♪ >> live from pier three in san francisco, welcome to "bloomberg west." i'm emily chang. our lead story of the day, facebook struck a deal with whatsapp. now we know google and microsoft tried to buy whatsapp as well. why so much interest? users.p has 450 million they send 18 billion messages a

day, which is nearly all the text messages sent around the world combined. on welfare andp food stamps and was so poor he could not afford to call this family in the ukraine. his cofounder got turned down for jobs at facebook and twitter. aftersult, both of them leaving yahoo! started a messaging service that anyone could afford. foundays ago the ceo himself eating chocolate covered strawberries at mark zuckerberg's home on valentine's day and striking a deal that will make him and his employees very rich. i want to bring in serena fido from new york as well as jon erlichman nla -- in l.a. telephone we know about the interest from google and -- tell us what we know about the interest from google and microsoft. >> there was not really a formal

process to sell whatsapp, but the company through the years as it publicized how much users it was gaining, that got approached by other companies. we learned that google and microsoft tried to buy the company and did not succeed, where facebook it. the price of facebook paid is probably unbeatable, and i don't know that for sure, but another concern that whatsapp founders might have had is the fact that google and microsoft have their own operating system and maybe would have closed the app that can run on every smartphone. and facebook is like that too. the price is like unbeatable. >> $19 billion, that is hard to beat. what do we know about how this deal actually got done? on the face of it seems like mark zuckerberg shaking hands,

not asking advice from anyone else. is that what happens? >>-- happened? >> clearly there is more involvement than just that. mark zuckerberg is very bold. that has been the headline on his willingness to do this deal. very certain on where he wants to position this company. that leaves him confident enough to try to get these deals done quickly. in the case of facebook and what they're trying to do and their willingness to say, we can feel -- go beyond just facebook and have mobile communications dominant by owning different .latforms, owning instagram if you were to compare the strategy of what a microsoft may have been thinking, it's member that microsoft owns skype, which looks pretty reasonable in terms of what they paid versus this deal. there's a business where they buta consumer end to it, there's a business aspect for microsoft. they are able to integrate that

into some of their offerings. they already have a messaging app. i don't know how serious microsoft would have been. mark zuckerberg very serious about growing the mobile communication story of facebook. >> speaking of messaging apps, they have taken away 32 and a half million dollars away from the carriers already, but there are a lot of people making money on this deal. you cover the venture capitalists tell us about how much sequoia is taking home here, the only investor in whatsapp. >> what is fascinating about this company is it has really been under the radar until this deal happened. yesterday when the deal was announced, everyone was surprised, especially in the u.s., where the application is not as popular as it is in europe. sequoia had silently invested in the company with an initial round of $8 million in 2011.

than $2me more billion. billion sequoia is taking away from this. we will consider our conversation about facebook and whatsapp. ♪

>> i'm emily chang. you are watching "bloomberg west ." day, thestory of the impact on facebook and their competitors. with me is ben thompson. he joins us from taiwan. inedict evans here with me the studio in san francisco. i'm glad to have both of you on this, because you are two of the foremost anchors on what is going on in mobile. benedict, i have to ask the question about the number. whatsapp iswhatsapp worth it? >> was instagram worth $1 billion or worth 1% of facebook at the time?

the question for mark zuckerberg is around maintaining share if engagement and share of activity. it is a significant percentage of facebook. is taking a big chunk of people who should have been using facebook and they are all using facebook first. do youstion for him was, just sit and try to compete with that? they would be looking at facebook messenger or the numbers for that for the last year or two years. would you say, this is a really great mobile conversation product and should be part of facebook? >> looking at the landscape of mobile messaging apps out there, you are in taiwan, you have seen the rise of viber. do you think this is worth it? >> i tend to think it is.

the price per user is very reasonable. the growth is fantastic. plateaued. i think it's not a great comparison. from that perspective, it is reasonable. the bigger thing that benedict was driving at is, i don't know if there's a price that would be too high. i don't know if that particularly mattered to mark thereberg because he felt was a threat. we saw the same sort of thing with the snatch up thing. there's this area private messaging that facebook really kind of has a brand to go into. google are scared to put stuff on facebook that is private. at this point in the game, everything is very expensive. >> does it matter that facebook is buying versus building innovation?

