Eric Seufert: ChatGPT's ad launch mirrors Netflix's slow start — the real question is how fast OpenAI can build a Meta-style ad stack

we have Eric Sufort from Heracles Media. He's been on the show before from Mobile Dev Memo. If you're not familiar, uh he got us absolutely fired up about advertising. We're huge fans of him. We're huge fans of advertising. And he's in the reream waiting room. So, we will bring him in to the TVP Ultra Dump. Eric Seford, how are you doing?

Good to see you.

How's it going, guys? Thanks for having me.

Hopping back on. Uh we've been following the chatbt ads roll out the story. You've had a ton of great analysis. We talked about it a little bit on the show, but we wanted to, you know, hear it from you and dive way deeper. So, maybe you could uh set the table for us on uh what the launch is looking like right now, what the product is looking like, what your expectations were. Just uh maybe begin at the beginning of this saga for the ads and chatbt.

Well, the saga begins where chat GPT begins. We all knew we were going to end up here. We all knew ads were coming. I mean, I wrote a piece May 2025. I said obviously chat GPT will monetize with ads. Why did I feel so confident in that? Because they had just hired Fiji Simo. She's kind of known for having led the uh the mobile newsfeed uh ads product of Facebook. That's obviously been one of the the most successful ads uh businesses in in the history of mankind. And so it seemed natural that that they would uh they would bring given the domain expertise they had acquired that they would bring ads to bear for ChatgPT. And they have. Now the launch looks like the launch of Netflix ads, right? And uh if it remains that way, it's probably doesn't bode well for the for the business. But I think they're going to evolve it over time. What they've said now or what's come out, the information has had a lot of good reporting on this. They're charging on a CPM basis, which is, you know, not standard for uh kind of direct response ads. That's more of like a brand advertising uh formulation, but so it's uh $60 CPM, which is exactly what Netflix came out of the gate charging. Y

um they're asking for commitments of less than a million dollar. So this is clearly like a testing uh phase and they're going to offer very little in the way of of measurement or or targeting. So this feels like a very sort of primitive uh MVP. But you know the question is like how quickly can they evolve it into something that looks more like the uh the Facebook ads platform.

So what do you think like what do you think got us to this place where you get Fiji Simo? She's done this before. She has massive connections and skill set, but it still takes, you know, 8 months to roll something out that feels not as mature as something else. Is it a talent issue? Are there other regulatory concerns or are do they do they need to worry about certain edge cases that people might not be aware of or is it specifically uh strategic to actually is there some secret reason why they're they're taking this approach?

So here's my hypothesis, right? So it's not just about, you know, Fiji Simo, she's the the the CEO of apps, but um they they acquired Statsig, which is, you know,

staffed by a lot of X Meta people that was an experimentation platform. That's the exact kind of talent that you'd want to ingest into a company if you're going to roll out an ad platform that needs to be aggressively experimented on.

Um here's here's what I think happened. I think um you know, ChatG so open AI kind of evolved over time. it was a research lab. Then, you know, obviously they've had the the drama around trying to pivot into a for-profit corporation. Um, my guess is the investors wanted them to bring in somebody that was a little bit more sensitive to um, you know, the commercial sensitivities, right? And so, you know, Fiji Simo would be a very good fit for that profile. Um, they brought her in and my sense was there probably was a little bit of animosity internally towards the idea of this being an ads uh, an ads driven business, right? primarily an ads driven business which which I think it ultimately will be

only only like two years ago Sam said I look at ads as like a failure state for

yeah and then he started pivoting the rhetoric and started saying well I like some of the Instagram ads when they're targeted well they're actually delightful and in the right context they can be good uh and he was coming around to the three of ours worldview which is that advertising is great uh but but he did have to message that externally and then obviously had a whole bunch of work to do messaging it internally and uh May maybe that's why there was a little bit less energy internally to to to really push towards that. Uh that makes a lot of sense.

