emily: i'm emily chang in san francisco. this is "bloomberg technology." alphabet reports fourth-quarter results. highlights from my conversation with the alphabet cfo, ahead. tech's -- slack filed paperwork for its direct listing. the crackdown on huawei continues.

claims the company was trying to steal technology. it starts with broken glass. first, our top story. shares of alphabet falling in after-hours trading. ad revenue in the fourth quarter remain strong with paid clicks climbing over 18% to $27 billion. however, operating margins fell below analyst expectations and expenses rose. meantime, the investor call is underway. the cfo addressed rising costs. take a listen. first,key drivers were, content acquisition costs, primarily for you to -- youtube, mostly for our advertising supported content, in what is a seasonally strong quarter for you to -- youtube. but also for our newer subscription services, which have higher cac as a percentage of revenues. emily: joining us to discuss,

crawford, what are the key highlights you would pull out here? investors seem to be focusing on margins and capex. >> this is not a revenue problem. this is an operating margin problem. we saw that even though revenue in the core advertising business was quite strong and even though revenue in some of the other revenue, which would be things like pixel and google home, actually beat expectations slightly, they just are having to pay more for some of the services that they want to create. if you believe in the long game here, if you believe that this company is really going to develop over the top services, they are going to have to pay more for them and you have to adjust their model in terms of what they are going to pay for those services. i think google really is going to be -- trying to be the video disruptor here, and that's what you're seeing in the numbers,

which is a cramping of the operating margins. emily: i asked specifically about capex. she told me they remain focused on investing for the long-term. they take a disciplined approach to key areas. the primary driver continues to be investing in technical infrastructure to support growth. data centers and machines. this reflect our outlook for global growth in ad, search, yo utube, and cloud. sort of echoing what you suggested there. paul, investors are concerned about it. paul: i think they are in the short-term. the market has generally given ruth porat high grades for coming in and instilling a sense as it relatesnty to both their operating expenses and their capex, a certain level of discipline. the three areas where they are investing our -- are very high for those areas, including youtube.

internet ad spending on video is the fastest part of internet and spending -- ad spending. when you combine that with the cloud, another extremely fast-growing end user business, longer-term most google investors feel very comfortable with google's p&l and capital spending. emily: there continues to be questions about how much amazon is now taking a bite out of the digital ad pie. their evan or -- their other revenue category rocketed up to $10 billion. we asked about amazon and how serious a threat amazon is in the conversation with ruth porat. yousaid, "whenever inventory is created that attracts consumer interest, advertisers will be interested in advertising against that inventory. there is still a tremendous amount that is off-line." would you say the pie is growing, or is amazon actually a

threat to alphabet? crawford: amazon is absolutely a threat. amazon has got a lot of properties. they're going to be bringing on a tremendous amount of inventory going forward. if nothing else, the classic law of economics, what does that mean? it means there's going to be more supply for a finite amount of demand. to try toe is going do is they are going to try to create more valuable services where they can potentially offset some of those trends. market,etting into this like amazon getting into most people's market, is a threat to google in this space. emily: i have a question earlier . why don't investors punish amazon for the pressure on its margins, but punish google in this way? there's still a lot of data that google doesn't give us about how fast youtube is growing, how fast is the company diversifying beyond advertising. paul, did we get any hints about

how healthy is the cloud business, youtube, even though it has a lot of potential? paul: google needs to do a better job of exposure. particularly about youtube. it is about $8 billion or $9 billion of run rate, relatively high-margin. i agree that it is requiring a lot of investment, and that is pinching profitability in the near term. this company, historically, alphabet, has gotten the benefit of the doubt from the shareholders for making a long-term bets, not just the near term operating expenses. back some of the crazier areas. they have focused on three areas that can drive growth. most long-term investors will give them the benefit of the doubt. emily: they are continuing their share buyback program. take a listen to porat on the call just moments ago.

