From Mahard where Innovation, money and power. Collie in Silicon Vallet NBN. This is Bloomberg Technology with Caroline Hyde and Ed Ludlove.
I'm Caroline Heinder Bloomberg's World. I Callders in New York. Ed Ludlow He's back tomorrow. This is Bloomberg Technology coming up. Full earnings coverage ahead from Google to Microsoft a snap, we have got you covered. Plus we'll take a deep dive into the current state of social media as Elon Muskun veils his grand vision to turn Twitter into x into a one stop shop for financial services. Plus we'll stick with social media and push your head to Meta's
earnings out after the bell today. How have those cost cutting initiatives impacted the bottom line? We'll discuss it all first. Alphabet, Microsoft, some key movers on the benchmarks today. Dive into each micro picture and please to say that Daniel Newman of the Future and Group is here with our CEO and Dania's always great to have some time with you. And let's dig into Alphabet first, because it was a good set of numbers. Is this a relief rally or is
this actually signs of progress? And really AI is starting to work in their favor.
Well, I think there was a lot of concern when Microsoft first hit with chat, GPT open AI being is this going to start taking market share away from where Google makes its money and so Cloud, you know, was starting to make a little money and all of a sudden people are like, ooh, Cloud's starting to make money, but his search.
All of a sudden getting get hit.
I think we saw with what they were able to do with deep mind and brain getting their palm model, getting you know, uh, you know, the search generative search into market Caroline that effectively they're going to be stable. And now you can see what happens today is people are looking at Microsoft and saying, was the first move truly giving them an advantage?
Yeah? Interesting. I mean we understand there's reports even that Segei Brin's come back into the fold much more, helping drive the AI focus for over at Alphabet, But talk to us about market share, particularly around cloud, because it feels as though azure is the area that everyone's slightly worried about. With Microsoft that ramp up the double digits rule got so used to just cooling down a little bit. Is Alphabet taking any of that.
Well, they're taking a little bit because you saw they had about a twenty eight percent growth this quarter. Microsoft was just a little bit less than that, and anytime that Google outpaces Microsoft, it means small bits of micro market share. Now, having said that, there's a lot of large numbers, Azure did reveal some of its size, said about one hundred and ten billion in cloud, about half of that being Azure I believe were the numbers they put out, So they finally revealed a little bit of
what their cloud market looks like. I mean, Google's you know, sub ten tennich billion dollars this quarter in revenue for the cloud business, so it's still a bit smaller.
And so you know, remember when AWUS was growing. They're up to eighty.
Billion dollars in revenue at plus annually. These differences are hard to make up, so when you're young and you're growing fast care line. Having said that, I think Googles has some momentum. I think their AI play is really starting to pay off. So they came in late. But people are saying, well, you didn't have to be early in this case, because we're seeing how quick things are.
Catching up and whether they were technically late or whether they were just being more cautious about a rollout, realizing the power that they ultimately have in the in the community, their size, their scale. I'm interested in AI more broadly. It's interesting here in New York today. I think AWS is showing off its AI prowess. How much is AI going to drive cloud ad option more broadly, Well.
It's going to be significant across the board. We saw Azure and then Microsoft with Dynamics three sixty five rollout, some pricing companies like SAP, companies like Salesforce, they're all saying, you want our best AI features, You're going to have to use our services in the cloud. And so different companies like in SAP, you don't have a hyperscale cloud, so you have to use an Azure, or you have to use an AWS Salesforce. You have to use their
service to get the best AI options. And we're seeing the market. You know, we've done some recent market forecasting Carolina. We see this market growing by about threefold over the next five years.
What exact market we're talking cloud adoption market head.
We're seeing the AI market.
So we see about a sixty billion dollar market right now. Our future and forecast for five years out twenty twenty seven shows almost one hundred and eighty billion. This is in hardware, platforms software, So this is you know, a twenty two percent or so growth rate, which is big, but for how much AI.
I actually think it's going to be quite a bit bigger.
And I think some of this forecast is there's still a bit of conservatism. I think people are a little bit past the hype. Are they using the services? You know, I was using barred like crazy, I was using GPT and I found myself carrying over the last you know, a couple of weeks to month, almost like I'm not using them quite as much, so has a luster worn off?
