>> live from pier 3 in san francisco, welcome to the late edition of "bloomberg west" where we cover the global technologies and media companies reshaping our world. i'm emily chang. our focus is on innovation and the future of business. let's get straight to the rundown. facebook strikes back at a princeton study that says the social network will be largely abandoned by 2017. is there any proof to it? we discuss. a matter of if but when paypal will be spun off from ebay. willr he -- paypal coo

begin. macklemore --h t-mobile ceo at the macklemore and ryan lewis concert. first, to the lead. hip? princetonll students wrote a paper saying that facebook will lose 80% of its users by the end of the year 2017. facebook rejected the study saying that princeton used to -- google search data to predict engagement trends instead of actual engagement trend. they spoke struck back applying back by applying the same methodology. not all research is created equal or and some --

is facebook facing waning enthusiasm? joining us is paul kedrosky from san diego. paul, i want to start with you. i wondering if you think the result would have been different if the study came out where mark and sheryl depended. >> i doubt it. the thing to keep in mind this kind of stuff is that it is a sort of quasi-study in that it is not a peer-reviewed piece of research showing up in a top publication that will give someone tenure. it is an archive that is kind of one step up from reddit in respect to academic publications . you can put stuff there and people comment on it and some of it is great in some is nonsense. it is a repository for stuff that is not peer-reviewed elsewhere. people need to keep that in mind from the outset that this is not exactly an orthodox paper. having said that, i think that

facebook went to some milk and willful misinterpretations of the conclusions -- facebook went through some willful misinterpretations of the conclusion. i think they wandered off and try to make wise instead of --. questions coming out princeton, a very respected institution. what is your take on the methodology and facebook's response? is there any truth in either? on toon't want to pile what has artie been a pretty fun and critical discussion of the princeton research. i think one thing to keep in mind when you are working with predictive modeling and using organic datastream such as the researchers did that there is a lot you have to take into account, a lot of different variables. , buto necessarily rehash when you see ice cream sales spiking at the same time as drowning deaths and inferred that ice cream sales cause

drowning deaths you are missing part of the picture. those things happens in the warm summer months. there are a lot of variables you have to take into account that can lead you down some pretty erroneous paths and conclusions. one thing we try to do at the research center is to triangulate. uses many data sources and streams as we can to interrogate that data and hopefully in the end what we see is a more complete to ensure of a social trend or phenomenon that is happening. why do you think google searches about facebook going down? >> it could be any number of reasons. for one thing, facebook as a brand has become more widely known. people might -- might not need to search for it to know what it is or access it. morning -- more usage of mobile devices to search for facebook on different browsers might have something to do with it.

or are a number of different possible expedition for the decline -- there are a number of different possible clinicians for the decline in searches on google. >> i don't want to get research geeky, but i want to get a tiny bit. facebookect to the response to this princeton thing, it it was this will for that willful misinterpretation. it was not correlation and causation. it they were making a more subtle point. they were making a model saying that there is and if the sayslogical model that that i am more likely to use facebook if more people around me are using it. it is an infectious disease. in epidemiological model is inappropriate you -- view. they are criticizing what facebook does which is coming up with spurious models and saying look at us, we exist. they're saying that princeton will not have students, block,

block, block. that is wrong. itis not as effective as once was and to take it back to your point off the top, you can see that among users of -- teenage users of facebook. it is dropping off and becoming more of a novelty and that is important when you think about the future of the service. i think there was a powerful point to be made and facebook willfully missed it. >> what you have to say about that? you do your own research. what trends do you see? this is not the only study that is saying facebook has trouble among teenagers. >> we're seeing growth in facebook usage. we are seeing growth of the past year. 71% of adults are users of facebook and at the same time you are seeing organic search, google search data trend downward. to leanst that you have on more than one data source to really understand what is happening in the social media world. see withe what you

