>> from pier 3 in san francisco, welcome to the best of "bloomberg west," where we focus on technology and the future of business. i'm emily chang. every weekend, we'll bring you the "best of west," interviews with the power players in global technology and media companies that are reshaping our world. first, our leaders story. mark your calendars. apple will unveil its latest iphone on september 9, according to people familiar. we know the phones what have larger screens. one will be 5.5 inches. besides the size of the big

screens, what might other features may be iphone have? we spoke to brian marshall and i started by asking about the screens. >> believe it or not, apple is almost two years behind the leaders. it is going to be enough to a massive upgrade cycle. we kind of joked for the past year, it will be the mother load. >> why five inches? that is big. it competes with the ipad. >> the largest smart phone we have seen was the lg flex. we saw it this past year. it is six inches and it curves. it curves across the mandible. we do not think it was too big. we do not think the 5.5 will be too big. our best to guess it will probably be a 50/50 split.

>> apple did not seem to get it right the last time. the phone under performed for them. what does apple do? we do not talk about how well they have managed the supply chain. what does it mean? they tried to launch this in a bigger way. >> you bring up a huge point. there are 300 million iphone users of which we estimate 100 million are not eligible to upgrade. there are 200 million and in the install base ready to migrate to the larger phone. typically, what we have seen with launches recently, it launches and peaks and comes down. we think this is going to be 60 million, 70 million units.

multi-quarter refresh cycle. we think it will draw expansion. >> what about other new features? what else can they do besides screen size to move the needle? we have heard about battery innovation. i just read about wi-fi charging wirelessly essentially. what about this kind of technology? >> my iphone five is less than 50% charge for the day. we have a long way to go. first will be larger screen and second better battery performance. >> it will be physically bigger battery and more power. >> thinner, so we can cram more batteries in there. the 6 will be all battery. >> when you break to it open, it is almost all battery.

>> will have increased surface area. it will increase dramatically. number three will be the updated operating system. ios 8. frankly, we do not see a tremendous amount of innovation on the actual device. regardless, it will be selling like hot cakes. >> it will sell anyway. you wonder what it will take to get something more? talking about nfc and other things like that that move the needle. >> samsung threw all types of junk on their phone. do you expect apple to do the same? >> smart phones for the first time ever are over 50%. this is largely a mature market. think about pc's other than the form factor, has much really changed?

we tried this netbook thing and that did not work. a pc is not really evolving. >> apple executives say it's the most exciting product line he has seen in 25 years from apple. tim cook agrees. what else could there be? will an iwatch come out this fall? >> if they are trying to rally the troops. >> how could a big iphone be more exciting than the original? >> and nothing is going to move the needle from apple perspective with the exception of new, updated iphones. if you think about it, the ecosystem, they will generate over $200 billion of revenue next year.

even if the iwatch is successful, a grand slam success, it will not move the needle in our opinion. >> i looked at in the financials from the ipad and it was an incredible success. probably never seen. if they were to launch the ipad with the same success and they had in the first year this year to a bigger apple, it would be less than 5% revenue. >> an interesting way to look at it. >> they cannot do anything to match the success that have had. >> when you assume -- when you have sweetheart subsidy deals and up to access gross margins, this is on the iphone, it is so hard to compete with anything else.

considering that global cell phone market is at 2 billion units, you cannot get anything else to move with the needle. >> t-mobile is out of there with the strategy of untying the user to the contract. the users paying full cost of the phone. you have smart phones that have less features like the samsung galaxy but at a much lower cost. does that eat away of the business that apple and samsung has dominated? >> it will be a thing of the future. at the end of the day, smart phones cost $600 or $700 without a contract. that will be 2500 dollars with a two-year contract. the real cost to the user as the subscription service. i do not expect much change to the overall asp's on the high-end market where apple competes. the general smart phone industry is about a $335 asp. over one billion units.

apple pays at a category of more than twice of that. >> brian marshall and corey johnson. apple is also taking steps to control of more of the user experience launching its own content delivery network. how much of a game changer if it? that story is next. ♪

>> welcome back to the best of "bloomberg west." apple takes a major step of controlling every piece of the user experience and is reportedly spending tens of millions of dollars to build its own network, its own internet backbone. a report said a small percentage has gone live in the u.s. and europe.

