tv Best of Bloomberg Technology Bloomberg February 3, 2018 11:00am-12:00pm EST
♪ emily: i'm emily chang and this is the "best of bloomberg technology." we bring you all our top interviews from this week in tech. coming up, the tech named bonanza, all the major players reported this week. we will break it down. plus, we will narrow in on facebook's hit and miss. our look at fourth-quarter earnings for the social media giant and the most concerning metric for wall street. a new alliance takes aim at health care. the implications for the industry as amazon, berkshire hathaway, and j.p. morgan join forces.
first, to our lead. we had a slew of big tech earnings this week, and getting the attention was apple. i traveled to their new headquarters in california on thursday to sit down with tim cook after earnings were released. we went through some of the main takeaways. >> it sounds solid to me. when you look at a device like this, it is incredibly sophisticated. it is at a higher price point. the you consider replacement cycles for consumers are slowing, i think it is a very strong number. while people like to talk about the high price point might deter consumers from upgrading, you have to keep in mind it is a total cost of service. the hardware isn't the biggest chunk of the service. emily: we also talked about the performance of the iphone x in china. there has been concern that the
price was too high. i asked cook about that, he told me, in china, the top five selling smartphones, everyone is the iphone. this same situation in the u.s., japan, the top six out of seven smartphones or iphones, so not bad, he said. i feel great about that. what do you make of these numbers, given all of this fuss? corey: i think the numbers show it was too expensive. there are different ways to look at this. apple made a lot of money selling an expensive phone. they are clearly defensive about what we are hearing about a slowdown, what we got out of qualcomm yesterday about the unit sales on the year-over-year basis were down, even though this phone is a technological marvel. i think julia's point is an important one. it cannot be overestimated. looking at the competitive world and at apple itself, apple is trying to move its financial model towards a service model
and away from being purely about hardware. the introduction of new hardware isn't about the hardware itself. it is the trojan horse to services that customers will pay for overtime. over time, we have to evaluate it is not just about how well the phone sells, but the ability to pull along other revenues over time. as a result, that will take a little longer. we do not know when the iphone launched that uber and instagram would be invented and become the killer apps for this device of a smart phone and the iphone. we might not know when the first 15 weeks or so of the existence of the iphone x what the killer app is. apple's goal is it will be an apple app and that the next uber and instagram want to be created -- will not be created with the materials but will be owned by apple.
emily: i asked tim cook about the so-called battery date. bloomberg has reported the sec and department of justice are asking questions about the iphone battery replacement issue. he couldn't comment on the specific agencies, but he said there are agencies around the world asking questions and they are cooperating. he singled out the apple watch and how quickly that is growing, that this category would be the size of a fortune 300 company on its own. how optimistic are you about the non-iphone products in the portfolio? >> this builds on the point. there are a couple of eggs that are key as we look forward on apple's success and as corey pointed out, when is the services. that makes these devices more valuable, and the more devices a consumer owns within the apple ecosystem of products, then it is more valuable that each of
these products become more likely apple will be able to sell services like music, payments will become embedded in day-to-day life, things like that. both of those things are important as we think about apple's momentum. emily: we know that apple is bringing billions and billions of dollars back from overseas, thanks to tax reform. i asked tim cook if that would be changing anything about m&a strategy, like if they would be consider buying companies like a netflix or tesla and he pointed have acquired we 19 companies in 2017, a company every two weeks to three weeks. the key question is always, would it improve the life of a customer, can it help us prove better products? that is how we decide. what do you read into that? corey: i want to go back to your fortune 300 comment. that seems ridiculous. fortune 300, i understand what
