>> from pier three in san francisco, welcome to "bloomberg west." the biggest gainers in tech, trip advisor and cisco. a cease-fire in eastern ukraine helped to settle some of the broader attention in the markets. cbs reports a drop in fourth-quarter sales and profit. the company said rising affiliate fees and advertising sales were something that other companies haven't been able to pull off. cbs and nfl have renewed the

thursday night football deal. shares of zynga tumbling after analysts overestimated the rebound in the game maker. zynga was one of the leader in games played on facebook but now is trying to draw users on smartphones and tablets. for candy crush maker king digital, it's going much better. the company's results showed they were diversifying away from the top-selling game and having success with other games. groupon is trying to convince investors that it is experiencing a turnaround. sales were up 20% in the fourth quarter. shares falling. groupon blames the currency swings around the world for the forecast. dealmaking takes off. just weeks after reaching a deal to buy travelocity, expedia is

at it again, striking a deal to acquire rival orbitz worldwide. $1.6 billion. expedia gears up to take on priceline answer new competitors. what does this mean? here to help us figure that out, mark mo heaney of rbc capital, and sam shane. i'm glad we had both of you here. the things driving this are the history of online travel and maybe the future of online travel. since you are the senior guy here, what does this mean for these public companies? >> we have seen an enormous amount of consolidation. it has become a duopoly. expedia and priceline. they have a lot of the vertical plays. they may look to buy more like

hotel tonight, but this base is consolidating and they do it in a way that is usually pretty smart. setting up accretive deals, a multiyear trend, probably will see more of it. >> what you wrote in your note is that there are no antitrust issues because orbitz has how big a share? >> a pretty small share, single-digit share of the u.s. market. orbitz, politely put, is a pretty weak asset. they are too heavily dependent on the u.s. market, too heavily dependent on the air market. >> the air market stinks in terms of what the airlines pay out. >> you don't make any money selling airline tickets. all the economics are in the hotel market. >> the smart thing would be to start a hotel business -- wait that is what you did with hoteltonight. what is the trap you see orbitz having to deal with?

>> the shift to mobile is the big trend. the starting point for online travel, the largest is google. that is where people go to start their travel. in a mobile world, people are going directly to apps. that means brands are important. that place will to something like expedia is gathering all of the starting. >> in case of expedia, why wouldn't the app, why wouldn't that be the most successful thing they could be doing? >> they are investing in that but there are other places that people are going to. other flavors of apps that resonate better with people. we are the leaders in online travel. we have carved out a nice market is for ourselves and we are growing fast. >> from a design standpoint, you offer a different type of service. expedia is like a smaller version of the website where you have to pick dates and scroll

through stuff. is design an important part of that? design a business impediment or expedia? >> i think their legacy business is an impediment for the we started with a clean slate. the front and back and were invented specifically for mobile use. it is very fast to book a room the only show you great tells because of the way the hotels compete on hoteltonight, our rates are about 10% lower than anywhere else in the world. >> that really did sound like a commercial. when you look at expedia and mobile, do you see this as a problem? >> there have been two seismic shifts in the internet space the rise in mobile particularly. this requires expedia and priceline to pivot well.

they can certainly put the effort in to make sure all of their apps work seamlessly on mobile devices. there are opportunities especially when you have these big ships. >> whenever i talk to anyone in the travel industry, they talk about google, some antitrust issues with the way that they show search results. how big of a threat is this to expedia? >> chances are, they will always be the biggest player in travel because it will be a required marketing challenge. you may have figured out a way to get around them, but you want to succeed in online travel and commerce, you have to pay the piper. they will stay at the top of the final, along with trip advisor. i doubt that they will get deep into the bookings are. -- part. they have tried for years and have that much traction.

they are fine, their business model works just fine for travel. >> when users search on their phones, are they getting the best options for travel, the cheapest tickets, the most direct connections to hotels? >> it is imperative for google to present that, otherwise people will search on a meta search company. the big thing for us is that the starting point is not necessarily google. once you have the hoteltonight app, and you come back several times over the year, we see people looking sometimes sometimes researching rates, but we are not requiring that of the customer over and over again which is what happens in search and optimization.