Or now we're starting to see it applied into tools, and that's where it's going to really start to pay off in our CRM, in our search when we're actually using these things for business and enterprise purposes.
Dan, can you when you're looking at modeling that out for the next five years, what are you using as price points? And we're only starting to see what a Microsoft would charge if you're going to adopt some of their overall being AI within the enterprise thirty bucks a month. Additional, how are you seeing companies charge for this, and how do you forecast that forward?
Well, so here's the thing.
The MODELINGUE is incredibly complicated because you have the modeling of things like hardware, where we have quite a bit of clarity whether it's an Nvidia, Intel AWS selling infrastructure. And then you have software. We have companies that are kind of saying, hey, we're going to give this away.
You know, we're going to.
Just include this because it's how we protect our moat. And then you had Salesforce that showed a really rich pricing and said we have a ton of features across service marketing, sales Cloud, and you're going to pay a lot, but it's going to be very, very feature rich, and it's going to be incremental. I think where Microsoft has a good play here is that they're going to be able to put all these copilots into every part of
their business. And they charged twenty thirty, but remember they have hundreds of millions of users, so even small incremental gains across their product portfolio are going to drive it north. So I think the reaction today, I mean if I was an investor and I was looking at the reaction today, I would say it's a little bit of an overreaction. But look at how which these companies have run and you know, we're resetting. We're saying this AI thing was a lot of hype. It's not only hype. It is
going to be real. But in the long run, the way this rebalances companies incremental revenue is going to take a little more time to play out.
And when you looked at that five year forecast, when you're thinking of what was it one hundred and eighty billion being added? Does that vindicate the sort of valuation increases that we have seen so far, or do you think they've got ahead of themselves.
I think the market is early, but it's very indicative of where we're going. You can't possibly see tools like supply chain management tools HR and hiring tools and see how AI could help us get to the right candidate, you know, streamline getting product into market. Everything here is about productivity gains. And when you think about productivity gains, you think about earnings increases, and you think about what the market is driven by. It's driven by can a
company make more money in the future. All these tech companies have big bets on AI and we're seeing kind of the winners get separated. The companies that are going to lag in industries like real estate and oil and gas, that's what we're seeing from an AIU standpoint, are going to be the ones that are going to be harder
to invest in. So in every field, what investors need to really be looking for is which companies are going to see these incremental and then exponential gains because they're going to be able to put AI to use.
And is it from Microsoft, from Alphabet, from Amazon that those sectors adopt from or is it more bespoke focused AI tools. So we're actually seeing more fun and in the venture space right now.
Well, I think it's going to be partnerships.
So I think you've seen Jensen Wong of Nvidia out announcing partnerships with pretty much every tech company. You see him out in healthcare, you see him talking with financials, and then of course he's partnering with Hyperscale.
Cloud providers, SaaS providers.
You know him and Bill McDermott, we're on stage together at the Service Now event.
I think there's a lot of collaboration.
I do think vertical specific AI turnline is going to be tremendously opportunistic because knowing real estate.
Knowing retail, you're going to have to build solutions.
There's too many options, too much optionality of how to build an AI solution. People are going to want it in a box, just like we wanted CRM or HR management solutions. They're not going to want to try to build it from scratch, and we've seen that change in just a couple of months.
Dan, great to get some mos of tees. Thank you running on over here in a very hot New York. Damn newman of the future and group. Great to have him on site. Mean, while coming up, look Snap plunging after its sales forecast disappoints. We're going to have much more next with jument Emburg of Insider Intelligence. Plus, I mean, we've got to talk more broadly about the social media space,
the giant that is Meta reporting earnings after the bell today. Yes, there's been the hype about threads, but what about the reality of their financial discipline, what about the clampdown on costs? This is Bloomberg Technology. Let's talk product now. Samsung unveiling it fifth generation of foldable smartphones today, seeking to counter a sluggish market for devices and outcoming rival products coming from Apple. Some Sung's executive vice president and head of
Customer Experience Officer Mobile Experience Business. It's quite a long titled. As Patrick Truman, he's work exclusively Bluemang News in Seul. Just take a listen.
