>> live from pier three in san francisco, welcome to "bloomberg west." we focus on innovation technology, and a future of business. i'm cory johnson. here's a check of your bloomberg top headlines. u.s. stock posting gains after being down for part of the day. the nasdaq and dow up about 1%. crude oil erased its earlier drop. mcdonald's which is replacing its c.e.o., and boeing, were among the winners. the senate has voted to defy president obama and aprove the keystone x.l. pipeline but they're five votes short of the majority needed to overcome a veto.

san francisco based visa set a four for one stock split in march. the world's largest payment network reported gains for the first quarter and profit. profits up 12%. sales up 7%. payment volume up 11%. to $1.2 trillion. visa has embraced new technology like apple pay and is poised to benefit as consumer spending rises in the u.s. indiana governor mike pence has pulled the plans to start a state-run news website. the website was going to offer prewritten stories to the media. it was criticized by indiana lawmakers in both parties as well as journalists who likened a state run news outlets you might find in russia or china. pence said the goal is to better report news from state agencies. he calls the project poorly

crafted. two of the biggest companies in technology have reported fourth quarter earnings, google and amazon. amazon's sales in the fourth quarter holiday season up 23%. and they turned a profit, -- up 15%, to $29.3 billion. and they turned a profit. it was a smaller profit than last year's fourth quarter. meanwhile at google, sales up 7%, net income up 41%, but the average price of an ad fell and after a 2% decline last quarter, this quarter the 3% decline and google continues to spend, spend, spend with operating expenses hitting $6.8 billion in the quarter. joining me to help figure this out, brad stone, author of a book on amazon. let's start with google.

the google results were interesting but the, you know, wall street doesn't like it, i don't care, but it is interesting that the business is in some important ways decelerating and the prices of ads actually falling. >> yeah, i mean what you're seing is that a lot of this applies to google too. the core business to some degree is experiencing some commodityization. even though you're getting significant demand, prices continue to drop. and i think at the same time you've got a company that's investing for the next 100 years and it's really difficult to reconcile those two things if you're an outsider, not there seeing how these things all come together. going forward, google needs to acknowledge that. i think they probably either need to start reining in some spending offering setting expectations differently so

people can get their heads around what the cycles will look like for this company that's investing for something that's over the horizon but has a core business that's changing today. >> the skoal ssh sales growth is still there but the decline in that rate of growth is pronoubsed. >> yeah you look at a lot of other companies in commodtizing businesses, those businesses grow they grow really, really well but the margins continue to drop. google's experiencing that but they're not providing a lot of transparency on the progress in modernization of some of these efforts. >> and the click growth was there but again slowing down quite a bit all the way down to 14% in terms of the number of people clicking on ads. that's suddenly, you know, when it was 25% down from 31% not a big deal. but 25, 17, 14, that's getting slower and combine that with the value of a click, it looked like that was going to bottom out last quarter it was down to only negative 1% but the ad prices decline. that's bad news. >> it is bad news and that will continue system of what google

needs to focus on is engagement. getting people to click on those ads and they seem to be making progress there. but at the same time they need to get people to pay up for that engagement, to preserve a.s.p. >> brad, i'm sorry, i'm ignoring you, he's sitting here across from me, i'm ignoring him. what do you think about those results? >> investors don't seem that worried. mobile continues to be a big challenge. mobile ad returns are lucrative for them and the iphone, such a runaway success, the relationship between google and apple so tenuous, i think that's a big potential weakness in google's armor if apple decides to go another way with default search on the iphone. >> they talked about that in the conference call for yahoo. it would be interesting if apple were to take some of oh the wind out of google's sales.

