tv Bloomberg Technology Bloomberg October 31, 2019 5:00pm-6:00pm EDT
-- we hear from an essential figure in that period. tesla owners are talking in part to a bloomberg expansive study, thousands of model three owners. we examine whether parts and to parts.re up twitter announces it will stop all political as on their platform, with the ceo saying it is not about free speech, it is about paying for reach. the sentiment was not echoed by facebook. they reported earnings and reassured their stance when it comes to political ads. brandcebook ceo stayed on during the earnings call. >> i expect this will be a very tough year. we try to do what we think is right, but we will not get everything right. this is complex stuff. anyone who says the answers are simple has knocked out long enough about -- has not thought long enough about the nuances
and challenges. i get that some people are going to disagree with our decisions and think they may have a negative impact on things they really care about. but i don't think anyone can say that we are not doing what we believe or that we have not thought hard about these issues. taylor: i am joined now to discuss that. how much more pressure is mark zuckerberg under today than he was two days ago? >> he was already under some considerable pressure, you have biden, elizabeth warren, alexandria ocasio-cortez piling on. i think mark zucherberg and sure jacki'm not dorsey really tips the scale that much more. certainly what jack dorsey and twitter did on wednesday, it takes away one of mark zuckerberg's arguments, right?
that his peers at twitter ban google are all doing the same thing -- and google are all doing the same thing when it comes to political ads. taylor: one half of 1% of revenue, which is the political ad contribution on facebook. why even get in this controversy to begin with? >> i think that is a great question. certainly, that is a point any people have made. that facebook would not be giving up really that much revenue if it decided we will just stop taking political ads and take ourselves out of this part of a conversation. i think the argument mark zuckerberg is making -- that is the argument mark zuckerberg is making. it does feel like he really believes it, is that facebook does not want to be in a position where they are asked to censor political speech, right? he really sees it as a free speech argument. there are politicians who agree with him.
he does feel like a principal stand rather than a stand that is motivated entirely by money. taylor: facebook has one half of 1% of ther has 500 of revenue coming from political let's. why is that their decision to weigh in here? easier decision to say were going to stop taking candidate ads, ads related to hot button issues like health care or abortion or taxes. those kinds of margaret has missed are a tiny fraction of a company that is already the size of facebook. twitter has never been a place that is large enough or where the as were targeted enough to be appealing for political related advertising. dorsey, given credit for taking a position and sticking to it, but it is also true that it is easier to take that kind of stance when the advertising and
he is talking about is relatively insignificant on twitter. taylor: you write a bloomberg opinion column in you get hundreds of comments an e-mail's coming in. using that as a sample data, who was right here? are don't think my comments necessarily representative, but i do feel like the facebook is in the cycle where nothing they do was write. -- this cycle where nothing they do is right. it is also true that look, they are a place that has an audience of a couple billion people plus on a daily basis. the choice that they make has an extremely large impact both on who gets seen,, whose voice gets hurt, and that is why there is so much tension on the policy choices that facebook makes and on how they write their algorithms. the choices of one company controlled almost entirely by
one man are so important in the discourse of the country in the world. taylor: you write a very obvious question that i have failed to ask up until this point, which is, how did google managed to stay out of all of this? >> i don't know. this is one of the great , onlines of advertising advertising controversies alessio years. who has managed to stay out of the fray? google is the largest advertising seller in the world. they somehow, while mark zuckerberg is taken these visible stance on free speech and gotten criticized by everybody from the president on down for how they handled political candidates and their advertisements on facebook, google has said nothing as far as i can see, can they really have not been called to account. i can't imagine it will stay that way, but have just let mark zuckerberg take the fire. taylor: i want to jump over to
another big tech giant that has been reporting, that was apple, yesterday. apple created new ways to boost iphone sales. during an earnings call, executives put aside the typical praise of design and technology, and instead they talked about installment plans, trading programs, and giveaways. iphone sales fell in the latest quarter, but overall revenue grew. how are they doing this, juicing up sales with other products and other plans? >> in a world where iphone sales, revenue from iphones is going down 9%. the fact they are growing overall when their products are not as hot as they used to be, clearly they are doing something right. people are out there buying apple watches, pain them from my services -- paying them from
-- for online services. thatey can continue to do and keep things moving forward, the question is, why do investors care? why don't they just get behind this? taylor: what is the plan that stood out to you the most? is it trading and phones for value, talking on apple tv if you purchase a new device? what did executives on the call feel was the most significant to boosting the extra revenue? washe answer is cook basically asked, what are you going to do? it was more a case of, we are going to be flexible. we are going to do things in a reason-specific way -- region-specific way. china was helping them there. where not going to charge as much money -- we are not going to charge as much money.
