>> live from pier 3 in san francisco, welcome to the late edition of "bloomberg west," where we cover the global technology and media companies that are reshaping our world. i'm cory johnson. uber is headed toward evaluation of $10 billion. big question -- is it worth it? critic's on both the left and right are already pouncing on what internet fast lanes could mean for consumers and business,

but first, a check of your bloomberg top headlines. a chinese smartphone maker is getting into the tablet business as it broadens its challenge to apple and samsung. the xiaomi mi pad has a seven-inch screen and uses the same software as android. we look at how it may shake up the chinese market later this hour. and cloud computing company rackspace has hired morgan stanley to explore strategic options. could mean a sale to a larger company, a going private transaction, or any type of option, really. shares have slumped 22% this year. the u.s. air force says it is spending $60 million to hire 100 people working on certifying elon musk's spacex satellite.

to our lead story, uber in talks to raise a new round of funding, nearly tripling the valuation from its last private deal last year according to people with knowledge of the matter who say that uber is talking about raising less than $1 billion and a new private equity round. if it goes through, it would join an elite club of startups valued at that really giant level for private companies, including airbnb and dropbox. this is a really big number. this is the stage at which a private company would go public. >> several rounds ago. you have seen a trend of companies staying private for longer because they have somebody options for capital available to them.

uber is looking at private investors. they have options to raise debt as foursquare and a number of other companies have done. >> if they think the interest is great, they raise debt, pay it off, and keep their equity ownership. if they think it is time to go public, they go public. they are kind of picking and in-between. >> yes, you have seen a number of other companies going this sort of route, and you are seeing companies like fidelity and blackstone get in in much later rounds. there's a number of options for them to raise money. uber is a pretty capital-intensive business. they need to hire in each of the cities they go into. they aren't about 115 cities around the world now. they need to hire people, they need to invest in lobbying and

sort of trying to fight off all these angry governments that want to shut them down. >> what i think of capital-intensive, i think of my day when they were building railroads across the country. that was when capital was intensive. there are places where uber was not legal. that would seem like the ugly fact that might keep an ipo from surviving. >> they will need to get it tattooed down before they can broaden it to the retail investor or wall street having the appetite to take on such a risky investment, but this has been true of their entire history, back to 2008 when they were just getting started in san francisco, and local california regulators were saying, "this does not sound legal." california backed off. new york has for the most part back off. a lot of these cities that went after them at one time have decided that it seems like it could be a pretty good thing. now you are seeing cities like religion and brussels cracking

down on uber right now -- cities like berlin and brussels cracking down on uber right now. in london, you have halo, which is basically the uber of london. uber is trying to find a way into china, but they are having to compete. in germany, there is easy taxi. get taxi in the middle east. there is an uber of just about every city in every region, so that is another thing they will need to figure out, how to battle dozens and dozens of clones that are popping up just about everywhere. >> i think about bloomberg news reporters as the uber of "bloomberg west" because supply increases as demand increases. >> hopefully nobody clones us. >> thank you very much.

a deeply divided fcc voted today to consider new rules of the road for the internet. the proposal could pave the way for broadband providers to cut fast lane deals with some companies like netflix, who has already had a fast lane deal with comcast, and it also leaves the door open to a heavier dose of regulation. chief washington correspondent peter cook was there. it is not everyday we see protests during sec meetings. this was a contentious event. >> it was. it is normally a pretty somber place, and not all that exciting for the meetings, to be honest. not today. we have protests outside the building. we had protesters inside the meeting. all of them convinced nothing less than the future of the internet was at stake. some of the protesters had to be removed from the meeting room. at the end of the day, tom wheeler's proposal did prevail. it would bar internet service providers from blocking illegal

contact and also separate isp's with some content and a faster lane of traffic, but wheeler said the steels must set a very high bar and must be commercially viable. he classified -- again, despite all these reservations out there on the part of some of his fellow democrats, they backed wheeler today, giving him the vote he needed. >> i strongly support an open internet. i look forward to engaging with the american people to finally enact to fill the void that exists today because there are no rules to finally enact open internet rules.

