cory: live welcome to bloomberg west spirit i am cory johnson. a check of your bloomberg cap headlines. an emergency meeting. a ship carrying migrants capsized in the mediterranean sea. that ship was carrying 900 people. hundreds are believed to have drowned. the foreign policy chief on the growing crisis. >> there is no magic solution. together as europeans, and consistently here.

cory: all over the middle east to africa to board ships in europe. relatively optimistic. he is not confident inflation will incline. speaking at the monterey summit at bloomberg headquarters today. >> the unemployment rate is still too high. the inflation rate is too low. because the economic outlook is to's -- uncertainty, i cannot tell you when it will occur. it is data dependent. cory: optimistic about the u.s. economy for a number of reasons including growing consumer confidence. ge in talks with wells fargo and other companies to sell its commercial lending business according to the wall street journal. the commercial lending business

provides loans to midsized u.s. businesses. last year, they said they would exit most. an action could raise 2 billion euros in extra cash that greeks could use -- a russian energy giant will get an energy trust complaint from the european union this week. sent a statement of objection this week after a two-year investigation. looking at whether the company unfairly lead oil and gas prices that prevent customers from reselling gas. the complaint had been delayed

due to sanctions leveled against russia. google facing perhaps its biggest threat yet to its business after the eu found in antitrust complaint against the search giant last week. regulators accused google of using a search monopoly in an competitive fashion, specifically by favoring and shopping service and competition. five years ago. google leading the charge against -- against europe is eu former danish economic minister and known as the iron lady of denmark in certain circles. visited our studios today with stephanie ruhle and erik schatzker. check this out. >> what we aiming at from a european point of view is that it has a very dominant -- if that decision you do not get the

answer you want, you get google shopping. every time you do a search, then we have a problem. that is why we have it lined up. stephanie: when i do a google search today versus three years ago, i have to do a lot of scrolling down before i get what i think is unbiased. eric: google has extruder market share in europe. it is the predominant search provider in america. google accounts for 95% of search traffic in europe. >> more than 90%. it is a very dominant position. a monopoly. that is why it is earned. .: would you be bringing the case against google if the

numbers were more like what they are here? >> you would look at what we are aiming at. american authorities have taken a different path. .: would your case the easier -- easier if a complaint was sought against google? >> no. >> the current cfo of morgan stanley. this morning, and earnings call. he said for the last five years, morgan stanley generally has agreed there are necessary and needed changes as she wanted to go along. if she becomes the cfo of google and says, i just want to get along with regulators, you and others, what would you advise her to do?

>> i do not think i am in any position to give advice. other people do that. i think for any business, the advice is to go by the book and be competitive, but beat additive on the merits and that attract customers because you have a great product. stephanie: could the takeaway b, hate the game and not the player? regulation is not caught up with how fast industry has grown. we take a snapshot at google. they have an unfair advantage, they have gotten outside, so it is time to change innovation. >> i think the regulation is robust. in my experience, you find only so many variations over human behavior the dominant position

cannot be proven. we have seen that before in history. eric: what would it take to settle the matter today? cause i would not know that and they would not have to. almost 10 weeks. eric: if they were to make a settlement offer, what would that factor? they would have to agree to do something. stephanie: right now, what do you want google to do? >> to treat equal things equally and not give preferential treatment to another own services. also to let others serve for their products. eric: libby a financial penalty for it?

>> he are interested in customers. it is very tough kid but very open because what we last night is it -- is an in-depth -- we do it with an open mind. we should listen and look at the market and how things work before we make up our mind. cory: coming up next on bloomberg west, we will take a look at what's at. revenue for facebook. will that change? virtual reality. all that and more coming up next.

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cory: what's at sets its eyes on a billion users by next year. a google buyout, not to long ago. the deal that never was. an interesting comment from elon musk pair first, a check of bloomberg top headlines. natural gas properties shale assets could be valued at a billion dollars despite low gas prices according to people with knowledge of the matter. gas assets to focus on petroleum products. strong earnings profit of 59% earnings. >> we continue to execute against benchmarks previously established and will remain focused on them for the duration

of 2013. cory: reduced on fixed income business and relying more on trading stocks. half of facebook lost its bid to revive -- resume -- revised lawsuit against. fled his home last month, along with his family. contracts in e-mails to bolster his facebook claim. $22 billion last year, now has 800 million monthly active users according to facebook over the weekend. any other -- more use than any other messenger app, including facebook messenger or facebook does not make a dime from the service yet. joining us now is author of the facebook effect who joins us.

