Benedict's Newsletter: No. 568

NO. 568 FREE EDITION TUE 26 NOV 2024

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My work

AI eats the world

Every year, I produce a big presentation exploring macro and strategic trends in the tech industry. For 2025, ‘AI eats the world’. LINK

News

The DoJ’s pitch to kneecap Google Search

This summer the DoJ won a case arguing that the $30bn Google pays to third parties each year (~$20bn to Apple) to make it the default search engine is illegal (and also that it abuses its dominance of search advertising to push up prices). Now comes the remedy stage, where everyone argues and bargains about what the court should do. This week the DoJ stated its opening position. Those payments (‘TAC’) are banned, the restrictive contracts with Android OEMs are banned, Google can’t invest in or buy any company doing anything that looks like search or that could become search (cf the Perplexity story below), and Google must sell Chrome and end any ‘self-preferencing’ (i.e. integration) of search or ‘AI’ features in Android.

These options were all pretty obviously on the table at the time of the verdict, but as I and everyone else pointed out then, it’s hard to see how they would actually change Google’s search share, and it’s also hard to see how some of them would work.

So, ‘sell Chrome’ sounds simple - but who buys it? There’s no path to revenue except selling the default search slot, but Google isn’t allowed to bid, which only leaves Microsoft… unless OpenAI, Perplexity and Anthropic want to play? If Google doesn’t own Chrome, what browser ships on Android? What happens to Chromebooks? And meanwhile the users can switch back to Google! Ending ‘self-preferencing’ is harder even to define - it’s one thing to say Google can’t kneecap competing apps, but every new feature on the phone will use AI, so does this mean Google can’t ship any new Android features that don’t have APIs for third parties? How does that intersect with privacy and security - must any third app have the same access to user data as the OS?

This is, of course, bargaining - the DoJ doesn’t expect to get all of this, and the appeals will last years. But rather as for Microsoft a generation ago, by that time all of this may be moot, as the market might have changed anyway: see the next two stories. LINK, GOOGLE

Perplexity does shopping search

Perplexity is emerging as a bet that a narrow focus on using LLMs to redefine search can win against the OpenAI (and Anthropic) approach of a model that does everything, including search (this may perhaps also be a bet against LLMs scaling indefinitely). That seems to come with an impressive shipping cadence, and this week it launched shopping search. How many jobs-to-be-done can be refined from ‘get me the right link’ to ‘get me the answer’? LINK, DEMO

OpenAI looks at browsers, and everything else

According to The Information, OpenAI is planning a pretty aggressive expansion of product scope: a web browser (would it bid for Chrome? It just hired one of its founding developers), integrated search, summarisation and recommendation tools for third-party publishers, a partnership for Samsung’s Android phones, and maybe more. Some of this is classic BD strategy powerpointing and platform-building (remember when it tried an app store?), but it also points to the more generalised shift from science project wondering where it might get money to for-profit company thinking about what it should be. So, what rows and columns would you put in your product development matrix? LINK, DEVELOPER

The week in AI

DeepSeek, a Chinese foundation model company, published a model that (on its own benchmarking) gets to some SOTA results. At this stage foundation models are in the ‘feed and speeds’ phase, a little like smartphones 10 years ago or PCs in the 90s - there are lots of different specs, benchmarks and metrics, and lots of argument about the best way to measure, but the big picture is that they all seem to be converging on the same point. Hence the scaling arguments - is pre-training slowing down, are we just waiting for the next generation of clusters, and will more iteration maintain the fundamental growth rates? LINK, API

Hence, Nvidia had another quarter of revenue growth heading up and to the right. For the semis analysts there’s a lot more nuance about quite what’s going on under the hood (transition from old to new platform, inventory management etc), but the takeaway for the rest of us is that demand remains well ahead of supply. The CEO, Jenson Huang, had some obviously bullish comments on the ‘is scaling hitting a wall?’ debate, but the the entire conference call is worth listening to for a sense of the ‘AI maximalist’ view of where all of this is going. LINK

Amazon invested another $4bn into Anthropic (much of which will be spent on AWS compute), as it scrambles to get back into the game and its own LLM projects aren’t good enough yet - see also the long feature story below on how Alexa ran into the sand. LINK

ChatGPT has a new online learning course aimed at getting teachers to use the product in the classroom. LINK

Software eats TV

Comcast confirms it’s spinning off some of the legacy cable channels. LINK

Conversely, as rumoured (and denied) earlier this year, the adtech platform Tradedesk is building a smart TV operating system. A TV now knows what you watch and where you are (at a minimum), so the ads can be targeted, and this is already around a quarter of US TV ads. LINK

About

What matters in tech? What’s going on, what might it mean, and what will happen next?