ruth: finally, on capital allocation, our primary use continues to be sick -- to support organic growth, followed by retaining flexibility for acquisitions. after taking these needs into account, our board has authorized the repurchase of up to an additional $12.5 billion of our class c stock. emily: presumably, that is welcome news to investors. crawford, you do your own market research. can you fill in any of the blanks in terms of the numbers that google is not giving us? crawford: not yet. what we can see is that some of these bets are extremely long in duration. for example, things like google fiber. those are probably not meaningful yet, yet the costs associated with those grew significantly in terms of the other bets lost. they're spending more money on those things, and that's also

what you are seeing that is weighing on margins going forward. now, i guess, i will say that these are -- the one area where they need to start showing more growth and showing more progress is in the google cloud platform. that's where they've got two competitors, one being azure or microsoft, which has massively pivoted into the segment and the other being amazon, obviously,. they are third in the three horse race right now. i think they need to start disclosing the kind of progress they are making. i think that's going to be imperative for them to get investor confidence in that segment, in that they can participate. they are talking about capex growth in that space but in the next few quarters,, they need to start showing how they are growing revenue in that space. emily: thomas came in, replacing diane greene.

google cloud firmly in third place as far as we know behind amazon and microsoft. one interesting question i get asked ruth porat was about acquisitions -- i did ask ruth porat was about acquisitions, because this company has not made any huge acquisitions in the last three years. i asked if they had any plans. believe, "we do acquisitions are an attractive complement to what we do to drive organic growth." they did more smaller acquisitions last year than the year prior. "we want to make sure if we are doing a deal, it is the right deal, and if it is the right deal, it could be an accelerant for the business." paul, any ideas where google could buy smartly? paul: one of the areas we see being disrupted is the traditional media business. whenever you see a big media property, to the market, whether it's time warner, directv, 21st century fox, investors step back and say is that a business that

google should get into in a bigger way. yes, they have youtube, and that is significant for them, but do they need to jump into the deep end of the pool as it relates to content and make that another pillar of their growth, much like jeff bezos appears to be doing at amazon? to date, google has shown no interest in getting into the media space. i think they are concerned about what it will do to their growth rate and what it will do to their returns. that could be an area, but to date we have not seen them do anything really. emily: ruth porat saying they are keeping an open mind. bloomberg's paul sweeney, crawford del prete, thank you. you can turn to bloomberg for more on this. for more commentary and analysis from our bloomberg reporters and analysts. we will have highlights for you throughout the show. well, speaking of acquisitions, jpmorgan says there are a number of companies that would be strong strategic fits for apple if the company decides to use that cash pile. the bank says the company should

look at acquiring netflix, activision blizzard, or sonos. apple has roughly $130 billion in cash in its coffers. coming up, slack inches closer to going public, filing key paperwork with regulators to move ahead with its direct listing. we will bring you all the details. and if you like bloomberg news, check us out on the radio. listen on the bloomberg app. this is bloomberg. ♪

emily: messaging platform slack

is moving along with its plans to go public, filing confidential paperwork with regulators. this is one of several high-profile tech companies on track to hit the public market in 2019, including perhaps airbnb. we are joined by olivia who covers deals, for us. this is not an ipo. slack: today, confidentially filed for a proposed public listing, which is filing speak for a direct listing. direct listing, for those of you who are not familiar with it, is essentially when a company lets its shareholders, employers, and early investors share their cells -- sell their shares on the public market, but it doesn't go through the traditional ipo process. essentially, it allows the early investors to get liquidity without generating more cash for the company, which saves a lot of dilution. emily: this is something spotify did as well. it is unusual. why is slack going this route?

