Marketecture: Get Smart. Fast.
00:27:02 · Eric Franchi
[00:27:02] S1: Alright. We are back. Man, we could have gone forever with, Chris. This is stuff that I think we we missed. We we we wanted to get to. But we had a lot of news this week. Let's see how much we can get into it. Let's start with earnings buzz. Two of the biggest companies in the world, Alphabet and Microsoft, reported last night. So I'll talk about it. You guys can react. So Google, Google's down today, by the way. Like, something like nine, 10%, the stock to it was a pretty rough quarter. So search grew 12%, contact $63,350,000,000. Just ridiculous numbers. But that's down 17% last quarter. YouTube ads grew 9% to $112,200,000,000, down 13% and under the analyst estimate. And the only kind of like bright spot, I don't think it was mentioned was the network was up 1% versus being down 1% the the last quarter. So, so not great growth from Google relative to what we saw last week with Meta. And they said something that was kinda odd. The the... They, I think, intended this to be taken very positively, which is queries are growing the fastest rate in five years. AI mode has passed 1,000,000,000 monthly users. These queries run about three times longer than traditional search, which means usage is growing, but like monetization is not, which I guess the street is taking as a real signal. It could just be the stuff is too is too, early. And, you know, Schimmler said, like, AI careers have lower monetization. On the bright side, tons of talk about AI, more AI talk than ad talk. A 100% year over year growth in cloud, Gemini Assistant, a billion users, fastest growing product in Google history. So let's... That was a lot. Let's talk about Google before we get into Microsoft.
00:28:43 · Ari Paparo, Eric Franchi
[00:28:43] S0: Yeah. I I think the... A little bit of the chicken coming home to roost here where, you know, I think I wrote an article about these exact metrics, like, more than a year ago, maybe eighteen months ago. And and there's basically, like, users use AI, and therefore, they monetize less. They go to other places, and they click less. And if you multiply all those things out, it doesn't look like the search business is infinitely sustainable the way it used to be. And it feels like this is the first quarter where we're seeing a little bit of that. Now on the positive side, you could have made the exact same argument when the iPhone came out, and people did. I think there's an old blog post of mine on aripaparo.com where I do that. And everyone was like, okay. Smaller screen, less clicks. You know, users are gonna have apps. They're not gonna click as much, blah blah blah. And Google just ran through that like a freight train. So I'm not saying the long term outlook for this company is bad. It's the most successful company in the history of humanity until anthropic maybe. But this is a real challenge to the search business. [00:29:51] S1: Chris, what you got?
00:29:51 · Eric Franchi, Chris Harihar
[00:29:51] S1: Chris, what you got? [00:29:52] S2: Yeah. I I think it's... I would not bet against Google. I mean, at the end of the day, they... I think they're they're essentially subsidizing all... Like, they're they're they're figuring it out, I think, on the... How to monetize some of the AI features and functionality that they're rolling out. I mean, like, they will take the time to understand how to better roll out, like, ad experiences across that... Across some of those capabilities and features. It just feels like, you know, they're... It's early days on how they're gonna monetize that and at some point they're gonna flip several switches and they're gonna be making like trillions of dollars. Like, feel like we're... Any any like, pullback on Google to me seems very, like, much, like, short term thinking. I mean, like, this is... When you see an an... Anthropic like s one and you understand that Google has so much data, so much opportunity to actually be a bigger player in the AI space just given how entrenched they are, it just seems like they will at some point absolutely crush it in terms of monetization on AI.
00:30:57 · Ari Paparo, Chris Harihar
[00:30:57] S0: I'll make two other points. One is that there's no evidence from any other company that there's a slowdown in advertising. So the macro picture does not appear to be slowing down. Although the YouTube number is only growing 9% is concerning. And then the second point I'll make is that the growth in cloud is just astounding. And I think Google as a public company is a much more attractive company if they have two legs of a stool in the hundreds of billions of dollars a year in revenue as opposed to, like, Meta that's 99% advertising. [00:31:28] S2: For sure. The YouTube members are kind of interesting to me just given how... Like, I I will say YouTube is an ad heavy experience. Mhmm. They are rolling out features every single day for creators, for advertisers. It feels like they've jammed a lot in there. And and I do wonder what's going on in terms of in terms of that slowdown. But YouTube seems... YouTube is is absolutely massive. You see the pressure that it's putting on a business like Netflix. And I feel like they have... They're still possibly scratching the surface on how to make more money off of YouTube and we'll, you know, we'll see. I think more premium programming is... You know, like there's gonna be more investment on that front. We'll see. But YouTube, it's kind of interesting just given what the experience looks like today.
00:31:28 · Chris Harihar, Ari Paparo
[00:31:28] S2: For sure. The YouTube members are kind of interesting to me just given how... Like, I I will say YouTube is an ad heavy experience. Mhmm. They are rolling out features every single day for creators, for advertisers. It feels like they've jammed a lot in there. And and I do wonder what's going on in terms of in terms of that slowdown. But YouTube seems... YouTube is is absolutely massive. You see the pressure that it's putting on a business like Netflix. And I feel like they have... They're still possibly scratching the surface on how to make more money off of YouTube and we'll, you know, we'll see. I think more premium programming is... You know, like there's gonna be more investment on that front. We'll see. But YouTube, it's kind of interesting just given what the experience looks like today. [00:32:11] S0: And now we don't have in the notes, the show notes, the... What I think is really big news, which is that Instagram's going to be doing long form content and coming to your TV. You know, this is something we talked about in our annual predictions episode, Eric. We were thinking YouTube... I mean, Meta was gonna get into... I was thinking Meta was gonna get into CTV as a... As an ad network. We knew they were doing something, but I I think they have a very viable opportunity to displace some YouTube viewership, with long form content, you know, broadcast on a... In an app on a TV.
00:32:11 · Ari Paparo, Eric Franchi, Chris Harihar
[00:32:11] S0: And now we don't have in the notes, the show notes, the... What I think is really big news, which is that Instagram's going to be doing long form content and coming to your TV. You know, this is something we talked about in our annual predictions episode, Eric. We were thinking YouTube... I mean, Meta was gonna get into... I was thinking Meta was gonna get into CTV as a... As an ad network. We knew they were doing something, but I I think they have a very viable opportunity to displace some YouTube viewership, with long form content, you know, broadcast on a... In an app on a TV. [00:32:45] S1: Absolutely. And we might give you that prediction by the way, because, you know, like, getting the consumer app and getting that at scale, like, is the way you build a a big CTV business. On the meta front before we get into the other stuff, Chris, are you a Muse guy? Yes or no? [00:32:59] S2: Love Muse. Muse is Muse is actually [00:33:02] S1: Interesting. In [00:33:03] S2: in in the time that I've like played with AI tools, ChatGPT was like, when I first wrote a press release for me or Claude, was like holy shit, like this actually worked. Muse is the other moment for me where I've I've... I was... I'm just blown away. I use Muse more than... Possibly more than any other AI platform right now on a daily basis. It it is mind boggling how much it can do and how good it is at... From a harness perspective in terms of understanding and remembering tasks on an ongoing basis. It's it's shocking to me how good it is.