Big Technology Podcast
00:14:08 · Alex Kantrowitz
[00:14:08] S0: Right. Yeah. I mean, the bet is basically that it it... Well, this is kind of like what we've been talking about in the past that Silicon Valley is making this all in bet... All in, literally, unlike an unproven new technology, which is, I guess, it's what they do. I mean, I guess I wrote a book called Always Day One, so I should be the one preaching this more than anyone. But to be relevant in tech is this constant cycle of reinvention where you cannot hold on to what got you to the dance for too long. Otherwise, there's going be a new dance and you're not going to be invited. And so what I think is happening across Google, Amazon, all these companies Meta for sure maybe not Microsoft, we'll get into that is that these companies believe so strongly that AI is going to change the interface that they have to be like. You're right, it's innovator's dilemma and rather than be a relic of time we're going to try to go for what's coming in. But in the near term, there are going to be rewards to those who aren't so good at it. Listen to this. This is an interesting reaction to the earnings from Steve Howe, an economist. He said, Interesting idea. Everyone assumes Google will win the AI race a complete 180 from a year ago. I don't know if it's everybody, but they have the number one model with Carbon, their new model they released this week, which is like number one on the benchmarks. And he writes, Yet winning AI may not be commercially good for Google as they haven't figured out how to target ads well within AI mode, while Meta is pulling away on ad revenue despite lagging on LLM. And then he drops this chart. And the chart is amazing because in 2024, the leader in ad revenue was Google. In 2028, the leader in ad revenue is Meta, like by a good margin. And Amazon has gone effectively from kind of a distant third into a company that's now challenging Google for two, although still somewhat behind. But this is interesting, the fact that Meta, which has struggled with LLMs and hasn't really made that big shift to change its entire experience to make it AI, it's pulling in the ad money, whereas Google, which is making this move, has fallen behind. What do you think?
00:16:21 · Ranjan Roy, Alex Kantrowitz
[00:16:21] S1: No, I think that's a really good point because if you think about it, Google's ad revenue, their golden egg, golden goose, Please don't call a golden egg. Think it's a golden egg. I think the goose lays the golden eggs. I don't think the goose is actually made, like, has a golden sheen to it. No. [00:16:42] S0: I'm gonna add to Google's Google's search queries right here, and I'm searching it. So [00:16:47] S1: Alright. So while you're searching, I think [00:16:49] S0: Oh, oh my god. Yep. The goose Ace. This is from AI AI Overviews, Ace was favorable. The goose and the golden egg, a classic story about a greedy farmer who kills his goose, which lays a single golden egg every day hoping to get all the gold at once only to find nothing. [00:17:04] S1: So you just both were proven wrong, and you provided no value to the external web ecosystem and received that information by some poor publisher that actually just put that information with their heart and soul out onto the web and it just got AI overbued. [00:17:23] S0: No, you're wrong. The story comes from read.gov. It's a government site, so I've actually just convicted them by brainwash the masses type of campaign for [00:17:33] S1: No, no, this is the future of the web. The only publishers that will be live are government. [00:17:38] S0: But that's bleak and that's possible. I mean, seriously, maybe that's what happens.
00:17:38 · Alex Kantrowitz, Ranjan Roy
[00:17:38] S0: But that's bleak and that's possible. I mean, seriously, maybe that's what happens. [00:17:43] S1: But so God. Oh my god. That's terrifying. But... Okay. So what's interesting is Google's ad model is dependent on this entire web ecosystem. It's dependent on websites exist. They pay Google to direct traffic to them by keywords, and that's been the model. Amazon and Facebook or Meta's with Facebook and Instagram have closed ecosystem advertising models. The advertising all lives within... And honestly, Amazon showed, like, how valuable that can be. Meta, their ads format is not going anywhere. It's only gonna get more and more valuable. People are still gonna scroll through Instagram and Facebook and see ads within there. So actually, more thinking about it, that open ecosystem of advertising is probably the most ready to be dis... Or is being disrupted already, whereas it puts Meta and Amazon in a much better position. [00:18:42] S0: Definitely. Golden Goose, by the way, is an Italian fashion brand. So [00:18:46] S1: Oh, yeah. Those are those shoe... Have you... You know the shoes. Right? [00:18:49] S0: No, don't have them, but I would say that my read of the situation makes me at least a little bit more hip than you, given that you went to the read.gov site. [00:18:59] S1: All right, you're thinking of the $500 pre scuffed shoes, but [00:19:05] S0: Yeah, Ranjan, get with the times, man.