apple has reportedly struck deals with large providers to deliver content on ios. this means the content can be delivered at faster speeds and without relying on technology from third parties like level three which apple currently relies on. cory johnson and i spoke to an analyst who wrote the report. dan pointed out that ios 10 downloads are directly from apple to the comcast network. i asked him how he figured it all out. >> out all things netflix and microsoft and google decided to build their own because they needed to take more control of what they were distributing. for most content owners and syndicators, it does not make sense of going into the business of building. from an economic standpoint, they are not large enough. apple has a lot of different software downloads and streaming as well.

if you think about the radio and updates and apps, they are only just starting off now. they're only doing a small portion and they will continue to do more. >> you say this content delivery network is huge or potentially huge? >> it is pretty big if you talk to some the isps i have spoken with and they talk about the type of capacity that outlets put into place. what apple has done and is typical of a company that builds its own, it is still pretty small but they put in the capacity for 10 times that for the future. apple is looking at this as a long-term play of where it will play of them controlling the entire ecosystem. >> some other reports show apple uses only 4% of internet traffic except when they do an ios update when it becomes netflix like.

what does it take, exactly what does apple have to do to deploy this? >> it is not that difficult. they are deploying servers, in many different locations, not too many because they are primarily focusing on north america and europe. they play servers as well as their own data centers that apple controls a couple. they build them out. those servers connected to other networks. the connecting networks and sometimes a paid interconnect deal like we saw a netflix do with comcast. apple is doing the same thing. >> they are not laying fiber but turning on what is already there? >> they are not a backbone provider. apple is buying from companies

like level three and a voice and a lot of network resources and putting it together to create their own network. they do not own the cable into the ground or laying the cable. >> when you look at the the potential for this, how big is it? the update to ios 10 yosemite, where is it going to come into play? >> level three most likely. they point out that while apple is a customer, no customer is more than 10% of revenue. we know they are spending less than 150 million last year. they are probably spending tens of millions of dollars to get their content on the net.

they could achieve cost efficiency. if it is cheaper, their growth margins get better. number two, they may be able to tailor it if they are tailoring their servers to deliver the kind of content that apple creates and that will come across faster and cleaner. not just the stuff we know like movies and music or software but things they struggled with like i cloud that is the future computing and apple has had issues. >> if apple is controlling so much of the user experience, do you think it is something other companies could do as well? >> other companies have done it. apple is late to the game. microsoft, google, yahoo, a lot of these companies started

building up in 2006 and 2007. cory is absolutely right. apple has a huge advantage. their servers would not be all purpose built. they will be for apple content. they roll out additional service and i cloud is something that is to performance issues as something apple wants to correct. it is going to become imperative to the quality of service and they will provide across all of their services. >> what about apple television? it is something worked out about four months. could something like this come into play in a big way if indeed apple comes out with a television set or some kind of television service? >> once they wrote the report, a lot of people speculate about an itv. this has nothing to do with the itv. i do not know any other plans. they are putting this in place for software. they want to improve software in icloud. apple needs this book is the size of their business today. it does not have anything to do with itv right now.

>> what does it have to do about creating a dropbox or something like that? it is something that apple has look to grow in the past. >> absolutely. any additional services they want to roll it down the cloud, they can use their cn 4. they are only rolling it out. that was not deliver 100% of their content overnight. microsoft and netflix who has done something similar, it takes 24 months before they bring a vast majority of their content. i do not think apple will ever bring 100% of their content but they will bring most of it over time. >> our editor at large cory johnson and dan rayburn. coming up, a group of russian hackers. ♪

>> welcome back to the best of "bloomberg west." how safe is your data? it is front and center after russian hackers allegedly stole 1.2 million passwords. the stolen information was collected from more than 420,000 websites. the affected websites were not named. for more, cory johnson aand i spoke with a vice president of a security company. i asked him how serious it is breach is. >> it is very difficult to know

without having to examine the data set. it has not been made public. we will probably learn more over the next two days as more details are released. it is on a much larger scale than previous breaches. it is scary and we know that a major websites were affected but we will not tell you which ones. >> that is an interesting question. if you look at series breaches and they affect a small websites or a single website. in the case of the ebay breach where you have credentials -- what would the distribution look like in this case? one company that accounts for a vast number of the credentials? >> i am glad you said it. they have had enormous expenses because of what they had to do to fight to this. are there specific companies will have to face similar costs in the current quarter where they have to pay more to fix it? >> certainly if they discovered

