Jobs, AI and Tech Earnings

23:17And Take-Two is not saying them. Take-Two has said that the number is unprecedented and exceptional and astounding. Those are all words that CEO Strauss Zelnick used. But they're not saying the exact numbers. So all eyes are on November 19th for the launch day and the final sales figure.

23:37Ed Ludlow:I guess the idea is that the world will have an expectation of what that number would be because we have a really good sense of what the prior GTA titles were able to achieve, right? We know the date, but give us the kind of backstory of why it's taken us so long to get to GTA 6. Yeah, a couple of things. So GTA 5, the last game in the series, came out in 2013 and has since sold 230 million copies. It did really well on launch day, but a lot of those sales have come in the year since then. It was really a long tail, an unprecedented long tail for that game. And so the numbers that we're expecting here are going to be exponentially higher than the numbers we saw from GTA V on launch day because the series has gotten all that much bigger since then.

24:25As for why it's taken so long, this game has been in development for about eight years since the release of Red Dead Redemption 2, which was Rockstar's previous game. And it's big, it's fast, it's got a lot going on. We'll find out more soon. And another kind of date to watch if you're interested in Take-Two shares is August 27th, which is when Rockstar and Take-Two have said they're going to show the first extended look at GTA VI, meaning what it's actually going to look like and feel like to play the game rather than the kind of cinematic trailers that they've shown so far. And that's actually another unprecedented thing is that it's going to be a Netflix exclusive.

25:07The gameplay is going to be released on Netflix six hours before it's released on the rest of the Internet.

25:13Ed Ludlow:Bloomberg, Jason Schreier with All Things GTA 6. Thank you very much indeed. One other company out with earnings is Airbnb and shares jumping by the most in 16 months after the company boosted its annual revenue forecast for a second time this year, citing robust demand in the U.S. and also in Europe. Bloomberg's Natalie Lung is here. What do we need to know? Yes, so Airbnb is seeing this really strong demand, especially from North America. Group travel is really strong. People are booking entire homes to go travel with friends. And, you know, it's really contributing to this growth optimism that Airbnb is seeing.

25:51It's kind of a different story from last year where they would always call out that North America is sort of the drag on the business. and another thing to call out is you know this kind of optimism would bode well for a lot of airbnb's new business initiatives like a la carte services like in-home beauty appointments and grocery stocking as well as their new you know hotel booking initiative as well so that's my

26:17Ed Ludlow:question what is airbnb's technology story right because you have to look past it being a short-term rental story right now? Yeah, so CEO Brian Chesky is trying to turn his company into an AI native company, using AI to help people discover homes more quickly, make a decision on the reservation more quickly and basically convert them into bookers. So upcoming features later this year include AI search, which will be more conversational with more visual elements than your traditional chatbot. The other thing is like an AI home comparison too that they're testing. So that's what we're going to expect from them in the coming year.

26:57Ed Ludlow:Bloomberg's Nassi Leung, thank you very much. Coming up, Lyft CEO David Risher joins us to discuss his company's earnings and its global expansion efforts. That's next. This is what markets look like. There has been a sharp slowdown in the U.S. jobs market. Technology stocks are higher. There is outperformance in semiconductors. Bond yields are falling. And it's all about the idea that that interpretation from the market reflects that the Fed will not be forced to raise interest rates anytime soon. Pretty good economic sum. It's halftime. This is San Francisco and Bloomberg Tech.

27:41Ed Ludlow:Welcome back to Bloomberg Tech. It's a Friday where markets are being driven by economic data. Technology stocks are higher. We're up 1 % on the NASDAQ 100, some outperformance in chip stocks. But very simply, there was a slowdown in the U.S. jobs market. Not only are stocks higher, yields are coming down on treasuries. And the interpretation is that the Federal Reserve is not under sort of immense pressure to raise interest rates anytime soon. That is what's kind of happening in the here and now of the market. There are bigger and longer term considerations. BlackRock sought to raise debt financing for a metadata center.

28:14Ed Ludlow:But there was one type of investor, the asset management giant, was trying to avoid those looking for a quick profit. So it focused on real money accounts, pension funds, insurance funds, to avoid fast trading investors who can quickly tank a bond's secondary market performance. And so far the strategy looks to be working. Bloomberg's credit reporter, Tashos Vosos, is here to explain why. There is a lot happening. basically supply has exploded and issuers have tried to reassure the market that supply is not going to overwhelm it and in the middle BlackRock's trying to manage that environment. It's exactly that.