>> that was chairman wheeler again defending his proposal, making the case that he is not that far removed from some of his critics out there, including some of the protesters in the room, but there is still a long way to go here. >> what i like about the way you have been covering this story is we have been so focused on business when some of the others are focused on consumers. what has business reaction been to this proposed new rule? >> we certainly have heard more so far from internet service providers, broadband providers. verizon and at&t issuing statements, saying nice things about the open internet, nice things about the fcc, but clearly saying that if they reclassify the service, that is a very bad thing. let me walk you through a quick statement from at&t -- it would represent a tragic step in the wrong direction. that is the sort of reaction we are getting from providers.

>> interesting stuff. thank you very much. we are going to look at these proposals and talk about what it means for the future of business. emily chang and i return on "bloomberg west." ♪

>> welcome back to "bloomberg west." i'm emily chang. the internet as we know it may be about to change. what does it mean, and what is the cost to you? editor-at-large cory johnson back with us now, and also the george washington center for business and public policy and co-author of big bang disruption policy joins us. thank you so much for joining us. larry, i will start with you. who is this good for? who is this bad for? >> i don't think it is good or bad for anybody yet. all we have is a proposal. we have not even seen the specific proposal. >> who could this be good and bad for? if this proposal vote -- the way they voted today ends up final.

>> it will not really change things dramatically for anybody, frankly. content providers or isp's. it is really a rewrite of the last set of rules. >> why are people protesting so much? >> i don't know. there has been a tremendous amount of misinformation. some of it is self-interested. some of it may be leaked out by the fcc. there's a lot of political agendas going on. a lot of misunderstanding. >> why are people protesting this? >> millions of people have already taken action to raise their voices and demand strong, open internet protection because they recognize that this proposal does endanger the openness of the internet, and it threatens the vibrancy that has made the internet transformative platform for free expression and organization online.

the truth is this does take us down a very bad road. it should trouble anyone that cares about the openness of the internet. >> there have been no enforceable fcc rules, and yet, we have trillions of dollars of investment, all the apps we got, america leading innovation. the fcc really does not have a role to play here. it may in the future, but so far, there have just not been the problems that required it. >> what about netflix, which takes up there before percent of internet at the times? >> if you had true open internet rules the said nobody gets any priority, you think your netflix speed is that now, in a form where everyone has equal speeds, it will get even worse. >> i would argue that in terms of internet speeds, there are dozens of countries that have faster internet connections. i wonder if that is part of the debate. people want a faster internet

connection. it could happen if you open up some fast lanes. why is it a bad thing? >> the united states does lag the rest of the world, our global competitors in the developed world in terms of level of conductivity and in terms of the price we pay, and all of this is because we have allowed companies, major industry players to write their own rules of the game and right competition and consumer protection out of the business. it is worth noting that for a time, we did have stronger protections. at that time, we had better consumer protections and open internet protections. investment and jobs both increased. as soon as we took those away and allowed the emergence of local cable monopolies, consumers suffered. innovation has suffered. it was with strong open internet protections that an ovation has flourished and that the platform for self-expression and online

organizing in a place where voters inform themselves and where so much democratic discourse takes place. it was with these protections that all these have flourished. if we start closing the open internet, all that is jeopardized. >> paint a bigger picture for us. comcast is trying to buy time warner cable. at&t is potentially buying directv. all this net neutrality stuff is happening at the same time. it is all related, right? >> obviously, what is happening is as technology gets better and cheaper at the same time, the content industries, communication industries are going through a chaotic form of what we call creative disruption, and we are seeing all kinds of business models emerge. not surprisingly, we see companies trying to use the regulatory process and lawmaking as a way of protecting their incumbency or trying to give themselves a leg up as that chaos ensues, but the truth is the technology is what is driving the change here. >> why should private companies or publicly traded companies like comcast, time warner -- why

should they bear the cost of providing high-speed access from every business in the world? >> that is not what this is about. this is about allowing companies like comcast or time warner cable to be innovative about new ways to pad their bottom line. it can give a preferred provider a fast lane on line allowing them to route around congestion and route around traffic online. you have created a perverse incentive for a network operator to allow congestion to build up. that is anticompetitive. it also introduces the opportunity for content providers and carriers to favor their own content over those of their competitors so that a company like comcast might be tended to favor its own video-on-demand service over competing online video services. that is sort of collusive behavior and anti-competitive behavior that does not help anyone.

