♪ taylor: i'm taylor riggs in san francisco. this is "bloomberg technology." coming up in the next hour, the beat is on. apple's fourth quarter report -- results beat across the board. for facebook, sales top estimates. plus, twitter ceo jack dorsey is doing what she -- what mark

zuckerberg would not. twitter is banning political ads of all types. we have details. google's former head of design ethics talks to bloomberg from the event in new york. his thoughts on to knology, apple has beati across the board, topping estimates from both last quarter and next quarter. this is a significant accomplishment for apple despite some sputtering iphone sales. to break down the report, i am joined by our analysts. let me start with lee. broad-based beat, what is your take away with this? thatit is not a surprise

the stock had performed pretty well coming into the report. especially on the services side of of this was a pretty large beat. that and the gross services number was pretty unexpected. that and the guidance for the holiday quarter was pretty good. look at the expected revenue numbers, the midpoint for the holiday quarter is about $5 million below the all-time high, which was last year. in terms of apple's business, they will be a smaller business. the financialization has led to higher eps and stock price. know, 52% of the revenue still comes from the comee, so it does still down to iphone sales. talk about the average sale price. as states lowered that, actually, the number of phones are slowly starting to pick up. how much of this demand are you

seeing? particularly around the iphone 11? >> i think certainly lowering the prices can bring more consumers into the market or can speed up replacement cycles. as the phones have got more expensive, and sometimes they rival or are higher priced than even laptops, consumers have slowed down. if we were to look back five or six years ago, it was much closer to two years. now it is beyond that. taylor: did we see people replace their older phones faster? is that what is driving next quarter's forecasts? lee: it does not look like it. i think julie has it. that replacement cycle is expanding. myself and my wife are good examples. i have the 10 and she has the and neither of us upgraded. 7 we are looking forward to something new. something that is a game changer in terms of the hardware. there is nothing there.

the next cycle looks like we will get 5g. that is where the both of us will upgrade. i think you will see that upgrade cycle take up again. i think the markets basically this in.asically bake you will get lower upgrade cycles. out in china, that upgrade cycle is also slowing significantly because they are working off of comps from the last year where that upgrade cycle is very high. where apple did not really have a large phone to sell into china. now we are on the back end of those tough comps. it will take a while for that to burn off. then, again, that 5g upgrade cycle, you may see it pick up again. taylor: julie, we were talking a little bit before the show. as we want to focus on iphone, we want to talk about services as well. that is the higher-margin business. i am showing another chart here, showing the growth of that services business.

it has rebounded 18% here. how much of that services business do you see pushing growth going forward for the company? is essentialk it to apple as we look forward. bringing the -- you have more services on the market. you are bringing the tv service and arcade service in. you could be up over $500 per month per consumer on this annualized basis. services, because they are subscription, tend to be stickier. they have a lot of building -- billing relationships with a lot of their customers and that makes it easier to convert customers and keep them. taylor: do you need to see apple of theiransition more revenue to stable services from cyclical iphones? when does that happen? lee: we have discussed this. it has to be a year and a half, two years. is builtrsation

around, why doesn't apple get a higher multiple? here's my problem with that. the software revenue is dependent on the hardware revenue. the question itself may not necessarily matter. one really leads to the other. that is why they will not get the higher multiple. it is great that they have more services revenue but if for some reason a competitor comes in in the next cycle or two and puts out a piece of hardware that really blows the iphone out of the water, i think they will have problems either way. whether the services revenue is a lot or a little relative to that hardware revenue. taylor: we are hearing tim cook on the call, coming out and saying that he is calling for a 9% decline in the iphone and that is an improvement over the 15% decline in the quarter and the iphone 11 is the best-selling iphone. we will continue to bring you those tim cook headlines as they come.

