The channel while cutting overhead. Bbc america is available in 80 million u. S. Households and airs shows like the musketeers. Twitter shares soared 20 today following a strong earnings report, its biggest daily gain since the day after its ipo. The ceo says changes made to the service are working. He says revenue rose mostly because users spent more time on twitter, and the audience for tweets beyond twitter itself is more than twice its active user base. And Edward Snowden temporary asylum in russia is set to expire tomorrow. He has requested an extension. Coming up at the bottom of the hour, an indepth look at how snowdens revelations about federal government spying have impacted business, government, and your privacy rights. First, to our lead story of the day. Amazon make its objectives public in its dispute with a book group over ebook prices. It has been going on since may. Its key objective is to lower ebook prices. Amazon argues that if ebooks were priced at 9. 99 instead of 14. 99, there would be more sales. Amazon also indicated it is willing to except the same share of total revenue if hachette agrees to lower the price on most books. Amazon rights, while we believe 35 to go to the author, 35 to hachette, the way this work is we would send 70 of the total revenue to hachette and they would decide how much to share with the author. Joining us via skype is the ceo of an ebook distributor serving in the authors, Small Presses and literary agents. A self published author of several books on amazon. You have been supportive of amazon throughout this dispute. What do you think of this latest response . Im happy that amazon is finally talking about what their negotiation terms are. It confirms everything i suspected just from watching the company over the years and dealing with them as an author and publisher. They went through this in 2010, fighting for reasonable ebook prices. Back then the response from publishers was to form a cartel and collude with their supposedly competitors in order to artificially raise the prices of ebooks on readers in order to protect their legacy print industry, or to make as much money as they possibly could for readers. I think it has been to the great detriment of the authors at hachette that they are fighting for these higher ebook prices. Im glad amazon is finally talking. We are in a weird situation where you say hachette has not returned your calls for comment. It is usually the other way around. Hopefully this will put some pressure on hachette to come to the table and negotiate. It sounds like they have not been doing that. Mark, amazon wants 30 and it also wants hachette and the authors to split the remaining 70 , which is different from the way it is today. I believe authors get 25 today. Can you explain how this differs from what amazon is proposing and what authors actually take away when they sell a book today . Some of what amazon is proposing here is a disingenuous smokescreen. If amazon really wanted to offer consumers lower prices, it would be doing other things differently. Right now amazon for self published authors penalizes the author if they price the book under 2. 99. You only earn 35 , rather than 70 list. Right now amazon makes it really difficult for authors to price their books as free. The only way to price your book at free is to enroll in their exclusive kdp select program. I think this is about amazon gaining control over the price, and control over the ebook margins. If you look at what amazon said in their blog post, they are talking about 70 of revenues. 70 of proceeds. They are not saying 70 of price. What he publishers want is the freedom to set their own prices, and earn 30 list and give the retailer 30 list on ebooks. The publisher wants to earn 70 list. It should be the publishers decision what they pay the authors. I agree with many of the critics and i agree with you that publishers are not paying their authors enough. Theyre only paying their authors 25 net, which works out to 12 to 17 of the list price. If you look at what self published authors are earning, they are earning 60 to 80 of the list price as their ebook royalties. There is a big gap here in what publishers are paying and what self published authors are earning. Now, amazon makes the argument they use the price of an ebook at 14. 90. They say if they reduce that to 9. 99, they would sell 74 more books and bring in 16 more revenue. I want to bring in our editoratlarge, cory johnson, who has been looking at this very closely as well. Torrey, is a smokescreen as mark said . Mark is right to point out how cleverly this is written. The publishers can do the exact same kind of mass. They have done their own price analysis. Price analysis like this is never fixed. They dont know for sure that every title will have the same pricing dynamics. They make it seem like it is math set in stone. The other thing were doing here is at the end of their note, which i have tweeted out it is an interesting one they try to create another area of focus, which is how much the authors are getting paid, arguing that the publisher should split 50 50. Pointing out that the publishers dont do this right now. Getting authors ticked off that amazon is a problem for amazon. Amazon is trying to sway their opinion, suggesting there on the side of the authors, and writing that in a blog post. Hugh, what do you think . Do you think amazon cares more about amazon, or does amazon actually care about you . Amazon cares about amazon foremost, the reader secondmost, and then the author. I have never been treated as well by any publishers as i have amazon financially. It is night and day. Mark is trying to make a different argument about ebook ricing, saying amazon punishes ebook prices that are too low. Amazon just released a pricing rule. It is not that amazon is just for low prices or higher prices. They are fraught to mull pricing. What they have right now is publishers charging too much for ebooks in large part because of protecting relationships with bookstores, with their legacy print industry. I am working with over 30 publishers around the world, and they have told me they cannot lower the price of my ebook because it will upset bookstores. Your expert who thinks that publishers