>> live from pier 3 in san fransisco, welcome to "bloomberg west," where we focus on innovation, technology, and the future of business. i'm cory johnson. here is a check of the top headlines. the senate has failed to override president obama's veto of approving the xl keystone pipeline. five votes short of the two-thirds needed. pipeline advocates promised to bring it up again when government spending bills and

limit increases are debated later this year. the supreme court is hearing the latest arguments in challenges to obamacare. >> the administration is not working with the states to have innovative models, which would give flexibility to how health care is delivered to our states. >> in the one hour and 20 minute hearing, the justices appeared to be divided across ideological lines. chief justice john roberts and anthony kennedy were unclear. a house committee has subpoenaed former secretary of state hillary clinton's emails on libya. she used her own e-mails instead of the government server. the transmitter received was traced back to her internet service from her home. clinton already disclosed more than 300 e-mails from her personal account.

the use of personal e-mails was not against state department policy or law while she was in office. it's beautiful here on the east coast, but if you are bracing for another round of winter weather, you are probably on the east coast. 3,000 flights have been canceled as snowfall approaches the eastern seaboard. new york city expects 4 to 5 inches tomorrow. they are expecting snow and freezing rain in dallas. the next startup may join the $1 billion evaluation process. they say warby parker has not held a formal funding process but with investor interest, it could change their minds.

not to the lead -- etsy, the largest market for handmade crafts, has filed to go public. they have a $100 million fundraising ipo. they would put it on the nasdaq exchange. could be the largest ipo for a new york tech company since the dot-com bubble. leslie, this is interesting. these guys are going for it. what is this stage? >> it appears growth is still strong, 56% revenue growth in 2014 versus 2013. still unprofitable, posted net losses for 2014, still indicative of many of these tech companies that go public when growth is strong, profits in the negatives, and investors seem to like those companies. in this environment. >> topline growth in a zero interest rate environment looks exciting, i guess. is there a suggestion that things are getting better?

you have your newly minted nyu mba. >> there is indication that things are getting better in terms of scale. they have enacted several policies that will expand the ecosystem. those include enabling sellers to outsource their manufacturing and distribution. artisans -- this is a website for handmade goods. by nature, that is not a scalable business. they are embarking on strategies and differing ideas that will expand their platform. something they have not tried in the past. the prospects for growth are there. whether they will be able to execute on those remains to be seen. >> it was intriguing that the number of repeat buyers that they have has been big and is a little bigger. they make it look like a huge deal.

they go from 75% to 78% in four years. i'm surprised. >> that is important for them. especially since they create unique items. their whole selling point is creating items you cannot find on ebay or amazon. the fact that users come on and by something completely different the next time, it is a very interesting statistic. >> any other surprises? you and i will both be going through this. >> the fact that they weren't profitable was a surprise actually. their ceo was on the record several years ago saying they were profitable. now their net losses have widened. looking into that, it looks like the marketing expenses have gone up.

also administrative expenses have gone up as well. that was interesting, but all in the name of growth. >> operating income last year, $6.3 million loss last year. thank you very much. another big scoop -- apple is delaying the production of the larger ipad. it was expected earlier this year. the device giant, apple, initially planned to make a giant ipad at 12.9 inches. it was going to come out this quarter, but the date has been pushed back sometime in september. they say a slow down on supply on display panels as the culprit. tim, this is a big deal. >> it's part of tim cook's strategy to get more government agencies using the ipad in day-to-day opportunities. >> specifically, i have tried

this in with the discussion of the importance of ibm as a seller, writing custom apps, this would be a corporate purchase. >> a lot of analysts see this as a replacement for the personal computer that you would take around, exactly. this is a delay. it is also not that unusual for apple to delay something if they are not quite ready to go forward. >> this is not a few weeks or months, this is six months. two quarters. >> truo. yet next week will be an apple event to watch. there will be a lot of attention. there is a lot of wiggle room. tim cook has been very positive about the future of the ipad. he sees the potential for growth. unlike other companies, he is not giving up on it. >> let's talk about some numbers. ipad sales are down in units selling price, take a metric.

the business is slowing down for the ipad. $9 billion in sales, but one year ago it was $12 billion. >> last year there was a quarter where mac outperformed the ipad. >> although the average selling price is so much higher for mac. do they need a bigger ipad to sell? >> it needs some new invigoration. >> we haven't had many opportunities for bad news for apple. maybe bad news, certainly not good news for ibm. >> well, they need something to sell. >> thank you very much. "bloomberg west" will be right back. ♪