julie and lee, thank you. twitter has announced it is banning political advertising from its platform globally. in a tweet on wednesday, jack dorsey, the ceo, said, "we believe messages should be earned, not bought." the policy will go into effect on november 22. joining us for all of the details is kurt wagner. why this decision? kurt: i think the timing is unique in that facebook literally announced earnings at the exact same time and twitter is rolling out a policy that is very counter to the one that is facebook ad. we have been talking about this a lot. what are these companies going to do going into 2020? will they allow politicians to pay to promote falsehoods on their platform. jack dorsey hinted in an interview that he said he did not agree with the stance mark zuckerberg had been taking.

here he is making the official statement today that they are not going to be the ones to let people pay to promote lies. taylor: the headline in that tweet came out right as facebook was reporting their earnings. that is not a coincidence. kurt: i imagine not. because this policy is so starkly different than the one that facebook as, it was a pretty opportune time for them to not only make a splash and announce this but do it at the time when everyone was paying attention to what facebook was going to be doing with their earnings. i don't think this was necessarily coincidental. taylor: i want to talk about twitter's business a little bit. said --d that facebook that twitter said it was not a big portion of their business. do we have any indication of how much political ads contribute to twitter's revenue? kurt: we do. we just heard from twitter

executives on their own earnings call a week ago. they said during the 2018 midterms, they brought in about $3 million in revenue from political ads. that is a very small percentage. a pretty much nonexistent part of twitter's business. so, it is kind of an easy thing for them to do. not only are they taking a stand. jack dorsey believes this is a moral or symbolic stand about free speech but it will not hurt them at all financially. so it is a pretty easy decision when you think about it that way. taylor: hurting them financially, how does this help or hurt their overall appearance with regulators? twitter had been staying out of the eyes of regulators. how does this change in the eyes of regulators? kurt: i don't think it changes much. it might apply some extra pressure to facebook. you have one of their chief rivals when it comes to not only

advertising and these free-speech debates. all of a sudden, people might say, if it is going to work on twitter, why can't it work on facebook? i think this provides a little extra pressure. another weapon for those politicians who think facebook's policy is wrong. but i don't think it will dramatically impact twitter. it has not really been one of their major issues around regulation lately. taylor: bloomberg to knology's -- bloomberg technology's kurt wagner, thank you. coming up, it still may be taking heat from its political ads policy but facebook is going -- is feeling the love from wall street. we break down the third-quarter results, that is next. if you like bloomberg news, check us out on the radio. listen in on the bloomberg app, bloomberg.com and sirius xm. this is bloomberg. ♪

taylor: it looks like regulatory challenges and political ad criticisms cannot stop facebook. the social network's third-quarter sales rose to a better-than-expected 29%. facebook also added about 35 million new users with monthly users reaching 2.45 billion. that was matching estimates. for more from seattle, we have marketing analyst deborah williamson, and still with us, lead rogan -- lee drogan. i want to start with debbie. we are hearing on the call from mark zuckerberg, he is taking on jack dorsey of twitter. he says he is opening up the call, he wants to talk about

principles. while it does not impact his business, all of this controversy is creating a lot of these headline risks so to speak. even the political ads don't

if they were, shouldn't those margins come in a little bit lower? debbie: on one hand, you could say facebook could never spend enough to clean up this platform. there is clearly a lot of cleanup to do. there is no question that it is spending a lot of money. the more it can throw at this, i think the better. at the same time, the revenue continues to rise. the user base continues to rise. these are issues that facebook has not had to worry about for several quarters now. they are the more boring stories about a company like facebook. you think of some companies and you worry that revenue or user growth will not match up. that is the big story going into earnings but here, the big story is not revenue or user growth. it is these other big overhanging issues. i agree, the more that facebook can spend and the more than it

to appease the many critics it has, the better it will be over time. for now, the revenue and the user base growth is looking just fine. taylor: sometimes what is news is what is not said. libra has not been talked on the call so far. is that? -- is that news? lee: i think the interesting thing with this is when we look at the past for facebook, it is their ability to basically lock people in with different aspects of identity that has kept them on the platform. single sign-on was such a mess -- such a massive thing for facebook. i think zuck's strategic

