♪ cory: i'm cory johnson in for emily chiang, and this is the "best of bloomberg technology," where we bring you all our top stories from the week in tech. coming up, is the iphone x just too expensive? analysts cut their numbers. amazon announces strong sales of the alexa. we will look at how the smart in tech fits into the plans of amazon for 2018. and among all the cryptocurrencies emerging this year, ripple is breaking out of bitcoin's shadow. we will hear from ripple's ceo.

but first, apple analysts have lowered iphone x shipment projections for the next quarter citing weak demand late in the , holiday season. iphone sales have declined by 10 million units next quarter. other analysts cite the iphone's high price and a lack of groundbreaking innovations. we talked about that to bloomberg technology's alex webb. alex: the iphone x was released six weeks after the iphone 8. and so there was a fear that maybe if they got too close to the release date of samsung's next high-end smartphone which will probably come in march, there would not be enough demand to sustain the demand they otherwise have to get. cory: competition is another part of this? alex: exactly. particularly in china, a lot of the local manufacturers are coming out with products now which have a better price point than what apple is able to offer but have similar very , similar features. nobody quite yet has the face identification or the sensor

that the iphone has. some of these analysts were writing earlier today, that has not been enough to bring up demand for the product. cory: it seems like a big part of the apple strategy of the phones is drumming up the general marketplace of potentially new applications and stuff that we have not seen. the phone could do really cool facial recognition stuff or , but there are not a one of applications for it. it has interesting features that the earlier phones did not have, but there are not really any uses for them yet. alex: it is the kind of curb to being apple. they are very secretive what they have in the pipeline in terms of hardware. when they unveiled the phone in september ahead of its release in november, that is not a huge timeframe for analysts to -- for developers to start coming up with new tools. it could be that in the coming year, 18 months, we see far more compelling innovations which use , these 3-d sensors. cory: we will never know the mix between iphone 8 and iphone x, but if they sell more iphone

x's, both the top and bottom line, because the phone is so expensive, are going to do so well. there is always this chatter saying china is not going to buy , the expensive phone, india is not going to buy this expensive phone. we have seen quite the opposite. china is willing to pay for the luxury item. alex: the other thing you have to think about is the iphone 8 is largely the same form factor as the iphone 6. there is not a huge amount of change between these three generations of phones, 6, 7, and 8. that means the admissibility materials have come down. but the price point is still pretty high. it is not the end of the world is -- if apple is selling iphone 8, rather than iphone x. the 8, three or four years, then the components are very cheap for them. cory: so, gross margins might be better on the iphone 8? alex: it is hard to tell. there are estimates that say they will be better but not have been significantly worse than on

the x. cory: to be clear, the estimates, even though the numbers have come down, it is the biggest first-quarter that apple has ever had. 10% year-over-year revenue growth on one of the biggest, most profitable companies in the world. alex: absolutely. apple itself does not break out any iphone revenue numbers. and so what we are going to be seeing? cory: specific iphones. that means that, of course, the forecast, the revenue forecast for apple that they have made themselves, that might already take into account some of the demand. cory: that was bloomberg technology's alex webb. for more reaction of the forecast, david westin and alix steel spoke to gene munster. he says, don't worry, be happy. gene: if you take the numbers for face value, for the production in the march quarter, that would imply above 50% of the phones and the next year -- in the next year will be the iphone x. that is the $1000 plus phone. and investors are expecting that number to be 25% to 30%. so this is i think expected, number one. and number two, i think it is

actually a positive. david: that is the first quarter of 2018. take us back to the fourth quarter of 2017 for a minute. they brought the 8 and the 10 out at the same time. the 8 sales were disappointing because people were waiting for the x. do we have any indication whether they made up the disappointing sales with the iphone x in the fourth quarter? gene: we have a little bit of an indication by looking at the supply. and we talked to some of the builders, the suppliers. they have been struggling to keep up. if you look at the inventory in the u.s., we checked this every day, we looked at about 140 stores every day. and they are just reaching full supply. they are at 97% as of yesterday. my point is this, if there was not a lot of demand for this phone, the iphone x, you would have more supply. i think this is -- the numbers are going to be reported in the next three weeks, and i think they will do better than expected in terms of the iphone x. if i was going to boil the whole apple story down over the next

