More on Airbnb, Jack Dorsey's Return to Square, Generative AI News Bonanza

0:28We have updates on our Airbnb and Yahoo conversation. is Ranjan Roy of Margins. Ranjan, welcome. Good to be here, Alex. Great to have you. So I think we have to really begin with two follow-ups from our conversation last week. First of all, I want to thank Big Technology Podcast Nation for coming out and showing your support for our desire and our push to get a Yahoo episode on the feed. Some amazing reviews came in. Here's one from PD283, the host and his co-host of Great Chemistry. It really is a nuanced conversation. I really enjoyed the 915 episode. And yes, would love them to do an episode on Yahoo.

1:06We also have someone, I think it's an equation editor. The review is Yahoo with like four O's. And love the 915 episode. Hoping for that Yahoo episode. Yahoo! And plenty more. So first of all, thanks to everybody that posted a review. And if you haven't yet and you want to use the review as a way to get questions, If you put a five-star review and ask a question in the review, here's the thing. Ranjan and I will get to your questions in the next episode. So a little more incentive to post those reviews. Anyway, here's the update. Jim Lanzo and the CEO of Yahoo is going to come on the show. It's going to be a couple months down the road.

1:42I was texting with him this week. Very busy heads down at the moment working on everything Yahoo. But we're going to get that episode. You asked, you will receive. And I am so excited to bring it to you. So stay tuned. And I'm hoping sometime, you know, maybe later this year or at the very worst beginning of next year, Yahoo! episode coming to the feed. I'm telling you, it's one of the most interesting stories in tech right now that no one is talking about. So I'm excited for that episode. Right. And we will be talking about it. And I'm excited, too. And I know Jim is as well. So can't wait for that.

2:15I'll keep you folks updated on when he's going to come on. And again, thank you for all the lovely reviews. means a lot and helped us also increase our standing in the ratings, the rankings on Apple Podcasts this week. So thank you for that. Okay, update on our Airbnb conversation. Last week, Ranjan and I were on talking about whether Airbnb is going to do advertising. And he's like, why don't you put it to Airbnb? And of course, Brian Chesky and I were about to sit down a few days later. We did. I asked him about the advertising and his perspective, actually quoting Jeff Bezos was that he's going after the perishable market first, fixing the main product.

2:53And then it seems like once he gets that down, he's going to go after advertising. Because when I started reading him, the predictions of how much advertising revenue was going to come in, the predictions from Skift, I mean, folks, it was only him and I in the room, we weren't able to record it for video. But the guy's eyes started lighting up, like you could see an instant reaction. And he's like, really? Like that's the prediction? Billions of dollars in from advertising, higher margin revenue. So Ranjan, I'm curious what you thought listening to that as we put our question to Airbnb CEO Brian Chesky.

3:26Yeah, the numbers are certainly astounding. And again, it's an incredibly high margin business. So at every level, it made sense. But I actually have to say in overall, I mean, honestly, everyone go back and listen to the episode, the entire episode with Brian Chesky, if you have not, because he came off, honestly, as one of the kind of most thoughtful, but also, you know, fired up tech CEOs I've heard in a while, but in a kind of a smart, thoughtful way. Again, on advertising, the whole idea around Jeff Bezos, I loved that idea of go after the perishable opportunities first. What are the opportunities that will not be there if you don't go after them today.

4:07And so for them, and we can definitely talk about that, and we had fixing the product all, you know, it's become almost a meme, the cleaning fees around Airbnb. And clearly, they, they're answering that that was, you know, a big part of their overall announcement, how they're tackling that frustration that all their consumers have. So I think I think it's smart how they're approaching it. But I mean, I will say that the product placement in Airbnbs, I'm still kind of liking this idea. I know that's probably not the way he talked about it is in the more traditional sense that Uber, DoorDash, Instacart, as we saw, it's pushing them to profitability.

4:43The idea of just having advertisement, basically people paying to push their listings up within the conventional product. But I still think Kiehl's should do a collab with Airbnb and have their products in every Airbnb. That's me. It did seem to me that it's just something that he's chomping at the bit at. And by the way, it takes a little bit of pressure off the broader business and sort of allows you to do things with the broader business that you might not have been able to otherwise. For instance, you want to provide better customer service? Well, one way to do that is have a higher margin business, hire more customer service people, or potentially use that to offer more credits.

