00:11:11 · Jordi Hays, John Coogan
[00:11:11] S0: Well, Elon is playing the enemy of my enemy is my friend. [00:11:16] S1: It's like, I I love these guys. Yeah. [00:11:18] S0: Love to see it. [00:11:19] S1: It's not a it's not a knockout drag out fight. So, let's go over to Oh, this is interesting. So Michael Nathanson of MoffettNathanson, who's been on Stratechery a few times in the Wall Street Journal was quoted, what people worry about is just the math around search. Isn't AI going to be negative to search? And they went out of the way many times on the call to say, that's not what we're seeing. And so there's this big question on can can Google avoid disruption by integrating the new disruptive technology, artificial intelligence in a way that doesn't destroy their core business which is search ads. They're putting up 80,000,000,000 [00:12:01] S0: in revenue a year on it. My personal feeling is that Chrome specifically is just so unbelievably sticky. Yeah. As long as it takes the average person to to, you know, hitting hitting two buttons to get to the point where they can do any type of search, Google will continue to dominate. Because right now I can hit command t Yep. Search something quickly. Yes. I'm sure I could update the default like search Yep. To something else, but I haven't. [00:12:33] S1: There was [00:12:33] S0: a And I love the model. [00:12:34] S1: There was a time when I bounced around. I remember having Opera installed and Firefox installed for a while. And then for the last decade, it's just been
00:12:34 · John Coogan, Jordi Hays
[00:12:34] S1: There was a time when I bounced around. I remember having Opera installed and Firefox installed for a while. And then for the last decade, it's just been [00:12:41] S0: I used to love there was a moment, like, probably five years ago that I was loving Safari. It was just so snappy and fast and simple. [00:12:48] S1: I believe it's also built on Chromium. But, yes. Course. But it's not a Google product, so they so they could in theory reroute reroute No. [00:12:57] S0: Safari is not built [00:12:58] S1: Oh, it's not? [00:12:58] S0: On Chromium. Interesting. Uses Apple's own web kit
00:12:58 · Jordi Hays, John Coogan, Alex Hawkinson
[00:12:58] S0: On Chromium. Interesting. Uses Apple's own web kit [00:13:01] S1: rendering Okay. Do I do like so it's weird. I use I use Safari on my phone and Chrome on my desktop, which feels like it totally breaks the continuity. Right? But I've just I've just kinda stuck with that and it's been fine and I don't have like tabs that float in between. They're kinda separate, but it's fine. Really quickly, this show is brought to you by Restream. One stream, 30 destinations, multistream, and reach your audience wherever they are. We love Restream. You can sign up for free. So let's go over to, Ben Thompson talking about Google earnings. He has said, I've repeatedly laid out the theoretical case for why AI is potentially disruptive to Google, and we asked him about this when he came on the show. My question was, like, is there a world where where revenue and profit from from generative AI products is actually not as counter positioned against Google in the sense that, like, if they had launched the Gemini app first and become the ChatGPT, they'd probably be seeing a drop in search volume, but then also seeing revenue spike from an even more popular Gemini that's monetizing even better. And and was it a question of them just, like, not being able to take that pill, or or was it more about, like, the risk in PR nervousness than [00:14:16] S2: The thing that Ben
00:14:16 · Alex Hawkinson, Jordi Hays, John Coogan
[00:14:16] S2: The thing that Ben [00:14:17] S0: said that stood out That stood out to most, the most to me, and I'll probably butcher it a little bit. But he effectively was saying like, it's really hard for companies to change who they are. Yeah. When you look at Google's mission statement to organize information and make it universally accessible and useful, that is so deeply aligned with AI. Yep. It's like what does ChatGPT do? Like organizes information and makes it useful. Right? Agents like ChatGPT agent is making that information useful. [00:14:46] S1: Yep. [00:14:48] S0: And so it just feels like, again, like generative AI is, like, deeply aligned with the core mission. And so it's easy to see, you know, them continuing to win here. [00:14:56] S1: Yeah. I I I think the the problem is is, like, the like, disruption comes when you create a product that is not as good, but the financials are structurally different. So the idea of, like, if AI disrupts, like, a law firm, you look at this product or even, like, I don't know. What what what's the classic example of of of disruption that people go through? I don't know. But, like, this idea of [00:15:27] S0: like Yeah. The big thing was Innovator's Dilemma.
00:15:29 · John Coogan
[00:15:29] S1: Yeah. In Innovator's Dilemma, the example is like a new product comes to market that does something 90% as well. And and so it's like unacceptable to the people that are buying the current product. But then over time, it gets better and better and better until it replaces the current product. And so there is a world where if they had just changed the the Google search bar to just be like, this is just an LLM now, people would have been really, really disappointed with that shift, and they would have been like, I want to go back. And ripping that Band Aid off to the tune of, what, $300,000,000,000 a year in in search revenue would be really painful. So they had to take a more a more iterative, like, stepwise improvements, but it seems like they're doing well. And Ben Thompson is kind of echoing this. He says, Once again and however, I have to come to Google's defense. All available metrics suggest that the company is doing quite well. Indeed, I would go further. You can make the case that the company's biggest mistake is not going harder. And so, they flip infrastructure spending is through the roof, as we mentioned. So in in after the q four twenty twenty four earnings and their announcement that they were spending 75,000,000,000 on CapEx, then Google Google Cloud's revenue numbers disappointed, but this was because they didn't have enough GPUs and they were actually constrained. So they they missed on top line. Like, didn't bring in enough revenue, but their margins actually improved. And so what that means is that there was so much demand that they had pricing power. And they could say, no, we're not giving you any discounts because everyone wants these GPUs right now or the TPUs. They want our infrastructure. So we don't need to we don't need to sell them at a discount. And so their margins were really good and what that revealed was that they were they were capacity constrained and that justifies the bigger CapEx spend that they're going into right now.
00:17:22 · Jordi Hays, John Coogan
[00:17:22] S0: And Google is still the poly market which company has the best AI model end of twenty twenty five. So December 31, there's been one and a half million of volume and Google is still sitting comfortably at 46% chance of being at the top of LM Arena at the end of the year. [00:17:42] S1: Yeah. This is this is such a crazy supply constraints metric. So the Google CFO Anat Ashkenazi said on the earnings call, in cloud as I mentioned, the demand for our products is high as evidenced by the continued revenue growth and the cloud backlog, guess how big their cloud backlog is? Just the demand for for Google Cloud products that they can't fulfill because they haven't built the data centers. Like, but if they had more capacity, they think that they could deliver this. A $106,000,000,000. That's so much money. [00:18:13] S0: Great. Honestly It's so much businesses should try to put themselves in the position [00:18:18] S1: Yes. When they [00:18:18] S0: have the It's a little billion of demand that they can't. [00:18:22] S1: 106 106,000,000,000. [00:18:24] S0: We try to not give business advice because it's so Yeah. It's fraud. Well, it's just it's just like every business is different. Every every founder's different. Yeah. But in general Yeah. If you can develop a a a demand [00:18:36] S1: It's a good call for like a YC company. Like, you go on stage at demo day and you say like, yeah. We have LOIs and we have some demand backlog.