china's great slowdown is finally hitting the tech industry. i am emily chang and welcome to bloomberg west in our new time slot. nasdaq takes a giant leap into bitcoin technology. airbnb ceo tells me about the fax of a growing market. and some say the ceo of -- may save twitter. to our top story, the tech industry is feeling the impact of a slowing chinese economy, with smart phone shipments down

for the first time in six years. according to idc shipments filed that ship -- to idc shims fell 4% from a year ago. while it is working out nicely for apple, in the third quarter it had the biggest share of china's market followed by xiaomi. what does the evolving consumer class mean for the world of tech giants? joining me to discuss is brad stone of business week, bob o'donnell, and brian buck well. but i'm going to start with you. is the chinese's smartphone market tapped out? bob: what we have seen over the past couple of years is these adoptions of large smartphones. these phablets. those things are the primary computing device of a lot of people in china. the reason why apple has done so

well is because a lot of people were waiting for the big version of the iphone. they finally got it, things have done incredibly well. the thing we have to because just on, i would argue samsung was the canary in the coal mine. samsung was first to these big smartphones. he did really well and hit a wall. i think what is going to happen is the rest of the industry is going to hit that wall. once you get a big smartphone, the desire to upgrade is a lot less frequent. in china they don't always have a two-year automatic upgrade. emily: brad, you went to china and spoke to the ceo of xiaomi. what do they think about this echo brad: -- about this? brad: xiaomi is not just telling a smart phone, they are building a brand. to the extent that china is becoming an emerging market to a

mature market, they are very reliant on online sales -- online sales and that is difficult to measure. xiaomi as well positioned. xiaomi is focusing on other markets for a reason. emily: brian, you have a good sense of how consumers in china are dealing. at the same time we are seeing alibaba take a big stake in a u.s. company. alibaba once more revenue to come from abroad. is it because of fears of china's slowdown? brian: i think there is something else going on or alibaba. -- on four alibaba. they are so big they are playing defense and and the -- and a lot of other companies are playing offense. alibaba was a bit late to the game in terms of mobile compared to some competitors. while their overall market volume continues to increase the

revenue is decreasing on an absolute basis because of that. alibaba is looking a broad because they are trying to find new markets to grow in while their competitors are moving into china and growing in their home market. emily: at the same time apple is not giving up on china. tim cook was there today. he signed up on -- what do you make of that? bob: apple sees that their future growth is going to be in china. the smart phone market has already hit the levels that we are starting to see in china. we saw a bit of a boost when the iphone 6 came out, but for the foreseeable huge or the u.s. market is going to be in a tough spot. apple -- foreseeable future the u.s. market is going to be in a tough spot. people think of apple as this green company that thinks about the environment. this is a public statements to

think of us in a positive way. emily: if not china where else? brad: apple trying to expand to china alibaba trying to find a foothold in the u.s.. nobody talks about alibaba's big play in the u.s.. they did a horrible job marketing to u.s. consumers and understanding what they want. instead they are investing in companies like zulu, lift jet.com. alibaba has made a secret investment. i think we are seeing the same thing play out on both sides of the pacific. emily: brad stone, bob o'donnell, brian buchwald. it is time for the future is now. wall street is listening to the valley a little bit with nasdaq dipping its toes into bitcoin

technology. the tech focus exchange is running a pilot program for p ipo shares. we could -- for pre-ipo shares. we could be looking at an expense of use. bitcoin describes the technology behind the crypto currency known as block chain technology. it is like a digital ledger that tracks the entire history of transactions for a single unit or coin. the nasdaq wants to use this technology, not the currency, as a way to track audit transactions more accurately. it will also be able to fire out trades more quickly. wall street has been conservative about digital currencies. we saw some dutch boy -- some dutch banks have experience it with the technology. the bitcoin investor tweeted that nasdaq showing bitcoin interest --

what steve case things about skyhigh valuation as it becomes commonplace in the valley. i will show my paris go video here on set with cofounder. -- my periscope video on set with the cofounder.