28:54I mean we were here last month talking about how these bonds underperform in the secondary market because frankly speaking people are concerned. People are concerned that so much bonds are going to come into the market they won't be able to absorb that many and what banks are trying to do now. Obviously, you cannot take away the AI buildup. That's the future. The market has actually agreed with that. So that has to be financed somehow. But what the banks are trying to do is trying to take away the risks out of the market as much as they can. As you mentioned, fast money accounts, those who buy the bonds, sell them straight away for a quick profit.

29:27We've seen in previous months, they come to the market and the bond price tanks straight away. You have to take them out of the market. And then, of course, you have reassurance by companies saying, yes, we're going to raise$25 billion today, but

29:38Ed Ludlow:we won't come back until the end of the year, as we saw yesterday with Alphabet. Yeah, we covered Alphabet. You know, recently there have been several$25 billion bond deals, right? I think about Amazon, Nvidia, SpaceX. The main point is that there has been poor trading after that issuance, but the market still keeps going.

30:00Indeed. It keeps going, but the concerns are brewing a lot. So Barclays, the big British bank, reached out to 300 investors and they asked them, what do you believe is going to drive risk premiums across bonds of the hyperscalers? 60 % of them said supply cadence. What they meant by that is the pace of supply. Bring too many bonds and the market's going to go berserk. 25%, which is like a distant second was whether the AI investment is going to play out. So there are two major risks in the market right now that investors have to digest. One is whether the AI problem is going to keep, which is a bit of a longer term concern.

30:40The main concern right now as we speak is what people said, the supply and how you manage that. And this is what banks are trying to do, manage it better.

30:49Ed Ludlow:This is the story that everyone's been reading about this morning. Blueberg's Tassos Vossos, Thank you very much indeed. Back to tech earnings. Shares of Lyft higher. The company reported growing demand for premium rides. Also, strengthening European markets. Super interesting in kind of the global expansion story. Lyft CEO David Risher is with us. There is a very specific data point actually that I'd like to start on. And that is that in markets, specifically San Francisco, where you have Lyft rides and Waymo rides, you said San Francisco grew 20 % year on year. That's right. So explain the causal or casual relationship within that data point.

31:28Yeah. So, you know, our industry is going through a big transformation. And it is the sort of bringing on of these self-driving vehicles. Waymo, of course, is the market leader in that. Anytime you see a transformation like this, one or two things can happen. You can either see sort of a substitution or you can see a market expansion. And in this case, we're seeing a market expansion. And it's not that surprising. When people take self-driving cars, they tend to like them a lot. They're a very reliable product. They're a nice private product, so you feel like you could have a private conversation.

31:55But at the same time, it doesn't seem to take away from people's interest in being driven by humans who can help with luggage or have a good conversation. So it really is accretive.

32:03Ed Ludlow:This is a micro case study. It's one market, San Francisco. But the questions are, is Lyft gaining market share from Waymo in this city? Or is it that this is an issue of supply? So because somebody cannot get into a Waymo within a reasonable time frame, they go to the Lyft app. Yeah, yeah. Which is happening. Probably both, honestly. Probably both. So interesting. Yeah, and I think this is such an interesting thing that's going to play out. My expectation over time is what will dominate will be the market expansion. And again, the reason is sort of simple. You have a cool new product coming onto an existing platform.

32:36And what we believe the hybrid network, which is human-driven cars plus AVs, really kind of creates the best possible outcome for everyone. But we'll all have to see how that works.

32:45Ed Ludlow:I think that you and I have discussed on several occasions the idea that the introduction of the robotaxi and maturity of the market expands the overall TAM for ride hailing. Just recap that argument. I think that's exactly it. So, I mean, look, people take, just in the United States, about 160 billion rides a year in their private cars. Today, we deliver a billion. Maybe the other guys deliver two billion. So let's call that three billion. Out of 160 billion, and it's a good experience. You're sitting in the back seat. You're able to text. You're able to have your own space. What holds it back?

33:16Well, for whatever reason, some people might not want to be driven by another driver or someone else in the car. This takes that away. I'll tell you a very specific story. So I was just with an old friend of mine. I just ran and drew to the airport. Her son had a tragic, tragic accident a couple of years ago. Absolutely devastating physical accident. He's in rehabilitation. For him, the idea of getting in a self-driving car where the doors open wide, maybe there's not even a driver there. Not that there's anything wrong with that, but it just gives him more space to sort of be in his own zone.