but let's talk about amazon, your bailiwick. i know you've been poring over these numbers. >> it was a good day for amazon investors. got the top line beat. got a profit, a remarkable thing for amazon, over $200 million for the fourth quarter. maybe more important, they're listening to shareholders. there's two points in disclosure that i say they're going to start breaking out a.w.s. numbers in the first quarter so next quarter. >> really? >> yeah, they said that on the conference call. number two, they talk more, got into more detail about prime membership. they said it's up 53%. that's a key part of the business. if you're an investor, one of those long-term faithful shareholders, taken a beating over the last year as the market has gone up, it shows amazon is

listening, they want to create more transparency. >> $6.2 billion probably mostly web service, i can't wait until they break that out. every guest we have on bloomberg west who has a company to launch is doing it on web services and their services growth is pronounced, probably the size of the business will compel them to preport that. what's your big takeaway? >> my big takeaway, the price elasticity point on amazon prime hasn't been reached yet. there's a ton of demand for the product. we're seing that amazon is an incredibly valuable service but people will pay up for improvements on it. people pay up to lubricate the gears associated with amazon. there's interesting value there my other takeaway is you need more. we're going to see more and more scrutiny in those numbers.

i think it's smart of them to start showing that. if they're going to play and be the backbone and spine of so many companies out there. >> i think it will also help to understand why the business in international only grew at 3% and the domestic business grew so much more, over 20%. but those mysteries maybe have to wait for another quarter. brad stone from bloomberg wiz week. we appreciate your time as well. we're going to hear from ali baba's co-founder next. ♪

>> this is "bloomberg west," i'm cory johnson, here's a look at the world news headlines. the death toll from a gas explosion at a mexican hospital has been low to severe -- two after an earlier report of seven. dozens were hurt in the blast that damaged the children's and maternity section of the hospital. a tanker was delivering gas when

a hose burst. pilots cut power to a critical computer system and that contributed to the plane's eventual crash. the eu has approved further sanctions of russia for their support of pro-russian separatists. they're meet to develop more sanctions including names to the black list of ukraine officials that have been involved in the consulate. >> facebook has grown, now he is focusing on growing that.

>> you are legendary for growing facebook. how much of it was you and how much was facebook? >> i think it was 99.95% facebook and like 50 basis points me. i inherited an unbelievable leader who had an unbelievable vision and i was lucky to have a group of people who wanted to tolerate me for, you know, four or five years. >> but i know for a fact that start-ups today are consciously looking for their chamath. they have a nickname for you charlie fox trot, which stands for c.f., which also means crazy effer. are you a crazy effer? >> yeah. >> more of that interview tonight on "studio 1.0." ali baba sees focus but is that

hurting growth? they have a slower rate of growth than the prior quarter. they have 340 million active buyers but more shopping on mobile, ads on mobile generating less revenue. they're also dealing with a recent chinese government report accusing the company of allowing fake goods and other fraud to sell on its suite of websites. earlier, betty spoke with ali baba banker joe psi. >> on the monetization rate we reported 1.96% which has been trending up. one thing to remember about mobile is we have now 265 million monthly active users coming to our mobile apps to buy

things. so that's a very, very good result, especially in light of the net add. we added 48 million monthly active users in this quarter. so we believe that as long as you continue to attract users on mobile to buy things, to engage on your platform, at some point, monetization will follow. and one thing i would like everyone to remember in the fourth quarter, ali baba generated $1 billion u.s. dollars in revenue. so this is a very substantial number. we broke that $1 billion mark this quarter. >> joe, on other developments, and by the way, spoking about mobile, yahoo saw some good mobile ad revenue growth in their quarter just a day ago marisa mier has now spun out her ali baba shares into spinco. would you have any interest in buying all or part of spinco? >> we don't anticipate entering

into an agreement with yahoo or spinco. this is something that is the right of yahoo to do. their bored has obviously decided to do the spinoff. from our interspective operating the business day-to-day, today we have a 15% shareholder in us, yahoo. after the spinoff we'll have another 15% shareholders spinco. it doesn't really change anything from our perspective. but i would like to just take this opportunity to thank marisa mier and also jackie resus, who has been on the board of directors until the i.p.o. they've been great partners with us over the last couple of years. >> joe, i know you're a great deal maker, you have made lots of deals for ali baba. is yahoo on your radar at all? can i ask that? >> we are very focused on our business in china.