Well, he may have been the one that was message. He may not have been the one controlling the message there. He may have been the one that was message too. We need ads because ads are inevitable. It's not that ads are great. Ads are inevitable. If you want to reach what I call humanity scale, ads are inevitable. If you want to monetize that at the at the at the at the scale it can be at its total potential, you need ads. That's how you do it, right? And so he may have been the one that was convinced. um and and you know bringing someone external in who had been there done that may have been part of an investor strategy but but putting aside my hypothesis look I think this has the potential to be an incredibly successful initiative the question is how quickly can they pivot into something that looks like the meta model right so if you look at it right now it's you know and and and I think look we to every everything you just said mirrors what happened at Netflix for years Netflix said we would never do ads ads ads are offensive they're an affront they're an to uh to to my sensibilities as a consumer That's um that's what the leadership said. And then one day they weren't right. And the exact same thing happened with OpenAI. The questions all don't forget all in. All in was anti ad. And and we we beg them.

We beg them.

We beg them.

And now

and I you know they made the decision independently of course but they're they're running ads now. They always

I mean I've been

I've been banging the drum for for since May 2025. Um but I think the question is is it six months? Is it 12 months? Is it 18 months to get something that looks like meta ads? Right. And that means uh targeting right based on behavioral profiles. Uh that means measurement. That means allowing that means explaining to advertisers the the the sort of impact of what that you've delivered on their behalf.

Um and that means like a whole lot of tech that needs to be built out, right? And that means you know creative optimization all these things just conversion optimized advertising is very different from what they're offering. And is it 6 months? Is it 12 months? Is it 18 months to get there? That's the big question, right? But that'll determine the success. And if if you say, "Look, this mirrors what Netflix did." Well, that's not really a playbook that you want to draw inspiration from, right? I mean, they had to pivot. They had to do a hard pivot. I mean, the the ads tier has been live for three years. They did 1.5 billion in 2025, right? So, uh, you know, it's it's not a significant chunk of the revenue yet. I think it could be a much larger chunk of the revenue, but Netflix has other concerns, right? They've got quality concerns. They've got, um, you know, consumer, uh, sentiment concerns that where they can't just like fully embrace ads. I don't think CatchBT is limited in that way.

Yeah. Yeah. Take me back to the that initial launch of Netflix. You said similar CPM, $60 per thousand views, but what uh what was the response like? Like like did were there any advertisers that were like, "Yes, this is great. I got my money's worth. It worked out." Was it just vague and un unattributable? Problem?

My perception is like great performance marketers are always excited to try new channels, especially a channel that's driving high intent traffic, right? So, if you tell a performance marketer, hey, I've got a billion users and I'm going to let you advertise to them, they're going to be excited no matter what the general setup is cuz they just want to get in there with a test budget and like you'll talk to marketers and at a certain scale they'll they're they're like, "Yeah, let's try 100k here. Let's try 100k there." It's just like you're just kind of throwing around money and then you're going to double down on on what really works,

right? For the initial roll out, this is how you launch an ads platform. Don't get me wrong, this is how you launch an ads platform. That's why I'm talking about 6 months versus 12 months. This is how you do it. This is how you bootstrap the data. This is how you get people on boarded. This is how you get feedback. You have to launch it like this. There's no other way. You can't launch a conversion optimized ads platform because by definition, you don't have any conversions data yet. Right now, that's that's another reason why I think they they launched instant checkout. I think instant checkout is a stalking horse. I think that's a method of of of gathering conversion data that they can use to then uh target against with ads. I think that was the whole purpose of that, right? I don't think that was seen as a a long-term revenue opportunity. I think that was seen as a way to bootstrap the data. But this is how you launch in an ads platform. I mean, it's got to evolve into a conversion optimized ads platform, but you can't be that at the start. You can't intuitit the settings. You can't intuitit the tuning that you need to implement to make this work. But but the question is how long does it take them to get there, right? And and so that that you know that we'll just see. But my sense is they've got the DNA. They you know the information reporter they have 700 ex Meta employees. Like essentially everyone at Meta is working on ads whether they're working uh you know as an account rep or they're working as an ML engineer. They're all sort of rowing in that direction.

Yeah. What was what's been your reaction to instant checkout? There's been a lot of debate on on the fee structure. Some people saying no retailer can afford this. We were pushing back on that in in a number of different cases. There's plenty of brands where you say like would you spend like 4% of AOV to to acquire a customer? I can also see the other side of it. A concern that I have is like, you know, you're running an ad on a meta platform to find a customer. The customer then goes to Chat GBT if that's where they're searching for products and then the the brand is effectively paying twice to like actually find the customer, drive them, get them interested, and then and then at the bottom of the funnel, they're paying like another 4% fee. That feels like not great. But what's been your reaction?