approach with libra was if you can lock them into this currency, you can keep them -- keep their identity in all of the platforms and all of the personal data flowing to the marketing machine. i think when we look at 2, 3, 4 years, that was the big strategic driver. i don't think anybody really discounted it into the price. if you look out 2, 3, 4 years, where is the growth continuing to come from? we will have to find another acquisition to keep people in the walled garden. this does not seem to be what it is going to be. they would talk about it more if they felt that it was going to be the future. that was debra williamson. thank you for joining. rogen, you will continue to be sticking with me. up next, how things fare for

this quarter. from google to facebook, we break down all of the results. this is bloomberg. ♪

taylor: facebook, apple, amazon, google, netflix, they have all reported. it is time to take a look back . who is your standout performer? leigh: facebook continues to put up incredible numbers against a background of cacophony. that is a great report. netflix was a little bit of a disappointment. i think they are a little tapped out on user growth and coming up against a lot of competition. i think facebook really stands out here. taylor: netflix is rising today. they are up as much as 4% at one point because at&t is pricing at -- is pricing the hbo max

service at $15 per month. that is the first time we have seen pricing above netflix. how big of a headwind remained competition in your eyes? leigh: i think these platforms will be able to raise pricing. with so many of them in the market, at what point are consumers tapped out? i am not really concerned about pricing. i don't love the fact that they pushed the stock up for hbo. i don't think that makes so much sense. i don't know how much more runway there will be domestically for facebook -- sorry, netflix. i think the international growth for netflix is still totally on the board. those numbers about their moving in the right direction and --

taylor: we spoke with scott minor at guggenheim. we asked him about unicorns. take a listen. >> the cracks are forming in the dam. it is hard to know exactly when the dam will give. we definitely have the signs of erosion at this point. there may be another last hurrah for the unicorn but i think the prudent money would stay away. taylor: can you confirm that you see cracks in the unicorn market? leigh: i don't look at it as a monolithic thing. i think there are a set of companies that represent a specific aspect of venture funding and late stage venture funding. all sorts of shenanigans going on. there are companies that totally absolutely deserve their valuations. i think airbnb will come public

and absolutely deserves every dollar of its valuation based on the fundamentals and how it raised money in the past. then there are the companies and wework.d lyft, all of the food delivery companies. basically anything where you have humans involved, where these companies have said for so long that the margins just don't matter and they are going straight after growth and we'll figure it out later. that is basically done. i think wework was a seminal moment for that. that was not a part of that --an delivery or pain humans paying humans less than you should trend. the capital raising was of the same ilk. i'm really scared for this uber report. i think it will be really rough. the lyft report was not terrible. the grubhub report was awful. their guidance was awful. i think it is so interesting what they did with the letter

they put out where the listed -- where they basically let despite then fire rest of their industry. for good cause, they are in the right saying that i was have good business models. i think that is the case across the board for a lot of these companies. i would not them with a 10 foot pole. taylor: are we appropriately pricing these stocks? or should we see a bigger regulatory discount overhang? leigh: the california thing will be really interesting with the ballot initiative. definitely keep an eye on that. i don't think that is the main thing that will drive this. i think that is a tertiary thing. i think the general aspect of the fact that we are having this conversation at all regarding the input costs, the human input costs of these businesses, that is the thing. taylor: thank you for joining.

still ahead, more on apple and facebook's big beats. later, we go to lyft. they are impressing wall street. they say they will reach profit by the end of 2021. this is bloomberg. ♪ whether you're out here on lte.

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this is "bloomberg technology." back to the titans of tech. as for apple, highlights include sales and profit topping analyst projections. services and revenue reached a record high. apple will launch a no-interest iphone payment on the apple card. ceo tim cook says he believes the apple card is the most successful launch for a credit card in the u.s. ever. .ith more, it is tom forte

tom, we've given you a few minutes to dissect the earnings. your key takeaway? tom: the key takeaway is that apple continues to benefit from low expectations as it transitions away from the iphone. you talked about the success of apple card and how they will leverage it to offer free financing for future iphones. if you look at their financial services efforts and look at the upcoming content efforts, and you look at health care, all these things enabling apple to diversify away from the mature smartphone industry. you are seeing that in the stock. it's very good news for the shareholders. taylor: what do you need to see from this company to take the stock higher? we talk about it as a stock that's up more than 50% on the year. it reached another record high this week. what else do you need to see from this company? tom: it's an excellent question. what i'm trying to determine is

