emily: i am emily chang and this is "best of bloomberg west." we bring you all our top interviews from the week in tech. coming up, diversification at alibaba is starting to pay off and we will hear from the cofounder about the push into cloud and media streaming. plus the lay of the land at, disney and who better to hear from than bob iger. the media giant's chairman and ceo joins us to discuss the road ahead. the escalating e-commerce war, will walmart's acquisition of jet.com give it enough ammo to and jet.com give it enough ammo to really challenge amazon?

first to our lead. diversification is paying off for alibaba with media streaming and cloud revenue driving revenue up 59% in the latest quarter. the main e-commerce business is holding up in the face of a weaker chinese economy. him him we spoke with the executive vice chairman and i asked him about the m&a strategy and if any mega acquisitions are in the cards. >> if you look at our core operations, $2.5 billion of operating income in our core commerce business. that operating income is growing at 38% year on year. if you look at eps, it is growing at 33%. that is very robust growth. having said that, we did consolidate the operations of two other companies and we take the long view and despite consolidating these losses, we are generating 61% operating margin in our core commerce business. what that means is that gives us

the luxury and the resources to invest very aggressively into new businesses like digital entertainment and our new innovation initiative such as internet cars and things like that. so we feel very comfortable with our margins. we feel that we have a lot of resource and cash flow to invest in new growth. emily: yahoo! is going through a sale of its core business. have they discussed with alibaba what they plan to do with the shares they hold? >> what they need to do is figure out what to do with the alibaba shares. they could also do nothing, but we are going to be fairly reactive when it comes to that.

we are going to leave it to the yahoo! board to decide what they want to do with the alibaba shares. the important thing for your viewers to know is if yahoo! sold their alibaba stake they would incur a huge tax liability, and that does not solve the problem, even if we are invited to acquire the shares of what they call the remain co, because we would not be able to cancel those shares legally and we end up inheriting, the tax liability. it is going to be a difficult question for us. emily: alibaba has been very inquisitive in the past, more to the than $24 billion in yields in the past year. we have seen massive deals in technology, microsoft, linked in. how open is alibaba to really big deals? >> when you have 61% operating margin in your core business you

have to think about how to smartly use that extra cash flow the margin, to invest for future, growth. when it comes to our m&a strategy, we are going to be very disciplined about it. we have set several important criteria including growth in our user base, improving our customer experience and expanding in our categories. if you look at large acquisitions and investments we have made over the last year, they all fall very consistently into those principles. we acquired yok u because we want to get into digital entertainment, and we partnered with one of the largest -- so these are examples of acquisitions that we have done. we are open to large deals and we are open to small deals. the important thing is they stay consistent with our m&a principles.

emily: you guys made a big investment in a company to be paid over two funding rounds. according to reports, at some point alibaba stopped paying. what actually happened there and how do other companies know you will not do this to them? >> we have actually fully paid our investment into that company. the fact is, by far we are the largest capital provider to that company to the tune of over $100 million. and we have paid on time and we fully paid up. the fact is, by far we are the i think what you have seen was a report regarding a contract where there is some technology that they were supposed to develop for us.

the fact of the matter for the china market, it is a very different market and for the kind of product they were trying to develop, it was very difficult to gain traction. but by no means was there any kind of dispute. we have a very good relationship with them and we are supporting the entrepreneurs. that is the approach we take when we invest in markets in the u.s.. we want to back entrepreneurs. emily: holly all the cofounder. -- alibaba co-finder. our conversation with bob iger. we will dig into disney's new acquisition as they look to offset investors cord cutting concerns. the magic of early-stage investing, we will also hear from two veteran investors on the fact of the matter for the how to spot diamonds in the rough. this is bloomberg.

emily: walt disney reporting earnings this week, the quarter reflecting tough times for the company's cb business. the ceo bob iger announcing -- david westin caught up with bob iger soon after the earnings release and asked about the new earnings deal. david: i would love to talk about bamtech. i used to work for you and we used to have a discussion about content versus distribution and this is the first time you have made a major investment into bamtech. is this a recognition it is not enough just to have content, you also have to have distribution? >> that is a good question.