Yeah. So, I was in the former camp. I said that that's not a that's not a workable fee. Let me let me come back to that though because you asked a question about what happened when Netflix offered ads. They had too many advertisers sign up. They had too many they were demand they were supply constraint not demand constraint. They had to return money. I think that's exactly why OpenAI is saying no look we're setting an upper limit on this. A million is the max, right? Because they won't have enough people to advertise to. This is just a way to test it out and to start scaling it. Now the problem Netflix made was they never act. So the problem that Netflix had from day one was they had the partnership with with Microsoft with Xander. So they were using external tech to run the ads, right? Xander's an an ad platform. Um, and so that's the problem. They couldn't implement, you know, custom placements. They couldn't do a lot of measurement stuff. They couldn't do a lot of targeting stuff because they weren't operating the actual pipes, the actual plumbing that was delivering the ads. There's a lot of like data data issues, just access to data issues. That that's not what OpenAI is doing here. Open AAI is starting out by building their own tech. And Netflix, by the way, pivoted to that, but they pivoted to that very late. That's why I think the ads uh initiative at Netflix was not successful and and and you know, hasn't really delivered that much revenue. Going back to the 4% fee, first of all, here's what I think is going to happen. I think they're going to drop that to zero or very low. It'll be tiny because I think the whole point of this is to just drive conversions. And the whole thing is like when you see performance in Chat GPT as a retailer who's just basically uh paying for the conversions essentially with the fee, you're going to want to actually advertise against that. You're going to want to control it because you have no control if it's just surfaced based on what Chad GPT believes is relevant. And at some point, you're going to have too many retailers to place into a single placement. So, you're going to have to mediate that by bids, right? Ultimately, I think this gives way in in in the main. This gives way to advertising. But whether the 4% um is sustainable or not uh actually comes down to how you view what those purchases are because it's not user acquisition. You're not acquiring a user. If you were, then you'd compare that to LTV. But since it's not user acquisition, you're not acquiring that user as a sort of like with a long-term relationship in mind. you're essentially trading a percentage of the checkout for the checkout, but that user doesn't interface with you, right? And in a lot of in a lot of uh

so there's going to be no there's not going to be pass through to the underlying vendor. You're saying like of

No, I mean look, you're the merchant of record, right? And you get their information because you have to fulfill the order. But chat GPT or Open AI specifically says in the terms that you can't use your email address for like remarketing, right? And you know Amazon says this too. So, so the thing is you're not capturing a customer. You're just getting you're giving 4% for that one-off transaction, but you have no control over whether you reach that customer again, whether that customer is brought into your orbit. There's very that's a very different proposition from advertising to someone and acquiring a customer. You acquire that customer, you get a whole stream of opportunities to remarket to them. If you're just, you know, trading 4% for the transaction, that's all you get. So, it's not actually customer acquisition. And if you think about 4% per transaction, now consider that if if you thought about the the people talked about, you know, when that when that number came out, they talked about, well, some people spend, you know, 50% 60% on Facebook ads. Why is that different? Because that's over the life cycle of that customer, not for the

or even or even just or even one time they pay for the customer one time and then they come back, you know, 15 more times or they end up subscribing and they've actually they actually own the customer relationship. Yeah.

Exactly. Exactly. And and and and think, you know, think about it also this way. um you know that 4% that might be all the margin you're getting as an e-commerce you know as an e-commerce you know operator right and the thing is that's not preventing you from advertising that's not saying okay you just save your entire advertising but you're going to still have to advertise everywhere this is going to be a tiny sliver of your orders that you're not in control of you can't control it this could be lumpy this could be up one month down the next right you can't control that you're going to have to continue to advertise now you have no idea to your point whether this is cannibalizing uh purchases that would have happened from the people that you advertise on other platforms, right? So, this ends up just being a cost, a drag probably on your advertising expenditure elsewhere.