--lor: shira, your take on they are having to kick like crazy in order to stay afloat and keep lighting. this is a company that is going to have to work a lot harder. they would've been really disappointed toward three years ago. what they are doing with installment plans, basically effective discounts, through trade-ins of older devices and things like that, they could get even more aggressive on price if what they are really interested in is getting devices into the hands of more people come on you were devices in the hands of more people, then trying to sell them on things
like music subscriptions, more applications, video games, things like that. i am very curious to see when their service launches on friday, however -- -- how apple. taylor: they were also hooked on this new device. >> you described it as a gift to the fan base, if you like. we talked about how wonderful the content was, but at the same time, underpinning that. we like it, we want them to like it, we spent money on that. he is creating an audience now, not selling devices. he is basically doing audience
duration. that plays into the service model. if you are an investor, services have twice the gross margin of apple's hardware. taylor: talk about that strategy as well, with the apple card. that was also a similar strategy, where not only are they getting people to take out -- for purchase or apply for an apple card, you're also getting a product. >> it is another way to effectively discount the price of the new iphone. in apple card, perspective, in a place like the u.s., the vast majority are so full by the telephone carriers, verizon, at&t, and others, what apple is doing with things like the card discount or installment -- appleose are only canvas control the phones that it sells itself, and that is always going to be a fraction of the price is sold in the united states. and -- ian king
and shirs ovide, thank you both for joining. interest stocks reported avenues that missed analyst estimates. shares fell as much as 20% to a level just above the company's april ipo price of $19 a share. third-quarter revenues posted nearly $280 million, compared with analyst estimates of $282 million. coming up, bloomberg's new survey shows while the model to struggles for service, the battery is like no other. we break down the numbers, next. if you like bloomberg news, check us out on the radio, bloomberg radio app, or in the u.s. on sirius xm. this is bloomberg. ♪
it is the biggest survey of tesla drivers ever conducted. bloomberg pulled almost 5000 model three owners with a questionnaire. the data reveals many of tesla's troubles are coming from the repair shop. w.r for more is david is service improving are not? >> -- or not? >> it is, but still has a way to go. the number of complaints have come way down as the quality of the vehicles has gotten better, but it is still taking too much time in the opinion of customers for tesla to come out and make repairs for vehicles, particularly after there is an accident. the reason is because they have been going sales of the model three very rapidly. a decade growing sales
ago, gangbusters in the u.s., the dealers could not getting of service techs hired to meet all the demands for warranty work, basic repairs, and services. in their case, they are sending people out to do this work. up with itto keep and has a is having a tough time with it. taylor: what is the problem, is it a supply chain issue? they cannot train their employees fast enough with the technology, for example? what is the real issue? >> it is kind of all of the above. we have many more call -- cars and owners of there. it is difficult to get people to service them. that is one part of being a big becomesany that really like general motors or toyota or volkswagen, with an advantage , with company like tesla a big upstart, it is very easy
for them to take care of these sorts of things. tesla is still building that out. they are still really getting the whole sales and service operation in place. is stilltself relatively new to the market, so they are still working bugs out. common complaints are things like scratches, it comes down to basic craftsmanship when building a car. improving, when models are new, they often have these issues. many of many were vehicles out there have a lot of those problems, and they are just catching up to the fact that they are becoming a regular car company now. taylor: it is interesting that this is on the rise. you have covered all of the auto sector. it is in your company, how much of it is an expectation that these kinks will be worked out eventually? >> there is always an expectation issue. tesla has an advantage here in -- whatever they have had
whenever they have had quality issues, there has been a lot more tolerance from the customers, because tesla owners like the electric drive, they the touchscreens, the technology in the vehicle, so they are pretty forgiving when there are small glitches or steps when it comes down to quality. -- thes an issue where customer sent to be pretty tolerant, but it is an issue of ringing up the infrastructure and getting enough people to fix them. taylor: as we know what has look, it is all about the battery. someone said charging my tesla at home means i never have to think about it, and other people complain there are not enough superchargers nearby, even though those have been promised. what is the take on the battery? peoplebattery itself, have not had problems so much with the battery. by far, there were more craftsmanship issues.