for next year's upgrade cycle on the iphone, what are the expectations on a 5g device? will investors we looking for a global rollout of a 5g device or just a regional rollout? i think the argument now can be made that over the next two years, you have the potential for unit growth in smartphones to return as they start rolling out 5g devices. that could be the next leg up for the stock, as we look for expectations of a 5g device for next fall. taylor: i'm taking a poll of every analyst on the street so i pose the same question to you. what percent of revenue within the company needs to come from services, where you get to a place where you no longer worried about the highly cyclical revenue? is it 30%? 50%? tom: the way that i think about it i guess is slightly the

inverse of what you're talking about. if you look at the last fiscal year, iphone sales were 60% of total sales. so what does success look like for apple from an iphone standpoint? if that 60% of sales in five years can be 30% of sales, the -- can be 33% of sales, the dominance of one device goes from essentially two-thirds to one-third, that would be wild success. if you go from 40% to two-thirds, that would be a different way of looking at the numbers. taylor: we are hearing that wearables are up more than 50% from a year ago, according to the cfo. is wearables automatically assuming that will be a growth driver for the company? tom: the answer is yes. the amazing thing about the success in wearables is that the battery life for a lot of smart watches remains limited. i think the fact that they have been able to do so well with

what you thought would have been a gating factor to succeeding wearables, having to watch it doesn't last 24 hours, it's very remarkable. but what was so interesting was, 17% sales growth when you adjust for the iphone, so they do have a fair amount of growth going on if you can set aside the mature iphone market. taylor: i want to look at a chart i'm showing a bloomberg audience. it is total cash, which is still above $200 billion, minus $100 billion of debt or so, which leaves you about net cash of $100 billion. where should the company be using their cash? tom: the big story has been returning cash to shareholders via dividends and buybacks. i think what they need to lean into is basically new products and new services to diversify

their revenue away from the iphone. so you are seeing that were -- that more with kind of dipping the toe on content, but we would like to see them lean more heavily into services and devices that are not iphones, in addition to returning money to shareholders and i think the stock will continue to rise. taylor: tom forte, thank you for joining. now want to go back to another major tech story of the day, and that is facebook. ceo mark zuckerberg has been remaining defiant on the investor call. take a listen. mark zuckerberg: i expect this will be a very tough year. we try to do what we think is right, but we aren't going to get everything right. this is complex stuff. anyone who says the answers are simple hasn't thought long enough about all the nuances and downstream challenges. i get that some people will disagree with our decisions and

i get that some people will think that these decisions may have a negative impact on things that really care about. i don't think anyone can say that we are not doing what we believe or that we haven't thought hard about these issues. taylor: i want to bring in our bloomberg intelligence senior analyst. you just got off the call. were you surprised that he was using a lot of time defending the political ad situation? >> i'm not surprised at all. it has been a big topic for the last couple of quarters and will continue to be so. going into election year. the business side of things is humming well. they came in well on every metric, including margins, where there were some worries. they are projecting a slowdown in the fourth quarter. but the quarter is really showing is facebook is setting up for its newer businesses to

diversify, so you're talking about e-commerce, talking about payments, and that is the story from a business standpoint. as far as the regulatory aspect, that is going to an ongoing discussion, argument, through next year. taylor: are we seeing cyclicality in their ad revenue around the election cycles? we know that facebook and google continue to dominate the ad space. jitendra: it's not that big in terms of total revenue. if you look at facebook or twitter, the political ads small , a portion of the business. not cyclicality in terms of revenue per se, but there is organic traffic, more eyeballs, that do come along, that may

