Temporary truce with opposition leaders after 36 hours of violence. Is a peaceful ending in sight . Our lead story this hour, however, facebook striking a deal to buy the messaging billionwhatsapp for 16. An additional 3 billion for employees that will invest over four years. 70 of people use it every day with one million new registered users being added daily. Whatsapp allows users to send messages over the web for free. In a statement, Mark Zuckerberg said, whatsapp is on a pass to connect one billion people. The services that reach that milestone are incredibly valuable. Jon erlichman joins me now on this news. 16 billion. Wow. That has been the universal reaction. I think now that this news is out, the road towards this deal looks obvious. We did not know it was coming. If you think about what facebook has positioned itself to be at s premier mobile unit of communication platform, all of that time and energy spent in bringing facebook from your pc to your phone and the lead up to the initial public offering, the purchase of instagram, and for them to be watching what is happening in this fast growth area of messagingbased apps, which a lot of them, because of , frustrating paying those texting fees and choosing to use a service like whatsapp. Not to suggest that facebook wasnt trying to do some of the stuff on its own with Facebook Messenger. Not able to gain as much traction as they hoped for. They tried to bite snap chat. Whatsapp comes into the picture. Right. Google reportedly also tried to buy whatsapp, but facebook snatched it away. The founders have been famous for hating advertising. We want to give our users something that is ad free. According to whatsapp founders, they say, here is what the change will mean for you. Nothing. Whatsapp will retain autonomous and operate independently. You can continue to enjoy the service for a nominal fee. You can still count on absolutely no ads interrupting your communication. If facebook is not going to add ads, why buy it . Ofwe all know the position Mark Zuckerberg, emily. He seemed reluctant to bring advertising to that facebook platform. His reluctance to saturate facebook with ads and make people feel like that platform is less relevant. When they acquired instagram, he said, give instagram some time, let it breathe. A lot of people looking at the growth of the facebook business, in terms of dollars and cents, would say they are doing a pretty darn good job of finding ways to generate revenue. It should come as no surprise that they would despite paying 16 billion, they would say we are not embedded in a position where we need our new acquisition to be thinking about that. Key, and connecting with a billion people, whatsapp being on that road, seems to be the key indicator of that. Jon erlichman, thank you so much for breaking it down. We have a special roundtable joining us to discuss the 16 billion. That is what facebook has agreed to pay whatsapp in cash and stock. M joined by the founder gentlemen, thank you for rushing to the studio to join us on this news, which broke minutes ago. Jury action . I think it is a great move your reaction . I think it is a great move. For facebook, the idea is we are looking at them, talking about a billion users, that is a potential competitor they have just eliminated. They have taken them out of the marketplace. It reduces competition. Especially in newer markets were where facebook has not really penetrated. This is a great move. This is the kind of aggressive move you would expect from a founderceo. David kirkpatrick, you wrote the book on facebook. Is 16 billion, is whatsapp worth it . I was hit upside the head when i heard the number. You cannot help but say that its ridiculous on first hearing it, but then when i look that the data and i thought about it and you think about the fact 20 twitters market cap is billion and it is infinitely smaller, the number of users are way less, the statistics are astonishing. 70 of users, on daily, which is higher than facebook, which is 60 . Day, it isillion a very powerful in the developing world. Facebook has this huge goal to grow globally. Zuckerberg is about bringing more people onto the internet. This service is achieving something similar. If they really have the potential to reach a billion, there are very limited list of companies in this league. Facebook, google, skype. One that i would point to is we chat, which is the only Similar Service and it does something extremely similar coming out of china. I cannot even think of another service in this league. We chat is huge in china. Is 16 billion ridiculous or not . Ridiculous, but it is the kind of ridiculous that makes a weird sort of sense. We were talking about the most expensive acquisition on a per user basis, 15 years ago, the microsoftquisition i by microsoft. Weirdly enough, on a per user basis, you may or may not be instagram acquisition, you may or may not like microsoft buying hotmail, but there seems to be process andal respect to the per user. Are so stunning that on a per user basis, this is the kind of number we have seen for sometime in these kinds of acquisitions. 450 million users of whatsapp. That is total users for twitter him and not monthly active users. That is a very different statistic. Twitter does not have anywhere near 230 million monthly active users. On the Conference Call, facebook has been holding a call for the last several minutes talking about this acquisition. Mark zuckerberg will continue to allow whatsapp to own to run independently. Some people have said that kevin wanted back himself, is it possible to keep whatsapp operating completely autonomously . Is operating pretty independently, though the ads have come in. They are still experimenting. Whatsapp has to live as an independent entity. We have been talking about whatsapp, there is the other trained trend happening right now. Messaging apps are becoming conduits for selling other apps and other ecommerce related things, especially in nondeveloped markets. There is a huge opportunity for facebook to take what they have found success with, which is app related advertising. They can start to make money on that and not really offend the users of whatsapp that much. How does facebook take