they are affected by the breach, they want to figure out what went wrong and what did they can do about it. one of the scary things is there may not be anything they can do about it depending on the attack. some of the details that have been released so far indicate the hacking group started off by just purchasing credentials online from other groups on the black market. they switch to using bot net. we use a bot net attack, which you can do is leverage the previous credentials you have stolen to go through the front door of other websites and test those credentials and discover which are valid. >> let me paraphrase. they learn an individual's username and password and blasted across the internet and

other places where the user has used the same thing and the company never knows? >> exactly. that is not something that constitutes the average breach. they do not have vulnerability in their infrastructure. they are going right through. >> how do the companies know? >> they can find evidence of the passwords a user's names being used. in this particular hack, they found the initial use cases have sent is spam and malicious e-mail links. the companies that have the users that are breached may discover these spam or malicious links going out. >> the report they say is a russian gang. who are these people and what are they doing with the information? >> is a very sophisticated ecosystem when it comes to credentials.

there are many things they can do. it looks like they are monetizing by providing services. it can build bot nets. it is man in the browser that can be used to take the credentials and steal money from people with bank accounts. the level of monetization they can accomplish in space on specific type of attack and they are selling to the rest of the black market. >> i imagine it affects so many different businesses. businesses online and companies turn to being online and mobile even. i wonder what the companies' risks are? >> it is certainly requires sophistication and vigilance in order to be able to maintain a complicated online presence and companies are trying to reach their users as broadly as possible wherever they might be. having an online presence is essential.

>> target the just-released the cost of that massive data breach. $148 million. we keep asking the question, can the attacks be stopped? can a security get so good that it does not happen or will that hackers catch up every time? >> i do not see you can ever make a system that does 100% unhackable. what you can do is create defenses that make certain types of hacks so expensive that the hackers end up doing something else. being able to introduce barriers between different websites in order to prevent automation from occurring. this gang is estimated to be 20 million in size. the only thing you can do that is through automation. if you can stop the tools, the

exploits in the first place and all of the tools and monetize them, it is much costlier for them to crate a business. >> putting up walls between websites? >> our product is called the bot wall. it prevents an automatic attack from going to your website will stop when they are trying to use the username, and are unable to use the script to automatically log in. you cannot manually test and try to log into each one manually. you have to use some type of script in order to reach that scale. if the automation does not work, the attacker goes away.

>> cory johnson and shuman ghosemajumder. coming up, the car poolling business. a new feature dedicated to car pooling. lyft is not alone, uber is following. ♪

>> welcome back to the best of "bloomberg west." i am emily chang. carpooling has gone digital. lyft just launched a carpool program. it is only available here in san francisco. uber has also announced a similar feature that will launch in san francisco later this month. i spoke with john zimmer about how mobile works. >> 90% of lyft ride said some to going in the same direction.

we are taking the two routes and matching them up and saving users 62%. >> uber is testing out something similarly to this month. how will it be different? >> it is flattering to see others follow what we're innovating in the space. i think one thing that we created is a sense of community and this culture of sharing within lyft. it is also true to our roots and vision from the beginning. we started a company prior to lyft where we did long-distance ridesharing. we have come full circle.

>> you can save up to 60%. one of mobiles is taking a ride in a direction? >> we will still give you a savings. it might just be 10% or it might be more. >> if i allow some in my car with me i still get this cap. why won't everybody do that? >> we hope everybody does. we think it is the best way to get around. we are creating personal transit at your doorstep. it is enticing for users. we have seen hundreds and thousands of rides. >> we have a lot of lyft users on our team. there was a bit of and i don't know what i get into an uncomfortable situation? >> people had those questions and we started lyft at the beginning. we have created an incredible experience. you have screening of both passengers and drivers. it is work that well. we have done 10 million rides on the platform.

we have over 60,000 drivers. it is more than fedex does vehicles. people do want the service. they are using it in large amounts. that social piece, and works at. >> writers yet more and drivers pay less. fewer drivers are needed. how does it work from a supply and demand perspective? >> at our peak times in the morning and evenings, it is nearly impossible to get enough drivers to serve those needs. when you create a five dollar ride or a seven dollar ride, that increases demand. we are about creating your daily ride. when you start creating something that is a five dollar price point, people get rid of their cars. the story that has been told previously is what we are doing

in this $11 billion taxi and limo market, the way we see it is we are going after the consumer transportation market. that is a $1 trillion market in the united states. 95% of it is people spending money on personal vehicles. >> you had some challenges in washington dc. some people say it is not really lyft anymore if you take out the fun stuff. other places complained you can't get a ride and there aren't drivers of metal. >> we are seeing an incredible demand in new york city. this is our third highest demand across all 67 markets. we have all been live for about two weeks. markets like chicago that has been live for over a year are not seen as much demand as new york city already has. this is a massive opportunity. we have created new product there that we are calling lyft pro. regulators said it had to be this way. we are bringing peer-to-peer as well. >> how will you get more drivers on the road?