two quarters into one thought, it is this idea that asp, the average selling price of the iphone, is going to be going up, and that will be the key factor investors will be focusing on. david: talk about the asp, because there are reports that there is some resistance on the price because as you say, it is , over $1000. do we know if in fact customers are getting price-sensitive when it comes to apple? gene: we can look back at what the supply is, and the supplier remains tight, to indication -- an indication that the demand is good. i think the simple takeaway is this. the asp's are going to go up meaningfully. we think they are going to be up greater than 15% this year. it's important to note the vast majority of people who buy iphones, greater than 80% globally, buy it on a monthly basis. and so you are talking about going from $40 to $48 a month, and that $8 difference is ok for most people. alix: does that mean that apple has to sell less of those iphone x's if their asp's are going to go up that much? gene: it can fire on those

cylinders. if you look at the bang for your buck, your phone is the highest utility that you are going to get for any technology. i think people recognize that. even though that is a big number, $1000, i think people recognize the value bet they are getting. david: what about overseas? china has been a big target for apple. there has been thought that when you get up to those kind of prices, it will get crowded because there are a lot of cheaper competitors over there. do we have a sense of how they are doing? gene: don't have as good of a sense there. it has been boom or bust. the iphone 6 cycle, they did exceptionally well in china, and the last two years has been more difficult. i suspect the first days of the iphone x is going to do well in china, but then competition will probably chip away. cory: that was gene munster speaking to david westin and alix steel on bloomberg daybreak: americas. coming up, big tech, big gains. facebook, google, amazon all saw double-digit gains this year. it could be headwinds on the horizon. plus a tumultuous 12 months for uber. we delve into the ride hailing app's biggest roadblocks for 2017. this is bloomberg.

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cory: as we close out 2017, tech companies are holding on to some historic gains. the nasdaq 100 up 30% on the year. it was driven by fast-growing sales, record profits, and hopes of continued growth. but a big tech reckoning could come in 2018 in the form of government oversight in a fractured relationship with users. we spoke with an analyst. i love the way that you have covered these companies because you're looking at a lot of these very big companies but with a skeptical eye, on some of the top issues we have seen them show. when you look at them, who is at the top in the coming year? james: it has been an interesting year because all of these companies have posted tremendous financial successes and definitely grown much bigger , than what many thought at the beginning of the year in their

own right. at the same time, we saw all of this regulatory scrutiny across all the companies. the election certainly did not help with that scrutiny. but with looking into 2018, i think you can handicap it with amazon likely in the driver's seat when it comes to favorable winds with the regulatory environment. but as you move down that list within the same group, i think google is next. they used to be the politically savviest. but then you have facebook. i think they are drawing ire from both sides of the political spectrum, which i think will get worse as we approach the midterm elections later in 2018. i think that scrutiny will only get worse from here, at least from the headline perspective. cory: so bad fake news headlines is what you are predicting for twitter. twitter, facebook, youtube, part of google. do you think that actually hurts financial results? over the weekend actually, facebook introduced this feature

that lets you find out if you actually retweeted or reposted something from a fake news site. i thought that was an interesting response, but done very quietly over the holiday weekend. james: i think financially speaking, it is full steam ahead for all these companies. you have amazon getting even share facebook continuing to , gain share versus traditional media outlets. google, the same story there. twitter, you know they are trying to carve out their own paths going more niche, but at , the end of the day, these companies will continue to grow. that's not going to affect their financial results. cory: what you are saying is a lot of headlines who will not care if it will affect their financial results. james: you do have to think about from a stock perspective, the degree of multiple expansion that is in there. obviously we have the earnings power, but at the same time valuations have been steadily rising for all of these companies. they are still relatively attractive for valuation

relative to their growth rate, but you know, i do think that is something investors will definitely need to consider. cory: do we separate investment results from some of these other companies? one of the things -- you mentioned legal problems potentially not looming for amazon. but boy, there is no company that scares -- they used to say when mike wallace would knock on the door -- don't answer because "60 minutes" is outside. amazon comes into your business model, every ceo in america is scared of that, whether it is a small business or a large business. i wonder if china's regulatory concerns will concern amazon? not least because this president does not like the washington post, which is owned by jeff bezos. james: sure. i think it will come, but it will come later. right now, you are in a situation where you have amazon moving closer to all the federal agencies with the aws. you have them shopping around their second headquarters, where all of these cities are clamoring for the attention to get that. cory: which means you will pick