he means by that, but on the day when he is still pointing to lists that don't exist anymore, there is no fortune 300 list. i think the cherry picking to dress up these results at being better is stretching a little bit. apple sold fewer phones. it was the biggest release they said they have ever had. they sold fewer phones than they did a year before when they didn't have such a big release. some of that has got to be about price. they charge a lot of money for this phone. they brought in a lot of money for the phone. the revenues were fantastic, the free cash flow is fantastic. it is all those things you expect from this company, but the success of the phone is tepid. the success of the watch business paled to the phone, because the phone has such a historic growth rate. fundamentally, it is going to be about the phone sales going forward. i think the reduction of the guidance for the next quarter in terms of revenues, so much below
what wall street had a net and what wall street expected in terms of growth based on where apple directed them. it shows that apple is up against it a little bit with this phone. emily: still ahead, we will zero in on facebook. ceo mark zuckerberg said time spent on facebook decreased 5% in the fourth quarter. what it means for the social media giant. if you like bloomberg news, check us out on the radio. you can listen on the bloomberg radio app, bloomberg.com, and the bloomberg station on sirius xm. this is bloomberg. ♪
subpoenas were sent in december. the firm's shared the same ceo. tether issued a claim and has yet to verify it holds $2.3 billion in reserves. facebook has banned a whole sector of ads on its platform. no, it has nothing to do with russia and the u.s. election. the social network is banning ads that promote cryptocurrencies, initial coin offerings, and binary options. facebook says these ads are "frequently associated with misleading or deceptive promotional practices." facebook reported its fourth-quarter earnings. here are the highlights. revenues coming in at $13 billion, beating highest estimates from analyst. users totaled 2.12 3 billion, while daily active users came in at 1.4 -- 1.4 billion, slightly below the forecast. for the first time, daily active users declined. the author of the
facebook effect and a bloomberg and list to discuss. >> it raises the question about the changes they are making to the platform. it could be a temporary shift to these metrics, but instagram and ad pricing our big offsets for them this year. i think more commentary will be focused on what those changes mean to this trajectory of the decline. emily: zuckerberg saying the changes they are making are decreasing user engagement. how do you look at these results? >> i wouldn't put too much importance on the drop of daily active users globally. what he mentions about a decline in the u.s. is interesting and could be a response to facebook's manipulation of the way the newsfeed work. i want to point to something in the release that makes me wonder
how the world ought to respond to this notion of the making -- of them making these changes to try and make us all do better. it is a manipulative attitude. listen to what he said. he said we have made the decision to show fewer viral videos to make sure people time is well spent. we reduced time spent on facebook by roughly 50 million hours every day. that is global, but really, doesn't it sound a little bit like geppetto and the strings of pinocchio? we will show you fewer viral videos because we know what is good for you. i think they are in thin ice with the way they are handling these problems. it is hard to know what should be done, but i'm not sure telling us to watch fewer viral videos is the answer. calls facebook earnings have started. the cfo and zuckerberg speaking on that call. you can watch the live headlines as they happen on our terminal.
is this thin ice for now facebook is swinging in the opposite direction, trying to do better for its users? jitendra: i believe so. having said that, they do have instagram. that platform is heading towards one billion people right now. it is just in the beginning phase of monetization, and it could be much more material in terms of revenue contribution. i think at pricing offsets and instagram would be my core point. as far as changes are concerned, if they are able to show this trajectory of daily active users is temporary and the amount of time eventually improves, i think they will be fine. emily: do you think they will have to make these hard choices on instagram as well? david: it's possible. it's interesting instagram hasn't been hit with the same concerns as facebook's platform. even as instagram is clearly getting more advertising revenue. i want to point out that,
despite the political and social challenges facebook faces, the financials of this quarter are spectacular. they have the highest operating margin they may have ever had. their profits, their revenue went up just about 50%, but their costs only went up 30%. like on a $12 billion per quarter revenue run rate. this is a profit machine that has a lot of money to experiment with these many problems they need to solve. emily: i want to point out another number. the increased headcount, 47% year-over-year. they now have 25,000 employees. we know they have been hiring people to combat things like fake news, offensive and disturbing content. what do you make of the sheer scale at which the employee base is growing?