33:42It's actually going to be something.

33:43Ed Ludlow:It's a technology and an engineering story, a design story. It's a design story, exactly. And so anyway, I'm very optimistic about this. And then when I look at our capabilities around fleet management and kind of matching supply and demand, I get really excited about the future. Lyft is, let's go back to the core business and earnings, but Lyft is pushing outside of the United States. You know, every time you've been on the show over the last year, there's been a development on that front. But what did we actually learn through your earnings about how you're growing ex-USA? So here's what's really cool.

34:13So Lyft was primarily a domestic company up until about a year ago, maybe call it 18 months ago. Then we started to expand in Canada. That's gone very well. Now we acquired a company called FreeNow and a couple of other smaller companies overseas. Okay, what's happened since then? We're in the process of transforming ourselves to a truly global company. Some of that is internal stuff, back of the house, multi-currency, GDPR, all these sorts of things. But we're also beginning to introduce new functionality to customers. So I was just in Barcelona a couple of weeks ago. I was very lucky to be there.

34:40I got a chance to check out on our beta app the ability to use the Lyft app, not a new app, but the Lyft app, to hail local supply, local taxi cab in Barcelona. I did it four times, worked flawlessly. So good, because I don't have to do a different app. I already know the user interface and so forth and so on. FreeNow, the company we acquired, they're also growing now too because of some of the innovation, the technology we've been able to add to their stack. So, look, our service levels are really good, and I love that about our product, and now we can take that to a more global audience and hopefully continue to grow as a result.

35:09Ed Ludlow:It could be Europe, Spain specifically, but how are those markets different to the United States? How does the consumer behave differently? You know, there are subtle differences. I mean, a very significant, I guess, difference, not subtle, is the role of the taxi cab in a lot of Europe is very significant. You know this. They're culturally entrenched in many economies in Europe, as an example. Very much so. And unlike maybe in a New York where people almost begrudgingly take a cab, for example, in a place like Spain and certainly London. You're going to have New Yorkers phoning into this program now.

35:38And I get that. And New Yorkers have opinions about their taxi caps, right? But in Spain, it tends to be almost a career. You get in the car and it's probably someone who's been doing it for many years. Maybe his father did it as well. Certainly in London, everyone knows the knowledge. I mean, it's an all sort of incredible thing. So that's a really significant difference. And for us, it favors us because FreeNow is strong in taxis. And the sort of double click there is because taxis tend to be quite regulated, the relationship that that company and our company has with governments tends to be quite strong, which, back to the AV question, really matters a lot.

36:12AV is new technology, and for a lot of governments, it feels maybe a little bit intimidating, and we can help there. So it's a really nice sort of set of circumstances that tends to sort of favor our business.

36:22Ed Ludlow:In markets outside of the United States, Uber is already there in some cases, Bolt, etc. How are you going to make Lyft different from a technology perspective or just a product perspective? Yeah. So stay tuned on this. This is actually a very, very live conversation we're having internally. I can use some of the examples of the U.S. maybe and give you a little sense. Please. So in the U.S., we've really redoubled our innovation. And you know some of these products, Women Plus Connect. I've just heard that we've given over 175 million rides between women and women in the U.S. over the last couple of years.

36:52Lift Teens, Lift Silver, this is real innovation. We're hoping to bring some of that innovation to the European space for sure. And then there's also a lot of conversation around, you know, let's say the reputation of those guys in Europe isn't necessarily super, people don't necessarily love the company. I'll just say it that way. And we hope we bring some joy to the conversation as well.

37:12Ed Ludlow:Internally, where is your biggest focus on the technology side? What are the types of people you're trying to bring in and things you're building, rebuilding, code migration, literally anything on the tech side? Yeah, for sure. So many interesting things. So I'll give you a couple of examples. Some of it's basic, some of it's more far-reaching. Here's the basic thing. We now pick people up on average, so 75 % of the time, we will pick you up either the same or faster than our big competitor. Okay, why is that kind of a big deal? Because our market share is smaller. So doing that reliably, 24 hours a day, 7 days a week, because people are busy.