everye off -- tick off single city you do not choose. they are going to make political problems. james: at the same time, you also have all these centers that are going to open up from a headline perspective, new jobs, and whatnot. so i think amazon is safe for now, but once you trigger some major headlines such as reaching up to $1 trillion in value, i think that that will reopen the floodgates for regulators to come in. because right now i think , regulators will be more focused on things that could potentially affect the election. and because because if this was actually an issue, the ftc would've scrutinized the whole foods acquisition a hell of a lot more than just a one sentence response, which we think was, wasn't -- cory: you are putting your faith -- you are putting your faith in government regulators? really, james? you are? james: i am just saying that there are priorities and there are incentives. what are the regulators incentivized to do?

it is incentivized to attack the things that, you know, can affect their political prospects. and amazon -- cory: yeah. i will give you that. i'm just giving you a hard time. james: i think 2018, the bigger story for 2018, all of these companies have been growing in their own right. but i think what you will see in 2018 is for them to start to encroach on each other's territory. you have the google versus amazon battle brewing. you have the google versus facebook battle brewing. and i think that those battles will continue to escalate. so it will be a question if not -- of not will these companies get bigger, but will there be a zero sum type of aspect? where share shifts will start to occur between the 2 -- i think that will be interesting. cory: it is curious that with the duopoly in advertising of facebook and google, you have amazon growing a big advertising business. and with the lock on search that google has, with the devices like echo, you see amazon getting into search in its own way.

james: exactly. you are eliminating the need to search on google explicitly when you can introduce a discovery , mechanism on amazon. when you look at google, the product listings have been the bread and butter for the company in recent years. as you shift that away, and then you look at the content side of the equation, where amazon is likely going to be the biggest content spender in the industry, potentially even eclipsing netflix, you know, so what are the the implications there for youtube and facebook as well? cory: technologies' most obnoxious product of 2017 maybe have been fake news. sarah frier looks at the fake news hits of the year and what social media companies can do to contain it. ♪ sarah: 2017 is the year that we realized how quick and easy spreading misinformation on social media is, and how profitable the spread of fake news can be. before the u.s. presidential election, fake news was a get

rich quick scheme to cash in on online advertising, but this year we learned it is also a tool to disrupt democracy. the kremlin-backed internet research agency reached over 150 million americans on facebook with inflammatory posts intended to stir conflicts over issues like race and religion. this is done with 80,000 posts boosted by $100,000 in ad spending. >> these ads are just the tip of a very large iceberg. sarah: and it resulted in google, facebook, and twitter all testifying in hours of congressional hearings about russia's tactics and how to try to stop them. but it is not limited to the u.s. the spread of fake news became a global issue in 2017. france and germany successfully fighting it in their own election. meantime, other governments are using facebook as a tool to spread propaganda. a genocide in myanmar, the rohingya muslims, much more.

so just what can big tech do to rein this in? facebook is trying the human route, hiring thousands of people to sit through that content, but critics worry about social media companies taking too many liberties and going too far with their censorship. twitter said that they shut down thousands of accounts. they are taking steps to get tougher on extremists. no matter what the sites do, one thing is for sure. fake news is going to get harder to stop. facebook often argues that it is a technology company, not a media company. well, to take on fake news in 2018, it may have to be both. ♪ cory: that was bloomberg's sarah frier. coming up, silicon valley joining us to talk about punctuated equilibrium. a big idea that helps explain innovation. plus, amazon could be a big holiday winner again, announcing 4 million people trying amazon prime in just one week. we will take an in-depth look at the e-commerce giant. this is bloomberg. ♪ ♪

cory: he has been part of the fabric of silicon valley for a while. he is now the ceo of c3iot. he is focused on software for what he calls the digital transformation. whenever we sit down, he seems to have some big ideas. >> we are working with some of the world's largest corporations to apply cloud computing, artificial intelligence, and take advantage of the internet of things to basically engage in what is being called digital transformation. cory: basically, taking companies that are not yet digital in all the ways in their -- in they can work in getting there.

