♪ >> live from pier 3 in san francisco, welcome to "bloomberg west," where we cover innovation, technology and the future of business. i'm emily chang. our lead story of the day, facebook has struck a deal to buy whatsapp for $19 billion. this is the company with 450 million users, 70% of them daily users that send 18 billion messages a day, nearly the equivalent of all of the text messages sent around the world combined. the c.e.o. is joining facebook's board. this is a guy who grew up on food stamps and was so poor he

could not afford to call his family back at home in the ukraine. his cofounder, brian acton meantime, got turned down for jobs at facebook and twitter. the result, the two of them after leaving yahoo! started a messaging service that anyone could afford. just days ago he found himself eating chocolate-covered strawberries at mark zuckerberg's house on valentine's day and striking a deal that will make him and his 50 employees very, very rich. so how will facebook's acquisition of whatsapp impact its competitors? i spoke with ben thomson, an author, who joined me from taiwan and andreessen horowitz partner benedict evans. i asked them if whatsapp is worth the price tag? >> it's a bit like the instagram acquisition. was instagram worth $1 billion or 1% of facebook at the time? the question for mark zuckerberg is around maintaining share engagement and share of social activity.

whatsapp now has 450 million active users, 70% of them active every day. that is a significant advantage of facebook users. whatsapp is taking a big chunk of people who should have been using facebook and they are using facebook first. the question for him was do you just sit and try and compete with that? they have been looking at facebook message for the last year or so and that has not stopped the clock. -- whatsapp from gorwing. you might say this is a great mobile conversation and that should be part of facebook. >> looking at the landscape of mobile messaging apps, you are in taiwan and you have seen the rise of wichat and others. do you think this is worth it? >> i tend to think it is. i think the price per user is very reasonable. the growth is fantastic. it's a big difference with viber which had plateaued.

it's not a great comparison. the three that matter are whatsapp wichat and line. from that respective it's reasonable. what benedict was driving at -- i don't know if there is a price that is too high. i don't know that it particularly matter to mark zuckerberg because he felt it was a threat. it was the same with snap chat. there is an area of private messaging that facebook has a brand but does not have permission to go into. people are scared to put stuff on facebook that is private. the best way to get into that is to buy in. at this point, everything is very expensive. >> does it matter that facebook is buying versus building innovation? >> not especially. one of the interesting trends here that you can see with instagram is how difficult it is

to forecast these successes in advance. you could have launched 10 apps that look exactly like instagram under a different name. one of them would get to what instagram got. would the other nine? maybe, maybe not. it's hard to say to the degree of luck. luckerstate the degree of in some of these spectacularly growing businesses. the driving dynamic here workth looking at is on the desktop, there are really strong winner takes all dynamic. when you go to mobile, most of them fall away. these apps can use your address book. they all get an icon on the home screen. all of the friction around using multiple social networks on desktop has fallen away on mobile. there are anything up to 50 of these apps that have had more than one million downloads. >> it is kind of messy out there.

>> it's very messy and so the ones that break through the noise and explode, trying to replicate that again is a fools errand. if you see a rocketship, you need to grab the rocketship, not go away and try to build your own. >> if it's not winner take all, ben, how many social networks messaging apps and my managing in the future? -- am i managing in the future? >> i think to a degree benedict is right. they all use the address book. then again, there is the network effect that the best network for me is the one my friends are on. i think what you are seeing and will continue to see is this being fought out on a country by country basis. just to take a personal anecdote, my wife only uses line where i have four or five. >> you are a unique use case, though. >> yes. my whatsapp friends are mostly all abroad. my wife is mostly all taiwan.

we use wichat for friends in china. i think that is how you're going to see these battles going down. you see these big marketing things. that is country by country. >> there are several different dynamics here. it could play out the way facebook played out. there were local champions who got squashed by facebook on the desktop. it could play out the way that instant messaging did. 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 three social apps in it. it has phone, sms and e-mail. i hesitate to presume there will be one more. i think what all these guys are doing is unbundling different parts of your social and communications experience -- so you can choose. how am i going speak to my boss? is it an email or sms? how am i going to speak to this person? do i want to send a photo on snap chat or post a picture on instagram and tag five friends?