Can you explain attribution and the evolution of Netflix's ad product? Because if I'm sitting on my couch watching a movie and I see an ad and I go to my phone, it feels really disconnected. Even in a pre-att world, it feels extremely hard. How do they do attribution? How how good can this get? And then and then with chat GBT what what's the upper bound on attribution for open AAI given that we are in a postat world

upper bound is basically what you see with Facebook because it's going to be direct response it's going to be clickbased right with Netflix it's a little different so with CTV

the way that companies do measurement and attribution uh in CTV is is traditionally they set up what's called a clean room right so I set up this environment it's a centralized environment I push all the ad interaction data that I have so basically what I Oh, I showed an ad to someone. I push all the data into this clean room. A lot of times it's, you know, it's IP address and device uh information and then the advertiser pushes that information into the clean room and I match it up. That's attribution for CTV traditionally. Now, there's other ways to do it. There's other ways to do measurement. That's just totally probabilistic. This is like media mix modeling and stuff like that. Um, but with with attribution when you when you want to use that term, traditionally it's done with a clean room like that. So, I'm just like linking the data sets together based on some key. A lot of times it's the IP address. But if you think about clicks like clicks out, right? So that's like I'm viewing, I'm on second screen, I can look at time uh like there's time elements you look at temporal elements too to do attribution, but if I'm clicking out, I've got the click, right? I've got the click and so that carries a lot of information. I can still look at temporal aspects of that, but I can all I can do a lot with the IP address, too. And so that's, you know, if you look at a Cappy, that's what Cappy is. A Cappy is just a way to get this data on the back end. So it bypasses the apps, you know, it bypasses the mobile device, it bypasses the browser. So there's no way for, you know, Apple to interfere with that with ITP or ATP or AT. And so you're able to get, you know, it's still probabilistic in that way if if you consider, you know, the the decay of the validity of the IP address over time to induce probabilistic measurement, but that's traditionally how it's done and then a pixel as well. But I mean, that's what OpenAI has at its disposal. It's got the Cappy and the and the pixel because it's going to be clickbait. So So there's there's a there's a a high degree of fidelity that will come with the measurement there, the attribution. That's way higher than what you can do with CTV.

Uh, what are what do you think the prospects are for the number of companies that are trying to build LLM ad networks? I got pitched at least a few companies that were, you know, maybe a year or so ago saying like, "Hey, LM are going to be free. They're going to insert ads. We're going to build this kind of network to to serve ads across a bunch of different apps." I was super bearish on those specifically just because I thought that OpenAI would want to own the full stack. I I obviously Google would own the full stack and I and I think we're heading towards, you know, an oligopoly of sorts and in consumer AI and and uh where where's the scale really going to come from? But uh any any kind of takes on that front?

Well, there'll be a long tale of agents that are going to want to monetize with advertising. So, I think there might be space for an ad network to exist that services them. I don't know why that wouldn't be an existing ad network. Um I don't know why that wouldn't be or you know just sort of DSP like I don't want I don't I don't know why that wouldn't be the trade desk say um but but yeah I mean I think there's probably an opportunity to monetize some of those longtails of agents with uh with ads but if you think about it like a catchy of course they're going to build their own I would you know perplexity is apparently restarting its ads initiative. Um I I think these companies it's it would be silly to not build their own. You want to have that ad stack so you can make everything bespoke, right? And and and and maximally perform it, right? If we look at meta earnings, I mean, that's exactly what delivered that big beat. And and I think what people forget about the the prospects of of of the sort of like AI enablement with advertising in um in digital advertising is that these effects compound over time, especially when you're talking about direct response based ad platforms, right? So like with with Meta, I've been banging the drum since Q1 2025. These effects compound like people point to like oh 3.5% or 5% or whatever uh increasing clickthrough rates or increasing conversion rates from from Andromeda or from Gem or from Lattis who cares these are tiny. No, but they first of all that's every quarter they're they're noting these performance improvements but also they compound over time. If I'm targeting 90% a 90-day recoup on my ad investment and and you know 120day 110% rorowaz what am I doing after 120 days? I'm reinvesting the 110% in advertising on your channel. And so if you're giving me 3.5% 5% bumps every quarter, that's just going to end up getting reinvested. That's why we're seeing the growth reacelerate. Growth is reacelerating going into Q1 2026. That's amazing. That's why Facebook was up 10% last night because growth is reacelerating. They're going to see growth rates they haven't seen since the postAT doldrums. That's incredible. That's incredible growth. And anybody who doubted the capex going uh historically has to accept that reality now. And they did. They did yesterday.

Yeah.

