cory: still to come, whatsapp since its site on one billion users by the end of the year. we talk about the deal that never was. some interesting comments from it you elon musk. but first, a check of your top headlines. as this could be valued at $1 billion despite world gas prices. according to people with knowledge in name matter. a company in canada they have been unloading gas assets to focus on heavier distillates and oil petroleum products. a strong earnings profit in the first quarter, just under $10 billion. here is ceo james gorman on the earnings call. james gorman: we continue to execute against the benchmarks

previously established to and will remain focused on them for the duration of 2015. cory: he has been relying more and advising what we clients. well, the fugitive who claims he has been owning half of facebook has been denied his claim of half of phase. whatsapp now has 800 million users. it now has more users than any other messaging app including facebook messenger, but cash not so much. joining us now is the author of the facebook effect. david kirkpatrick joins us.

david, i say they don't make any money there is a little bit of revenue from some android products, but i have to believe that there is a secret master strategy to monetize whatsapp and facebook. what do you think? >> i would doubt that there is secret master strategy, i think there is a confidence that it will be highly monetize a ball. -- monetizable. now that whatsapp is carrying phone messaging, they can start charging the way guy does. -- skype does. they take the view of numbers are what matter, we can make money later. cory: well, money can be monetized as well. the notion of global domination might be, if we can take away the biggest growth platform the carriers have to always use messaging, if we can take away the eyeballs that are going away from facebook and at least control them through whatsapp,

facebook will be the better for it. >> that would be a counterproductive strategy because he is trying to simultaneously get all of the carriers to work with them on internet.org. so they are highly sensitive to the idea that he is taking away , revenue from sms. i think it is really more one of these classic zuckerberg idea is that people want to communicate more efficiently whatsapp lets them do that. it is increasingly a head-to-head competitor for the top five social apps that facebook do not own. cory: a lot of little interesting tidbits out of the f eight conference. it started to suggest there is a big strategy here. this notion of a dumbbell. there will be newsfeeds and all that, but there will be littler

things. if you can call 800 million users of whatsapp or the users of instagram -- >> 300 instagram, 600 instant messenger. cory: so you have these other app that have huge user bases that are also using race book. can you imagine stitching this all together? >> they are all sort of integrated underneath from a data point of view, just the kind of thing that people to worry about. it is interesting if you count together instagram, whatsapp and facebook messenger, you get 1.7 billion users, many of them overlapping. but that is even a bigger number than the 1.4 billion that they have on their own. i think there's clearly a strategy to build a consolation -- constellation of product

that continue to strengthen its user days. and another thing by the way i'm about to write a piece about his paper, which is something they developed internally, another interface for facebook on the iphone that is actually better than the regular facebook app on the iphone. it becomes another way of keeping their caps on you when they are on their phone. these rural phone communication apps. to some degree they are agnostic which when they are using, as long as you're using something that they own. cory: might be a data play as well? i don't want to use the word metadata but people are here, people are tweeting more messaging more, certain hours or around certain events. they can better form the advertisers and engagement. they get more revenues from those tabs then from the ads on whatsapp.

-- because the ads are more contextual. even though the ads never show up on whatsapp. >> along the lines of things they own this is one of the , most data centric companies that has ever existed. facebook knows i did do it probably better than any other company with the possible exception of maybe google. so they are absorbing and digesting an extraordinarily complex and detailed data about users all the time. they slice and dice it a million ways and they will use it to make their product better. cory: thank you. bloomberg contributing editor david kilpatrick. a film festival this week. we will talk out to a director. we will be back with my partner emily chang right after this break.

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cory: virtual-reality purchased by facebook, the first use cases are coming out. a virtual-reality film based on the little prince came out of the tribeca film festival. >> vr and ar are completely new art forms. it is completely different from all art forms that came before it. that includes a cinema, operas musicals, and you put in all of those things and he put inside a real-time engine and you are able to see virtual-reality.

cory: the storytelling part has to be very difficult because the viewer is not in a static position. in a comment book, the viewers there. in tv, and viewers there. in movies the viewer is there, and we were walking around the planet. we saw the little prince come out. >> you can turn it around 360 degrees and there was a solar system. cory: you could hear the wiring -- watering can. >> we have people who are used to telling stories and teaching movies. uf to rethink how to tell the stories. interestingly so you great things for mobile you to create in a native way. for vr and ar they have to have something completely re-created for the and byron meant. rethink the way to retell the story.

emily: i have to admit i was one of the skeptics, why did ace books spend $15 billion on this? what are the other possibilities beyond entertainment and a 15 minute movie? what else can you do? >> that is right. we add -- at penrose think that they're going to be several killer apps that are developed for this apartment. one of the things we think is something you just automotive virtual-reality stories. episodic content. that will be one of the things that drives the early uptake of the platform. there are implications when it comes to education, when it comes to gaming, when it comes to things like health care and virtualized meetings. can you imagine doing a telepresence oriented pr conference call, for example.