or do i want to show a bunch of baby photos with grandparents? there is a systemic plurality of options. i'm not necessarily sure that 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 10-15 years ago. 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 its own weight. you start saying, actually i don't have to do all my stuff in one place. i don't have to do all of my web on aol. or yahoo! i can go straight to use a bunch of other services. >> i know mark zuckerberg has insisted it will remain separate. jan koum has said the same thing. ben, down the line, does whatsapp change at all? do they add stickers? do they add the dreaded a-word?

do they try to integrate and turn this into more of a platform or try integrate it into facebook overall? >> i think it will remain separate for the foreseeable future. that's the biggest benefit of whatsapp. if there were a big benefit to being called facebook, they wouldn't have bought them. i do think stickers makes a lot of sense. i love stickers. i will freely admit to that. once you have used them, you can't go back. i do not think you need ads in messaging. there is fascinating business cases built in messaging, a direct marketing channel. you see with line, through stickers, people give brands permission to add them as a contact. that's a direct channel. or there is pushing apps, monetizing within the other apps through in-app purchases. there is actually a lot of interesting ways to monetize

through a messaging app. the bigger picture, facebook doesn't need to. facebook's monetization is going very well. they have the luxury, i think, 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. >> that was ben thomson and benedict evans. well, tesla has set a goal to deliver 35,000 electric cars this year. we'll talk about that and their latest earnings in an exclusive conversation with c.e.o. elon musk.

>> welcome back to the best of "bloomberg west." i'm emily chang. well, tesla is riding high on an increase in model x deliveries.

-- s deliveries. they reported fourth quarter revenues of $615.2 million, up 101% year over year but one thing missing from the report was details about a battery gigafactory. our "in the loop" anchor, betty liu spoke with musk about why they didn't disclose more details about that factory as part of their release. >> there just wasn't enough time to get into the details of the gigafactory on this call. we had a lot to talk about with the rest of the business. just talking about fourth-quarter results and expectations in the near term for this year. whereas the gigafactory is more of a long-term development over the next three years. it deserves its own call. we're going to do that call and answer questions in as much detail as we can next week. >> elon, as much as i can, can you just clarify a couple of points on that? number one, are you going to be building this with partners?

>> yes. we expect this to be done with a number of funders, yeah. >> can you give a clue as to who they might be? panasonic? samsung? >> i think there is a likelihood that panasonic would be part of it, but that is not 100% confirmed. since they are our main cell supplier now, i think that seems like a pretty good likelihood. >> right. a reasonable assumption there. how are you going to pay for this, elon? >> we can pay for it in more than three years if we -- we can pay for the gigafactory from retained earnings if we allow the timeframe to extend beyond three years. if we want it done in three years, we would probably need to raise some capital. >> yesterday your shareholders got a little bit richer on

reports that you had met with the acquisition chief at apple. is there any truth to a possible partnership merger with apple? >> of course that is -- if -- if one or more companies had approached us last year about such things, there is no way we could really comment on that. >> well, did you have a conversation with apple? [laughter] >> we had conversations with apple. i can't comment on whether those revolved around any kind of acquisition. >> are you for sale if there is a right price? are you for sale? >> i think that is very unlikely, because when you stay super focused on achieving a compelling mass market electric car, and i would be very concerned in any kind of acquisition scenario whoever it

is, that we become distracted from that task, which has always been the driving goal of tesla. >> you say very unlikely, but i'm not hearing -- in the years that i have known you, if something is not going to happen, you say no. i'm not hearing that. i'm hearing there is a door open perhaps at some point. >> well, if there was a scenario, where it would be more likely that we would be able to create the mass market sort of affordable, compelling electric car, then it would make sense to entertain those discussions, but i don't currently see any scenario that would improve that probability, so that's why i think it is very unlikely. >> if anything, elon, if apple were to come to you and say we want to get in the car business and perhaps start making cars, what would you tell them?

