"press here" is sponsored by -- grilled cheese. a high-tech entrepreneur bets there's an app for that. jonathan kaplan my guest for this week. and cnn invests big in ipad but leaves the brand behind. mark johnson in conversation with our reporters. from bloomberg business week, and john schwartz of "usa tod " today", this week on "press here." good morning, everyone. i'm scott mcgrew. my first guest invented the

world's most popular video camera, the flip camera. he's moved on to grilled cheese and that's not a code name for anything. it's literally grilled cheese. it is truly one of the strangest of high-tech success stories -- the melt. a chain of grilled cheese restaurants in san francisco is the latest effort by entrepreneur jonathan kaplan. it's his second act. in the beginning, there was the flip, a wildly successful inexpensive video camera which quickly became a best seller. in a head scratching move the whole product was purchased by cisco for $590 million in stock, only to see cisco dump the product just a few months later. which brings us back to the melt. kaplan took his millions and adventure capital into a pinch of partnerships to open these

restaurants where you can order a $5 grilled cheese sandwich, using your iphone. three locations all in the san francisco bay area, but kaplan hopes to expand to seattle, boston, new york, as many as 500 locations perhaps. joined by john schwartz of "usa today," rich gerislovsky of bloomberg business week. video cameras to grilled cheese, what now? >> well, i think my real idea was to work on another project that was very consumer focused and that made people happy. one of the big joys about making the flip was seeing it used in action and war zones, seeing it used in action, seeing it record first steps or last words. the memories and happiness was something i wanted to reproduce again. everyone has to eat and everybody loves the grilled cheese.

let's do a drigrilled cheese an soup chain. >> and flip offers a fine art of cashing out at the same time. "new york times" says that. well, you did get out at the right time. we can ponder forever why cisco bought it. you're probably glad not to be in the flip camera business now with the iphone shooting such glorious video, et cetera. >> i'm so excited to be looking out the rear view vir more and when i think of successful the melt has been. and the flip had new products that were going to come out. the team that developed the flip are now on to doing pretty exciting things at apple and pretty exciting things at consumer electronics companies. i'm not sure it was the best time to get out. cisco stock ended up not wanting to go where i wanted it to go. if we brought some new products to the market, they would have looked at us the same way they'd look at us.

how will you possibly compete with panasonic and -- >> well, you hammered them. >> how are you possibly going to compete with mcdonald's and how are you going to compete with chipolte? >> exactly. our idea is if we can create great customer experience and a great product, we can compute with everyone. americans want comfort food right now. they want to feel good about what they eat. they want an eco friendly environment. the melt has created that. they want a brand they can trust. a whole idea of fast casuals is really expanding and doing very well. we have seen it with chipolte in the mexican food space. i think you will see it in the melt and the grilled cheese space. >> so in a sense you go from competing with one set, to go from a flip camera to flipping sandwiches so to speak. what made you decide to do something so radical as this? >> when i got into the film

business, boy, that doesn't make any sense. if we even pop it up from a level to video camera levels, that doesn't make any sense. it makes no sense, it's hardware, i mean, that u.s. then't make any sense. so restaurants are equally challenging. they are fraught with all of the issues that exist for consumer electronics business or for -- >> yeah. that's actually interesting you would say that. >> well, real estate. if you don't choose the right estate you'll be in big problems. we are lucky enough to have ron johnson, now the ceo of j.c. penney and he hired a great team of investors to help me. and making that product be consistent and all natural and eco friendly and, you know, the idea that mcdonald's brought to us all, if i have a hamburger in beijing or in san francisco, it always tastes like a hamburger. that's easier to do with a

mcdonald's hamburger than with a grilled cheese sandwich and what we've tried to do is create a good product that's good for you and good for the environment. >> something that kids started on, it's probably the one item you can always order even if it's not always on the menu. there's that kind of grilled cheese -- >> i think the grilled -- there's something about it. i don't know what it is. we have done a little work with the professor at stanford to understand why do people love grilled cheese. they don't say i like it, it's delicious. i don't know if it's the bread or the butter or the gooey or the melting, i don't know what it is, but coffee has something special called caffeine that makes us want to have it every morning. we haven't found it yet. >> if you have a venture capital backing, apple store's figuring the real estate, and the great chains -- this goes back 50 or 60 years or 100 years were started by the milk shake salesman who -- the stuff we love weren't venture capital