whatsapp and turn it into a bigger business . They charge a dollar a year to use the service. How does facebook turn this into a business . Ways. On of Cross Marketing is a very powerful thing. Even if they did not have ads on the service, they could use it to cleverly drive traffic to other businesses. You are going to see all kinds of integration to the degree the users wanted. They are just starting to charge that one dollar a year in some of the markets, as i understand it. It will be able to increase their revenue as they go forward. Wepeople use it as much as hear they do, and i have seen it myself, i think people probably would pay more. It is a hard question to answer half an hour after we heard about the deal, but i do not think it is out of the question. I would turn it around. The point is to figure out punitive there is a option going on. It is worth this much to facebook because it was worth a lot to google and if i can hurt my largest competitor by outbidding them, there is some negative option alley. Is not exactly burying anyone with respect to its traffic. Something google this is something google badly needed. We keep talking about this is if it is 16 billion straight up in cash. This is mostly facebook paper, which they are more than happy to print and use to stick something in the face of google. Little bittalk a more about what it means for google on the rest of the competition. We have been using listening to this Conference Call. We will talk more about their vision and their founding story with you after a quick break. Staying with us to talk about facebook buying whatsapp. We have an exclusive interview with Tesla Ceo Elon musk. Hear what he has to say about the companys latest earnings. Welcome back to bloomberg west. I am emily chang. Facebook buying the messaging Service Whatsapp for 16 billion in cash and stock. Count 19 billion when you the additional 3 billion they are paying the employees. We have a great group of guests to talk about it. Our contributing editor in san diego, auto burg author of face burke affect facebook effect. The founders of whatsapp are former yahoo guys. Them on theto get show many times and i do not like talking publicly. I have been pretty passionate about their hatred for advertising. But this acquisition into context for us. There have been two similar acquisitions in the past. Icq,as icy cool you which aol bought. The acquisition did not go anywhere. The second big acquisition was skype by ebay. Which was a disaster from day one. Skype and microsoft, a similar acquisition. They have not really facebook and whatsapp is a good match. They are similar kind of companies, similar overall objectives to have a similar two different modalities of communication. Instagram does not need to be part of facebook, perfect is one of those combinations with facebook. From that standpoint, we can talk about the money and how much money this brings, but this is additive to the facebook business. If the founders of whatsapp are theyst advertising, developed a very native idea of advertising for instagram. Up with will come something similar. It will not be banner ads. Really that discouraged on the idea of them doing advertising. The founders of yahoo of iatsapp who come from yahoo , heard that yahoo was aggressively trying to buy them as well. We are getting more headlines out of this Conference Call. Mark zuckerberg first proposed this acquisition last sunday night. What makessk you, you think this is going to be more successful than some major deals that have failed in the past . Is really in this business already. It was completely battle. Affling, ebay buying skype people are going to want to talk to each other before they buy things. The whole reason peoe use ebay is because they do not have to talk to each other. The difference here is facebook has demonstrated they will do everything in their power to make sure they do not get disrupted by someone growing faster, and make sure those platforms do not go to their largest competitors. They know exactly where their market is. People are holding smartphones in their hands to access and communicate with their friends. They will outbid anyone to get it. Does it matter that they are buying versus building innovation . I know they tried to with Facebook Messenger to grow that part of the business. It does not matter because they are pragmatists. They are not standing on principle. Ity are saying, we will buy from someone else, but we refuse to be disrupted. That is something the Tech Industry has struggled with for a long time. This is something they are extremely good at, we will not stand on principle, we need to own them. What does this mean for google, david . It is not good for google. They are kicking themselves. I was wrong about twitter, they do have 240 active users. Yahoo is also in this league. Withrms of why, i agree everything paul said, zuckerberg and the crew from whatsapp have been friends from for years. Zuckerberg has given him a lot of advice. They have been building towards this for a while. I would make a minor justreement, facebook launched paper a couple of weeks ago, which is a totally internal project. It is not catching on quite as fast as some critics might suggest, but it is a very creative internally developed thing. It is not like innovation is dead at facebook. They are very pragmatic. Owned bygoing to be somebody else. They had to own it themselves. We will continue this conversation after a quick break. Well be back talking more about facebook buying whatsapp. Elon musk will be joining us later this hour. We are talking about facebook agreeing to buy whatsapp. I want to get some final thoughts from our experts. Movecebook made the right because like all companies that become big, they have challenges of innovation. This was a great move. Paul . It is a rational sort of ridiculous. It is a stick in the eye to google. David, what does it mean for snapshot . I think it is probably good for snap chat. I was skeptical of 3 billion, but i am sure they will be worth more. If they can keep growing, it is good for anybody doing messaging apps. David, you will be interviewing Mark Zuckerberg next week. I cannot wait to hear what you have to ask him. Thank