olivia: mainly because they already have a lot of cash. and they don't need the marketing or the pr, the publicity, the recognition that comes with a traditional ipo. they really just want to give their early investors and their employees some liquidity. emily: and also they can sell the shares right away. olivia: right. and the biggest reason it doesn't create dilution. that is huge for a founder. they don't want to dilute their shares and bring in all this cash they don't necessarily need. emily: what are the risks potentially? really the jury is still out on this. spotify had a very successful listing. their shares of today -- as of from the daywn 6% they opened publicly, but that's normal. there are is -- there is a risk the shares could flop on opening day, and you don't have an underwriter to guarantee it. but if the banks do their job, and there are experienced

theyrs working on this, should do a good job leading up to it of really getting the right price for the shares, understanding on the supply side what people are willing to sell for and understanding on the buy side what people are willing to pay. emily: what about the chance of a government shutdown, another shutdown? we have been talking a lot on the show about how the initial shutdown stalled things at the sec, could have slowed things down. we don't have any concrete details on whether the process actually slowed down, but it certainly has the potential. olivia: it definitely slowed things down. there's a huge backlog at the sec right now. there is this sense of the bogeyman -- boogeyman waiting in the wings. we understand the sec is proceeding as everything is normal and there is a backlog and they will get through things. slack has said that it will --

actually they haven't said this,. we understand that slack is planning to aim to go late spring, middle of the year. so, it should not delay things too much if there is another shutdown, unless the shutdown goes on for months and months, in which case everything will be delayed. emily: the uncertainty of going public during the trump administration. thank you so much for that update. an investorta, is in slack. starg up, an electric car wants to take on tesla, but after two years nothing has hit the market. is the company on track to hit production next year? follow us @bloomberg technology -- @bloombergtechnology. this is bloomberg. ♪

emily: tesla has agreed to buy a battery company for $218 million in stock. they are paying a 55% premium to the closing price. the deal will give tesla more expertise in energy storage and power delivery. leaders across the energy industry are gathering at bloomberg's future of mobility summit in san francisco to talk about the issues and opportunities in transportation. one company shaping the industry's evolution is lucid motors. it aims to complete with tesla -- compete with tesla. joining us now to discuss, the chief technology officer. when will the car go on sale? are you still on track? >> we are on track and start of

production is slated for the end of next year, 2020. emily: the car will start at $100,000. is that correct? >> it will have a range of prices. the initial batch of cars we sell will be highly specified, so they will average over $100,000, but we will make progressively more affordable versions of the car available as we ramp up production. emily: you said you think you can bring the costs down to $60,000 ultimately for the car. the model three is aiming to get to $30,000 -- $35,000 a car. how do you compete with that? >> our car is operating in a different sector of the market. unique to compare us with a mercedes-benz -- you need to compare us with a mercedes-benz, not a -- emily: what about the higher and -- end tesla? >> a model s tesla would be a comparative electric model.

but we differ in that we are truly a luxury brand. you look at tesla, they are high-tech, beautifully engineered. they are disruptive. they are a premium price, but you only have to get inside a tesla to realize it is not really a luxury car. it is a premium car. emily: have you told that the elon musk? >> not yet. emily: give us a timeline on production. peter: we are starting production and cassa grand -- casa grande in arizona in late 2020 and we ramp up production throughout 2021 and 2022. we ramp up from just a few cars to 50,000 units a year within two or three years. emily: when does the first car hit the road? peter: effectively early 2021. emily: the saudi private investment fund, which is also an investor in tesla, is an investor in lucid. explain that relationship to me, given that tesla is your competitor. peter: all i can speak about --

emily: on the premium end, not the luxury end. peter: we are delighted to have them as strategic investors in s.cid motor they have invested in the management and the technology. our powertrain is designed and created in-house. it is world-class technology. they are a great partner. theirurn, we enable vision to transcend the -- transition the economy of saudi arabia away from one which is more dependent on fossil fuels. we can create hundreds of high-tech jobs in california and arizona. emily: the saudi public investment fund recently reduced -- they didn't decrease their stake in tesla, but they hedged their risk. is there any indication they theirbulk up on

investment in lucid or any indication of why they did that? peter: i can't speak for what moves they've made with tesla. i can only speak for the relationship with lucid. we are strong strategic partners. there is a spiritual alignment. we both are very committed to ransition toward a more sustainable mobility model, and we believe that is done by making the best car in the world, making up premium -- a premium luxury brand, which is lucid, and making that a global player, and progressively make other cars which are progressively more affordable, then more people can benefit. we can actually have a meaningful impact upon the environment and the impact it can have on global warming. emily: as you know, there was an explosion of press around the murder of journalist jamal khashoggi tied to saudi arabia.

