Been the most successful . Would you believe it is amazon . We will tell you about the online. We begin with spotify, the company hoping a new partnership with led zeppelin but sits on a stairway to even greater success. At an event in new york this week the Company Announced a free service for smart phones and tablets meeting customers no longer need to pay to listen to content on mobile. The band thus far has avoided digital streaming. Our editor at large caught up with spotifys chief content officer. Heres how he described the new changes. The new Service Allows users to use with the device of their choice. A few years ago and we launched the service in europe it was a different world. There is a clear distinction there are no Computers Computers were on desks at the time. Now the majority of our users are using on a mobile device. It was important that we keep them engaged. And now that is the most important. It also increases what they can access from those mobile devices. Yes, you dont get all the benefits of premium, of course, but premium is ondemand. Theyre still a clear distinction between the benefits of premium and what free users get to do. But they get the experience. They get to build collections and experience play listing and all those cool features while maintaining the benefits of premium. No ads, and offline theres a difference to radio better than radio because if you want to listen to nothing but bob marley you can listen to them all day long. There are not that limitations that bmc ahaz which imposes it on their listeners. I remember seeing a story that Frank Sinatra is contract with capital says that he was specific to medium. So when cds came around, they had to go back to sinatra and renegotiate a deal. For a longtime there is no sinatra catalogue available on cd. It was medium specific. Are there a lot of contracts that you have to wrestle with as you expand your service . There are some. Theres a short list of artists that retained the right to say no to certain types of exploitation. For acts of the statue of led zeppelin it is not uncommon for them to have those approval rights which makes it all the more gratifying for us if they had the right to say yes or no and they said you know what we want to embrace this model and introduce our catalog to a new generation of fans. Is there going to be a time in this business where you dont need record labels . You talk about a catalog right now, but new music is a big thing. There has always been talk of labels not promoting way used to. For big bands it is. But surely you get approached by ask that want to go correct by acts that want to go direct. It is true that it is easier to make a record today than it used to be, but still the label system provides for artists and gives them capital and Marketing Muscle to cut through the clutter that exists. It still is an important part of the landscape. I can look at pandoras book and i know what their costs of being sold are. I cant look at yours yet could i would like to someday. I wonder what the progress has been about lowering your costs which of course you like to lower and the artists would like to see going the other direction. We think that artists deserve to profit. No Business Model is going to be successful unless it aligns itself with the interests of artists. As daniel mentioned today, the cofounder and ceo, we still pay out approaching 70 of all revenue to the rights holders, which includes artists. We pay directly to rights holders and copyright owners who in turn into artists. We are proud of that and we think that everyone deserves to make a dollar. The radio stations are in single digits. One of the cool things we announced last week is a whole new level of transparency in terms of how this model works. We launched a website that we call spotify for artists. It provides a real detailed window on exactly how this model works. I would encourage you to check it out, but there has been you guys have spent over 500 million this year paying for music. Correct. And 500 before that has gone back to rights holders. We wouldnt be having this conversation if it didnt go so well. At the end of the day, we have the continued ability to do that and go back to point made earlier. Were trying to get more people. It is an efficient way to move from no pay to much higher payback to the industry. That is about getting more people onto that very efficient Conveyor Belt that has worked well for everybody. Spotifys ken parks with our cory johnson. In other news, facebooks photo showing up instagram is launching its first messaging tool. It was announced at an event in new york on thursday. It will allow people to send photos and videos directly to as many as 15 friends who will then comment on them in private conversation. People you follow can send photos directly to you, photos from strangers will end up in a pending queue. Is this a game changer or will you be able to peel away users from snapshot and twitter . This is very much a facebook story. I think of facebook as this battleship which can choose to focus its attention on any number of projects and right now facebook is squarely focused on messaging. This explosion of messaging apps, free messaging apps because that is being fueled by the fact that people do want to pay all those fees when youre texting a lot of own. Facebook is in some ways playing catchup. Maybe it was to capitalize on the trend. We obviously know they tried to acquire snapchat and that is not successful. Now they go through instagram to persist ahead and why not . If you look at the growth of the instagram plan arm, a lot of people are going there, theyre already commenting on photos and to do Something Like this might improve engagement. For example if i taken i shouldve on trees in los angeles, someone might comment on it an hour later or three hours later. I might see