>> do you think it should be banned outright? >> absolutely. no proposal that allows fast lanes is open internet. no proposal that allows fast lanes is net neutrality. >> tom wheeler says "there's not going to be slow lanes, just fast lanes." is that really possible? how can they assure that the fast lanes will certainly be faster than the not fast lanes, right? >> we keep upping the ante. speeds continue to improve. mostly because the technology is that her and cheaper to doing so, so the possibility of having the public internet be fast and still being able to offer specialized services and content delivery, all things by which we've had for the last 10 years -- that has worked, and i do not see anything in this proposal that would take that away, and if he could, believe me, we would all suffer. >> i agree we would all suffer if we have fast lanes online.

it is a slow lane for everyone else. i'm not so worried about whether the biggest companies in america would be able to afford a fast lan online. i am worried about whether alternative, independent, diverse, or dissenting voices will be able to afford priority access. all this is supposed to happen on a "commercially reasonable" basis, but what does that even mean? the definition might change from one fcc chairman to the next. it does not give innovators or entrepreneurs the regulatory certainty they need. >> thanks so much for joining us. thank you both, obviously, a debate that is far from over. will continue, at least for the next 100 days. still ahead, new technology from paypal lets you shop at retail stores without even taking out

your wallet. will this move the needle for mobile payment? you're streaming on your tablet, phone, bloomberg.com, apple tv, and amazon fire tv. ♪

>> welcome back to "bloomberg west." i'm emily chang. we are focusing on how technology is changing the retail business. paypal is focusing on a small device that can make a big difference to brick-and-mortar retailers. it takes hands-free payments to the next level. jon erlichman is with us now from l.a. you look at how businesses are putting this to work.

how? >> we know that ebay, the company that controls paypal -- both of those companies are obsessed with the idea of mobile commerce, facilitating that commerce, but it's easier said than done to go to stores and pay without pulling out your wallet. that's why they have been pushing beacon. here is more on how it works. the process for making parisian macaroons has not changed much since the 18th century, but inside this palo alto store, there is a high-tech revolution. >> we are a very traditional-based business, a small business, so technology allows us to be very competitive. >> paypal is turning to a group of small businesses like this one to help test beacon, its new hands-free payments system. >> we are trying to make payments disappear for people who want them to disappear. >> about the size of a pack of

gum, it offers smooth features for retailers that can send messages to customers who use the paypal app when they come near a store, like a special offer or sale. if you opt into the hands-free mode, you do not even have to take out your wallet. >> just walk right into the store, focus on what you want to buy, and when you are ready to pay, your name and face just appears in the point-of-sale system of the retailer, and they just charge your paypal account. >> when the customer comes in, you do not have to exchange any more credit cards, and that allows us to save a lot of time and focus more on the customer service. >> paypal hopes macaroons are just the beginning. they are currently testing with a wider rollout planned for later this year. >> obviously, we know that there are a lot of players interested in this area. square would be another. i think it comes down to ease of use. can you do this very seamlessly.

does it not take a lot of power out of your phone when you are trying to make it all come together? >> there are indeed a lot of players trying to get into mobile payments and when this market. thank you. chinese smartphone maker xiaomi is breaking into the tablet marker. what does this mean for major players like apple and samsung? that is coming up. you can watch a streaming on your tablet, your phone, bloomberg.com, apple tv, and amazon fire tv. >> time now for bloomberg television on the markets. i'm julie hyman. we did see a selloff. it did come back a little bit by the end of the day, but really triggered in the morning by a worse than estimated in industrial production report sending shares down sharply.

i want to point out the selloff we saw in small cap stocks as well. the russell 2000 now down 9%, 10% off the highs it saw in march. ♪

>> you are watching "bloomberg west" where we cover innovation, technology, and the future of business. i'm emily chang. we turn out to a big story out of beijing. chinese smartphone maker xiaomi is releasing a tablet next month as it escalates its competition with apple and samsung. it will have a seven-inch screen like apple's ipad mini and will use google's android software. i know the ceo of xiaomi always gets a rockstar welcome, sort of like steve jobs got at apple conferences. what was the reaction in the room when he came on stage and unveiled this?

