Wall Street to Silicon Valley: “Show Me the AI Money”
Earlier this year, we discussed how we were entering a new phase of AI mania in which more attention would be given to products and competition. The idea that a higher AI tide would lift all boats would become more nuanced. Wall Street, referring to a collection of different market participants, had given their OK to aggressive capex projections in exchange for this greater focus on product, and presumably, revenue and profit.
Due to ongoing questions on the product front combined with signs of some management teams possibly becoming intoxicated with AI mania, Wall Street appears far less willing to give Big Tech a financial pass.
In looking back over the past few months, we see that AI products have indeed received more attention. In addition, there has been a more serious discussion regarding competition. While there is evidence of text-based chatbots and generative media finding their way into the mass market, it’s been far short of transformational change.
Scattered AI-generated content like event fliers and fundraiser notices are appearing on social media feeds, pointing to growing casual usage of generative media models.
Many writing verticals have been infiltrated by AI assistants and text chatbots. It didn’t take long for education to fall victim to the creative writing killer.
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Ten Uncomfortable Truths in Tech
We will try something a little bit different this week: Ten uncomfortable truths that are currently found in tech. Each one of these can be turned into their own Inside Orchard essay, and that may very well happen in a few cases. But sometimes value is found in brevity.
The mass market doesn’t care about AI. It won’t come as a surprise that optimism surrounding all things AI is much higher in tech circles than with the general public, where concerns and skepticism remain elevated. Lofty AI-related projections and prognostications ignore how people care more about products than the sheer power found with LLMs. For most people not connected with tech, “AI” is increasingly associated with “Google AI says…,” referring to Google’s AI overviews. This is a big reason why AI mania will need to focus more on product (representing the next AI phase).
Chatty chatbots are a head fake. A byproduct of their shortcomings,
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The Next TikTokification Phase Is Here
One of the defining post-pandemic shifts in tech has been unfolding in the social media space. Seemingly overnight, tech giants including Meta and Google found themselves on the ropes, fighting a new kind of competitor: TikTok and algorithm-fueled video timelines. From my vantage point of analyzing quarterly earnings, we are already seeing the next phase of TikTok’s influence seeping through the industry, and the observations make me increasingly worried about where things are headed.
Beginning in late 2021 and coming to a head in early 2022, Big Tech’s layoffs caught many people off guard. Various theories were floating around as to what was going on. Some of the theories came across as being a bit out there – such as Apple ATT being blamed for single-handily bringing down the entire advertising complex and all of the businesses that depend on it to drive revenue. The subsequent rebound (and we are talking in some cases strong rebound) in the advertising giants’ performance puts a fork in that questionable theory.
Instead, macro unknowns and TikTok hit Big Tech’s digital advertising revenue so quickly that management teams had no choice but to cut payroll ASAP.
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Receive Exclusive Essays. The cornerstone of an Inside Orchard subscription is access to Neil’s weekly essays on the latest developments in the technology industry. Weekly essays are ~1,000 words and sent via email. Essays revolve around the following topics: technology industry analysis, business model analysis, technology’s impact on societal and consumer trends. Create a free profile to read a few sample essays.
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