I’ve spent 20 years analysing mobile, media and technology, and worked in equity research, strategy, consulting and venture capital. I’m now an independent analyst. Mostly, that means trying to work out what questions to ask.

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Ideas

Meta, AWS, Azure and Google say they plan to spend about $220bn on cloud capex this year, up $90bn from last year, and that’s just the big four. This kind of thing produces a lot of second-order consequences in the capital markets, as people rush to finance data centre construction, energy hookups and everything else, and Wall Street is ready to wet its beak. But some of the quotes in this Bloomberg piece trigger a different kind of pattern-recognition: “One rival banker admits his firm is juggling so many data-center deals that it doesn’t have enough staff to cope with the workload.” We have seen that movie before and we know how it ends. LINK

The US National Academy of Sciences published a long report on possible economic consequences of LLMs. LINK

Long Bloomberg feature on how Alexa ran into the sand. As we all realised fairly quickly, voice assistants were a dead end - they were really just IVR phone trees in a box, and though Amazon sold hundreds of millions of those - at cost - that didn’t drive any other revenue. And then, LLMs changed the whole market, leaving Alexa (like Siri and Google Assistant) stranded. LINK

Interesting fireside chat with Sam Altman last month. LINK

Mike Darcey, former COO of Sky and CEO of News International, on the next wave of TV consolidation. LINK

RCS remains a mess. LINK

Internal emails documenting the breakup between Sam Altman, Elon Musk and the OpenAI founders. Spot the solo entrepreneur and the politician. LINK

Dennis ‘Foursquare’ Crowley’s new thing. LINK

Outside interests

Interesting podcast interview with Anthony Boulton. LINK

Leica just had its best year in its history. It’s interesting to compare how Leica and Bang & Olufsen have handled the disruption of their markets in the last decade. How does luxury consumer electronics work? LINK

The Kaleidoscope theme archive. Sometimes I miss macOS Classic. LINK

Data

Menlo Ventures did a good study on the state of Generative AI in the enterprise. LINK

Activate Consulting does a very useful annual deck on the impact of tech on media, with a lot of primary research and huge amount of data. LINK

And Atomico has released its annual State of European Tech. LINK

Ampere’s annual state of TV and connected TV. LINK

Some interesting data on the refurb smartphone market. LINK

Interesting data point from Brian Wieser on a potential ban on US pharma advertising: it's 10% of US ad spend and 20% of TV news. I wonder what Fox News thinks of that. LINK

The Verge saw Microsoft’s list of its top 10 Azure OpenAI customers - Adobe and Meta are both on the list. LINK

The GSMA estimates that there are now about 4.6bn people using mobile internet (versus something over 5bn who own a smartphone, and over 6bn with a mobile phone). LINK, COVERAGE

Lots of interesting data on the state of semis and AI in the investor days at ASML and Qualcomm. ASML, QUALCOMM

Preview from the Premium edition

AI eats the world

Almost every year since 2013, I’ve published a big presentation trying to make sense of the key issues in tech. To begin with, I was a mobile analyst, and the deck was about mobile and smartphones, which was the central issue in technology - we were going through a platform shift, from PCs and the desktop internet to smartphones, mobile internet, and apps, and with that, a change in what companies mattered and what questions we were trying to answer. Microsoft had failed at both the web and smartphones and become almost irrelevant. Lots of very serious people were arguing that Apple was repeating the mistakes of the 1980s and that ‘open’ Android would win. Oh yes, and HTML5 would make apps irrelevant anyway.

All of those questions are old and forgotten now, but generative AI takes us right back to the beginning, and the one thing we can agree on and understand is that it’s all very early, and we don’t know how any of this is going to work. For last year’s presentation, I laid out some fairly high-level questions - is this a platform shift, or something more than a platform shift, or perhaps even a path to AGI (no), and what would each of those mean? This year, we know a lot more, or rather, we have a lot more questions, and I tried to group that into three sets of questions - how much more this will scale, what this is useful for, and how we can use it to build products and companies.

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