00:03:41 · Gorkem Yurtseven, Molly O'Shea
[00:03:41] S1: The way we talk about it, AI really has like three product market fits. One of them is search and initial ChatGPT consumer product, and now Google and Gemini. The other really clear one that's growing really fast now is coding agents. And the third one is, we believe, generative media. And to put things in perspective when we talk about it, with coding agents an individual can go spend maybe $10,000 $20,000 a month on their cloud or OpenAI subscription. Generating media is the only other thing this exists. An individual, if this is your job, you work at an AI native studio or a real studio these days, you sit down in front of a computer and you generate videos all day and you spend 10,020 thousand dollars a month. This is the only other use case in AI that an individual can spend that much money. And search is so big that it gets a pass and there is no other use case or part of the industry that has this dynamic. It's just coding and generating media. And that's why you are seeing all this growth because more people are adapting it and individually they are spending so much money on it. [00:04:51] S0: I know this is kind of an elementary question, but did you like, were you surprised by how much money there is behind this?
00:04:58 · Gorkem Yurtseven
[00:04:58] S1: 100%. Were too. Like we thought like we were surprised all along the way. We were surprised how quickly we switched from image models to video models, where like now we make I would say 50% of our revenue from video models. And then after that transition we thought like video was gonna completely take over, right? It was zero and then it reached to around like 70% of our revenue. And then we thought image models are like done and it's like it's not enough compute. It's a simple problem and from now on it's all gonna be video. And then turns out image editing models brought life back to image models. And then it's also useful for video models as well because it you can create different frames and video models does such such better job interpolating between those frames. So image editing all of a sudden made image models come back and now like our revenue is $50.50. Even that was surprising, right? Like when we thought like a portion of our business was dying but it like made a huge comeback. But yeah, video models keep getting better. Currently what we can do, like the best video model maybe creates ten to twelve seconds of video. Like the new ones are gonna reach maybe like thirty seconds. But until you can generate like real time streaming very high definition video, this is gonna keep increasing. And as you increase the resolution, as you increase the duration, the cost increases exponentially because you have to have more attention during inference time and resolution increases the amount of pixels exponentially. So things are getting much more expensive. So now we have a framework to think about, okay, there's a lot more money to be made going forward because the video output we get is still like very rudimentary.
00:06:50 · Burkay Gür
[00:06:50] S2: There was also, like, a very interesting point sometime last year when Veo 2 came out. I think at the time, like, Kling was probably one of the best video models and there was also, like, Minimax. And the prices were, like, somewhat kind of going lower. I would say, like, they started at, let's say, 40¢ per five second video and then they sort of settled around there, maybe like 30¢ for a five second, like, clip. And then Veo 2 was, very surprisingly, it was like $5 per five second video. So it jumped like, you know, more than 10x. And we were like, Okay, like, who the heck is going to pay all this money, right? Like, this is just another five second video. Turns out, like, there is essentially infinite demand. So people started using that model and then even more expensive models came around and people started using those models. And what was really happening under the hood was we actually saw more and more professional use cases start happening for ads, like real people who are in marketing and ads and actually movie production, they started using these models because the quality went so much higher and there was just more demand that other models weren't able to actually capture. So, it's like the usage is going up and then the capabilities are going up and then everything's getting more expensive over time. So, essentially, yes, like people ended up spending so much more money. And in terms of progress, it's still happening. Like we're nowhere near, you know, with LLMs, I think people talk a lot about hitting a wall or like diminishing returns. I think in this side of the market, we're nowhere near actually hitting diminishing returns. I think there's just so much new stuff happening with CDAS V2 and V2.5. It's just like the quality is going up, prices are going up, and people still want to use all these models.
00:08:56 · Molly O'Shea, Gorkem Yurtseven, Burkay Gür
[00:08:56] S0: For sure. I mean, do you guys remember Sourcery? Yeah. [00:08:59] S1: Feels like it was a lifetime ago. No. [00:09:02] S0: I mean, that was a really cool moment, but clearly, too expensive. [00:09:06] S2: Yeah, it was too expensive. Like, in fact, we saw we also hosted Sourcery on our platform, and, like, we saw huge growth in the, like, last three months before they decided to, like, take it down. We were like, What's happening? Like, there's, like, infinite volume here, essentially. But, yeah, it turns out, you know, the rumor is like there wasn't enough compute for everything else. And it's also expensive to run. So, yeah. But I think it had a great future. Maybe it'll come back sometime. [00:09:35] S0: I mean, it's really interesting because earlier today we were down at AppLovin' and this will probably get released later than that, but I was talking to Adam, the CEO there, and Gio, their CTO, and we were kind of talking about how they've created their algorithms for all the ads and what works best, and the best ads are actually sixty seconds long, and I was like, Okay, well, are you thinking about using a Higgsfield or any of these other companies out there and offering that or acquiring any of these kinds of like generative ad platforms. Cause some of them just really, I mean, most of these cases are ads and like, it's just really not there yet. It's like the best they can do is like five seconds. So it's like not every brand can do In terms of where you guys came from and where it's going, advertising is going to be the biggest use case, you think?
00:10:22 · Gorkem Yurtseven
[00:10:22] S1: I like ads, like as a business, like internet runs on it. And also like the content these models are able to make is perfect for these UGC style ads because the content is usually throw away. If it doesn't work, make a new one, like it works great. But also, like, the quality, like the lighting, nothing has to be perfect. It needs to be almost looks... Needs to look homemade, so it's like easier to do. And, you know, the best ad may be sixty seconds, but you don't have to do a continuous sixty second generation. You can do fast small cuts, which works maybe better in certain cases. And then what you can do is you get a lot of data back, right? I don't think anyone is particularly doing a good job at it, but if because you can post these ads and see how people are interacting with it, you can have like continuously improving or you can do small changes to do what you are posting and just show more of the things that are performing well, and this can all happen automatically, right? So this is I think it works great with video models. No one has done it perfectly, but we would love to be part of this automated ad story. I think it's going to be a great business.
00:11:42 · Molly O'Shea, Gorkem Yurtseven, Burkay Gür
[00:11:42] S0: It was really funny. I was going to mention this in the interview, but then I realized it was probably kind of inappropriate, but example you just mentioned of reinforced learning models on themselves and just kind of optimizing over and over again. There was, and I don't know if you guys see this in your Instagram feed, but I do this because I make clips and I make like stuff for the internet. And they're like, one of the best hacks that I had was showing my armpits. Like, I got so many more views from showing my armpits. [00:12:12] S1: As the hook, right? [00:12:14] S0: Literally. Literally. It's like I got 10x views just from, like, having my arms up and like, and I [00:12:19] S2: was like, what [00:12:20] S0: the hell? Yeah. [00:12:24] S1: Imagine, like, you can have yourself in 100 different positions. Let's go. [00:12:28] S0: Yeah, I mean, that's like a thing. It's like, the thumbnail is always testing. I mean, for like YouTube, for us, it's like, you gotta test thumbnail, you gotta test the title, you gotta test like the copy, all of that kind of stuff because it works the algorithms differently.