The Twenty Minute VC (20VC): Venture Capital | Startup Funding | The Pitch
00:20:08 · Parag Agrawal, Harry Stebbings
So if we figure out how valuable pitch book data is for your agents to make your decisions, because Because, clearly, you're investing a large hundreds of millions of dollars. So, clearly, you presume that you make a great return on that. So this data is truly valuable if you depend on it today. So you should be able to figure out how to compensate PitchBook for the data even when agents use it, which is not by the seat. If we figure that out, it'll be a huge market and agents will be better off. If we don't figure it out, you're gonna be in this weird cat and mouse game. Off. PitchBook being like, no. I wanna sell you a seat. I'm gonna shut it off. And your agent is stuck without the data, and then, like, you're involved in, like, pulling data. [00:20:51] S1: I think every big company has the choice today of do we let agents in or do we keep them out? And Amazon has said, I'm sorry. In most recent times, Muse, you will not be let into our garden. Shopify has said, come in, baby. Expedia said, come in. How does this play out?
00:21:08 · Parag Agrawal
[00:21:08] S0: I think eventually, everyone has to let them in. The question is on what terms? So how do you align incentives for everyone? And people are gonna have to play their strategy games on how they win in this new world. Literally, the customer is changing in front of our eyes. Right? Like, the customer used to be a human. You're building products for humans. Now you're building products for agents. All you're building agents. And so now you have to figure out what your place in this new reality will be. I don't know if there's a right or wrong answer here. It also depends on sort of how much market power you have. Do you think Amazon were right to say no to Muse? Depends on what they do next with it. If it turns out that they have sufficient market power to have Muse or other agents connect to them differently perhaps over time or ship their own agent and drive crazy adoption. Let's say they have that capability, then I guess they were right. Right? On the other hand, once they've made this, they're not gonna allow anyone else's agent And they cannot ship an agent that consumers use, and they won't allow anyone else's agent to use them. And a lot of the transaction economy starts moving off of to agents, which are all big ifs, by the way, then it would be a bad move. Now I'm betting on agents. I have mixed feelings around agents and what fraction of ecommerce transactions they do. Like, it's unclear. Right? Like, it's...
00:22:26 · Harry Stebbings, Parag Agrawal
[00:22:26] S1: I... Do you think it's unclear? I think it's unwaveringly clear. Maybe I'm super early on the adoption curve, and I buy everything through instinct now. Other than holidays and a home Yep. I'm literally just everything through instinct. Mhmm. [00:22:39] S0: So so me too. But I also know a lot of people who like to buy things themselves. And, like, listen, we want to delegate to agents things which we see as chores and uninteresting and not delegate to agents things that give us joy or pleasure or make us have fun doing those things. And I know people who don't want to delegate shopping. They wanna delegate a lot of things in their life. They don't wanna delegate shopping. And so that's why I don't know the distribution of these people and how behavior changes, but it might be people give away a lot of other chores and then spend a lot [00:23:09] S1: of time shopping. One thing that does worry me is actually the dissolution of the advertising industry in the wake of agents. If I have... You know, if I order my delivery and my Uber, DoorDash for our dear American counterparts through Instinct, that Uber banner that's now advertising something becomes worthless. Amazon, their advertising business is bigger than their e com business now. Of course, they're shutting it off because if agent's the primary customer, your ads business goes to next to nothing. Correct.
00:23:09 · Harry Stebbings, Parag Agrawal
[00:23:09] S1: of time shopping. One thing that does worry me is actually the dissolution of the advertising industry in the wake of agents. If I have... You know, if I order my delivery and my Uber, DoorDash for our dear American counterparts through Instinct, that Uber banner that's now advertising something becomes worthless. Amazon, their advertising business is bigger than their e com business now. Of course, they're shutting it off because if agent's the primary customer, your ads business goes to next to nothing. Correct. [00:23:39] S0: And this is not just... You're talking about this in the e commerce line, right? But this is what I meant early on when I said like the business models have to change. Ads don't work with agents in their current form. Forgetting e commerce for a second, if you think of you're in the content business, let's say your page, which is ad supported public information on the web, ad supported page, people show up, you show them ads, you make money, great content. Agents show up, no one sees ads, you make no money, which is why we like to pay people. So we're effectively building an AdSense for agents showing up to read your content. So we like to pay content owners a variable amount of money every time an agent derives benefit from reading their information, which is a variable amount of money is what a visitor to your website will pay you based on a click probability or a value probability on ads. Why do you do that? To incentive align content owners. Otherwise, what's
00:23:39 · Parag Agrawal, Harry Stebbings
[00:23:39] S0: And this is not just... You're talking about this in the e commerce line, right? But this is what I meant early on when I said like the business models have to change. Ads don't work with agents in their current form. Forgetting e commerce for a second, if you think of you're in the content business, let's say your page, which is ad supported public information on the web, ad supported page, people show up, you show them ads, you make money, great content. Agents show up, no one sees ads, you make no money, which is why we like to pay people. So we're effectively building an AdSense for agents showing up to read your content. So we like to pay content owners a variable amount of money every time an agent derives benefit from reading their information, which is a variable amount of money is what a visitor to your website will pay you based on a click probability or a value probability on ads. Why do you do that? To incentive align content owners. Otherwise, what's [00:24:28] S1: gonna happen? Everyone's gonna block agents. So you you need to find a replacement to the ads business model. I get you, but you have to assume that you're gonna be, like, a 100% of the market then. Because if you're 30, 40% of the market and you're like, oh, don't worry. We'll pay you. And New York Times is still like, well, thanks, Parag, but 60% of my traffic is still unpaid. So I'm just gonna block all of
00:24:28 · Harry Stebbings, Parag Agrawal
[00:24:28] S1: gonna happen? Everyone's gonna block agents. So you you need to find a replacement to the ads business model. I get you, but you have to assume that you're gonna be, like, a 100% of the market then. Because if you're 30, 40% of the market and you're like, oh, don't worry. We'll pay you. And New York Times is still like, well, thanks, Parag, but 60% of my traffic is still unpaid. So I'm just gonna block all of [00:24:50] S0: you. No. But I think they're gonna block them and not me. They're gonna give me a data feed. What does incentive alignment mean? It means that New York Times believes that I pay them competitive market price or the right price or an attractive price or a fair price. If I do that, they should give me their content. And if somebody else doesn't give them that, and if they have the technical levers or legal levers, they shouldn't give it to them. Do you think [00:25:12] S1: this business is a little bit like music with streaming, which is like the business just becomes candidly much worse for the creators. And it still provides some money and significant money, but they have to get a little bit more creative with alternative streams, touring, merchandise, alternative business. Is it the same where your core goes down and you have to get more creative?