00:19:05 · Alex Kantrowitz, Ranjan Roy
[00:19:05] S0: Yeah, Ranjan, get with the times, man. [00:19:08] S1: Days of golden eggs are over. It's only about Golden Goose sneakers right now. I think, so to me, wanna hear your take. The most interesting part of... I think this week was the moment that investors are recognizing these companies are betting on being a different business. We said they're disrupting themselves, but do you think that's what's happening? They are betting on being a data center compute provider business, which have unproven economics, which maybe they will win. They're very well positioned to win, but no one knows what they look like. And almost I have to imagine definitively, there's no way a compute provider business model has the same attractive economics as search advertising. Do you think that's what's happening?
00:20:00 · Alex Kantrowitz
[00:20:00] S0: Well, again, you take certainty versus uncertainty. And certainty is this search advertising business is working well. And uncertainty is your cloud business is going to power an uncertain AI takeoff. So that's sort of you factor in the risk and you make your decision. And then the other companies like Amazon was very interesting, by the way. So this is from the Wall Street Journal. Amazon stock drops on Wall Street missed despite biggest cloud growth in years. So you would think that if the investors... Well, you're right. Investors are seeing these companies go in this different direction and they're not buying in 100%, which is very interesting. Amazon.com reported its highest revenue growth for Amazon Web Services in years. That wasn't enough to quell investors' concerns about artificial intelligence. Amazon Web Services brought in $46,000,000,000 in revenue for the three months through September, accounting for 39% growth year over year. About the retail business. The retail business is and by the way, overall revenue increased 12% to $201,900,000,000 The retail business amazing because amazon.com was seen as like this and it really was a revolutionary invention for good or for better or worse. Is sort of a cornerstone of the early internet and today but it is changing in nature. Listen to this: Groceries and Amazon's everyday essentials accounted for half of units sold on its Risdale website in the quarter. Again, it's everyday essentials from Amazon and groceries half of the units sold on the retail site in the corner. So Amazon as the everything store is really... It's a little bit different now. What didn't you say?
00:21:52 · Ranjan Roy, Alex Kantrowitz
[00:21:52] S1: Well, overall unit, half of units, I feel is a bit misleading because if these are cheaper products that [00:21:58] S0: are So each cucumber counts as like [00:22:01] S1: yeah, When you do a Whole Foods order, they're gonna count it. But they wanna show growth there because that's like a habitual purchase. So I think that's what they're trying to show with that. That's like kind of a... Feels like a bit of a massage number to investors. But I just say, do you know what the crazy thing? My son, seven years old, he... Because he'll get toys on Amazon, people will send him gifts through Amazon. He... When he sees someone, a delivery person with an Amazon vest, he looks at them like Santa Claus. Or when he sees an Amazon truck on the highway, he's actually like, look Amazon truck. I got... No, no, I mean, gotta say Amazon, Andy Jassy, you guys have a foothold in the consumer of tomorrow where they're not looking at you as this like thin crushing mom and pop stores. They're looking at you as kinda Santa Claus at scale. So it's crazy to see his eyes pop up. [00:23:02] S0: Oh, yeah. I mean, I will say just this is a bit of a divergence, but the Amazon branding on their trucks is incredible. Every truck you see has this... It's not even the most clever phrase, but it just reminds you of the value to Amazon. They have the big footprint, they're using it for branding pretty effectively.