given your own experience? >> what would i tell apple if they said they wanted to make cars? >> yeah. >> i would probably tell them that i think it is a great idea. >> ok. all right. as you know, it has been a long and tumultuous road to where you have gotten. some have said also that what would make sense is some sort of partnership between your company, and let's say google and apple using their software, their systems to power your cars. is that something you have thought about or open to? >> using ios or android? >> exactly. in your own system. >> we considered using android in the beginning, but at the he thought android was not ready for implementation into an

automotive application. it was too early in the life of android. i could see us potentially doing some sort of protective mode or emulator or something that allows people to use android or ios applications. you know, that is somewhat peripheral to the fundamental goal of tesla, which is to accelerate the electric car evolution. to make it happen. that is really the important thing. things like whether there is ios or android in the car is somewhat peripheral to that. >> before i let you go, i tweeted out to our followers what questions they would have for you and most of the questions that came back revolved around driverless cars. there are reports out that tesla

has partnered with this israeli company to look into driverless technology. do you want to be the first out of the gate with driverless cars? do you want to be breaking into that market? >> yeah. i should clarify that. tesla has built up a significant expertise in autonomous driving. i would not use the word driverless cars. the terminology that we like to use is autopilot, which is analogous to the autopilot function that an airplane has. you still expect someone to be able to pilot the plane, but the autopilot helps improve precision and improve safety and reduce pilot workload. that kind of thing. that is the way we view autopilot cars. i would venture to say at this point, we have probably got the strongest auto autonomous driving engineering team of any car company.

maybe any company. we are continuing to build on that engineering expertise. we do expect to be the first company to market with significant autonomous driving functioning in vehicles. >> betty liu speaking with tesla c.e.o. and founder elon musk. box is one of the names being floated to go public, but what does the company's founder aaron levie have to say about a future i.p.o.? next on bloomberg west. ♪

>> welcome back to the best of "bloomberg west." i'm emily chang. well, box specializes in web-based content-sharing platforms and is led by the colorful c.e.o., aaron levie.

the fast-growing company is reportedly on the road to an i.p.o. there are his shoes, very colorful as always. jon erlichman caught up with levie at digital entertainment world expo. jon asked him about the company's plans to go public. and how they might be using box before it is released. >> there was a somewhat popular new release of a new album that happened 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. this is allowing content owners to actually do more with their information and have more

security around it than if it hadn't gone to the -- to the cloud. >> beyonce? >> maybe, maybe not. speaking of secrets, it has been reported that you guys are planning to go public. anything you can shed on that subject? >> probably not. that is two subjects in a row that we can't talk about. we're trying to build an independent and long-term company. that is path that we're on to staying independent. >> you guys focused on business. dropbox, and other companies in this area. >> i've heard of them. >> you decided that was not your market. >> we like consumers but not in a business model. >> you have these two fast-growing bay area companies. one box, one dropbox. >> the trademark department also gets confused. >> in terms of this competition

between your businesses, even if they are focused on the consumer and you are focused on business -- i go back to the i.p.o. question. >> i would say we think about that race less than people watching the industry think about it. it is not a huge priority for us to be in the financial market race. we think it is far more important that we build out a robust business. >> the companies you are competing with or get labeled as the classic tech companies, the big players in technology. everybody always likes to use the microsoft example. microsoft has a new ceo -- if i read your twitter feed, it looks as if you kind of have approval of him as a leader for the company. >> i am sure he cares. yes. >> did you reach out to satya nadella? have you guys shared an email or a text? >> he was one of the first executives at microsoft to reach out to us, a couple of years ago.