help twitter more so than facebook. but cyclicality based on elections on the business side of things should not sway it as much. taylor: not to be a total negative nancy but i think there were some concerns that the barge and -- that the margin beat. we were looking for margins to miss to show they were spending money on cleaning up the platform. are they doing enough to clean up the platform? jitendra: if you look at their guidance for cost and expenses for 2020, they usually give higher guidance early on. it is basically telling you the headcount will continue to increase, with the u.s. be more cautious henceforth. this will be a moving target over here. it is not a one-year fix. it is evolution of infrastructure spending and how they allocate personnel. they are making sure there is capital and spending baked into

expectations for next year. taylor: i know that you, as a bottom up analyst, look at fundamentals. the problem we're having here with facebook is that it is increasingly becoming a political conversation, a regulatory conversation. with the twitter announcement that they're going to ban all political as, we are getting more tweets from senators. senator marsha blackburn coming out and saying that freedom of speech is paramount to who we are as a nation, the beautiful thing about our country is that twitter has made the ultimate decision as to what type of content that allow on their platform. i know you don't want to cover all the politics, but talk to me a little more about the political backlash that facebook is getting, and their image for regulators. jitendra: it's basically two lives they're living. one is a constant battle with regulators and that will be an ongoing topic. the other aspect is the business

side. more than 70% of the world's online population is using it every month. from a business standpoint, they do have the advertising strength behind them and they have the capacity to get into e-commerce and payments. as far as regulations are concerned, you're starting to see some impact over here in terms of how quickly they can roll out products and what kind of changes they can do. how much flexibility they have in long-term strategies. you are seeing that in long-term results, but if that focus on some of the strengths and diversifying, especially instagram checkout, e-commerce, and when i say payments, i don't mean libra, i mean what they're trying to do with partnership with instagram and things like that. those are the avenues where there is a very big audience for the platform who is willing to transact, and they're making tools available for them.

so they have to manage these two lives into next year. taylor: thank you for joining. coming up, lyft shares are up in after hours trading after beating analyst estimates on revenue. we will break down the figures discuss how rival uber is poised before its earnings. that's next. this is bloomberg. ♪

taylor: ride-hailing company lyft blew through analyst estimates for the third quarter. lyft they said full-year revenue will be at least $3.75 billion, beating estimates of $3.5 billion.

the company said it will turn a profit in 2021. shares rising in after hour trading. i go straight to da davidson analyst tom in new york. tom, what is more impressive, the top line or the bottom line here? tom: i think you have to say the topline trends, a nice beat on revenue, and they beat on active riders and they also benefited and beat on a sharp acceleration in revenue per rider, which was driven by them optimizing on price. so, taking up prices on some initiativeres, an they started late in the second quarter on select targeted routes and targeted markets. the top line beat was quite nice. the headline beat was quite nice. there's a little more nuance which led to the stock trading

up now, but even a bit more when the headline numbers came out. overall, we think a very solid quarter. taylor: and is a bottom line profit finally by 2021 in line with your estimates where you want to see the company turn a profit? tom: they beat us by a few quarters. we had them mid-2022 when they generate a profit on ebitda -- generate positive ebitda. it underscores a couple of things. the north american ridesharing market really is benefiting from a rationalization of the competitive intensity that we saw from both uber and lyft when both were private companies. they are public companies now. they have shareholders they have to answer to and they have to demonstrate profitability.

in lyft's case, it highlights how it's a lot easier to forecast business that is one product, geographic market, a one challenge that uber has a bit more challenging facing them given how many markets they are both uber eats and ridesharing. taylor: you talk about the targeted strategy. why is that better than the uber strategy going in a lot of different directions and other lines of business? i don't know that it is better. when we devise our rating system at davidson, we generally look at a 12-18 month time horizon. in the case of these two companies, we feel like the visibility of lyft is significantly better. uber markets are at different stages of evolution. you have a far more competitive landscape.

