And republican gillespie for governor. In new jersey, republican Lieutenant Governor is challenging a former democrat to replace the outgoing governor, chris christie. In new york, bill de blasio is up against a republican hallenger. Malliotakis. The pentagon has been aware for at least two decades about failures to give criminal history to the fbi. It includes information the air force did not report about the Texas Church ShooterDevan Patrick kelley. Devin patrick kelley. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Bloomberg technology is next. Cory im cory johnson from new york. This is bloomberg technology. Coming up shares of snap are in freefall in afterhours trading after a crummy earnings report. Well break it down. Plus, alphabets soup driving unit close to chauffeuring people in minivans without human backup drivers. We have a Progress Report from the ceo. Congress continues to make the case for Holding Big Tech more accountable. We will talk about the efforts to hold Internet Companies legally liable for the content on their platforms. But first in the lead. Snapon with disappointing results. The analysts are always wrong anyway, but the users numbers are really bad. Daily average users, 170 million. Less than the 180 million analyst estimates. Like i said, theyre always wrong. Ad prices are looking weak. Shares tumbling after the results. Down in freefall 17 . Decline. Over 24 of them afloat were i was short. A lot of people were expecting this, but the only analyst we want to hear right here. Good to see you as always. Sorry to dis your analysts. Look, analysts get these wrong. 24 of the flow was short going into the quarter. Hese numbers are weak. In fairness, when you look at the color commentary around he headwinds in 3q, the differ comp, you could have arrived at the numbers they posted, but with the street has once some benefit of the doubt in trying to give them some hope that engagement that some of the new features are going better, but i think the takeaway is when you look at the Facebook Google the duopoly, there is no silver bullet. Cory the daily users is a lot of people, but nothing compared to twitter and an infinitesimal amount compared to facebook. Which is relevant. Its a lot less than instagram and instagram stories. We dont get quarterly numbers or monthly numbers from instagram. Last to report i think we had 300 million on instagram, using instagram stories. This 178 million users from a percentage effect, just 2. 9 basis, a sequential its not great. James it is not great from about the same time, you have to think that they have so much opportunity to engage these users. They have all of these publishers trying to forge relationships with them. It is more raw content, and there is a discovery aspect that i think is not there with the ephamoral nature. Its not there with services. The Biggest Issue is that snap has all these users, all this engagement and i think they are their number one worst enemy. Its not facebook. Its not google. Its they are not capitalizing on the engagement and users they do have and i think you can draw that same parallel to twitter. Cory they are losing money on every sale. They have negative gross margins. Again, negative gross margins. Not negative operating margins. Negative gross margins. It costs them more to deliver dancing hotdogs than they get revenue from dancing hotdogs than staff, r d, and their hosting cost which they break out. Their hosting cost went way up again. James look, there are areas of criticism that i give you credit for criticizing but on the hosting side, i dont think thats quite fair because, i mean corey 88 cents ory 88 cents. James the opportunities, the business skilled in the way it was supposed to, you would see much deeper leverage directory. Cory i wanted to start in the nba, but it did not work out that way. To your point, if the revenue was going, we would not be talking about this, but the rising cost per user, 1. 18 per user, by my calculation. That number is way up from the. 84 last time. There seems to be no scale to this business. Once they got over 100 million users, you would think the cost would fall off and they can continue providing the service, but with the filters out there, it is costing them more to do it. James there is no scale because the moderation and the growth curve is a lot steeper downward than you would like to see. 1. 17 this39 from last year. Quarter. That is a number that should be growing in the triple digits. Some lower korey 84 cents last year cory 84 cents last year. 35 year over year. James it is not great because you are so early in the growth curve. These numbers need to be posting at a bare minimum in the triple digit territory. Cory when i try to Say Something nice. That is your duopoly thing. I have been thinking about the way i started my career in the magazine business. One of the claims to fame was i worked for this great guy that passed away yesterday, sadly. One of his claim to fame was putting out a 584 page issue of Sports Illustrated previewing the olympics. Sports illustrated now no longer chockfull of ads. A tiny thing. Ad dollars arent going to magazines but they also arent going to snap and twitter. Theyre going to facebook and google and it seems like facebook and google alone. James i think of them taking the lions share of the the apple i think zor effect is potentially shrinking the overall advertising because you are not seeing the big brands advertising as much as they need to because they go to the private label. You think about the three biggest advertisers are finance, auto, and consumer packaged goods. Consumer packaged goods is going private label. Auto is going to selfdriving and then Financial Services is being this intermediate as well. If you look at the biggest ategories changing structurally, the pie is shrinking. Cory talk about shooting themselves in their own foot. They cannot get around the problems with the android. Most smartphones in the world are android phones, and they dont have they have technological problems, to put it kindly, providing snapchat on those phones. James look, almost all the problems i would argue are selfinflicted. Like the android issue. That should be done. They have a great search functionality but people dont know about it. The maps feature i think is very interesting but people dont know about it. Maybe this new ad this new app format that theyre rolling out will start to fix a lot of these things because their strength arent being showcase and people dont know about them. Cory the last one i will tell out there. For all the fawning press they got over this stupid glasses, exactly my point, who would not want that besides you . 