>> good morning to you. you can imagine the kind of reception he got. it's kind of odd to call this a classic xiaomi event for a company that is only four years old, but it was. the beijing hall was packed beyond capacity, filled with cheers for every new product launch from a new tv, a new router, and the big product was the new mi pad. it takes on apple for half the price. he hates to be compared to steve jobs, but you know what? xiaomi is clearly taking a page from apple in leveraging its growing own user base to sell tablets. already, it sells more phones in china than apple. it has risen to number three, apple is number four. i caught up to the man who is in charge of the international push

for xiaomi, including taking the mi pad overseas. that's you go borrow. -- hugo barra. >> we are going to launch in china first, make sure everything is ok. then we are going to start probably in southeast asia and taken to the other markets we are exploring like india, latin america, and so on. >> what kind of timeframe? this year as well or see how it does in the china market? >> timeframe is determined by our manufacturing capacity. we have to see how quickly we can wrap, but certainly hope we do that this year. >> the tablet market is pretty much dominated by one if not two players, apple and samsung. can you get to be global number three? >> definitely a high bar in this market. we know that for certain. we have spent four years working

up to the point where we thought we had the right hardware design and also software capabilities to build a world-class tablet. we think we are there finally, so we think we will help change this market without a doubt. >> how important is it for your product portfolio to go international, to have a tablet? also, this new television, the new router, the whole portfolio of different products, not just phones, for the international market? >> we have taken a slightly different path from what a lot of people would have expected. we did a phone, then a tablet, -- we did a phone, a tv, then a tablet. these things work together in your living room, your office, and so on. >> went into the united states? what do you have to do to get to that point where you can be competitive in a u.s. market? >> the u.s. market is obviously not in our plans for this year. it is an insanely competitive market. getting there requires working very, very hard and being ready.

we will work up to that. we do not know when that is going to be, but certainly, that is the goal. >> now, about 97% of xiaomi's phones are sold in china, but they are now entering 10 international markets. guess whose job that is? hugo barra's, of course. >> big coup for xiaomi to get him to move to china and run the international expansion. from the perspective of the chinese consumer, how did you see the mi pad, which sounds a lot like i've had, i've got to say -- how do you see it competing with the ipad and other options in china? is this something that consumers there really want? >> when you go to events like this, you get the faithful. of course, they are saying they're going to smash apple, but if you look at numbers for the phones, they are expecting 100 million users, but the

xiaomi executives i spoke to today would not bite when i asked them for sales rejections. -- sales projections. i did talk to one of the initial lead investors, whom i'm sure you have interviewed before, a former board member. loyal customers, emily, who want to perhaps migrate from their homemade phone to their mi pad as well. >> prices they tell me are a lot better, right? >> yeah. if you look at the 16-gigabyte mi pad, it is about half the

price of the retina mini ipad from apple. 60% cheaper to go up. then they will have a 100 28-gigabyte version. -- 128 gigabyte version. they did not give it a price, but it will probably be along the same price frame. apple does not even offer 128, so i do not know how cheap it will be. >> thanks so much for covering that event for us from beijing. for more now on xiaomi's position in the crowded tablet market in china, i want to bring in a research group assistant who joins us from shanghai. cory johnson is with us as well. how impressed are you? what do you think? >> i think that this is a good evolution for the company. they have clearly done very well with rolling out smartphones that have gotten people excited in the market.