backed with data analysis. why not just open a couple of stores the way they used to which is sink some money into it and see where it is? >> well first of all, it's me, and that would be boring. i want to do put 150, 200,000 jobs into the work force. one of things exciting about the melt, we need comfort food, but we need jobs. i have over 110 hourly employees right now. i only have ten full-time people with more stores -- well, three stores open now and one about to be opened december 17th at the stanford shopping center. it is exciting to put people in the work force, to get a chance to understand what it's like to do a consumer business and trying to give back the way we did with flip, we're doing it with melt. >> you have a situation, the set-up where you can order online, you can order from your iphone. the food is cooked and scanned,

and how many people take advantage of that and do you see any benefits from your end to people doing that? >> it's a great question, i think what we're talking about here is this idea you can go on the melt.com, you can order your meal. you never have to tell us you want to pick it up at 12:00, you never have to tell us where you want to pick it up. what you do is you get a qr code and then when you walk in, there's a scanner, you scan that and we cook your meal right there. that's when we charge your credit card and when we start cooking. so you're getting a hot, fresh grilled cheese and soup at the time that you want it, which is really important to us. what's important to us about it as a business is we didn't have to take your order. we didn't have to stand there at the cash register. we didn't have to ask you nine questions and have you wait four or five minutes. because there's lots of questions, cash or credit, here or go? do you want tomatoes and bacon on that for free? you have done that work for me. you as a consumer get a better

experience because you can skip the line, your credit card is saved so you don't have to worry about finding the credit card in your pocket, you can be on the cell phone if you want to. you don't have to talk to anybody if you don't want to talk to. but the added product and the end experience is an experience that i think is just phenomenal because you can't get it anywhere else. >> i think this is something that a consumer is going to want more and hmore of it. it's like ticketless travel. i was at macy's i was looking for the right dress shirt size. you guys know if you have it or not. i'll buy three of them if you give it to me right now. i think people are going to get more and more impatient on that. >> a friend of mine, i have two friends who asked the same question of me. this is from my friend laurie. set it up. >> way to go, laurie. >> dessert menu? like s'mores or get two specialty cookies?

>> yeah. >> we launched it about two weeks ago. you can call -- >> laurie, i'm going to give her credit for it. but laurie has nothing to do with it. we just launched the sweet melts and we have the s'mores. >> that's all i'm asking. >> the raspberry shortcake and the no nuts pb & j. they're delicious and kind of a little treat. >> we have to go to break, but before we do, i want to ask a question. how do you avoid just becoming a deli? maybe we should have salads, we'll have that. >> you sound like my management team. my management team keeps wanting to put meat in and selling the potato salad. >> i think that would be a mistake. >> stick to grilled cheese. >> the flip wanted to make it a camera. wanted to do this and that. and my job as the ceo, my job as

the founder, to keep us focused, keep us simple. keep it a grilled cheese. we're going to be a grilled cheese, we're going to be a melt, great soup. >> like in and out. >> simple. >> they don't try to get too fancy. >> last time they changed the m men you was to get -- menu was to get dr pepper. >> we'll be back in a minute. this is an rc robotic claw. my high school science teacher made me what i am today. our science teacher helped us build it. ♪ now i'm a geologist at chevron, and i get to help science teachers. it has four servo motors and a wireless microcontroller. over the last three years we've put nearly 100 million dollars into american education. that's thousands of kids learning to love science. ♪ isn't that cool? and that's pretty cool. ♪

welcome back. we're talking about grilled cheese. >> i wanted to go back for a moment to the mobile payment issue, because that's still -- we're really at the very beginning of the whole thing of using your phone to pay for things and everything. i was curious about what percentage of your users are actually prepaying using their mobile device to pay and whether you're able to track any improvement in the metrics in terms of your line length or something like that as a result

of it? >> sure. so we're in about -- a little over 10% of our customers actually either order with their mobile food or on the website. if they order on the website -- >> that's low. >> really? >> but we're talking about san francisco. >> that's true. >> the home of the iphone and the twitter. >> that's true. >> i was going -- >> that's what i thought. >> in the ebarcadero center, the assistants they have a lot of assistants and they scan the qr code and brings the melts back upstairs for them, it's over 15%, a little less in the bay bridge on spirit street. the key to the mobile payments base is i think over time, this is going to be 20% or 30%. i don't think it's ever going to get to be 50% or 60%. but i think when get some of the other technologies, once those that are 15 and 16 become 19 and

