♪ caroline hyde. this is the best of bloomberg technology where we bring you from ther interviews week in tech. we have ibm's conference and rometty ibm's ceo ginni . plus, salesforce teaming up with ibm. at the same time, marc benioff says the window for acquisitions is closing.

and eliminate jerks. pledges to dober as it improves its work environment. first to our lead. ibm is focusing big on the growth in the cloud, which makes 17 percent of company revenue. we caught up with ibm's ceo ginni rometty and ousted what it is about ibm's loud that sets it apart from the fears competition. it is the platform for new business. one is it is enterprise strong. enterprise strong, but you have got to prepare for the future and there are two more things about her clout that are very distinctive. one is it is data first architecture and it is called

native at its core -- it is cognitive at its core. you have got to put innovation i and all the time, a pipeline. today we also announced production on the ibm cloud. that up stranded sections -- that ups transactions at 10,000 the second. that is what we need to do. and we are the first quantum computer available on the cloud. you have to do it on the cloud. you cannot do this on your premises. at the point is enterprise strong, you have to have security better than anything else. yes, be around the world. be those things. data first, you've got to protect the client's insights, not distribute them. when you look at the consumer guys out there, what they do is take data and really it is how

they monetize it. the value for our client is in their insight. we can give them data for sure and tell them that data is not intermingled with someone else's. we are not monetizing them. we can show you how to protect it. that is data first. the third part is this idea of cognitive at the core and that is locked in. and what is different, you see ai is a small piece of it. you think about something. with all of the data in the world, 80% of it is not virtual. onhink everyone thinks it is the internet. 20% is not. that to me -- you will, everyone will be cognitive. >> the cloud at the moment is 17% of your revenue?

>> 70%. -- 17%. wanted towhere do you be? >> we do 90% with the largest banks in the world. we run 80% of the biggest airlines. when you look at the telcos, 90% , 90 percent of the credit card transactions come through us. it is bringing them into a future world. caroline: will it build your revenue? our globalthat in technology business. many people say that is running services for other people. that will go down. it hasn't. we have been building our backlog. what i think is a bit of a will build many new things on the cloud, but they have reasons they keep other information -- they have invested in big systems and data. the big thing we have to do is building hybrid cloud

environments as well as be the best public cloud. we are in both of these worlds. caroline: will the revenue that you are garnering from the cloud drive revenue growth in coming years? >> it will, it will. revenue -- it grew 35%. when you look at the cloud, our watson, thatenue, is what we call strategic imperatives. that part of ibm, that has been growing 13%. , complementedbm by work we do in our core franchises, which may not always be growing, but they are really important. we are investing in the areas where we are investing to grow. caroline: china. >> yes. theline: talk to me about

partnership. will you always have to be partnered with someone in china? we have a very large business in china. we run all of ibm's business there. we have been there well over 35 years. 35 years in china. very well-established brand. very well-respected brand. the banks are the most sophisticated financial operations in the world and require volumes that are very difficult to manage. great attitude and agility and skill and wanting to report. and as well they have a huge business that will be on this cloud. they will be a partner in the cloud. and it will be a great footing, i believe. they have a very big english system in addition to the clients ibm has.

ecosystemhe large around wanda coming together. i look forward to that being a very successful partnership. come, marctill to benioff, the king of the deal, says the window for the deal is closing. and reminder all of our programs on bloomberg technology are live streaming. check us out 5 p.m. in new york, 2 p.m. in sanford scope -- in san francisco. this is bloomberg.

caroline: we continue our main cloud ibm's business with a system called interconnect. some 20,000 ibm customers gathered in las vegas and ibm announced it is partly up with salesforce. thereby offering a horrid vance data analysis. we caught up with the ceo marc benioff.

