating as a personal entity and not profiting off of it, and you don't have a company based around selling services or aircraft, you can do it. >> the data is not where the money is. >> the money is an agricultural surveying and construction. >> are you delivering packages?

>> that is a good idea and something that might happen a few years from now. >> do you think it is a good idea? it seems like a ridiculous idea. >> i think if anybody is going to make it happen, just these us -- jeff bezos is going to make it happen. >> if you hit my dog with your drown i am not going to order from you anymore. >> that would be terrible. -- what iss this this kind of thing used for? is this what you sell right now? >> this is our consumer product. again, if you want to take a picture of your kids soccer game --work with go pro >> i arm it by going like this. beeps like my roomba, but unlike my room but, it is going to get some air. that looks totally not at all safe at all. over my kidslying

soccer game. that is flying up to emily in the studio right now. give me a sense of volume. how many of these things have you sold? >> this is not out for consumer use yet. some developers have it. we expect to sell a lot of these because they are inexpensive, $750, and they are a lot of fun. >> you are controlling this with two joysticks. $750? >> i mean, i think what things are moving toward his you're going to operate this with your phone and your tablet. i do it like this because this is how i am used to doing it and i get finer control and can point the camera exactly where i want. it is a fully autonomous aircraft. the way we want people to operate these things is to say go to hear on a map. push a button and go to hear. these will eventually be used for checking oil and gas pipelines and things like that, not delivering coffee.

do a goodd waitresses job of that. >> delivery makes sense if you thata high-value package has to get to a place where cars can go. if you want to deliver medical supplies in australia against -- across great distances, one of these makes sense. it has regulatory hurdles and technological. >> you have a phd, which means you have been to school a lot. to entryere barriers and is this really technological? are there going to be 50 companies offering this so the margins won't be that stable they will be everywhere or are there a lot of barriers to entry? hard is to make it work really well and what's hard to say go to this point and

take a picture. >> so there could be a lot of computers, but ease of use and grace in the software is hard. >> exactly. this is a flying camera. the people who buy this want to take a picture. they do not want to fly, necessarily. they want to have an easy experience. is the mostou think important change you would like to see in terms of legislation or rules to allow drones to operate more in the u.s.? >> it makes sense to me that you want to regulate aircraft that are going to operate in manned airspace. --could possibly be up with they could possibly be up with regular aircraft. but i think they should look at deregulating small business so that you could do crop surveys and things like that. i am going to fly this thing up behind you now.

look out. here it comes, emily. >> i see it. i see it. hello, drown. e. dron thank you, guys. coming up right here on "bloomberg west," an original member of the paypal mafia will tell us why he thinks carl icon's plan to spin off paypal from ebay actually makes a lot of sense. ♪

>> welcome to the early edition of "bloomberg west." i'm emily chang. carl icahn says he is ready for a proxy fight over ebay. he expects the company to resist his proposal that he spin off the paypal unit. our next guest is an original member of the paypal mafia and thinks the proposal may make a lot of sense. in studio. here

what do you think of this idea? >> this is an idea we have been talking about for years. you can see wall street having the same conversation. i think this is driven by reality. ebay,e sold paypal to ebay transactions were two thirds or more of paypal. today they are one third or less of paypal's volume. and decreasing rapidly. the non-ebay portion is growing much, much faster than the ebay portion. question ofis not a if but when. its trendlinesat keep going the way they're will, ebay transactions eventually be a single digit percentage of volume. it is always hard to specify the

benefits of focus, but all of the companies in silicon valley i think are seeing the benefits of focus. there is a fundamental difference between a company that is trying to sell retail and merchandising. ebay is trying to get people to the site and find the goods they are looking for. the questions paypal is trying to solve our how do you keep money in the paypal system. how do you prevent fraud. these are two different types of products even though they do come together at the moment of purchase. >> you think paypal should get more involved in things like financial services. >> i think that paypal on its own could be a hundred billion dollar plus financial services powerhouse. to understand about paypal's business is that all of the profit comes from transactions funded by a paypal balance. the credit card funded transactions roughly break even. it is critical for people to

keep money in the system. paypal has grown tremendously, more than we expected, over the last decade. but if you look at the funding mix, which is the percentage of transactions funded in a low- cost way, that has not kept up. i think there are a lot of different ways that paypal could improve that. you can offer check writing on paypal accounts. you can offer direct deposit to paypal accounts. and you can pay interest on paypal accounts, which is something we actually did. it is a future that ebay took away. >> let's talk about that. what kind of innovation do you think there has been a paypal since going under the ebay umbrella? i referred to -- we were paying the highest rate of interest in the industry on paypal balances. reason. be a regulatory