>> this is "bloomberg west." i'm cory johnson.

uber started value at more than $40 billion is starting a new search called decarta. this is a big deal, perhaps signaling an arms race in the world of mapping. a lot of the functionality they see in the uber app is highly reliable. uber once solely relied on google maps, now they will utilize a blend of mapping technology including google maps, apple maps, and others. this is the first information they have publicly disclosed. earlier i spoke with marc prioleau about what this means. >> it may be early to be a war

but they may be skirmishes. i think what is happening is google maps is 10 years old. they really developed a great property and everyone went to them by default. but i think as a business means, especially big companies like uber, what they are finding is relying on google maps interface -- which is essentially designed as a consumer interface -- could be the start of a trend. >> regarding those, talk to me about -- 10 years ago, the dominant forces in the world of mapping, where companies like tom-tom and garmin making developments. a few others had the maps. it is interesting that these developments are happening away from what the cutting edge was 10 years ago. >> i think there are a couple of things that go into that. one is the maps themselves, the digital maps have become easier to collect. you have things like open street map that are starting to drive back.

technologies like mobile devices starting to collect map data. the other thing about map technology is some of the technologies under the covers are not very sexy, not very glamorous. hard to build and very hard to differentiate yourself positively on. for instance, with routing, you can have something that sends you the right way 99 times but the one time you didn't, it is bad. it is very hard to build. when you see them buying decarta, it is them trying to get to the market much sooner and having a technology they can customize for their needs. that is the key thing, more than money that will drive it. >> it is interesting that these two companies were business partners, and google made a big investment in uber, now they are setting up to be direct

competitors. >> yes, they may be. on the mapping side, uber started using google maps. but they have gone along what they see, one of their differentiation will be how precisely the algorithms can dispatch drivers to customers. what they found is they could not do that on the consumer focused-app like google maps. now they will take that inside and put effort into it and develop a competitive advantage. it was interesting on twitter this morning, ups has 40 people working on routing algorithms. this is big stuff, really where they are different from anyone else. that is the move. that is what uber wants. if you want to be a big player you have to look around and say, we want something different is

tuned to our business model. that is where you see companies starting to make investments in geospatial and mapping technologies. >> there also seems to be a trend, is this fear of the google planet? is this all of these companies thinking, i don't want to build my business where i am dependent on google. i don't want to wake up and see that they are competing with me. >> yes, i think one part is that. google has been pretty aggressive into getting into the travel business. google maps, you scratch your head and its travel-related products. >> "bloomberg west" will be right back. ♪

>> this is "bloomberg west." i'm cory johnson. the game developers conference is in full swing. all of the talk is in virtual reality. sony is trying to convince everyone that is a virtual-reality player. they unleashed project morpheus, a virtual reality headset for playstation 4. they intend to release the device in the first half of next year. we spoke with the head of project morpheus, dr. rick marks. i started by asking him, what is new about morpheus? >> actually, we have a new headset. it has new specifications and is much better than the old one. we also announced the release date is in the first half of next year. >> how is it better than the older one? >> it has a higher frame rate, a

new oled panel instead of lcd, so just much nicer on your eyes. a little wider field of view ergonomics are better. a lot of improvements. >> tell me about your expertise and why you were in rocket science, and now you are in virtual reality. >> that is basically systems engineering, and games are about complex systems. hardware and software components. it translates pretty well, even though it doesn't seem like it might. >> what are the principal challenges? at stanford, a lot has been written a lot about virtual, probably more than anyone. he thinks games are not the best use of the technology, that you just get exhausted by the bombardment of the 3-d experience. obviously you guys think differently. >> when you are in virtual reality, it feels like you are

somewhere else. the more realistic the place is, the less you are overwhelmed because it just feels like someplace. >> killing zombies in an abandoned mine is not real. that experience is not exhausting, but the real experience is exhausting? >> you can make it as exhausting as you choose. you can also ramp that back. we are seeing in virtual reality, versus traditional games, it is not just about running through as fast as you can. it is more about enjoying the place you are. a lot of the ambience is really important. maybe more than traditional games. >> the trippiest thing, i have experience with the oculus product. just sitting in the yurt, and turning around and realizing