when i asked him what ibm wants provide from salesforce that it does not already have? you just moved to san francisco. those crazy hailstorms we had last week -- yeah.ne: yeah, >> we manage the top five companies with salesforce. these companies want to notify customers to put their cars in the garage. we will save them a lot of money and the combination of ibm and salesforce let's is do that. what's and is going to tell the weather, hey, the hail is about to come and we can notify those customers, get that car in the garage. the rest is magic. are a company that built your own products. was it just such easy, low hanging fruit to go with what is

already on offer? >> we had technology with salesforce, but is very tightly integrated with our core platform. it has been available to all of our 150,000 salesforce customers all over the world. the opportunity with watson is to bring a general purpose platform that is programmatic so customers can implement our solutions with what watson can do. caroline: where else in the product line? where is the low hanging fruit? where is the demand coming from? , almost every industry can be much smarter. you find employees are able to extend their capabilities through artificial intelligence. with salesforce einstein, for example, we see people being more productive than ever before. they know exactly who to call on, when to call on them in a

prioritized way. that is all done by einstein. just announced a partnership with a w s -- aws in australia. where geographically are they eating up artificial intelligence? >> you see that across the world. software is eating the world. ai is starting to percolate into that software across the world. alle are seeing ai inside of these different jobs and work streams. the advances in ai, i think, have far exceeded our industry expectations. and vendors like salesforce and also ibm can extend and complement our solutions with this amazing technology. intelligenceine area deep learning as well. you probably saw two weeks ago coca-cola announced they will build these coolers that have

cameras and them, and they will be able to do real-time inventory management. so when people take those coax out of the cooler, trucks are rolled to the stores knowing that they need to replenish those supplies. does it mean for your bottom line? what does it mean for your topline revenue growth? what does ai build into that? >> salesforce is already in the top five software companies in the world. we just delivered a phenomenal quarter. i think it is the best quarter for revenue. we exceeded our expectations. a lot of that is being driven by ai. it is being driven by a lot of major trends that we assigned ourselves to very early. because our customers are really

moving to those for trends. that is how we have created extraordinary growth. the fastest-growing of the enterprise software segments and will be the number one segment in the enterprise software industry by 2021 and we are the number one vendor in crm. we are uniquely focused on sales, marketing, analytics, commerce as well. you just mentioned how ai will be affecting jobs. does the world realize how much different they are going to make live with jobs? >> that is why went to washington. i'm really focused on that issue. the workforce is going to dramatically change. lot bying to be driven a artificial intelligence and

these changes. new jobto start doing development before that changes. i called for a moonshot based on a lot of the things we have learned from countries -- like you were based in germany and switzerland. we can bring that to be united dates and improve the quality of our workforce. government our u.s. listens and creates that moonshot. there are so many opportunities to educate people, especially in the united states. there have been phenomenal opportunities. commuting colleges, universities, our k-12 systems. there are so many people ready for these next generation jobs. i look at the things that we try to do bringing veterans into our .ompany and retraining them in the bigger picture, salesforce will create 2 million add $400 billion to gdp by 2020. we are really focused on

creating these new jobs and getting people ready for salesforce jobs. i think apprenticeships are the key and also automation and one-on-one. you have been acquisitive company. does that remain the case? >> the last year, i think i was super clear that there was no --dow that was really oh and really open. demandht a number one company and commerce and we deliver demand solutions so much . toadidas will do $1 million $2 million on the e-commerce platform. we have an incredible productivity tool. a lot had happened. as you know, this year, the markets are roaring. so the m&a windows have

narrowed. because they narrowed, i just a see us doing a lot of m&a this year. salesforcehat was ceo marc benioff. coming up, overhauled a held a news- uber conference. all the details next. still to come, avoiding being hacked. that includes china's baidu. you more about combating hackers, next. this is bloomberg. ♪

caroline: now it has been quite the week for uber. continued pro crises, the right hailing giant held a rare conference call. their plans tout read them culture that has been rocked by scandals.

what scandals? jeff jones and three other employees headed for the exit. over proprietary information and of course the sexual harassment suit. our correspondent was on the call in joins with more. asit was sort of advertised we are not going to make any news and they said some interest inc. they said they would have a diversity report by the in of the month. eric holder's report on their sexual harassment allegations would hopefully yelled by the end of april. they made commitments. the hr said they had a cult of the individual and they needed did change that. the head of hr -- cory: the head of hr report to their own organization as a cult? >> i think they said they had good values, pull yourself up by your own bootstraps, and that creates a culture where one superstar is more important than the morale of a team.