we usually think if someone reaches out, they have a knife behind their back. in this case, everything we interacted on felt like it was in an interest of becoming a much more open company and platform. that's why i'm very bullish on satya. he has been at microsoft a long time. people thought, is he going to bring enough change? he was the change agent in microsoft. >> you bus people from san francisco by the way. >> we do have a bus. >> do you think about the employee responsibility and what is becoming a touchy subject in san francisco of less room for the middle class because of all the successful technology companies that have given new opportunities to people who now live in san francisco and bus down to the valley? >> we have buses because it is efficient. the alternative is to have 75

extra cars on the road. we want to make it so people can get to work more easily. it is from a capitalistic intent also. we have wi-fi on the buses means you can work, so we get an extra two hours of work from people. we're focused on how do we create the most productivity from our employee base, for society? i do not think buses are the real issue. it is not even a symptom of the issue. the issue is that you have not a lot of housing in san francisco. with scarce housing and an increased workforce, all you can do is have a shift in the population. that is super unfortunate. the solution is you build more houses and pay people more. unfortunately, we are unrelated to either of those, so we are going to keep busing people. >> that was jon erlichman speaking with box founder aaron levie. well, the ipo pipeline is filling up with tech offerings, perhaps including box. we're going to help you separate

fact from fiction in the i.p.o. process. that's next on "bloomberg west." ♪

>> you are watching "bloomberg west," where we focus on technology and the future of business. i am emily chang. it has been a busy year for ipo announcements. hot tech ipo's are drawing a lot of interest from retail investors. our next guest says some of these offerings will yield high rewards, and it can be difficult to separate fact from fiction. to understand the misconceptions of the ipo process, i spoke with brian hamilton. i started by asking him what

tech offerings he thinks are goodbyes. >> king digital might be one. alibaba. possibly square. it is interesting with king digital. their multiple is very low and they are profitable. the value looks good on the surface. >> king has a game, candy crush, that is 78% of his revenue. how is that safe? >> that is a good point. their relative price multiple is very low. when twitter went out, they were 50 times sales and a multiple. this is 2.7 times. the market is adjusting up. i think it is a good company if they can broaden their product line. >> what about square? they specialize in swipe technology. now there's all this talk about

chip and pin. square is going to have some difficulty getting beyond the united states. >> that is a dog with the same fleas. they are probably not profitable. the valuation is the big flea there. we see it over and over again over the past year. companies go out to early or way in advance of what they actually perform the market. >> are you saying that investors should or shouldn't invest a square goes public? >> here is my thing. there is a checklist and it is a basic one. is the company growing its revenue well? is it profitable? is there cash flow? what is the brand like? if you look at all of those together, then say i can deep dive. if it does not make those, it -- those basic cuts, it makes me

concerned. it is not necessarily in a bull market where we all look smart. everyone wins. the average return on ipo tech companies was 62%. we all the great. with the market goes down, and it always does, what happens to those companies than? the average bull market is about 3.8 years. we are into the fifth year of growth. these companies that do not have strong fundamentals, they explode with the market goes down. -- when the market goes down. it does not stay up forever. >> what about alibaba? we don't have the same transparency. >> that is a great question. they meet all the basic points on, is this company pre-strong? -- pretty strong.

they are growing very well. they have cash flow. they will be subject to review. there will be debate about the strength of their financials as to the quality of the financials. on the surface, it look like a pretty good company. the value is going to be very high. >> how are you looking at twitter right now? facebook, linkedin. >> we can't take those all together. you know how i feel about twitter. it is still way overvalued. i think it is good that they are turning the corner in cash flow. the valuation is astronomical. when they went out and went public, there were 50 time sales. when microsoft went out, there were five times sales. the value with twitter, it is a slamdunk. maybe they will prove me wrong

in two to three years and they will catch up to the value. you are buying it at a very high multiple. >> that was brian hamilton. still ahead, will teens come back to facebook? we will talk to an expert about how young people are using social media next. ♪

>> welcome back to the best of "bloomberg west." i am emily chang. will facebook buying whatsapp bring teens back to facebook? did they ever really leave? i spoke to an expert on how teens are using social media. she is the author of a new book called "its complicated, the social lives of a networked teen." this is what she had to say about how teens are using whatsapp.

