>> live from pier three in sentences go, welcome to "bloomberg west." i am emmy chang. edward snowden and speaks to sxsw, talking to the technology community and saying tech company should take the lead on encryption. for the moment, advertising is coming to instagram after a deal with omnicom. we will tell you why it is not a typical agency deal. first, a check of top headlines.

in a statement, ebay'says they lack the experience and expertise. john donahoe received 13.8 million dollars in total compensation last year, up 50 -- from 2012.3% drop google wants android to be the goto platform for wearable computing, google glass. android them to create apps for wearable devices. aey say this could be used on wide variety of wearables, including a possible smart jacket. hackers have reportedly broken in to the service of mount goss to find out where bitcoin was. reports say the hackers found information indicating the mount cox executive has kept bitcoins

for themselves. lost 850,000 bitcoins. snowdenead, edward speaks via videoconference from russia to sxsw. cory johnson joining us. sees really interesting to he chose the technology community to address these. class an amazing moment we have a guy not welcome in the united states. talking with great irony about how to make the internet more secure when his experience has been sharing things with the internet. the -- put theok responsibility on tech companies to think about security first

when developing a product. i want you to have a quick listen on what he said. qwest the nsa, try all of these, not just in the u.s.. this is a global issue. the future of the internet. the people in this room now, you guys are all the firefighters. we need you to help us fix this. companies developers are the firefighters. it is easy to make a good cause to think about the user experience. a big part of the experience is the security. press this is really weird. you have got a guy who really feels it is important to show the secrets of what our government is doing. at the same time, he is talking about ways that makes it more death will. he wants to have the companies protect user information from the government. in so much where the hackers

eastern europe or between individuals, but worried about the government to be able to see what people are doing. >> he did say it is not the company should not collect data, they should collect data they need but at a certain point, they need to get rid of it and it is dangerous to have a massive store of information. take a listen to more of what edward snowden have to say this morning. qwest when we think about what has happened with nsa in the beendecade, the result has an adversarial internet, a global free fire zone. it is not what we wanted. it is something we need to protect against. after that is when he brought about companies and their businesses and how they should operate. just do not hold onto it for too long. take a listen to that.

>> it is not that he cannot select any data. you should only collect the data and hold it for as long as never -- as necessary. youher google or facebook, can do these things in a responsible way where you can .till get the value you need >> gather data use it to discard it. the value of the data might not be relevant until much later on. issues withl new these companies now where they can collect the data, keep our personalized data, or should they ask that -- abstract that and let it go. how much say should individuals and governments have about mandating such things? >> one of the most interesting

parts of the discussion was when he talked about -- he'd expressed a little sympathy saying, look, a few years ago when the u.s. government started to mass surveilled people, they did not know what they would get here they were just trying something new. at a certain point, they collected so much information they realized it was not necessarily that useful. he claimed they do not get any use out of it. we need to do something else or we need to not do this at all. it was creating a storm of information in the vault that led to a potential backdoor if anyone could break into. a criticism without the metaphor same they created a lot of hate that. the boston bombers could go ahead and do it they were going to do. they targeted everyone instead of targeting the people who would actually do things. we will never know about successes that have been in the dark but we can see the failure. we saw in boston. again, probably see it unfortunately, and that is the big issue here.

qwest one of the big ironies, it was happening at google hang out. aclu technologist was onstage with edward snowden, who will be joining us later in talkhow where it i want to to him more about what we as average consumers can actually do it is white. user wants to make my communications and my conversations more secure, what app and what browser should i use? creates an awareness of the government watching what businesses are doing. other businesses will evolve in a way where whatsapp did, so there's nothing to search. qwest coming up, more of our coverage from sxsw. the secret app, chocolate town. i bet you want to hear more about those. >> no secret any longer. >> i talked to michael heyward about the deal next. ♪