i have got to believe there is a secret strategy. it will eventually be highly monetized. one analyst says skype makes $2 billion a year in revenue. phone messaging, maybe they could start charging the way skype does, calling happening on whatsapp. a lot of ways but numbers are what matters. quite money can be counted numerically as well. you think it is enough, and it is the notion of global domination, might be hey messaging. if we could take away the eyeballs going away from facebook facebook would be

better for it because no one else would benefit. >> that would be a counterproductive strategy given he is simultaneous we trying to recruit all the character -- in the developing world. highly sensitive to the idea he is taking away their revenue from sms. it is really more one of these classic mark zuckerberg ideas that people want to communicate more efficiently and whatsapp lets them do that. it is also increasingly a head-to-head competitor, only one of the top five social apps facebook does not own in the world. cory: a lot of interesting tidbits. one of them was a notion of a dumbbell strategy, that there will be on one side, they want to grow and expand that but

then there will be a lot of other things. 500 users of instagram or whatever. >> 300 instagram's. you have got these other apps that have huge user bases that are ancillary services to facebook. d imagine -- do you imagine a stitching together of all of this? >> they're all integrated from a data point of view the kind of thing a lot of people worry about, let's admit. it is interesting, if you count together instagram and facebook messenger, you get 1.7 billion users, many of them overlapping pair that is a bigger number than 1.4 billion that facebook has on its own. there is clearly a strategy to build products that continue to strengthen facebook passes

ability provide communications of a wide variety of type to its user or another thing, i am about to write a piece myself about a facebook paper something they developed internally that is actually better than the regular facebook app on the iphone. it becomes another way for them to keep hands on you when you're on your phone. all of these are effectively phone communication apps. to some degree, they are gnostic , which when you're using an any given time so long as you're using thing they own. cory: i do not want to use the word metadata, but i do not have a better word. they are gathering of mission about what users are doing. people are here, people are tweeting more. what's at, more messaging more. so they can better inform advertisers on facebook. so facebook is better with more engagement. more revenue, so the data is

feeding facebook. >> that is true well beyond its own. but absolutely, it is one of the most data companies that ever existed. facebookto do it better than probably any other company with possibly the exception of maybe google. they are digesting an extraordinary complex detailed data against users. they slice and dice it a million ways. they use it to make the products better and try to get hooks into it more deeply. cory: all right. thank you. interesting conversation. a film festival this week, we will talk to the creative director and check out this with emily chang. ♪

cory: virtual-reality with big aspirations. the first use cases are coming out. based on a children passes classic premier film festival. emily chang and i watch the film and spoke with the filmmaker. >> they are completely new art forms. includes theater, cinema, and things like music and musical -- and musicals.

you put them inside a real-time engine and are able to the virtual-reality. cory: in a comic book, them -- the viewer is there. in a movie the viewer is there. we were walking around. the sound is amazing. in turn this way and you hear it in your left ear. >> we have people who told stories in cg movies. you have to read and how to tell the stories are that it is such a new art form that similar to mobile apps, when you create things that are mobile, you have to create interest civic way there you have to have something made completely native -- natively. live in normally tell stories in

virtual-reality. emily: that was my first virtual-reality experience. i was one of the skeptics. why did facebook spend $2 billion on this virtual-reality company? what are other possibilities? beyond entertainment, jan to 15 minute movie? what else can you do? >> several killer apps will be developed for the environment and one is something you just saw episodic content. we think that is one of the things that will drive this platform. big implication when it comes to education, gaming, health care and virtualized meetings. can you imagine doing an oriented vr conference call, for example? feeling like you're talking face-to-face?

emily: one thing lacking is film like you are going to a social experience that i want to look to you and talk to you, and i'm scared at first because i am in the middle of another world. cory: you look down with the planets floating below you? >> the idea of multiple universes and what ever you wanted to be in these universes -- universes. cory: because the experience is so much more than just a video or audio, it is exhausting and maybe 5 million episodes is doable but maybe a 2.5 hour movie is not. >> the first song was about 45 seconds long and no one back then probably thought that movie could last 90 minutes or longer.