Before these designed for productivities, we enlarge the ecosystem with a range of new application developers in the productivity domain. And the multitasking has improved with the taskbar, and that is because we have this incredible performance and AI capability with the new processor.
Some Song has this open collaboration environment where like a culture for Galaxy, and like Google is part of it, and Microsoft and Meta and like they all have some kind of agendas to have their own generative AI tools. And now that Apple is joining the race, is there any like some songs efforts to do it.
So there is a lot of intelligence and AI at play already in many parts of our devices. As said, we are working with Google on the partnership for a long time and we have a culture to foster the innovation together.
Chinese smartphonemakers like I'm Shoo, me Opo and o'hawe, they're all rolling out their own version of voldoble phones with cheaper prices. Is there any chance that someone would like to provide more foldable prices for foldable users, let's say in India or China in the near future.
Some analysts predict the market to grow beyond one hundred million units by twenty twenty seven. In the next three years, we really expect to capture a large part of the growth. Right now, I can say it's a growing category and what dies the appeal the pool is actually quality. It's quality and innovation.
And is there a chance that you're going to add more feature about the flip after the fifth generation.
On the software on the xperiancede, we continue to improve many mini experiances with are intelligions coming in more so there it's just the beginning. I would say we are still at the beginning of a new ar and we are very excited about.
The potent voldable phones now about five percent of the market. We understand Samsung's executive vice president and the head of customer Experience, that's Patrick Trumman. The Bloomberg's Sue Kim. Let's return now to where AI has perhaps been taking away
a little bit from the bottom line. We're going to talk snap right now, tumbling today, after the social media company reported well second quored results that gave revenue outlooks a little bit weaker than expected, even as it continues to invest in new ways you can be advertising on the platform. Let's talk about the earnings, and we're broadly about social media landscape. Jasmine mbugs with us lead coverage
of influencer marketing and social commerce and insider intelligence. Of course you look at Snapchat, you also look at TikTok, Instagram, YouTube, Twitter, now x Facebook will get onto all of them. But jusmin, I mean Snap always does this. It feels like it has pretty volatile reaction to earnings and often to the downside. Is there hope that in the forward looking future we will start to see well benefits of the investments they made.
Yeah, well, Snap is clearly not out of its revenue slump yet, and prior to earnings yesterday, I had said that its ad business wouldn't start to turn around until at least the second half of this year, and now it's looking like Q four at the earliest. But despite the weak guidance for Q three, there were plenty of bright spots to look to, and its earnings, Snap made all of the right moves. During Q two, it worked to strengthen its user base, diversify its revenue streams, and
improve on its ad platform. We saw a couple of positive signs already from those efforts, including in the number of active advertisers as well as advertiser retention. There's clearly still a lot of work to do, and efforts to diversify its revenue streams through Snapchat Plus, for example, will take time to actually have an impact on its bottom line.
And my AI is where I'm most hopeful for Snap's business in the future, because it really does or has the potential, to give Snapchat access to first party data that it can use to serve more relevant content and advertising across its surfaces, and actually making up for some of those lost signals from Apple's privacy changes.
Interesting that, of course, a subscription model therefore still to bear fruit. What's interesting is well, other companies have started to do subscription models, and we think of the way in which Twitter now X is trying to monetize, trying to make up for some advertising weakness, to the tune of fifty percent, what have you been making of social media? More broadly, the competition, the fact that everyone seems to
be on each other's toes. Can you just talk about X and the rebrand for a moment, What do you make of it?
Well?
Absolutely, I mean, first of all, there is a ton of competition in social media. That's another reason, of course why Snap continues to struggle. But with X and the rebrand, I mean, it was a massive moment for social media. It really truly is the end of an era. I mean, Twitter is an incredibly recognizable brand. The word tweet is part of the public consciousness, but the rating was also on the wall here. I mean, Musk has been very vocal about transforming Twitter into X. I think the timing
in some ways was right. You know, Musk is a master of media, and he may have wanted his news cycle back, but that that's not to say that this wasn't coming. The question now is, though, you know, there's obviously a vision for X, but what is the strategy behind it?