they have shown they can work the market. i think this tablet is a really good step. it has great effects. -- great specs. it competes very well with apple. if you look at the tablet market here, consumers are not necessarily married to the idea of buying the apple tablet or samsung tablet. the tablet is usually the second purchase for most of these consumers after they buy a smart phone, so it is really a wide-open market right now. >> is the notion of a market where the pc never exist -- a lot of these consumers change the role of a tablet in china? >> absolutely. if you look at the demographic that xiaomi might be trying to sell to, which is the 15 to 34-year-old -- these people barely use e-mail. they are spending most of their time during the day on a smartphone, possibly a laptop in the office, but really, it is phones and tablets. i think xiaomi is well positioned to cater to this group. >> most of us in the united states and outside of china have

never used a xiaomi product. how good is the actual product? how does it compare to an iphone or ipad or samsung galaxy? >> people were looking at how cheap the products were, and i think the assumption was that it could not be that there. the reality is the hardware is nice. it is sturdy and well-made. they have spent time on industrial design. they have spent a lot of time getting feedback from their customers, those faithful we talked about earlier. they update their operating system every week, which is something that companies like samsung do not emphasize as much. the overall user experience is very positive. it does not feel like a cheap product. >> what do you think xiaomi's prospects are for going global?

and potentially breaking into the u.s. market? >> i think they have to go global. if you look at what is happening right now, china is a much more mature market then it was even a year ago. they are not going to get the growth they want to get out of china. i think the logical next up is the one they are taking, moving into south east asia, moving into some other emerging markets like brazil or turkey or russia. i think we are going to do quite well. they have a clever business model. they know exactly what the young tech savvy consumer who does not necessarily have a lot of money want, so i think they will do well there. the u.s. market is a long-term goal. it is probably a good goal. it will not be easy. the reality is they will have to establish themselves in one of these other markets first to develop the brand reputation and develop the cash they need to be able to attack a more developed market like that. >> i am dubious of the fan boy experience. it looks real, which makes me think it is not, but is it real, and does it transfer when you get outside the chinese border? >> looking at china, there is a huge amount of buzz around the brand.

when you talk to consumers, you ask them who their heroes are. they are not interested in celebrities or actors. they are interested in entrepreneurs. the cult of the entrepreneur -- they are interested in the brand. they want to read and see everything they can about it. they are interested in buying the product because they like that a chinese product is seen as being cool and interesting. it will not be as easy for them to sell and replicate in other markets because they do not have the exposure. they have a lot of other low-priced competitors who are doing a similar thing, but the advantage they have is they are good at developing new products. they have good people working for the company, so i think he will be able to bring an options that consumers in india or russia or brazil or singapore or indonesia are really going to like. >> all right, thanks so much for sharing your thoughts on the mi pad and xiaomi's future. in just two years, we wanelo has

gained 11 million customers without selling any products. how the shopping site's business model could change customers' relationship with retailers next. you can watch us on your phone, your tablet, bloomberg.com, apple tv, and amazon fire tv. ♪

>> welcome back. i'm emily chang. we turn back now to our "wiring the world" series, and we look at how technology is changing the future of retail. wanelo is a company with 11 million customers but no products. the social shopping website allows you to save and share richard dice within a store worldwide. right now, it offers more than 12 million products from about 3000 companies. -- 300,000 companies. how are major retailers taking advantage of this new social network for shopping? wanelo's ceo joins us in the studio.

thanks so much for joining us. >> thanks for having me. >> first, tell me how you started the company and what your vision is. >> absolutely. i started wanelo because i was a frustrated shopper. my style never fit into any particular category. i would pick and choose from categories and make up my own style. i found the traditional mall was a very limited experience for me. i wanted to know what my sons shopped for, what stores they shopped at, and find more unique products in stores. i started wanelo to make it really easy to discover stores and products that are unique. >> is your goal for this to be another social network like facebook or twitter? >> it is very much a social experience fully driven by users, but it is only about product and stores, and that is the main difference. we have this very single-minded focus. >> give me an idea of what traffic is like.

>> traffic is great. we have millions of users. we are 85% mobile, which is great. mobile commerce is expanding and growing tremendously. as you mentioned, we are building a huge ecosystem with retailers. the wanelo buttons are live on over 50 retailers including sephora, forever 21, urban outfitters -- really big brands that everyone knows. >> you have over 300,000 stores. is more always better? you see other e-commerce companies taking a more curated approach. >> more is better when it comes to self-expression, when it comes to connecting you to that specific, unique product that will express exactly who you are. that is where more is better. >> you guys recently wrote a blog post about twitter commerce, saying it won't happen. what do you mean? >> we believe that in order for shopping to happen, the platform has to be 100% focused on shopping. twitter, facebook, instagram -- these are platforms with very general purposes.