when it comes to charging, people out on the road need a supercharger that they can get access to wherever they are. this is true for all electric vehicles, really. the whole world of supercharging is kind of building itself out as we see more vehicles, more electric cars purchase across the country. behind the be population of electric cars back there, and that is probably true for tesla, according to the survey. people are happy when they can charge the car at home and not worry about it, but people putting more miles on the car and need a charge out there, onre is an electric station every corner, you have to wait for one, it makes a little bit more difficult. taylor: while we wait for part three of this amazing some session amazing survey that comes out tuesday, november 5. thank you, that was bloomberg's
california power companies say that blackouts limit wildfires. pg&e restored forward to nearly 330,000 customers, but extreme weather events candidly people without access to sell networks and the internet. according to the fcc, 17% of cell towers in sonoma county were down on wednesday. what can be done to preserve utility grids from the effects of climate change? our next guest is working on that very question. it is ashley phillipson, the project leader for grid resilience and intelligence platform over at stanford
ai tosity, using redistribute power to necessary systems during say, a superstorm. ashley, great to have you. wo of threeyear t of this project. what are the major challenges your confronting? >> unfortunately, firefighters here on the west coast have become pretty regular, just like the seasons. same thing on the east coast, we are having regular hurricanes that are increasing in power, and we have to learn how to deal with these. how can we have a more flexible, adaptable great -- grid? trying to figure out ways to essentially have new tools and solutions in our toolbox, like ai, machine learning that can absorb and recover from these events. taylor: walk me through some of the solutions you have found so far. >> basically, we look at
wildfires, ice storms in vermont, wildfires in the west coast, and we are looking at things like predictive analytics. how can we look at actually figuring out where crews should be placed in advance of a wind event? in our absorption use case, we are using a method that uses machine learning to figure out, how can we balance -- the power balancing with water heaters, electric vehicles, that actually allow us to have a more flexible grid to observe these events? taylor: i love that you talk about solar inverters, because when you shut off the power, you can have a solar panel. does a solar panel run on battery, the batteries are $10,000, also connected to the grid. when do we start to see the solar power become a solution instead of also tied to the great? >> -- the grid? >> absolutely, we are trying to really capture value from distributed energy resources and being able to -- being connected
to the main source of the grid, but also being able to, in terms of outages and all these kinds of great events, being able to still have the lights on and keep the mission critical appliances running. like in hospitals, nursing homes, you want to be able to utilize batteries, even electric vehicles, essentially. there is a lot of opportunity to tap into these kinds of solutions. taylor: i'm thinking of edison, pg&e, they don't have access to technological upgrades or upgrading the infrastructure is too expensive, how much of that is also coming into play here? we have told different utilities and co-ops who are advisory members to this project, because exactly, they are interested in the work we are doing and they realize any to integrate some of these solutions into their business plan. they are trying to also learn as we are doing this research how they can integrate that and
utilize this, as well. taylor: pretty much every day, i hear the word ai being thrown around. how are you using ai to help? >> a perfect example is using image recognition. a lot of utilities and co-ops are using drones to actually be able to run the wires, take photos of distribution poles, and identify, are they tilting one way, is a vegetation growth, could that be a fire hazard? and monitoring that, in addition to human crews. creating more efficiency. taylor: if that is not a phd student, i don't know what is. gip, think you so much for joining. coo,ar from facebook's sheryl sandberg, next. this is bloomberg. ♪
taylor: this is "bloomberg technology." i'm taylor riggs in san francisco. facebook has seen its share of recent rain clouds with antitrust issues, cryptocurrency pushback, and data breaches hanging over his head. one of the most controversial stances was recently announced by ceo mark zuckerberg, who said facebook will not and political ads even though they are known to be false. in an exclusive interview after the company posted earnings, caroline hyde got perspective from facebook coo sheryl sandberg.