>> not especially. interesting strands here you can also see with instagram is how difficult it is to fork off these successes in advance. you could have launched 10 apps that look like instagram on a different name. one of them would get to what instagram got. with the other nine, maybe and maybe not. it's hard to overstate the degree of chance and luck in some of these really spectacularly growing businesses. dynamic is perhaps worth looking at. on the desktop, there are really strong winner take all dynamics around social. when you go to mobile, most of those dynamics fall away. can get pushhey notifications. all of the friction around using multiple social networks on

desktop falls away on mobile. it's kind of messy. >> it's very messy. the ones that break through the noise and explode try to replicate that again -- explode, to try to replicate that again is a fools errand. >> if it is not winner takes all, how many social networks, messaging apps and my managing in the future -- am i managing in the future? >> they all build on the phone address book, they all use the phones' photo roll. there is still the network effect of the best network for me is the one my friends are on. this being seeing is fought out on a country by country basis. anecdote, my wife only uses line. i have four or five. >> you are a unique use case.

>> yes. my whatsapp friends are mostly a broad. i think that is how you're going to see these battles going down. you see these big marketing things. are several different dynamics here. it could play out the way facebook played out. there were local champions the got forced by facebook on the desktop. with instant messaging, there was a local winner in each country. that's what everyone used, rather than anything specific about the product. when you get your smartphone out-of-the-box, it already has phone, sms and e-mail. i hesitate to presume there will be one more. if all these guys are doing is unbundling different parts of your social and communications experience -- you can choose.

how are you going to speak to your boss? how are you going to speak to this person? photo on to send a snap chat or post a picture on instagram and tag five friends? there is a systemic plurality of options. i'm not necessarily sure it's going to collapse into one anymore than the web collapsed into one. one of the ways of looking at what is happening, facebook, it is what happened to yahoo! or aol. you go from having strong benefits to having your stuff in one place. over time there is a gravitational well, a black hole effect that pulls more and more things into it and it collapses under a certain weight. you start saying, i don't have to do all my stuff in one place. i don't have to do all of my web on aol. i know mark zuckerberg has insisted it will remain separate. jan koum has said the same thing. down the line, does whatsapp

change at all? do they add the dreaded a-word? integrate ando turn this into more of a platform or integrated into facebook overall? i remain separate for the foreseeable future -- it remains a separate for the foreseeable future. i do think stickers makes a lot of sense. i love stickers. once you have used them you cannot go back. i do not think you need ads in messaging. cases.scinating business you see with line, through .tickers brands have permission

that's a direct channel. or there are pushing apps, monetizing within the other apps through in-app purchases. there are a lot of ways to monetize through a messaging app. facebook's monetization is going very well. they have the luxury of continuing to push whatsapp growth and come back to it when they need to. i don't think they need to for quite a while. >> benedict, what's the biggest risk that facebook has right now? >> there's a case you can make that says that facebook is playing whack a mole. when they bought instagram, a lot of people are saying there is this unbundling problem. they bought instagram, problem solved. that was not the case at all. the same for snapchat, which has passed the volume of facebook.

the question is, is the opportunity so big that it doesn't matter that they don't have all of it? 70%t ok for facebook to be of your smartphone socializing activity, spread across a bunch of federated applications, whether it is facebook home or messenger or whatsapp, or the next big thing they buy. the downside might be, they bought instagram and that was a great deal in a financial sense that it did not do anything around the positioning and photographs. spentey bought whatsapp, $19 billion, which brought them 450 million active users. what happens next? is cannot presume this game over. the elemental thing that is happening in mobile, there are two basic issues. is the internet with the web, and that was settled in

1994, 1995. when you go to mobile, suddenly you have a massively more complex environment of how people engage. this year, laster is messaging. i cannot give you a reasonable forecast on what i will be doing in my smartphone four or five years from now. goes back to my question, is it worth paying $19 billion if we do not know in five years if we will still be using it? >> what if google bought this instead? >> what if? twitter had bought instagram, you could argue that twitter would be in a different place now. and facebook might have a different problem. it goes back to the point i made earlier about aggression. the really interesting thing about watching facebook and google now is how aggressive and ruthless they are in reacting to disruption and in jettisoning previous functions about what their business is supposed to be.

that's very different from what big internet companies were doing 10, 15 years ago when they thought, we have won. i think mark zuckerberg more than anyone else would say, i have no idea what facebook will be five years from now. >> benedict evidence of andreessen horowitz, ben thompson of stratechery. we will be back with more. ♪

billion price$19 tag for whatsapp shocked many. was it a huge surprise to whatsapp's competitors?

