Bluesky Takes Off, Big Tech Earnings Blowout, Do We Want Human Writers

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1:17Welcome to Big Technology Podcast Friday edition, where we recap the news in our typical cool-headed nuanced manner. We have so much to talk about this week. There's a new social app on the block. It's called Blue Sky. We'll talk to you about Blue Sky. We'll also go through big tech earnings this week. We had Amazon, Facebook, Google, and Microsoft report. Also Snapchat, not big tech anymore. We'll touch on that. And then finally, we have the UK regulator blocking the Microsoft Activision deal. What does that mean for the future of tech mergers? Not just here, well, not just in the UK, but all over the globe and the policy that we have in New York.

1:59A lot to touch on, so stay tuned. It's going to be very quick, very fun, moving. I feel like this week is going to get spicy. Joining us as always is Ranjan Roy. Ranjan, welcome. Happy Friday. Happy Friday. Welcome to Blue Sky. I think you just joined within the hour. What's your immediate impression? What is Blue Sky from your perspective? And what's your immediate impression of Blue Sky? So first of all, I got the handle at Ronjon, which is the single most important thing, which I never could get on Twitter. You couldn't even get your full name on Twitter. You have an X in there in between, right?

2:36Yeah, no, exactly. I couldn't even get Ronjon Roy. So I have to stay on Blue Sky, I guess. But for a bit of background, blue sky is jack dorsey's uh comeback tour where he has launched a social app and from what i understand the the biggest distinction from twitter is that the data is stored on individualized servers right now if you get an invite and if you log on like you'll likely default to the main server but you'll have a lot more control over how your data lives where it's stored and that's that's definitely the bigger vision it looks just like twitter it acts just like twitter and it feels just like twitter so so in terms of what whether it can now become the new twitter i mean it remains to be seen i'll admit i had my mastodon handle in my twitter profile for a little bit it was a lot more complicated and a lot different a lot more different than uh the standard twitter experience So I don't know.

3:37How have you been enjoying Blue Sky so far? I think it's terrific. And OK, so I'll explain a little bit also. So first of all, Jack Dorsey did give them money, but he's not involved in the day to day operation as far as I can tell. Also, what's interesting about this system is it is distributed. So there can be a number of different clients built on top of it. So you could effectively see someone, anyone build like a Maps app on top of Blue Sky. and you could like you know go region by region and see the different skeets which is their word for tweets that are coming from that region you could also have different apps built with different moderation policies eventually but they started in a very smart way they started centralized so this whole idea of a federated network it doesn't exist yet all that exists right now is effectively them demoing the technology and the protocol in this one app and i think that's what's actually helped it take off the way that it has because it is not difficult to sign up like my mastodon is it is akin to twitter it is letting users in at a fairly high pace and when you do all of that you start to build energy and people start to move over and we've seen this flood of people coming in from twitter going to blue sky and a blue sky invite has become like the hottest ticket on the entire internet.

4:59I can't go five minutes without my phone buzzing for someone asking for an invite. By the way, do not have any. They are being very methodical in the way they distribute. But the cool thing is, is that there's been this initial surge of energy and so many people have gone on and used it that used to be power users or are power users of Twitter, but don't really care very much about what they're posting because they don't have any followers. and it has this like really irreverent fun and wild energy that is it's it's pretty amazing to watch and you know i think we should talk about this idea of like what the next twitter might be whether something can be the next twitter whether we want something to be the next twitter i'm curious like what you think seriously like what do you think the next social network should be i go back and forth because i tried to spend time on mastodon and i did for a couple of weeks and And then I went back to Twitter.

5:55That question of does there have to be a next Twitter? I think this is where Elon Musk and his relationship with the world and what they see him for and how he's changing the platform has definitely made it feel like there needs to be. But by the same token, you go on Twitter, there's still incredible amounts of information, entertainment and everything else that's always provided. So I think there's two parts of it. But there's the Elon Musk factor and whether just essentially aligning with him, what he's doing to the platform, especially from a business model standpoint, is crazy. And how that plays out at any point, you don't know what's going to happen.