>> they're using different applications for different purposes. messaging apps allow them to speak to a smaller group of people. it is in many ways building off of sms. we have seen sms around for a long time. in the united states teens' engagement with taxing has been relatively new -- texting has been relatively new. it is not the same as what we are seeing around the globe. >> do you think -- what does it mean for snap chat? >> young people are using the services differently. what is fascinating is we are seeing a proliferation of different tools used by different friend groups for different purposes. the same teens using snapchat to make it a joke but they used messaging apps like this to speak to a larger group of people. they are still taking photos and

putting it on instagram. these are different than the photos they put on a facebook. proliferateg tools in ways that allow for new opportunities to interact with different groups of people. >> what happens five years from now? i don't know what i am going to be using on my phone five years from now. >> we will find ways to communicate one-on-one with people that we care about, in small groups, and with larger audiences. we will communicate across interests that we are passionate about, whether it is one direction or youtube videos. it was rare when everything was consolidated to one service. i think this is a more obvious way going forward. we will have tons of services that are mobile first. >> what about whisper? whisper broke news about gwyneth

paltrow. is that how teens are going to be in their news? >> i think it is the desire to pay attention to gossip. i see this secret type of app as an extension of what we saw previously, you want to know what is going on in your world. you want to hear the things nobody would share and they will only do it through anonymity. that is what makes it so delightful. it is a fun place to game. people are posting things that may or may not be real and it may be part of the fun. >> are teenagers using these apps? >> they're experimenting with them. even with the messaging apps, we we are seeing whatsapp and kick and all of these different services being explored and experimented with.

the same is true of all of the other photo sharing apps, secret tools, they are using them but it is not like everyone. >> does facebook have a teen problem? saying, does e-mail have an adult problem. there used to be a day in which "you've got mail" was an exciting moment. you were really passionate about what would appear in your e-mail. now most of us look and go, oh, e-mail. for teens, they have switched from thinking of facebook as a passionate place to hang out to a place to get a contact number of people of the don't know their cell phone yet. they share a photo they want everyone to see. or they contact an adult within a school context. it is not the passion place. >> in your book, what surprised you the most? you know this more than anyone, what surprised you? >> the thing that amazed me was

i thought the internet was going to magically transform summoning -- so many aspects of teen life. when i got to talking to teens, they were doing the same things they ever did. it got inflected in different ways. it became more visible. adults look at what they can see and panic. i thought it was interesting to figure out how do you tell the story of young people to show them what they were doing was the same things they have always been doing. they have been socializing and gossiping. flirting, the whole nine yards. >> dana boyd, the author of "it's complicated." it comes out next week. if you're one of the many people glued to the screen watching the second season of house of cards, you will want to stick around. we will talk about the risks taken in original programming next. ♪

>> welcome out to the best of "bloomberg west," i am emily chang. it was a big week for netflix with their season two release of "house of cards." it was a hit with subscribers as well.

anywhere between five and 15% of subscribers sampled at least one episode. jon erlichman is here. i asked larry about the risk a show can take in this situation. >> we are talking about it right now on tv goes to the point they are proving that anything can happen on netflix. people are talking about it. it is drawing people to the show. it is something you would not typically see on broadcast television for sure. >> why wouldn't we see it on broadcast television? is there something about the format or their willingness to be a bit bolder? >> on broadcast tv, if you have a big start you use that talent to bring the audience back in. if you lose a big star, it might hurt your ability to use them to market. netflix is saying we are going to take creative risks and we will do what we want creatively.

we have seen something similar on a "game of thrones" on hbo. there were some shockers in terms of main characters being killed off on the show. that got people talking. it got the social media machine turned up. a lot of people tune into the show. >> i was going to bring up game of thrones as well. do think we are seeing this because they are not on the broadcast networks? or is storytelling changing? >> i think you are dancing dangerously close to spoiler territory. i guess there are two answers. i would say yes. 100%. when netflix started doing originals, they did not want the same stuff you see anywhere else. we had steve van zandt on here

before the first original they did in "lillyhammer" came on. it was the story of a mobster in the norway. it had subtitles. if you think about the broadcast networks we see a lot of procedurals, programs that have wrapped up by the end of the hour, there is a huge appetite for those in other markets. there is a balancing act of doing something like that, cbs does a lot of that. or can we do shows like under the dome that we are staying competitive with shows like "house of cards" on netflix. >> viewers were complaining about "house of cards" do not have any real recap. it is been almost a year since you have seen any "house of cards" content.