i want to bring in a special roundtable of whatsapp competitors. the cofounder and cto of tango. whoa whenrybody went this was announced, but what did you guys think? >> the sheer number of the purchase, when you factor in the rs you -- rsu for keeping employees. when you divide it by the active number of users it's only about $40 a user. when you factor in the growth in the growth and add one million users a day, you are looking at outng them out a few years $20 a user. you're talking about something realistic in terms of being a good return on investment. one of the reasons it surprised people here was because they

have an app used mostly overseas. a lot of people in the u.s. have not heard of them or use them. >> i have tried to use it personally, but not enough of my friends here have it. people do communicate with me from abroad. what was your reaction? >> when you think about it, they half the price of twitter for twice the user base. when you look at the excitement there is around the messaging space, and how about changing the face of social networking, i think they have to make a move. >> do you think google is in a bad place, that they did not get this? >> i don't think google is in a bad place in any way. the first thing you have to remember is that they own android. a lot of these apps are not really possible without that is amentally, android

platform and these have the apps. people have aspirations to make bigger platforms. for $900 million. it remains to be seen whether people can build platforms. in five years, he does know what he's going to be using. there has to be some consolidation down the line. what happens to all these messaging competitors if they are not differentiated enough? don't some of them have to go away? >> that is the case. it's difficult to compete with large networks that have been created and gathered hundreds of millions of users. we will see a handful of dominant players emerge. think about the communications, att -- at&t's and verizon's of the world. end upsame way we will

with a variety of players that are coming up the market in this new era of communications. estimate, i believe messaging services are going to cost the carrier's $54 billion. >> this is one issue that is underplayed. whatsapp has an application that serves no ads. the question is, who will end up paying for this? the answer will be the carriers, in terms of subsidized network plans for their users so they can use whatsapp and facebook to lure in new subscribers. much of the anticipated motivation of the service will be negotiations with the carriers and facebook. >> thanks so much for sharing your perspective with us today. we will be back with more. ♪

♪ you are watching "bloomberg west." we focus on technology and the future of business. i'm emily chang. judge has blocked streaming tv company aerial from operating in several western states. this is not until the u.s. supreme court takes up a related case in april. broadcasters have argued that it is stealing tv signals without paying. aereo maintains its antenna should be treated the same as individual antennas. htc has plans to unveil the first of three wearable devices next week. a smart watch prototype a sonic wall, device will be previewed

exclusively in barcelona next week. htc is developing a watch that plays music. the winkle box brothers, famous for their legal battle with mark zuckerberg, announced a financial index for bitcoin. provide a regularly updated figure for the price of the virtual currency. the news was announced in a regulatory filing. the big story we're following today is facebook buying whatsapp in a deal valued at as much as $19 billion. whatsapp is just one of many new apps and social media tools that allows people to connect around the world. someone who knows what the power , theese technologies is chief technology officer for

obama, helping build a team of developers from tech companies like twitter, google and facebook. they use big data and social media to help president obama's reelection in 2012. harper is now the ceo of the financial tech company that connects retailers with mobile buyers, and mobile briars -- buyers with the products they want. i have to ask you about this whatsapp story. in washington, how do people there use whatsapp, viber, snapchat, instagram? is a greathis technology for trying to interact with the constituents. there's a lot of excitement about, how do you connect with -- people. something that is something we try to do on the campaign. would thing we have learned is how quickly the social media

landscape changes. do with theou president if you were involved with him in 2016 or the next candidate? that is's a lot changing the landscape of tech right now. with the emergence of line and , messaging has been taken off the big platforms and now put back onto one of the big platforms. really interesting aspect of privacy and control. some people are very interested in trying to solve this. i'm excited to see what happens in 2016, and will the same things we did in 2012 with social work? will people be more skeptical? for instance, with e-mail targeting and whatnot. >> is privacy a fair expectation at this point? >> i think it is a fair expectation. but i also think that many people don't really care about it in the same way that people

who are thinking about it academically care about it. i worry that between those two is where we will have a problem. it is an expectation that is fair. zuckerberg'srk biggest ambition has been to connect the world and now he's trying to bring internet access to everyone in the world. how does something like whatsapp further those objectives, the more political objectives we have seen from him when it comes to internet.org and forward u.s. and immigration? >> i think this is the most important part of the whatsapp acquisition. when you think about, especially on feature phones, or the platforms that are not necessarily supported by the regular chat applications, this is a great way to hit the people who don't have the privilege we have in the u.s. with internet access and give them an opportunity to communicate with their friends and peers, etc.