jitendra: they have under monetized properties as well. they have to support billions of people, so you have messenger sapp.hat i do not know if hiring people is directly correlated to the actual impact of that in terms of reduced fake news and better quality content. at least they are making the effort. i feel this year, based on what mark zuckerberg has said, that number might be even bigger this year. emily: zuckerberg speaking on the call right now. you can see what he is saying, reiterating the importance of personal connections and how passively consuming public content takes away from that time people spend connecting with each other, so there you go again. david, to some extent, sort of moralizing the way we use facebook. going strong there. david: it is interesting. moralizing is an interesting word. clearly, the world wants facebook to have less of a toxic effect on society, and i would argue, on balance, facebook
still has a phenomenally beneficial effect on society. there are some toxic components we have been hearing about, whether it is addiction, political manipulation, etc. that is a global problem. not just in the u.s. it is interesting to ask whether the world really wants these people with very little transparency to be the ones telling us what is good for us. i think it's a slippery slope, and i think they could get some pushback for that. it underscores what a challenging position they are in, as they try to make us stop thinking they are doing us harm. emily: that was jitendra and david. coming up, amazon has thrown the health care business into disarray, joining forces with j.p. morgan and berkshire hathaway to target the industry. what it means for the health industry, next. taiwan may be positioning itself to become the next cryptocurrency hub in asia,
♪ emily: amazon, berkshire hathaway, and j.p. morgan are planning a new company to provide u.s. employees with tech solutions for simplified care at a reasonable cost. this could possibly be a massive disruptor for the industry where rising costs are under the microscope. the trio is an unexpected partnership. what is not a surprise is amazon's expansion into another sector. >> there is absolutely nothing to stop this company. >> amazon is a powerhouse in the digital space and online space and their acquisition of whole
foods is a game changer. >> the risk here to the incumbent payment players is that amazon decides to build it on paypal. -- build its own paypal. >> amazon has been great. all the things they have done, but what we cannot do is sit idly by and allow them to take our business. >> this company could double from here. two $2000 per share. >> they are going to be a force in content, in search, 55% of u.s. product searches we calculate are initiated on amazon. last but not least, on advertising. >> wherever amazon is bumping up against the other three, it is winning. where it is bumping up against apple, 70% share of voice in the home. apple in the media, number seven and percentage of share during prime time, now it is number three. fastest-growing media group. it is literally kicking be but -- kicking the butt of siri in
front of everyone. amazon is our fruit -- are truly first cap it mark company. emily: jeff bezos said we open this challengeo open eyed about the degree of difficulty. >> what a week for health care innovation. first, apple getting into the space and now the announcement that amazon and j.p. morgan and berkshire hathaway made. i think it is all about cost for these large companies. if you look at amazon, they spend somewhere between $3 billion in $5 billion on health care alone for their company. it is threefold times inflation over the last 40 years. for amazon, that is $250 million in costs. that is 1% to 2% of their profit. the fact they are getting health care, that they have been frustrated with the way it has
worked for so long, and they will bring know how to disrupt this industry, it doesn't surprise me. emily: what other details to we have about how this will work? >> the interesting thing is we don't know that much about how this is going to work. we know berkshire hathaway, jp morgan and amazon are teaming up to take on health care, this really big cost. they say they are going to look at transparency, doing stuff digitally to bring down cost, to provide care to employees, but it remains to be seen. does this mean they will try to replace some of the middlemen in the system, some of the folks who provide insurance? investors are concerned about it, but we don't know yet. emily: jamie dimon saying the three of our companies have extraordinary resources. our goal is to create solutions that benefit our u.s. employees and families, potentially all americans. warren buffett saying the ballooning costs of health care
act as a hungry tapeworm on the american economy. we don't come with answers, but we don't accept it as inevitable. rather, we share the belief that resourcesr collective behind the country's best talent can check the rising health costs, while concurrently meeting patient satisfaction and outcomes. what kind of challenges are they going to run into? classic think this is a decision for them. they have been buying this for so long. there have been intermediaries, insurance companies, pharmacy benefit managers who have been trying to do this for these companies for a long time. not surprising, their stocks are down significantly today, -- 4% to 6%, 40% companies like cbs, express scripts. i think amazon and j.p. morgan, berkshire are going to try to build this. two things they need to do, one, they need to build direct relationships with health care systems and with providers. they need to do direct
contracting. that is where a lot of the cost is. the cost of health care is actually care itself. they need to get down into where care is provided and develop contracts. that is not easy to do. secondly, they need to bring the know-how around engaging with the consumer, around paying. that is where j.p. morgan comes in. they have expertise in payment rails. around underwriting risks, you are talking about a broad population. you have to underwrite their health care risk and cost. that is where berkshire hathaway comes in. amazon comes in with the consumer engagement know-how and the analytics and data around segmenting population according to their risk and how healthy or not healthy the are. i think they have a lot of road, -- a lot of to chop chop, but a company like amazon, they have proven almost every single industry, the health care economy is a percent of gdp. i don't see why they wouldn't start attacking this industry.