it is still early and we cannot actually know today how long someone will stay. we think it will probably take the next few years for us to discover. five minutes is a good number for now. cory: i do not think i could handle 2.5 hours of the godfather. serious drama where you are so immersed. emily: can we biologically handle that? >> i think we will discover that. the technology is so early very when the technology guest is something that is very seamless any look at movies in the future, things like the movie "her" for example, it will become a lot more natural. back in 2007, it was strange to have a smart phone in your hand and it is now ubiquitous. i think we will see the same thing happened. cory: that was the virtual-reality founder. tesla some interesting

contradictory statements from tesla's ceo. and steve going nuts, but this time nuts at a clippers game. it happened yesterday when his team was playing the spurs. we will show you that ridiculous video when bloombert west continues. ♪

cory: this is "bloomberg west." i am cory johnson. let's check bloomberg's top headlines. full access to iran's nuclear sites. any economic sanctions. the trinity secretary speaking to peter cook today. >> if there are reasons to suspect any site, there has to be access to that site any site for a well-defined process. >> access to sites remaining hurdle in negotiations, barred from certain military facilities. saudi arabia is worrying about a

possible terror attack. no additional information provided. four nationals have been targeted since they joined the u.s. coalition against islamic state fighters. comcast and time warner cable will meet to discuss the plans for merger. comcast could work -- walk away from the deal. approval, too strict. staff attorneys in the doj's's antitrust division leaning toward blocking the $45 million proposed deal. a group led by pbg capital, a majority stake. requiring minority states and the details were not disclosed. residents running in las vegas orlando, and a number of touring productions.

shares of oil and caribbean dropped the most in three years after a cruise line cut its annual profit forecast by $.20 per share. the company blaming fuel prices and a stronger dollar. guest from outside the u.s. are spending less on board. two years ago just two years ago and not even, tesla was struggling to turn electric cars into actual sales. reservations good, sales that. so bad that you on must began negotiating a deal to sell the company. he was going to sell google -- tesla to his friend and google ceo larry page. in turn, google agreed to spend another 5 billion and capital on an expansion. how close to the comfy come to selling the entire business to google in 2013? i'm joined by ashley, a great writer and a great writer of a book -- elon musk, tesla, spacex, and request for a fan at -- fantastic future. an amazing story.

two aspects of this story jumped out at me. told me it was amazing that would not tell me a month ago. you told me there was something related to sales. tell me where your story breaks. >> model s came out in 2012. great reviews. the motor trend car of the year. you had all these early adopters who came in and bought the car. what started to happen is word-of-mouth was not that great. door handles, windshield wipers things like that here people were giving it a hard time. all these customers in line had bought a spot in line to buy a tesla and they were not following through. >> we have got a timeline, which starts to tell that story. the first thing that happened with the timeline, it goes on sale the middle of the year. november winds motor trend of

the air. it was a fully refundable deposit, as i recall. complaints happened. cars would start to catch on fire. they jack the price and everyone the company says, we are in a crisis. >> as i was told the story, some of the executive held the severity of the situation from him and little bit and they come to him and say, look we're in a crisis state and he takes people in hr and finance and engineering he says, get on the phone. your job from now on is calling these customers and turning preorders into sales. cory: about the word-of-mouth you're telling me everyone in the country found out the word-of-mouth was bad, and yet in a conference call investors specifically asked about that. you could see it in online forums, that some people loved their teslas and other people had issues with them. let me read you the early

optimism on it -- on the conference call. the two investors, owners of the company, he said nothing is better than word of mouth, which has been fantastic. >> it is funny, you had people who fell in love with tesco -- with tesla. it is like apple, a cultish thing. then you have another group of people who had paid $100,000 for a car and its exit everything to be understandably, perfect. they started to grumble and i started to catch on. cory: among other things that were differing from what he was telling investors, like the conference call, where you are required to tell the truth, for example, a revival is miraculous for this company, that among the things that started to happen, they shut down the factory. first, let's read this quote. if we do not deliver these cars, we are f'd. but then this miraculous revival

happened. he shut down the factory which nobody knew happened. he certainly did not tell investors he was shutting down the factory. they offered to sell the factory for $6 billion in all the sudden, there was a turnaround? >> he had gone to larry page with the rescue plan just in case any said, if we do not pick up the sales, would you buy tesla? he then puts all these work this -- workers into selling cars nonstop. the timeline does seem to work out on this. in the span of two weeks, tesla sold thousands of cars, in that first profitable quarter. you remember that quarter was a surprise as well, even by you on's optimistic standards. that was a blowout as well. >> the reason he said deliver cars rather than sell them is that sales were already happening but deliveries were not being accepted until deliveries happen, already sold. delivering cars -- they could