emily: president obama has named airbnb ceo the presidential ambassador for global launch ownership. among his new job responsibilities to increase

internet literacy in cuba. airbnb formally entered the country a few weeks ago. i asked the ceo about their big push in cuba. >> took us three years to get one home in san francisco, new york. i don't think we ever had a market grow as fast as cuba. by all indications it will be a huge opportunity. for half a century americans have had the desire to go to cuba. now it is a lot easier. emily: how do you in this environment -- you are the darling of the vc community. how do you make the decision to raise more money now versus going public? brian: we haven't made any specific decisions although we don't have any immediate plans to go public. the focus is what is best for

our business and community. we don't need to raise more capital, the company is doing great. that being said we are always opening opportunities are all based on our expansion plans. emily: we are talking fundraising plans. a $20 billion valuation is more than most major hotel chains. when talking about pressure and your responsibility a ceo, how do you make sure you live up to that number? brian: first of all, we have nothing to confirm. there has been no financing that occurred, so those are just rumors. more broadly, the question of how you live up to high expectations? i think we all have to realize the gravity of what we are dealing with. we have hundreds of thousands of people. 52% of people in cities and communities depend on airbnb. i feel an immense responsibility to that community. it is very humbling to be invited here to the white house

and have all these jobs and people depend on us. emily: i know you guys have doing a lot to improve the quality and experience of renting and airbnb. i am a huge customer. there are times when it doesn't work out. my editor just got back from paris where she had to cancel because she walked in and the towels were wet and it wasn't clean. there is this whole ecosystem building off of your success, pricing airbnb's, cleaning, key exchanges. would you ever consider buying a company like that or integrating some of these services into airbnb to improve quality control? brian: i am excited about the idea that it is turning into an ecosystem. especially if they are making the experience even better. i am really excited about that. as far as whether or not we want to acquire one of them, we have no immediate plans to do that. i'm excited about people being

able to live on our platform and thriving. emily: i want to bring in brad stone of blumberg business week. what you think is the most important thing of this cuba push and the white house pitching its lag into airbnb? brad: the white house is experiencing something i call airbnb diplomacy. if you look at what they are doing in cuba, they are bringing people on line, bringing more capital into the country. it is a seductive thought that could ultimately lead to greater freedom read on the airbnb side it is great. they are fighting the state-by-state political battles. it is clearly great for airbnb. emily: airbnb diplomacy, we are going to add that to the bloomberg dictionary. speaking of that dictionary speaking of valuations we have been hearing about those big funding rounds that i spoke to brian about. can we really trust these numbers? this is what i want to talk about today, waterfall. what does wonderful have to do with unicorn startups? quite a lot.

it describes the way investors try to reduce their risk by locking in a high valuation for their money if the companies ever get sold for less than what the -- what they bought in for. take a look at this chart. here is our unicorn. early employees get some equity. this is early start up territory, valuations are low. our unicorn is doing well and it is ready for outside funding. it is a healthy funding round and enables our unicorn some growth spurts. things are going super well. so well that money is pouring into these plate stage investors and they know they are onto something good. this is where some of those protective measure start coming into play, where we start seeing some of those huge valuations. i spoke to steve case the cofounder and ceo of aol. here is what he had to say about this very topic. steve: there are a set of two americas here.

one is free states, california, new york, massachusetts. those markets are hypercompetitive. i think valuations and many of the cities and sectors are on the high side. emily: what are you doing to protect your own investments? we have been talking about liquidation and terms investors are building to make sure they are protected. what diligence do you do, what terms do you build into your deal to make sure that you are getting a good deal in the end? steve: we are investing larger sums in our growth investment versus $6 million on our startup and venture investments. we are looking for companies that already have traction, tens of millions of dollars of revenue, sometimes hundreds of millions of dollars of revenue. we are more diligent than we are careful and make sure we understand the market opportunity. we do structure those growth investment in a way to not only maximize the upside but also protect us on the downside.

emily: what do these trends mean for employees? investors are getting better terms, where does that leave people who are building these companies? do they lose out? steve: there is an opportunity for everybody to make money and be successful. it is obviously important to make sure a management team and the employees do have the right incentive. i saw this with aol. only 30% of people were connected, it took us a decade to get traction. there were a lot of ups and downs. it was a bit of a struggle. eventually we broke through and built a company that was valuable. we did have a philosophy of having all of our employees have stock options. the customer service representative would end up doing quite well. emily: braddock, i want to bring you back in here because the question i'm trying to get to is are these unicorn's not really unicorns in the end when it comes to the employees who matter?