>> yes. they are now using this new generation of information, this new step function that has come online in the 21st century to change everything about the way they manage their business processes, design products, deliver products, and deliver services. this is really like nothing we have seen before. cory: i love your idea about how we kind of look at technology to see new things. you found this idea of punctuated equilibrium, notion sort of from geology, which basically says -- tell me if i am paraphrasing right -- at a -- by the time you have seen it it is too late. , the big changes in evolution happen even faster than we can record them. so in geology, if we see a new plant species or new kind of animal, the big change of this coming into existence has are -- has already happened. the same idea applies to technology? >> i think so. i gave this some thought, attempting to explain what is going on where we are seeing an exponential growth rate in the adoption of these new technologies. elastic cloud computing, internet of things, artificial intelligence.

the other aspect of this that i could not quite explain, like you, i have been around this business for a few decades now. as we moved from mainframe computing to personal computing to the internet, all of these decisions were made by the cio. cory: right. >> and now these digital transformations are all being driven by the ceo. i tried to figure out what this was all about because it is massively disruptive. so i took a page out of evolutionary biology. and if you look at the early additions of the "origins of species," darwin thought that speciation of the planet would have a continuous function. place like it would in information technology. moore's law is a continuous

function. cory: right. >> but it wasn't until, what, this century that evolutionary biologists said -- led by it did notld -- that happen this way. speciation was not a continuous process. darwin could not explain the gaps in the fossil records. so what stephen gould describes is this punctuated equilibrium. he said going back, even in the last 400 years, we have had 6 mass extinction events. the most recent being 65 million years ago, when that meteor hit the earth, and something like 85% of the species on earth disappeared, including the dinosaurs. so then, after we have this mass extinction event, you have a mass speciation. which in that case, it was good for us because mammals filled the space. it's like what is going on in the corporate world. since 2000, 52% of the fortune 500 companies have disappeared. they have merged -- [speaking simultaneously] cory: i started checking, i could not believe that just since 2000, 50% have gone away. but it is amazing. some have gone away through

-- the enrons and worldcoms because of fraud. , some of them had massive mergers, taking away people, businesses in combat. >> hewlett-packard or maybe ibm is next, who knows. but then you have what you talk about everyday on the show, is this mass speciation that is going on with companies with this new, whatever we talk about, this new dna, the airbnb, the uber's, the amazon's. cory: and with the new iphone, people will say it is not that different than the last the big one. change was when there was no iphone, to when there was an iphone, there was no mobile, there is no cloud and then there is a cloud. the big change is the one that matters. >> the telecommunications industry as you and i knew it, is gone, replaced by the portable computer and the portable communication devices. cory: are there still companies out there that can reinvent themselves enough to survive

this new digital age? >> i think if you look at what is going on, it is in the funniest of places. like caterpillar, john deere, ng in paris, and now in rome, department of defense. these are companies -- cory: the department of defense does not have a choice, it has to evolve. it can't go away. >> massive, massive, and these are ceo's. so you sort of, why is a ceo at the table making these technology decisions? he or she was never there before. and i think the fear is, you either, you know, you get on the train, or you're going to be on the tracks. cory: some of the thinkers believe they can get ahead of this stuff, not try to buy -- nobody ever got fired for buying ibm, maybe somebody will fired for buying ibm now. >> if you are a walmart and you're looking at amazon coming down the tracks, you are in a world of hurt. ok, and if you are in the automotive industry and looking at uber or tesla, what is going on there, you don't adopt, you don't change. it is not going to end well.

cory: it sounds like what you are talking about with ai or iot, internet of things, you're really talking about process. not just, by all this stuff, and we will figure it out. >> it changes everything. the internet -- i used to think that the internet of things was about the censoring of value change. it isn't. internet of things is about the fact everything is becoming -- it is a change in the form factor of computing devices. eyeglasses, heart monitors, you know, smart meters, cars, thermostats, refrigerators, everything is a computer. and that you apply logic to that where the power of the network is the function of 50 billion nodes squared. that is a pretty powerful network. cory: the ceo of c3iot. coming up, bitcoin is not the highest rising cryptocurrency. that honor belongs to ripple xrb. we get the ceo of ripple who will tell us that will happen with all the tens of billions of dollars of ripple that his company is sitting on. and a reminder that all episodes of "bloomberg technology" are

live streaming on twitter. check us out at @technology, weekdays at 5:00 on the east coast, 2:00 on the west coast. this is bloomberg. ♪ cannot live without it.