5:22It's the thing. This is the thing. And I think this is why Amazon went after it. by running this high margin business, Amazon is able to run a effectively break even retail business and then keep people locked in because of that. So that's the one thing that I think we should be thinking about with this is, you know, is advertising actually ancillary to Airbnb? Is it ancillary to Amazon? Is it ancillary to Instacart right now? It doesn't seem like it is actually does seem like it's core. And so like, I agree fixing the product number one, but as you get deeper into it, some of this advertising revenue can become core and can enable a service that allows you to compete in a way that you can't without it.

6:03And that was my takeaway from it. Yeah. I mean, Amazon's a poster child of this. And again, from an antitrust perspective, that's a different topic. But again, AWS, super high margin business, now their retail network, their advertising business, super high margin, funneled that back in. And you said break even. And the actual e-commerce and retail business has lost money many quarters, but they can afford to do that because they have these others, you know, cash flow generating machines. So, yeah, I think it'll be really interesting to see how Airbnb pushes that opportunity. It was funny, I think, because at one point he was even talking about, you know, like, we won't get into the jet turbine business because that's so out of the scope of, you know, the type of things that we're doing.

6:49But very clearly saying advertising, you know, makes complete sense. Ranjan, you also picked up a little bit on the product manager shift. I'm curious if you have a very brief reflection on that and why you thought it was worth paying attention to. I know. And I've heard, you know, on Hacker News or wherever else, like Airbnb has always had this kind of mystique about it, that they're a design first company, that everything is design driven versus like you think of an Amazon is operational masters. And he really kind of laid out the vision of a large company, and they're a huge company. As he said, they're in the Fortune 500 now.

7:28Is the idea that, and like Apple, things are not divisional. It's not that you have an engineering department in AWS, in the e-commerce division, like a company like Amazon, which is divisional. You have one engineering division. You have one UX division that will go across products across the entire company. And it was interesting to me because you see how that ends up, you know, disseminating to the entire company and you see it in the quality of the product. But also you see how something like the cleaning fees or these other issues, like how the whole company can come together to tackle something like that and how that energy can come around and really be focused versus, I mean, even a Google especially, I feel they've kind of been having the same product name, two different things.

8:19Basically, it creates focus in a way. And obviously, Apple, you see it in the end product. Right. One other thing that I found interesting, and then we'll move on, is that he talked about how writing the press release for the product you're building in a way that Amazon does, which I always thought was a terrific way to build products. it takes away the the weakness is that it takes away your ability to uh iterate and imagine on the way if you're only building toward that product and that is your north star then you could end up missing the ability to really build different and big and interesting things that can come up in the middle of the product building process so wait wait can you explain for people who aren't familiar the amazon press release thing but and also i actually and and how did Airbnb do it differently?

9:05I can't quite remember, but I remember it was interesting. Yeah. So basically when they build a product inside Amazon, they start by writing a press release with a quote with fake quotes from customers that talk about how much they love the product. And so Chesky is saying that when you're envisioning a product, you can write that press release. It's all well and good. But the thing is that as you're building and as you're moving toward that North Star, if, you know, for instance, your testing leads you elsewhere, your designers lead you elsewhere, your instincts lead you elsewhere, you could potentially miss, you know, the big opportunity by focusing so much on the press release that you wrote in the beginning.

9:49So he actually wants a little bit more flexibility in the product process. And so they don't use those type of documents. And I actually think that, you know, for the first time, it was like an argument against the Amazon process for certain types of business that made a lot of sense to me. All right. Yeah. Yeah. No, I can definitely see that. I, I, again, the overall conversation around product management, and this is someone as myself, not a product manager, but someone who's, you know, built, been part of teams building products. It was, it was really interesting how they approached it. Let's also go quickly through a story that we also brought up last week, which was the tech IPOs returning.

10:28And we had a bit of a debate about whether the pops are meaningful or not, that when the stock goes up on IPO day, you actually have something remarkable that's happening and it's good for the company. Let's leave that debate aside. But I want to talk a little bit about what has actually happened with these tech company IPOs since they went out over the past few weeks. So this is from Aaron Griffith, New York Times reporter. All three of the recent And tech IPOs had first day pops that didn't last. Arm, Instacart, and Klaviyo are all trading below their first day opening price and are flat to their IPO price.