just unusual for company to do -- i mean, companies have problems. but this airing of the dirty laundry in public just does not we know. the uber >> it is a company consumers have a close relationship with, so i think there is a big obligation to own up to your customers. salesforce talking to corporate's. they need to explain to riders and drivers. drivers were a big theme on the call, saying they are going to trytry -- they're going to to improve the product to make their lives easier. cory: when you have a business where you do not own the stuff, you're really demanding the attention of both customers and providers. these guys are leaving college every day.

>> exactly. ubernk what guys forget is won it to start this year obsessed with brand. that is why they wanted jeff jones, a marketer, to be the president. it was all about brand and it was destroyed the first three months of the year. now rachel holt, one of the top executives -- call, ivaquin from the guess. this is jeff jones -- i guess not from the call. that seemed like it was really -- that really seems like it's referring to something went down. a biting comment. clearly he disagreed with travis kalanick, the ceo, a couple issues. i sourced at some of them. the tipping issue, he supported tipping drivers. the other was safety on the platform. he had concerns. the leasing program encouraged

less safe drivers to join. there were a number of clear debates within the company in which they seem to be taking different sides. caroline: now to accompany out with earnings this week. consent posted fourth-quarter earnings that missed estimates. operating costs are surging and tencent-- 10 sent -- faces competition. they are adding more space to re people on its we chat service. 60% from themped year before. i think investors are ok to take a hit on the profit margins at this point because they are seeing a lot of growth and other revenue streams. they are not just relying on the old growth engine of mobile gaming. they are expanding into payments, into new content and

the video business as well. aroline: when you look at profit of 47%, most would die for that sort of number, not be upset by it. of the video.e is that where we are seeing this, in? >> management reiterated over and over why video is so important. there are pretty significant losses. cent, alibaba, they are funneling billions of dollars to create content. they realize that taking the loss in the short-term is worth it. video is such an important way to get advertising dollars, suspension dollars, and to hone people into their ecosystem. good content drives users and like amazon, they know that content will drive more people to the platform. caroline: i am fascinated by the new mini programs. it is an app within the wechat

program. how much is this catching on for wechat, and how much of a threat is it to apple and the app stores? >> it got attention because, as you said, it seemed to be a the apple store. we did not get at 10 of data on the metrics. they said the purpose of this is not to make it easier for users. you can scan a qr code and then the mini app pops up within wechat. they say this type of ecosystem has created more downloads within the app store as within the app. barrier a pretty high of entry to get someone to download something. they can access it through wechat, and if they like it, they will download it, too. caroline: most chinese companies

are taking measures to avoid any data breach, including chinese giant i do. we have the story from beijing. idu's head of cybersecurity knows he has a fight on his hand. sackers passed by baidu' security every day. in the most serious case, a gang was put together to steal their prized automated technology. shows what definitely know ineone tried to hire someone the underground market to steal this from us. reporter: cyberattacks can come hacking -- automated bots or international gangs. they are backing what might be called ethical hackers like the blue lotus team.

[indiscernible] reporter: they showed me how they could open up my phone. try a site like youtube.com, and then we see "hacked by blue lotus." reporter: it is one way to keep china's best i.t. minds onside and there is a growing demand for ethical hackers. find weaknesses that can be dangerous and then report them to companies like apple and google. du has also paired up with some of its competitors alibaba.ent and >> we must help each other. we are not enemies. they are the enemy. threats are only expected to increase in china's

tech giants are in it for the long-haul. tom mackenzie, bloomberg, beijing. caroline: still ahead, google's add prices spreads with -- ad prices spreads. this is bloomberg. ♪ .

welcome back to "the best of bloomberg technology." i'm caroline hyde. a controversy erected last week after the london-based "times" newspaper reported some ads were running with videos that promoted terrorism. the world's six largest advertising and marketing company pulled itsads.