they will have to be licensed by the taxi and limousine services. >> there are 1000 drivers lined up in new york city. people want the opportunity. we are just scaling up really fast. >> that was john zimmer the cofounder of lyft. russell simmons is wanting to increase his empire. we speak with him next. ♪

>> welcome back to the best of "bloomberg west." i am emily chang. as the cofounder of def jam, russell simmons broke hip hop into the mainstream. his notice venture is helping new artists achieve success in

the digital world and beyond. they received a $5 million in funding. cory and i spoke with him. i asked what all that digital is going to do with all that money. >> we want to find important content. we have young writers and directors and comedians and poets and people who need exposure. with our partnership with the music company we are putting out a record of week with samsung. the money -- we don't need his money. it is his brilliance that we need. we'll meet the $5 million. we need the brilliance. we look at the executive pool that is out there, the other tech partners we need to expound upon our ideas. the na li answers.

i have known these guys for a very long time. having him and limiting the amount of money i take, they own a great piece of it. i am happy to have them the cause of their brilliance. the idea is to find great content and create content that will be different from the marketplace and make it difference. >> let's talk about that brilliance. he was an investor in maker studios that disney bought. he knows where the revolution of video is going. where is the revolution going? >> it is interesting. the younger demographic, the top five recalled stars in the world for kids between 13 and 18 are all youtube stars. that has replaced additional celebrities. when russell explained his vision of trying to use these

lap forms for short form video and unearth this new talent that has not been able to break through, now they can publish themselves with these guys taste making and using platforms around them and taking that talent into movies and record labels and television shows. it was a marriage that was too good to be true. >> when kanye west was saying he did not know any better. hollywood is so segregated. we had a moment with bernie mac and chris tucker and tracy morgan. they emerged at one moment because there was an integration process. no one except some of the older guys like kevin hart have emerged. it youtube is a place where artists can emerge the spite the

lack of creativity in hollywood. i get the chance to say yes instead of asking an executive to say yes. that is very exciting. there is so much young talent and people who have not gotten a break yet. youtube will give me that break. hollywood is regressive, but they live in fear. they have not done a good job of integration. the girl on scandal is the first black girl to lead a show sense julia. >> that was in the 1970's. i remember that as well. >> it is a giant white space and want to fill it with creative content. >> is this musical content? >> yes. we have music every week. we are putting out a record every week.

>> that is a kind of release schedule to we would've not seen in the music industry. what is it about the digital era that makes you want to do it this way? >> this technology that lets artists upload their music and samsung has funded this bill that which is part of our process. this -- we built this. they upload the music. we curate from that. these are artists who built themselves with huge youtube followings or social media followings. we put the single out every single week. a lot of them have become stars. already. >> it is not just the pace but these platforms are global. we are finding talent all over the world. i think what historically people thought of as urban is everybody. it is global and everywhere. >> the girl that they are

showing right now grew 600% in sales last week. it has everything to do with the collaboration of all of these tech ologies, especially youtube support. i've mentioned samsung eight times, but they have funded this. >> speaking of collaboration, jay-z was at one point the president of death jam. we have been covering the on the run to her. you are seeing other artists pair up. this is the only with furnace to make that kind of big money these days? >> we are looking at all of the artists. they have deals with the pieces of everything that the artist does. thai reese is a movie star. jay-z is a business guy.

there is a lot of branding exercise. i created a clothing business that i got jay-z to be partners in. there is a lot of ways to exploit emerging talent. there are areas that they want to exploit their celebrity. that is what we do. we are a immediate company that understands all kinds of media. we have movies at different studios and lots of the artists desire to be in them. that makes us a unique company. >> that was def jam ceo russell simmons. foursquare has revamped its app to focus more on location-based search. is this enough to draw users back to the service? ♪