Does he truly have one?
Because super apps, of course, are unproven in most of the Western world, including in the.
US, Can you tell us a little bit about super apps? It feels like maybe everyone's trying to build them right now. I mean, of course, in the past what's interesting about X is there's a real focus on payments that are going forward, and we know that, you know, Musk, that's where it's made a fortune to begin with this PayPal, But PayPal can never quite make the cross that rubicon
in terms of actual banking services. You look at how meta originally Facebook was looking at its own payments infrastructure and wipe that away. And then it feels like TikTok is starting to get in on the text based communication as well. Is everyone eventually going to try and go for some sort of we chat model.
Well, it looks like everybody wants to do a little bit of everything, right, but with the we chat model in particular, I mean that is one that Musk has pointed to for you know, over a year now. And the reason why super apps really haven't taken off in the US is one, you know, we have established habits, We are used to doing different activities in different apps, and it is incredibly difficult to change consumer behavior. There's also a lot of privacy concerns, especially when you move
into things like payments and financial services. People have to hand over a lot of personal and payment information and they're not necessarily willing to do that, especially on a social media platform. In some ways, I understand the rebranding as Musk is trying to move towards this exhivision of a super app, because it does distance the company from, you know, the problem that did exist at Twitter before. But there's a lack of trust and Musk itself himself too.
And X of course is a new company or a new brand that really doesn't have that same kind of recognition.
But they do actually have a CEO who's very well known within the spending market area, and Lindi Akarino doing her best to navigate X as Zeno Musk does appear from the outside looking in very much still calling the shots. How much do you think, just in general, were at some sort of bottom when it comes to advertising sentiment here because I asked report at that of Alphabet and she didn't really want to make any sort of call there.
Well, one of the biggest challenges Linda Yakarino was always going to have was balancing Musk's vision for the platform with what Twitter users and advertisers want. You know, it was never going to be an easy job, even for somebody with as much experiences as Yakarino. I think that early optimism that you know a lot of people had, including myself after her appointment, has faded and is mostly gone.
At this point, we can tell that, you know, Elon Musk is very much still calling the shots, and publicly she hasn't said much more than applaud many of these changes and his vision. Of course, you know, the Twitter's ad revenue struggles are very very well documented and there hasn't been much movement in a more positive direction, and it's going to be even more difficult to do so now.
In Cider Intelligence, principal analyst Jasmine Enberg, it is such a busy space and you're always so clear thinking and click out about it. We appreciate it a lot. From New York.
It's a blue meg technology.
I've always been a person who's just been attracted to hair. I like to sit and think and theorize how I can manifest these visions that I have for braiding, and how I can take something that may seem like it's a line drawing in my mind and apply that to someone's scalp.
We are the only culture that has hair that grows out of our head the way that it does anyone from the African diaspora is born with this amazingly curly hair that can be shaped into a variety of different ways of expression.
I want Black people to love themselves for how they naturally appear, and also to appreciate the cultural practices such as braiding, that our ancestors have practiced for centuries.
It's time now for work shifting, where we look at the changing landscape for the labor market amid advances in technology, and we therefore to look at how the head of the largest US private sector union, Teamsters is turning his attention to e commerce giant Amazon.
Amazon's definitely going to be a target to organize. We're going to take this historic agreement and use it as a temple to show the Amazon workers what they will receive when they join the team Stite union and we organize them.
Of course, this comes just hours after reaching a tentative deal to boost pay and benefits for hundreds of thousands of UPS workers. Brilliant plus, Google, the Microsoft, and Open Ai are launching a safety model for artificial intelligence. The effort, called the Frontier Model Forum, aims to consolidate the expertise and member companies and create new AI industry standards meanwhile,
and is planning a restructuring now. The jackmar backed company is looking to break off its blockchain and overseas units to pave a way for its revival of an initial public offering, and that's likely to be down out of Hong Kong rather than that duel listing that was initially targeted in Shanghai and Hong Kong. That of course comes over after a change of ownership that prevents them doing
that in Shanghai for at least three years. Meanwhile, coming up, part of the Elon Musk grand vision to rebrand Twitter into an everything app includes pushing into financial services. We're just talking about with Jasmine Enburg, but let's talk about whether he can really succeed where some other tech giants have failed to really bring on board the banking services within a social media company. Plus, watching shares at teledoc, this shares absolutely surging well a quarter for their entire
market cap today, best move since February twenty twenty. The virtual healthcare provider is raising the bottom end of its revenue forecast range for the full year. Annaly is saying that that burns control over its costs because bearing fruit even as it faces a tough backdrop, so much more on earnings to come from New York.