>> very interesting stuff. sam shank, mark, good to see you both. questions about twitter and ceo dick costolo. he gave an interesting interview yesterday. our exclusive interview with dick costolo. ♪

>> here is a check on your world news headlines. citigroup is raising prices on currency trades.

for some clients, it could be a 25% hike in fees. citigroup is looking to boost revenue after suffering more than $150 million on losses from the search of the swiss franc. train manufacturer bombardier is replacing its ceo. the new ceo is elaine belmar of united technologies. they have faced delays and cost overruns in developing its new c-series jet. it's been postponed four times and is expected to cost $5 billion, up from $1 billion a few years ago. chinese smart tv maker lay she -- leshi will invest billions to sell electric cars in the u.s.. the executives tells us they can be successful because it will capitalize on the design manufacturing, and distribution strength.

twitter does not want to become an electric car company but are talking about an ecosystem of products and they want to make more money off of each including vine. to reach the goal, twitter has agreed to buy niche. brad stone sat down with an interview with ceo dick costolo to ask him about that acquisition. >> it is absolutely the very beginning providing monetization opportunities to the viners who have done such great work at building this unique community of content creators and connecting them to brands, we think will be awesome for the brands who want to leverage the great work these viners due to create stories and for the viners who are able to build a career of the fun things they can do on the arm. >> do you find yourself competing with snapchat for this new generation of video

creators? >> i think of it more as this unique platform we have developed in vine. there are the stop motion animation experts, comedians vine magicians, frame by frame animation work. being able to leverage their talents to help companies tell their stories across the twitter ecosystem, we think is cool. by bringing niche on board, we think we can do that across the broader twitter ecosystem, within twitter itself. >> there is so much energy right now around the vine and snapchat ecosystem. it makes me wonder whether you -- youtube has squandered their opportunity in mobile video. >> there will be lots of players in this native video mobile space. i say that a lot and what i mean by native video mobile is radio

primarily produce for consumption on mobile. we led the way with vine. we think there is an enormous amount of opportunity there. buying niche was part of realizing that opportunity. >> a couple weeks ago, my twitter app allowed -- updated itself to allow for native video. as that rolls out to users, what kind of consumption have you seen? >> great usage. one of the things we have been fascinated about in the first couple of weeks is how much people are using native mobile video to reply to tweets. someone will text and mention another user on twitter and that user will reply with a short video. we have seen that from individual users, companies, medium has been doing a q&a using native mobile video.

we just did a q&a today with comedian amy schumer who is in this movie coming out this summer. she did all of her responses via video. it would not have been the first use case we anticipated, but it is need to see that. >> let me ask you about user growth. recently in your quarterly earnings report, user growth was down when you expressed confidence that it would come back up to previous levels. why are you so sure? >> that was in the first week of february. we had the benefit of seeing what happened in january. that outlook was based on seeing a return to organic growth growth initiatives that we have had inside the company that are delivering results, and then some seasonality where q1 is higher than q4 traditionally. >> you have introduced the cadence of launches. one of them is instant time to talk about the importance of

that. >> i have been talking about it since we were on the ipo roadshow, bridging the gap between awareness of twitter and really engaged on twitter. part of that gap is new users coming to the five warm, they saw it on tv, they sign up for the platform, and they cannot find the right accounts to follow, they don't understand how to use it. instant timeline delivers immediate value to the users the moment they sign up. we can get them a great timeline of 20, 40, 90 accounts to look at immediately and show them how to use the platform, not try to teach them. >> that was twitter ceo dick costolo. later on we will have sony picture's former cochair amy pascal, talking for the first time since the studios massive

hacking scandal. she talks about what it was like the days after that massive attack. ♪