the last thing ebay once is to be regulated. i think there would be more regulatory flexibility of paypal was spun out into its own entity. >> it certainly things that -- seems that the last thing ebay once is to spin off paypal. this is the crown jewel. this is where growth is coming from. where would this leave ebay? >> the question is would it increase shareholder value to separate these two? ebay would be more focused on its own problems if it did not have this crutch to rely on. over the past 10 years, if you did not have this fast growth business bringing up the average, i think ebay might have had to focus a lot sooner on its growth. certainly, companies like amazon or aly baba have not the same types of growth problems. i think by separating them, you actually forced both companies to focus on their own issues. >> who should run paypal if it is spun off? >> to me, that is a secondary

question. i don't know exactly the details of carl icahn's proposal, but one of the things you have to do is have a business relationship between the two companies. legitimate number of business synergies, but i think all of those things can be captured through the right type of business instrument. obviously, there would be major shareholder spin outs, so their incentives would be aligned. >> no hey pal founders are involved in paypal anymore. would they come back? board. at their there is not one person who was involved in the start of paypal on that board. we all know that the companies that do the best long-term are the ones that keep their founders involved, especially when you have founders and leaders and business people of the quality of elon musk.

why aren't these people on the board? yahoo!, apple, ebay and paypal take a larger interest. you say it is not a matter of if, but when, how ugly is a going to be on the way there? >> i would classify the benefits of spinning it out. obviously, you have to figure out some of the details, but given the potential value that could be unlocked, i think it could be a worthwhile exercise. >> do the founders want to go back? do they want to be on the board? >> i will give them a call right after this and ask them. i think they all feel paypal is

an important company. sense the paypal stalled when it went over to ebay? anybody thought it would make us more focused or innovative, but we had a real dependency on that -- at that point on ebay transactions that no longer really exists. 12 years ago when we sold the ebay had basically declared war on us. but now it is a salient company. >> this is something we will continue to watch. much.you so one l.a. startup is using technology to bring guys the cleanest and cheapest shave.

we are going to take a look at the dollar shave club next. ♪

>> the dollar shave club. for a monthly fee you can enjoy all the netflix like services of razors. we went inside to see what's happening. >> we are in los angeles. all these business people are working on getting you a better, cheaper shave. >> let's get a shave, shall we we?now -- shall quick so what is dollar shave club?

>> for a couple of months -- couple of bucks a month, we send to you.lity razors if you ask guys have a feel about buying razors in a store, they will tell you they are frustrated. i am not a lefty, so hold your breath. they are tell you frustrated with the price and the experience. you have to go to the store. you have to park your car. you have to find the guy with the key to the razor fortress and he is always doing something like texting his girlfriend. >> are the blades any good? >> no. youblades are great. >> have become a viral video sensation. >> it is a story that has resonated and guys were excited about the business. it is a story they have forwarded to friends. -- somethingng god

guys talk about a lot, the cost of razors and the frequency with which you need to get them. we are done. ♪

>> welcome back. i am emily chang. coming up on the late edition of "bloomberg west," we are going to be speaking to the man who measures waves for the mavericks surf competition. and it's time for on the markets. let's go straight to new york and alix steel. a it is shaping up to be relatively ugly day. the dow is looking at its worst week since june of 2012. the nasdaq off by over one and a half percent, really picking up some steam to the downside.

my new saying that pullbacks should find support in the next then rally. walter energy. wells fargo downgrading shares pricing and a high debt load. the company is also lowering its price target. an analyst said is raised review site to neutral. are watching starbucks. the coffee giant releasing fourth-quarter earnings after the bell yesterday. the revenue came in at just $4.25 billion. julie hyman has been looking at this. when you look at five percent, that is great growth. mcdonald's would kill for that in the u.s..

but you have to look at value versus growth. >> that is the slowest growth we have seen since the first quarter of 2010. starbucks has kept up this great growth since the financial crisis since the depths of the recession. investors have been seized by the performance. you saw the five percent growth in sales, which was below estimates, but the shares were up. it looks like people were also focused on earnings that came in better than estimates. and this ironclad confidence can execute.s >> talking about execution, how fast can these guys turn out the goods? when they wind up having more items like we are going to heat up your egg in the microwave for you, that is going to slow down the line. mcdonald's has that problem also.

>> star beck says it is absolutely not a problem. -- starbucks says this is absolutely not a problem. how fast people get through the store is absolutely not a problem. he basically wants to stop talking about it. i talked to an analyst who said tests thiscks really whole process. it has warehouses in washington literallyhave people standing in this spot and then a person at the counter standing in the spot. how do you shave off seconds from the whole process? to your point, new products have to be heated up. a bakery in san francisco a couple of years ago and are rolling out the products nationwide. consumers are saying, and some of the store managers are saying

that this is slowing down things a little bit. starbucks says no, that is just perception. if people are standing to the side waiting for pastry products and people are sinning to the side, waiting for pastry products. the store looks more crowded. maybe it feels more crowded. starbucks is the actual speed you are going through the line has not changed, and they are constantly trying to improve that. >> interesting it continues to be a conversation. ♪ >> welcome to "money moves," where we focus on alternative assets. what investors