This is Bloomberg Technology.
Welcome back to Bluebg Technology. I'm Caarenhid in New York. Quick check on the markets because the day is a day of macro data and decision making. You've got to be focused in on what happening with the Fed. Of course, most anticipating there will be some sort of rate hike. The question is will there be signal for rate hike comes September two? Many feeling that that shouldn't be taken off the table in terms of an option, even as
we do see inflation starts. Cool Naza currently off by four ten percent and large part on the back of key earnings. Microsoft just pulling us a little bit lower the Dow I show it only because it's on his best run since nineteen eighty seven. Folks, thirteen straight days of games. Bitcoin does have about two tens percent, but it looks we're still languishing around thirty thousand. In fact, volumes are the lowest in thirty months in terms of
spot Bitcoin training. We understand moving on and we go to some in particular earnings that maybe we've missed out.
So far.
I mean, we haven't missed Outabet just leading the pack when it comes to the outperformance on benchmarks today up almost six percent. Remember new role being expanded for with poorat as she looks for a new CFO but takes the reins of CIO and indeed president. But most notably this is a company that's managing to show advertising coming back five percent increase in particular on that advertising juggernaut.
We're looking at eBay just up three tens of percent results of all some software is merchandise maybe was being anticipated, but we keep an eye on what's happening in terms of eBay and then look ahead to its own earnings coming a little bit later. We look at targets being raised ahead of them to fifty dollars by Jeffreys in fact, that came yesterday. I'm looking at what's happening with in terms of Micron. We're up to and a quarter of
a percent now. Micron actually getting some strong talk coming from video moves in terms of its memory chips could be advantageous. We understand some analysts signaling that this is looking brighter for Micron, particularly in its application to artificial intelligence. We're up to and a quarter percent, unlike the rest
of the chip sector after Texas Instruments. Now let's move away from earnings and go back to the billion billionaire Elon Musk, known for you know, dabbling in different sectors aerospace, electric cars, course more recently social media and AI. But he's rebranded Twitter to X. Musk is buying to actually got back to his previous role as a banker. Re Magni's Finance Reports of Jenny Strain has a great piece out, what are you thinking about the tough task X has
to into wee've financial transactions, maybe even banking. This is all about becoming a super app. But it's a tough space to get into. Yeah, I mean that's exactly right.
We've seen many, many tech giants go before him, and we really haven't seen much traction. You know, you have the likes of the Facebook or Google, even Amazon. You know where they've gone this path. It really hasn't been as successful as they you know, might have hoped when they first set out. And it's just because banking is a really hard space. It's highly regulated. The relationships that big banks have with their consumers are extremely sticky and
hard to disintermediate. So Elon's got some high hopes here and it'll be a really tough road duho to to you know, get to where.
He wants to get, because ultimately we've not only seen, as you say, the likes of Alphabet sort of drop all plans to eventually odd banking services. We saw, of course, what happened with liber and the long road it took to get crypto interwoven within now Meta and that didn't pull off. But PayPal, I mean what ultimately Elon is original x dot com became they couldn't even offer banking service as a wealth management ride. It's still a transaction company. Yeah, no, that's exactly right.
So it was about two years ago actually where PayPal had set out on this big journey where they wanted to be that super app and they had a big, ambitious goal that they would have seven hundred and fifty million users and they were going to be kind of the one stop financial spot for consumers. And two years on, you know, they have seen their s thoughts tank, they've had to really retrench, they've had to focus on that core checkout but and that kind of everyone knows PayPal for.