6:35But then there is the bigger vision. And yeah, as you said, the decentralized aspect of it, which also amazingly, the fact that the word blockchain and crypto have not made it into that, into the kind of the way it's being spoken about is a good thing and amazing. but yeah I think that idea of can this be a platform that starts to give you more control over your own data and the way you interact with the internet and how you can build on things clearly I mean Twitter was kind of the poster child for you know in the early 2010s the developer community around it that things built on top of it were amazing even Facebook for a while that was a big part of it.

7:16And then all these platforms, when they're centralized at their core, start cutting things off. And then that energy goes away and everything gets kind of condensed into the platform. So again, I've been on the platform for about 45 minutes. And I think I posted one skeet. And yeah, we'll see. I'll admit there's also the part of me that just, you know the next twitter has been coming for a long time and twitter is still twitter and i think it is worth pausing on what the next twitter should be so obviously there's like part of it comes from like the data practices part of it comes from the advertising but also part of it is just simple network dynamics right and twitter did have this goldilocks moment where at one point it got big enough that it was vibrant and fun and interesting and even i would say somewhat magical at times.

8:10And then it grew to the point where it became, I think it just hit a size where if you hit this size and if you're a live feed, and maybe that's 100 million users a day, I don't know, maybe 150, but certainly not 75. But eventually you hit this point where people inevitably resort to flame wars because the stakes of winning arguments and performing your side become so high that you don't really find another path other than doing that type of stuff. And that I think is part of what's happened with Twitter turning so toxic. And I think that it would be great if the next Twitter is not maybe one Twitter, maybe it's a few Twitters, but they are big enough that they're vibrant and filled with information and useful, but also small enough that you don't see this sort of toxicity that we've seen on Twitter main.

8:58Is that - Well, I disagree. I disagree. I agree. Twitter lost its magic for the same reason and the toxicity, it comes from the algorithmic curation. When it's a follow-based timeline, when it's who you follow, that's really the only tweets you see. It's not what's going viral. Then it's just a much cleaner experience. I mean, I've written about this a lot and I really believe it, that the moment the entire default becomes algorithmic, then being toxic rewards you, being outlandish rewards you, going in and like screaming at people will push you up into other people's timelines and gain you followers.

9:40So the game becomes being as ridiculous as possible. And one thing I did note that was interesting from a UI standpoint was now on Twitter, the for you tab, the algorithmic tab is the first one. It's the default. And then your following is second. At least Blue Sky is starting with the following is your first tab and the for you slash algorithmic tab as the second. So maybe they will really try to push it more in terms of the follow based non algorithmic curation. But I don't know. I feel that's still to me the danger of all of this. And therefore, UTAB in Blue Sky was definitely a bit Twittery in my feed.

10:21Or it was people all complaining about Twitter for me. Well, that is how every new network starts, by people only talking about how it's differentiated and comparing it to the last thing. That's it. But I'm going to give you the counterpoint here. All right? So what everybody would say back to you on this one, everyone that works on these products, is if you have just the following feed, you're going to miss a lot of the important tweets or skeets or posts, whatever you want to call them. You'll miss them. You'll miss them. And the algorithm helps people end up seeing the stuff they want to see.

10:54Now, that's argument one. Argument two is without an algorithm, you end up living in a following tab where people see that the incentive is just to keep posting and posting and posting and posting and posting and posting and eventually it just rewards spam. so what is the counter yeah but exactly but it doesn't it if you keep posting and posting people will unfollow you i think the problem with the follower based model is scale is it not everyone's going to put in the time it's why i mean in the i remember before twitter switched to algorithmic that's why most of my normal friends did not use it because they would sign up what didn't want not want to invest the time into actually uh into actually figuring out who to follow how to follow where to find the best information and so they that they didn't use it that's why twitter did not explode like a facebook where there's a built-in network from your friends and family um so i think but in a way that's why twitter rewarded people who spent the time and put in the work um and that's why i think to me my my dream social network is definitely one that's more, it requires a little effort and a little work and a little thought.