Yeah. Yeah. What what uh people like the the criticism is like Zuck is being so ballsy with capex

specifically on genai

specifically and the criticism is like hasn't launched a hit Gen AI product yet. Our take earlier on the show was like look this guy is serving more Gen AI content than almost anyone on Earth. Even if he doesn't have like a breakout net new product, his product has massive tailwinds because of all this. like he's in a perfect position to decide, yeah, I'm going to I'm going to be, you know, one of the biggest spenders in this category and and plan, you know, however many years out in advance.

They're making more money on AI than anybody except for Google. Look, the the idea that they're not they're not utilizing generative AI. Have you seen the ads on Facebook? Those are all generative. There was a revolt. There was an advertiser revolt there. There was a scandal recently because Meta was being too aggressive with the ads generation there. The idea that they're not implementing generative AI is absurd. I mean, first of all, generative AI is not just what you see on in the output. I mean, they talked about pairing LLMs with ad ranking, that's really fascinating, cutting edge research in in advertising. Use an LLM to sort of give you feedback on the ad. Does this resonate? Is this something that someone would click on? Like, pretend you're this demographic. There's already research that shows that that has a a really beneficial impact on advertising. It's not just like what you see in your feed, but also the stuff that you see in your feed is generative. The idea that they're not utilizing generative AI and advertising, that's absurd. You can see it. Just go on Facebook right now. [laughter]

Makes a lot of sense. I I want to move on to other companies, but I want to have one more question about OpenAI. Do you think that there's any um any sort of risk to like push back of like the creepy ads like being too well targeted? Uh, Facebook went through that with like the t-shirts that said your name on them basically in like your whole career path.

Yeah. My my assumption is that eventually like you're only getting ads that were specifically generated for you. Like this idea of like historically you'd have, you know, one ad that a a brand would make and they'd run it at the Super Bowl. They're like, "We're going to send this to all of America." And then eventually with, you know, on platforms like Meta, I would assume that every ad is like a one-off generated and it knows it knows exactly how to position a product, what color, what environment to put it in. And it'll be insane that we used to have ads, we'd make one piece of creative and then run it to like 10 million people because it was like good. And it's like, no, this will all just niche, niche, niche, niche, niche down

uh more and more.

Yeah. What do you think? Look, I mean, it's like the idea that everyone would see the same feed when they opened up Facebook is absurd now, right? I mean, like, look, if if people truly hated creepy ads, fa Facebook user numbers wouldn't you know, monotonically increase every quarter, right? And uh you know, Europeans would be lining up to to buy the subscription in Europe when in fact only 1% of users in Europe has uh taken that offer, right? And is that an offer to eliminate is that like an adree like meta offer? Is that what you're talking about? Because I know they're talking. So they've got the the less personalized ads option in Europe as a result of the DMA compliance, right? So they have three options. They have the full-on subscription, no ads. They've got the less personalized ads and they got the normal experience. 1% of people opted into the subscription. Like people hate ads. Uh they just hate them less than every other monetization model, right? People love ads. And if you look at, you know, demonstrated behavior, it people love ads. People love access to free tools. People love access uh to to to to sort of like endless uh endless capacity, right? You start capacity constraining things or you start putting up pay walls, you know, obviously by definition those are going to get used less, right? Or you know, most likely by definition. And so the the thing is like the idea that like chat PT is going to run into this problem that's unique to chatbots. I just don't buy that. And first of all, maybe they will because maybe they'll design this the wrong way, but I give them the benefit of the doubt. I think they can do it in the right way. And one way to do it is to just not tether the ad at all to the chatbot context. You could just say, "Look, this is a display ad for what we know you're in market for based on Cappy, based on the pixel. It and we're going to make sure it has nothing to do with what you're talking to the chatbot about. So you never have to even question whether the chatbot has your best interest at heart." That's a very easy way to sidestep that problem. But I think they've got very skilled people there. They know exactly what that trap is and they're going to avoid it.

Yeah. Do you think we're going to get ads in Siri in the next 24 months?

No. Because of just because of Apple's uh because of the optics of Apple doing that, I think Apple would probably love to do that. I think there's probably people inside Apple that are pitching that, but they they won't because uh it's not in alignment with their optics around advertising. But but nonetheless,

Applereasing we were talking like I I think people will be normalized to ads and Apple products. They obviously are in the app store today. German was talking about ads in Apple Maps uh coming in the near future and then I think from that point if people are starting to use Siri as a search engine there will be ads eventually. It will just be too to to to be able to serve ads like basically natively in the UI to iPhone consumers will just be too tempting.