So it really just shows that even when you already have a background in finance, you know, it's really hard to kind of push that envelope and go into that next step. And really a lot of these folks just end up having to stick to their knitting.
Here, and as our resident fintech expert, as our banking expert, you'll know more than anyone that it's ulto many trust that they have to build. Not everyone at the moment feels all that trusting of whatever you know Musk is doing in social media. Yeah, I think that's such a great point. You know, especially in the US.
We're a very different market than say China, where super aps have actually taken off, and consumers have shown this really big willingness to bank and do shopping and do their social media all with one company. We've seen it with Ali pay, We've seen it with WeChat pay. They
haven't had that same willingness here in the US. They seem to really like the fact that they get their banking services from a bank, and they get their social media services from a social media company, and they get their commerce from an Amazon.
Or a retailer.
So there's that trust piece, and there's this really that willingness not to kind of cross those borders. They like those things to be very segmented. And to your point, you know, Elon's on a name they know in banking. They know him as Tesla, they know him as Bacex. So it would be kind of interesting to see if you can bridge that gap, because it's hasn't been done before really successfully here in the US.
With an Indigaco couldn't do that as well, Who, if anyone, would be the most to lose if X could crack this from like a wealth management? Is it the online wealth managers? Is it the banks lose out? Who really hurts?
He seems really keen on payments, and so I mean I think PayPal, I think an Apple pay, I think the credit card companies. So I think payment seems to be what he's most interested in. It makes sense. It's the piece of finance that consumers touch every day. And so when you look at a tech company that just really wants to gen up usage, payments makes the most sense.
And so you know in that it's a very hotly competitive field, and so I think you'd see lots of pressure on different players, whether it's a bank or even a payments company like a PayPal.
Well, many have learned that to their detriment to bet against you, Muss. So we'll see whether you can cross this particular vercon. Thank you, Jenny Surine Go check out her story. It's brilliant time now for our VC Spotlight prime Mover's lab. Well, it's plays two hundred and forty five million dollars to back young startups working on some
unconventional ranges of technologies. The firm specializers in making investments kind of at the edge what's technically possible, including brain implants, psychedelics related therapies, space infrastructure, new funding rings its total assets under management to more than one point two billion dollars. Let's get more on well, the state of venture capital and some exits finally occurring. Rebecca Lynn, the co founder and general partner of Canvas Ventures, is a firm specializing
in fintech in artificial intelligence, among other things. And Rebecca, what you've got eight hundred and thirty five millions in assets under management and just now one of your portfolio company's case texts it's an AI legal assistant. It looks like it's just been acquired by Thompson Reuters for a cool sum of cash. Tell Us a little bit about why now we saw this sort of exit.
Yeah, I mean, it's really exciting to have sort of their first and largest our cash exit in this recent wave of AI, and it's been really exciting. I mean, kse Tex has been a company at the forefront of AI since we invested about six years ago, and was working heavily on it even before that. And they had developed some really incredible technology even prior to GPT four involving parallel search technology that earned them a customer base
of over ten thousand people. So because of that, they were invited to be in the sandbox very early on GPT four with open Ai, and they launched this new product called co Council in March and within forty five days they added another thousand plus customers using this new product. So you know, we've seen we've seen AI come a long way in a very short period of time. The delta from GPT three point five to GPT four was pretty incredible.
So case Text actually tried to pass.
The bar with GPT three point five and they scored sort of a measly ten percent on the California state bar.
I took the bar years ago.
I'm a lawyer as well, and I probably could still do ten percent, I hope.
And then when they.
Launched their new co council product using the fully featured GPT four, they actually scored ninety four percent on the California State Bar, which essentially means that this product could stand in the shoes of a full legal associate in many ways.
It was Chat GPT three point five and four that got the whole world suddenly ignited and excited about artificial intelligence. But you have been investing in it for a long time. This is a company you're backed years ago and continue to then see its trajectory. Will Are we in a hype cycle or is it necessary that that had to happen to get this sort of level of sudden application of a case text for example right now.