emily: right. how much could this threaten the incumbents in industry standards ? they will offer this to their employees initially, but could there be other customers in the united states? how much could this actually change the industry? zach: investors are saying this threat is real, take this seriously. whether that is a threat to thend health, cigna, and -- anthem down quite a bit today, it is still not clear. what these companies are going to discover as they move through this, some things they will want to build and do their selves, and some things they will say, we will let unitedhealth group cvs handle that, because they are better at it it remains to be seen. that is why people are so nervous. emily: amazon's move into health
care is the latest in a string of major announcements from the company. we took a look at amazon's continued expansion. ♪ emily: amazon's question for -- quest for world dominance continues, almost seemingly unchecked. it has unveiled a convenience store of the future, office spheres, and the purchase of whole foods. a purchase that pushes amazon deeper into the $800 billion grocery market. remainsst spending traditional brick-and-mortar, like walmart. now, amazon share price has rocketed up over 66% in the last year and it surpassed $1400 for the first time on friday, fueled by investor enthusiasm around e-commerce growth and profitable cloud. let's not forget amazon's growing advertising business that promises better profit margins than online sales. some investors aren't bullish, thinking this wall street darling is due for a pullback.
after all, big spending the at outweighs revenue growth has been the thing that triggers and amazon selloff. investors are watching for signs of growth for prime subscribers. the service can turn occasional shoppers into the voting. the fourth quarter is an ideal time for subscribers. thanks to free two day shipping during the holiday. could a company that has 90 million members and is planning to open a second u.s. headquarters that wants to take over your home appliances and get into the health insurance game be reaching a saturation point? we will be watching. ♪ emily: ahead, we get back to the big headlines, and that is earnings. amazon and alphabet reporting this last week. we will bring you the main takeaways. all episodes are livestreaming on twitter. check us out. this is bloomberg. ♪
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near or far covered. leaving every competitor, threat and challenge outmaneuvered. comcast business outmaneuver. emily: welcome back to the "best of bloomberg technology. i am emily chang. back to the slew of tech earnings and turning to alphabet, which reported thursday after the bell. i spoke with the cfo right after earnings work released and discussed the takeaways. along with our own editor cory johnson. >> the other parts of the business are costing them too much. the expenses grew faster than revenue in the quarter, so what you see is that, while some of their new efforts are making great progress, particularly the clip you just played about their cloud, their cloud business is growing. it is starting to get to scale,
but they are the number three right now in a three horse race. they need to do a lot of work in order to get that business to contribute on a scale that is going to allow them to not only continue to grow, but pay back some of the investment they have made in that business, which is still what you are seeing in the numbers. there are other spots in the numbers. youtube has had a tough year. they have to consolidate some of the other businesses where they have been making their other bets. but the bottom line is that the business hasn't scaled the way they needed to. that is why you saw the mess. emily: i just got off a call with the alphabet cfo. we talked about how shares were down, and she told me we are proud of the ongoing strength of the business and overall revenue growth across all regions. we are staying focused on long-term investments for the businesses and intra-quarter variability will be what it is. how concerned should we be?
cory: i don't know if we should care it all, but i don't think she should be terribly concerned. i saw some things within the numbers that looked reasonably positive for the company. i am no genius for tracking this, but the two things that i think are the important metrics outside of generation of free cash flow is the click growth and the value of a click. what we saw from the click growth, how many times people are clicking on ads, it grew faster than last year. 43% is better than the 36%, and that is a year-over-year change. i think that is pretty good. more encouraging, and maybe i'm looking for good news and i shouldn't care, if you look at the devaluation of the ads, as ads have gone to mobile, marketers are paying less and less, unlike facebook.