myspace and facebook, the social media world is rapidly changing and evolving. no one platform is exactly like another. i think he gets really complicated really fast -- it gets complicated really fast. >> i love hearing your predictions. what you think will happen at facebook over the next five years? we have touch it and talked about snap chat. we talked about instagram. what happens to facebook over the next 5, 10 years? do they have anything to worry about? >> i do. i think the risk is they become a substrate that everything else jumps around in his more nimble. you can see that in now they are fumbling a bit in trying to create a more cold air and cold here- a more and timeline. that is the real threat. the fact -- the threat it is a

slow moving archival service where people shoot -- share photos. outace where you go to hang , like the mall, is the places like twitter and snap chat. i think it will be the biggest threat and i think facebook will look very troubled over the next five years. >> we will be watching. will be sticking with us through more the shore. jesse will come, thank you for joining us. , thank you for joining us. we'll be talking more about the coming up. ♪ >> welcome back to "convert

west." i am emily -- "bloomberg west." i am emily change. -- emily chang.

t-mobile ceo was kicked out of a macklemore party a few weeks ago and he restarted -- responded by hosting his own concert in l.a.. hahappened yesterd up with lere at the aone who knows kno i am a huge lemoreans ani ll be right the front row pefuy wh he veout and seron top of me and i thromight. >> fe song >> hite walls have tholeist. yrs? >> "thrift shop." for sure job cocolike "thrift shop?"ft we are right down the street

from t-mobile offices. >> at this with a time i think of might be empty. times are tough. i am shocked -- did you say i would -- i shot my mouth off? how did you do that? >> i think if you -- >> what i said is --is a big day for us -- it is a big day for us. mother ship is a egg competitor for us and so far it's been going well for the customers. >> has randy reached out to you ursula? >> is that what you call him? i don't think i'm on the top five list and i don't aspire to be. i have no personal issues with at&t or with -- >> i was going to ask that because it is gotten a little more dirty lately. >> dirty? , on. look at me. look at this smile. >> is is a price war or a long-term commitment? >> not a price war for us. is a price war if you were

hearing 55% of the margins and your been artificially using consumers to drive your profitability. what i'm doing and this is a profitable growth business for us. with what we're doing i can drive it very profitably. i stand by my commitments by growth and revenue. what i cannot tell you is what it does to these guys. that is their issues. not me. >> critics say you are pulling the price lever at everyone's expands, it including your own. how low can revenue per user go? >> price is an issue relative to course ishe issue of that customers have been getting screwed. i made it clear that there was a 97% gross margin on this issue. i price profitably as to what i'm doing overall. i cannot help but if someone has -- help it if someone has artificial youth a rule up at dualo artificially used a

drive profitability. >> what more can you do? , to lower 10 you go? >> i'm not going lower. i am going higher. artificially driven declination for us with this movement to the 100% value plans -- where weate the took away -- unlimited data upgrades and more, we moved into mobile banking. >> how did you get that idea? customers areour the customers that have a great cash flow. a work with the company but they do not have an instrument to participate in the card economy. we give them one. >> how far are you willing to go with that?

will t-mobile get a banking license? ?" -- of theill do the things other guys will not do. so far it is working. it's funny. most of this conversation -- my attitude has not changed, the company's attitude has not changed, the other guys are being looked at. all the questions you're asking are coming from them. we are cool. things are going very well. >> what about the spectrum auctions. what you want out of that? >> i've been clear that we all need spectrums. weight is the growing, everyone needs more spectrum. what we just it with the 700 megahertz spectrum is good for us. is a low-band spectrum. we got it in with verizon. it was helpful for us. andre looking for options for us, multiple past successes.

one of them is to successfully move forward if the government wants us to have a competitive environment, you're going to have to make sure the duopoly promised to their crush the little guys and have the one gigahertz spectrum be moved to them. i am open to that. >> what about download? as he invited? >> i found that interesting. he is a smart guy. he's another of those guys that people look to see where he is investing. i was very happy to see him on a list of people investing in t-mobile. >> is a t-mobile-sprint merger a thing? >> i don't know. carrying the vision is good for a nation. from the standpoint of companies consolidation -- consolidating to get better scale, i open to looking at options. >> what is that -- what does that say?