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♪ cory: welcome back to the best of "bloomberg technolgy." i'm cory johnson. digital currency ripples, is breaking out of bitcoin's shadows, up more than 21,000%, more than any other cryptocurrency. the ceo of ripple brad garlinghouse joined us. he argued that ripple has functionality that bitcoin can only dream of. brad: there is a lot of hype in this space. but i think it is also -- cory: you think? [laughter] brad: but there is a lot of reality. ripple has been very focused on how do we create utility. there is a multitrillion dollar problem. cross border payments.

if we can reduce the friction, using blockchain technologies, we think we can create a lot of value for consumers, for banks, for the whole ecosystem. cory: yeah, but anyone who was traveled overseas and goes to an atm machine, and sees the massive fees just to access their own money often from the same bank they use from their native country knows what a problem this is. you are looking for beyond it i guess from what the banks themselves are paying. brad: even within the banking community, there is a few banks that sit on the top of the whole global payments structure. and all the other banks pay them to help settle the global liquidity required for commerce, for small business, for retail. across the board, it is amazing we still live in a world where to send money today to london today, the fastest thing for you or i to do is to drive to jfk or newark and fly the money to london. that is crazy. we live in the age of the internet, and we can't move our own money in real-time. and as you said, the cost can be really high. cory: it is a fascinating thing.

it seems like the kind of thing i love when you say it should be easier as sending an email. downloading a website, whatever. when you make the sale for this business, to whom do you make a sale? brad: well we really are in the business of selling solutions, selling technology to banks. part of that is simply a software sale. and part of it is for customers who want to take advantage of a digital asset, that means instead of pre-funding literally the trillions of dollars that banks have with other banks around the world. the pre-fund that amount that sits there. it is dormant cash sitting there. with digital assets you can make that much more real-time to enable a payment across a border into another currency in real-time. today, ripple is doing that into mexico with companies like qualex. we see that expanding with other

partners and customers overtime. cory: i want to take you into the bloomberg terminal. i think you have seen this, i sent you guys a screenshot earlier this week or a few days ago. we created this monitor of cryptocurrency on the bloomberg, we listed the price of these cryptocurrencies. lo and behold, number two is ripple. when i look at what that has done over the last year, holy cow. look at that gain! that is a stunning gain for anything, particularly in the last few weeks as we pointed out earlier. and that price right now of $1.23 we will call it, how many coins or xrp's does ripple own right now? brad: ripple owns 61% of them. i think it, there is no doubt 2017 has been the year of crypto, and within the year of crypto, xrp has outperformed any other digital asset out there. year-to-date as the chart shows, we are up 20,000%. if you ask it why -- cory: that also gives you about what, $75 billion worth of coin right now?

brad: that gives us a huge strategic asset to go and invest and accelerate the vision we see for the internet of value. for me, it is all about an opportunity to participate and accelerate a vision we have had for some time. there is excitement about digital assets broadly. xrp specifically because people have realized we have real customers. we have the best performing technology. cory: right. brad: i know you have talked about this. to complete a bitcoin transaction takes about $40, and the transaction costs. cory: and is slow. >> it takes several hours on average. in contrast xrp is very efficient and settles within three or four seconds and costs fractions of a penny. so while i think there are lots of use cases and utility you can have from bitcoin, it is not going to be a payment solution. there is value there, but if we talk about other use cases, in all these digital assets, i think it comes back to what is the utility? what is the problem being solved

and can customers take advantage of that? cory: but if you are sitting on $75 billion of an asset, do you envision a scenario where you will sell any of that? brad: certainly we use some of it day by day and week by week to invest in the ecosystem. we use -- in december, we actually publicly produced a quarterly market report talking about what is going on in the xrp markets. we sell a little bit with market makers, incentivized market makers, we want to make sure we have very tight liquidity between xrp and fiat. we want to go into as i was describing into the mexican peso. we want tight spreads between the mexican peso and xrp. and other currencies. we work with market makers globally, we work with exchanges globally to make sure there is very good liquidity to deliver on that. cory: that was brad garlinghouse