recognize the revenue more quickly and did not have to move a car to a person to move a person to a building. >> it is true. elon plays a high risk and high-stakes game. you can see this went right down to the wire and he rolled the dice on this one and it actually came out in tesla's favor. we could be talking about tesla as a division of google just as easily. cory: in the same conference call where he did not let on there were any problems and did not tell investors the factory was shot, he also's head things were fine in terms of reservations. i know a lot of investors had figured this out and these questions were specifically in this form so he would try to tell the truth, and he said, we have enough reservations right now to fill out the year. literally, we could say goodbye to every store and every salesperson and meet our target. you are saying that was not true. they had to tell every hr person and every factory worker and every person.

>> it is like you say. it is a linguistic game of sorts. preorders of people standing in line. i think the number was huge. and then converted that to the sales was the tricky part. >> i cannot wait to read more of your book. eying courage our viewers to go to your local bookstore. all right. bloomberg businessweek and bloomberg west should be right back. ♪

cory: let's get a quick check of bloomberg top headlines. hands on the european wireless network for the first time. his unit buying world k bm positive mobilephone business for millions in cash. investing 1.6 billion dollars to create a cyber security company.

equity partners, a new firm with web cents. they agreed to buy. 20,000 security experts. imagine that. streets are thick with cyber people before the conference. attending the conference and a senior advisor, good to see you as always. gathered at our doorstep, cyber security is never more important. a couple of dramatic rings. what do you think the first big focus unique to this year will be? analytics is probably where people will spend a lot of their time, trying to understand and get a greater sense of what is going on internally to your organization, start looking at how you can basically try to take away some staff to her you

do not have enough people to monitor all the alerts so if you could take that information and run out rhythms against it it will enable you to actually determine what is worth focusing and what is a false positive. cory: how is that different from the past? kuester has not been enough data systems to handle the data. what is happening with cyber is there is so much information that is internal in an enterprise that people have struggled to pull it together in one place before. cory: his denial of service attack was by definition someone bombarding service pyramid today could keep it at bay but they cannot try to understand it and now they can try to understand it? >> tackler. that is brewed force. it is done by a lot of systems. the way people are getting in now is they go in and do a spear fish and gain your credentials and what they do with the information is they look to escalate villages and move around internally internetworked. the hard part is determining who the individualist.

cory: i'm sorry i keep interrupting you. the target that happened, where somebody got credentials to give in, -- to get in, but they did not just take everything. they snuck in, look around, got control of more systems, and that is when data theft happened. >> exactly. they are doing reconnaissance. trying to determine when we are going to be less detected, is there a certain time of day where they do not have the right people on duty, and are there certain things we should do to mask our behavior as we leave? doing crib 20 take information out? the other one is threat intelligence. people are very focused on understanding what exactly is happening to other institutions. thanks seeing the same threat coming across the wire, are the energy sectors seeing the same threat? the reality is every threat is unique and people are now trying to take information pull it together, and enhance each other's defenses, a collective

defense. cory: the notion that when the company gets attacked, they should open and share what happens in the intelligence community so everyone can learn from it, is there tension about that approach? i think we are seeing best practices that i wonder if there are smart and thoughtful people who decided, you know what, that introduces a different kind of risk. >> i was with someone yesterday who said, the expectation is that you share everything in the government shares nothing. the truth there is the government may not know as much as the private sector thanks. the second is the private sector is delaying for appropriate detections. the big thing is liability protection to enable them to share. they are trying to incentivize the private sector to share more to her the reality what is happening, and this is very important, people continue to actually help each other out. in cyber security, it is not really a competitive advantage you do not want competitors to have a big breach because that

does affect you one day or the other. cory: interesting. mark crumpton is up next? mark: the federal reserve bank of new york says it is worse. the great recession gets most of the blame, crating a nonvirtual cycle of students being unable to pay back loans because they could not find jobs. just one third of borrowers are current on loans. bloomberg's higher education reporter janet based on the numbers and tells us why the fed analysis differs from that of the education department. i will see you on top of the hour. back to you in san francisco. cory: thank you. the payroll start up is taking the clout to a new place and taking on rivals. we will talk to the ceo off the back of the $16 million funding round coming up just next. ♪