>> i'm cory johnson. twitter cfo anthony noto's account was hacked this week the second time he has had issues with his company's product. a few months ago, he sent a private message to his public followers. so how big of a problem is the direct messages if the ceo cannot even figure it out? brad stone asked that question to dick costolo. >> it is being able to take a public conversation private. we believe when you see these public conversations and you

participate in them, there is a tremendous use case for taking the conversation to a private channel, whether it is between you and a company -- how many times do you see people say i missed my flight at delta, virgin america, united, please help me, and they respond. being able to take that context of any public conversation between two accounts to a private channel between one or more of those accounts, we think is a huge opportunity both for businesses and users on twitter, and also there are times when you see a public conversation on twitter and you want to have a sidebar conversation with your friends about this thing happening. this is about enabling that and enhancing it to make twitter increasingly a daily use case. >> the product behind these features, you have some instability. some managers coming and going. has that situation stabilized?

>> the short answer is yes. i love the team we have in place and i have also been particularly enthused by the way that my reports are building on their bench and strengthening it in bringing others into the company. we had a couple more additions to our engineering leadership. that is something i'm excited about. organizations will always change over time but i like the team we have now. >> do you feel like you make previous mistakes in -- made mistakes in previous incarnations of the team? >> i always tell people it is up to you to improve your team. your job is not to defend your team but to improve your team. that is something i focused on and pay careful attention to. i love the way the team is set up now. >> i was struck about the internal statement that you mentioned about bullying. what would you like to see the organization do?

>> i think that was the first time i said we suck at this, used cross language like that in a companywide e-mail, and of course that is the one that is linked -- leaked. the point of writing that no to the company was to let them know i take responsibility for that. we are not going to go ahead with the status quo anymore. we will get more aggressive. it is on me to make sure that we do that and we will be aggressive and fast about making changes. that was about me putting the weight on my shoulders and letting the rest of the company know we are going to get more aggressive. >> e-commerce on twitter. i feel like amazon has been trying to sell me the same portable usb charger since the feature was introduced. how big can this feature be? >> we are still experimenting.

the opportunity for twitter is to really be the place for in the moment commerce. now commerce. in the context of seeing some public conversation -- i want that. as distinct from other kinds of commerce, here is just a catalog of stuff. we have a number of experience we are running. we are learning a ton from running those experiments, we do not have anything new to announce. you will see us continue to explore with what now commerce means. >> facebook has 1.2 billion users. a $200 million market cap. is your vision for twitter still on par, is a facebook scale? >> our vision is to have the largest possible daily audience in the world. we believe twitter is of value and can be of value to every connected person on the planet. that is the strategy we are delivering against. we think that strategy is

comprised of stringent moving -- strengthening the core of logged in users, but also organizing content experiences for the more than half billion users a month that country twitter and do not log in, and syndicating those experiences across the entirety of the web and mobile lab it -- landscape. >> your cfo anthony noto, some good-natured ribbing. his account was hacked recently. what is going on? does he need a tutorial on two factor authentication? >> he received a compelling office -- offer from a nigerian prince. hard to resist, i will leave it at that. >> i love those guys. coming up, departing pictures of cochair amy pascal from sony. she speaks about her -- in her first public appearance after her studios hack attack. ♪

>> you are watching "bloomberg west." i'm cory johnson. amy pascal speaks out for the first time since the november 2014 cyberattacks on the company. speaking last night in san francisco at the women in the world conference, she opened up about the very early moments when she first learned about how big this attack was. >> you have been through something so extraordinary in the last few months. none of us can hardly imagine what it must have been like. >> no, i promise. >> tell me about the moment when you first realize the slow-moving car crash was

