Welcome to the Techmeme Ride Home for Friday, November 1st, 2024. I'm Brian McCullough. Today, OpenAI officially gets into the search game. Earnings from Apple and Amazon, why Google is switching up how it does Android, and in the long reads, meta to win AI, even if it doesn't produce AGI, and how downsizing it's helping game developers survive the job
apocalypse. Here's what you missed today in the world of tech. OpenAI has unveiled ChatGPT Search to let paid user search for timely information using GPT40 after testing the feature since July. A direct challenge to Google, sure, but also think about how this gives them important parity with other competitors in the AI space too. Quoting the verge. ChatGPT is officially an AI-powered
web search engine. The company is enabling real-time information in conversations for paid subscribers today, along with search GPT waitlist users, with free enterprise and education users gaining access in the coming weeks. Rather than launching as a separate product, web search will be integrated into ChatGPT's existing interface. The feature determines when to tap into web results based on queries, though users can also manually trigger web searches.
ChatGPT's web search integration finally closes a key competitive gap with rivals like Microsoft, Copilot, and Google Gemini, which have long offered real-time internet access in their AI conversations. In a pre-launch demo, OpenAI ChatGPT's search lead Adam Fry showcased the feature by searching for Apple's stock and any relevant news. In return, it displayed an interactive stock graph, upcoming earnings information, and news articles with clickable citations linking to
original sources. There's also a source's sidebar that lets users scroll through a list of relevant websites. In another example, Fry searched for Italian restaurants in San Francisco, which returned an interactive map that dropped pins for recommended restaurants. In both examples, Fry asked follow-up questions to hone the result, like finding restaurants that are more casual and neighborhoody. The new search functionality will be available across all ChatGPT platforms,
iOS, Android, and desktop apps for Mac OS and Windows. The search functionality was built with a mix of search technologies, including Microsoft's Bing, Fry said. The company wrote in a blog post on Thursday that the underlying search model is a fine-tuned version of GPT 40. It was originally released to 10,000 test users as a prototype called search GPT in July, and we reported in May that
OpenAI was aggressively trying to poach Google employees for its own search team. Prior to this update, ChatGPT's knowledge was limited to a cutoff between 2021 and 2023, depending on the model. OpenAI spokesperson Nico Felix said, even with live search active, the company will continue to refresh its training data to, quote, ensure our users always have access to the latest advancements, but it is distinct from the training of the company's models. This launch comes as AI powered
search heats up across tech giants. Meta is reportedly developing its own AI search solution. While Google recently expanded its AI overview feature to more than 100 countries, when questioned about the timing coinciding with Alphabet's earnings on Tuesday, showing that Q3 search revenue raked in $49.4 billion, Fry maintained the release was independently scheduled. That's one clear reason a user might choose ChatGPT over Google search. There's no
clutter of advertising or promoted queries pinned to the top. While Google makes a lot of money off advertising and search results, Fry said there are currently no plans for advertising in ChatGPT. Still, AI powered search is more expensive to operate than traditional search, and it's not yet clear how OpenAI will finance it for free users. Felix said that free users will have some limits on how often they can use our latest search models.
Apple reported Q4 revenue up 6% year on year, but net income of only $14.74 billion versus $22.96 billion in Q4 of last year. That is apparently after paying a $10.2 billion charge as part of a tax decision in Europe. Q4 revenue from services, which includes the App Store, Apple TV Plus, and Apple Music came in up 12% year on year to $24.97 billion, a new
quarterly record, but below estimates. And actually, according to 24.7 Wall Street, this is the story of the quarter that Wall Street is thinking about, quote, based on analyst comments and the mediocre performance of its shares, Apple had an average quarter. It still trades below the S&P 500 this year, which is unusual. Traders are probably waiting for the next report to see how the iPhone 16 is doing. When teased apart its divisions showed an alarming fact, Apple is doing poorly in China.