They got to do ads in the alarm clock app. I want to wake up to a different ad every day. Get out of bed and start buying.

Get online. It's time to check out. [laughter]

Yeah. Morning to night, you should be you should be consuming. Look, I don't know. May maybe I think maps podcast for sure. But the thing is like I wrote this piece when when Apple introduced AT. I said Apple robbed the mobs bank. I said, "Look, this is just an opportunity for them to uh to to shift some of the budget that's going to Meta into their own ads ecosystem." They did that because they expanded their Apple search ads. They just doubled the number of impressions per search. They've got two placements now in Apple search ads and they're also blurring the lines between ads and organic results there. Right? So the idea that Apple hates ads I think is mistaken. I think what Apple needs to do is they need to sort of walk this tight rope of appearing to hate ads while also benefiting from ads because they are such a you know an accreative uh sort of margin expansive way to make money, right? So maps for sure. I think podcast is another like prime uh piece of real estate for ads to be inserted into. I don't know about Siri that that feels like maybe a little bit too on the nose, but who knows?

What about uh Gemini? Did you What was your reaction to Demis talking about ads in Gemini?

That makes total sense because they're already monetizing Gemini with ads. They're doing it with AI overviews and AI mode. They're they're monetizing ads and AI overviews at par with search. Why would they rush to put ads in Gem in Gemini, the chatbot? Keep in mind, Gemini is two things. Gemini is the family of models and Gemini is the chatbot. Why monetize with with ads in in in Gemini the chatbot? You never need to. You could just drive adoption of that. They're already monetizing Gemini, the family of models through AI overviews and AI mode. AI overviews reaches two billion people a month. That's the biggest single uh LLM output uh ad surface that exists. They're already monetizing Gemini through there.

Yeah. And is that product uh just uh what's the shape of that product? Is that just the exact same as uh just branded keyword search on Google? Like what is there are there anything different or any learnings from the uh the ads in AI search overviews or AI powered search?

So AI mode is essentially the chatbot. AI overviews is the is the results that's basically takes up now the the whole above the fold on Google search. But it's better it's better than search. You know why? Because the whole point with search is I want this to be one shot. I want to type in my keyword and I want to get the best possible result in that first list of results. And if I don't, then I think your product is bad, right? And so Google is incentivized to make sure that there was one click and that's it. So you get one chance to show ads. With AI overviews, the whole point is to then prompt further queries, right? So you get a bunch of opportunities to show ads, right? So if that's monetizing at par at par, it's probably also driving impressions up. I think that's a much better ad surface area than traditional search.

Yeah. Uh, how should

startups, business owners be thinking about Tik Tok under new ownership?

Tik Tok is funny because they're going all in on commerce again. It seems like they had a really big, uh, kind of Black Friday, um, you know, whatever event, you know, uh, revenue pop, um, revenue spike. Um, but, you know, they seemingly had had were walking back the Tik Tok commerce opportunity. Now they seem to be, uh, leaning into it. I'm not quite sure what to expect there. I think, you know, Tik Tok, I think they were in a little bit of the stasis for a while just because of the uncertainty around what was going to happen with the uh with the spinout. Uh my sense is now that they have the certainty, they'll probably lean into where they feel like they're best positioned. And that might be commerce now that Meta has completely abandoned it. Um you know, and I but I think like I just don't think that that's the right approach. I don't think Western audiences really uh appreciate that as much as just the ads driven model and so you know, the pure play ads driven model. So we'll see if that ends up working for them. But yeah, I mean I think Tik Tok um you know it it if Meta can do what they did to Snap with Tik Tok, they're going to be in a pretty difficult position. Um and they may have to just adapt in ways that that Meta won't and that would be leaning into commerce more heavily.

Yeah.