>> this is less than 1% of our revenue and revenue is not worth a controversy, but what mark said is we believe in free expression, we believe in political speech, and ads can be part of that. i think where we are leading is on transparency. we put out an ad library, we announced a presidential ads , and that kind of transparency we think is really important to people understanding. you also talked about investing in protection. one of the things we talked about on our earning call is the size of the investments we are making, prepared for 2020, working with election commissions all over the world, hiring engineers, using machines, using human reviewers, really doing what we can to make sure people are kept safe. caroline: do you question your decision or standby the
fundamental reasoning? >> mark just said on the call that we have thought about this for years and certainly we have been thinking about it now and we fundamentally believe political ads are an important part of the dialogue and can be important against incumbents, important for new views, but we also believe free expression across the board is something we stand for as a company, and people all over the world are using that. certainly politicians are using that, but people are using it, and that is how you see our growth continuing. caroline: it's going to be a tough year in terms of regulatory scrutiny. do you worry about talk of the business model being under attack? how do you see your role in educating particularly those on capitol hill about it? >> i think we really have to help people understand that targeted ads and privacy are not at odds. we can do both. if you are an advertiser, you are the biggest company in the world or the smallest company,
and we have 7 million advertisers using our services. you want to show and add to women in their 50's -- that's me -- who live in california, we take the ad, show it to that person, give you back aggregated results. we can do very good targeting that really makes ads good for people and really helps advertisers reach the right person without violating privacy, and that is something i need -- i think we need to do a much better job of explaining. taylor: more on facebook and antitrust. mark zuckerberg is defending the company's acquisition of instagram in 2012 which facebook -- which critics say facebook did to eliminate an emerging rival. when the headline came out that instagram was the focus of an antitrust probe, is that what he is hearing from regulators? >> it must be because he kind of
volunteer that information a little but on the earnings call yesterday, talked about the acquisition of instagram and how that is going to be discussed at lot it sounds like in the near future. he brought up, to your point, view, which is that it was not a direct competitor but complementary to what they were building. he did not see it as directly competing with the news feed at the time, and it is kind of a valid argument because instagram was at the time very small. facebook is painting a picture that instagram only became the behemoth we know today because of facebook's help. we will never know the actual answer to what instagram could have become on its own, but i think that will be their pitch and their framing bring forward. taylor: we talk about instagram's strength relative to facebook, but the antitrust scrutiny around eyeballs, around advertising, and what would happen if you split those two apart.
>> it's hard to fathom because most of instagram's business is built on facebook technology. if you are an advertiser, you are using the same platform, the same technology to send and purchase ads on instagram, too. in some ways, instagram would in theory have to build that all from scratch if they were to be broken up. at the same time, they have the audience. people already know, advertisers understand the appeal of instagram, so it would not have to do a lot of selling, but it would create a technical challenge of if you were to split them up, how would that work because they use the same infrastructure. taylor: we heard from the coo of facebook, continuing to defend their rules about doing political ads, regardless if they are true or not. what is your take? few weeks ago facebook should do away with political ads simply for the headache. she mentioned these are not a big part of facebook's business. i think it is 1% of revenue.