to get my gratification then. Some become it right away if emily chang to give me thumbs up on my photo right away i might stick around and instagram a little bit longer. Jon, i will keep my eyes on your feed, ok . Is a something they can make money on . If you talk to people, moneymaking with messaging is a tough thing. Obviously, if it is just texts the phone companys were charging people for which led to all the creation of these free messaging apps, that Business Model makes sense. But free messaging apps have a challenge with things like advertising, first because it is not easy to target those ads to people who are in a conversation. It is really tacky. Is different than ads that stream through a twitter feed. If you are instagram and you can improve engagement and key people in the platform a little bit longer, maybe in the posting your pictures in the course of the, in six months as his and that that on an announcement like this and see a win. Jon erlichman on a messaging. Now bing gordon is starting a new venture. We sit down for an exclusive conversation with him next. This is bloomberg west, im emily chang. This week, the firm announced that he will become its chief product officer. Product works is a new program for measuring entrepreneurs and mesh and overseeing Technical Details and product design. Jon erlichman set down for an exclusive interview and asked being why he chose to do this. Take a listen. I am concerned about the level of innovation in life. I have a high filter for cool and we are the florence of modern economy here in the valley. There is untold emotional creative and economic rewards for doing cool really well. I dont think this is a fix it, we just see that when people get something 90 right, it is not nearly as valuable as a hundred percent right. Speaking about people specifically, it sounds like the model youre looking at are people like steve jobs. Other not enough people following in the footsteps of steve jobs . There are a lot of people inspired by steve jobs. Dave said jobs push for the last 10 . He said we thought we were done and he would go for insanely great. He would push for that last bit. You look around and you can see people like tony fidel and and Hossain Rahman who channel steve daley. You spent a lot of years on helping people build the business of zynga. You share this tidbit by founder mark pincus from a media mogul john malone. Can you elaborate . More broadly speaking, we all look for mentors and sometimes youre lucky enough to have a mentor who will let you sit on his or her knee and tell stories and talk in detail. I think mark with malone and maybe me with david ogilvy as more of a remote mentor, more a relationship we have with books, so pincus when he worked in malones organization could see from a distance of inside information the way malone would use math to get right to the heart of Value Creation in the media business. Pincus has extraordinary ability to use math to see inconsistencies and possibilities in this new media ecosystem. Product innovation is needed at Young Companies and large companies. Zyngas new ceo used to be at microsoft and microsoft is looking for its next ceo. On these themes are youre talking about, how important is that decision of microsoft to decide its new ceo in terms of its future . Its probably as least as important as General Motors. It looks like congratulations to them. Not only is it the former head of product, but also a female. I grew up in detroit. Those two backgrounds for ceo of General Motors was inconceivable when i was growing up. Talking about another company, amazon, because you have sat on its board and jeff bezos is getting a lot of attention for his future focused on drones, ebays john donner told emily chang that is his fantasy. Obvious the people are going to be dealing with critics in the short term, but what do you make of all of that . The best way to predict the future is to invent it. A culture of amazon is very much about invention. Most invention starts out seeming foolish are impossible and circling back to steve jobs, he said to stay hungry and stay foolish. When i look at one particular product story, since her talking about innovation, intel spends all this money to develop a tv project only to now reportedly be looking at finding a buyer what do you make of that . Kristin claytons book makes it clear that it is hard for incumbents to do discontinuous innovation. I think it is never a surprise when an incumbent fails at his continuous innovation. The surprise is when they pull it off. Microsoft holds off xbox and xbox live or when amazon pulls off aws or kindle. Or frankly when apple pulls off the ipad. That was bing gordon with Jon Erlichman. According to new research, Kleiner Perkins has the biggest pipeline of potential ipos in the coming year among Venture Capital firms. Plummeting pc sales has Hewlett Packard pivoting its business strategy. But can they move things around by moving to the cloud and data service . We hear from whitman when we return next. This is bloomberg west streaming on your phone and now on apple tv. Im emily chang. Hewlettpackard is looking to reduce its dependency on pcs as sales keep falling. The company is rolling out a set of data servers and Storage Solutions for the enterprise. Hewlettpackards executive Vice President and general manager of the Enterprise Group is working with Ceo Meg Whitman on the companys turnaround. I spoke with him at a conference in barcelona and asked him how big this infrastructure business can become. What customers are looking for is they no longer want big silos of servers and storage. What theyre looking for is a single pool of physical resources. When we announced today was a breakthrough set of innovations that frankly enables customers to more easily and more efficiently access that infrastructure, whether it the computer or