cory: at least one business is needed by every residence in the world. payroll. people have got to get paid. one startup thinks it will grab a big chunk of the market. $60 million by smart investors. capital ceo explained to me the strategy. >> every business in america and every business in the world is connected to this market. if we look at companies like adp, for example they have market caps of over $60 billion combined. i see that people re: have it. -- already have it. are those paychecks somewhat newer, they have been around for a long time. what are innovations they have

missed? >> 6 million companies need payroll. that was shocking to us. it is encrypt -- an incredibly fragmented market. 40% of businesses today due to a by hand. that was a shocking statistic. what we have done is try to bring the philosophy of modern software where things should work seamlessly, be easy to use, anyone can access it for a small business owner underserved ignored, and elliott it for -- alienated for a long time. cory: describe to me the screwed up ross s that led to the way software is written in paychecks as well. >> i can speak more to what we are doing. in our case, the late payroll is done come we use gmail as an analogy. when you use gmail come he do not know how it works to send a message to someone.

it is not necessary for that is the main message. 16,000 task goes across the u.s. a lot of compliance requirements. all these millions of companies across the country, outside the bay area, they have mostly been doing it on their own for the last sectoral decades. -- several decades. cloud-based solutions, mobile devices. they are on the go, serving the customer in whatever way they're doing that business. we can now deliver value to them in a way that was not possible before. there are three trends that power our product. number one is paperless. the lot of ease e-file, efax. cory: are you using a particular service provider for that? >> most is homegrown. the goal is to take all of thousand task codes and enable a small business owner to have that hat off their head. clout is one where trust is very

important. we never had a pilot. literally, payrolls the highest you can imagine. bank members routing numbers thousands of dollars from your bank account to it on the mobile side, again, most of the this sister not have or put offices. in our early messaging, you could run payroll from the beach, we used to say. testament to the transition again. cory: one of the big hurdles is, it takes so much money to acquire customers. >> we really spent the first year we were live, we have been for about two years building a foundation on organic and inbound growth to we did not do paid acquisition for the first on most year-and-a-half of the company because we wanted to make sure the product solved a real problem and added value to the customer.

mps is a net promoter score. it asks if we can recommend the product is summon us. the content products we do, the product solving a real problem and people through twitter through facebook, through social media, it has been one of our biggest drivers of growth. we have a program with contents and bookkeepers worry empower them to bring our products to customers. we see a lot of changes happening in ecosystem of the focuses on serving customers. so again, usually fragmented market. 40% of businesses today doing it by hand. the other statistic that shocked us is one third of companies every year get fined for incorrectly doing payroll taxes. you have all this unnecessary pain and unnecessary complexity. that is why we started the company. we are growing quickly. in the last year, we grew

processing several billion dollars in payroll now. we always have the potential to control our destiny when it comes to things like profit. we give it two months free trial. over 90% convert from prepaid. it is a straightforward business and we charged with five dollars per month for the company. i would love to probably an off the air context. cory: we really appreciate your time. the bwest byte is where we focus on one number that tells us a whole lot. here to tell me a whole lot more is ashley. what have you got? 248 is a lot of something. >> the number of days it has been since steve bought the clippers. the first playoff game. >> there is steve ballmer at the

sideline yesterday during the clippers first game, losing his marbles. or maybe he is loaning them out. this is enthusiasm we expected from him. >> he was sort of going to strike out during the game, but this is what he is like all the time. amped up. >> first losing to anyone, i am worried about the reigning champs. are any bets he made playing off? >> it is still being determined as far as the clippers. last year, they advanced to the finals of the western conference. it has to do better than that here it otherwise, if they do not, they think about blowing up the team and starting again. a lot of pressure on them this year. cory: interesting stuff. thank you very much. still rooting for the clippers right now. get all the latest headlines all

the time on your phone and tablet, bloomberg.com, and bloomberg radio. more tomorrow. ♪

"money clip." from bloomberg world headquarters in new york i am mart krumpton. -- mark: from bloomberg world headquarters in new york, i am mark crumpton. to our viewers in the united states and to those of you joining from around the world, welcome. we have full coverage of the stockton stories making headlines on this monday. janet lauren has the room picture for student loan repayment. commodities reporter su keenan has