Yeah. The the I always assumed maybe naively that they would lean out from commerce because it seemed like it was just a money pit. They were just lighting money on fire and the new owners would say like, "Okay, we just bought this. we have to pass back 50% of our revenue to bite dance. Like the the whole like economic model of the business seems like super upside down. Let's just serve ads and try to run the business lean and maintain the user base. Uh but leaning into commerce just feels like I don't know. I I there's so many brands that that I've heard about over the last 12 months that are scaling into the hundreds of millions of revenue and and it's almost all on Tik Tok shop and it just feels like that was you know basically subsidized by Bite Dance for a long time and will the new owners want to subsidize these brands that are driving real volume but ultimately I don't know if that they would be able to stand on their own two feet.

Yeah, I mean they did walk it back. I mean, they did two rounds of layoffs in the in the in the commerce division. Um, yeah. I mean, the thing about So, one thing you have to remember about Tik Tok and the and the the bite dance and the the whole like the parameters of this deal is that they're they're still licensing the algorithm, right? So, like I think that impacted the kind of the the valuation um and that that may impact some of these other economics. But yeah, I mean I I just I just feel like they maybe they they maybe sense that that's an area where Meta retreated and so that's where they could potentially flourish. But it was odd because they did walk that back and now they seem to be, you know, embracing it again.

Yeah. Uh what's your current thinking about the Netflix Warner Brothers deal? Um it's uh it it feels like we're in a lull. It's moving forward, but uh would be interested to see.

Yeah. I'm also interested just how how do you think about, you know, Paramount's prospects as an ad platform without all of that IP?

Yeah.

Yeah. Well, so it's it's interesting. So like the thing is like the IP is so so important, right? So like the one of the aspects that I I found really interesting about the the the Netflix uh deal was that they essentially valued WB games at zero, right? So WB Games makes remember their big hit games and makes their Game of Thrones game on mobile and they've got Mortal Kombat games and a lot of different console games, Batman Arkham. Um and at one point it was for sale in the multi-billions uh price range, right? And so Netflix essentially valued it at zero. Why? Because ultimately there would have to be like a IP licensing agreement that allowed them to continue to monetize those games, right? So I think the same is probably true on the IP side just generally with with WB. Um my sense is like what this indicates to me is like you and this was just I mean this was said explicitly in the earnings call. It's like you know we're going to pay for content one way or the other and like we need this high-end IP, right? And like, you know, if you look at I mean, everyone saw the the Joe Rogan clip with Matt Damon and um and and Ben Affleck talking about like Netflix makes us restate the plot of the movie like every couple minutes in dialogue because if people don't hear it explicitly, they just lose interest because they're on their phones. like you you wonder, okay, well, is that a result of like people's uh uh attentiona spans uh you know uh declining or is that just because the stuff you're pumping out isn't that interesting and people are not really paying attention um because they're kind of bored, right? And so I think maybe it's the latter. Um and so if you bring in a bunch of top-notch IP, maybe that keeps people more engaged and then hey, maybe that boosts the the ad CPMs or maybe you know ultimately boost subscription numbers. My sense is like they're going to pay for content one way or the other and like um you know maybe just buying a lot of it in bulk at once is the best way to do that.

What are you what else are you tracking this week across earnings? Uh you know Microsoft and and Tesla. I don't know if you follow those stories, but what what else is interesting you this this week?

Well, we got Apple.

Yeah.

Right now.

Yeah. [laughter] Um yeah, I mean uh I think like you know you had you had uh German on yesterday and um you know he's just always an amazing wealth of of leaks. It's pretty impressive that he's able to get those. Uh Apple's pretty button down.