37:45They want to get to where they are. That's an awesome accomplishment. I'm hugely proud of our Marketplace team for accomplishing that. And then bigger picture, I'm really excited about Lift Teen, one of our newest products that allows teens to get in and get constant messaging back to their parents to make sure the parents know that they're safe and sound. It's just a good... I look at this as almost a generational thing. A new car now costs like 800 bucks. No, it's going to be 800 bucks a month. 50 ,000 bucks. Yeah, on a lease basis, yeah. On a lease basis. Plus maintenance, plus gas, all these sorts of things.

38:12Lyft is just a better answer for a lot of people. And so I'm sort of excited when I look two, three, four, five years out at some of the kind of teen innovation now because I think that'll help change a whole generation.

38:23Ed Ludlow:Lyft CEO David Risher, thank you very much for coming in and thank you for being back on the show. Coming up, sports betting platform DraftKings is up next in the earnings conversation. DraftKings CEO and co-founder Jason Robbins is joining us. This is Bloomberg Tech.

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41:01Ed Ludlow:Okay, ending the week with more tech earnings. DraftKings reported disappointing second quarter earnings amidst growing competition from new prediction market players like Kaushie. But there's some momentum post-World Cup setting up a pretty strong back half. Stock up 7.5 % on track for its best day since June 26th. DraftKings CEO and co-founder Jason Robbins joins us. It's interesting, right? Initially, that was the reaction. Disappointment, second quarter earnings. There were favorable sports outcomes. There was promotional spending. And then this morning, everyone was like, actually, you know what?

41:35Ed Ludlow:The World Cup seems to have some tailwind with it. Well, I think that really what you're seeing is that after having a little time to digest and hear some of the context, people understand how strong a position DraftKings is in from a business perspective right now. Our core business is on track to do about a billion dollars in adjusted EBITDA this year. Just a few years ago, we were losing money in that business. Now it's a very strong cash flow generator for us. And we see really strong traction on predictions. Enormous growth over the last month or two. And the best time of year is about to come with the fall season and NFL and everything that that brings.

42:13Ed Ludlow:Okay, bear with me. but apparently people were betting on whether you would say Couchy on the earnings call. Prediction markets are a factor. Just react to that, Jason, please.

42:28Well, making trades on whether someone is going to say something on an earnings call probably isn't something that I think should be out there in my opinion. But nevertheless, I understand it is. I didn't know that, though. I didn't read it. I don't remember. I don't think I said that. Noted. No. Hopefully not too many people took the positive side of that one.

42:49Ed Ludlow:Jason, can you just explain the World Cup, how it manifested for DraftKings, the behavior of people that went to DraftKings during it, and whether there is some momentum carried out of it for the second half of this year? I mean, World Cup, on pretty much every metric that we look at, exceeded our expectations. We acquired more customers. That was both true of predictions but also true of our online sports betting business. We were way better than we expected from an acquisition standpoint. We ended up having much more efficient acquisition, too. Our CACs were 25 % lower than we expected. Total engagement was big.

43:28We had a really strong increase in MUPS as we published in our report. Also saw a really strong post-World Cup engagement, probably the most exciting thing to me because a lot of people are probably thinking us included this World Cup audience. Are they going to stick around or is it sort of come, you know, bet on the World Cup trade on the World Cup and done? Not at all the case. July, we actually saw a 20 % handle increase after the World Cup ended, which is an enormous number compared to where we were going into it. So you're absolutely right. I think a lot of momentum coming out of the World Cup, right going into our most important time of year.

44:02So it couldn't have been time better.

44:03Ed Ludlow:And Jason, very quickly, those were people that went to DraftKings maybe for the first time in the World Cup and then stayed? A lot of them were. A lot of them were people that had played previously and activated and continued to play afterwards. Remember, after NFL ends, sometimes a lot of customers go dormant. So these big moments are really great opportunities to get people to engage with the product again. And you never know if they're going to drop off or not. We see that sometimes or if they're going to continue. And at least for the World Cup audience, it seems like both the new customers and the ones who reactivated are all continuing to play through July.

44:37And I think coming into August and September when we have our most busy time of year, it's going to only continue.

44:43Ed Ludlow:Jason, in prediction markets, the field of players seem very focused on how they communicate with the under-21 category. What is DraftKings' policy and approach basically to marketing to that demographic quickly? Well, I think this is an important distinction between DraftKings and some of these other companies out there. We are not, as you see some of them doing marketing that you can pay your rent money and marketing to college campuses on fraternities and things like that. We are focusing on marketing to adults and positioning this as an entertainment product, which I think is the right way to do it.