I don't think we're necessarily in a hype cycle. I think the technology just came up the curve to that last increment very very quickly. So we've been investing in AI, you know, since I've been an a venture at Morgenthaler. We were the first institutional investors in Siri, and just to see the evolution of how good AI has become since then, I remember, you know, product testing Siri in the early days, and it could understand you know, very
little initially. And then we came into figure eight, which was really the picks and shovels for AI, and that company was acquired by a public company called Appen, and then we did Luminar, and Luminar, you know, has AI at its core. They're an autonomous driving company and they reinvented the entire light our stack and the AI software to go with it. Right, So I think AI just suddenly had a leap forward in its capabilities. As we saw from the leap forward from GPT three five to four.
How many public companies, so how many ultimately big companies A desperate to stop buying in this space was Dojo is the only one out there who was wanting to buy case text.
You know, I can't comment exactly on the on the other possible acquirers. I can say that the company has you know, more than their fair share of venture term sheets they could have chosen from if they wanted to go ahead and take an equity round. And then you know, Thompson Reuters was just the logical acquisition partner for this company.
Let's talk therefore about the venture equity that still wants to get into AI, and more broadly, in the space, what does it look like, what are terms? What devaluations appear? To you as someone who's looked at AI before, it kind of got frothy.
Yeah, so overall, you know, valuations are down, but for AI right so AI is I would say, the most heavily invested, you know sector right now. However, I think it's really hard to imagine an AI company starting from scratch right now and becoming a big entity.
I mean what we like to see.
I actually love sort of Series B companies, right so, companies that are late A or early Series B. And what that means is they have some semblance of product market fit. They're actually solving a real problem, and then
AI can come in and really supercharge that initiative. And so, you know, for me, I think the bigger opportunities leveraging a technology like AI are companies that have a unique data set that already have a client base that they understand the use cases for quite well, and now they can come in and solve the problem in a much
more robust and interesting way. So we're focusing a lot on that sector and we're seeing it in our own portfolio even how this new technology is really helping to I guess, supercharge our current customers, including companies like Skyflow and offer fit in Connecticut that are all really benefiting from this new technology.
Now, I'm not going to say which of your portfolio companies aren't managing to cross that AI void, but all of their companies out there that are going to ultimately become obsolete. How are vcs in particular trying to ensure that they're founders, their companies already backed, can pivot when necessary.
I think you just they need to stay ahead of the curve. And so anyone who kind of got the press release on open Ai and now thought they should do something or our GPT four is behind right, And so you know, the companies and the good companies that are out there have already been thinking about this and been incorporating the benefits and the and the and the advantages of you know, GPT four and have been way
ahead of it. And we were just lucky to be sort of part of that, you know, having seen kind of what was coming they were going to release with GPT four.
What about venture more broadly, like, obviously you've had the benefit of the odd exit just now, but IPO still remains pretty much shot for many people. People are feeling that there's a regulatory hurdle of big companies buying smaller ones. At the moment, how does your industry look? How is it thriving or not?
I have never been more excited about our industry since I came into venture really in O eight. I entered a venture right when Lehman crashed, which I thought was probably the best time I possibly could have entered adventure. I think these kind of dislocations bring an incredible amount of opportunity and that come I mean, I'm a fairly contrarian investor, I believe. But we are seeing early stage
funding down probably about forty to fifty percent. We're seeing late stage funding down even more, and probably the most exciting thing for me is we're seeing the Series b's, which are always the hardest round for a company to raise, taking longer than they have in twelve years to get their funding. So the time span from like a Series A to a Series B investing round is about thirty one months right now, which is longer than you know,
really I can remember on record. And on top of that, when you look really under the covers of what's happening. About forty percent of the Series A and B rounds happening that are happening right now after taking thirty one months, are actually being led by insiders, so people that are already investors in the company that are trying to support the valuation that they currently have, which in many cases
is too high. And so for us, what that means, you know, we're because of where we invest, we have a lot of time to look at the companies and to make our choices, which is ideal.
What about coming in as a new investor, So if you're not just as some of many just being the insider that backs the company that's already in your portfolio, but wanting to come in and write checks to new companies, what are the terms look like? How much control do you have when you're that person looking from the outside to get in.