20 and 30, they're going to expect to use their mobile phones to do all of their payments. we wanted to have a system that made it easy for them and convenient for them, but also wasn't just cool. it actually played a role. this does play a role for the consumer. your favorite order is saved. you can order that qr code and you to go any location and pick up the products. it is different from using the web in order to preorder something versus a real mobile phone payment. >> i know that starbucks monitors line length. that's one of the key metrics. >> sure. >> somebody once told me i don't know if this is true, that's one of the things they looked at whether to open a new starbucks nearby, the line lengths, people walk out the door if it's too long. are you able to track what if effect -- the 10% which seems to me is a substantial number, does that have an appreciable effect

on how long people are in the store? >> not only line lengths but the number of customers we can serve in an hour's period. if you show up 2011:00 a.m. and 1:00 p.m., you're likely to meet a line. if you have to wait more than five or ten minutes for your lunch, you won't do it. people have a lunch hour and waiting ten minutes is not something you want to do. we tried to make it interesting by having some interesting things like sampling and we provide what we call the order status board, which lets you learn about our products and watch where you in the line. you can watch your sandwich being made. kind of like the airline board to see if you're going to be upgraded north. >> domino's pizza does that. >> kind of cool. but we know that where we don't have online ordering we can do between 90 and 1 what 00 -- 100 customers an hour.

and places where we have it, we have over 100. >> so you want 500 locations within five years. in addition to that, might you cater and a tech company like a google, apple -- >> you don't mean like a party. you mean an actual location -- >> yeah. internal kitchens. they have a wide variety of things so maybe you might be one of those? >> i think our goal right now, you know, we really don't know what we're doing. i mean, i know it sounds -- >> sort of refreshing. >> we really don't. we're learning. what we would be like in an airport, what we would be like in a ballpark? >> at&t park, you'd do well. >> we're learning now. we know that we're going to sell lunch at lunch. we're going to explore whether we should breakfast at breakfast or explore whether we should sell dinner at dinner. what does late night look like? we're doing exploration. stanford is going to be

different than the embarcadero. as we learn, maybe we'll talk more and decide, you know, is google the right place for us? on campus. franchise, i don't think we want to do. i think capital is the reason why companies franchise. they want to grow faster than the capital allows or the management team allows. i think i can raise the capital necessary to have 25 restaurants next year, get to my 500 years in -- restaurants in 500 years. >> for now, that's all the time we have. thank you for being here. >> my pleasure. up next, ipad changes the way we consume news. the world tailored just for you. this is an rc robotic claw. my high school science teacher made me what i am today. our science teacher helped us build it. ♪ now i'm a geologist at chevron, and i get to help science teachers.

it has four servo motors and a wireless microcontroller. over the last three years we've put nearly 100 million dollars into american education. that's thousands of kids learning to love science. ♪ isn't that cool? and that's pretty cool. ♪ welcome back to "press

here." a very smart venture capitalist said if you do not have an ipad, you cannot understand what's happening. the intimate personal relationship that people have with ipads mean that content producers have to change their information. it's beyond the web on the tablet, it's a rethink of the whole experience. tech entrepreneur mike mcqueue compares the ipad to a hurricane destroying the internet as we know it. to rebuild, he asks what would a new internet look like? for many app developers that looks like a digital magazine. something like this called an easy to reed selection of pictures and tailored to your interests. this sort of presentation of the news impressed cnn which bought itor a rumored $20 million

last summer. the first purchase of a tech company in cnn's 32-year history. mark johnson is the ceo, which while owned by cnn is run as an independent company. he comes from microsoft, but it is his first time at the helm as ceo. thanks for being with us this morning. >> thanks for having me. >> i was enjoying it this morning. i noticed in the top story sections a story brought to me by abc news. if i'm the head of cnn what are we doing there? why are we promoting -- in fact, it was hard to find cnn contechblcontent. >> we are truly an independent company. cnn bought us because they saw something special. they realized that people want content from all over. they're looking for lots of different sources. they have lots of different interests. we satisfied a different need than the people coming to cnn. people come to cnn for breaking news. they're kicking back on their

couch at the end of the night, reading about the varied interests. for different purposes. >> there's the better approach. but as an aol does this, they have a similar sort of magazine thing. not a whole lot of aol content on it, and if i was the aol -- >> variety is the spice of life. >> but this is mcdonald's serving burger king, i think that's maybe a -- attention coming ahead? >> i think cnn is supportive of our mission. certainly, cnn produces great continue tent -- content also. we look at millions of things a day. that's why we have astrology. >> you have an ardwino section. >> you won't find that on cnn. >> no. >> can i ask a quick question.