the crisis went global after marketers including at&t, verizon, and johnson & johnson polled spending as well. google promoted its policies and many advertisers were waiting to see further details or results ads again.cing >> i think there's a couple of things. in the political limit we are i end there's a lot of sensitivity around eight beach, our rounds terrorism. and there has been growing noise in the industry about google ad facebook -- google and facebook. and now they kind of see an opening and they are really seizing it. caroline: and jpmorgan is also taking ads off you too. -- itfirst to you affected the u.k..

the worry was this could have global repercussions. it clearly does. how much do you worry about the stock performance therefore? toi think it is subject headline risk. you will see more brands concern.ting their so far, google does not appear to understand the gravity of the situation. on some levels it's mind-boggling. on others it is not surprising because it's very googley, i guess. it will continue for a while. they will solve it eventually. boycott not about the per se. we will never notice that. we will never see it in the numbers, unless it did persist

for weeks on end. every advertiser is going to have a conversation with google about using the strategy, whether the strategy is about moving money into digital, not spending intot google and facebook. the conversation is all about brand safety. google is completely on the defensive for the next three to six months. that will hurt their ability to expand the business at the pace that they would have. out ane: let's take it step and let's look at the display ad business. this is not the search is this of google. this is not the major cash cow. affect advertiser spending generally? >> search, as you said, is

google's read and butter. it represents three times what is bent on video on youtube. so, search in the u.s. is about $37 billion this year and about 78% of that is on google. they are by far the dominant player. it is about a third of what search represents overall and google has about 20% of the u.s. digital video advertising. we are talking about egg dollars. this does come at 8 -- eight dollars. this does come at a critical time for google. as brian was saying, they are trying to expand the conversation. they are trying to draw the tv advertising dollars. draware trying to themselves as a haven for tb style advertising.

search business is something that they know how to do. they know it better than anyone else. but video is something that certainly google and youtube have a major presence, but there players who other are buying with the same advertising dollars, so the stakes are really high. , you have been nodding your head throughout. brian called this "rather googley." reacting faster or taking it seriously enough? fair, other analysts , to hisgging this off point that this will not be material on the revenue. but google has kind of whether this before. they are not really panicking and maybe to brian's point that they should be, we have to think about the fact that a lot of advertisers do not have a lot of other options. where else are they going to go?

they may go to facebook. they may go to snap. there is a new advertising channel on verizon/aol, but google is still the best paying for the buck. buck. best bang for the but two: now not one analysts are breaking from consensus with the biouy on snap. this is bloomberg. ♪

caroline: a story that we are watching, a consideration whether to make a higher bid for monogram. they announced a deal pending

regulatory approval. a competitor swooped in with a $20 per share offer. t willunknown whether an counter or wait until they finish due diligence. instagram would allow you to set restaurants byh clicking a button in their profile. ais will give advertisers direct way to measure the power appse act could challenge like opentable. now to snap. while his ipo but a lot of fanfare, but also a lot of scrutiny, which has been slowing user growth. not one analyst gave the company a buy rating until this work. first had a buy rating and a

$25 price target. then on wednesday, another followed suit and snap shares gained 9% in early trading. we caught up with him on wednesday right after he cast this outlier review with editor at large cory johnson. >> it boils down to three things. one is innovation on the camera. we really have not seen that much innovation since the invention of the camera. as we push on the software side, i think we will be in a position where they could take over the camera app on your phone. that is the hook. the money, the holy grail will come from the premium content deals they do where they curate that and offer a differentiated mobile optimized experience where with all of the competing platforms that are plug-in playing, they can channel the

content into mobile. and you can really, you know, separate yourself from the back. lastly, it boils down to incentives. if they move more toward a tv model, what is going to happen, the financial incentives of the content producers will jive much better with the interest the end-users are looking to face. when you have that balance, i think you are in a trajectory where the user will grow at a 60% clip over the next two years. respond top that, if you will. there are lots of needs there to achieve. principally i am embarrassed for james for the price target like this on the stock. no, i am just kidding. how much revenue can the users support?