emily: one of the things it was lacking was the social experience of going to see a movie. i wanted to look at you, talk to you, and i was a little bit scared, because i was in the middle of this other world. cory: when you look down, you see the planets voting below you. emily can it be made to be a : more social experience? >> absolutely. one of the things that we think is important is persistent universes. videotaping ever -- the idea being whatever you want to be. cory: because the experience is so much more than just video or audio, it is exhausting. maybe five minute episodes are dual, maybe a two and a half hour movie is not. emily: intense. >> will you know cory, the first film that exists today was about 45 seconds long. no one back then new what was going on. vr is so early, and in the next

three years we can see what is going to be discovered. we add 10 rows feel it will probably take the next few years. five years is a number for now, but i think that number may go higher. cory: serious drama where your soul immersed freda seems like you it would be a lot, perhaps too much. emily: can we biologically handle that? >> we will see that over the next three years. the technology is so early, it is hard to imagine now, but when the technology is to something that is seamless when you look at movies in the future, we're you see augmented reality experiences, i think you'll find that i mentioned -- it will become a lot more natural as it is developed. i remember in 1997 it was strange to have a smart phone in your hand, but now it is ubiquitous. cory: that was penrose virtual-reality founder eugene.

coming up some interesting contradictory statements from tesla's ceo. we will show you the ridiculous steve ballmer video when we continue. it happened yesterday when his team was playing the spurs. ♪

cory: this is "bloomberg west" where we focus on innovation technology and the future of business. i'm cory johnson. let's check the top headlines. inspectors need full access to iran's nuclear site in order to lift any economic sanctions. that is from energy secretary ernest moniz talking to peter cook today. secretary moniz: if there are reasons to suspect any site, there has to be access to that site. peter: any site in iran? secretary moniz: any site through a well-defined process. cory: access to sites remain a hurdle. the ayatollah says inspectors will be barred from certain military facilities. saudi arabia is warning about a

possible terror attack. the government is warning a oil company and shopping malls should be on guard for potential attacks. no additional information provided stop -- provided. four nationals have targeted and joined the coalition against islamic state fighters. comcast and time warner cable will meet with the department of justice to discuss their merger. according to people familiar with the matter comcast could , walk away from the deal if concessions needed to win approval are too strict. this is after bloomberg reported that staff attorneys of doj's anti-trust division are leaning towards blocking the $45 billion proposed deal. a group led by cbg capital has agreed to buy a majority stake in cirque du soleil. from founder, they are talking about a minority stake in the deal terms were not disclosed. they have resident shows in las vegas and orlando and a number of touring productions. shares of royal caribbean dropped the most in three years

after the cruise line cut its annual profit forcast by $.20 a share. they are blaming fuel prices and the stronger dollar even though bookings are up. two years ago, not even two years ago, tesla was struggling to turn preorders of its electric cars into actual sales. reservations, good. sales, bad. things were so bad, ceo elon musk again negotiating a deal to sell the company. he was going to sell tesla to his friend google ceo larry page. google would have paid $6 billion to tesla and agreed to spend another $5 billion on factory expansion. how close did they come to selling the whole business to google?

i'm joined by ashlee vance, a great writer of a book. the book is out may 19. an amazing story. two aspects of the story jumped out at me -- we were having the conversation a month ago. you told me there was something related to what was going on with the production of cars and sales. what does your story break? ashlee: the model did not come out until 2012. great reviews. the motor trend car of the year. you had all these early adopters who bought the car. that what happened was word-of-mouth was not that great. it had some glitches with the door handles, windshield wipers, things like that. people are giving it a hard time. there were customers in line with that bought a spot in line to buy a tesla and they were not following through. cory: we have a timeline. it really tells the story. first thing that happens in the timeline is it goes on sale in the middle of the year. november, it wins car of the year. the sales were not happening. you can put the money down but it was a fully fundable deposit and the complaints happen.

the cars start to catch on fire. they jack the price. he goes to every company and says we are in a crisis. your job is to deliver cars. ashlee: some of executives held to the severity and they went to him and said we are in a crisis state. people in hr, engineering -- get on the phone and your job is to call these customers and turn the preorders into sales. cory: about the word-of-mouth you tell me everybody in the company was finding out word-of-mouth was bad. yet, the conference call -- investors asked specifically about that. you can see it if you talk to

