00:30:04 · John Coogan
[00:30:04] S1: Just you know, a couple percent here, a couple percent here. Just very consistent growth, very consistent growth, very smooth growth curve into a monster of business. So, congrats to everyone over at Vanta on the new round. And we will go back to Google. So, more broadly, the way in which Google seems to have flipped the switch in terms of going all in on AI along with Meta's spending on AI talent really does strongly suggest that AI in the end is a sustaining technology that favors the incumbents most of all. Both see a line of sight to new revenue streams and critically, both can fund AI from profits, not speculative investment or debt. And of course, both have distribution including search. Sometimes the Empire Strikes Back. I love that. So there were other takes from from search. You'll have to subscribe to Stratechery to get the full analysis. You gotta go and subscribe to Stratechery. If you're not subscribed, what are you doing? But the interesting takeaway from from search is that there it seems like Google's being a little squishy about hey, we don't want to report certain KPIs anymore. So they used to report paid clicks, and now the chief business officer, Philip Schindler, is saying and and on your paid click question, look, to be very clear, I think we said this before, we manage the business to drive great outcomes for our users and attract attractive ROI for our advertisers. We don't We actually don't manage to pay clicks or CPC targets which is fair and good, but it's funny because Ben Thompson is like, but I want that data. That would be helpful to me.
00:31:35 · Jordi Hays, John Coogan
[00:31:35] S0: I mean, when a business has a metric that they tell you is important for a long time and then they suddenly tell you it's not important. [00:31:42] S1: Don't worry about it. [00:31:42] S0: You gotta But [00:31:43] S1: it does make sense. They're a huge business. They've moved on to to bigger and like higher levels of abstract. [00:31:48] S0: Just look at the growth in tokens. Yeah. Yeah. But Don't worry about anything else. [00:31:52] S1: What what he says is that there are there are product changes and policy changes that actually drive better monetization but at the expense of paid clicks and that's probably AI searches and stuff like that. You'll see in the 10 Q paid clicks were up 4% year on year, but a number of factors affecting this these metrics from quarter to quarter such as advertiser spending, product changes, policy changes, user engagement. So it's really important when it comes to pay clicks and CPC to avoid drawing overly broad conclusions solely based on these metrics. Don't put me in the truth zone on this, he says. So Ben Thompson, this is exactly what you said. I don't even think you pre read this but you basically have Ben Thompson working in your head because [00:32:32] S0: This is what I said when Ben Thompson came on the show. Was like, I think your way of thinking has been so ingrained into my mind Yep. That I I think that I have an original thought and you've already thought it.
00:32:32 · Jordi Hays, John Coogan
[00:32:32] S0: This is what I said when Ben Thompson came on the show. Was like, I think your way of thinking has been so ingrained into my mind Yep. That I I think that I have an original thought and you've already thought it. [00:32:42] S1: Okay. So this is what he says and it's literally I haven't read just the article. It says, the more that management tells me not to pay attention to paid click rates, the more I want to pay attention, which is exactly what you just said. Regardless, once again, the fact that paid clips, paid click pay clicks were up 4% and search revenue was up 12% makes it clear that search growth is primarily being driven by higher prices. And so the actual number of clicks is up 4%, but revenue is up 12. That means that they're monetizing each click better. But people are obviously gonna read into, oh, paid clicks aren't growing that fast. Like the actual pie isn't growing that fast. They're just getting like It's basically like, you know, once Instagram reels is is popular, everyone's watching it, then you just gotta put more ads in the feed. Right? And that's kind of that seems like what they're doing and that's what's driving search revenue up 12%. AI overviews is another question. This is a funny one where basically the the chief business officer Philip Schindler at Google says basically says that AI overviews are monetizing as well as other Google searches. And Ben Thompson says, given the fact that the vast majority of Google searches don't monetize at all because people just click on the link
00:33:59 · Jordi Hays, John Coogan
[00:33:59] S0: That's what I'm that's asking. Oftentimes the if you're searching for information that you can have very low purchase intent. Right? Like, how many times a day do I search for a specific fact? Yep. And never would have you could show me the best ad in the world, I wouldn't click through because I'm just looking for a fact. [00:34:17] S1: Yep. So if you're looking for something like, you know, Hulk Hogan's age, that's not a that's not a purchase intent. If that comes from an AI overview or it comes from a you know how they used to have those, like, knowledge boxes or, like, we would pull from Wikipedia. Or if you click on Wikipedia, none of that is making Google any money. So it really doesn't matter the UI or the actual underlying technology to get you that answer. And then Gemini is on absolute tear. Really remarkable. How how many monthly active users do you think the Gemini app has? These are MAUs, not DUs. [00:34:52] S0: On the mobile app? Web app? [00:34:54] S1: Gemini app. Combined? Yep. I think this is probably across mobile web and desktop but I would assume mobile. [00:35:01] S0: 520,000,000. [00:35:03] S1: Oof. Big. Right? And [00:35:05] S0: it And that's signed like, I guess I get I mean, they kind of get the it's kind of a they cheat code because everybody already has a Google account so they're like Yep. Signed in. Yep. But in in term I I don't know.
00:35:17 · John Coogan, Jordi Hays
[00:35:17] S1: They're monthly. And and what we know from semi analysis is that they're not taking share of queries that much. But 450,000,000 downloads on an app and monthly active users is pretty pretty high. And so Yeah. If there's if there's a world where Google can build a business around if they can bring in ads faster and keep the Gemini app cheaper and offer better better products and like you get deep research, you get agent, you get the $200 tier, the ad free if if OpenAI and ChatGPT has a $200 tier that's ad free and then Google's giving you the same product and the same experience but with ads for free. Like that feels like an Android IOS battle going on. That feels like something that could actually be pretty sustainable and kind of drive this like little bit of a duopoly. I don't know. We'll have to see how it goes. But daily requests grew over 50% from Q one to Q two. And I think everyone everyone is is pretty surprised by that. And I was also surprised when I went and pulled up the the Gemini app. When I went to go download it, the number of five star reviews is like hundreds of thousands. And I was like, okay. This is very serious. And that reflects the actual number that they shared, 450,000,000 monthly active users. So still a lot of work to be done. I was very frustrated when I went to go get v o three. I got the Gemini app and they were Are they [00:36:43] S0: already having it? [00:36:44] S1: But I couldn't access it. [00:36:46] S0: Is Gemini some frustrations default in in Android yet?
00:36:46 · Jordi Hays, John Coogan
[00:36:46] S0: Is Gemini some frustrations default in in Android yet? [00:36:50] S1: I don't know. I I imagine that it has to be preinstalled in the next round of Android phones that go out. Why would you not want that preinstalled in in there? But I don't I would be surprised if that's what's driving it because, I mean, how many Samsung Galaxies have they sold in the last quarter? Probably not 200,000,000, right? I doubt that that's what's driving the growth. But maybe that might be an interesting thing how many of them are pre installs, preloads. But even then you have to open it to become an MAU. But yeah, maybe maybe they're testing, maybe people will churn and go back [00:37:20] S0: to OpenAI and GPT. Android users have had access to Google assistant for a long time. Yep. That's getting phased out. [00:37:27] S1: Yep. It's just [00:37:27] S0: gonna be Gemini. [00:37:28] S1: Yep. Well, let me tell you about graphite. Dev code review for the age of AI. Graphite helps teams on GitHub ship higher quality software faster. You can get started for free at graphite.dev. [00:37:38] S0: I don't know if people can hear but anytime we do a an ad read, the entire team breaks out in applause in the studio. So it's really