>> welcome back to the best of "bloomberg west." i am emily chang. foursquare is trying to get back in the forefront of users minds. they hope you will draw more people to the service. it focuses on location search and helping people find restaurants and businesses. the check-in feature was moved to a separate app called swarm. i spoke with dennis crowley. take a listen. >> we had a focus on local searches. this has been since 2010. over the last four or five years we have gotten so much data around the types of places that people go and what they do. what we are trying to do is personalize the local search. it feels broken that if you go to yelp where people get the same search results. we want users to get different results depending on what their

tastes are. >> i agree with you that nobody has cracked local search at. i could have used this when i was walking around looking for a restaurant to eat at before the jay-z concert last night. foursquare is known for mayors and badges and check-in's. people are asking me to ask you what is the up take on the swarm and why are you doing it this way? are you seeing more users? >> we look at the app that we had created. we realize that some people were confused. we want to use the search but we don't want to check-in and some people did not know we had a search feature. we broke it down into two apps. we launched swarm in two weeks ago. it seemed like people that were

checking in on the old app on a checking in on swarm. that is great for us. we have lost some users. we are set up to dominate local search with the core app and innovate with apps that meet up with friends on the swarm map. >> you are tracking users continually. why will it use this information willingly when you have people flocking to secret? >> one of the great things about the new app is we are not sharing your location with friends anymore. that was one of the complaints we heard. people did not want others to know where they were all the time. even though foursquare understands the places that you go to, we do not share that. it just makes recommendations stronger and more personalized. >> we have talked about how products have evolved. you are positive and confident

about the future. what do you think this next phase is? is it a make or break phase for foursquare? we have had a strong roadmap since we started the company. how do we collect data from all of the interesting things happening in the world? we give it back to people in the form of personalized search recommendations. have done this since 2009. we have a lead over anyone else. nobody is approaching the space like we are. no one is building the technology that we have. we learned so much about the world. this is when the first chances we have to show people what we can do with all the data we have collected. we are super excited about it. >> you have always said you want to remain independent. how long are you going to keep

at it? how long will you try to break through? >> we will do it until it works. we feel strong about the condition of the company. we have generated significant revenue. we have generated more in 2014 than we did all of last year. we are in a fantastic position to execute well. >> that was dennis crowley of foursquare. food shortages are one of the world's biggest problems. one start up has found a new way to make eggs without eggs. we will talk with him next. ♪

>> welcome back to the best of "bloomberg west." i am emily chang. how about eating scrambled eggs or an omelette minus one ingredient, the eggs. what? hampton creek foods is a startup that makes plant-based and alternative.

they have more products in the work. they are backed by bill gates. what is the technology behind them? i spoke with their founder and asked why he started this business. >> you think like most people, this is why we started up with mayonnaise. our idea is that food just needs to get better. it could be about cookies. food needs to be healthier and more affordable. we are started out by saying there are 400,000 plant species around the world. we can use them to make everyday food a little bit better. we don't have to talk about all the hall. and the sustainability though we believe it. we want to make the good thing work for you. >> isn't this made out of eggs? what is actually in there? >> eggs are one little piece of

the food system. eggs don't always come from the best places. they are not the safest. we identified one piece of this system to make better with plants. we have the oil and water. instead of the egg giving you the texture, we use a canadian yellow plant. we work with farmers in western canada. we identified these plants using this science and biochemistry. we start but don't end with the conventional egg. >> it looks like it has the same amount of fat and calories. is it healthier? >> it has no cholesterol. let's say you are having a hamburger. it has less cholesterol.

people have egg allergies. there are no antibiotics associated with this whatsoever. there is less saturated fat. >> you also make cookie dough. it this cookie dough has no egg in it. you are selling this. you've got a new retailer. >> we have been really fortunate to combine this philosophy of making food better for everyone with a technology that makes awesome products. we are going to be beginning this movement with target on august 24. this is the best retailers in the world.

they align with why we are doing this in the first place. >> you've got other grocery chains online. >> the top two grocery stores in america. it we've got safeway and kroger. we have whole foods and we are watching with walmart. >> what else can you make without eggs? are we going to be eating fake chicken? >> the key is what is outside the conventional egg. we have all of these issues in our food system. we have rising rates of diabetes. maybe sugar is not the best thing we should have. we have foods that could be more sustainable and use less water. we are identifying plants that are better than sugar. we find plants that could be a hyper source of protein in the developing world. the more we find things that just make things better. >> that does it for this edition of the best of "bloomberg west." you can catch us monday through friday. we will see you next week. ♪