reg the carrier said it one more tip it -- competition out there. >> emily, it is a long game. we are the nubber for character moving quickly. four character -- carrier moving quickly. how do you take the maverick and supercharge it? we need either more spectrum and capability, more investment, or we need consolidation. there are a lot of different paths to do this. i think you want a few what is a chance to do it. >> is there a chance you could be doing your job so well that a merger happens and you do not have to? >> i am so good at my job, i'm sort of like you. bluebird wouldt intend to do something with another company and leave -- bloomberg would intend to do something with another company charge?e ciory in

>> what about microsoft? >> could you pitch or and i sitting in the same room? no. they're a great company they have a lot of work ahead of them. >> have a approach you? >> i cannot talk about that. ceo john leger. we're going to talk about that. >> i know that we will -- he loves the show and we watch. ♪

>> welcome back. with me now to discuss my interview with t-mobile ceo john , back is paul kedrosky

from san diego. cory johnson is here as well. i will start with paul. let's start with the microsoft idea. he would not have to move too far to redmond, washington. what you think about his answer to my question about whether he has been approached? i honestly snorted whenever i heard that. i mean, i guess. it is possible. microsoft is probably working on sabbatical he -- working out sabbatical he and they've reached the else -- working out sabbatical he -- alphabetically and they have reached the 'l's. a fit for mye sample but it would not be supplied -- >> k and j come before l. >> i don't know about that argument, but what you think of

combinedre's antics with what he has been actually doing it t-mobile? >> there's a long, proud tradition of this kind of sex pistols punk rock marketing. even if you don't play the instrument well, pay attention. this is kind of what he is doing. his point. by me or i'm going to be a nuisance. free up spectrum if you want competition. twoe are the pitches to the constituencies that matter, regulators and the competitors. it is defective and he its customers because he drops prices. as is he just making noise are we saying the company start to turn around? in terms of subscribers, use as they got more than warming subscribers last year. you say it is not that important. -- 4 million subscribers last year. you say it is not that important.

>> raw number of quarterly revenue for subscribers and total subscribers has ticked up over the last six quarters. he talked during the interview 's supposition about 65% at the margins. for t-mobile, they have gone down to about 19% last quarter. his guys are spending a lot of money to get customers to build a network. they are taking the competition in a way that is cost and profit. >> he definitely spoke much more positively about the possibility with a merger with sprint that i ever heard him speak before. the regulators sort of seem to want for bringing competitors out there. competitors out there. if sprint were to go with t-mobile, could that be a more attractive option?

>> i think that is what he wants. the other pitch which is, all i need is more roof -- room to be competitive, it is a noise. it is a stock cap proposition. ae reality is he is trying to team like customers and use that to drive some sort of -- value and use that to drive a transaction. things can be moved. >> i kind of agree with you. i think when he says he wants war room, that is exactly what he gets. by getting this hundred megahertz spectrum, they will be able to add a lot more subscribers and they have the capacity. he is got that room. they will have a lot of room to run with over the course of the year and i think will make a big difference in the term of t-mobile. bikes what he second, paul. -- >> 20 seconds, paul.

>> i think it is the latter. >> we will be watching. paul kedrosky in san diego. cori, thank you. ♪

"bloombergwatching west," where we focus on technology and the future of business. google says the service disruptions hitting gmail and other google apps will be resolved. for the glitch and say they are to make the system better. it impacted gmail users for about an hour earlier today. dell cfo has resigned. he was the highest-ranking executive to leave dell since the company went private last year. he told the ceo michael dell that he is seeking ceo opportunities elsewhere. the corporate controller welcome play -- replace him.