>> this is "bloomberg west." now chairman and ceo of the dc-based investment firm, revolution, and i started by asking him about valuations, gettings like what's at bob by facebook for $19 billion. no significant revenue. twitter with a $30 billion market cap, having never turned a profit. take a listen. >> the valuations are healthy. there is no question about it. andanies drawn like crazy people are trying to figure out what they will look like five years down the road. andtimes they guess right sometimes they guess wrong. you cannot argue the valuations are not pretty rich and pretty. you a is. i know there is

concern about a bubble, i do not think it is broad-based. there are a number of companies that are healthily valued and some may be overvalued. a lot of companies are fairly valued and many are undervalued. you cannot take it with a broad brush. you have to look at the specific situation. tell mehad an analyst he does not know what he will use on his phone in five years. if that is the case, why is whatsapp worse -- worth $19 million? >> it is hard to say. the threat is worth noting. facebook was giving 10% of their stock to acquire whatsapp. it was not an all cash deal. they are saying we think having the app in our world is invaluable and will give us 10% of our company to do that. we do not want to be in somebody else's or bit like google were to someday grow up and compete with our facebook core business. it is as much a defensive move

as anything else. adding a million a day. trye move into services and to compete on a broader scale basis, there is significant revenue generating operation. whether it ends up being a good taketion or not, it will five years to figure it out but i understand the facebook logic in understanding that is the right strategic move. >> what are the big risks with facebook's whatsapp? what are the big challenges? what should they do? -- microsoft,el when they were acquiring companies in the 1980's and 9090's, they required people to move to seattle for it all to be in one place. facebookseen this with and instagram. youtube, the hopes

that they would keep the entrepreneurial zeal, keep the quarantine together. i think that is the right model. if you try to push them thether, you lose some of innovation. class i interviewed eric schmidt, the executive chairman of google. facebook, apple, google, and amazon. i will not change for quite a long time. hat do you think of that? christ it depends on the timeframe. they're calling the four horsemen now. very smart guy. eventually, things will shift. one of those companies will make a mistake or a new company will emerge and become one of the leaders of the pack. the idea of the same leaders today, it is historically not accurate. turns a little bit every 20 or 30 years.

15 years ago, there was a cover of fortune magazine basically saying is microsoft or aol going to own the internet and the answer was neither. they not ended up revealing -- , none of which existed 15 years ago. that is great about sxsw. they want to change the world and disrupt the status quo. that is what this is all about and that is what america is all about. christ apical -- >> apple is coming out with a category defining product. >> i am sure they will. a number of years, apple tv. owning a strategy. a greatcompany with

track record innovation. i have no doubt several years down the road there is prioritizing and sequencing. qwest facebook, can you imagine a world? >> i could. when aol started 25 years ago, our bet was on the community. people connection, chat rooms, instant messaging. we were still leader of the pack. the community now is still social, but over time, new entries challenged the status quo. will somebody challenge facebook? probably. five years now, 10 years from now, the ideas they have a lock on the future forever. it has a story clean not proven to be the case. and former ceo of aol. coming up, instagram signs a $50 million ad deal. not your typical deal.

what does it involve? we will discuss next. you can watch streaming on your phone, tablet, bloomberg.com, and apple tv. ♪

>> you have got a scoop on them. class one of the interesting ad networks out there. an ipo.eparing for the company is getting ready for an ipo meeting with bankers. interesting information from people familiar with the matter. greater thano do $100 million in revenue this year. smaller than competitors such as -- both companies have gone public recently. rocket fuel offered an amazing

iart with a fantastic -- think the stock of rocket fuel, i think maybe the success of the -- youas really shown look at rocket fuel, 78% up. since last fall. pretty a has had a fantastic run lately. filing for that ipo, secondary as well. that great run -- by comparison, it is not as big in terms of at [indiscernible] pretty oh is number six. rocket fuel is a smaller company. >> is when what you mean. -- explain what you mean. >> [indiscernible] the largest of all the ad networks is google. number one on the list of top 20. radium is number nine.

what an advertiser does, they they wantt kind of -- to advertise to a male 18-24 in the last 24 hours has look at the seeker advertising page, and they want to send them an ad for shoes. they want to send it to them in the next 10 seconds. they goes one anna edwards and go all over the internet and find a user. it is programmatic advertising. developed away from the likes of google. that is what the site does. that is what rocket fuel does. they also hired a new chief financial officer. woman to be the last thing they need. they are picking bankers right now and the ipo is expected in the third quarter of this year. qwest all right. we will follow it in its road to ipo purely want to talk about instagram inking its first ad

deal with on the calm, a deal worth $50 million. clients include at sea nissan, , covers facebook and digital advertising for bloomberg industry. i read this is not your typical agency deal. what exactly does that mean? what is different about the deal? >> it is interesting for ittagram in the sense that is the first real foray into monetizing instagram. $50 million is not the big number per se but it just shows mark zuckerberg and facebook are very focused on starting to monetize some of their acquisitions. they acquired instagram in 2012. the real challenge for some of the acquired properties for facebook is to introduce advertising and ultimately try to generate a return on the acquisitions. $700 million on instagram and