do you have any concerns about the ethics of their money? peter: look, the story here, the key story is that we have an alignment, a partnership to do something which is very meaningful and very good for many people of this generation and for future generations in moving the world mobility -- the way that mankind is mobilized to a more sustainable model. i really believe that is our focus. that is my passion. and it is something that we can do in partnership. the public investment fund of saudi arabia is enabling us to exercise that vision. we've reported that you had talks with ford about selling a couple years ago. a deal didn't happen. the ceo confirmed they did look at lucid. would you still be open to a sale? peter: we believe that with the partnership we have gotten,

strength from that partnership, and the future we have with a 10-year plan, lucid can be hugely valuable. we are not contemplating sale. what we would contemplate is potential partnerships in technology. we think we have world-class technology that all the world could benefit from, and a lot of the incumbents, the traditional automakers haven't got the technology that we have developed, and i think they could benefit from that. so, i think that model would work, but a sale, no. emily: we will be watching for the first lucid car to hit the road in 2021. peter, thank you so much for stopping by. coming up, our exclusive reporting on huawei, including details on how the chinese company has allegedly been trying to steal u.s. tech secrets. that's next. we are also continuing to monitor alphabet earnings after the company reported thinner profit margins in the fourth quarter.

the ceo said google takes security for its users very seriously. we will continue to bring you headlines as we have them. this is bloomberg. ♪

♪ this is bloomberg technology global link where we join bloomberg daybreak to bring you the latest in news. haidi stroud-watts in sydney. let's take a look at the top global tech stories of the day. haidi: we are watching sony again today. shares falling the most in 3.5 years. the japanese electronics maker reporting weaker profits in the playstation business. also reducing the annual revenue forecast. goldman sachs among firms that cut price target on the company. now that the trump administration is cracking down, u.s. semiconductor makers are

complaining that china is dealing their secrets. china is the fastest-growing market and chipmaker lobbyists say carrots are not the answer. they want immigration reform that would allow companies to recruit and retain foreign graduates from u.s. universities. google spending skyrocketed, alphabet reported dinner profit margins in the third quarter as the internet giant will expand its hardware businesses. google'sion and capital expenditures jumped 80%. those are the top global tech stories of the day. shery: thank you. bloomberg businessweek has a report that sheds on huawei, specifically the allegations the chinese tech giant have been trying to steal u.s. trade secrets. max worked on the story and here to discuss. we know there have been several investigations into huawei. most recently, the grand jury

indictment against the company but it is what happened last month on the sidelines of the consumer electronics show that really caught our eye. max: what we are reporting today is while those indictments were basically dropping, the fbi,tments last week, the u.s. department of justice is working on this other case. what we reported today was a small chicago-based startup, kind of like your typical startup, got in contact with huawei'sd found actions to be a little bit suspicious. reported that to the fbi and that led to this crazy scene in las vegas around ces where fbi agents havd the executive leading the huawei executives for this back and forth caught on tape. a reporter probably watching the whole thing. emily: one minute you are a

startup ceo, and the next you are wearing a wire for the u.s. government. sat down with the ceo and talked about this incident that raised suspicion. i want you to take a listen to what he had to say. >> in sending some of our samples, as we do with the other potential customers, we received back on the second round of sampling, a sample had been damaged. a large portion of the glass was missing and broken, which was very concerned for us. after seeing this portion of the glass that was missing, we realized this is not really something that could be done in shipping, but more so attempt at theft of intellectual property. emily: by the way, this glass is supposedly very innovative. it has a layer of artificial diamond coating on it. give us the play-by-play in terms of what happens next after they get the broken glass back. max: they got the broken glass