from there, being able to push the messaging to them from brands, etc.. i know we keep talking about ads, will ads go there. i don't know if that matters as much as making sure it continues to work. >> we have seen some great examples of washington using technology, for example in the 2012 presidential campaign. what about the examples where they have used it poorly, when it comes to healthcare.gov? what is a going to take for washington to catch up? >> -- it going to take for washington to catch up? >> that is a very nuanced question. healthcare.gov is not an example of washington using technology poorly, it is just a large product that is very difficult. we have to -- it is everyone -- have to pay attention to what the cutting edge is and really

listen to the users on what they want. one of the things i worry is that in 2016 if we follow the playbook from 2012 we will fail. we constantly have to have our ears to the ground. good answer for why or how we can make sure they do things better, they being washington. i know by just talking about it in continuing this conversation, will hopefully push those leaders to make good decisions. >> what will define the race in 2016 when it comes to tech? >> it will be much more about getting key consulting grupoups in. i'm excited about my friends doing work at service group in chicago. people who are just building kind of a platform based on what we did in 2012, that will be the .efining characteristic on the democratic side, these great consulting firms helping

out and pushing the candidates. we won't have a lot of time. we will only have a couple of months because we won't have the 18 months we had in 2012. it will be interesting to see which of these technology firms really jump and run? >> tell us about what you are doing at modest. >> at modest, we're trying to make the future of commerce better. right now were kind of worried about the direction we have been going and we think we can make it better. that means making it easier to buy things on mobile devices, making it so you [indiscernible] when i want to purchase a pair of shoes on a train, how do i make it so that happens? -- harper reed, ceo of modest. still ahead, will this whatsapp acquisition bring teens back to facebook? we will talk to the expert on what is going on inside teens' minds, next. ♪

>> welcome back to "bloomberg west." i'm emily chang. will whatsapp help her bring teens back to facebook? joining us from microsoft research center and the author of a new book called "it's complicated." 'se is on "time" magazine list along with tim cook and mark zuckerberg, most influential minds. you have been talking to teenagers. how does whatsapp compared to instagram, snapchat, facebook am a twitter? >> -- facebook, twitter? >> certainly for teens, the messaging app is an opportunity to talk with a smaller group of friends, sharing messages and photos and videos. it is building off of sms.

everywhere else in the world we have seen sms be around for a long time. in the u.s., engagement with texting has been relatively new. it is not quite the same as what were seeing around the globe. >> what does this mean for the snapchats of the world? >> young people are using these services differently. what is fascinating about this moment is time -- in time is were seeing a proliferation of different tools used in different friends group for different uses. the same teens that are using snapchat are also turning to messaging apps like whatsapp to talk with a larger group of people, but they're using multiple tools, still taking photos and putting them on instagram. funny moment right now because rather than a one-size-fits-all tool, you're seeing tools proliferate in a way that allows for new

opportunities. >> that is what is happening right now. what happens five years from now? benedict from andreessen horowitz was just on saying, i don't know what i will be using on my phone five years from now. >> at the end of the day, we will find ways to communicate one-on-one with people we care about, with small groups and large audiences. we will communicate across interests we are passionate about. era whereare everything was consolidated to one service. of goingobvious way forward is there will be tons of different services, many of which will be mobile first. >> what about the secret apps? broke news about quintess paltrow. is that how people will be getting their news -- when it paltrow -- gwyneth paltrow. is that how people will be getting their news? >> i see the secret type apps

being an extension of what we , where you kind of want to know what is going on in your world. you want to hear the things that nobody would share a. someone close to you. that is what makes it so delightful. it is also a fun place to game. some people are posting things that may or may not be real, and that's fun. >> are teenagers really using these apps? >> they're experimenting with them. there's not a one size -- all teens on a perfect service. we are seeing whatsapp, but we're seeing kick, and all the different services being explored and experimented with not just by country but by teen group. the same is true for all the other photo sharing apps. they are using them, but it's not like it is everyone. longer-term or now, does

facebook have 18 problem -- a teen problem? >> it is like saying, does e-mail have an adult problem. there used to be a day in which you got mail was an exciting moment. now most of us look and go, emails. for teens, they have switched from thinking about facebook is a passionate place where they hang out with their friends to where they get the contact number of a friend from school that they don't know their cell phone yet, or they figure out how to share a photo they want everyone to see, or they contact an adult in a school context. they are still using it but it's not quite the passion play. >> in your book, what surprised you most? you know this more than anyone. but what surprised you? i thought the internet would magically transform so many aspects of teen life. it did for me. when i got on the ground talking to teens i realized they were