think of the drama they've had to deal with than just the last few weeks and we are still a year away from the actual election. it is nott was that worth the headache for that 1% of revenue, and i think twitter kind of proved that point when they came out yesterday and said they were going to get rid of political ads, and it's a very small part of their business, too, and i think they decided it's not worth dealing with all of this if they are not going to make money from it. taylor: we are also getting news zuckerberg will be meeting with political rights groups including al sharpton, having to meet with these leaders can anp, but also how much of obstruction is it? >> i thought this was terrible news for facebook. i did not think of it in terms of just twitter exclusively. every single person who is out
there thinking facebook's policy is wrong can point to twitter and say, they are doing this, why can you not do that? hillary clinton was tweeting about this. a number of other politicians yesterday took jack dorsey's tweet and spread it out and said , "facebook, it is your turn next," and i think that pressure is the biggest thing. taylor: coming up, it is one of the biggest things to emerge from the facebook cambridge analytica scandal. that's next. this is bloomberg. ♪
's ceo made the decision to remove political ads. $10 million led by jack dorsey. what are you doing with the money? .> we are building an exchange we have historically run token sales, and today we are expanding that to secondary trading. historically, when you have run these primary sales, you've got these tokens afterwards. you need to move them to exchange to trade them afterwards. imagine if you bought shares in an ipo and had to move them onto an exchange to trade them after and go through a whole process. it does not make any sense. we are changing that. taylor: i was chuckling a little bit because you said you are compliant. in this world, what does compliant mean? >> compliant means a lot of things and there are a lot of agencies with a stake in these
matters. the fcc says all these different agencies are making sure you are rules theywhatever are. you have to be compliant with whatever regulators are looking at that. we look at what they are doing and have to be careful about those issues. taylor: and we talk about being compliant, i would be remiss if i did not bring up libra. what are your thoughts? >> libra i think is a great thing for the industry. facebook has more reach than almost anyone else in the world and they will expose a lot of consumers to the idea of cryptocurrency. once that happens, it's an open market and people compete for market share with libra. i think there are upsides and downsides, but at the end of the day, they will bring -- they will expose a lot of people to the industry and that is something we are excited about. taylor: you talked about you have been working with regulators to get compliance. libra clearly has struggled to get people on board.
to look atg you have is facebook is not looked at kindly for a variety of reasons, privacy issues included. some of the pushback libra is getting is not actually specific to libra projects but more about the issues facebook has had historically, but there is good news, and this has gone largely unnoticed. in the past couple of weeks, a commissioner from the sec has started talking in public speeches about the idea of safe harbor crypto tokens, meaning you might be able to carve out certain crypto tokens with certain attributes and allow them to be traded more freely. that is something really exciting. we are far from conclusion on that, but she has at least talked about it. taylor: you think because we are talking about it more, despite negative headlines on libra, it is good for the industry? >> i think at the end of the day, they will find a way to launch libra. they may have to get over some unexpected speed bumps, but it will reach millions, maybe more
people, and that will be good for crypto as a whole. taylor: funding environment, a private company. about private companies, particularly wework. how is the funding environment now more difficult than let's years ago?or two >> i think for a long time, we were looking at this ecosystem of growth at all costs. today, especially in light of the wework news, investors are looking at business models. can you make money with this business? the crypto industry more than any industry out there, it has winter, spring, and you have to be able to survive that. a real business model generates real revenue, and it has been really important. investors thisr time around really want to see that path to profitability?
>> we had a lot of investors that had been with us from the beginning and that is why they re-upped their statement and got involved. taylor: the facebook cambridge of 2018a scandal raised our alarms. brittany kaiser has a new role and mission. caroline hyde sat down with her to discuss the controversy around personal data. >> since becoming a whistleblower, i have got to explain to people how important their data is. on a day to day basis, it is being taken by companies all around the world making a multi trillion dollar industry off of your information. that sounds a little gloom and doom when people think they cannot get their privacy back, but the truth is people have agency. there's a lot of things we can do on a day-to-day basis to
protect ourselves, and legislators and regulators are finally listening. laws thatfantastic not only can protect us ahead of the next election but can make sure we live a more ethical digital life from here forward. seenine: we have california past laws. g pr is something facebook itself has pointed towards. where do you think legislation is leading the way gap recognizes your data is your property. transparency is the most important part of the conversation which is why i'm excited that california has implemented a version of gdpr that will come into effect in january. also governor gavin newsom in the state of california has
introduced something called the data dividend law, which means need to to companies tell you what they hold on you but how much money they are making from your data and get a cut on that. everyone in america is pre-opted in to your data being available, which is the opposite as in europe. mark warner has a package of legislation that demands everything from transparency and consent to how your data is selected to banning negative use data that push hatred and vitriol to the top of your newsfeed. caroline: we are also seeing the companies themselves react in many ways. facebook announcing they are having more third-party fact
checking, employing more people. what do you think about the steps being taken by the companies themselves? plex i think the investment facebook is making it to stop and foreign intervention in our elections is important and direly needed. unfortunately, we did not have those protections in 2014 and 2016. what facebook does not recognize the greatest threat to our democracy is domestic. it will continue the problems we saw in 2016 where everything from incitement to violence, racial hatred, sexism to voter used byion tactics were the trump campaign and aided by
facebook. facebook'some of employees have written a letter. do you expect that to change? >> i do expect that demanding changes the only way we will get anywhere, if it's facebook employees or regular citizens. day to calle every legislators. i speak with legislators every day who say they have never heard from constituents that they care about data rights. that is a problem. contact ourves legislators, they are legally required to do something about it. facebooktill ahead, revenue growth contributed to solid third-quarter earnings. not impacting the report -- regulation and libra, for now. we talk about the numbers next.