alibaba could be looking at declining business in russia thanks to new rules on foreign package delivery. documentngthened checks on imports intended for personal use. certainups have stopped shipments. ups is shipping but with la's. -- delays. carl icahn says he is ready for a proxy fight with the company. he expects ebay to resist his proposal. i spoke with an original member of the paypal mafia, former paypal coo david sacks. i asked what he thinks of the proposal. >> it is an idea we have been talking about for years. it is pretty interesting to see wall street sort of having the same conversation. i think that sister of and by the mathematical reality. -- that is driven by the mathematical reality. we sold paypal, that's when we

sold ibo, -- ebay transactions are a third or less of paypal's volume. it is decreasing rapidly. the non-ebay portion is growing much faster than the ebay portion. question ofs not a if, but when. continue goinges the way they are, ebay transactions will eventually be at single-digit percentage. wechsler stock about what it means for paypal. why would be good for them? >> is hard to specify. all the companies in silicon valley understand the benefits of focus. there is a fundamental difference between a company that is trying to solve retail and merchandising which is ebay. it is about how you get people to shop on the site. out you get them to find the goods they are looking for? and a company that is a payment system.

the types of questions that paypal trying to solve is how do you get people to keep money in the paypal system? id prevent fraud? -- how do you prevent fraud? think that paypal could get more involved in things like financial services? >> i think that paypal on its own could be a 100 dollars -- $100 billion plus financial powerhouse. the key things to understand about the business is that all the profit comes from transactions that are funded from a paypal balance. the credit card fund and transactions roughly breakeven. it is critical for people to keep money in the system. tremendously,wn more than we could've expected of the last decade. if you look at the funding mix, which is the percentage of strands action's that are funded -- transactions that are funded, that is not kept up -- has not kept up. there are a lot of different

ways that paypal could improve that. you can offer check writing on paypal accounts, direct deposit. could pay interest on accounts which is something we actually did and it is a feature that ebay recently took away. >> let's talk about that. what kind of innovation do you think has been at paypal says going under the ebay umbrella? >> it is easier to point out some of the features they have taken away. this is something that we worked out and we were paying the highest rate of the interest in the industry through our money market interest on paypal balances. i don't know what it deprecated that. it might be a regulatory reason. i think there needs to be more regulatory flexibility is paypal or spun out into its own entity. >> it seems the last thing either out -- ebay wants is to spend it out. this is the crown jewel. ve ebay?uld it leadv

>> ebay would essentially be more of focused on its own problems if he didn't have a scratch to rely on. over the last 10 years if you did not have this fast growth business bringing up the average, i think ebay might have had to focus more sooner on its growth. usually it is companies like amazon or alley, that have not -- ali baba that not had the same issues. >> who should run paypal if it is spun off? >> id structure this is sort of a secondary question. i think is critical for there to the structureknow of the proposal, but you need to have a business relationship between the two companies. the ceo of ebay has pointed out that there are a number of legitimate business synergies heard i think all of those can

be captured to the right type of business arrangement. ebay would remain a major shareholder. >> we were talking about how there are no founders, no paypal founders involved in paypal anymore. do founders come back? >> they are saying that paypal is so value that is why they cannot spin it out. look at their board. there is not purse -- one person involved in the creation of it on the board. do the the company to best long-term other ones that keep their founders involved. especially when you have founders and leaders and business people of the quality .f elon musk why are not these -- why aren't these people on the board? >> we have seen activist investors take an interest in technology companies. out -- how playing do you see this playing out? how much about

discussion he can provide ebay even though they do not want to do it. how ugly will be on the way there? >> there is a distraction from fighting this thing. there's is the distraction of spinning it out. i would classify the benefits of spinning it out. you can point to -- you have to figure out some of the details. given the potential value that could be unlocked i think you would be a worthwhile exercise. quest to the founders want to go back and be on the board? >> i will give them a call and ask them. -- they all'll feel feel that paypal is an important company and product. >> is the consensus that innovation up paypal really stalled once a win over to ebay? went over to ebay? >> i don't know anyone who thought that we did the acquisition it would somehow make us more focused or innovative. we had this incredible dependency at that point on ebay payments -- sorry, on ebay