and they thought that was weird. we should say we don't know how good this class is but what is interesting to me about this story is what happens next, which is one of the executives from this company -- we saw the ceo walked into a field office in chicago, reported this crime and all of a sudden the fbi sprung into action. there were conference calls. this piece, this sample was sent to a lab in quantico, virginia. it was analyzed. the analysis suggested it was cut by a weapons grade laser. then, the company executive got the huawei reps to tell them that the sample had been to china which is a violation potentially of u.s. law. that led to this sting. i think what is pretty interesting here is we don't know how big a deal this

specific piece of the government 's investigation is. we know the government is coming at huawei guns blazing. they are expending serious resources on what amounts to kind of a small in the scheme of things. shery: on all of those u.s. allegations, huawei denying those charges on the company itself, on subsidiaries. they are saying they have not committed violation of u.s. law and also not aware of any wrongdoing by the cfo. that was the latest huawei statement when it came to all of these u.s. indictments. at the same time, we know there is a history of these investigations ongoing on ip that for the company, dating back more than a decade before president trump's trade war. haidi: although huawei has not commented on the story -- max: we are waiting to see what they have to say. it is important to note there

has been this long running argument between the u.s. and china where the u.s. accuses huawei of stealing trade secrets and huawei kind of says this is ticking techie stuff. with respect to the indictment, the t-mobile alleged theft of a robot. this is something that happened years ago. it was settled, a civil proceeding that was settled. kicking is kind of huawei for political purposes. politics are part of this. president trump is eager to strike a better deal with china. you can imagine a situation where the trump administration wants to put the screws to huawei to extract concessions out of china. emily: hearing from the u.s. government, is there any indication about how this latest sting goes into the broader picture? max: it is all speculation for now. the investigation has not led to an indictment.

we reported there was a raid of a huawei laboratory in san diego. we have to see where it goes. i think it is fair to say that the government is not done with huawei. that said, we don't know is this going to result in an indictment, charges? possibly not. if it doesn't, that tells you the fbi, ag ain going full blast -- again going full blast against huawei and not turning up much. emily: bloomberg businessweek's max chafkin, thank you for stopping by. check out the full report on this huawei sting in the latest edition of the magazine. stay with us. this is bloomberg. ♪

emily: since donald trump became president of the u.s., he has used his twitter platform to repeatedly attack one business leader in particular. that is amazon ceo jeff bezos. the following january tweet " so sorry to hear the news about jeff bozo being taken down by a competitor, whose reporting is far more accurate than his lobbyist newspaper. hopefully the newspaper will be put in more responsible hands." since trump took office, it appears no one has benefited quite like bezos. the amazon chief has become the world's richest person in that time. seeing netflix skyrocket by $56 billion. to tell us more, we have mike dorning in washington. the story president trump was referring to was about a personal affair. jeff bezos. that aside, it is quite

ironic that bezos of all the business people in the world, his wealth has rocketed the most during the trump presidency. mike: it shows you the president will hop and all he wants but will not hurt a solid business of that is ridi ng a wave of e-commerce and cloud computing. all the things trump has threatened -- raising postal rates, other attacks on amazon has not really materialized. has become the world's richest person while trump is in the white house and has made $66 billion since donald trump's election. he has made more off the trump era than anyone else, even the president. emily: bezos has not just hung back. he has responded to the

president at times during the trumpgn, when candidate revert to amazon has a no profit company. still reserve him a seat on the rocket, #senddonaldtospace. is this wise given the possibility of regulation and that amazon could be in regulatory crosshairs? tweets don't think the make that big of a difference. bezos ownership of the washington post is one of the things that bugged trump, and the washington post has published a bunch of investigative journalism that has shown problems in the administration and also made revelations about the russia investigation. that is what appears to be aggravating the president. that's where the risks comes from and he has embraced having the washington post and doing