taylor: the top story of the day is all about facebook's third-quarter report. it was well received by analysts , but that does not mean that regulation woes and crypto earningsll not hurt eventually. in all your years of covering this, how surprised are you mark for aberg came out and lot of the portion was defending his political ad position? >> he owns the company essentially and acts like he owns the company and has been strongly opinionated from the beginning and i respect that. facebook stock, you are in part making a bet on mark zuckerberg and how well he has handled the company, how responsible he will be through these crisis moments.
there could be another crisis moment in terms of this next election if there is a rumor that starts about there being in parttion, so you are making a bet of how dependable he will be going through this. i think he has a pretty good track record. taylor: twitter came out, notably at the same time of the earnings, and took an opposite position. who is right? showe divide is if you political advertising on the network. i much prefer the point of view of zuckerberg and twitter -- then dorsey. his point was why don't we show the political ads? it does not really matter in terms of the revenue number to facebook. 0.5% of their number. let's show the ads and have complete transparency. there are some ads probably in poor taste. absolutely. they are called attack ads. they have been around for
decades. let's make it really clear who is spending the money on those ads and if senator warren or president trump or somebody who supports those sides or candidate biden -- let's find going out and getting bad, unfair ads. in the past, at the end of the tv ad, you would hear "sponsored by" or "paid for by." make it obvious it is a political ad and here it is so we can fact check it ourselves. theor: they had beat on operating income, margins, and bottom line. are you worried they're not spending enough to clean up the platform? >> i think that is such a great question. most people would go the other way and think it is great they are not spending enough. they are still expending aggressively next year. they are going to grow capex about 15% and their operating
expenses about 30%. that is within their guidance. that is good growth. ehat is what you want to see - long-lasting tech franchises do. you also found the trend is decelerating a bit from where it was last year. 2019 was a big spend here. it seems to us they have done a pretty good job improving the stability and durability of the platform. taylor: we also, i think, got more of an indication on where regulators are focus. the company came out and said instagram has been a focus issue for regulators. we have a sense of where these antitrust issues are headed? >> not really. there's three areas of regulation -- taxes, privacy, and monopolistic, anticompetitive practices. the instagram acquisition was approved. i think it's very hard to look
back on that and say that was not an asset that was tiny at the time that had some nice facebook.with core breaking up facebook and forcing them to spin off instagram, i don't know on what grounds you would do that. i think it would probably be a negative event. i don't think that is a positive catalyst. taylor: you like the stock. what is the biggest headwind as we enter 2020? >> i think there are two or three of them. at the top is what you have been leading with, which is regulatory risk, and then maybe a competition risk. there's a popular new social media site out there called t iktok. it's possible that could start clipping the growth maybe not of core facebook but of instagram and maybe snapchat, two. taylor: what do you see that
could take the stock higher? do we have to remove that regulatory overhang? >> probably or have new revenue streams cap in next year. i think this is the most attractively priced on a growth .djusted basis it is rare companies trade at a discount to their growth rate. i think facebook is the one he percent, 25 percent earnings grower trading at less than 20% earnings. i mean stock will go up on the multiple going up and on positive earnings revisions. you don't normally get that. when you get it, you should be aggressive on the stock. we are. taylor: thank you. for this edition of "bloomberg technology." "bloomberg technology" is livestreaming on twitter. be sure to follow our global
eñ paul: welcome to "daybreak australia." i'm paul in sydney. kamaruddin inphie hong kong. we are counting down to asia's major market opens. ♪ paul: here are the top stories we are covering in the next hour -- more trade war uncertainty shakes the markets as chinese officials say they doubt a long-term trade deal with the u.s. is possible. bigger trouble back home for president trump as the house votes to back the impeachment