♪ >> live from pier three in san francisco, welcome to "bloomberg west," where we cover technology in the future of business. i am emily chang. google is adding solar powered drones to their arsenal of self driving cars. we will play what they plan to do with titan aerospace. first, a check of the top tech headlines. it is taking longer than expected for many websites infected with the heartbleed

glitch to fix them. the nsa once again denied a bloomberg news report that it knew about the heartbleed bug for two years. bloomberg is standing by its reporting. mozilla has named chris beard as as interim ceo. yes been involved sincerely days of firefox and also is an executive resident at greylock partners. he replaces the ceo who resigned this month after being criticized for donating money to an anti-gay marriage group. spacex has called off a launch of the falcon nine rocket lesson two hours before launch. it was blamed on a helium leak. the capsule is tearing supplies for the international space station. first, to our lead story of the

day. google's latest moonshot -- buying the drone maker titan aerospace. this is a company that makes high altitude solar powered drone satellites. it could help bring internet access to people who don't not have it. this comes as the war for drones is heating up. facebook just bought another drone company. brian womack covers google for us. patrick, i will start with you. tell us about tight. how do they stand out from the other unmanned aircraft companies out there? >> the way that this one stands

out is that this is actually like a high altitude platform. the idea with this is that it will be able to stay on station for long periods of time. they will be able to use it to broadcast different signals, internet and whatnot. they still have hurdles to overcome but the promises large. it could mimic low earth orbit satellites. >> it looks kind of like a dragonfly in the air. brian, this is a company that facebook was in talks to buy. what happened there? >> google wants what it gets sometimes, and he got this. google is coming in later now for this. google has a lot of users. it has to get more. it has to find more places to advertise so we will do whatever it can to get these kinds of

companies to get access to all the folks all over the world so it can show more ads and sell services. >> the goal according to google and facebook is to bring internet access to everyone. are these unmanned aircraft in use anywhere for this purpose on a large scale? or has this not actually happened yet? >> it has not actually happened yet. we did stuff like this when we worked with the army. as far as commercial ventures and widespread use, not so much. >> brian, how do we even know this technology is actually going to come to fruition? is it too early? >> that is a big question. i think our guest knows more than this than i do. who will take the moon shots. they will spend the money and get the smartest people together. facebook is doing this sort of effort as well and it is not just ringing and other people from nasa to other places. they need to get these projects to work and they will spend

money to make sure it happens. >> facebook bringing on unique talent. aerospace industry experts. patrick, how do you see these bets playing out is this going to work? >> i believe so. what you're seeing here is almost like proprietary internet. look to the examples of the cell phones and what that did to develop the world. it is a situation where infrastructure was poor and they circumvented that. that is exact the wood is going to happen here. you'll see them come him. -- in. they will not need any infrastructure. they will just need to have their flying fleet. using africa as an example, you will have millions of people who will not only come on abusers of your products, but also can be users of your bandwidth, your proprietary bandwidth. to be honest, when they work out the kinks and get over the technological hurdles, this will be worth billions of dollars.

>> what about the regulatory hurdles? don't many things the to happen before this can actually happen? >> yes. but where these aircraft are going to operate our at altitudes that are above a regulated airspace. they will have issues on the egress to these altitudes where they will be operating. the other thing to take into focus, or consideration, is that in developing worlds the civil aviation authorities or the government is going to be more amiable to these types of systems flying about their countries is because what they will get is the promise for their economy of what the internet and telecommunications did for other countries like the united states or countries in europe. it is a big boost to efficiency for any country or group of countries. >> interesting new acquisition to add to the list of google's

many acquisitions as of late. patrick egan, and on and aircraft consultant to the army and brian womack. thank you. it was a wild day in hollywood with makers studio at the center of a bidding war. relativity media unveiled a $1.1 billion dollar offer for maker but disney had made an offer for $950 million instead. jon erlichman is following the story. what is the latest? >> it is a funny one. when disney announced that it was acquiring maker, the immediate reaction was not, i wonder who else might bid for maker? the financial value that was placed on maker seemed pretty high for a business that some are trying to figure out what is the best financial model, the best way for them to be making money. clearly based on what maker is saying, this is already a done deal for disney. relativity felt different

heading into today. it is interesting to know why they had interest. on the disney site, that company is looking for worthy eyeballs are going. you have seen these network develop. younger audiences comfortable watching content on youtube. these kind of networks bring these content into one spot. thousands of channels, billions of use per month. rmb relativity's side, which models itself as the new media studio, they are hungry for a digital edge as well and that is what brought them to the table. >> what is next? is this a done deal? >> based on the commentary coming out of maker, it sounds like a done deal for disney. relativity, in its response to what maker had to say, did not suggest it was going back to the table.

