Who is and what are his qualifications . Heres a background look at the man who is taken over for steve ballmer. How would you like to follow this act . The good news is, no one expects him to be steve ballmer, or for that matter wants him to be. In fact, he is now having to deal with the tugofwar over strategy. Cofounder bill gates initially disagreed with ballmers land to make mobile devices. It did not help that their tablet was a dud. Iker soft promoted a manager who has proven himself on both the business and tech sides. Hes an electrical engineer from india who got his mba at the university of chicago. He spent 22 years at microsoft heard he ran the companys r d unit before ballmer named him head of the server group. He reengineered that business that is now known today as cloud and enterprise. He is seen as someone who can help microsoft innovate faster as it tries to navigate the postpc world. In the meantime, he can still count on microsofts two big moneymakers, windows and office. So, what does the future of microsoft look like with Satya Nadella . I started by asking corey, who was outside the event here in seven cisco, whether nadella deserves credit for the companys push into mobile. I think his influence was felt in the decision to do things like this app. His groundbreaking decision and insistence that they offer oracles database on the microsoft cloud to their customers was a kind of decision that this also represents, the notion of making an ipad one of the great strengths of microsoft is microsoft word and powerpoint and excel. Those are applications unique to microsoft. Making a decision to share this with an operating system, there are planning to beat the marketplace. It is going to strengthen them very directly. 30 of those sales will go through the itunes store. That is a very aggressive decision. Absolutely, this started under steve ballmer, but it also started with nadella showing the way of the future. Obviously, office is one of microsofts biggest products. I just spoke with bret taylor the former cto of facebook who is trying to replace windows through mobile altogether. I was in the next question out to you, crawford. His office really the right thing for nadella to be taking on yeah co. Quacks absolutely. Microsoft office is a huge part of that language. People can throw rocks at it and say it is not as relevant as it used to be, outside of the valley it is the way people use information. This is a move for them to up level away from the os and toward microsoft services. Youre going to see more about office and one drive and skype as a collaboration platform, as a way for them to unlock value in areas beyond the os where they are significantly invested. Michael, you worked with nadella before. He is an incisive thinker and he loves to fight nearterm opportunities within the company. I agree with cory. This makes absolute sense. It could probably drive 3. 5 billion in the next 12 months to the microsoft hotline. I think satya has an immense challenge in terms of changing things within the culture of microsoft. You really have to go after those blue ocean opportunities ahead of times from where the competitors are today. That remains to be seen. Or wonder about microsofts own mobile devices. Cory, what are the plans for those . Is satya going to continue to focus on the products . I think the reason they slept this announcement apart from their big build is that they do want to get a lot of focus on this ios product. The estimates out there talking about billions of dollars in revenue area to big art of this is not so much about the consumer. Well the consumer will certainly spend some money on this, i think really what this is is trying to get back at the enterprise on devices that they have lost the battle on. We have the Android Devices and the os devices, particularly the ipad. Executives have let the ipad into the office place. You have your ipad without office. Microsoft has a chance to get that subscriber revenue on a regular basis to bring those users back into that ecosystem. I think that is the strength they want to emphasize here with this offering that is part of office 365. What do you see about his chances of making this big major platforms shift decisions that could be very difficult along the way . As cory indicated, microsofts relevance has dropped. They cannot afford to let their involvement with enterprises dropped the same way. People want to use this microsoft service. You can use googles service, but it is harder. This kind of a service has huge value. Microsoft needs to unlock the value and the need to transfer the company to be able to say transform the company to be able to say we can monetize that and grow. I think theres a much more willing seller participants that want to be able to experiment and go after these kinds of innovations. They need to be lead there and pushed there. We are looking at him on stage right now and he is not jumping around like a monkey. He looks like a normal ceo. Crawford gives them 75 odds. I think that is exactly the kind of mission that microsoft needs to focus on. Still had, he is known for backing twitter when the company had just 25 employees. You can watch a streaming on your phone, your tablet, bloomberg. Com and apple tv. Im emily chang and this is the best of bloomberg west. Some Companies Like box and king are choosing to go public. Others are going for mega rounds of public funding instead. All of them are pouring money into Silicon Valley at an unprecedented rate. The latest example is block rock. Venture capitalist peter fenton sits on the port of horton works. He led early investments in yelp, uber and others. We have a responsibility on the board to make sure that companies go public or there such pressure from the Public Market and hedge funds to participate early. Theyre fighting for ipo allocations. It allows us to build a company that has the foundation to be not a group on or xanga. We have heard it ability in the performance of six plus quarters. What the future looks like harry we have also started a relationship with a longterm capital base. Black rock and passport. The