$19 billion for whatsapp. >> i was trying to spina defense between that and in instagram-like advertising programmatic ad buying on the internet is the wave of the future. this is how most of the advertising will be bought and sold on the internet going forward. ad buying historically has been for remnant inventory, nonpremium advertising inventory. now, we are starting to see programmatic ad buying start to be utilized by premium advertisers, premium publishers, and the ad agency as well. the more official way to buy and sell advertising. a lot of the internet media companies hope is the ability to buy online a very simple to use user interface will actually expand the number of advertisers that will consider advertising on the internet, thereby generating more demand for internet advertising. nothe folks have insisted

advertising will ever be coming to whatsapp. what makes you think this will be a step in that direction? class that is right. not only will they operate separately from facebook, they will be managed separately. they are really reluctant to bring advertising on board. if you are facebook and your mark zuckerberg and you have to generate a return on the $19 billion acquisition, at some point in the future, and i would argue it would be sooner rather than later, facebook has to bring to its investors some strategy for not only growing the user base, which it has been a -- extort very successful on that, but whether it is for advertising or e-commerce or a more expansive subscription model, we are not sure. you cannot just lay out $19 billion with no plan to generate a return with no timeframe. >> thank you so much. from ahead, mark cuban

sxsw. full of one-liners. ♪ >> it is 26 minutes past the hour. we are on the markets. let's take a look at where stocks stand. declines today after a worse the next the mated chinese export data. we are balancing a little bit off the low through the s&p down. at 1874.ur points in terms of individual stocks, a name change from green mountain. the tigger just announced it is changing its name. shareholders approved the change. the ceo says it reflects aspirations of the company's future. tesla,also watching getting sued in ohio for trying to sell its cars directly to customers without going through dealerships. complaining it violates state's

law. tesla maintains it is a necessary measure to promote technology. we will be back on the markets in 30 minutes. ♪

>> among the many ingénues in sxsw, mark cuban. he spoke about starting a business and talked about the right time to sell a business. his opinion on when entrepreneurs should cash out. >> depends what your goal is to her and my goal is freedom and to do something unique. getting the streaming business going -- there is no one right answer. everybody's different and you have to make your right -- your own choices.

>> he sold broadcast.com to yahoo! and before that, he spoke roadbout an hour about his to the billionaires club. he was absolutely fantastic. so funny and so seemingly authentic. i really enjoyed it. >> the times were so frothy, our headline was "this wii's legionnaires." both of them have become billionaires that week. what market that way was essentially put a trade on that cap all of his gains in the stock and made him a billionaire and effectively sold and agreed sosell his shares of yahoo! he could stay regardless what happened in the market. >> when he became a billionaire, he was naked. then asked us, wouldn't he want to be yet -- wouldn't we want to be? also, guess the first thing he bought. it was not a house. it was not a car.

a lifetime pass on american airlines for $2000. christ he told me about this. tips about how entrepreneurs can spot a gold digger. one of they tell us they like charity, to if they like to travel, three if they tell you are handsome. remember that one. >> you told me none of those. >> you know by south i southwest is host to be a breakout moment. it was a breakout moment for twitter and foursquare. this year, the talk of the festival was the secret at. have you tried these out yet these things, snapshot on another level. >> you can post an anonymous post. you are thinking about this or quitting your job or something like that. it is completely anonymous. these apps are going off by southwest by southwest.

it just raised $10 million in funding led by google ventures. whisper has raised about $20 million in funding or so. you have legitimate investors backing these guys. a lot of people think they're awesome and a lot of people think they are ridiculous. i got to speak with the whisper ceo about what exactly it is there. >> and economist social networking site's people connect with the rest of the world around them. are, where youou are, what you're thinking and what you want to talk about. a lot of these identity-based platforms, people do not necessarily share things about that make themselves very vulnerable. the true power of smartphones is to connect you to the world around you. this is an amazing platform for people to be able to connect anyone to anything. christ something that would be

popular for teenagers. >> less than five percent of our users are under the age of 18. it is pretty much by design. anonymity is a powerful tool. there is a spiderman quote, and with great power comes great responsibility. a famous one. in the sameymity way, and it is a powerful tool. >> some of the things posted are about specific people. some of them are mean. some of them may not be true. >> right. so, really, i tell people all the time, whisper is the safest place on the internet. normally, when you think about aboutity, we are all authenticity. we have a strict policy where we only allows -- allow you to use anonymity for yourself and never anyone else. it simply does not even go live.