storage or network bandwidth. How big do think this can become in terms of the percentage of hp business . The feedback that we have had from customers and partners here in barcelona has been overwhelming. What are partners are telling us is look, today they do much of this integration them selves. What theyre looking for us to do is deliver that integration outofthebox for customers. We think that this could be up from anywhere from 2530 of the business and growing. We know youre really excited about the moonshot server business and especially for large websites and large businesses, what about all the smaller businesses, the less cuttingedge businesses that rely on hp here . The reality, emily, is that customers are looking for a new platform that delivers much greater density and much lower cost. For those highest foia workloads. So small or mediumsize businesses, while they may not directly deployed moonshot server, they may rely on an hp partner or Service Provider that has deployed that server in their cloud, delivering for Small Business better economics and better efficiency. So as infrastructure becomes 2530 of the business, what becomes a smaller part of the business . The reality is the infrastructure business matures, emily. Customers are looking for scale. Theyre looking for speed and efficiency. It is very logical where really for the last 15 years they have had these isolated brutal silos. Theyre going to consume more compute and storage and theyre going to consume more bandwidth. This is a more efficient, better way for them to consume it. Last quarter hps enterprise revenue was up two percent which is great because the quarter before it fell about nine percent. Since you have taken over this area, what are your biggest initiatives what have your biggest initiatives been . Last quarter for some eight quarters we grew the business. We saw the growth. We delivered a better Value Proposition for customers. We saw growth in servers, we saw growth and networking. The reality is when i think about what were doing in the Enterprise Group, what were doing is delivering tremendous innovation is delivering better value for customers. Is a simple as that. We are here in barcelona at hp discover and frankly, we are having an Innovation Party over here. Some of the Biggest Companies like amazon, facebook, google, they are buying their computer parts and service from non brandname companies. Theyre putting things together themselves in customizing things, how do you defend against that trend . The reality, emily, is that many customers are going to want to do the infrastructure, but they need a partner like hp to deliver that value. A facebook or google might be able to afford engineering talents to deliver that. The majority of customers need a partner like hp to deliver that value for them and that is what we intend to do. So q4 networking revenues at three percent at hp does a lot of networking business in china and you have cited some week is there. Weakness there. How exposed are you to slow in spending from the staterun enterprises in china and other Chinese Companies . When you decomposes numbers, it is up 3. 3 . It is reasonably well balanced across different geographies. China has historically been a strong market for us. We saw growth in asia broadly and we saw good growth in europe as well. So, you are meg whitmans righthand person. She seems to have been realistic about what we can expect and she said on the last Earnings Call it will be a tough year but a pivotal year. When do you think we will hear more positive statements . Emily, we are working really hard and are pleased that she highlighted the progress and the turnaround. I wish you could feel the buzz with customers here at discover. The feedback has been tremendous about the innovations we announced today. As you know, Companies Come back on the backs of Great Innovation and our pipeline is healthy and the Customer Feedback has been very strong. Hewlettpackards executive vice resident and general manager of the Enterprise Group. Amazon is known as an ecommerce even for its cloudbased web services, what apps . We will have more on this lucrative and was unknown part of the business. Youre watching bloomberg west, where we focus on technology and the future of business. We know amazon is a major online retailer. You may not know that amazon has been quietly building its Advertising Agency yes, an Advertising Agency, over the last two years. They earned over 600 million in ad revenue last year and is expected to grow to over 836 million this year. To talk more, cory johnson sat down with the head of amazons ad business. He began by asking what the goal of the business is. At amazon media group, we focus on our customers. We start with a customer and we work backwards. We focus on the consumer. We focus on delivering relevant advertising experiences for our customers that we can help them find, discover, and buy what theyre looking for. We are a Global Platform and we have over 200 million active customer accounts around the world. When these ad show up, they really drive sales in a direct way. We have not seen in recent history. It is a core area we are focused on. It is called ecommerce sales. We take amazons shopping functionality that many of our customers love, things like digital coupons and Customer Ratings and reviews, and we embed that right into the ad. We are seeing great results. Our ads are performing at 20 to 30 more than standard ads. I am thinking back to my magazine days when direct marketing was two to three percent. What are the standard kind of returns for a good ad in e commerce . Theyre performing 20 to 30 better. What we are also seeing is that multiscreen really matters. As you know and i know is i shop, i spend more time on my mobile phone and my tablet. What we are seeing is our advertising that is running cross scr