company gets to know them. It does put real pressure on the traditional late stage venture market. There is a new actor. The late stages now occupied by these public investors. There are ridiculous amounts of capital chasing deals right now. To think it is ridiculous and do you think it is at all bubbly, the amount of capital and amount of valuations were seeing . I started in the Venture Business in 1999. I saw what happens to the businessman capital is free. You start to take routes to acquire customers that in many cases can be nondurable. The challenge we have faster actors when we have this flood of capital is to try to maintain the fiduciary responsibility and discipline the muscle memory for having an economic model that works when capital is not free. It is less capital availability, it is what you do with it and how does it affect the way you build your business for the longterm. That becomes a big problem when you have Companies Whose underlying model without free capital wont work. You cant grow without buying customers, then you have a structural problem of not being able to structure regular returns. In spite of that, there are some extraordinary companies that deserve these valuations and there are a bunch that dont. As a market gets more frothy on late stage, were going to push the boundaries and end up having more companies that dont deserve a category. I think this is a question of competitive advantage. Can the economic model support increasing returns to scale . Something we obsess on. If youre spending more per quarter to acquire customers and to sell to them successively, that is a massive red flag. Those to me stand out in that dont category. At the moment, everyone is thinking that growth evaluation. Here in los angeles you have snap chat, which is a Company Benchmark has invested in. It got a lot of headlines when its said thanks, but no thanks to facebook. I spoke to entrepreneurs at that time and they wouldve liked to have seen a sale of that business almost as a validation of the la market varied would he think about the idea of Companies Selling versus going along a road and maybe going public down the road . How does it help to validate the market whether it is silicon beach or south on valley or or Silicon Valley . Every Great Company, a google or twitter, faced an opportunity to sell early, they were giving a multibilliondollar offer that they rejected because they had their gaze on the horizon. One of the challenges of la, and it is one of the biggest ac in new york, is there is a more shortterm mindset around monetization. Valley has us believe, his background purpose to build the next google. You cant build it if you sell before you have realized your potential. What evan is doing at snap chat, benchmark is an earlystage firm. We work shoulder to shoulder with these teams so they can realize the full potential. Along that road your conviction gets challenged. Theres a number that is put in front of you that is so irrationally large you have to be irrational to stay independent. The best thing for los angeles and new york as they will get their google or facebook or twitter. You cant do that if you sell early. You made the decision to relocate to San Francisco from Silicon Valley. Nadia done that, how are you measuring success . What has it done for your brand, for the benchmark brand . San francisco became an epicenter post sales for success as a place to build tech companies. The reasons are fascinating to us. The unintended consequences of google and facebook gave young engineers the option to live in seven cisco and bus down. If youre given the choice of living in suburbia versus the city as a young engineer, you pick a city. That started the process. From benchmarks standpoint, we work shoulder to shoulder with entrepreneurs. We are measuring success by time with companies. This has gone up meaningfully guide being in San Francisco. We look at two thirds of our investments in seven cisco in the last five years. More than two thirds of our market cap is in San Francisco. Theres something going on which is not resolved between the Technology Company integrating. It is something we are now obsessed with because it has created tension, as you expect when you have one community that has been hyper successful, and the rest of San Francisco needs to be brought into that success, which is a real opportunity for our industry. Aol is hoping to become a force in the online ad market. Tim armstrong joins us next to talk about the companys push into automated ad buying. This is the best of bloomberg west. Aol is moving beyond content hoping to get a bigger slice of the online ad market. The company has introduced one by aol. It helps automate selling ads by combining technology that aol has acquired in recent years. Cory johnson caught up with aol see eeo tim armstrong. Take a listen. Basically, it is a platform for the advertising business that will make advertising as easy as ecommerce. If only. Depending on the months, we have 20,000 or 30,000 other publishers who use our ad system. It will go across the entire ecosystem of our network. It is else of an open platform. If customers want to bring in other partners or data, those type of things, it is truly like in itunes or amazon type lab form for advertising. Is the notion that this will be a parallel for ad buying our system is an open system. You can buy across the entire web almost. You can bring your data and your own pointofsale information and crm data. It is really powerful. Im trying to get my head around it, i feel it is rapidly evolving. The entire supply chain of automotives from iron or to buying the car, the only piece in that supply chain that hasnt been fully automated is advertising. The baseline is just to automate, to put machines in places where machines can tirelessly do over a big scale was humans have a hard time doing. Human capacity in advertising campbell to the creative side and the planning side of advertising. Not to the placing the ad are finding the right audience. Youll want to use Human Knowledge to do spreadsheet work. You want to find audiences. Machines will help