if you look at the deals we do in terms of investments and m.m.a. activity, over 90% of them are focused on how we grow our user base, how we increase user engagement and how we expand our categories in china. and with limited activity that we do outside of china is very much focused on the cross border trade. always with one leg in china. how that is how to enhance our ability to serve small businesses to sell chinese business -- chinese businesses to sell to overseas consumers and more so now how to help small businesses from around the world including u.s. to sell into chinese consumers our platform of 334 million active chinese consumers. >> joe, i mentioned earlier about the fight you have had in recent days, i'm sure it's not

something you wanted to talk about or that you would want to talk about on a day like today but the fight you've had with the chinese regulators over alleged fraud at ali baba. the fact of the matter is, that is one of the risk factors here in buying into your company. what exactly are you doing to combat fraud on your online marketplaces, joe? >> so, the underlying issue is an issue that we take very seriously. ali baba runs retail platforms that trade $370 billion a year on a last 12 month basis. that's a lot of transactions. so in a way we very much reflect very significant part of the retail economy in china. the issue of fake product, counterfeit products, are really a matter for all the participants in the economy to solve. they involve both online efforts and offline efforts and we --

let me just say this. you know, for us, there's nothing that's more important than the trust that consumers have in our platform. that means they should feel comfortable to come to our platform to buy things and trust that our vendors are selling them high quality goods. so we take a very draconian approach toward counterfeits, we spent a lot of resources and money and people to combat this problem. we've worked with law enforcement agencies to actually shut down factories and warehouses that make counterfeit products and put people in jail. we are doing as much as we can on this issue. >> that was ali baba's vice chairman george tsai. coming up, we find interoffice love non-american style.

♪

>> welcome back to "bloomberg west," back to our top story ali baba, shares are down 15%. wall street, where's the love? there's a whole lot of love at ali baba, as our executive producer found when she traveled to ali baba's campus in china to get a firsthand look at working at the ecommerce giant. >> when you enter ali baba's headquarters in china, it's a

lot like stepping into any tech campus in silicon valley. inside there's a starbucks to fuel all-nighters, yoga classes, and three cafeterias serving dishes like peking duck and noodle soup. but the perks don't stop there. ali baba takes it one step further, helping employees to find love, marriage and even start families. it may look like any other tech company but the culture here is unique. employees refer to each other as ali people and many assume nicknames taken from novels. >> one of the big influences on jack's life was an author who is a martial arts novelist. as the early days, people took on nicknames of different characters in these martial arts novels. >> that fighting spirit has attracted young people to work at ali baba. the average employee is just 30 years old, works 9:00 to 6:00

and has a starting salary of nearly $33,000, more than seven times the salary of average chinese workers. >> it attracts young chinese at the top of their field because it's an exciting corporate culture, people feel they can break down barriers and do new cool, innovative things in their work life. >> jack ma is also unlike any tech company founder, from serenading employees to playing match maker. a heart-shaped dating board between the gym and cafeteria is filled with photos and fobe numbers of single employees looking to find love. >> every year, jack ma marries couples once a year and they

have ali babies. >> those families can get an interest free loan for a down payment on their first home and over the year, ali baba has also given birth to a whole new generation of chinese internet companies. former employees have helped start more than 145 new businesses. >> they've attracted people who believe they can do something different. individuals who are dreamers and felt they could change the chinese economy through ali baba. >> this close knit culture has been a critical part of ali baba's identity and keeping it in the family has helped it grow into a global power house. with over 24,000 employees, more than facebook and yahoo combined. candy chang, bloomberg, china. >> that is crazy. office love, imagine that the c.e.o. of sling tv is going to join us next.

you can watch us on your tv, tablet, and amazon fire tv. ♪

>> he's a modern-day silicon valley renegade. chamath palihapitiya is unafraid of breaking the conventional rules of engagement, vowing to take bigger risks, solve the biggest problems, and make money big-time. from putting chips in our clothes to starting a university. he is best known for supercharging facebook from 50 million users to 750 million users. joining me today, the incendiary