are doing a price analysis and making a logical decision that is not how these decisions are being made by publishers. They are being made emotionally, they are made because of existing relationships, because they dont want ebooks to gain penetration because it takes that power away. People who think that publishers are behaving logically here in the best interest of authors for readers have not studied the history of the Publishing Cartel that exists in new york right now. It is not operating in the best interests of its own authors. I hope amazon wins this fight and we get ebooks at a reasonable rate. A Publishing Cartel. We will be watching to see how hachette response to this. Thank you so much, author hugh howey, mark coker, and cory johnson. Could snapchat really be worth as much as 10 billion . Alibaba could be ready to invest some serious cash in the photo disappearing app. That is next, right here on bloomberg west. Im emily chang. This is bloomberg west. Snapchat is in talks with Ali Baba Group for a financing round that could value the photo messaging company at 10 billion. People with knowledge of the situation tell bloomberg the talks are ongoing. The terms of the funding could change, but if it is completed snapchat would join Companies Like dropbox, airbnb, uber with valuations more than 10 billion. Alibaba group is gearing up for a u. S. Ipo and has invested in a number of u. S. Companies recently, including shop runner. Joining us to discuss from new york is the ceo of tbg digital, and our editoratlarge, cory johnson. Simon, i will start with you. Snapchat has no significant revenue that we know of. 10 billion . Is that fair . It is when you look at valuation approaching 200 billion dollars. It snapchat can take a bite out of that market, 10 billion might be cheap. Facebook recently offered 3 billion, which they turned down. Snapchat launched a new product, similar to a stream of information that disappears every day. That is getting one billion views a day. The numbers are getting significant. It could be worth the money. What do you think, cory . If you compare it to facebook, which tried to buy snapchat for 3 billion, is this a fair price . The price is ridiculous. There is no revenue. There is no way to imagine how there would be revenue. But we have seen this before, where companies are prerevenue but getting great big valuations. If it happens with this valuation, it would be a bit. Let me offer two ways to think about this. One is the size of snapchat. In june, snapchat had 27 million users. That compares to 72 million users on instagram. It is in or mislead popular. A third of instagram already. A lot of messages. Numbers i saw from february suggest they are doing 1. 5 billion messages a day. A lot of active use. A lot of the users who are not paying anything for it, neither are they seeing any ads. The other thing that is different is that this being ali baba, it might open the doors to snapchat in china, in the way that some chinese blessed companies are allowed to do business in china, where facebook and google are not. That could make this business a lot more valued Thomas Sibley by the fact that it is an investment from alibaba. It is interesting also because alibaba has stake in its own messaging app. Simon, what do you think about alibaba in particular being part of this potential financing round, and how involved they might be . As cory said, if they can take snapchat out of the billions of people who are in china, it could be a scary prospect for the networks which dont currently have access there. They already have the investment in we bow, which the majority of it is a decent stake. It gives them a few different bets on it is similar to twitter, facebook combination. Snapchat is a slightly different approach, where the messages disappear. It could be huge. Simon, cory, i want to talk about twitters big earning report. Twitters monthly active users up 24 , stemming concerns about slumping user growth. Twitter also doubling revenue, more than doubling revenue. The stock has gone crazy. Cory, are the numbers as good as they look . That loss is not as bad as it looks, either. Principally stock compensation charges, which is a noncash item. You saw that expense on the income statement this quarter, as it does every few quarters after the ipo. Without that, it would have been profitable for the first time. What you see from this company is a lot of thing starting to take. You saw an increase in the growth rate of new users. You see an increase in the growth rate of page views. And you see a continued increase in the value of the users. The revenue for 1000 page views hit 1. 60 in the last quarter. It was half that a year ago. If the advertisers are getting what they want and paying more for it you mentioned the user growth rate changed. 6. 3 if the more important number. They put 24 in the press release. When you look at the sequential change from quarter to quarter, you can really see the company kind of bottoming out in december and then turning around. The growth rate of those users is growing a little bit faster now. It was a little bit faster last quarter. They have managed to reaccelerate user growth more than 270 million users now. Simon, it is all about User Engagement when it comes to twitter. What does twitter still have to prove . Can they keep this up . They just have to keep continue doing what they are doing in terms of converting the huge awareness that twitter has. Everyone knows what twitter is. Making the experience better for people, based on what they are interested in. The work to get around the world cup, maybe expanding that to other events that people can really engage and find out information about topics they are passionate about. That is what will convert that awareness into user growth, and that is how they will catch up with facebook him a 1. 