i think it would be safe to assume this is our largest investment in what you might call distribution. we look at it as an investment in technology. we have been saying that our strategic priorities include making high quality content and using technology to make the product better, make the content letter, use it for production and quality reasons but also use, technology to distribute in more modern ways and more ubiquitously. ways that the consumer enjoys more and is gravitating toward. that is what this is. it is safe to assume it is a distribution play. we view it more as a technology play and that is vital to the future of this company. david: for those of us who like to watch baseball particularly on our smartphones, we are familiar with this technology because we have watched what mlb has done. i would assume you would not

make this investment if you are not inclined in the direction of putting disney content on this new platform. when can we expect that to happen? bob: we have been incredibly impressed with what major league baseball and bamtech have created. and all of our due diligence proves that we are right. people who have been clients of their product have just raved about it, content owners who have used to distribute it as well as consumers. we have used competing platforms and nothing comes close to what this platform offers. they have a great product, the user interface perspective. i am a big fan of major league baseball and it is a great platform. we clearly are investing in this to use it as a sports platform and we are going to launch an espn branded service utilizing rights that bamtech has already acquired and adding rights that we have already acquired.

we believe this provides us opportunities to jumpstart us and other branded businesses into the directed consumer space, notably disney branded and possibly marvel and may be a star wars down the road. we do not have specific plans, meaning we do not have -- the platform does not offer design yet, nor do we have a date. we actually believe this will inevitably put us into that business. david: is it safe to say that espn is probably first as you get into the process? bob: espn sports is first up. that is the business bamtech is largely in, although one of their big clients is hbo now. it can be used for many different types of product, but sports will be first for us and espn branded. very exciting for us because we think we can launch something that is a compliment to the current channel offering a

business that espn participates in, in a very big way. david: i know you take interest in the creative process for the movies, the films, and you also do it for things like shanghai. give us a sense early on how you are doing and if you are on track for what your plans were for shanghai at this point. bob: it was more than a labor of love, it was one of the most important steps the company has ever taken. the biggest investment we made outside of the united states in the most populous city in the most populous country of the world. it was a 17 year journey for me. i obviously was quite involved. we built something that was very large and complex and unique, and there is a lot of original product in shanghai disneyland and it opened flawlessly. the reaction to it in china has been great. interestingly enough visitation,

has come from all over china and has taken great advantage of shanghai as a tourist destination, particularly in the summer. awareness is extremely high and people are staying about two hours longer per visit than we expected. that suggests people are enjoying the product a lot and the per cap spending has been strong. we had estimates that we were just guessing how it would do because it is a brand-new market for us, we are pleased with what we have seen. well over one million people have visited since it opened on june 16. the prospects for this business look really strong, so much so that we have already broken ground with expansion. we feel great about it. david: bob, absolutely the last question. give us advice. we talk a lot about doing business with china. particularly u.s. companies going to china. you say you spent 17 years and had a lot of success learning how to work with the most senior leadership all the way up to the top of china. other companies have not had an

easier time, they have had a tougher time. what advice do you have for others who want to do business with china? bob: i have thought about that question because i have been asked a few times. it is not an easy answer. we went to china in the sense that disney is well-known in china, and certainly a trusted company. it took a tremendous amount of communication, a lot of candor and patience and perseverance and tenacity. there were many times it would've been easy to fold the tower tent because it would take too long or it would be too hard, but we did not do that because we truly believe in the market and how our product would perform in the market. we had created a tremendous rapport with our partners and the government of shanghai. we build up a trust because you are speaking truth and you have faith in them.

and frankly as partners, they have been great partners to us throughout this process. my only advice would be, it is a big complicated market. it is a market that i think, there is a lot that does not meet the eye in the sense that you may feel because you spend a lot of time there, you are an expert. there are a lot of surprises, not necessarily good or bad. you have to have real patience and real commitment to be there. i think the patience we showed paid off not just because we hung in there, but i think we were respected because of that patience. it was not easy to negotiate and it was not an easy product to build, yet our partners have been with us all along and we all feel great about not only the partnership we created but the product we created.

emily: that was disney's ceo bob iger speaking with david westin. coming up, the clash of two retail titans for e-commerce supremacy. can walmart use jet.com to take on amazon? this is bloomberg. ♪

emily: can walmart turbocharge the e-commerce business? the big retailer is hoping to do just that with a $3.3 billion, acquisition of jet.com. it has been a tough stretch for walmart as they put billions of dollars into the online operation and they still trailed amazon by a long shot. can jet.com help turn things around? we spoke to david kirkpatrick and brad stone, and a former employee at amazon and ebay. this is such a young company and they say they process 24,000 orders a day, adding 400,000 shoppers a month, but there are

reports that have been struggling. this is the best way for them to spend $3 billion? >> first of all, let's discard the numbers. it is a year old company. look to the left or right of you are any of those people jet.com customers? probably not. i have to go back to my book, the amazon acquisition of quincy. six years ago walmart stepped up to the deal and was talking to a company and through a combination of distraction and lack of faith, walmart lost the deal. mark lohr has a team, scott hilton, nate foss, he has a team of people that can think strategically about e-commerce and know it better than anyone. now they have a record of identifying opportunity