11:01So for listeners, Arm went out at$51. It climbed 25%, and now it's at$50. Instacart went out at$30. That was its IPO price. It climbed 40%, and now it's at$30. And 12 cents, so it's returned back to earth. Klaviyo out its IPO price,$30. it jumped 23 % and now it's$33, but it's really given up most of that pop. I'm curious. I mean, obviously it's a rough week for the market, right? But what do you make of the fact that these pops are now all gone? Yeah, it was only a week ago, everything was great in the technology industry. And I imagine every investment banker out there was calling up their clients who've been sitting on the sidelines for months or even years now who have just been chomping at the bit to go public, that maybe the window is open and it's time.

11:51But this week is not looking as good. So I think we got to separate it out into two parts. One is the specifics of these companies, and then two, the economy itself. Now, Instacar was interesting. Like Corey Weinberg at The Information, we had brought this up last week, and he wrote in more detail. And Arm did this a bit. So Arm floated only 10 % of the company, actually made it available. The other 90 % is still owned by SoftBank and Masayoshi Sun. Instacart is even less. The entire float was only 6.7 % of the company. Now, a typical IPO, 10 % is already the very low end. You see typically up to 25 % of the overall value of the company being floated and available to sell.

12:37So you have a very, very limited supply of stock being issued, which obviously helps push the price up just because the scarcity of what's available and everyone is interested in this IPO and buying this stock. So I think already you saw the pop. You saw the interest. The financial engineering worked until it isn't as much anymore. And everything's coming back a little down to earth. But I think then, and we should definitely get into it, the economy as a whole, the Fed this week, things are looking a little more reserved, let's say, from the Fed. I mean, I'll take it a step further. I felt this was one of the most depressing weeks in the market we've had in a very long time.

13:19You have the S &P, this in the past five days alone, down more than 2%. A lot of the gains that we saw, at least in the second half of the year, have just been completely given up. And it does stem from the Fed signaling to the market what it's going to do. So there were two elements to this, Ronda, and I'm curious if you think I have it right here. The first was that the Fed didn't immediately say it was going to lower rates and said it might even raise rates this year. So that was element one. But the second and the more impactful thing is the Fed said, listen, we're going to keep those rates.

13:52We're likely going to keep those rates high for longer than we initially expected. and if the market's trading on the next 12 or 18 months ahead of time it seemed like we had a pretty good time in the market not for what's happening now but for what was going to happen over the next year and a half or so with the fed saying it's going to keep those rates high all of a sudden the good times the market expected are gone and now you start to see what really is you know a stock market crash so i guess two for you two questions one is that a proper diagnosis of what's happening to is this still just really confined to assets or is the fact that the stock market is going south in a hurry lead us to a potential area where a recession could now actually be in focus?

14:36Yeah, so I think that's a proper diagnosis. Actually, one of the best ways I read it put was, so basically, typically when rates are, you know, there's a hiking cycle, once that's finished, rates drop quickly. The Fed's hiked, inflation is headed off, and then in order to keep the economy stable, they drop rates quickly. The biggest thing that Jerome Powell and the Fed indicated, both through what he said and in the dot plot, which is where they indicate what their forecast for interest rates are, basically is that rates are not going to drop quickly in the same way. The line I read was, is that rates go up like stairs and drop like an elevator.

15:21And it captures it. So what they're trying to say is inflation is moving down, but it's still not dropping quickly. So the Fed has to be a little bit conservative, but economic growth has still been resilient. So from their perspective, it actually seems reasonable at this exact moment that they don't need to cut rates yet. They should actually give because one, inflation could raise its ugly head again, or the economy, if it starts to show signs of weakness, they need to give themselves room to cut. So I think, again, at this exact moment, the way the Fed communicated, I actually think is correct, but clearly the market did not take it as such.

16:09And what about the chance of a recession taking hold now? I mean, it's so interesting because every time I see people predicting a recession, it's always like a year away. And at this point, I don't know how you could have any credibility if you keep predicting a six-month-away or one-year-away recession, and it doesn't materialize. So what do you think about that? Yeah, I actually, I would guess the number of pundits that are predicting a recession is probably going to be down because everyone was wrong 12 months ago. So people are going to be hopefully a little bit more reserved. But again, I mean, the economy is in likely a more precarious situation right now than it was 12 months ago.

16:47But the precarity of it is, again, like as you see in the Fed's decision calculus, it's difficult because everything's okay right now. So trying to plan ahead for 18 months from now or 12 months from now, that's the difficult part because inflation is still down growth is still pretty good right so where you go from there and how you navigate out of that it's it's a very tough thing to do it is interesting i mean one theory here has just been that like the main impact of their rates has been on asset markets inflation was going to come down anyway because the supply chain was riding it and the economy will look good until it doesn't and that's when you might have a problem because this stuff works very slowly.