someone behind me is making soup. that is such a totally different type of gameplay, especially compared to first person shooters. >> it will definitely be different. some genres translate well, like driving games, but others do not translate directly over. some of the worlds people have already made for first-person shooters, but maybe the gameplay will be different. >> what advantage does sony have over facebook and oculus? >> we have 20.2 million playstation 4's already out there. we have an established base. we can control the ecosystem. the morpheus is made for playstation 4. we have known people interested in this kind of stuff and we can deliver software to them. we kind of control our own destiny. we have a new controller, the dual shock 4. every unit is the same. when a game developer makes it

you know exactly how it will be experienced. you don't worry about drivers or anything. the person buying it, they know they can just plug it in. >> is the technology so unique that it can't be replicated? samsung tried to get the attention with their oculus glasses. you guys are going your own way completely. are there really essential patents or differences in the two kinds of technology between oculus and sony or others? >> there is a lot of commonality between the systems. sony has a lot of experience in areas that make sense for virtual-reality -- display audio, optics. all of these things in consumer devices. we are good at all of those things, so it's a natural fit. other companies have elements of that as well. unfortunately, on the pc side, devices range from maybe a piece of cardboard all the way up to a

high-end stuff. whereas on a console, it is more one choice. there's not as much variability. >> sony has had a very different experience over the years with independent producers of games. it has changed with every console release. for independent developers, is this something you will have a lot of? because it is a new technology will it be harder? >> i think it is the opposite. independent developers have a huge advantage because there is not an established set of genres out there. not a giant corporation. >> you don't have one -- not like activision, you can come up with a game that is cheaper to make? >> yes, and also, the gameplay has not been decided what the best one is. it just takes one idea to define

the new genre. you have this kind of open, wild west space where people are trying out new things. >> what do you do to encourage that? >> we encourage indie developers. we have a lot of been experimenting right now. >> how do you do that -- do you fund them, meet individually tell them what we know our best practices? >> we have definitely been loaning kits to people who we think are creative and have good ideas. we are flexible on the business model because it is so new. >> that was richard marks, head of project morpheus for sony. "bloomberg west" will be right back. ♪

>> you are watching "bloomberg west," where we focus on innovation, technology, and the future of business. partners cofounder roger altman said russian president vladimir putin is more vulnerable to sanctions than people realize. he says that putin is overestimating the tolerance of his citizens. >> it is not inconceivable if we were to tighten sanctions further and europe were to agree that we could actually force russia to bend. >> russia is entering its first recession since 2009.

sanctions and plunging oil prices cripple their economy. dozens of miners are feared dead after a coal mine explosion in eastern ukraine. it is not linked to fighting between pro-russian rebels and ukrainian forces. they are blaming a mixture of methane and air. warren buffett's berkshire hathaway is planning to sell its first bond in euros. according to people familiar with it, berkshire has hired a handful of bankers. in euros, it has dropped to an all-time low of .88 percent last week. another sign of abercrombie & fitch struggles. this is a tragedy. they are selling their private plane. they had to write down the value of that plane by $1 million.

the ceo once had a 40-page manual indicating how people should act and dress upon the plane. the chairman says the search for his replacement is moving along. >> the overall process is moving at an acceptable pace, but it is important to note that these things take time. it is more important that we get the right person than to move quickly. >> today they posted a 10% plunge in same-store sales from the quarter. and the tallest building in the world is up for sale. it is also $1 million off, but maybe not. the willis tower, formerly known as the sears tower, was built in the early 1970's. it was sold in 2004 to a group of new york and chicago investors.

there are a lot of ways to pay -- swipe, square, apple pay, snap cash. these payment options look confusing. you have invested in stripe. snapchat. very interesting companies. let's talk about stripe and what it is and isn't. some people compare it to visa they compare it to apple pay, it is really none of those things. >> if you think about how payments used to be for e-commerce merchants, it is a much more complex process. today, any developer that opens up a website and starts selling goods, payment is a way to embed in their site. >> it used to be when someone started a website, you had to

build an infrastructure to figure out how am i going to recognize the numbers coming in, how am i going to verify those numbers and suck the payment out of that account? how can i tell consumers that it has been accepted? >> that's right. today, you create your website and in minutes you can accept payments. stripe does that in a matter of moments. >> the inter-webs, a series of tubes, is at least 16 years old where you have e-commerce sites. is it really that -- the entire time or has not been an api for that? >> absolutely not. in today's world it looks like a broken stack. when you think about what the interchange -- >> a broken stack, which is to say lots of bad technologies that don't fit well together?