alongside amazon. nobody can beat amazon in convenience. you probably cannot beat them on selection. what jet.com has been able to do is beat amazon on price, find opportunities to create a brand that will speak to economic minded consumers. emily: we have been digging into some charts on the terminal. the walmart e-commerce business is not only declining as a percentage of its overall business, but their online business grow just 7% this quarter. is it worth it? >> in this game of e-commerce it is either grow fast or die slow and walmart realizes they see decline in the e-commerce sector. for them it is a game of how to, get back into the war. the crowned jewel is the pricing technology that jet has built. we have tracked amazon, walmart, and jet over the last year or so and as brad pointed out, we have, seen walmart.com has been expensive.

roughly about 8% to 10% more expensive than amazon. jet has been trading the same lines as amazon, sometimes even cheaper than amazon.com. this is a good game for walmart to sort of take a look at what the pricing technology is and bring that in-house, and potentially grow their e-commerce business. emily: the way this algorithm works, the more you buy, the cheaper it gets. the algorithm encourage you to buy in bulk. i spoke to mark lohr. listen to what he had to say. >> we do not see amazon or anyone else as a direct competitor. we see a $300 billion market in the u.s. growing. we think this space plays to multiple players. emily: david, i want to bring

you into this. amazon is far and away the leader in e-commerce, is this a play for number two? can walmart ever be number one? >> the simple answer to that is no. i do not think there is any near-term scenario where walmart will be number one in e-commerce. i cannot imagine that. if you listen to what we say here, it is for talent. $3 billion worth of talent. it is to get a better pricing methodology. they are paying $300 billion to reduce their margins and maybe increase their market share. i do agree, and doug macmillan is accessed -- obsessed with this issue that they have to become a more digital player. it just shows how hard it is for some of these lumbering behemoths to make the pivot they have to make. it seems like a costly way to achieve a desired result. emily: how much can jet really turbocharge walmart's e-commerce business?

>> i guess we will see. the big challenge is how do you utilize or exploit the assets that walmart has? those big stores, the huge distribution centers, the expertise it has a getting product in stores, how do you exploit that advantage for e-commerce? the question is, marc lo re and his team running walmart.com, can they get to the desired benefit if they are not running walmart? you do have some of the best strategic anchors of e-commerce. if anyone can pull it off, maybe it is them. emily: more data from the bloomberg, walmart is opening fewer stores and revenue is also growing more slowly. we have actually got a chart to show you that. the bigger question is, what is the future of walmart? how do they balance their e-commerce efforts with their physical store efforts? bloomberg, walmart is opening it is like an existential

identity crisis. >> let's take a look at it from a shoppers' standpoint. let's fast forward five years from now, this will be a high-tech game, not either or. walmart has the physical presence, they have the store network and they have that high touch game already figured out, being so close in proximity to the american shopper. but they have sort of lagged in the high-tech game, and this is a shot in the arm for them to bring high-tech into the picture so they can get a chance to compete with high touch and high-tech and go head on with amazon potentially. emily: that was david kirkpatrick, brad stone, and boomerang commerce ceo. coming up, a shakeup in the ride hailing wars in europe. we talk about partnering with a legacy carmaker and how they are identity crisis. taking a different approach to the market than uber. you can now listen on the bloomberg radio at and in the u.s. on sirius xm.

this is bloomberg. ♪

emily: welcome back to "the best of bloomberg west." i am emily chang. a few weeks back, halo announced a merger with gamblers my taxi, directly targeting uber. just last week, uber's older china business to their arrival. we sat down and asked if there were other markets like china that uber can't crack. >> i don't think i would never say that. the company of that size and scale and depth of funding and the quality of people in execution may have shown will be foolish to make a blanket statement, but clearly, one of the challenges you have operating a global business is

how much you do centrally versus locally. one of the things where i think reflects the chinese situation is when you are a local player with local expertise, that can give you an advantage over in terms of size, scale and funding. >> hail is an example, gm investing $500 million in lyf t, how does this layout? do you see consolidation in this industry? >> difficult to know at the end game is. i am extremely surprised if there will be a winner take all environment, where one player ends up either through consolidation or through market domination winning the entire globe. i think we will be seen in the moment uber playing on a global basis within the emergence of regional champions, whether that is china, india, grab in