17:29Like it's not like you raise interest rates by 2 % and next thing you know, like that's reflected immediately. It takes a while. So speaking by the way of the stock market and good times to bad and then bad times to good, Square or Block as it's called now is down 85 % since it's COVID highs. And there's a familiar face that's returning to Square. His name is jack dorsey he's the head of uh head of block or they call the block head so that's the umbrella set of companies that include square and title and some other stuff anyway the ceo of square is leaving dorsey is apparently returning i'm curious what you make of the fact that jack is back in the game and and what it's gonna say for for square so jack is back um and what's really interesting about this company is one it is called block like we i think people are sometimes forgetting that this was like in terms of what it made me remember was i was on their website i'm gonna let you talk in a second but i was on their website today and i saw like they're like blocked they still have like blockchain and their leadership is all like a cube and it's just amazing like how silly it seems right now sorry go ahead no no but exactly so that's what was so amazing about this story is I had forgotten it was called Block.

18:50I forgot. I mean, if people remember, and we've now hit a point in the cycle where like COVID ridiculousness is kind of fun to watch in exactly that. I remember they renamed themselves Block in peak pandemic era, like insanity. They had a corporate site with exactly the leaders are all cubes and blocks. They're like, yeah, their headshots are spread over three-dimensional cubes. And it's hilarious because you have like their facial features on one side of the cube. And then the top of the cube is just their foreheads. See, this happened. This happened to a multi-billion dollar public company. And again, the fact that blockchain was going to be the answer and they invested in Tidal, which was always kind of interesting.

19:39Or did they buy Tidal, I believe? Bought it. Yeah, so they bought it. So overall, but the core business, Square, has been having some issues. It had its first, I believe, nationwide outage recently. But actually, I was here at a blue bottle, and it just didn't work. And there was a line. And then I read the headlines later. It's a massive outage for the payment provider, which actually is known as one of the more reliable systems in the market. So it was interesting to me that - They're just working on Twitter servers. Exactly. So I am so intrigued whether does this mean they are now getting back to fundamentals and recognizing, okay, Square is the business.

20:27All this block stuff was all kind of a diversion or maybe not the right approach. and Jack is going to clean things up and tighten up the old organization and make it all kind of built around the core business of Square? Or are they just having a lot of problems and the CEO, Alyssa Henry, who was the CEO of Square, is leaving and they're going to have to find someone else? It would be extremely fascinating if Jack comes back and cleans out all the blockchain stuff because he's like Mr. Bitcoin and Mr. Blockchain. Yeah, exactly. I don't see that happening at all. And so that's going to be a very interesting tension between Jack, who's all up on Bitcoin and blockchain, and maybe what the strategic imperative is for Square.

21:16There's so many of these stories I love. And we're seeing it all now, September 2023. And as you said, the transmission of effects of high interest rates take time. where all these things that happened in 2021, we are now seeing the fallout continuously on. And this is another one that just quietly, it's all related to pandemic absurdity. I was going to say, have you seen the headlines or the snippets of the lawsuit that FTX has brought against Sam Bankman Freed's parents? Oh my goodness. He's talking about 2021 insanity coming out now. What did you think about it? uh i mean maybe that can be for an entire episode or segment in the future but i i strongly encourage everyone to go read everything they can around how sam bankman's freed's parents were very involved with the overall ftx process and uh just the the level of like yeah absurdity or just things that people thought they could get away with still still blows my mind i mean there was a one snippet of it where the father had been asking allegedly had been asking sam for a higher salary and it was like supposed to be two million but instead it was like a hundred thousand dollars and he like writes in an email that's cited in these court documents that he's going to go to sam's mother to have a discussion about this i mean we're talking to your mom pretty amazing my salary right now one thing that didn't that seemed like it might be you know short-lived or a bit of hype but it actually isn't and has been sustainable and very interesting in a way that has surprised me and might actually have me rethinking some of my theses around when people are going to pay for social media is Snapchat Plus.

23:04I mean, the company this week just announced that 5 million people have been paying for subscriptions on Snapchat and that's stuff that gets you access to new features on Snapchat. They're my AI bot, which is like sort of a dumbed down chat GPT. I'm curious what you think about this obviously it's very impressive success and starting to alleviate some of the business trouble that snap has had on the advertising front it's kind of the opposite of the way that we started the discussion today but it is fascinating to me that they've been able to grow this product in the way that they have especially considering the consumers that they have which is that they have a lot of young people without much disposable income and then millions of them are paying them for the premium version of this product what do you make of it yeah this is incredible to me because for the amount of noise and conversation over Twitter's subscription product, which at one estimate has around 550 ,000 subscribers, Snap quietly has for its Snapchat plus subscription offer 5 million subscribers.