people that some people love their tesla and other people at issues. early optimism in the conference call. he says on the conference call to investors he says there is nothing better than word-of-mouth which had really been fantastic. it was not. ashlee: you had motor trend, people falling in love with tesla. it is sort of like apple, that cultish thing. so you have that group of people who are sort of celebrating the car. then you have the group of people that had paid $100,000 for the car and expect did everything to be perfect and they started to grumble. cory: among the other things that we are differing from what he was telling investors, like in the conference call where you are required to tell the truth, the revival was kind of miraculous. among the things that started to happen, and even reading a story, i do not quite understand what happened. they shut down the factory. first let's read this quote,

this revival happened in spring of 2013 where he shuts down the factory. he did not tell investors. they offered to sell the company for $6 billion in all of a sudden there is a turnaround? ashlee: if we don't pick up sales, will you buy tesla? they had this handshake deal to do this. then he put all of his work into selling cars nonstop. as i understand it, and the timeline works out, in the span of about two weeks, tesla must've sold thousands of cars. ending up in that first profitable quarter. because you will remember there was a surprise, even by elon's standards, it was a blowout quarter. cory: the reason to me he said deliver cars instead of sell cars because the deliveries were not being accepted. at the same time, they started delivering cars if the customer would come to the factory. they recognized the revenue more quickly. they had to move a person to a building.

ashlee: part of this, high-risk game. you can see right down to the wire, he rolls the dice and it came out and tesla's favor. we could be talking about tesla as a division of google quite easily. cory: in the conference call he did not tell the investors that the factory was shot. he said things were fine in terms of sales. he was putting this question out there. this is what he said about early demand -- "we have enough reservations right now to fill up a year. we could say goodbye to every sales person and still meet our 20,000 car target." you are saying it was not true. he was not telling every salesperson they had to get cars delivered, he was also telling every person they had

to get cars delivered. ashlee: it is a linguistic game. there is the reservations, the preorders of people standing in line and i think that number was huge. converting that to the sales and thenconverting that to the sales was the tricky part. cory: i cannot wait to read more of your book. i will encourage all of our viewers to rush to amazon and place preorders or go to your local bookstore. or you will be standing in front of bloomberg west selling some? ashlee: anything it takes. cory: ashlee vance, bloomberg businessweek. "bloomberg west" will be right back. ♪

cory: this is "bloomberg west." a quick check of some bloomberg top headlines. john malone is getting his hands on the european wireless network. his telnet unit is buying royal kpn's mobilephone business for $1.4 billion in cash. it is based in the netherlands. defense giant raytheon

investing $1.6 billion to create a new cyber security company. the new firm will combine the cyber products unit with web sense. 28,000 security experts swarming the streets of san francisco. cyber security people for the rsa conference. one of the top three things to focus on this year -- joining us now is brian white. attendee at the rsa conference and senior advisor. good to see you. the world is gathered at our doorstep. cyber security has never been more important. what do you think the first big focus unique to this year will be? brian: security analytics are what people are spending a lot of time.

cory: security analytics is what? brian: trying to understand what is going on internally to your organization. start looking at how you can try to take away from staff. the idea is you don't have enough people to monitor all of the alerts. if you can take that information and make some sort of algorithms against it, it will enable you to determine what is worth focusing and what is just false positive. cory: how is it different from what was done in the past? brian: in the past, there haven't been systems that can actually handle the data. what is happening with cyber is there is so much information across the wire and it is internal and an enterprise that people are struggling to pull together in one place. cory: like a denial of service attack was by definition somebody bombarding service. maybe they could keep it at bay but they could not understand it? brian: exactly. that is brute force. it is done by a lot of systems now the way people are getting in is they do a spearfish, they gain your credentials. they look to escalate privileges and move around internally. the hard part is determining who the individual is. cory: i'm sorry i keep interrupting you. target, that happened. somebody got credentials to get in. they do not just barge into the front door and take everything. they snuck in, looked around

and got control of more systems and that is when it happened. brian: they are basically doing reconnaissance. they are trying to determine when a we going to be less detected? is there a certain time of day where they don't have the right people on duty? there are certain things we can do to mask our behavior as we leave. do we encrypt when we take information out? cory: what are the other big points? brian: i think people are very

focused on understanding what is happening to other institutions. are the banks seeing the same kind of threat coming across the wire? is the energy sector seeing it? every threat is actually unique and people are now trying to take that information, pull it together and enhance each other's defenses. cory: let me ask you about this notion that when a company gets attacked, they should open up and share what happens to the intelligence community and then everyone can learn from it. is their tension about that approach? we don't see best practices and i am wondering if people have decided we are not going to do that because that introduces new risk? brian: i was with somebody that said the expectation that you share everything and the government shares nothing. the truth there is the government might not know as much as the private sector thinks. the big thing is the liability protection to enable them to share. what they are trying to do is incentivize the private sector to share more. i think the reality of what is happening, if people actually help each other out. in cyber security, it is not a competitive advantage. you don't want your competitors to have a big breach because it would affect you one way or another.