China is by far the world's largest smartphone market, about a billion people in China have smartphones compared to just over 300 million in the United States. Revenue from its promising services business hit $24.97 billion up from $22.31 billion. That means its annual run rate is over 100 billion. That is almost better than Mac iPad and Wearables combined. But greater China
revenue was flat at just over 15 billion, barely half Apple's revenue in Europe. The China figure shows that the iPhone maker has not successfully competed with the large smartphone companies in the world's largest country by population. Based on phones shipped, Apple was second to Vivo in the third quarter. It was barely ahead of Huawei and Xiaomi. The three Chinese companies grew
during the quarter year over year, while Apple's shipments were flat, end quote. So, given that Apple shares are down a bit this morning, I guess we should attribute that to the fact that Apple's revenue growth in China was a mere 0.3%. Amazon, meanwhile, is up 6% this morning after reporting revenue was up 11% year on year. $15.3 billion in net income versus 9.9 billion in Q3 of last year, and 17.4 billion in operating income versus only 11.2 billion in Q3 of last year. So that's solid.
AWS revenue was up 19% with operating income from that unit, beating estimates by a full billion dollars. Also, Q3 ad revenue was up 19% year over year amid its push to insert ads into prime video. And subscription sales were up 11% year on year to 11.3 billion. Google is changing things up in terms of how it develops and releases Android. Starting next year, Google plans to release Android 16 and Q2 instead of Q3 or 4 as has been tradition for over a decade.
Why? Quoting Android Authority. There was nothing ever forcing Google to release major versions of Android and Q3 or Q4 each year, but it's been the norm for so long that the release cadence just kind of settled in. Of course, Google does need time to plan, implement, and test whatever new features and APIs it wants to include in the next major release of Android. It also needs to leave some time for app developers to try out the new changes and APIs before the
public release. However, there's no technical reason that Google can't just do more mine releases of Android instead of putting everything into a single big update. The main reason Google hasn't done that is because it didn't want to overwhelm app developers and OEMs, both of whom might struggle to keep up with a faster release cycle. Android's existing yearly release cycle is predictable, which benefits the app developers and OEMs who are most impacted by it.
But it's also problematic for two reasons. First, it means the best Android phones and the best Android tablets cannot launch earlier than Q3 of any given year. OEMs are not allowed to launch devices running the latest version of Android until that version has been publicly released to AOSP, not even if Google already gave them the source code months prior to the public release.
If an OEM wants to launch a new flagship device before the public release of the next major version of Android, then it has to ship it with the previous version of Android, which is exactly what Google itself was forced to do when it launched the Google Pixel 9 series. That might not even be possible for many OEMs to do since the new flagship chipsets that Silicon vendors release each year are only built to support that year's major release of Android. The Snapdragon 8 Elite
and MediaTek Dimensity 9400, for example, launched with support for only Android 15. The second major issue with Android's existing yearly release cycle is that it slows down how often Google can push out new framework APIs and fix issues with existing APIs. If Google wants to introduce some new API in the next version that can't be pushed out via a project mainline update or through Google Play services, then it has to do so before the cutoff happens, which is typically in March.
That's well before most app developers have even had a chance to take a look at the new APIs leading to situations where they discover a bug that Google can't push out a fix for until next year's major release. For those two reasons, Google wants to not only move up the release date of new major versions of Android, but also push out more minor releases of the operating system. Going forward, Google says that Android will have more frequent SDK releases and that two such
releases are planned for 2025. A major release in Q2, EG Android 16 followed by a minor release in Q4, EG Android 16, QPR2. Moving the major release forward to Q1, as I just mentioned, will let Google better align with the schedule of device launches across its ecosystem. Some more devices can get the major release of Android sooner. This will hopefully mean next year's Google Pixel 10 series will
launch with Android 16 instead of Android 15, for example. The Google Pixel 10 series will, of course, have a lot of exclusive software features that aren't found in Android 16, but it's still nice to know what new Android features will be present on the new hardware. How many times do I quote from the Washington Post in a given month on this show, easily into the dozens, right? They're one of our most referred to sources. Well, this podcast is
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than I have. Then along essay, Ben says that meta is well positioned to be AI's main beneficiary in the short term but also in the midterm and long term. Quote, the big question weighing on investors' minds is when all of this GPU spend will generate a return. Tesla and XAI are dreaming of autonomy, Azure, Google Cloud, AWS and Oracle want to undergird the next generation of AI powered startups and Microsoft and Salesforce are bickering about how to sell AI into the enterprise.