transactions that no longer exists to nearly the same extent. i think it is possible. we didn't really feel like we had an option 12 years ago we sold it because, again, ebay was 2/3 of our payments. they had basically declared war on us. today you can capture all those business benefits through a deal and enable paypal to be a standalone company. coo --er paypal >> that was great. who would know better? i thought that was really interesting. the founders think this thing should be spun off. >> i'm having a tough decision here. there are so many great things on the show today, but you played with drones outside. flying behind our studio -- >> there is this whole sort of fantasy that amazon has of delivering packages by drones. i think the real this is users and companies going out to this are out there right now to do

everything, from examining pipelines to real estate. we talked to a guy -- >> flying over your kids' soccer game. >> it is bad enough they're getting hit by the soccer ball. we were shown how the drones can work. check it out. >> everyone who buys one of our products buys it under the commercial use exception. if you are a regular individual you can buy one of these in flight. lice when you're trying to build a business around this -- what kind of business have you built around this? how big is your organization? >> we are about 120.8 -- employees -- 120 employees. as ang as you operate personal industry and you are not profiting, you do not have a company that has services based on aircraft, you can do it. >> that is not where the money is?

likes the money is an enterprise. that is where we're going. >> not in delivering packages? >> that is a good idea and something that might happen for a -- in a few years from now. is it a good idea or -- -- >> if anyone will make it happen, jeff bezos will make it happen. it is a long ways off and very dangerous. but if you have my dog with your drone i will not order from amazon anymore. >> that would be terrible. >> this thing weighs about three pounds? thingoes this kind of used for? is is what you sell? >> if you want to take a picture of your kids' soccer game, jordan film a server, you can do all those action things. >> >> us try this out. this out.- let's try unlike my room but, this is going to get some air. , this is going to get

some air. that does not look safe at all. it is flying up to emily in the studio right now. how many of these things have is a new >> this release product. it is not up for consumer release yet. some developers have it but we expect to sell a lot of these because they are in expected -- inexpensive and a lot of fun. -- you and strong this are controlling this with joysticks. what things are moving towards is that you will operate it with your phone or tablet. i do it like this because this is how i'm used to it. i get a little bit finer control and i can point the camera exactly where i want. it is a fully autonomous aircraft and the way we want people to operate these things is to say, go to your on a map. push a button, go here. checking oil and gas pipelines and things like that, not delivering coffee.

they have waitresses in waders -- waiters and waitresses to do a perfectly good job of that. >> it has a high value package that cars can go, that is where delivery make sense. if you are delivering medical supplies in australia across great distances, one of these makes a ton of sense. if you're doing something residential we have to fly over peoples' heads, it is not a great situation. there are regulatory hurdles. >> you have been to school a lot. this really hard to do technologically? is it hard to invent this stuff? are there going to be 50 companies offering these things? or is there really a high barrier to entry? >> i think it is really easy to make a copter that flies reasonably well. hard -- what is hard to

make it really well and the aton me. to say, go to the waypoint and take a picture. that is what we work a lot in. >> it sound like the apple computer idea where that can be a lot of computers, but the ease of use and grace in the software is hard to come by. >> think about it as a flying camera. people who buy this, what they want to do is take a picture, not fly necessarily. they want to have a really easy experience and that requires autonomy. >> what you think the most important change that you are like to see from the faa in terms of legislation or the rules to allow drones to propagate more in the u.s.? the want toince regulate aircraft that are going to operate in a manned aerospace -- airspace. i think they should look at ways of deregulating small business, small commercial business so you can make a business around crop survey or around construction survey. robotics.s 3-d we are cool.