3 billion users. Simon mansell at our editoratlarge cory johnson, thank you. What is an entrepreneur to do when he has been fired from his last start up . Write a rock album . Travel asia and start something new . We will be back and talk about the former groupon ceos latest detour. Welcome back to bloomberg west. Im emily chang. Could it be a great Silicon Valley comeback . Andrew mason was fired from groupon back in february 2013 after shares plummeted by 80 after the ipo. Since his departure, mason has been doing some traveling, side projects but he has also been working on a new locationbased audio tour app called the tour. Brad stone went on a tour with andrew mason to find out what he has been up to post groupon. It sounds like he was quite entertaining. I would expect nothing less. Do this eagles really you know what . [laughter] as we were doing when these detours in fishermans wharf, the great san franciscan tourist neighborhood, walking, listening to the tours you go to a specific area. A fisherman is talking. He is very earnest about this experience. Andrew mason has a great sense of humor and dealt with it gracefully. Not the most dignified thing. Audio walking tours. Why . It is a big market. There are a lot of these apps. Other people have tried it. Andrew, who was all it groupon about getting people out of the house and getting to experience their city in new ways, is riffing on his idea in a different way. He has a former couple former groupon engineers working on it. They think locationbased phones, gps, all these things can create a better experience. We will see. It is not just walking tours, it is entertainment grade we did a tour of the tenderloin and John Parry Barlow narrated, the grateful dead lyricist. He talks about the hots he likes in the tenderloin. We will see when detour opens up the marketplace and allows people to contribute, how big it can be. My last encounter with andrew mason was chasing him around times square. The bad publicity had already started. What is his postgroupon view . What does he have to say about it . He was pretty up front when he was fired. Thats right. He takes a lot of the blame for what went wrong. He says primarily that they went public way too early. Rapid growth company. Hundreds of millions of billions of revenue in one year. They had new organizational problems. To try to figure that out in public is hard. What you want to address is the relationship with the board. He says, we are great friends. But it is clear that he is joking, and there is tension in that relationship. He made 400 million off of this. Why bother . It seems like he is wellconnected with some of the bigwigs in Silicon Valley. He still has got at least a good reputation among them. Yeah, and i asked him why do this. He said, what else should i do . He is still an innovator. He is young. I dont think it is a quest for redemption. It is like hes trying to build something that enlivens their city. He talked about oculus rift, and he demoed it. He said, when it comes out there will be no reason for us to ever leave our living room. He wants to get detour out and succeeding before we all disappear into virtual reality. That is a good point. We will be watching, and maybe listening to his album of work songs hardly working. He actually made an album. Thats right. It is not clear how tongueincheek that was. He called the best thing he has ever done. All right. Brad stone, thank you. Tomorrow is a big day for Edward Snowden, when his asylum in russia expires. What happens next . How has the revelations of nsa surveillance impacted business . You are watching bloomberg west. Im emily chang. This halfhour, we are taking an indepth look at the impact Edward Snowdens revelations about nsa surveillance have had on business tom egovernment, and consumers. We are looking into what it has meant to your privacy rights and how the news about bulk phone record collection, internet wiretaps and more has changed the Business Practices of Technology Companies and the broader corporate world. First, it was a little over a year that snowden first exposed the spying tactics employed by the u. S. Government. How there is an nsa reform bill in the senate that has already passed the house. This legislation would stop bulk Data Collection and force stricter requirements from gathering at, and and metaData Collection from phone calls. The bill has plenty of supporters in the tech community, including yahoo , google, facebook, and apple. Here is what those ceos have had to say about nsa surveillance. We need to be significantly more transparent. We need to say what data is being given, how many people it affects, how many accounts are affected. We need to be clear. We have a gag order on us right now. We cant say those things. Do you know google is quite a post along with the other Tech Companies to what we see as overreach by the nsa, and we all think that bugging Angela Merkels phone is pretty stupid, if i can be blunt. Number one question from google. Dont do stupid things. That does not mean we dont need to have a system of surveillance, because we do. That has to be accepted. If you dont comply, it is treason. Much of what has been said is not true. There is no back door. The government does not have access to our servers. They would have to cart us out in a box for that. That just would not happen. They did not knock. They did not call. They did not send a letter. They just visited. [laughter] what request would you make to president obama . Transparency. So we can help our users understand exactly how many requests we are getting, and or the range or types of request as we are getting, and how those requests will be used. The nsa issues are a real issue, especially for american internet companies. Trust is such an important thing when you are thinking about using any service where you are going to share important and personal information, and we continue to work to make sure that we can share everything that the government is asking of us. Do you feel the trust has fallen because of this . Yeah, i definitely think so. And not only within the u. S. , but internationally. Certainly there are other countries that have concerns about what the nsa is looking at. Transparency is something that would really ultimately help us. It is my job and our job to protect everyone who uses facebook and all the information they share with us. It is our governments job to protect all of us and also to protect our freedoms and protect the economy. I think they did a bad job of balancing those things here. Frankly, i think the government blew it. Mark zuckerberg thinks the government bl