so we mentioned mike mcewen in the set-up piece. what is the difference between what you do and what they do? i know the answer, but tell people who are unfamiliar with both companies. >> sure, flip ware is a social magazine so you curate it through a few ways. sort of the people you follow on twitter. the different sections that you look at in flip word. but they're limited to a number of curated sections. so we get smarter as you use it. we try to deliver you more of it. so we look at your twitter feed. we look at the things that you might have stored but we use that as an input and try to take those steps and say, hey, because you follow these people, because you read this stuff, maybe you read this other stuff. the number one comment, people say, wow, i read stuff here i could not have found elseelsewh >> there's some algorithming going on back there. if you make dog, you must like

cats sort of thing. it's very complex. >> that's right. so we're six years old, came out as a research project from the university of british columbia, and there's another product before this, and we did a pivot, i came on as an adviser about two years ago. and we did a pivot about a year and a half ago from the old product, and what's great with having that years of research was we were able to create the interesting technology that had lots of applications. the ipad came out, we had the great personalization technology and you marry the two together and you have a great product. >> cnn happens to be owned by a company which publishes a lot of magazines, time, time warner. cnn is not necessarily known as a place you go to read. it's a place you go to view video, to see news rather than to read news. why is cnn a better home for

you, than time inc. would be? >> well, cnn is an extremely innovative company. they've changed the way that news was delivered on cable. they realized that in order to be relevant in the new millennium, they continue to change and they see this as something revolutionary and they want to see us move along. another thing to remember is that cnn has 13.5 million mobile applications out there. their one of the top websites in the world. so even though it was founded as a cable news network, it really hasn't moved far beyond that now. >> i think for -- i know you're not saying how much, but let's say it was $20 million. and for $20 million, you get a lot of laboratory. and in the grand scheme of things that's not very much. you don't know what's going to pop and for $20 million you can say maybe it's going to be this and we can handle that. >> you know, i'm wondering how

do you guys prosper -- i mean, cnn bought you so you don't have to worry about that. you have life stand, there's propell propeller, there's pulse -- >> google, yahoo one, propeller. >> yahoo's -- >> i don't know -- i mean, how do you rise above that? people like reading off their smartphones. i'm not sure they want to read all day from the smartphone. how do you differentiate yourself from them? >> there's a lot of proliferation right now. there's lots of big and small companies in it. we came out of nowhere. when we launched people didn't expect to see zite. when they start using it and personalizing it, we want to keep them. the retention rates are really really high. that's because we give a great, personalized experience. i think that sort of continuing to evolve that technology, continuing to make the experience really great is really what's going to -- >> you try to keep it fairly simple too?

design it -- the way that the news is delivered. not a circus layout. but the more simple, elegant display? >> certainly the ipad helps. but the former entity warrior helped us to -- a really good design. you know, forced us to into really simple design. we left lots and lots of features out of the product that we could have put in. we wanted someone to come in, set up their accounts almost immediately. and within a few minutes be able to read personalized news. that's a tough thing to do. >> go ahead. we have a minute left. >> you're ios only right now. how do you look at the landscape of the other platforms. is there anything else out there besides ipads that looks like it might be worth your while to seriously develop for? >> certainly phones really interested. people don't always have an ipad with them. certainly on the web is something we're looking at. >> by phone, do you mean iphone

or android, everything else? >> all phones. i think everybody has a smartphone. not everyone has a tablet. everybody has a web browser, not everyone has a tablet. i think the kindle fire is one of the most exciting things that's happened in the tablet space. certainly since the ipad launched. >> mark johnson, we have to leave it there. it's available on the apple app store. we'll be back in a minute. my high school science teacher made me what i am today. our science teacher helped us build it. ♪ now i'm a geologist at chevron, and i get to help science teachers. it has four servo motors and a wireless microcontroller. over the last three years we've put nearly 100 million dollars into american education. that's thousands of kids learning to love science. ♪ isn't that cool? and that's pretty cool. ♪

that's our show for this week. a programming note, we are preempted from the usual sunday spot by nbc sports. but the we'll be back here in two weeks. we're available on itunes where we're the seventh most watched podcast. we are number seven behind maria bar toe romo.