there has been a lot of talk about facebook commerce, and that never happened, and i believe twitter commerce will not either. >> what about pinterest? >> same thing. when you go on pinterest, you see landscapes and interior design photos, and that cannot possibly create a good shopping experience. >> some of your users are incredibly passionate. give us an example of a use case for wanelo. >> sure. most of our users come in a few times a day and spend over 15 minutes in the mobile app per day, so it is a highly engaging experience. >> you also have big retailers involved now as well. a number of retailers have what you call the wanelo button. >> yes. the wanelo button makes it possible for users to easily save products. if you are on sephora, and you

find a product that you like but a not ready to buy, you can click the button, and it will save the products. if you go to wanelo.com/nordstrom, that will show you how nordstrom is managing their page. they can very actively curate their collection. it is essentially a digital way of merchandising their stores. >> where do you want this to goal? -- to go? is the goal to get more big retailers on board, for every retailer to have a wanelo button? >> we definitely want wanelo buttons everywhere, tonight all of shopping, which means paying attention to the smaller guys that matter to our users. we are building a single, dominant social network for commerce. that is what we are about. >> what do you make of some of the

shift happening in the e-commerce industry? fab is having a lot of trouble. a lot of smaller companies are not quite working out. kevin ryan, the chairman of gilt group, thinks a lot of smaller companies are going to disappear and a few bigger companies will rise to the top. >> i do think there will be a single digital mall in the future that connects you to the stores that are relevant to you. >> is that what you want wanelo to be? >> that is what we are hoping for. >> a single digital mall. >> that unites all of shopping. >> thank you so much for joining us today on "bloomberg west." some software companies have delayed their initial public offerings. zynga started trading on the new york public stock exchange today. that is next. ♪

>> welcome back to "bloomberg west." i'm emily chang. zendesk trading again today amid investor skepticism over software ipo's, though zendesk has opened strong with shares still climbing. joining the now from the new york stock exchange is zendesk's ceo, and cory johnson, our editor at large, is back in the studio as well. shares are up 3%. -- 43%. how are you feeling? >> i feel great. such a fantastic day today, and a celebration of a milestone of our company. being here today, opening the exchange and seeing your company go public, your company you have been working on for so long, like building out a loss in copenhagen and seeing it here on wall street is an amazing experience.

>> you guys had a lot of money in the bank before you did the ipo, a little bit of debt. you are losing money. why do the ipo now? >> i think it is in our destiny to become a public company. that is what we built for. that is what we wanted to be. that is what we expect from ourselves, and it is what our customers expect from us. we have an opportunity to be a next generation business software company and set a standard for that category. to do that, we want to be a public company, and we are just very excited about being that today. >> some technology companies that have gone public recently have not had such a rosy debuts. others have delayed their ipo's. how much did you think about whether sticking with now was the right thing to do? >> we have focused very narrowly on our company. keeping focus on what is important for us, for our business, for our customers, and what we want to do. then there is the market.

market goes up. market goes down. for us, what really matters is the expectation for us and our market and our customers. >> i think of you guys as offering software as a service for customer support, just like products from salesforce. how do you differentiate from competitors? >> zendesk has built an amazing experience where it is extremely easy to discover the product, try the product, roll out the product, and start using the product. almost removing the technology from the interaction between your company and your customers, and we are providing a phenomenal experience so that today we had more than 40,000 businesses all around the world in more than 140 countries using our software to provide fantastic customer service to more than 100 million -- to hundreds of millions of end users out there.

we believe we are defining a new generation of cloud-based software where ease and ease of use and results out of the gate are keywords. >> explain the customer return and how sticky your business is. >> we are very proud about our return rate and our ability to retain our customers. we lose very little of our business every year. on the other side, our customers are giving us an immense expansion rate every single year. on a net expansion rate, we grow more than 120% every year. >> zendesk's ceo on day one is a public company. thank you very much for joining us, and thank you all for watching this edition of "bloomberg west." remember you can get the latest headlines at the top of the hour on bloomberg radio or bloomberg.com.

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