the exception with that is obviously anything in the public domain. --st what about someone like to bring up your competitor, secret, they just started in the last couple of months. do something quite similar. how do you think you're different? >> thing about all of these products is there is clearly a big matcher -- macro trend going on around anonymity and it is really a reaction to all of this people being aware of their digital footprint. a key differentiator is we do not tap into your address books. doing thing you do not know. you do not follow people. there is no social capital being exchanged. less to be gained from people posting things that may be untrue. additionally, we recently

brought on zimmerman. >> i want to talk about this. it is so fascinating. nissan used to work at gawker. he came over to whisper. right away, broke a story. >> i think the thing about -- one of the things that is so cool is we get to tell the stories nobody else is telling. and drive awareness and conversation around these things that generally are not being talked about. >> nissan is hiring more journalists. an incredible team of shining light on on these conversations that we should be having. >> will they be creating original content? >> it is a user generated platform. and --ll about curates cure asian -- -- curation. traffic to whisper.

tell me the strategy hiring at him and all these other people. qwest again, part of what we are , greatto do it that things going on on whisper. how do we then take that content and take those discussions and even amplify those discussions? somebody called him the kobe bryant of viral content. this is what he does. that is why we brought him on the team. we are already seeing amazing results as it relates to new users and engagement and everything. qwest how big a spike did you see in users as a result of that? >> our growth is assistant -- substantial. we see a substantial growth every week. many millions.

>> ok. billion in a3.5 month. qwest congratulations. becoming a tmzt format? >> the way we look at whisper is we see it as communication. not unlike twitter or sms or snap chat, these are different communication mediums. >> you guys are the talk of sxsw. you guyspeople think are awesome. a lot of people think these apps are ridiculous. how do you respond? >> anyone who takes any time to spend with the product to see the impact it has on people's i was juste, listen, reading a post this morning that said, i wish i was straight. i am sorry. i do not want to live in a world

where anybody feels that way. the fact this person feels like talkn't have any place to about that, whisper will always be around the matter what until nobody ever feels like that is something they cannot say. >> whisper ceo michael heyward at sxsw. we will keep our eye on those guys. still ahead, edward snowden wrapped up his conversation on sxsw. one of his first live video appearances. we will speak to the man who shared the spotlight with him next. ♪

>> welcome back. i am emily chang with cory johnson. getting back to sxsw where everett snowden has wrapped up his discussion. a fascinating discussion there. said, it is very interesting stuff. the conversation was not just him talking. technologist christopher sukhoi and.

chris, welcome back to bloomberg west. he just left the stage. idea ofve a better snowden's motivations thing to the worst -- thanks to the work they really wanted to spark a debate and he has been successful in the past months to make sure the debate thetaken place by bringing public into and making sure the public knew what the government has been doing. the reason that sxsw, his first opportunity to speak live to the world, technology brought us into a surveillance state. , sonology is the only thing this is a chance for him to speak with a technical audience so people can build the apps and services we all depend on. to depend on our customer information. qwest watching the video, i noticed the quality was not

great. he was frozen on screen. that is because he apparently sent the video through mold will different proxies. qwest that is correct. edward snowden and took some informationtect his about where he is. there is not an easy way to have a high-quality video feed and also have it secure and private at the same time. >> it is not lost on the chat was happening over goodwill. you guys use google hangouts. we talk about putting the responsibility back on developers to make the product from the start. -- that wey from were using the google service was not lost on us. we did an evaluation of the widely available videoconferencing services.

we found what the services that have been designed to be as is -- as secure as possible were not easy to use and did not work over seven proxies. we ultimately decided google'service would be the most reliable for us. that meant we were using a google service. we were having a conversation with 50,000 people. it did not need to be private. we did want to ensure as the location remained private sue other actors, there is a thatict between services are secure and services easy to use. unfortunately, regular people have to pick one or the other. class i thought it was notable snowden was not just addressing technologist, but addressing business people, people starting and investors will were deciding what kinds of companies to invest in. what did he have to say or what did he know -- you know about his views in the roles of

business? >> i think there is a big opportunity in the market right now for companies who want to compete with google and facebook i focusing on privacy and security. i think there are many people willing to pay five or $10 a month for a secure e-mail product for secure social is, theng and the fact mass-market services like google and facebook and skype are not designed to be private and secure. people pay for telephone service and fedex. i think people are ready to start paying for communication services and the market is therefore whoever wants to see it and run with it. and snowden, you are much more advanced than average consumers in terms of how you used the internet and how you used mobile phones. hat can average consumers do? what browsers and apps should we use and what should we not use?