brad: i have very little sympathy for the employees of these companies. they have seen the valuations go from one billion dollars to $5 billion to $10 billion. they are on an amazing ride. if you compare it to the companies of 10 years ago steve case mentioned aol, but amazon went public much earlier. they had a really rocky ride and employees had to stay there for longer to see that kind of increase in their stock. now companies are delaying the ipo. it is really in a protected environment. i think the employees are doing just fine. emily: brad stone, we appreciate that. thank you so much. coming up can paris go save twitter you go we will ask the ceo about his strategy for fighting piracy and keeping users happy. ♪

emily: it is time for the daily byte, one number that tells a whole lot. today's right is or hundred $30 billion. why is that number important? that is the total amount of cash reserve that just five us-based tech firms have. the majority of those are in overseas accounts according to a report from moody's investor service. michael soft apple, google, oracle all have large amounts of cash. the majority of that cash is held abroad. these are due to incentives -- about 90% of the cash held by microsoft, apple and google is

abroad. while google keeps 60% in its overseas account, we will see if the white house is able to cope -- able to coast any of this money back to the united states. periscope is attracting celebrities, news outlets, even boxing fans. the ceo joins me now in the studio with more. you know lots of concerns about user growth and engagement. can paris go save twitter? kayvon: it is a provocative question. our focus is just on building an amazing experience. we have been working with periscope for just over a year now. we had this crazy wacky idea we started working on in a garage. our focus now is can we deliver on this vision, which is to create this wacky teleportation machine people can use. i think we are stoked to be partnering with twitter. twitter is excited to have us as part of the flock as well. emily: i just spoke to the costello and he uses the word

extraordinarily awesomely excited about it. he really believed you are the future of twitter which leads me to my question, can periscope save twitter? kayvon: the exciting thing is the vision is really the same. when i think of paris go up and it potential i think we can read a digital pulse of what is happening in the world. that is twitter's vision as well. 140 characters and other media. they complement each other in a powerful way. i don't see it saving twitter, i see it complementing it. emily: we are doing our very first on air periscope right now. you can wait to the camera. let's talk about monetization. how do you plan to make money? kayvon: that is not in the forefront of our minds right now. we launched the product five and

half weeks from now. we believe in the xm -- in the axiom of building something people want to use. it is not something that should be the focus right now. emily: how seriously do you take meerkat? kayvon: we try not to think about our competitors. if we did we wouldn't get anything done. our focus is how do we excel and execute against that? there are so many people in the space because it is a compelling space. there have been many in the past, which is one of the advantages we have of entering this landscape one weekend. we were able to look at other people, what they did well and what they are focusing on right now. emily: can paris go to work with facebook? -- periscope work with facebook?

kayvon: think it is a sensible thing for them to try doing. we want to integrate with twitter. we think of twitter as a place for live conversation. it is the only worldly platform that focuses on live commentary. when emily chang goes live she should be syndicating out to her twitter followers. facebook is great for a lot of other things. emily: my window i choose facebook first? kayvon: we looked at it as what do people use these various platforms for? on china get a pulse of what is happening around the world. they don't think of what

platform has the most users. i'm going to go to this media has its how i learn what is happening around the world. emily: 734 people watching us right now. that's not bad. i'm going have to do this every day. let's talk about piracy because you guys made a big splash. and the winner is periscope, is periscope as excited about piracy as twitter? kayvon: it is not something that keeps us up at night. just to clarify, what we were excited about that night speaks to the power of paris go. begot see folks taking us behind the scenes and showing us manny pacquiao's locker room. that sort of thing really excites us.

it is something that is part of our policy and terms of how we craft the product. amalie bank can you build technology that identifies when someone is shooting a live broadcast or a live event that is not supposed to be shot? kayvon: it is something we are generally interested in. what would evolve tools look like? the procedures we have in place are effective in the sense you are able to respond to dnc notices within minutes. other than some unusual circumstances, there hasn't been a big issue on paris go. there is an order of magnitude of articles.

emily: thank you so much for joining us at our new time. we will be back tomorrow. that's it today.

matthew stone age popularity fix, we got you covered. -- >> if you still need your popularity fix, we got you covered. on the show tonight rubio is going up and down hill simultaneously. mayweather pacquiao, it is obama versus warren. the president told yahoo! that she is getting her facts wrong entree. she says the potus is not being transparent enough entree.