that journalism. as it has turned out, trump has not been able to do much that hurts bezos. if anything, bezos is benefiting. it looks like they are doing really well in the competition to get a big cloud contract from the pentagon. pentagon,nald trump's they decided it makes more sense to have cloud computing from a single source and that gave amazon a huge advantage over other competitors. emily: speaking of the washington post, they ran a much talked about super bowl ad, narrated by tom hanks, celebrating american journalism. democracy dies in darkness, which given the stories you have mentioned from the washington post, it seems to take a shot at the administration. trump jr. tweeted, "you know how mainstream journalists could avoid having to spend millions in a super bowl

commercial. how about report the news and that the leftist bs for a change." what is your reaction to that? mike: this actually probably helps the trump brand and the washington post brand, ironically. it shows the washington post to be willing to hold pwoer to look -- power to account. tnd for the trump supporters, i presents them as under attack from other institutions. there is a weird synergy between the bezos/washington post and the trump political machine by having this fight. they both benefit tremendously. emily: bezos perhaps has not been totally unscathed during the presidency given the national enquirer report. if you look at the size of his wealth, even if he has to split his assets with his ex-wife in rankivorce, he would still

pretty highly on the wealth chart, right? wife, he fact, his would be back to where he was the day trump got elected. arguably, you could say the trump presidency takes a divorce. emily: which also puts into contact how much he has made in the last two years. wealth at $134 billion. mike, thank you. now, speaking of people close to amazon, new york state has appointed a critic of the amazon headquarters deal to the public authorities control board. new york state senator will be one of three voting members on the board that has the right to block projects. new york governor andrew cuomo was decided whether or not to accept the election. he told bloomberg technology that "my views are clear and not changing." amazon has yet to respond to our

request for comment. still ahead, a brutal cold snaps gripped the country bringing dangerous subzero temperatures to the midwest. the epa tells us what this means for climate change next. we will talk about the biggest take away from the earning report. sundar pichai moments ago on the call talking about expanding into a new business. >> on project stream, and being able to deliver gaming with a kind of real-time, our requirements are low latency. it is evidently for us -- definitely for us. we think it will help us strive the new computer platforms we're working on. you will see us do more on 2019. ♪

emily: the midwest faced a brutal arctic blast last weekend president trump jumped at the chance to take a job at global warming. "windchill

temperatures are reaching -60. the coming days are expected to be even colder. what the -- is going on with global warming? please come back fast, we need your." ." i sat down with andrew wheeler, up for nomination to formally lead the epa, and asked if he agreed with the president. andrew: global warming is certainly occurring and man has an impact on global warming. there are some issues as far as the extent of the individual weather event but the important thing we are doing is following the law. we are following the law that congress passed. the clean air act tells us what we can and cannot do. under my leadership, we are following the statutes that congress has passed and the direction from the courts. emily: did the cold give you pause about the validity of global warming? andrew: i don't think you can look at anyone weather event and

determine the planet is warming or cooling. you have to look at the models over all, over a number of years and not focus on one particular whether of it. emily: so the president conclusion might be flawed? andrew: i did not say that. i think there was a lot more variability in the climate models and climate data than most people realize. i think the president is reflecting on that. emily: you did at her confirmation hearing, you said you were on an eight or nine on a 10 point scale of climate concern. someone look at the actions of the epa has retreating from aggressively regulating carbon dioxide emissions. how do you square that? are you retreating from the fight? andrew: no, we are not retreating at all. the obama administration put forth a plan for the electric power sector, the clean power plants. the supreme court actually never took effect. we are proposing regulation, the affordable clean energy rule for