-- ceo of ripple. cyber currency are unprecedented. a handful of stocks have glommed on to create the appropriate excitement around blockchain. among the biggest, hong kong based ubi blockchain internet. their stock is worth more than 1000% this year. i would a story about it for bloomberg news. you can find it on the bloomberg terminal. i talked about the blockchain bump with a bloomberg reporter. julie: this is a prime example of what is going on the past month or two in particular in that there is a juice maker that decides to put blockchain in its name. there is a sports bra maker that puts blockchain in its name. an e-cigarettes company that did the same thing. cory: wait, sports bras? julie: right, who would have thought blockchain could help the manufacturing process for a sports bra? but they are not really doing anything in blockchain, just adding that to the name, like the late 1990's early 2000's when companies were adding .com to their name even though they had nothing to do with the

internet. their stocks with surge. it is deja vu all over again. cory: when i was a money manager, when i was looking for stocks that i did not believe, i would look for things along the line of the trend. a social media company that did not have a social media network, or a wireless company that did not have a wireless product. so, when i saw this one, i don't know if it is fake or real, but when i saw it had both the internet of things and blockchain in its description and has zero revenues, but over $1 billion in valuation, i thought this was worth kicking around a little bit. julie: not even just no revenue, it has $15,000 of cash in their hand you wrote in your story. they're burning through $220,000 a month. it doesn't seem like a company, one that should be soaring in valuation. i think there is a quote from a professor saying the profile of the company is scary. and that is basically the summation of what this whole thing is. cory: and that is a professor from stanford business school who has written very positively about chinese reverse mergers.

even then he finds this one concerning. another thing i did was look at the progeny -- who is behind this deal. i was excited to see only four executives. and three of the people at the company, two of the former executives, have something called american bioengineering, american-chinese bio engineering, aob, american oriental bioengineering. their product was call the urine stopper. their expertise was in stopping bedwetting. julie: and you managed to get bedwetting into a headline at bloomberg. i love you for that, cory. cory: i appreciate the love, it is my finest achievement as a bloomberg employee. i talked to a lawyer from the company. these guys have expertise in bedwetting, how can they have a company that is based in the blockchain? beside the fact they have covered bedwetting products, and radioactive protons that would energize the product, and it was licensed from the university of california berkeley and none of those things turned out to be true, what is the connection between bedwetting and bitcoin?

they said, no one has experience in bitcoin. that is the greatest part about it. it is new for everybody. julie: you could be like, there is a reason people do not have blockchain on their resume because it is so new, they have not had time to add it. although, blockchain has been around for a while. i might take a bit of an argument with that. if you do have experience, you would want that on your resume. right? it says like they were not easy to get in contact with when you were writing this story. cory: that was julie barrage. coming up, 2017, a bumpy 12 months for uber. we will look at the challenges facing the ceo next year. this is bloomberg. ♪

♪ cory: a big win for masayoshi son of southbank.

softbank. the japanese conglomerate is to buy a large stake in uber. they got this way down from the $69 billion valuation from not long ago. joining us to talk about this, the gadfly columnist. let me start with you. this deal took quite a while for these guys to put together, but also really suggests that uber is not what it used to be to the tunes of tens of billions of dollars. >> yeah, i mean i think, you cannot escape the fact that uber is essentially less valuable than it was a couple of years ago when it was valued at $69 billion. and now, we are talking about a 30% haircut. and yeah, you can make all kinds of excuses, but this was a transaction, not from the company itself, but from its existing shareholders. but obviously, it has been a bad year plus for uber. and it is clear that it has hurt the valuation of the company. cory: it is really a shock when you look at it on that great chart made by one of the

producers of the show. brad, you know, this also took a while to do. who were the sellers of this deal? who decided that i liked it at $69 billion, but at $49 billion, get me out? brad: we don't know everyone who has sold, but you have that benchmark. an early inventor probably sold, another in venture firm. we don't know yet about travis kalanick. he still owns 10%. we don't know about the founder of uber. i want to add to what she had said. this was a year of controversy, and a year of ambiguous or negative economics for uber. the company lost $4 billion in 2017. and you know, there was a belief in the company for a long time that they could raise money and conquer and kill all the little guys, the regional players, but that just hasn't happened. uber is facing competition in india, singapore, and brazil. they had already done deals in russia and china. the softbank deal can kind of alleviate some of that competition because softbank has