>> when you think about what they are serving, they are handling risk and fraud. with everyone online today, we know so much more about them through other channels that you have to rethink the payment stack from the ground up. you have to think about fraud, the identity of users. therefore, a new contemporary stack emerges. it automates a lot of that for you. that is what stripe does. >> i'm paraphrasing, but in other words, in an era in which people are sharing all of the names of their kids on facebook and tweeting out their locations and birthdays, that suddenly the old rules need to be thrown out to have a new technology? >> absolutely. when you think about the purchasing experience in what a lot of social media is doing, in the early days you used to go to the store, pick what you want to

buy, and click on a page that is disconnected from the website. today, you want to be able to see a product that catches your eye on twitter or facebook and you want to be about to buy it right there. that is really what this is doing. the idea of payment is getting embedded in the concept of the product itself. >> valuation wise, i would understand why stripe would seem like that kind of company adjacent to a lot of money where they could get money in a massive scale. but not just valuation, what about oversharing? you invested in snapchat, a fascinating company, basically pre-revenue. what round were you in? >> the b round. >> so pretty early. it has achieved incredible valuations. to what do you attribute that?

>> it's really hard to create a large community of people around communications. when you think about what facebook did, where there are hundreds of millions of people using that monthly, that is a really rare occurrence. with snapchat, it can create communications, which started out as messaging, and now it is adding on. it is a fundamentally new way to communicate. users can think about how to communicate with friends. >> is there a real business model? >> there will be a business model there, for sure. you have to be cognizant of the fact that this is a three-year-old company. it has gone from zero to a couple hundred people. the growth is so stunning that it is not hard to understand that when you do business models, the kind of things that

evan is experimenting with, you will be able to scale revenue fast. >> a $19 billion valuation of snapchat, $3.5 billion valuation for stripe. i hope that is good news. >> yes, i hope. >> thank you very much, we really appreciate it. ♪

>> i'm cory johnson. this is "bloomberg west". according to insiders, 54 private venture backed companies made more than a billion dollars. the billion-dollar valuation the social network you may already know, had $100 million fund-raising round. the ceo and cofounder came. thank you for the long trip. congratulations on raising this money.

this is hardly imaginable back in the dot-com era. let's talk about next door specifically. how many markets are you in right now? >> along with financing, we are excited to announce that we are in 53,000 neighborhoods. that represents over 35% of all neighborhoods in america. penetration is really starting to accelerate. >> how do you define neighborhoods? >> we don't define neighborhoods ourselves, members do. we don't really know what neighborhood boundaries are in cities where we don't live. if someone in texas decides to join next door, they help draw the boundaries. there are typically 750 households in a neighborhood. there could be a thousand 1200

people average. >> realtors come with their own definitions. residents might not share that. you have raised a billion-dollar valuation. but you have raised over $200 million. what will you do with this new batch of money that will make the service look different? >> we're trying to build a local social network. it is very ambitious. it will take a long time. local is one of the toughest nuts to crack on the internet. >> since the internet was first doing commerce. >> the only way to do that is to play the long game. that means you need a lot of resources. we are very fortunate to have great investors that believe in us enough to give us resources. >> you are way too nice a guy, if i don't mention your competitors names, what do you think is wrong with the approach

to commerce that other local-focused internet companies are doing? >> i think the bottom line is it is hard to get scale in commerce. you think about that companies that have done well outside of local, they all have scale. they can have massive networks. they don't have to worry about critical mass in every market. >> drugstore.com or amazon.com huge businesses. you are not constrained by local. now it is different because more people have internet access and mobile phones than ever before but why in the current environment a lot of startups are focused on local -- what gives you the advantage? >> in general the hardest thing about local is that it is not a virtual community, it is a real community. so building a service that can successfully replicate what it's like to live in a neighborhood is the biggest challenge. all we think about is community

and how to build community and how to create a product to help communities get bigger and stronger. >> what are your two or three biggest sources of revenue? >> we will probably invest deeply in making recommendations, making those some form of monetization. most people say you will slap ads everywhere. that is not what we will do. for zillow, it was helping real estate agents get distribution from people looking for homes there. at nextdoor, it is over a million messages a day neighbors are talking about which service provider to use. we have an opportunity to connect neighbors. >> does anyone know a good plumber in my neighborhood or do you know a roofing guy? those are natural and you look at those messages? >> yes, and the great thing is we don't have to look at the