>> i was a fun one. coming up, we will be talking about surfing. >> i am all for it. ♪

clip from "chasing mavericks." justice the mavericks surfing competition has been going on about an hour away from us. >> if you drive fast, maybe. "twiggy"nner is grant baker. he is from cape town and south africa. in 2006.e competition >> the thing about this -- it was a secret from the surfing world forever until a picture us

-- picture appeared in a surfing magazine in 1990. showinger that picture up and it was a huge deal. when it goes off, it is huge. with technology, they've been able to use specialized computer models to figure out when the wave is going to happen. check out the interview with the guy behind the technology. >> the technology is super important because if you do not have waves, if you don't have the white window or conditions, you cannot have the contest. >> mavericks was a secret surf spot because it rarely went big. behind the scenes. no one knew about it. one guy surf to buy and sell for 25 years and then he let the secret out and now everyone knows about it. jeff clark. the pictures of him writing where there are other giant waves, he shows up and they wonder where he learned.

>> in his backyard of all places. >> talk about what all goes into this. how far in advance do you announce the contest will take place? >> you have a good idea, up to 10 days beforehand, but the reality is there are all sorts of tricks about what the wind -- wind will do. you don't want to announce until the last possible minute. 48 hours before hand. big assad -- one of the biggest surfing competitions the world 48 hours before. what technology do you use for that? you have people flying in from all over the world to compete. >> there are maple -- wave models, whether models, satellite data, mixing it into a secret sauce that helps us predict exactly when these wells will hit. we can nail it down to 30 minutes before time, exactly when the swells are going to hit. >> what the technology now that is not available the past?

>> there was really no satellites. it is really the computer models that are the most important part. you see it all the time on tv news, weather models. what we have a specialized models for surf protection. they tell you exactly as a storm is forming and wind starts blowing on the ocean surface, how big those ocean waves that are being generated by the winds and storm. we had sees ast high as 57 feet. that means that once every era, there are rogue waves out in the ocean there were over 110 feet tall. >>,. -- come on. what are we going to see at the competition? how big will be waves get? >> there is the hawaiian scale. is really about half of what the waves are. we're saying 17-20 feet.

>> that is from the basin where the waveforms to the top of the crest? >> yes. hawaiian guys taken cut by half. >> they say that they measure from the back of the way because that is the part you see. bases.aying 35-40 feet there is a lot of energy. it is not a thin little swell. it is like a bulldozer coming at you. >> and really shallow water, too. the rocks famously heard. -- hurt. >> yeah. or as a spot out there that is about 20 feet by 20 feet to 10 feet deep that is a pinnacle of rock. they hitswells come, the pinnacle, they jump up, and they basically create this giant gnarly tube and a lot of water moving. extremely dangerous.

>> have you surfed pipeline? >> yes. >> there is a rock jutting out underwater that i found the hard way. is a very heavy wave, but it is not as big, it is not a deep waterway. there is more water moving it mavericks. it makes it much more dangerous. >> amazing. we will be right back. ♪

>> this is "bloomberg west." the 56th grammy awards are coming to cbs this sunday but you will not deceive rock stars there. you also see some sports stars. super bowl marketers are looking at the grammys this year. i want to bring in john erlichman. orknow that super bowl ads $4 million for 30 seconds? you get the same bang for your buck at the grammys? >> this is a show that can get

close to 30 million potential viewers. i don't know who will get that high, but about $1 million. it's like a going range for the higher prices in the past, maybe a quarter of the price. you know, it is maybe an interesting bang for your buck. >> here's what i want to know -- who do you have? who's winning album of the year? >> i like daft punk. i like i claimed macklemore, but it was more like a -- >> gametime decision. i like it. >> i'm going with daft punk. >> i have to go for macklemore to because i got to take an awesome photo with him at the concert last night and i am now the biggest fan. --i think macklemore >> i think macklemore probably wins. >> i am framing it.

>> will watch on sunday. maybe they will give you a shout out. have a great weekend. ♪

>> welcome to "lunch money" where we tie together the best stories and news. let's take a look at the menu in davos. what is better than a bunch of suits in the swiss alps? dancing suits in the swiss alps. the biggest wake up calls. netflix goes behind the scenes of the romney campaign. how do you sell the best corner in the game after a rant like that? pop stars set sail with new content.