the price per click, value per click, how much marketers are willing to pay, they don't tell us the number, but they tell us the numbers are not getting worse. it was done 14% year-over-year, but that is less than recent decreases we have seen. i am hoping -- i'm sure they are hoping that google that will stop. emily: cory johnson and crawford on amazon's earnings report. >> we are talking about amazon -- also all thursday. >> we are talking about amazon where the biggest story is what happened with alexa and how it has become this giant platform. jeff bezos said they will double down and that we are at this important inflection point where the most important device in the in the world -- i just talked to scat -- to scott on the radio. he said this is the moment, the most important moment in technology today where the
leader in technology is no longer apple and now it is the amazon alexa. this inflection point is so important because computing is moving from the phone to voice. you can see it in the results both companies announced today. the apple like platform was open to most developers and multiple hardware developers. amazon is reaping the benefits of this. amazon is getting services revenues already. two thirds of households are prime members. alexa is part of the ecosystem. they are already in the place apple wants to be. emily: i did have a fairly long conversation with tim cook about the home pod, which is now out to the public in a matter of days. i asked, do you think you missed the category that you let amazon get away with that? he said i think quite the opposite. i don't think we missed
anything. he talked about this idea that a personal assistant, the number one personal assistant is your phone and they have siri. their conception of home pod -- cory: but they missed it. emily: music and audio device. cory: they missed their own release date. emily: history has yet to be written. we don't know how the home pod is going to do. i want to bring in crawford. what do you think? do you think apple missed it? crawford: two cory's point, o cory's point, alexa has got over 4000 home connected devices now in their ecosystem. apple may not have missed it, but they sure are looking at taillights going over the horizon. they will have to do one thing and that is attract massive amounts of developers to their platform to pay attention to home pod and to go out and do the work to get people onto the platform. i want to add one thing and that
is that aws grew 45% in the quarter. as it gets stronger, it's a platform that brings developers o enable things like alexa, so now they are into this virtuous cycle they get stronger and stronger and stronger. that is a pretty big move. it is unassailable for apple? no, but apple has a lot of work to do to close the gap. cory: we were listening to the apple call. tim cook was talking about -- tim cook is talking about service revenue. he is talking about babel double service revenue by 2020. -- he is talking about they will double service revenue by it was 2020. an impressive quarter and the other category, but to your point, amazon's business here, web services does fantastic. they are also learning about what everyone is able to do on the web. this notion of a completely hardware independent distributor
service business in the world of technology, separate from selling people lots of stuff i'm a dropping off boxes, these guys are the leader and growing at a fantastic pace and throwing off a ton of profit. emily: tim cook says we are to have a personal assistant in 1.3 billion people's hands, and that is the iphone. let's talk about the cloud. dig into the aws numbers and how quickly this business is growing. cory: it is growing at a fantastic pace at a large scale. i put a couple charts together to show what is happening in terms of margins. amazon loses money basically in the selling of stuff, and yet the margins they put up of 26.5% in a quarter are terrific and even better than last year.
it's an important quarter, because of all the demands. compared to the rest of their business, it drove the rest of the results to a 3.1% profit. amazon was profitable selling packages, selling stuff in the u.s., very profitable in aws and lost money selling stuff in europe. they had a fantastic cash flow. they got 7% rise in cash flow operations. is up, we are going to see a lot more quarters like this. it is worth noting that amazon is not working on the last quarter or current quarter. amazon is working hard on a quarter three years from now. these results show what they were working on three years ago, where apple is still tried to -- trying to get out the speaker
product you were talking about. they missed the date of it earlier in the year. crawford: my bet would be that those aws margins expand going forward as they start adding more and more tools that developers can use. they charge for things. the trick is, get the developers in, get people opening apps, and get people when they are managing to use more of amazon's developed tools. my bet is that could be a really scalable business, even more than it has been. emily: that was crawford del pratt and cory johnson. elon musk's startup boring company sold a product. he said "i want to be clear that a flamethrower is a terrible idea, don't buy one unless you like fun." it seems like his quirky promotions on social media are paying off. come thursday, he declared he was already sold out of flame