invested in other companies as well. cory: that is one of the things uber has bailed on this year. they bailed on a very big chinese investment. to me it seems like they got out of that deal pretty good. but also they bailed on their ceo and basically their entire executive suite. the seamlessness of the transaction, get in the car and get there, get out, is gone. brad: i would describe it as a year where the manifest destiny of uber to be a monopoly of ridesharing around the world, is gone. and that happened because of the controversy, but also happened because there were savvy investors out there like masayoshi son at softbank, who saw tremendous opportunity for these other players. part of it was uber's controversy. part of it was like capital flooding of the market, boosting, propping up other players like didi in china. that is part of what has led us

here today to the fact that on this investment, uber is taking a valuation haircut. cory: you knew me a long time, longer than brad, and you know i like my conspiracy theories. let me posit that the last round of investors in uber had a deal that would not get diluted in the future. that any future valuation of the company would only be up. we certainly see that and a lot of venture deals, so that is why masayoshi son had to pay a billion dollars at a high valuation while almost simultaneously paying a lot less at a lower valuation, it would not trigger even more shares to the last round of investors. >> i like your conspiracy theory. i have no idea if it was true. cory: i like everyone who likes my conspiracy theories, so i like you. but really it is striking here as brad put it, the manifest destiny is no longer clear. you can see it in the valuation. >> the thing i wonder is, if uber will not be this global winner take all.

what is uber, and how big could it eventually get? we already know as brad said, it is losing staggering sums of money, and it's had to retreat from various businesses in parts of the world. if you invested in uber a few years ago, thinking it will go into russia and indonesia and africa, and into the restaurant delivery business and all these other places and just steamroll every competitor, it no longer looks like a sure thing. what is uber worth if it cannot be successful everywhere in the world? cory: brad, it seems like the path to an ipo seems more obvious and less obvious at the exact same moment. the time to ipo is longer, and they said that they want to get to ipo eventually. but it also gets simpler because the varying shares of stock, the fact that shareholders do not have a lot of money at stake have more votes. so the early investors, the founder as well.

brad: everything has been simplified in this deal. no extra voting power for the early shareholders. you know, softbank is taking board seats, governance reforms. it has become a simpler company, probably defractionalized uber a defactionalized uber a bit. some of these lawsuits go away. and dara said 2019, some of the pressure for liquidity is taken off the table with this deal. i think he has got room to operate now. cory: as we mentioned, 2017, a rocky year for uber. eric looks at the company's past, present, and potential problems. reporter: 2017, the year that uber would probably want to forget. embattled ceo travis kalanick resigned. dozens of executives left. allegations surfaced of sexual harassment by employees that brought its company culture to

life. that was not all. uber's top rival lyft continued to eat away at market share. riding the coattails of the elite uber movement. one of uber's investors announced its suing uber over the alleged theft of trade secrets. to top it all off, to round out the year, uber lost its london license, was ruled a transportation service rather than a digital one in the e.u., and continues to face mounting legal battles from all over the globe. but uber is trying to turn the corner. with new ceo dara khosrowshahi bringing in new legal heads and a coo as they tried to right the ship. she has been on an apology tour, meeting with angry regulators worldwide in bringing uber's skeletons out of the closet, such as the massive hack of over 57 million accounts that have been covered up for more than a year. so how did uber's business fare

in 2017? well, it grew. gross bookings could reach $37 billion for the year. that is up from $20 billion in 2016. still, the company lost a massive amount of money. the year's losses could reach over $4 billion. so what is on khosrowshahi's to do list in 2018? a new cfo, a new board chair, and new directors. and don't forget, cutting losses and reducing redundancy. but the legal matters gloom -- loom largest. uber and alphabet face off in court over self driving waymo technology. and the u.s. justice department wages its terms, looking at the five different cases of overpricing, bribery, and trade secrets. one thing is for sure, 2018 will not be the year uber goes public. instead, it will be the year it has to rebuild its reputation in

the court of public opinion. ♪ cory: coming up, we are going to take a look at what is in store for amazon in 2018, and discuss the role of alexa will play in the e-commerce giant's plans. check out bloomberg markets on the radio. you can check out our coast-to-coast podcast on itunes. and you can listen to the bloomberg radio app, bloomberg.com, and in the u.s. on the sirius xm radio station 119. this is bloomberg. ♪