happening with the north koreans attacking sony, and they are sabotaging the whole system and people are finding skull and cross bones on their computers and it is all shutting down and you think everything is going haywire, but then this -- there was this personal moment when you realize they were about to dump personal e-mails out onto the internet. tell me what you went through at that moment. >> first of all, iran this company, and i had to worry about everybody who was really scared. people were really scared. all of their social security was out there, people were worried about their passports, all kinds of things. i kept calling and going, tell me you -- tell me they don't have our e-mails. no, no no. and then they did. it was a bad moment. you know what you write in e-mails -- many of the e-mails i wrote between my friends were --

we have been friends for 30 years. we have been having an ongoing fight since the moment we met. there is no way that you can ever explain the way that you talk with someone or you just sort of go into meta-conversations and sarcasm and role-playing, and anytime i even thought i would try to explain that to anybody, it would dig a worse hole. >> what could you do? >> as a woman, i figured that what i did was controlled by how everybody felt about themselves and about me. that's how i did my job. that is kind of the way that a lot of us act as leaders. there was this horrible moment where i realized there was nothing at all that i could do

about whether i had hurt people, whether i had betrayed people, whether i had said things i did not mean. i could not protect anyone, not their feelings, not what they thought of me, and it was horrible because that is how i figure i did my job for all of my life or it was also strangely freeing, because all of a sudden, it was just what it was. maybe that wasn't the way i did my job. maybe controlling the way everybody feels about themselves and me isn't what i was doing great maybe i thought that's what i was doing, but it wasn't. and there is something really interesting about that. >> how about repairing some of the relationships that have been damaged eye the e-mails, or did people understand -- >> the first person i talked to was andy after that e-mail.

everybody understood, because we all live in this weird thing together. if we all actually were nice, it would not work -- we wouldn't work. [laughter] >> you are the head of the studio. these actresses are getting paid less. they don't realize they are getting paid less than the men. explain. >> i run a business. people want to work for less money, i will pay them less money. i don't call them up and say can i give you some more? the truth is that what women have to do is not worth the less money. people should not be so grateful for jobs. people should know what they are worth and say no, and they will. >> that's great. >> departing sony pictures cochairman amy pascal speaking last night at the women in the world event in san francisco with tina brown.

pascal isn't the only executive who talked about the lessons learned. brad stone talked to a ceo at the tech conference. workers go to post anonymous reviews and salary information about their employers. take a listen. >> one thing i have definitely learned is that everybody makes mistakes. i made lots of mistakes. i have had my share of truthful negative reviews. people very accurately portrayed where i screwed up, and they were right. we have learned and gotten better. >> glassdoor made $70 million from google. a proposal to regulate the open internet. the fcc commissioner has spoken out about this, saying it will open the door to regulation

taxation. he will join us next. ♪

>> i'm cory johnson. this is "bloomberg west." tom wheeler shared his 22 page proposal for a new and open internet with his four fellow commissioners last week. not everyone was happy with these proposed rules. the public will have to wait until after the february 26 vote to look at a proposal. wheeler stated these are the strongest internet protections ever proposed by the fcc. the fcc commissioner has spoken about this proposal and he joins me from washington. are these the strongest rules ever proposed? >> it is a monumental shift towards government control of how the internet works.

that is the best thing i can say about it. >> what is the worst thing about it? >> it micro manages virtually every aspect of how the internet operates. it opens the door to billions of dollars of new taxes on broadband the consumers will have to pay. it will lead to slower broadband speeds. it opens the door to trial lawyers filing actions across the country. there are a host of harms that are going to happen. i wish you could see this 332-page plan which will not become public until after the fcc votes on it. >> i can see it. it looks like a phone book. let's go through those objections. you have listed a handful of them. let's start with the micromanagement trade at some point, if the skirmish is happening at this moment in which a user is trying to get the information, isn't that the place where the regulation has

to happen and get involved if there is to be any regulation? >> there are two responses to that. first, nowhere in this document does the agency ever identify any systemic problem. they might say the competition is limited, but they won't give any example of isp's acting as competitive gatekeepers in such a way that industry-wide rules are necessary. this document goes well beyond activity. for the first time, the agency would insert -- insert itself into debates about interconnection. it would set not only the requirements the companies physically interconnect, but also the rates they would have to adopt, and would open up a complaint process that will allow either the commission or courts to second-guess all these decisions, which are currently made in the free market. that is not something the agency or courts are equipped to do.