40 million whiteoff in the quarter for those dallases. 40 million of worthless inventory that i think anyone could have probably predicted. Except for you. Do you really wearjames i bought those for those . Research purposes, but it is actually quite entertaining to use the whole circle or format circular format. If they capitalize on that, then maybe theres an opportunity there. The resources werent put behind it in the way they needed to be. Cory always great analysis, great work. Theyre lucky to have you. James thank you. Cory coming up, alphabet taking over in the driving space. We will hear from john krafcik. This is bloomberg. Cory did you see what happened to shares of blue apron today . The stock was down more than 20 today, hit a record low after the ceo talked to the Investor Conference and said there were concerns about the Profit Margins at their newest fulfillment center. Blue apron report analyst ross sandler downgraded the stock to three bucks. Blue apron having all kinds of problems out of the kitchen. Selfdriving car units have been making progress the last few years. Hit a new milestone, waymo has announced they will art shoforing start chofering people in minivans without the safety drivers. The staffers who are there to make sure nothing goes wrong. They are testing out the actual Autonomous Service in phoenix. Mark sat down with the waymo c. E. O. At the lisbon summit with john krafcik and they talked about the progress of tech driving tech. We have been at this a very long time. It has been more than eight years working on fully self driving cars. E learned that experience is the best feature. Over those eight years, we have driven 3. 5 million miles autonomously. Across more than 20 u. S. Cities. Weve been learning an awful lot as you know in the Virtual World where weve now driven over 2. 5 billion miles just last year. And now we are to the point where we are driving really 10,000 miles on a daily basis autonomously in the cities in which we are testing and 10 million miles every day representing driving of 25,000 cars every hour of every day. We got it down to the point of confidence. That confidence allowed us to go forward internally with what we just showed the world today in phoenix, arizona. You have had success with your volunteers in phoenix for almost five years now. Talk to me how that program is going. What are participants like . What are the major lessons you have taken away . John yeah. We started the program earlier this year in the spring. The first signal that we had Something Special was the overwhelming demand. We talked about the possibility that these folks can help define the future of mobility. We had 10,000 applications to join the Program Within the first play for hours. First 24 hours. Right now we are in this position where theres a lot more demand for seats in our cars than we can actually provide, which isnt a bad problem to have, but wern were learning from these guys, right. Were learning the intricacies of pickups and dropoffs. They have helped us refine that in car user interface and what we share with the users on the screen. They have helped us determine what the best way is to alert them to the location of the start button, for example, in the roof pod. Those sorts of things just invaluable pieces of knowledge for our project and for the engineers working at waymo. Mark you said the commercial service is coming soon. It will take the shape of a ride hailing with a mobile app. It sounds like you are not at the onset working with lyft, any reason for not working with lyft . John we have a lot of partners we are working with in the space. You mentioned, lyft, fca, autonation, and avis to help us with maintenance and Fleet Management and those kinds of things. We will share more about what we are doing with our partner lyft going forward. We we talked about is we will help each other with the launch of new products. Stay tuned for details on that one. Mark ok. You started testing vehicles recently in michigan to deal with snowy weather. What is the next market . Will it be cities like phoenix . Good weather or will you take ore chag areas next . Challenging areas next . John well, phoenix is a big place. There is a lot of interesting and very challenging parts of phoenix that we will be driving and including the downtown area as we roll out our technology, but i think its a good bet to look at the places we are testing right now and imagine those will be likely the next candidates for us to roll out truly driverless capability. Mark something about a truly driverless that we talked about in the past is you are taking the driver out of the front seat. Companies like uber and lyft employ a lot of drivers. What do you think of the impact on the jobs for Driverless Cars and what responsibility will waymo play there . John i think it is something all of us in the space need to think deeply about for sure. And i guess a couple of things to that point. First is, were adding a lot of jobs as were developing this technology. There are a lot of folks who we need both with our partners but also at avis to and at waymo to maintain these vehicles, to work on our High Technology and the cameras and the radars. So there will be a lot of skilled trade positions