southeast asia, lyft in north america, two or three players in south america, or europe, so i think for a while, there is regional domination that starts to play out. and then how those players, whether they end up merging or talking together, i am not sure, but i think what the perceivable year both future, you will see this evolution of regionally dominant players taking shape. emily: globally, how many ride hailing players do think the market can sustain? andrew: as i say, i think you probably have four or five potential regional champions that complete strongly. it is a scale game. you have heavy, fixed cost at the center and the more volume you can push through, the more economically viable it becomes, so the regional players start to make a lot of sense. i think to your point, you might see some of those originals, as we have seen in the past, and you might see some form of those

regionals start into it together and move together, but whether you will see one or two globally dominant ones and then very small local players beneath that, i doubt. i think you will start to see this regional evolution and these regional players playing quite strongly for the perceivable future. emily: what kind of subsidies are you seeing from competitors and other cities and how of the resources of daimler help you take that on? andrew: that is one of the big benefits of the deal. we now have a shareholder base that is willing to quite aggressively go out to building share in the space. they see capturing the data, the patent of on-demand urban transportation as key to that strategic feature, so for them,

they really want to see them my taxi business income the leading dominant player or even more dominant layer across the european footprint, so having that in their pocket and ability to fund will help us play on a more even playing field compared to what may have been the case before. emily: what is your plan to overcome regulatory hurdles in europe facing a lot of different technology companies? andrew: i think it is important to note that either thehailo or -- the hai lo or my taxi business uses the phrase called constructive as opposed to destructive, so it is slightly different to other markets around the globe. i would say slightly socially more democratic in nature, where

the regulatory environment is there to deliver the best solutions for the city, so we do play within the regulatory infrastructure as opposed to trying to necessarily change and break that significantly. that i think is back to your original question, what are the advantages, and when we have is we are looking to play and improve the regulatory infrastructure for the benefit of the city, rather than to change dramatically. emily: is the consumer startup phase getting saturated? where they see the seeds of opportunity. this is bloomberg. ♪

emily: this week in our weekly

roundtable, where we dive into test investing and capital games, we hone in on early-stage investing and we heard from founder and managing partner jeff, known in the venture community as a super angel, backing startups and we heard from an early backrub slack and square space and facebook, as always spotify. take a listen. brian, you have had the couple of wins. you invested and your previous firm ended jet at xl, which just got bought by walmart, so first of all, what do you make of these huge acquisitions in the consumer space? brian: you have these large companies with billions of dollars on the balance sheet recognizing a great way to innovate is acquired talented teams of unique insights. if you look at both of those companies, they are not necessarily the traditional types of companies that would get acquired. it is largely a great innovator

when it comes to approach of marketing and run it comes to business model, which had not been done previously in the cbg space and a lot of people looked at this where they were reselling something you could our did buy on amazon, and it was attractive to our customer. on the jet side, i think a lot of people in silicon valley looked at the company and scratch their head, but jet is focused very much on audience that is not a typical amazon customer. there are a lot of people that search first based on price and convenience second. emily: i am not scratch my head about the idea but this is a barely year old company that got bought for $3.3 billion.

how can it be worth that much? brian: a lot of times, the value is based on what the opportunity is with the acquirer. another example would be this book -- would be facebook or gm buying a company like cruise, but if you are a large business, and for walmart, they are getting threatened by amazon, their e-commerce growth has slowed in recent years, so instead of doing these smaller acquisitions, which may not ultimately move the business, it decided to make a boulder move and work with the company like jet with a fresh brand that appeals to be in good demographic and amazing team, which could have a broader impact on walmart's business. emily: not to take away from them, but there are companies that have ambitions, presumably to be independent businesses. do you think that m&a or ipo's are the new exit strategy?

jeff: i think the market has been challenging this year. only five ipo's so far, and having a couple of companies in that case are looking at what is going on in the ipo market and bankers are saying, maybe you can go or not go, so there is not the pressure to go out in the environment, whereas, if there has -- has been awesome m&a, whether from the enterprise space and people are opening up to the change. once you are out as an ipo, you need to perform and the get the average performance of the 2015-2014 ipo's, so i think as a ceo, you look at the payback of $200 million or more versus the ipo market. i have a couple of my guys who say i would rather m&a. emily: that is my next question. you had a big exit with super

cell. do youfer companies go the m&a route question mark --? ipo is expensive, takes a long time and you do not necessarily have control over what will happen. brian: for us, we are really focused on building strong, durable businesses. facebook had several opportunities to seller leon and rear happy they went the public path because having a public currency has helped them be aggressive with things like what's up and instagram. emily: what about right now in this environment where we do not see ipo's, where it seems up the funding environment is tightening up and people are getting more picky? brian: seen public company is hard existence because if you have one bad quarter, it will take a long time to get things back on track. some of it depends on what is