>> a lot of this hinges on the guiding principles of how to administer this trade what tom wheeler wrote about it in his in oped -- op ed is he talked about commercial reasonableness and evolution of what he thought about what that meant. essentially, he said i believe the fcc could figure out what commercial reasonableness became. he said, i became concerned with this concept, and that what might be reasonable for commercial users, not consumers. should rules be there to promote what is reasonable for business, or for the users of the internet itself? >> i view our role at the fcc as vindicating the public interest. in my opinion, the public interest is driven fundamentally by what is good for american consumers. the question about commercial reasonableness or not is something we have applied in a great many contexts.

i'm sure we could do it here to vindicate the consumer interest. what happened in this case in unprecedented fashion, the president directing the fcc in early november to change course. that is more than any change of mind, what is driving this bus. >> taxes, you mentioned heavy taxes. isn't there already a rule in place, the internet tax freedom act that prevents there from being any taxes on the internet? how could that lead to more taxes? >> the internet tax freedom act only applies to a sales tax on internet access. it does not apply to the fees that would necessarily follow from us reclassifying broadband as a telecommunications service, which is what we are on the brink of doing. if you look on the phone bill and see that universal service fee, this order explicitly leaves the door open to us raising the federal fees under the universal service fund and letting states do the same. that is why one independent study said that $11 billion at

least in new fees will have to be increased as a result of this classification. that is something consumers will have to pay for regardless of that new legislation. >> that was the high end of their estimate, yes? >> you might say it is the high end. on the other hand, who would've thought that a year ago the fcc would all of a sudden spend $1.5 billion to expand our program? who would have thought the agency would contemplate dramatically broadening the lifeline program? it is funded by those fees great if you look at the fcc's spending ambitions, that spending will have to come at a price, which will be paid by consumers to the universal fund fees as a result of this order. >> when we talk about the fcc and party lines, we tend to -- knuckleheads like me, we tend to abbreviate and say the republican commissioners democratic commissioners, those appointed by democrats, as if those are strong party lines.

is there a possibility that you can convince your other commissioners that this rule proposed and indeed led by some ideas for a democratic president might be worth them voting against? >> i'm not sure if i'm going to be able to persuade my colleagues on the other side of the aisle, but i stand in the shoes of president clinton and in the shoes of chairman kennard and chairman janikowski, each of whom embrace the light touch regulatory consensus that has served this country so well when it comes to broadband, dating back to the days of 56 k modems and aol discs coming in the mail. the american broadband success story has been a good one, in part because these issues have not been political until recently. if you look at reporting in "the washington post" and "wall street journal," it is clear that this has been a politically jeff and agenda. at the end of the day, opportunity should have no political affiliation.

>> you talk about increased lipid -- litigation. isn't any rule going to invite some litigation? is that something that is different with this rule than any other? >> the question is whether these rules are necessary in the first place. i have said that net neutrality rules of this kind are solutions in search of a problem. what would not inspire litigation would be for the fcc to adopt broadband-friendly policies, getting rid of the legacy on the books, making it easier to deploy wireless infrastructure. i can assure you that not one person in this country -- most people in this country would not find anything problematic about that trade they would love to have more broadband choice at better prices and higher speed. net neutrality regulations simply take us in the opposite direction. generating litigation for the sake of making a political point is not good for anybody.