cory: good to see you, brian. a payroll start-up is taking the cloud to a new place and taking on rivals like adp and paycheck. i will talk to the ceo on the back of a $60 million funding round. that is coming up, next. ♪

cory: this is "bloomberg west." at least one business that is needed by every business in the world -- payroll. adp and paycheck already exits. one startup thinks it will grab a big chunk of the market. it is called zenpayroll and they've raised $60 million. ceo joshua reeves explains to me the strategy. joshua: we are in a market where every single business in america and in the world is connected to. our business is getting people paid. companies like adp and paycheck have market caps over $60 billion combined. cory: i see people already have adp and paycheck. paycheck is kind of newer, but they have been around for a long time. what are the innovations of they have missed?

joshua: 6 million companies in the u.s. that use payroll, they serve about one million of them. it is a fragmented market. 40% of businesses today do payroll by hand. that was the shocking stat. what we have done is try to bring this philosophy of modern software where things should work seamlessly, be easy-to-use, anyone can access it. for a small business owner that has been underserved and alienated for a long time. cory: given your total bias on this, described to me this fruit a process that adp's software is written and paychex as well. joshua: we have a lot of respect for companies in the space. in our case, the way that payroll is done, we use gmail as an analogy. you don't have to know how it works to send a message to someone. that is not necessary.

that is the main message, right? 15,000 tax codes across the u.s., lots of paperwork and requirements. these millions and millions of companies across the country outside of the bay area have been doing it on their own for the last several decades and that is what changing. we are one of the companies driving change. they can use cloud-based solutions, access mobile devices. right? they are on the go serving their customer in whatever way they are doing their business. we can deliver value to them in a way that was not possible before. cory: technologically, what is different that you are able to do? joshua: number one, paperless. we do a lot of e-file, e-payment. one of the goals is to abstract the government. cory: are you using a particular service provider for that? doc you sign? --docusign?

joshua: most of it is homegrown. the goal is the take those 15,000 tax codes and enable a small business owner to take that hat off their head. the cloud is one where trust is really important. we never had a pilot. payroll has the highest you can imagine. you sign on, give the bank numbers and routing numbers. on the mobile side, most of these businesses do not have corporate offices. we used to say in our early messages, you can even run payroll from the beach. we have gotten photos as a testament to that. cory: what is your sales process? that is one of the big hurdles for small businesses. it takes so much money to acquire a customer and there is not much left for profit. joshua: or us, of scalable investment is important to us. we spent the first year online -- we have been online for two years. we spent the first your building out foundation on organic growth. we did not do any paid acquisition for the first year and a half. we wanted to make sure the product solved a real problem

and added value to the customer. nps is net promoter score. word-of-mouth, the content that we do, solving the real problem. people are able to amplify that through facebook, social media. it has been one of the drivers of growth. we also have a channel program with bookkeepers where we empower them to bring our product to their customers. we see a lot of changes happening in the ecosystem but we are focusing on servicing our customers. a hugely fragmented market, 40% of businesses today doing it by hand. the other stat that was really shocking was one third of companies get fined for incorrectly doing the payroll taxes. you have all this complexity and that is why we started the company. cory: and how big is the business now? is it profitable? joshua: we are growing pretty

quickly. we grew by over 10 times. we are processing several billion dollars in payroll now. you know we always have the , potential to control our destiny when it comes to things like profit. we give a two month free trial to every new customer. over 98% convert. from free to paid. so it is a really straightforward message. we charge $24 a month for a company. i cannot share detailed financial -- cory: you could. i would not mind. joshua: i would love to in an off the air context. cory: we should do that. we will have you back when you are ready to give that out as well. i really appreciate your time. that was joshua reeves, the ceo of zenpayroll. the bwest byte focuses on a number that deals with a whole lot. here to tell me a whole lot more is ashlee vance, what do you have? ashlee: 248. the number of days it has been since steve ballmer bought the clippers and got to see his first playoff game last night. cory: that is a short turnaround. i would take 248 days. the warriors also there.

there is steve ballmer at the sideline, losing his marbles or maybe just loaning them out during the game. this is the enthusiasm we expected from him, right? maybe it is just loaning them out. this is the enthusiasm we expected, right? ashlee: i was worried he might stroke out or something during the game but this is what he is like all the time. cory: spurs losing to the clippers. i'm very happy about the spurs losing as a warriors fan. is it already paying off for steve ballmer? ashlee: it is still to be determined because last year the advanced to the finals of the western conference. in so, they sort of have to do better than that otherwise if a do not we will have to think about blowing up the team and starting again. there is a lot of pressure this year. cory: thank you very much. still rooting for the clippers right now. i don't want to see the spurs in the playoffs. if you want to see the latest headlines, bloomberg.com and

bloomberg radio. more "bloomberg west" tomorrow. ♪

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