it really just said we think we would be a good fit for the folks that maker. we have the platform and the kind of place where they can go and maybe take that next week. remember, one of the things that people at relativity are trying to do is use their different film and tv productions as a place for their talent. they do it with their sport agency, finding a home for some of the athletes they represent in their movies and their tv shows. relativity did suggest that it is going to stay active in this area and obviously there has been a lot of speculation about what the these other online networks may be the next to be gobbled up. it is a fascinating story because just a few weeks ago, a lot of people were questioning the relevancy of these businesses.

machinima tried to raise capital, got an investment from warner bros.. you fast-forward to the disney deal from maker and the conversation changes. they are the hottest thing out there. it is hard to say how it will play out. >> is this deal a sign of things to come, a sign of more potential deals in the space down the line this year? >> i think so. i think the fact that disney would pull the trigger on something like this, given what they experienced with their interactive unit -- they bought a business call playdom and said playdom, to do a deal like this, sends a message. i think the risk is real strong, feeling there are different audiences, the tv audiences that are watching things like disney properties from disney junior to espn may not be the same ones as online and how do you capture that? do you build it yourself or buy it? disney thought they could buy a. you will see that in the next few months, especially with the arcing power of something like

maker. star wars and other films will be marketed by disney in a big way. can they find new talent through it? if you can, you will see more deals like this. >> all right, jon erlichman bringing us that from hollywood today. still ahead, renting a spare bedroom or slapping a mustache on your car may seem like an easy way to make extra dough. that is until the tax man comes knocking. we will discuss how companies like air b&b deal with tax filing. ♪

♪ >> welcome back to "bloomberg west." i am emily chang. you are watching bloomberg west on bloomberg television. you can also see it on your phone, tablet, bloomberg.com and amazon fire tv. we have special programming all day long on bloomberg tv. taxing america, a look at everything tax-related.

how sharing companies like airbnb and lift deal with the tax man. joining us from new york is alberto escalarte. alberto, you have big backers like pharrell, the founder of youtube. what is the collaborative fund? >> we are in early stage fund that focuses on feeder rounds. we try to look for companies that push the word forward. companies that can be sustainable and brands that shape culture in the future. >> one of the things that you do is that you offer more practical advice like how to pay your taxes, how to deal with insurance.

our useful is that kind of information right now with some of those startups that are in completely uncharted territory? >> the role in helping with advice we had with experience with previous company. we also try to start projects that will help the whole and we start to see some of the pay points in the portfolio where we can help. insurance is one example. we started an insurance company for the shared economy called yield. we started a website last summer which tries to address tax questions for those involved in the share economy. >> speaking of a big tax question, airbnb has been running into trouble with the

tax man in new york, san francisco, and portland. they have agreed to basically start charging their occupants the occupancy tax in the cities and pay that over to the city. i has that taken so long for airbnb to do? >> probably because they did not have to. now it looks like the value of the company is $10 billion. it seems like it is time to make more comfortable to investors, the government, and users. there are some scary stories out there on the news. i think that is preparation for maybe the next phase of the company. it is about time. >> do you think this could hurt their business in terms of customers having to pay a little bit extra? >> it might hurt a little bit. they take a fee from hosts and guests. in new york, if everything goes as planned on july 1, they will start charging 14.27% occupancy taxes. i think that some people who

rent their homes and apartments were a good deal, and now they may be start thinking twice about it. i think that growth is inevitable. the trend of people sharing the resources is inevitable. my guess it will still keep on growing in the overall market and sharing site. >> could they have to pay back taxes? >> i cannot speculate on that. the new terms of service that they published a few days ago, they said that they will be able to charge from the host, but before the hosts were supposed to pay the tax themselves. any back taxes that will be charged may be on the hosts themselves. >> what would you say is the

most challenging tax issue for the sharing economies like airbnb? >> i think it is awareness. there is a lot of gray area that happens, especially when you think of what things you can expense. if you clean your car, you also use your car for private use, can you expense the cleaning, the cleaning of your house, or everything you do? if you do marketing to advertise it, especially for sharing, something that is specifically for other people to use. a lot of people now rent the houses that they live in. it could be a gray area for expense purposes. >> a of interesting issues for the startups to tackle.