>> the rule of thumb for people at home really should be, how much am i paying for the services i'm using? if the web browser you get is free and the mobile operating you're getting is free, think about how the companies who make them are paying their developers. there is no such thing as a free lunch. if consumers want services that will put their privacy first and secure their information, they will have to start paying for them otherwise, the companies will monetize their data and collect their information and hold on for as long as they can. qwest does that mean we should not use google? we should not use facebook? because the services are free? is not a charity. facebook is not a charity. they have a lot of developers to feed. those salaries are free.

you have to question, why is google giving you the service and wise facebook giving you this service? yourwant to collect information. if you want secure e-mail, it will not come from google as long as you're getting it for free. that is -- that does not mean they could not start charging for their services and then make them secure, but that is not a step they have taken. for now, these free services do put data at risk. should not use google chrome, what browser should i use? firefox browser is at least a browser aiming to be as privacy preserving as possible. the relationship is one where they give apple money and they give them devices. google is really an information poweringnd the fuel google''s entire ecosystem is the collection of data. it is not an accident the chrome

privacyis not very preserving by default. they are an advertising company. it suits their interests. >> thank you so much. we will be right back. ♪

>> welcome back. where does one of the world's largest providers of gps position itself in the smartphone h? garmin is turning to wearables. when you think about wearables and innovative mobile technology, you have got to put garmin in the conversation. the company has been very active in aviation and read for a long time. the personal navigation device market, they dominated globally.

they have been in the growing personal fitness world for now. cfo.joined by the good to see you. full disclosure, i was involved in the stock 10 years ago. we have had a lot of discussions about your business and i want to know where you guys are right now. it seems when i assured the stock in 2005, there was a new thing called a smartphone and people stopped buying new gathered -- navigation devices. >> we have seen an impact on the overall market. the nice thing is we have been gaining shares during that time. substitution with smartphones. we have been rebranding in many of the segments we are in. that.k to me about there is so much excitement particularly around fitness. the fit bit in spite of the big an earlierdespite

recall. talk about what you're trying to do here. >> it is a natural extension from what we have done in the past. our first product being the forerunner. we saw limitations on some of our competition. a fitness than right here, they introduce in the market around the world now. they add some features others do not have. one, it tracks your activity. it is very similar to what competition does. they have a one-year matter. they never worry about taking it off. always on display so you always get feedback on how much activity you're doing, how many steps you have taken, sleep patterns and a lot of information like that. ,onnecting with garmin connect so you can track activity. and if you do not move, you have a move bar that encourages you to get up and be active. if you sit here too long, he will tell me to get up and start moving around. wonder, i asked about the

features not just because i am a fitness geek, but because i wonder what the market is. -- it is a really big market and so many want to know how many steps they take or constantly monitor and improve their physical fitness. >> absolutely. there is a lot of room for growth. alternatives, the there is more need for just one. we have other devices that can do more than that and different wearables. golf products are wearables, the phoenix two. >> a lot of watch going on. my timex is not doing much. >> this is a brand-new product. the second generation. it really helps the adventurers

keep track of where they are off the beaten path. barometer, digital compass. if you are a runner or cyclist, you keep track of all the activity. it is a hybrid product. guys seemedng you to have worked well with the other software companies from this place, my fitness app or others. you seem to open up, which would not seem natural for a company like yours. >> software is part of the differentiation. we have developed our own internally. usee possible, we can also third parties. >> thank you very ceo of garmin. >> thank you. thank you all from watch it -- for watching this edition of "bloombert west." we will see later. ♪

>> from bloomberg world headquarters in new york am a i am mark crumpton. this is "bott omom line." malaysia expanded search for the missing aging-bound jetliner. unrest overseas. to our viewers here in the united states and those of you joining us from around the world, welcome. full coverage of the stocks and stories making headlines today. alaer