the power sector, that follows the law. upheld by the courts and lead to 34% reduction in co2 over the lifetime of that regulation. we are moving forward, making cuts in co2. co2 has gone down since 2005. that was the high water mark for the u.s. it is a global problem and the president recognizes that which is why he pulled out of the paris climate accord. the paris climate accord was not a global solution.we do need a global solution to address the issue and we don't want to unilaterally disarm our economy when other economies are not doing what they should be doing. emily: getting regular climate updates. what are you doing to educate yourself? andrew: i'm as well. i have had several briefings with the career scientists of the agency. we have more planned for january. we will get those rescheduled for february the is the agency was shut down in january. i am getting regular briefings. emily: if not paris, what is

better? andrew: something that will bring china and other emerging markets to the table for real reductions. emily: my interview with epa acting administrator andrew wheeler. you can catch the full conversation online. recapping today's top stories, alphabet's fourth-quarter results. the call is over, the shares are down after profit margins would be low. expectations as the company spent heavily on the cloud and youtube. with us to discuss is mark bergen who has been listening in, saying they are very mindful of the pace of constant growth that a lot of questions about disclosures from analysts and why we are not getting more details. mark: a lot of those costs will continue. 100,000 almost employees which is a massive amount. a lot of it is going to the cloud business where he saw no

new disclosures, but some signs of optimistic calls. emily: are analysts getting frustrated? mark: there were certainly in the analyst reports reporting earnings, maybe we would see some breakup of youtube. amazon broke out aws, a second ipo. analysts have been eager for some new disclosure over youtube sales and the cloud business. they shared vague terms of the cloud business about the members of customers they have won, over one million, but nothing coming close to disclosures that analysts want. emily: why do you think investors give amazon a pass when it comes to prime -- profit margins but not alphabet? is it because we don't have a lot of information about other businesses and it is built an advertising business. mark: in part, the core business has wonderful margins. they beat on all of the metrics

today, on revenue. look at the google properties. you assess the health of the advertising business, it looks pretty solid even though we don't have any visibility into youtube. what they are pushing into with clout and hardware, moving more into e-gaming, these are businesses where amazon in particular an apple are well ahead. with cloud, they almost have a three-year runway and have not shown any progress that they are catching up to amazon and microsoft in that market. the same could be said about hardware. emily: let's talk about e-gaming. this is a business of interest. mark: that was the first time talking about project stream. google has been trying this in different ways, but they have a lot of the structure in place. they have the backend to pull out streaming in a massive scale. youtube, the most popular videos are e-gaming.

this is a market where amazon and twitch is running away. in the cloud business, google was out and ahead, but yet there could be a possibility where they are headed and lose the market. emily: when it comes to costs this year, what will you be watching for? mark: keep watching for tack. traffic acquisition costs. it did go up. the cfo talk about this, it will eventually go down. that is the amount they pay out to companies like apple and carriers. we will keep looking at capital expenditure which grew about 80%. it is all going to google. that is not spending on things like driverless cars and health care programs. i think they are demonstrating -- the concern is if you go back three years, google is spending too much on the shots. that is not the case anymore. they are spending too much on the cloud business. there is still a long-running believe they can turn it into profitable businesses. emily: mark, thank you so much for keeping us updated.

all right, that does it for this edition of bloomberg technology. on tomorrow's show, we will be talking to the author of a new book out about facebook and the ceo mark zuckerberg called "zuck: waking up to the facebook yesterday." we are live streaming on twitter. follow our global breaking news network tictoc on twitter. this is bloomberg. ♪

shery: the first word headlines. president trump is preparing for his state of the union address with a new government shutdown back on the agenda. congress has just days to find an agreement on border security and the president has repeatedly said any deal that does not fund the wall will be a waste of time. he also suggested declaring a national emergency to circumvent congress and use military money to pay for the wall. so proclaimed venezuela leader has won the support of most of europe, as the u.s. led campaign to out nicolas maduro. the european union failed to offer its backing. venezuelan debt has come to a standstill.