can that be a problem in terms of losing the audience along the way? >> you have the benefit of being able to catch up on season one. a recap would be convenient, but you also enable people to come in to the show from scratch. that has worked very well for hbo. a lot of people see and hear about the controversy in certain episodes of game of thrones would go back to season one and catch up. you will see a big uptake on season one of "house of cards" on netflix. a new season comes out, season one gets a huge bump in viewership. it may play to their advantage. >> are you seeing viewers stick around for other shows? has anybody signing up for netflix for free and then leaving? >> that is always a concern and hbo grapples with it.

this is the first time we are seeing real connective tissue between their original series. you will see a promo for "orange is the new black" season two. they are starting to stitch together enough original programming where they can make a credible argument to the subscribers to stick around, there is a lot more coming. >> what do we know about how this content has influenced the business? what are the numbers telling us? >> they now have something taken that they can point to and say, this will help our subscriber numbers. you'll built in audience. you highlighted the traffic that tells us a lot of people are watching it. that is different from where they were when they started originals to see if they would work. they are using this as a way to boost their subscriber numbers.

there is a question of the idea that "house of cards" as a movie. it is like watching a 12 hour movie. you wonder if the question shouldn't be about "house of cards" and netflix versus traditional television or versus the movie industry. there is the potential for movies to be distributed that is similar to the way you have "house of cards" as a way of keeping people interested. this is a fight for your time. if you are playing games or watching tv, all of these layers -- players are vying for the same hours in your day. >> kevin spacey made that comparison himself. "house of cards" -- what is the difference between a binge cards" and ause of film?

they are movie actors. what do you see is netflix's ability to continue to attract that kind of talent with this kind of format? >> they are showing that they are willing to take creative risks. that is appealing to the talent. it is a unique type of storytelling. it will attract movie talent. there is sort of a bridge between film and traditional television. it is very appealing to tell his longer stories. a movie is a two-hour investment and you're out. people like the idea of knowing they can stick around for 12 hours and watch for two hours or for one hour. it is the best of both worlds. it is the company behind the [pst= -- post-it note. we go inside its r&d labs to find out what 3m is working on next. you can watch us on your phone

or tablet. apple tv, and netflix. ♪

>> welcome back. 3m may not be a household name, but their 55,000 products touch your life daily. packing tape, band-aids, cleaning products, and posted notes. -- post-it notes. crane went inside their r&d lab to see what they are innovating. >> 3m, you may recognize their work. their real value is in the glue that makes those tiny papers stick. >> you get up in the morning and you start your day. you wonder how many 3m product

will i touch today. my answer will be more than you can count. >> 3m is all about adhesive. they have that market cornered. >> with our post-its, you can see it because it is a product you buy. many of the products we produce are made in different devices. our product is embedded in the final product. you don't know necessarily that it is in there. >> making things stick is not new. the technology is. that is what is keeping these guys in business. >> in order to create 55,000 products, you need a pool of technology and capability. >> their second-biggest lab is electronics and energy. those wires that you don't see that make your life possible. 3m makes those materials. they must be tested to their limits. >> this lab is our high-voltage test lab.

we bring products in here and test them. this transformer is 250,000 volts. >> 3m tests about 200 products. a lightning lab may seem like a far cry from post-its, it is all a part of this company's plan to dominate every market. >> we are touching every company, home, life. are you expanding? we have to be diversified. we have the intention of broadening the things that we do and broadening our technology. >> that was rachel crane inside one of 3m's r&d labs. that does it for the best of "bloomberg west." thank you for watching. you can watch us monday through friday. 1:00 p.m. eastern and 6:00 p.m.

eastern. we will see you next week. ♪

the variety, intensity