throwers after four days. 20,000 flamethrowers at $500 apiece means he ranked in $1 million. the money will be used to fund his ambitious product to build underground transportation systems. they began digging a tunnel in los angeles a year ago. it will be a sellout crowd when spacex has the launch of its new falcon heavy rocket. nasa has sold up $195 tickets featuring a champagne toast and commemorative plaque. the new rocket could be launched as soon as february 6 from cape canaveral. coming up, cryptocurrencies continue to face hurdles in asia, but one country is looking to be the next big hub for the digital asset. we will bring you through -- we will bring you to taiwan. this is bloomberg. ♪
♪ emily: japan's claim check says it was hacked after it lost digital tokens last friday. it has prompted calls first or -- it has prompted calls for stricter industry oversight. officials said the country will conduct on-site inspections of exchanges and cryptocurrencies will most likely become an issue at the next g20 meeting. poly chain has decided not to go public. after holding talks with bankers about an ipo. assets,ts in blockchain it had 250 million dollars under management as of last september. the crypto hedge fund is backed by sequoia capital. sticking with crypto's, taiwan may become the next cryptocurrency hub in asia following crack down in china and north korea. as our correspondent stephen
engle reports, the best of half $1 billion from the coincheck exchange in the pen is raising questions about fraud. -- in japan is raising questions about fraud. >> the 23 brew company in taipei is at the intersection of old versus new. in a micro way, it is an establishment that is challenging the establishment. at least the established way of buying around. patrons can come if they desire, pay for their microbrew pines -- points with that going. >> we want to support bitcoin and kickstart that in taiwan, give power back to the people. >> in light of the heist in japan and crackdowns in japan and china, taiwan is trying to figure out where it stands think -- on cryptocurrencies. should the government and regulators suppress the market or set it free? a broker believes taiwan's state of statelessness works to its advantage. >> this awkward position that taiwan finds itself in is not a
-- is not unlike the awkward position that bitcoin finds itself in in the established banking world. i like it to be known as the r.o.c.. it is the republic of cryptography. >> we should take advantage of void left in the this region. >> risk aversion and red tape run deep. led by a younger breed of lawmakers, the legislative you -- yen past a bill last month to allow fintech experimentation. offerings could be covered, given the fraud and money laundering fears. >> it seems our government is passive or chooses to avoid talking about it. you can't run away from it. you would go underground and would have a lot of implications. i think taiwan can become a
ico trading hub in asia. >> what happened on the mainland was too much, too soon. it violated that do no harm. taiwan is taking things slower, but it is safer, as well. >> for now, taiwan is taking a more palatable first step in to -- into the crypto world. >> i think people will start to get into it. i can actually use bitcoin in my everyday life. this is where they can start, having a beer at a local pub. emily: joining us now is stephen engle, who spent all last week in taipei. >> do you think this coincheck situation derails taiwan? stephen: it could enhance regulation and oversight, but it can put a damper on the kind of innovation taiwan is trying to
achieve, at least another breed -- the younger breed of lawmaker that is trained to facilitate -- that is trying to facilitate this revolution through that innovations act that they passed in december. this whole story in japan blew up just as i was wrapping up my reporting, did i get a lot of messages from the various people i talked about. they were wondering how this is going to play out. the cautionary tale for taiwan has always been what happened in china, with the fraud there. japan was always looked upon as being the model for which to build a cryptocurrency hub in asia. emily: taiwan has a lot of advantages. there has been a lot of processing power on the island. how can we see them exploit these advantages? what about bitcoin mining? stephen: that was a question that was put recently when they
showed a big pop up in revenue that led to the bottom line for the latest results. from all the processing chips needed for mining. it needs a lot of power. this was a big concern of some of the lawmakers. taiwan can do a few things really well, but after they start stretching that power grid, which they do in the summertime when those chip factories start cranking up their air-conditioning. there is severe power shortages in taiwan, especially the summertime. when we were doing live hits with you that morning last week, that whole neighborhood went black because of a power outage. that is probably going to prevent taiwan from being a mining hub. emily: ebay's shift from its longtime partner is not paying off for paypal. paypal ceo joins us with what's next for the relationship between the companies. this is bloomberg. ♪
♪ emily: lyft is expanding to europe. the rival to his opening an office in the southern german city of munich. this comes after it announced an expansion into toronto in november, its first outside the u.s. the company hasn't said how many people it is hiring for the office, but they will work on the company's autonomous driving efforts.