12:04It's not going to just spoon feed you because the moment it spoons feeds you, that's where we end up with the toxicity. Oh, and I think that you're sort of roundabout way coming to my point, which is that if you have to put that work in, a network can't grow. Not to the same extent that if you use the algorithms. You have a very different type of trajectory. Twitter did grow. But very slowly and the big narrative around it for years was that you'd look at Twitter and it was just stagnating with growth, stuck in a 200 to 300 million monthly active user range,

12:39and not going anywhere. Where everybody else, I mean, look at TikTok, with the algorithm you go bananas. And I think that's what's behind Elon's attempt to use this algorithm is to say, hey, we really need some real growth trying to get to that billion users. Otherwise, this purchase is going to look dumb. Yeah, no, but that's my point. Maybe there's like a optimal ceiling on a social network and two to 300 million monthly active users is a pretty robust network. You know, I think imagine a world where Facebook didn't exist and the idea of you have to get to a billion didn't exist. And which is kind of where Reddit for a long time got to live.

13:18Like Reddit's kind of this beautiful case where, you know, for those who don't know, it was sold, I think, in 2006 or 2007 by the founders to advanced publications. And then it just kind of lived to the side without any real revenue pressure is this kind of like digital stepchild in a larger traditional publisher. And that's why it never exploded in growth, but why it continued to grow to hundreds of millions of people using it, but still staying very, very high quality. Okay. I think that that's a good example to leave on. And this is a discussion that we're going to keep coming back to. Should we touch on the big tech earnings that we had this week?

14:00yeah this one big tech has taken over the world again uh when you look that was your takeaway okay yeah well from a stock market perspective you know this market this week markets were selling off and then facebook was up what 15 yesterday on a you know a company of that size is crazy you know the company had 28.6 billion dollars in revenue daily active over 2 billion people use it every day it's the first quarter that their year on year revenue actually grew after three consecutive quarters of declining so so it's definitely meta is back google google's uh results are pretty funny because you know revenue was up it's still slowing earner earnings beat a little bit but for them the stock exploded because uh didn't explode it went up because they authorized a$70 billion share buyback.

14:56That to me with Google was a bit ridiculous in the sense of like at this moment where big tech is competing with each other on their traditional moats more aggressively than ever, especially for a Google with Microsoft coming after search in a way they haven't had to deal with, to be using your cash for share buybacks right now rather than going all in investing in the future, I think was a bit questionable. Yeah. And so it's interesting because you do have, you did see these really nice numbers from big tech and like the subtitle I have for this section is this is fine, fire emojis around it.

15:35Because at times it does seem like big tech is this island sitting amid the chaos. And of course, these companies had a very tumultuous 2022, but have largely come out of that and are racing toward new highs again. They're not there yet, but they might get there, which is unbelievable to think about given like where they were last year. You think about the comeback that Meta has had, for instance, just unbelievable. We talked about it with Josh Brown on Wednesday, but just like, wow, such a yo-yo situation in terms of what they're doing on the market. But I'm reading these numbers. I'm trying to figure out, well, is the market in a good place or is the market slash is the economy really in a good place or is it not?

16:14because okay so I see meta crushing its earnings right we talk about the fact that it made a lot more than expected it has 3 billion users now it returned to revenue growth then you look at the so you're like okay we're we're rip roaring back but then you look at Google right and Google grew 1.87 % in search and q1 after 24 % growth last year and then you look at Microsoft Microsoft's lowest cloud growth ever. Okay, it was 27%, but is that a sign of worry? And then you have Amazon go on its earnings call afterwards and say, our troubles in cloud are not over. And in fact, they're going to extend beyond where we are now.

16:56So I know I've just thrown a lot of data at you, but I put it all together and I say, well, I still can't quite put a finger on whether our economy is heading in the right direction or not. Yeah, I don't think big tech is or has been reflective of the economy at large for a long time, if ever. I think they, like Amazon results are very interesting because they beat on revenue and earnings and the stock after market shot up 9%. And then on the earnings call, once they started outlining troubles in the cloud business. And by troubles, it's still a$21 billion business. It's just growth is slowing.