you for joining us today. You are watching bloomberg west. We focus on technology in the future of business. I am emily chang. Ahoo has Just Announced unified marketplace, yahoo gemini. Advertisers can use the new tool. Apple is bringing its itunes festival to the United States for the very first time. The free concert event will take place this march at the annual sxsw conference. It was held in london in years past. Artists include coldplay, imagine dragons, and keith urban. Apple will stream all five nights of the festival live. Samsung seems to be taking the First Step Towards its own software and services. Its new version of the galaxy gear smart watch will run on tizen. It is an open source project. Expected to unveil its new smart watch later this month. Tesla is riding high on an increase in model as deliveries. The electric carmaker reported revenue, up more than one million percent year over year. Betty liu joining us today from new york. What are the big numbers from the call today . 33,000 model last sedans, that is up 55 from last year. The company had Gross Margins of 25 last quarter. They may even be able to get it up to 28 by the end of the year. They are planning to ship 35,000 cars this year. Tesla, it has always been more of a supply problem, not a demand problem. How will they meet the excess demand . Elon was asked a lot of questions. Are they basically at a point where they are constrained . They cannot actually supply the number of cars in demand right now. I just got off of that Conference Call between elon musk and its and his cfo. Most of the questions were giga battery factory they are going to put into place. That factory will be the one that will be able to allow elon musk to build that thirdgeneration cheaper, massmarket car that he has talked about. That will elevate tesla from being this niche luxury player in the car market to really be a competitive automaker. That is why you saw half the questions related to this factory. Elon musk was getting kind of exasperated by all of those questions. Look, next week, i will have a call and i will answer all those questions for you. In a fewlk to him minutes from now. Lets talk about this battery factory, this gigafactory. What does it mean for tesla . And battery production in general . About as much as the laptop industry consumes now. Tesla, if they want to get to , there is noon car way they would be able to meet the demand without the batteries. They have to do that costeffectively and keep the supply going. He was talking about this end to end factory. I believe the lawn is ready to join us right now. Eddie, i will send it betty i will send it back to you. Andlon musk, the founder ceo of tesla motors. Great to talk to you again. It is a marathon run before you release your results. I was listening in on a Conference Call. Frustrated with how many questions you were getting over this battery factory. Just didnt have some of those details are did not want to disclose those details in this call . There was not enough time to really get into the details of that gigafactory on this call and we had a lot to talk about with the rest of the business. Just talking about fourthquarter results and expectations in the near term. The gigafactory is more of a longterm development over the next three years. It deserves its own call. We will do that call and answer questions in as much detail as we can next week. As i can, can you clarify a couple of points . Are you going to be building this with partners . Yes. We expect this to be done with a number of funders. Can you give a clue as to who they might be . Panasonic . Samsung . The likelihood that panasonic would be part of it, but that is not confirmed. I think that seems like a pretty good likelihood. A reasonable assumption. I have to be careful what i say because we are a publicly traded company. I can reiterate something i said on the yarns call. I said on the earnings call. We can pay for the gigafactory fromthan three years retained earnings if we allow the time. To extend beyond three years. We would probably need to raise in f we wanted to be done in three years. You would prefer debt equity . I would love to answer those questions, but i cannot. One of the things you said on the call was that your best guess is that model as demand is going to exceed model less demand. Model x demand is going to exceed model s demand. You have said you were going to go in production in 2013 and you went to 2014 and now it is 2015. What is going on . Sure thateed to make our house we needed to make sure our house was in order with the model s. Going into north america in 2012, europe in late 2013, asia in 2014. Complexity ofthe a whole new product line, it was important to get our geographic deployment done and make sure we were delivering Excellent Service and all geographies. I amrespect to the x, somewhat of a perfectionist when it comes to product design. I take the blame for some of that delay. Being do to me personally, at not being completely happy with the product. What bothered you . That hardest thing about x is achieving great form and great functionality. It is easy to give up on one of those two. It is hard to make an suv that is beautiful and functional at the same time. It is a harder design problem than the model s. I do not want to come out with something where the production version is worse than the prototype demonstrates to people. I am quite insistent that we go to production, the production article is superior than anything that was demonstrated before. Is the actual car in production going to be different than the prototype you unveiled a couple of years ago . It will be better in a number of subtle ways. I do not know if most people would even notice it, but i think it will be better in a lot of ways. Is any of the delays around the model x going to affect the heart and soul of why you did tesla . The x isot think affecting the thirdgeneration car. Bad as fast asas we could do the thirdgeneration car because we are somewhat constrained by the creation and construction of the gigafactory. This natural rate of progression or maximum rate of technology progression, we are at that maximum rate. We are doing the x in between the s and the