alberto escalarte. coming up on "bottom line," the urban institute will talk about the high fees for tax preparers. the latest company to go public. is that it wise idea? ♪

>> welcome back to "bloomberg west." i am emily chang. it has been a rough month for

tech stocks with the nasdaq dropping almost 5%. that has not stopped companies from filing to go public. twitter's stakeholders said they will not be selling shares. i'm joined now by leslie picker from new york. let's start with jiu mei. >> they have a few months to allow the markets to temper a bit, to allow tech stocks to rebound. it's a little too soon to tell how this will impact their pricing, but it is an interesting timing for them. we have seen a rush of chinese companies looking to do ipo's in the u.s.. that is a sure sign it will not stop anytime soon. >> in retrospect, is twitter's

timing last year looking perfect now? >> pretty perfect. they saw a 73% pop on the first date of trading. you see a lot of the momentum that benefited twitter coming down from the tech sector in particular. what insiders have said is that they will not sell shares when the lockup expires. that is an important vote of confidence. they are showing investors that we are comfortable with this valuation. we are comfortable with continuing to go higher. we are not going to sell know and are willing to wait it out. >> what is coming up this week? >> we have weibo on wednesday, we have sabre on wednesday, the

company that owns travelocity. no slowdown this week. after this week, we have a clear schedule in terms of ipo path. clear up until the end of april. >> leslie picker, our bloomberg ipo reporter. thank you so much. coming up, $1.8 billion. that is how much priceline spent on online marketing last year, mostly going to google. how was priceline competing with google? the ceo next. ♪

>> you are watching "bloomberg west," where we focus on technology and the future of business. i am emily chang. just days ago, google license hotel booking software from room 77 to push their consumers on mobile. travelocity is scheduled to go public this week but it is priceline's revenue that makes it the largest travel agency in the world. darren huston is the ceo of priceline. thank you for joining us.

when it comes to mobile, how you're dealing with the fact that some people are booking things via apps directly rather than going to google? >> we are investing very heavily in mobile. just to give you an example, our largest subsidiary, in 2012 we did $8 billion and in 2013 $3 billion in mobile. it is an important channel in acquiring new customers but it is also a critical part of the end experience. that people are using mobile and tablets to book and stay is giving us a tremendous opportunity for users. >> we be working on specific apps? >> of our five brands, we have priceline, kayak, booking.com -- we continue to evolve those products. they have high ratings from

consumers. we have a ton of traction in that site. mobile is not about only as. it is about web. we feel we have competitive web products on the web and phone and we are excited. >> you spent 1.8 billion dollars on online marketing last year. most of that went to google and search marketing. is that a strategy you expect to continue? >> yes. we have always been very close partners with google. we have great website and they convert tremendously well. we look to google for other demand, whether it is trip advisor, kayak. there are other places where we

buy our demand. we will continue to buy from those channels as long as the returns are there. we are seeing that our returns on those channels are great. at the end of the day, we would love our customers to come more and more direct. but we will use google to find customers to show them how wonderful our products are. >> google is making more and more aggressive moves in your territory. the adjusted the room 77 deal. they bought ita. how big a competitor do you expect them to be? >> google, of course, respects us as an advertiser. they would like to get more of my money. the recent acquisition of some code from room 77 -- i don't think that is the biggest end that has happened. google has been working on hotel prices now for many years and they continue to want to make that product better so that it becomes more attractive to companies like looking.com or priceline to end up buying those customers. i think the biggest issue that

we face is not google or someone else. it is whether that we as a company can maintain the hunger to have the success that we have in the past. >> will you ever be adding listings from things like nab in the -- like an airbnb. >> we have been increasing our portfolio of accommodations. last year we went from 290,000 to over 400,000 very now we have over 450,000 properties on the booking.com site. we will continue to look at that. companies like home away and the airbnb, there are a lot of things that they work with that are not necessarily legal, even, in some cases. we hope that that space gets more clarified. if it does, we are looking at any kind of legitimate form of accommodation to add to our website in the future. >> sabre's ipo is coming up.