advertising scale. You have a bunch of acquisitions in this area. Is this all of those things coming together . Doesnt replace any of those things . We started back three or four years ago. Advertising is almost a trillion dollar industry globally. It is not automated for the most part. Where do you think automation is going to go. Planning, serving, buying we started building a Technology Stack and each one of those areas. The most recent was gravity which personalizes advertising for consumers, which is a big part of the future of the internet. Adapt tv is the best video marketplace online for buyers and sellers. Our theory is that sight, sound and motion is going to trump a lot of the things that have happened on the internet to this point. And video and mobile . People ask what our video and mobile strategy is. Video works well for consumers and advertisers. If you think about screen size, if you watch kids these days, even some adults, doesnt matter what size screen thereon. They will watch a movie on the smallest screen they have where web clip on the largest screen they have. Our ability to serve video throughout the internet and add video ads is a mobile overthetop strategy. I was talking to a friend who had become addicted to game of thrones. He preferred to watch it on his tablet. People like personalization in terms of how they use things. If you are in a normal household in america, if you have three or four or five people in the household, they have multiple people on different screens watching different wings over time. There is still going to be the need for watching content together, but you will see things get much more personalized, which in the long run is going to require a lot more content to get produced. I think the megatrends Going Forward will be massive increase in sight, sound and emotion. Youre going to see the networks and devices get really fast. The next 18 months you will go from single casts to multicast on most carriers. Video usage is already exploding. How about the way ads show up on a website, for example . It took years for formats to get adjusted to it would work well on the web. Video is in the early stages of that. Video analytics for advertisers is the first thing now. Advertising, which is the gap we want to close, is a business opportunity. It is still in the first inning. Cory johnson with aol ceo tim armstrong. The battle over tv broadcasters has reached the court. Chuck cannoggia answers that question when we come back. Youre watching the best of bloomberg west. Im emily chang. The will of most closely follow the Court Battles in tech. The case has made all the way to the Us Supreme Court with the Company Recently submitting its brief for the case. The idea behind this seems simple, the technology is not. Jon erlichman got an exclusive access to the manufacturing facility in salem, new hampshire. It is assembling the technology that makes areo work. At this facility in new hampshire, machines are assembling hardware. This is the areo antenna. We have a great design. We can achieve great performance. They gave us an inside look at the busy factory where the final product comes together. It is revolutionizing the way we watch broadcast tv. Would you see how the technology works, it is different than using oldfashioned rabbit ears. It has an individual subscriber. The antennas are not mounted on top of a tv. They are stacked on the a box that can accommodate several thousand antennas. The antenna sends the tv signal to a transcoder. Two to stream online and pause, rewind, and record. The standard antenna takes all of the spectrum and pushes it down the wire to you. Whether you want it or not. You are only listening to what you want to. What is the capability of what you can manufacture . We can manufacture huge numbers. We can manufacture 10 times what we are doing. The plan is to operate in 22 cities by the end of the year. They want to accommodate any level of demand possible. As demand grows, we can grow with it. The conventional model says i will build it and hope they come. We have a very analog business model. He had a chance to catch up with the ceo who was unapologetic about the service. Jon asked why he launched areo. We collected data from millions of homes. It was shocking, the majority of people watched seven or eight channels. Half of them happen to be broadcast Television Channels and are free on the air. Technology does not keep pace. People are consuming more content online grade people are cutting the cord. They are moving away from the traditional model. How close is this today to what you envisioned . Start up seven strange behavior. You start something and then you test it. You have a couple of mishaps. The ceo gets fired. It is a very common story. This is the first time that i have observed where something went like clockwork. This is exactly what we set out to do. We knew we wanted to do so well that this was to thet. Did you anticipate this kind of legal fight . The thing that i did not anticipate was the direct impact the future contributing cloud. If i take a moment to step back, you never do. The controversy and scope and scale of what is transpiring. Broadcasters continue to speak what their options are. Where they can take their channels and where they can move their broadcast network to cable. They can take it to the internet. What do you say to that . They have had an agenda to go to cable for a very long time. The need to take a step back. 50 Million People use antennas in some way shape or form. Are they capable of disenfranchising that large of a number of people . I dont think so. That is a very difficult situation. If you were not successful at the supreme court, is there a plan b . No. There is no plan. We do think this is the right thing. Progress is important. The mission was to try and create an open platform. We wanted to wedge the system open a little bit. If we dont succeed at that despite our best efforts, it will be a tragedy. It is what it is. Have you thought about selling the company . You started to grow, let somebody else worry about the legal headaches. I look at what is the best way to ge