the setup for m&a? if you have a strong business and you can approach and monday from a position of power, you can set it up so you're running a relatively independent business under the above the acquirer, so if you look at the opportunities of things like dollar change and jet have, they are not going to be put in some office on the side. they have imported operating roles going forward. it is the founder's choice at the end of the day. it is hard to push someone someone popular the other, especially in the daypacks -- especially the m&a path, but if you have a strong business, you will see if you will have an ipo, or if you keep growing the company and think about it sometime down the road. that is the kind of flexibility we want founders to have and that is why they give themselves that flexibility. jeff: if the founder of fines this opportunity and once the south, then you think as -- wants to sell, then you think as

investors are you make the argument, but ultimately, you will go with him or her, and likewise, if they have an opportunity to sell but they want to continue, then you will do the same. it is always smart to present the pros and cons and essentially you support it. emily: coming up, improved living standards in low income communities. we are speaking to postal impact, next. this is bloomberg.

emily: turning now to impact investing, finding profitable ways to deliver basic services to rural and low-income communities, a small to met postal impact bounded by mental investors, aimed to do that. the investing partner joined me to discussed.

what makes a good social impact investment and how is it different from a consumer internet investment? >> the way we define social impact is a company that can improve the standard of living and then give opportunities to low-income consumers. there are many ways to define that and that is what we look for. the most important criteria we have when we invest like this is to put consumers first. today, you see a lot of conflicts between shareholder interests and consumer interest, but if you look at industries like airline, hotel, thanks, -- banks, there is a certain point between the conflict of what is best for the business and consumers. the focus of impact investing is to put low income consumers first for the company, and the goal of the company is to stall as many consumers as possible

with the best quality product of service and build a sustainable company around that. a really good consumer internet company should have the same agenda. there should be a shared vision there, like amazon, for example, would share that same vision. but not all companies are built that way. this impact enters that activist agenda of same, this is how the companies should work. the shipper consumer interest first, and that will create the most long-term sustainable shareholder value asset. emily: you are investing in things that people will not only in use but need, like energy, education, not consumer products you may or may not use. tell me about the specific kind of services that you are focused on. sandhya: we look at what we called basic services as opposed to discretionary services. energy, education, finance, the so-called products that improve

the standard of living everywhere. what we do is find companies that can take distinct technologies and put together a product that creates accents to the service, which means take something really standard like solar panels, how do you go create a service to rural sub-saharan africa? you use simple solar technology available everywhere and has rate tech companies like solar city already developing business models around it read we have invested in companies that have not electrified hundreds and thousands of homes. we have invested in companies that offer high quality standardized education services. in africa, india, and also work in partnership with local

government because they have found ways to automate that product using technology and make it far more efficient than local businesses have been trying to do in centuries. emily: how do you assess risk and return? how might that be different from traditional consumer investments? sandhya: great question. the wave risk and return work, it is not so much a function of what the company's mission is but it is the market they are working in, so the market has less money and the return is lower, so if you work in silicon valley, where customers will pay a lot for convenience, versus working in rural india, or people are value conscious and will not pay the same for that service, so it is much more a function of the market than the business model, which means that

when they look at the kind of market we are creating or operating in, the expectations for having successful companies are lower than the return expectations we have from the same business model in silicon valley, so what we do is we adjust our investment model to fit that create the make smaller investments in hand to return rates that we can expect that are similar to the venture capital market. emily: how is the organization? i imagine it is different selling a global impact investment rather than what is in the organization. sandhya: we have very, very supportive investors we work with. i tell people who understand how technology can disrupt a market, how technology can build affordable and cheap solutions and very expensive solutions. we are working with people to really understand that and are highly market, how technology can motivated to support positive innovation, which is very focused on a different kind

of consumer then more fortunate stick investors might be, so that is something we have not the worried about. running a business comes down to how do i do what my customer and how do i build something that is cheaper than what my customers willing to pay for? emily: you are focused on india, africa and he used to work at sequoia in india, one of the most venture capital firms in the united states. i am serious how their approach to india is different given that that is where so much potential is right now. sandhya: they have a much bigger presence in india. they are a much larger fund, but hopefully, there will not be much of a difference. emily: coastal impact investing partner sandhya hegde. that has it for this edition. tune in at 3:00 p.m. we will see you then.

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emily: he says he never aspired to be ceo, yet, now finds companyrunning a aiming to prove wall street wrong. it was a match made in silicon valley have been. he became the ceo he never expected to be. hoffman stayed on as chairman. linkedin faces