messages. when you post, you tell us this is a recommendation for a plumber or drycleaners. all we need to do is connect you with the best service provider. >> what areas do you think you have the best opportunities for that? realtors spend a lot of money in marketing. not true with plumbers are -- or electricians. >> when it comes to service providers, where we will have the most success are all the ones who service home. a painter, a contractor, a gardener, these are the people that neighbors are talking about. there is another category that is not as structural. for example, a babysitter, a nanny, a tutor. i don't think we will be selling ads. i think those are people who want to be connected to neighbors that are looking for them, and that is what we have to figure out. >> interesting stuff.

nextdoor's ceo, thank you very much. >> thank you for having me. >> top headlines here from bloomberg. the controversial telecom neustar shares fell as much as 19% today after they lost a management contract. it helps consumers keep their number when they switch telecom carriers. 43% of their float has been sorted by investors going into this. the fcc's wireline competition recommended that the sec award the contract to ericsson. viva systems, the cloud software company, fell 25% after forecasting first-quarter billion. it is just 30% growth, half of lasy year's growth rate.

the pentagon is spending a lot more on a handful of weapons according to the government accountability office. programs increased last year by $27 billion. they called that undesirable cost performance. ashton carter asked congress to increased spending by $20 billion next year. "bloomberg west" will be right back. ♪

>> i'm cory johnson. this is "bloomberg west". the mobile world congress is a hotspot. drones are getting a lot of buzz in barcelona. mark zuckerberg assured attendees that facebook will connect the world to the internet, google announced that its titan drones will make their first flight. the ieee says it is only a

matter of time before a drone kills someone. how do people feel about drones? we asked hundreds in a surveymonkey shakedown. a lot of people, statistically significant number, about drone opinions. >> i was actually pretty surprised. 17% of the people said they were interested in buying drones. only 3% own one today. 17% say they want to own one that was high. >> how does that compare? >> we asked about smart watches for this show a year ago. 15% of people said they would buy a smart watch. if you said they would be the same, that was surprising to me. i think people don't know about drones, but there is a lot of interest. >> so how would they use a drone? >> that is still what they are not sure about. there is photography, i think

recreation. i look at it as like, when i was a kid i built model rockets. a drone is way cooler. >> so you were blowing up stuff as a kid? >> but a drone is way cooler. some of it is just entertainment. some people don't know what they would use it for, but they can see there will be more of this. they are for personal use. you start to hear more stories about them. >> among those stories we hear i feel like the use cases aren't really clear to people yet. they see a 60 minutes story and say amazon will have drones. do people want delivery by this? >> that came back as pretty low, and i think that is really about the consumer does not see the benefit of getting amazon

delivered by drone. most of the benefit is for amazon. >> if you have a labrador retriever, the benefit is not for you. >> exactly. but if amazon said we will cut the cost of everything in half because we're using drones or we can do delivery in three hours so people would say yes. there is no consumer benefit yet because it is still too early. >> i have shades in my bedroom but the issue of privacy comes up. >> yes, that is an issue. it is still very early in this but people are like, wow, i will be in my backyard with my kids and someone will be flying over taking pictures. that stuff was already happening with planes, but it is easier with drones. >> the business of surveymonkey, which is fascinating, is

fundamentally based on the notion that these statistically significant survey. survey size is one of the most important parts. what i wonder, this is a technology issue. you can't imagine -- you don't know what you will do with the device until you have it. do these survey results really matter now, or do we have to wait until people have experience? >> i think the general answer is people are generally interested in drones, but they are nervous about it and it is still early in the market. it might be this year something comes through. it might be a few years from now. the use cases have to be there. you are absolutely right, they are not defined enough. but they are getting cheap enough and powerful enough that people will start seeing more of them. i think the faa rules were

pretty overly restrictive. i think they will be hard to enforce. >> do you have one? >> i don't have one. >> yet. we will do the bwest byte right now. what do you have? >> a billion. >> a billion is a lot. >> it is a lot. it's the number of phones that twitter can reach with the mopub app. we learned that facebook will be launching a competitor to mopub, maybe as soon as this month. >> that suggests that twitter is bigger than twitter. >> yes, and it seems that could be harm to twitter's business this is something they really care about. >> thank you very much. you can get all the latest headlines on your phone, tablet,

and on bloomberg.com. ♪