they are the parent company of travelocity. aside from travelocity, how do you view them as a competitor? >> i think that sabre operates in its own space now the travelocity, most of their bookings now get done by the expedia group. it is not high on my radar, to be honest. we have good relationships there, but i focus mostly on the things which we control, which is the execution and operational discipline that we need every day to continue the great success that we have had as a group. >> so acquisitions are something you control. you bought kayak a couple of years ago. $1.8 billion. what other kind of acquisitions are you looking for? are they smaller or make acquisitions like that one? >> the priceline group has made some amazing acquisitions over the years. booking.com is maybe the most successful acquisition in the history of the internet. most of our focus is on ouganic

growth. it is about day to day acquisition of surprising and delighting our customers with our product, getting the supply on board, really managing, from a data-driven perspective, the way that we bring demand to the platform. that continues to be the demand -- the majority of our focus. we are always poking around the space, but we have a pretty high bar on what it would be to be a great acquisition to become part of the group. >> you mentioned booking.com, where the majority of your revenue now comes from. we have also seen william shatner, the star of the priceline ad campaign. we just interviewed william shatner last week and i wonder, how much body does a guy like shatner bring to priceline when the majority of your revenue is not coming from priceline itself anymore? >> he has been an amazing spokesperson for the priceline brand over the years. priceline is still a very significant part of our business. he has done a good job of

transitioning the viewer priceline to a name your own price model which was the original to a retail model. we love we've shatner. but priceline itself, with the introduction of kaley cuoco, i'm excited to see what is happening there. >> you thrive through the credit crisis in europe. are you worried about the threat in china? >> when you are a global player, you get to see it all. i am as worried about the malaysian air tragedy as the ukrainian crisis as well as the weather in the united states. they all impact the spirit of at the end of the day, we're quite diversified. right now, we are very optimistic about where we are going. not just with travel, but with online travel specifically.

>> how about in the united states specifically, given that most of your revenue is coming from europe? >> we are in a weird way, even though they priceline has been in the market forever, we are a late entrance in the market with booking.com. it is tearing up a storm. we are excited to encourage more americans to try our product. see what you think about it. it is a different product than what has been traditionally available in the united states. >> thank you so much for joining us here on bloomberg west. coming up, we will introduce you to winston, a cartoon from toy talk that interacts with children. that is next. ♪

♪ >> i am emily chang. this is "bloomberg west." imagine a cartoon that actually engages in conversation with you. that is the innovative entertainment that toytalk has created. the app brings characters to life listen and talk back to your kids. it is cofounded by oren jacob. i caught up with him and asked him how it works. >> toytalk works by building up two-way conversation with you and your family director. you talk through your mobile device using cloud-based recognition. we have had characters that can

put you in a situation and will play with you, make-believe. you are a doctor and they are a patient, a spaceman or alien. but in that situation, yes. you can playfully imagine what it is like to be an alien for real. >> show me what it is like. >> let's talk to a bird. >> you can throw me out of the nest. you don't even know what this flying thing is. >> i think you should jump out and flap your wings. >> what kind of a bird are you? hey, kid, jump out of a nest and magically fly. that is what you are saying. what is so great about flying anyway? >> what if you told it to jump out and not flap its wings? >> it would argue the other way. you can keep it going from both sides.

what you say in the microphone goes over a network to our cloud. we process the speech and try to recognize what you say. artificial intelligence decides to how to respond. >> you are also storing kids' voices. >> we would have to record children as the goes on and develop recognition technology. >> how hard is ever the voice actor? >> we have to get them to get the positive answer, the negative answer, and the quizzical responses. it is a large range. they have to perform that in a booth, away from the audience. it is difficult and challenging because they do not see their audience respond back to them. it is like a live improv show. >> you have an ipad show right now. what are your goals. ? >> we need to open up the idea of conversation as entertainment. we can create stories by communicating directly. >> you work with pixar for 20

years. what is your view on children watching movies or cartoons? >> i spent a lot of time making films that hopefully families enjoy. my family growing up, we told stories at the table all the time. >> i have an 18-month-old son and i'm causally questioning how much screen time i give him. what is your approach? >> my wife and i talk about that. we have three kids ourselves. that is constantly a conversation about how to best spend their time on the weekends and weekdays. homework comes first. >> is your goal educational? is it something more than just watching tv? >> for us, entertainment through conversation is primarily entertainment, but it is talking back to us if we are to understand you as well. developing vocally, which kids are doing at elementary school ages, is important as well.

>> what is it that you have taken from pixar to what you are doing with toy talk? >> they both exist at the intersection of technology and entertainment, and i think in both cases, what matters through that aren't the characters and story that communicate. >> what are your favorite ones? >> "finding nemo" and "toy story 2." >> what was it like working with steve jobs? >> in an hour-long meeting, that is what the company has to do, and there are 58 minutes of questions and answers, but you get the message across so simply. i've never seen anyone do that before. >> what was his relation like with john lasseter? how much did he listen to what steve jobs had to say? >> i think you should ask john that question, but certainly a lot. steve was an amazing influence on pixar and help the company become what it is today. we miss them very much.