uber has got a lot more private, d.c.-4 -- vc-funded competitors to deal with. more to react to if the competitors get aggressive on the incentive side. i wouldn't say it's better, but over the next 12-18 months where more comfortable recommending buying lyft instead of uber. taylor: we await earnings on still ahead, restoring trust in monday. the tech sector. we hear from a former google design ethicist who's now executive director for the center for humane technology. he is next. this is bloomberg. ♪

taylor: distrust in the tech industry has been on the rise in

recent years with data privacy breaches, potential bias, and antitrust probes. at bloomberg's global technology event in new york, the so-called conscience of silicon valley, a -- silicon valley, tristan harris, sat down with caroline hyde. discussed -- a former google ethicist, he discussed why he remains a tech optimist, despite it all. >> the pairing of profit directly to the incentive to modify or change your behavior, your attitudes and your beliefs. just a slight change to your identity is a profit auto. attention capitalism is always demanding to find cheaper ways of generating potential labor out of human vessels. if you look at the bloomberg , thatoom, expensive way

is a really expensive thing, what if we had people to trade links with each other to do the labor for free? we can generate the same amount of human attention as bloomberg can but it doesn't cost as much because you can convince people to do it for free. that's attention capitalism. it is finding cheaper ways to dupe us into playing the same lottery and sharing links with one another to generate human attention for a system that basically hollows out our media environment. it is sort of like the flint water supply for our brain. the next stage is to use algorithms because they are cheaper than to pay human editors to use moral judgment about what is true. it's expensive to pay all those people to review all that stuff, so let's use algorithms. the problem is, if you let youtube shape what to billion

people, more than the size of christianity, look at every day, we know that on a spectrum from walter cronkite to crazy town ufos, if i want you to watch more because of attention capitalism, i am never going to send you to the calm side, i will send you to the crazier stuff. you'd be recommending conspiracy -- alex jones conspiracy theories, anti-vaccines, flat earth. this has been poisoning our information. included with climate change. climate denial videos, about 50% of the videos recommended about climate change are denials of it. so we take into account that this is the new information system that we are feeding everybody that is controlling more of our informational lives, it's really not good. until we change the incentives,

we have to start paying for a world we want to live in. free is the most important -- most expensive business model. caroline: so is the answer regulation? it feels like the tide is turning, that businesses themselves have realized some of the limitations, they're trying to employ more fact checkers, add humans back in, ensure that youtube for kids is a safe space. there has been some change made. is it enough? tristan: youtube and facebook have both upped the amount of content moderators. facebook has 35,000 content moderators, but if you look at it as a percentage of their budget -- if you are in los angeles, how much do you think a city like l.a. spends on security? it is 25% of their budget. facebook, it's only 6.7% of their budget. you could say that is because of efficiencies. no. they have 35,000 content moderators for 2.7 billion

users. they took down 2.2 billion fake accounts in just the last month. -- the last three months. down 2.2an take , that'sfake accounts how much fraud is going through the system -- caroline: do you think ai, machine learning should make it more efficient? tristan: it cannot discern between journalistic value and a damaging speech. it doesn't have moral reasoning. the trap we put ourselves in is that attention capitalism has now anchored us on an expectation that we can generate these forms of emotional labor for a low cost while we've been poisoning children's mental health. teen depression has gone up 170% in the last six years after decades of decline. the business model has had huge costs.

just like with climate change, we are profiting with growth, fueling our growth -- we are profiting and creating more technological growth off the poisoning of our children's minds and off our democracy. we really have to decouple this. it's very much like climate change. we have to decouple the harm from the good. caroline: are you inherently a technology optimist or pessimist? it feels sometimes we are outweighed by the pessimists. tristan: i believe in a world where facebook could just be about finding out when your friends are in the same city as you and getting to see them. i believe in a world where you -- where facebook is just about people find connection when they are feeling lonely, a world where you can reconnect with those people that you lost track of 20 years ago. they can do all of those things . in fact, they can do it more often if they didn't have a business model that's about commandeering your attention.

the point is to realign the incentives that all the engineers behind the screen are working on your team instead of someone else's team and treating you as a resource. taylor: that was tristan harris speaking at today's bloomberg's sooner than you think tech conference in brooklyn. that does it for this edition of "bloomberg technology." we are livestreaming on twitter. check us out and be sure to follow our global breaking news network at tictoc on twitter. this is bloomberg. ♪ when it comes to using data,

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