>> important, i really appreciate you coming on to talk to us. >> my pleasure. >> great stuff, thank you. now a check of your world news headlines. sweden, the central bank is cutting its main interest rate below zero to stave off deflation. the bank is pledging to keep that rate negative until underlying inflation is close to 2%. it could happen by the second half of next year. the bank announced a plan to buy one but $2 billion --$1.2 billion in bonds this month. >> we did feel that it was right to acknowledge the impact on the earnings of that settlement, and as a result, the board as well as the executive board voluntarily took these reductions in compensation as an echo knowledge meant of the impact that the settlement had on the results. >> the bank also pledged to maintain its dividends.

the chinese maker of that drone that crashed into the white house lawn last month plans to double sales, working with the u.s. and chinese governments pushing for clear rules on the use of drones. the company tells -- sells most of its drones online, and plans to open up its own store in china later this year. valentine's day fast approaching, but all is not lost. those for looking -- those looking for the appearance of love, invisible girlfriends, a service that offers make-believe boyfriends and girlfriends. ♪

>> i'm cory johnson. this is "bloomberg west." valentine's day this saturday. the special person to give us the "byte" -- the "bwest byte" is one number that tells us a whole lot. >> the number is zero. the number of boyfriends and girlfriends you will need this valentine's day. >> my wife would agree with that contention. what is an invisible girlfriend? >> invisible girlfriend and invisible boyfriend are services that help you tell it better story about a relationship

you're not actually in. >> my friend dan lyons called this the saddest thing he's ever heard. is is for people who just can't get a girlfriend and are embarrassed, or for people from silicon valley who just want to be staring at their computers the whole time? >> we found the whole judgment around your somebody, your worth is based on whether you're in a relationship or not. there's lots of people who don't want to be in a relationship because they want to focus on their job, or they might beginning hit on at the office. this lots of reasons why people might use our service. >> you pay daily, monthly? >> $24.99 a month. from a real invisible boyfriend or girlfriend. you also get hand written notes, voicemails, and we will be expanding soon to gifts and perhaps even flowers at work. >> when you go through that really fast? >> we are not using social media right now. most of the interaction people

have is through their phone. we're using actual text messages. >> on the other hand, there is someone who is sending -- i'm thinking of the movie "her," which i loved, where this person had this actual relationship with this computer. >> we are in a position right now where were not trying to convince you you are in a relationship. we are trying to give you believable social proof to show to others. we find our users are really starting to use the service for conversation. they are talking to their invisible boyfriends or girlfriends at a higher clip than we anticipated. >> beyond the person getting hit on at work, who else would need this kind of service? >> could be a soldier overseas without a girl back home. it might even be someone who is gay or lesbian and have conservative parents in the bible belt. we found we have lots of people using it for different reasons. we have one person who is trying to make their ex jealous with it. this lots of possibilities to have this proof for a relationship. >> if i sign up, my wife might be jealous and give me better

presents on valentine's day? >> she might. >> i'm not going to try that. >> we launched three weeks ago. in those three weeks, over 50,000 people have created boyfriends and girlfriends from all over the world. >> no kidding. when we talked on the phone you told me you won a startup contest? >> we won the startup weekend competition, and got attention right then. we have been working ever since two lunch -- to launch the service. >> who are the people on the other side of sending these messages? are they polyamorous? >> that's exactly right. >> but who are they? >> a roughly 500-person work force in the united states. we are partnering with a copy in st. louis that helps us -- company in st. louis that helps us with these tasks. there are all these people around the country who are doing

these small, tiny tasks for us. they are able to respond to the text messages on a per text basis. >> it is this distributed model, not unlike uber, where contractors are volunteering their services without you having to go out and hire them? >> that's exactly right. >> are you also hosting on amazon web services? >> we are not hosted on amazon web services yet. we have seen such an immediate influx of users and interest that we are really focusing on scaling the business to handle that sort of traffic. >> what are you doing for valentine's day? >> i'm spending it in san francisco with my wife, who is in the room next door. >> there's always the real-life option. invisible girlfriend, maybe not as sad as it seems at the outset. matt homann, thank you very much. get the latest headlines all the time on your phone, tablet bloomberg.com, and on bloomberg radio. ♪

>> it was the decade of eight track tapes. a.m. radio and a great songs on 45s.