45:21And, you know, listen, those are things that right now are getting a little bit of scrutiny. And I think eventually they'll get reined in. But that's not up to us. But I do think it's something that we feel like we are really, you know, as a longtime trusted brand that's been out there for a long time and plays the long game and really understands, you know, it's not as much as it might get you short term volumes. That's not what you want to be doing in marketing on college campuses and things like that.

45:48Ed Ludlow:DraftKings CEO Jason Robbins, thank you very much for your time on Bloomberg Tech. Coming up, TikTok tweaked its algorithm in 2021 to stop users from being overwhelmed with harmful content, but it didn't roll out the safer version to everyone. We'll have that story next. This is Bloomberg Tech.

46:13Ed Ludlow:A judge in New Mexico has ordered Meta to pay over$500 million and make changes to the way young people use its platforms. following a landmark child safety case. The fine, which will be paid to a fund to address damages, is in addition to a$375 million civil penalty from the case. Meta says it disagrees with the ruling and will appeal. Another story on the growing concerns about social media and mental health. In 2021, TikTok tweaked its algorithm to stop users from being overwhelmed with harmful content. But not every user got the update according to an internal document. To see if the change might reduce the app's stickiness, the company kept 10 % of users or about 15 million people on the old version.

47:03Ed Ludlow:That control group included 16-year-old Chase Naska. TikTok's algorithm pushed him thousands of videos about suicide, sadness and loneliness right up until he took his own life. This is a difficult story, but it's an important story that Bloomberg's Olivia Carville reported for Bloomberg Businessweek, and Olivia is with us now. Take us inside the reporting. I outlined the basics of the back story, but it is both a technology story on the algorithm side and a policy decision by the company. That's right, Ed. I mean, to understand the story, you have to understand the timeline. And it really begins back in February of 2022, when a 16-year-old boy named Chase Nasker died by suicide in Long Island.

47:51After that, his mum was trying to understand what had happened to Chase because he had no mental health issues. He'd never been diagnosed with depression. He had a big group of friends. He was an honours student at school, happy, friendly, bubbly, energetic. So she wanted to understand what had happened to Chase and she went searching for clues on social media. When she gained access to his TikTok account, she was shocked at what she saw, which was a nonstop stream of really sad videos, many of them encouraging suicide. So a year after Chase's death, I write a story for Businessweek about his account and what the algorithm was feeding him.

48:32And when I reached out to the company for comment, it resulted in this internal review that we're only just understanding now. This was an internal confidential document that outlines how the company essentially analysed Chase's watch history in extraordinary detail. What he saw in the weeks, days and hours leading up to his death. And it confirmed from the company's perspective that he fell into a filter bubble. This is like an online echo chamber of sad content. and it tells us why that happened, which is because TikTok was running an experiment on filter bubble prevention strategies and it withheld a safety feature from 15 million US users and Chase was included in that control group.

49:17Ed Ludlow:I find this difficult. Sorry, Olivia. Does still be explicit on TikTok's response insofar as, what is it they've changed in response to the report and officially what it is they gave you in response to the report? So within this review, the company's own employees talk about how the control group was too big. It shouldn't have been set at 10%. It should reduce the control group down to 1 % of users and reduce the length of time they would be exposed to this kind of non-stop content about problematic or harmful issues like extreme dieting or in Chase's case, suicide and depression. So they wanted to reduce not only the size of the control group, but also the length of exposure.

50:08So it went from half a year to a full year down to just seven days and from 10 % of users or 15 million people down to just 1 % of users. And they made that change right around when they understood what had happened to Chase's account and that is outlined in the document. In response to this story, the company did provide a written statement saying that they are deeply committed to the safety and well-being of users and their hearts break for any family that's experienced a tragic loss. They pointed to other safety features they've rolled out to try and protect teenagers.

50:41Ed Ludlow:Bloomberg's Olivia Carville. It is a must read, a difficult read in Bloomberg Businessweek. Thank you very much. That does it for this edition of Bloomberg Tech. Do not forget to check out the podcast recap all of the reporting and conversations we've had today, this Friday, but also throughout the week. From San Francisco, this is Bloomberg Tech.

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