alphabet plans to rollout a ride-hailing service using driverless cars this year. the company says thousands more minivans are going to make it happen. the companies aren't saying have -- how many vehicles are involved or the cost. it is the third deal between an italian-american carmaker and the search giant. waymo scored hybrid minivans in 2016 and another 500 last year. ebay rose to a record this week after giving optimistic revenue forecast and unveiling plans to shift it's payment business from longtime partner paypal to a global payments company based in the netherlands. shares of paypal tumbled on the news. we spoke with the paypal cfo on thursday. >> the main takeaway is that this is a national evolution of -- natural evolution of our partnership. it is the next chapter. this was completely anticipated, completely built into our financial plans, and does nothing to change our long-term
earnings growth potential. emily: the market did not anticipate it. they are concerned about how it will impact payment volume and how you will replace that. how much volume comes from ebay and how do you and tend to make -- how do you intend to make it up? john: it is 30% of our volume -- 13% of our volume and the slowest growing part of our business. the average revenue growth for our ebay part of the business is 4%. the rest of our business has been growing at 23%. if you fast-forward to the end of the operating period, it would be a much smaller piece of our overall business. there are a couple key points. first is we will still be a part of ebay's business. we have a term sheet for a three-year extension where the largest part of the business we do, the branded processing, we will continue to do that. that is the most profitable part of the business. this allows ebay to partner with someone else. large marketplaces, most of them already do that.
that allows us to go out and partner with some of ebay's competitors, some of the largest and fastest-growing marketplaces in the world with unfettered ability. emily: let's talk about profitability. there is concern about profitability of ebay transactions on paypal. how will this impact the pulse -- how will this impact paypal's profitability? john: this is within our plans. we continue to grow these other profitability of ebay faster parts of her business, -- of our business. we believe it doesn't do anything to change the profitability profile. emily: when will we be able to buy things on amazon? john: hopefully we can do something there. to the extent we have unfettered ability with as many markets after that. emily: how has tax reform impact in your forecasts and desire for m&a? john: we generate a lot of cash flow offshore, so tax reform is an unmitigated benefit for us.
we will see our effective tax rates stay in the same range. we give guidance yesterday of 17%. taxes will go up slightly, because of the so-called guilty tax that will be imposed internationally. emily: this means you have more flexibility for m&a. what might you be interested in, bill payment, lending? john: all of the above. there are two categories we look at in m&a, one is expanding our geographic footprint. we are over 200 markets in the world. we would love to be bigger in some markets. there are a lot of complementary services payments like bill pay, like international money that are good for our customers. they took in really well. we have seen square roll out to bitcoin trading. something likeee instability? john: we have experimented with bitcoin with our braintree
platform in the past. because of the volatility of this currency, it is not something merchants readily accept. if you have a 5% operating profit margin as a merchant and and you accept bitcoin and see a 10% swing in one day, you are now underwater on that transaction. it'll be a while before we see stability in this currency to where merchants will readily accept it. emily: what about on the venn -- on venmo? john: to the extent our merchants want to accept it and customers want to use it, it is something we will look at in the future. emily: what about a store with paypal in-store capability? john: we actually have that. we partner with some of the other large technology companies. they often ask if we can use paypal. in-store is something that has a greater foothold internationally, a little slower in the u.s., but we want to be on the forefront of that and allow customers to use paypal however and whenever they want.
emily: the paypal cfo there. one last thing, my book is out this tuesday. this is the story of how women have been excluded from the largest wealth creation and the -- in the history of the world and what we can do to foster real change. i have been working on this for the last few years and i have so excited to share this with the world. we will have special coverage on this throughout the week, important interviews you don't want to miss right here. that does it for this edition of the "best of bloomberg technology." we will bring you the latest throughout the week. tune in each day, 5:00 p.m. in new york. 2:00 p.m. in san francisco. remember, all episodes are livestreaming on twitter. check us out. that is all for now. this is bloomberg. ♪ we use our phones and computers the same way these days.
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>> coming up, the stories that shaped the week in business around the world. the president takes to the podium to deliver his first state of the union message. president trump: the era of economic surrender is over. >> for the world watching and saying, we need some emotional peace from this leader, they got that. >> does this change the equation at all? >> no. julie: janet yellen leads her final meeting at the fed, and a cryptocurrencies shed, a trio of business legends launch a venture that could transform health care. >> they are teaming up and saying they will do something in health care, something