I think right now, when you're it's definitely a buyer's market. Right when you're looking at the outside to get in, you have more time for diligence because of just it's the time that it's taking and you can pretty much set the terms. We are beginning to see something we haven't seen in a long time, which is down rounds. Right when I did a lending club and the depth to the credit crisis in Q one of nine, it was actually a down round which which ended up quite good.
It was the largest US tech IPO of twenty fourteen. Right, but in that climate that most of those companies that were being funded were actually down rounds. We're seeing companies being recapitalized, so in other words, the new investor coming in and really cleaning up the cap table and funding that company for the go forward. So you know, it's a tough market when companies are raising rounds.
Right now, I would say camas Bench's co founder, general partner of Rebecca Lyn and talk about the tough but also the opportunities and indeed, congratulations on one of the exits just now, thank you for joining us. Meanwhile, coming up a more tech earnings, we're going back to the public market. We're getting into meta results that's coming after the closing boll more, what to expect from Mark Zuckerberg's Empire mid cost cutting efforts, and of course the lords
threads from New York. This is really big technology.
We are making sure we develop and deploy AI technology responsibly so that everyone can benefit. Last week, we signed on to joint commitments with other leading AI companies at the White House, building on the principles that have guided our work for many years. To take advantage of the AI opportunities ahead, we've been sharpening our focus as a company, investing responsibly with great discipline, and finding areas where we can operate more cost effectively.
Alfa bet CEOs no picture there on the company's earning school discussing AI, the responsibility there from not only driving revenue but ultimately building it ethically. There's another company that's about to go viral, and it's Meta out with its second quarter results after the market close, and expert in covers that social media more broadly for us. And I remember last time on earnings, you're really showing how much time basically Mark sokobad to talk about ALI rather than
the metaverse. Are we thinking the same thing again?
That's right.
It was six minutes last time on AI height and thirty seconds on the metaverse.
I expect that.
Might be the same. But what I think the street will actually be paying a lot of attention to is the health of the core business, the social media businesses. Maybe not the bright shiny objects of AI, the metaverse, or perhaps even threads.
But how is Instagram? How is Facebook doing?
And can this company actually come back to revenue growth? You'll recall that last year Meta actually posted its first ever year of revenue declines. Growth was around two percent last quarter, an let's expect about eight percent of revenue growth this quarter. When does that change? When did those
double digits come back? I think that's what the stock will move on, though I'm sure the executives would love you to focus on the big ticket spending items like AIAI infrastructure and the excitement around threads.
I mean it feels like pretty optimacy. I'm looking at the am function on the Bloomberg right now, and they're seeing double digits and revenue growth back so their fiscal third quarters, so we only have to wait one more. But to that point, how much are we seeing perhaps talk of an advertising balsom at the moment. I mean, Snap was ugly, but Alphabet showing much more resilience when it comes to people wanting to spend on search.
And I think Meta will probably fall somewhere in the middle. So Snap was ugly and they typically do brand ads where brands are talking about kind of their brand name, their upper funnel ads. Search ads where Alphabet is really strong. Those are ads that are really high intent. A user goes to search for something, then they buy something. There's a direct impact on the marketer's bottom line.
Meta kind of falls.
Somewhere in the middle and has a bit of both, so that's where we kind of expect.
It to fall.
Stabilization has kind of been the name of the game across a lot of the digital ad industry. Meta tends to move a little bit closer with Alphabet because they are the two kind of duopolistic giants and digital ads. So if there is stabilization, and if that if we see any kind of guidance like analysts are expecting toward double digit growth into the third quarter, that will be
a really exciting move. But if we get more bearish signals from Meta's executive team, perhaps on the call, then investors could have a little bit of frustration with some of the more fun things that Meta has been talking about lately.
Like Lama too, whether that's ever going to drive revenue certainly not, and well threads when they start to turn on any advertising around that Alex Barinka, brilliant as ever. Thank you ahead of those all important earnings. And while that does it so this edition of Bloomberg Technology, do not forget to check out our podcasts. Do not forget to tune in when the earnings come at four pm. We'll be there with the meta numbers. But of course go for our podcast in the interim on Apple, Spotify,
and iHeart from New York. This is Bloomberg Technology.