All of these bets are somewhat speculative. What would be the most valuable in the short term at least in terms of justifying the massive ongoing capital expenditure necessary to create the largest models is a guaranteed means to translate those costs into bottom line benefit. Meta is the best position to do that in the short term thanks to the obvious benefit of applying generative AI to advertising. Meta is already highly reliant on machine learning for
its ads product. Right now an advertiser can buy ads based on desired outcomes whether that be an app install or a purchase and leave everything else up to meta. Meta will work across their vast troves of data in a way that is only possible using machine learning derived algorithms to find the right targets for an ad and deliver exactly the business goals requested. What makes this process somewhat galling for the advertiser is that the more of a black box meta's advertising becomes,
the better the advertising results even as meta makes more margin. The big reason for the former is the app tracking transparency ATT driven shift in digital advertising to probabilistic models in place of deterministic ones. A medium term AI derived benefit that Meta will enjoy is that at some point ads will be indistinguishable from content. You can already see the outlines of that given I've discussed both generative ads and generative content. They're the same thing.
That image that is personalized to you just might happen to include a sweater or a belt that Meta knows you probably want simply click to buy. It's not just generative content though AI can figure out what is in other content including authentic photos and videos. Suddenly every item in that influencer photo can be labeled in linked provided the supplier bought into the black box of course making not just every piece of generative AI potential ad but every piece of content period.
Long term meta will benefit from AI in XR, AR and VR. Meta's AI driven upside is independent from XR becoming the platform of the future. What is different now though is that the likelihood of XR mattering feels dramatically higher than it did even six months ago. The real enabler will be AI. In the smartphone era user interfaces started out being pixel perfect and I've gradually evolved
into being declarative interfaces that scale to different device sizes. AI however will enable generative UI where you are only presented with the appropriate UI to accomplish the specific task at hand. This will be somewhat useful on phones and much more compelling on something like a smartwatch instead of having to craft an interface for a tiny screen. Generative UIs will surface exactly what you need when you need it and nothing else where this will really make a
difference is with hardware like Orion. Smart phone UIs will be clunky and annoying in augmented reality. The magic isn't being pixel perfect but rather being able to do something with zero friction. Generative UI will make this possible you'll only see what you need to see and be able to interact with it via neural interfaces like the Orion Neural wristband. Oh and the supplies to ads as well. Everything in the world will be potential inventory. This was all a lot of words
to explain the various permutations of an obvious truth. A world of content abundance is going to benefit the biggest content aggregator first and foremost. Of course Meta needs to execute on all of these vectors but that is where they also benefit from being founder led particularly given the fact that the founder seems more determined and locked in than ever. It's also going to cost a lot of money both in terms of training and inference. The inference part is an escapeable Meta
may have a materially higher cost of revenue and the long run. The training part however has some intriguing possibilities. Specifically Meta's AI opportunities are so large and so central to the company's future that there is no question that Zuckerberg will spend whatever is necessary
to keep pushing Lama forward. Other companies however with less obvious use cases or more dependency on third party development that may take longer than expected to generate real revenue may at some point start to question their infrastructure spend and wonder if it might make more sense to simply license Lama. This is where the ish part of Openish Looms large. It's definitely plausible that Meta ends up being subsidized for building the models that give the company so much
upside and quote. And finally since we've spoken so much about the tough employment environment in gaming this year I found this piece from Bloomberg interesting. It suggests many long time gaming workers are ditching large productions in favor of smaller teams enabled by the growing accessibility of Unreal Engine and other powerful tools quote. As video games have grown more complicated with larger worlds and more realistic graphics the companies behind them have expanded
dramatically. Top franchises such as Assassin's Creed now employ legions of programmers and artists in 2022 Activision Blizzard said it had more than 3000 people working on Call of Duty. As a result budgets have swelled uncharted 2 from Sony's Naughty Dog was released in 2009 and had a budget of 20 million dollars. The studio's latest game The Last of Us Part 2 cost more than 200
million. In response a significant number of long time game workers like Perkypile are ditching mammoth productions in favor of smaller teams where they hope to enjoy more autonomy work more productively and spend less time in meetings. It's an aspiration that feels more attainable today thanks to the growing accessibility of powerful game making tools such as Unreal Engine which
Perkypile and many others have used. Exact numbers can be difficult to pinpoint but in recent years developers with decades of experience including top directors at major companies have left in droves to work for smaller outfits. Some quit voluntarily while others were pushed out as gaming companies cut tens of thousands of jobs over the last two years end quote. Now weekend bonus episodes for you this weekend talk to you on Monday.