17:39As you pointed out, Microsoft, 27 % growth, but that's the slowest ever. That these are still just kind of like juggernauts of business, but they're just not going to be able to in perpetuity grow 20, 30%. I think everyone's kind of coming to the realization around that. And I think that's why, but still investors, a lot of the momentum around their stocks are where else are you going to go right now? they're really starting to concentrate power again, especially around the whole AI hype cycle. They're so well positioned from a compute standpoint, from a technology standpoint, from a product standpoint that I think, and for the economy at large, I think that worries me again is that suddenly you have five companies that are going to become the majority of the stock market after there was a brief period we thought the world might get diversified a little bit.

18:34Let me again make the counterpoint here, which is that you might be able to read something about the bigger economy when you look at big tech companies. I'll tell you why I think that might be the case. You look at search, right? Search is sort of foundational digital advertising spend. If you're healthy at all, you're probably making some search spend. And cloud is the infrastructure side of many of the burgeoning companies in our economy. So when search growth slows. When cloud growth slows, you're going to end up seeing much less of a downstream growth inside the rest of the economy potentially.

19:10And so maybe you can read a little bit into what's happening on the outside from the inside of big tech. Yeah, but also it was natural that cloud growth would slow when you go from an economy where the vast majority of businesses are not on the cloud and then they all start moving into the cloud and then at a certain point more people or most people already have their infrastructure in the cloud so i think it was inevitable that the growth of those businesses would slow i i do agree i think advertising is always kind of the best bellwether for the economy at large and obviously google slowing on the search side youtube ad revenue down i think like yeah there's certainly everything is not perfect.

19:58That's why you had the fire emojis around. This is fine in the caption. I think that that's probably the best way to look at it. And it's true that we're at this moment right now, everything like the numbers, even GDP came in, we're still growing. It's a little slower, but it's actually, we're not in a recession. Inflation is starting to trend down. It feels like at the headline, the Fed might have just done their soft landing, but then And there's still plenty of warning signs all over the place that we're not out of it yet. Let's do a lightning round just quickly going through some of the interesting, a couple of interesting tidbits that we saw this week.

20:38First of all, Google Cloud is profitable for the first time. But the company, and I'm not saying this is entirely responsible for it, the company did some creative accounting measures to move costs away from Google Cloud. So there's a part of their filing. you see changes in segment cost allocation. And they say, more of certain previously allocated costs are allocated to our consumer-facing Google services products and less to Google Cloud Enterprise products. I mean, I know you have to show profitability. This is the time. What do you think about the fact that there's been some - I mean, that wasn't the only thing.

21:17Now DeepMind is no longer reported in their other bets, kind of like the moonshot category. and now is part of their corporate costs. At first I read that and I'm like, what? That's ridiculous. Then maybe they're trying to spin the idea that now AI is so integrated and deep learning is so integrated across all business functions. So now it's kind of like a core cost of the overall business. And I'm literally trying to stretch my own mind to how they got there. Yeah, I think Google definitely, Definitely, Google is a company that, and I think we talked about this last week, what's been the great innovation, the great kind of like really standout thing that they've done in the last 10 years.

22:04Again, Chrome, Maps, YouTube, all these things are well over a decade. We did have a comment on that, actually. The answer that someone gave was AlphaFold, which maybe you could say decoding proteins is actually a real breakthrough. All right. that that's that is a very good one no revenue yet but but definitely yeah yeah yeah all right i'll give it that one so maybe there are other bets they still are quietly being the big innovator that we hope they are but yeah i don't know the biggest thing for google as we talked about last week search is being threatened more than it ever has been with microsoft so i think uh as a company I mean, it's clear that the, what do they call it?

22:49A red alert moment or something? Code red. Code red, code red. Yeah, I think they are in their code red moment. Okay, let's talk about Meta. Obviously, year of efficiency, but not that efficient. I mean, they still lost 3.99 billion in the quarter on Meta's Reality Labs unit. And on the call, Mark Zuckerberg took this moment and he's like, I need a moment to tell you all that I'm still doing the metaverse. There's a narrative that I'm not all in on the metaverse. I just need to let you know I am. Now, you might have been part of that narrative on the other side. So what's your perspective? No, no, no.