doing the same things as they ever were. it became more visible. result, adults spent a lot of time looking at what they could see and panicking. i thought it was interesting to figure out how to tell the story of young people to show them what they were doing is the same things they have always been doing. they have been hanging out, gossiping, flirting. >> i practically have a panic attack when i think about throwing up in a world where facebook exists and all the social networks -- down the line a few years from now, what do you think teens are going to be using? will it be vastly different? >> we will still see iterations of new technology. certain things are here to stay. use devices in your pocket to connect with your friends, your broader peer group , that is here to stay. what exact tools people are

using? who knows? the bigger question is how we fit it into the broader dynamic of teen sociology? -- 30 yearsns telling teens they cannot hang out in public places. >> danah boyd, author of "it's complicated." thank you for joining us. ♪

>> i'm emily chang. suffering has been from a severe drought. 2013 was the driest year on record. spent thezker has week here on our coast in california. he joins us from paso robles in southern california. you went to magic mountain

earlier this week. how bad is it? i know you like to get your kicks in lake tahoe. our buddy jon erlichman gets his big air at mammoth mountain because it's closer to los angeles. most of the traffic that mammoth gets come from los angeles. ceo ofregory is the mammoth mountain and chairman of the board. he has a unique perspective on the trot because he sits on top of the sierra snowpack. he has a window into the future and can see the time bomb that's going to blow up this summer when california begins to run dry. >> in the west, water is a big deal. it is a heavily agriculturally dependent area. the headwaters of the l.a.

l.a. with water. the politics of california starts here. governor brown declared a drought emergency a few weeks ago. as we move into summertime, we will see a lot of debate over what california is going to do with the lack of water resources unless mother nature changes significantly. >> rusty told me that water is such a divisive issue that it .tarts bar fights it can pit brother against brother. it depends what kind of allocation you have, depending on where your source of water is, whether a state or federal source. it can get really bitter down here. >> about a week and a half ago we got a ton of rain in california, something more like 50% of the rain we got last year. did that rain help?

>> it helped a little bit. if you go to mammoth mountain you will see there is snow. behind rusty gregory there's a full half pipe for the snowboarders. but it is less than half of what mammoth would have at this point of the year. they're not confident they're going to get any further rianfall -- rainfall. he told me that mammoth typically gets $150 million a year in a good year in revenue. of that, $45 million operating income. you would not think that skiing is so good. the problem is that it is so variable and subject to mother nature. this year he is anticipating they will lose at least 20% -- 25% of the revenue. the impact is not and at mammoth mountain. mammoth employees -- does not end at mammoth mountain.

mammoth employees. it reduces the impact on visitation and revenue of the company. it has a higher cost to it. it costs $2000 an hour of labor and electricity to run a snowmaking system. it is more expensive than having mother nature provided for us. the alternative is pretty bad. without snowmaking on a year , it looks like the gobi desert around here. one of the ways to hedge against a bad year is to buy whether insurance. -- weather insurance. while it is a well honed financial mechanism for hit or miss it was in the ski industry. some broker comes out with a snow policy. every time we have had one of those and try to collect, we

ended up in litigation. we look at it every year. it is not something we spent a lot of money on. snow, whichmaking is not ideal for a ski resort, places like mammoth have few options and are dealing with the same thing up where you are in lake tocco. in haskell robles, they have no water either -- lake tahoe. in paso robles, they have no water either. welcome to our state. it's time for the bwest byte, where we focus on one number that tells a whole lot. john has the bite in l.a. what do you have? >> one. one superstar, beyonce, who we believe recently teamed up with for thesharing service itunes album she secretly revealed to the world recently. i was speaking to the ceo aaron

the, hearing him explain situation without using beyonce's name. >> there was a somewhat popular release of a new album that happen by surprise recently, and one of the reasons why it was kept in secret so well is because box was the platform for managing that content. they were able to decide to reveal the information in the news at a time when they wanted to, and they could keep all of the security and controls in one place in the meantime. >> he told us all that but he would not say beyonce's name. he would not say if they are technically going public. >> box has never been so cool. >> [laughter] about it formore sure. entertainment is a big market for even a company like box. we will have those details on "bloomberg west" tomorrow.

>> thanks for watching. see you later. ♪ . .

>> welcome to "lunch money," where we tie together the best stories, interview, and business news. take a look at the menu today. what's the big deal with what's app? how about facebook's $19 billion purchase? if a tree falls in the woods, will google see it? in nation, the gap answers the call for higher wages. is walmart next? in startup, the biggest online publisher you have never heard of. look at the original g.i. joe. stay with the times. let's kick it off with what