Um but uh but yeah, I mean I think just the AI story there is is kind of embarrassing. Um, and you know, uh, like I wrote this piece a while back, Apple's besieged on all fronts. And I was talking about like, look, if you look at AI, if you look at some of the threats to AT, uh, there there's a lot of issues that that they face. Um I think you know one of the big questions for me when they announced the deal with Google to use Gemini for for you know uh Apple intelligence you know which among other use cases includes Siri um was how they would just manage the privacy aspects of that because they were so adamant right they talked about it the private cloud compute they were so adamant that when we do this we're doing it the Apple way we're doing it the privacycentric way um and then they do the privacy washing thing which is just then to partner with Google and allow them to do all the dirty work of sourcing the data right? Sourcing the data to train the model, right? or of just monetizing with ads like and they just get a cut on the back end and in this case Apple's paying but at some point but at some point Google will be paying for penetration into iOS and the exposure and I think you know that's just a question of like um is that really the reason is that part of the reason why they never invested here because they couldn't really do it in the Apple privacycentric way and if you want someone you know if if you understand that the dirty work of sourcing this data in ways that maybe are not completely above board or just monetizing with ads I mean Apple makes so much money from advertising and they just don't do it directly, right? They do it through the partnership with Google. Now, they're going to be making money through AI interactions, but they're not actually the ones training the models and sourcing the data in ways that could be questioned, right? So, I think that maybe plays a part in it. And I think maybe when you get to a point where all of this can be done on device, right? When the device is actually powerful enough to service most of these use cases, maybe you have smaller models, um you don't have like foundational models, but you have smaller models that can all run on device and maybe Apple will be more interested in that. But I mean like you have to look at the AI thing as either it was a massive whiff which seems to be what Gur's take was or it was just a sense of like look this is actually going to be really difficult for us to reconcile with our brand uh imagery and the sort of messaging that we've you know we've relied on for years and years like you know privacy that's Apple. Um maybe we'll just outsource this in the same way that we outsource search right and advertising to Google um until we're able to all process everything on device um and and ensure that we can maintain that that messaging. Yeah. Um I I mean my my take is like I agree with the whiff narrative, but uh also it does feel like there's the seeds of a rebuild between this new acquisition that they're doing. They're starting to open the pocketbook a little bit. The hardware really is best-in-class. We saw that with, you know, the Mac Mini boom to some degree. People are excited about the silicon, Apple silicon. And um and then and then just the partnership with Gemini like they're going to have access to something Frontier so they can start to vend it into different places but uh it's it's just on Apple's timelines which have been slow lately. So yeah.

Yeah. But the iPhone Air was the iPhone Air was a flop, right? I mean you know we'll see what happens with the foldable but like I mean I think they are facing you know the obviously the the replacement cycle is really long now. I think one thing that's like kind of under discussed is like I wrote this piece a while back like years ago um where I said you know what what are the implications of a billion iPhones and this is well before there were a billion iPhones in circulation and and my point was the implications are that a lot of those are in the developing world right they're they're secondhand thirdand uh iPhone devices and that's kind of like there's this strange dilemma that Apple faces like the more powerful the devices get uh obviously the the longer you can go without replacing them right because the demands of Spotify aren't changing the demands of Facebook and Instagram aren't changing from like a hardware perspective, right? And so the question is like how how how central can you make AI to the core use case um which is a lot more comput intensive if you do everything on device how central can you make that to instigate um a need to replace the device more frequently right not just like the because the power of the device at some point doesn't even matter like okay you tell me like the compute capacity of the next iPhone is 10x what I have now okay well are the demands of Spotify 10x because that's the that's the only app I and every day, right? And so that's kind of the question. And so it's like if all of that functionality can sort of like percolate down to like the iPhone 7, right? And no one really sees a a difference in in sort of like the the in sort of like lifestyle um between like the brand new iPhone and the iPhone 7 with they're only using Instagram and Spotify. How do you [clears throat] actually uh convince people to to upgrade on every cycle? Right? Because keep in mind like that that as that sort of install base that like you know iOS install base grows most of that's going to be through like secondhand.

Mhm. Yeah. Yeah.

Yeah. German uh it was interesting yesterday you shared that uh a lot of Apple's advantage on the hardware side in AI is because of the self-driving push the car that ultimately failed

allowed them to do the R&D that that is now being rolled out of devices. Uh Apple had a had a huge quarter uh beat uh beat uh estimates on the revenue side by uh 4 billion uh with China uh uh specifically uh and up after hours. The other news uh that's kind of interesting. I'd be curious before you leave, Eric. Chad GBT is retiring 40 as of today.

Yeah, that's interesting.

Putting putting it to bed. I'm sure that'll make a lot of people mad,

but it's simpler process for them. Yeah.

Well, yeah, but they also launched uh uh Go.

Yeah.

Right. Which is the sort of like lower price point um uh subscription tier. So, my sense is like, you know, if you're trying to push people to adopt that, which I think they are, you maybe have to get rid of some of like the the older models that the free tier relied on.

Well, thank you so much for taking the time to join. This was a blast. Uh

yeah, really enjoyed it, Eric. Come back on soon. We'll talk to you soon. Have a good one. Next time.

Goodbye. Cognition. They're the makers of Devon, the AI software engineer. Crush your