23:28Here's my theory. Here's my Zuckerbergian art of war theory right now. So one thing, and I've been trying to understand is the generative AI research spending, I believe falls under reality labs. From what I've read, from digging in, because for a long time, it was not considered this core thing. It was another part of the overall. Reality Labs was all about experimentation and the future. We don't know exactly how much of that big loss is going towards the generative AI stuff. And in our mind, everyone's still thinking it's all metaverse. Imagine if Mark Zuckerberg and them really internally are going all in on generative AI, and maybe the metaverse is quietly disappeared, but they still are saying it publicly to throw off competitors.

24:23That's my secret theory, that they've gone all hands in and they're actually moving away because I just can't imagine that they're still really investing in the metaverse vision that they outlined anymore. They can't. And he's a competitor. He's a ruthless competitor at heart. Well, we'll see. If that proves to be true, we'll see what the SEC has to say about it. I feel like there's a bit of a securities violation waiting to happen if you go on your earnings and you throw everybody off the scent by calling. But hey, look, in this era of regulation, you could basically get away with anything except perhaps if you are Microsoft trying to buy Activision.

25:08We will touch on the UK's blocking of that deal in the second half here on Big Technology Podcast. Stay with us. Ranjan Roy is here with us. From Margins, talking about big tech, talking about mergers or would-be mergers and the blocking of such. We'll be back right after this. Capital One's tech team isn't just talking about multi-agentic AI. They already deployed one. It's called Chat Concierge, and it's simplifying car shopping. Using self-reflection and layered reasoning with live API checks, it doesn't just help buyers find a car they love. It helps schedule a test drive, get pre-approved for financing, and estimate trade in value.

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26:58And we're back here on Big Technology Podcast, second half with Ranjan Roy of Margins. You can get his newsletter, Margins, at readmargins.com. Ranjan, let's talk a little bit about the fact that the UK has blocked the Microsoft Activision acquisition. So this is a big acquisition, many millions of dollars Microsoft was going to spend to buy this gaming company. And the UK says, no, you don't. So is this the end of the story here or is it just really the beginning? Well, OK, but let's go back to the actual beginning of the story in 2021. So this acquisition to me was always troubling. And I had actually argued with friends.

27:37I thought it would get blocked somewhere because to me it was outlandish, but I definitely got pushback on that. End of 2021, Activision is mired in scandal with their CEO. And this was, again, remember the last half of 2021 when the world was just out of control great. They offered$68.7 billion to buy Activision. And the price, I mean, the price was very aggressive. It wasn't insane, but it was definitely aggressive. Now, you know, fast forward a year and a half, the UK regulator has blocked it. And this is why I think this is one of the biggest deals in antitrust. One of the biggest things has just happened.

28:22It was funny. There's Mike Isaac of the New York Times. I saw this tweet. He's like, I have no opinion on whether this deal should have been blocked or not, but using a potential monopoly in cloud gaming as a stumbling block is funny. Who the fuck is cloud gaming? Basically, like, what is cloud gaming? Why is that? Why is why are we talking about this? This is the first time that I've seen a regulator going after a potential market where they see the world going. This has been one of the things that's happened in antitrust that at every time, Like every juncture, the reason regulators have fallen behind is we typically regulate what is the market size currently?

29:02How much of the market do you own today? They are going after where the market is going. And I think we can all agree that cloud gaming is the future. I would hope, or at least to me, that seems so obvious. So this is the first time I've seen a regulator really going after a potential market as opposed to an existing one. And I think that completely changes the way we think about antitrust. Yeah. How does it change the way we think about antitrust? No, instead of market size, instead of what percentage of the, because like if you look at the overall console market, mobile gaming market as a whole, like a mobile app that you download, that you own versus cloud gaming is such a tiny percentage of that right now.