>> just how healthy is the tech sector? major companies like google and yahoo! are opening their books this week with earnings. we will take a look at what to expect next. ♪

♪ >> welcome back to "bloomberg west." i am emily chang. tech earnings season is upon us. companies like yahoo! and google are set to report this week. will the numbers be good, not so good? paul sweeney joins us from new york. let's start with google. what are the big trends you are looking for? >> i think the market is clearly looking for continued good results coming out of google. in this big tech selloff that we have seen over the last several weeks, google has actually hung in there quite well. stocks only down 1% or 2% your

today. i think that is a reflexive fact that their core business continues to put up very good, top-line revenue growth. a little pinch on the marches as a continue to invest in new businesses but they continue to post strong numbers. >> yahoo!, on the other hand, down almost 17%. they have been hit particularly hard in the latest selloff. what are you looking at when it comes to yahoo!? we have information about new original programming content push that they are making. how do investors feel about that? >> there are two things when you look at yahoo! the via other 24% investment in alibaba, which is presumably going to go public this year, it reflects more than half the valuation of yahoo!. that stock has been a proxy for the overall ali baba chinese internet story. when you look at the fundamentals, there is not much there to look at in terms of growth this quarter. it will probably be a quarter of no growth in their core advertising business.

frustrating from an operational perspective. the company has not been able to post any sustainable topline growth. they are losing share to the googles of the world both in display advertising and search. it has been a tough for them. response from the ceo is to try to acquire some growth for the company. the most recent strategy, as you mentioned, is getting into this original programming. online video advertising is one of the strong growth areas of the internet and one that yahoo! is not fully participating in. been ceo for almost two years. would you say that she hasn't had enough time to make a market? >> i think the honeymoon -- if it is not over, it will be over

very soon in terms of operations. the whole alibaba operation has bought her time. the story has been such a boon for yahoo! at some point they're going to have to get back to fundamentals and show the street that the core display advertising business for yahoo! can grow. we know that internet advertising is growing about 15% per year. quite frankly, yahoo! has posted no significant growth over the last two years. we have not seen any results from that year. if the honeymoon is not over now, it will be very shortly. >> yahoo!, google, ibm reporting earnings this week. facebook, next week. interesting news out of facebook today that they are getting into online banking. >> in certain european markets, they are considering getting into online banking, if you will, taking a look at the remittance business. people all over the world remit money back to their home countries and i think that is a business that facebook is

looking at. they have over 1.2 billion users all over the world. they are actually a very strong social network. facebook has been quite successful building an e-commerce structure around that. i think the next that for them to really dip their toe and is in financial payments, perhaps starting with the remittance business, where one facebook user could remit money to their home country, their family members. that might be a way they start to look into the financial services business. >> who would want to use facebook as a bank? >> it is not really a bank. some of the users that in fact do not have bank accounts. here in the united states, about 80% of americans have bank accounts. in countries outside of the u.s., that number is much lower. so people that want to transfer currency or funds from one

country to another or just between themselves within a country, some online mechanisms potentially could fill that void that the traditional banking sector does in other markets. >> paul sweeney of bloomberg industries. we will be all over these companies as they report this week and next week. thank you very much. it is time for the bwest byte, one number that tells a whole lot. jon has the number in l.a. >> i have 100, as in $100. one analyst that covers apple put out airport report and he says that when apple comes out with its next phone, a lot of people are calling it the iphone 6, it will look to charge $100 more. whether the end consumer pays that is another story. apple has been talking to some of the carriers who apple works closely with to see how much of that they would be willing to

stomach. we know that carriers subsidize these phones. they don't love to, but if there is a hot new product, they can be willing. if you're talking about the unsubsidized version of the iphone 5 that sits at $650, maybe that indicates that with no subsidies, the new iphone would be in the $750 range. >> is this the iphone 6, the bigger iphone? we allhis the same size know. >> this is an important point. there are a lot of reports out there that apple is looking to go into that world of tablets that samsung has enjoyed a lot of growth with. having a larger screen -- if you have a larger screen device, it is going to cost more money for them to produce. possibly higher-end chip technology, which can be more costly. that puts pressure on the profit margins. can they find someone willing to a for that? >> we will be watching. jon erlichman in l.a. thank you and thank you for watching this edition of "bloomberg west." we will see later.

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>> had these statements have not evaluated by the fda. a this product is not intended to diagnose, treat, cure,