one.an interesting how many ads have they not yet put on? where is the possibility for more inventory? can they actually sell that inventory, or is facebook and google sucking up so much of the ad dollars for online advertising that there is not room for a lot of other outlets out there? i think that's an unknown question. with thisg issue coveted cover they have competition with instagram -- another big issue with this company is that they have competition with instagram. it's fundamental they will have to sell ads on their platform. it looks like instagram's story is keeping that from happening. we will know in a couple quarters whether they can grow this business or not. james, in response to the question out there, can snap thate a new model, content

has not been used before and do something different and make -- not potentially at the expense of, but at the same time as facebook and the like? james: i'm going to have to fundamentally disagree. cory: what? how dare you. james: they are trying to get the immediate conversion right then and there. it is based off hyperbolic content and a lot of things that are, you know, what you can call click bait. cory: fake news. a revenue sharing model. the more clicks, the more revenue the publisher and facebook generate. what snapchat is trying to do is youicate television where have brand dollars and you compare facebook and snapchat dollars. facebook is about 30% of the digital ad market.

the television dollars are 40% of the $600 billion ad market and they have not moved over to digital at all. why haven't they moved? because the at product and the experiences on mobile have not jive with the marketing goals these companies have. think if you can create tv like experiences with premium content, which facebook is not willing to pay for and snapchat way, thoserated dollars start to come in and a much more meaningful way. it's not fighting dollar for dollar. it is winning new dollars that have been stuck in television. cory: i think what we have seen in technology businesses is the big companies are so much bigger than the number two players. intel is so much bigger than amd. google is so much bigger than any other search engine could

dream to be. and they are fighting over peanuts because they do not get that network affect and you can see that in the slowing user growth that they can get around. they can throw as many ads to this user group that they can stand to and that may help with revenue in a small way, but they need to change the user growth and that has not happened. james: in fairness, the user growth was only moderated in the second half of this year. android was a slight hiccup. but where are the users growing? they are growing from the most affluent, dominant, tier one markets in the world. whereas facebook is growing from around the world and you can argue, lower value users, users coming to the platform. if that is the case, where you own the most affluent your -- , and if you world can start to shift of those dollars over, you can move it in a very meaningful way.

that wascaroline: james and our editor at large cory johnson. well-known and upstart restaurants getting in on the action. we have more on this story. reporter: the automation wave has arrived. mcdonald's is the latest fast food company to take advantage. the burger chain has begun ordering mobile payments. it says all this 14,000 national restaurants will be equipped to handle mobile preorders later this year. the creator of the big mac is a bit late to the party. other fast food chains have already adopted this technology to boost sales. dominoes, for example, is a leader here. at for the last five years, company has been emphasizing all the ways you can humanpizza with minimum

contact. it has more ordering methods with facebook and twitter, complete with emojis. and since the end of 2008 when , itso's was threatened share price has increased 60 fold. it is now worth $9 billion. starbucks also an early adopter with mobile pay technology. however the company may be a victim of its own success. who order drinks and food on their phones are, in some cases, seeing longer lines, resulting in lower traffic and sales. one san francisco-based railroad -- restaurant chain may offer glints of the future. it is an automated food chain were all the ordering takes place on mobile. there is no need for cashiers or

servers. man handsw hu behind the scenes. all of the evidence shows we are marching toward a fast food world where human intervention is optional. caroline: coming up, we catch up with the fitbit ceo. mountingto the challenges for the company. if you like bloomberg news, check us out on the radio. this is bloomberg. ♪

turning 10itbit is and the last decade has been anything but a walk in the park. five years ago bloomberg's cory johnson took awoke with the then private ceo james park. five years on, one ipo and 60 million products sold later, they took another walk on the streets of san francisco. cory: when we talked five years