♪ cory: well, amazon could once again have been the biggest winner this holiday season. the tech titan sold tens of millions of amazon alexa enabled devices during the holidays, but they have not told exactly how many. they said the echo dot was in the top spot across all categories on the site. and they said 4 million people started amazon prime free trials, or paid memberships in the week over the holidays. we discussed this with our

market analyst. mark: they said that their top two items was the echo and the other one was the fire stick. they are alexa enabled. there are a couple of wins. one is to get more of these devices out. the potential is how many alexa enabled devices are there? you can actually go on amazon and search for alexa enabled devices, you will find speakers, you will find light bulbs. there will be an increasing number of things. to get the echo system out there is a big win. they also put in the press release that they saw millions of prime customers were using alexa to order products on amazon. not only are they selling a device, but they are selling you kind of a convenience. it would be easy to turn around in the kitchen, you can say, alexa, order more coffee. cory: i think that is why they opened up the platform. that sonos device is like $450. i hope she is not watching out, but a really fantastic device. terrific sound. but it is not made by amazon. why would amazon give that away? mark: well, you get the amazon echo system embedded in multiple devices, and amazon has more

ways to deliver you products. you can interact with amazon not just when you are here at your desktop with your phone, maybe when you are driving you can order from alexa off of one of those things. and alexa devices for your car. we think, and we are probably too conservative, there are 40 million amazon alexa echo installed devices. that number is probably 50 million, even maybe 60 million. it is growing rapidly. you already mentioned the other one, the number of prime customers. we think there are 60 million in the u.s. they added 4 million in just one week with the subscription. cory: what is the conversion rate, you think? during a holidays it is probably lower than at other times. mark: 50% or something like that. it is probably higher. and then there was another one. the number of units they delivered, expedited, either a prime or same day, or next day, doubled year-over-year. people talk about this price -- cory: that is a revenue growth rate of 25%.

mark: yeah, yeah. but the point is, there is more than just a price advantage and a selection advantage that amazon has. they are building to get you products faster than anybody else. it matters. it matters as you are going into christmas and you don't have those gifts ready to go, you can still order on the 23rd of 24th. and then you recognize that advantage, and you will use that when you shop with amazon throughout the year. the convenience, that is the new mode at amazon. cory: our producer jackie is saying about 31% growth on the year-over-year basis. that includes fast growth that amazon services. but it is intriguing to me too that all the different businesses we are seeing these guys going into, do they all look back, selling physical goods to people? they might get into electronics, they might get into video, they might get into whatever, even a special drugs, whatever? but it is about selling volume of goods to consumers.

mark: i think so. it is just building up the customer relationship. one of the strongest relationships with consumers have is the people we give our money to and the response we get in order to get products. that is a very strong retail relationship. you can have a media relationship, but very few companies have that type of a media relationship. maybe netflix, google, and facebook. but a retail relationship at amazon now, they are providing goods and some services, entertainment, and anything of convenience. you can find products around the house. they are absolutely breaking into the new categories. you know that. expanding into groceries. the single largest consumer category, they are now the largest vendor of apparel in this country. there are still opportunities for them. cory: drugs. mark: i think it is almost inevitable that they go there. it is still three to four years out, but -- cory: they are getting brand, which they have never really

done. amazon seems to have a philosophical believe that people always migrate towards the cheapest thing. brand is of course the opposite of that. mark: it creates the opportunity for an amazon private label. it also creates another revenue opportunity that is a nobody's numbers. apple, the app store, they take a 30% tax on all products bought and sold on that apple store. google home does the same thing. right now, amazon does not get any of that tax revenue. but you get 100 million, 200 million alexa, alexa enabled devices out there, and when the consumer says, i need more coffee, or i need diapers, or i need a car service, all of a sudden, you have providers who could bid against each other in placement for the voice search results, and could have platform revenue. that could be a really big win. cory: that was mark mahaney. that does it for this edition of the "best of bloomberg technology." we bring you all the best in technology throughout the week. 5:00 in the east, 2:00 out west.

remember, all episodes are livestreaming on twitter. check us out at @technology. that is the handle, weekdays. that is all for now. this is bloomberg. ♪

♪ >> the dow now sitting at 20,000. this thing is such a firehose. >> notice certain european stocks are riding the postelection wave. >> political leaders will do national campaigning on friday. >> opec's ability to reduce the global supply glut. >> we can bring you that bank of england decision right now. >> we have seen the markets quite resilient. ♪ ♪