available at Companies Like waymo in the future. The other thing to keep in mind is that for the most part, the people who are using our technology right now in arizona are replacing personally driven miles anyway. The great bulk of the miles we will be driving as waymo, the driver, will be replacing miles that folks like us would have driven otherwise. Mark talk a little bit you mentioned you are reimagining what the inside of the car will look like. Is that the case . These vehicles will not necessarily look like they do today a few years from now . John well, just about every car that has ever been put out to the world has been primarily designed for the driver, right, at the primary focal point. It really does open up a lot of interesting possibilities when you imagine no specific driver other than waymo is the driver. No human driver. We have taken our first shot at that with our firefight prototype. Going forward, yeah, mark, we can imagine a lot of really interesting possibilities as we expand, and i mean the collective we, all of us working in the space. As we expand to provide more applications and use cases for this technology, you can imagine the vehicles becoming more specialized. Imagine a vehicle that might be perfect for just one person. Another vehicle might be perfect for a larger group of folks. Some might be designed with sleeping or napping in mind. Some might be food related cars you take on your way to a venue. Possibilities there truly endless in the future going forward. Cory that was waymo Ceo John Krafcik talking to mark bergen. Coming up, investors left 1 billion in enters. If you space phase, will. What jeff bezos is funding of blue origin is different. We will bring you the details on that, next. This is bloomberg. Cory well, the private race into space is heating up, but he billionaires on the mission are in some different routes. All of the spaceships will go straight up. We know that. Jeff bezoss sold 4 billion in stock in amazon and is using most of that money to personally support his space company, blue origin. Different Business Model from what elon musk is trying at space x or Richard Branson at virgin galactic. They would have taken outside move in their to Space Business quickly and commercialize the business. Do you live here now . I do now. Cory i have not seen you lately. This is really interesting that jeff bezos, who has not sold stock in amazon for most of the time he has run amazon, which is why he is one of the richest men in the world because it is the value of the stock that gets him that way,selling stock to own a is now different enterprise. That points to blue origin is his absolute passion project. He is in this unique position even more so than elon musk. He can basically go, i want complete control over this, and the way you do that is to not have outside investors and also not chasing revenue out of the start. Cory in the case of Richard Branson anyone musk, they are cumulative their fortunes. Accumulated their fortunes. With all three characters they have accumulated their for turns in different ways. Jeff bezos started a Hedge Fund Business but made his money at amazon by owning and keeping his amazon shares. Elon musk selling shares in moneylosing businesses long before they had any hope of uccess, whether it was tesla or spacex or paypal even when he worked there. That was not yet a profitable business when he got out. He and community losses for all of the businesses, enormous. Richard branson sold all leases of businesses like Virgin America or other things, but it seems to follow the philosophy of bringing outside contributors to the businesses and bezos going it alone. Tom and i think part of it is bezos is in a better position than anyone else because of the funding. Amazon stock is at an absolute tear. Even though he is selling a billion dollars worth of stock, that is a small proportion of his whole holdings. A stock was on the mock. Tom the interesting thing is what elon musk is doing. When we first started looking at the story, is he pledging shares to support spacex . He is using shares to support the city before he brought in tesla. Its incredible if you think spacex, because they managed to build his business, not a sinkhole of money. Apart from perhaps outside investors. Cory maybe its my obsession as a former hedge fund manager, stock if you locked up shares, which raises the cost of shortselling, but also some costs to cover. Tom that is getting very technical for me. Cory a huge Short Interest in tesla. Someone is getting paid to hold the stock. We dont know if musk is getting paid or not. He hasnt said anything about it. Is an interesting thing. How far along are these guys in their efforts . It seems they are all making very great progress in their efforts. Tom i think so. Spacex is an operational business for the last 10 years at least. Blue origin is looking a lot of progress. What they are not tried to do is get customers yet. Maybe next year they might send tourists to space. Spacex is that neither leader in trying to commercialize it. Out of choice, blue origin is pretty much like in stealth mode and doing the same thing. Cory Richard Branson is in a great because he wants to put his mother, who is 93 years old, on the first flight. His race is real too because he wants to do that and he might get in the flight himself. Tom i think he said he will be certainly among those customers. Maybe next year might be the time. Ory and not unlike tesla, hey managed to secure a lot of that business with big deposits from some of those future astronauts if you will. Tom yes, it is enormously popular. Just members of the public putting down hundreds of thousands of dollars. With teslas deposits for uture models, they have been using that to fund the operation up and running. Cory i checked, and Richard Bransons mother is in fact 93. Good to see you. Thank you so much. Coming up, Big Tech Companies have long used the 1996 law to shield themsel