ago, you said you were software guys making hardware. james: when we started, i don't thought about the challenges we would encounter. we just did it. we are really software guys. we've never done hardware. cory: now five years later, james park is speaking to that claim even though it is the hardware that made it a household name. it's really about the combination of the two working well together. that creates the magic. i don't think we can classify ourselves strictly a hardware or software company. be hardper growth may to manage, but growing still slowly may be as difficult. james: we had a rocket ship of a company for quite a long time. as you pointed out, we shipped their first product in 29. shipped 5000 units. stratosphericetty

growth. now the challenges we are moving into a slightly different environment. it is a new set of issues. from anoving environment that is hypergrowth to one where i think we have to be more efficient and focus on, you know, fixing a lot of the inngs we had kind of ignored the past just because of our growth profile, but i think that's a good thing for the company. it's time for us to kind of reflect, look at the things that are working. fitbit's first-ever contraction has been painful. shares have plummeted 71%. so many companies have stayed longer for -- have stayed private for a longer time. i wonder when you look back to the ipo, where are the

negatives, where the positives? alwaysthere are positives and negatives to these positions. the positives for us was for the longest time we were not very well capitalized as a company. we had hypergrowth, but the balance sheet was always pretty light. we used the ipo primarily as a financing vehicle and when we went public we raised hundreds of millions of dollars and it was the largest consumer electronics ipo in u.s. history. that was a huge event, put a lot of cash on our balance sheet. us capitol to operate the business going forward. cory: working capital -- capital, r&d, m&a. he gives a lot of security to the business. cory: when you look at the stock price and stock price is stock price, but i wonder what that

means for you in terms of a business plan and keeping the business plans. if you lower prices and cut margins -- you have chosen not to do that. why is that? is not something that you can reverse from. we want to make sure that people really value our products. maintaining rising discipline is part of that. we invest in pretty innovative and original research and development and that is something we want to continue. the stock price and the public investors, that's all very important considerations into how we run a business. but i think what shareholders would like us to see is properly manage the short term interests, but also look at the midterm. we hope that we are able to do that as a business.

cory: fitbit and announcing a restructuring plan, laying off 110 employees. how does fitbit plan to turn it around? have way toonow we many trackers out there. we are going to streamline our product portfolio. and our real focus is coaching, guidance, personalization. the later adopters in this category want solutions rather than just data and tracking. and we want to move into adjacency like smart watches. acquisitions of pebble, vector play into that strategy. we have announced we are entering that category. it's an addressable market. that is a huge area of growth. not only that, there are factors yonder the wrist we are looking -- the yonder the wrist we are

looking at as well. and we are looking at the business into perspectives. one, consumer, but more important, what we call in a price health as well, where we have already targeted employers, is starting to target in a morph and eight more focused way insurers and other health care partners and the ecosystem. and 100,000 units at a time? there will be incredible opportunity for bulk recurring sales tied to a health plan. it comes downly to inspiring sales and getting customers on their feet. what would you have told a five year younger you? james: there would have been a lot of challenges that were easier because you are not as visible, you're not being judged on a day-to-day basis. cory: right. james: a lot of the things that you do to pass to growth and profitability are definitely a

lot harder. what i think about on a deal basis is how we transform fitbit into a product that is kind of nice to have into something that is a must-have. a lot of that is going to come into how we integrate more effectively into the health care ecosystem. ceoline: that was fitbit james park and bloomberg's cory johnson. in this edition of "out of this ceo elon musk is no fan of authorizing money for nasa. timecluded for the first exploration of mars. but in a series of tweets, musk tweeted that it does not include funding. he says that perhaps there will be a future bill that makes a difference for mars, but this is not it.

night onear from bill his record -- bill nye about his recommendations or trump's transition team. all our programs are live streaming on twitter. check us out. that is all for now. this is bloomberg. ♪

>> japan is undergoing many social and economic changes. first among them is a rapidly declining population due to falling birthrates and aging. how is the country planning to move forward and sustaining economic growth? by drawing on women, senior citizens, and foreigners. this could serve as an example for countries around the world who face the same social changes. this episode decides the -- as well as paths to the futu