24:06And that's up from 4 million in June, 3 million in mid-April. It's a growing product. And I'll admit, I am not a heavy Snapchat user. I subscribed to it a few months ago just to see what's interesting about it. And this was when it's my AI bot, you know, like was kind of the driving feature of it. All the other ideas like custom app themes and unique app icons or the ability to pin your number one BFF. I do not have a number one BFF on Snap. It's all interesting. The AI chatbot, again, I tried to use it to set reminders to see if it could do it. It couldn't even do that. But apparently they had numbers around how many billions of queries are actually made to it every day.

24:51Even they just added, this was interesting, a feature called Dreams, which is basically Lenza. For anyone who had ever used it, Lenza was kind of this viral app where you take 10, 15 selfies of yourself. And then it generates AI, generative AI images in all different types of scenarios. And actually it was cool. And it went viral. And I paid like 12 bucks for one pack of photos. And if Snapchat, it's another. So to me, it could be this really interesting sleeper story where you have millions of younger consumers spending money and getting used to and acclimated paying a social media company, which no one has been and everyone has been trying to do.

25:37and then you start at because already I checked the dreams uh the generative ai photo feature if you're a snapchat plus subscriber you get like one or two packs free but then you can start buying additional ones so you see how just that habit of creating payment um and a company that honestly the one thing they've never figured out advertising well but creating highly engaging innovative products they're great at so I think this is a this is one to watch I mean talk about underrated stories that are going to really, you know, seem poised to take off. I think put Snapchat in the, in the picture as well.

26:13That should be our, yeah, the theme of our second half of this, this year is Yahoo and Snap, the, the sleeping giants of tech that you've, you underestimated. I'm smiling, but I actually, I do believe it. Look, this is one of the things that we talk about often here. There's hype and then there is actual production, right? That 5 million user number isn't made up it's real if it's made up it's an sec violation and people are going to jail so the point is like when you have those results that's when you can start to talk about things and there's real results there speaking of real results the growth as well again yeah three million just like five months ago it's impressive double and like and there's no advertising there's no i don't see i'm not again not a snap demographic necessarily but like It's not some giant story that everyone is aware of.

27:03It's just, it's happening. Absolutely. I mean, the growth is amazing. And they also grow their users. They grow their users in a way like Snapchat's going to be a 1 billion user product. It's just crazy to say. But it is. They've been trying for a while. It is. No, it adds 70 million a year. So over time, it will get there. All right, let's take a break. Come back right after this. Talk a little bit about the generative AI stories. So don't go away. We'll be back right after this. Myself and Ron John Roy. Did you know your credit card points and miles can lose value to inflation? Credit card companies often reduce the redemption value of your points and miles.

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28:52Each week, I'll sit down with some of the most interesting, provocative, and influential people who are shaping our right now. Big interview conversations are fun. I want a shark that... That eats the internet. That turns it all off. Unfiltered and unafraid. So in a lot of ways, I try to be an antidote to the unimaginable faucet of reactionary content that you see online, to the best of my ability. Every week, we're going to offer you the ultimate luxury of our times. Meaning and context. True or false, you, Brian Johnson, the man sitting across from me, one day, at some point, as of yet undefined in the future, you will die.

29:33False. Tell me more. Listen to The Big Interview right now in the same place you find Wired's Uncanny Valley podcast. Subscribe or follow wherever you get your podcasts. And we're back here on Big Technology Podcast with Ranjan Roy of Margins. You can get the newsletter at readmargins.com. We talk a lot about generative AI on the show. And this week we had a trifecta of big AI announcements coming from Apple. No, sorry, coming from Amazon, Google, and Microsoft, where we saw like legitimately impressive or substantial improvements, shall we say, from all three companies. but I also think there's like a varying degree of of of adoption that they're going to see I mean I think that like you can tell by my intro to this segment that like you know there's stuff you want to be psyched about but then you start looking at it a little bit deeper and the conclusion I came to was that a lot of this stuff is going to be enterprise specific and very interesting in the workplace and sort of like maybe it will catch on for the rest of the population so I was at Microsoft's event in New York City this week where they revealed their co-pilot, which is going to sit on Windows and Office 365 and inside Bing and basically everywhere you use Microsoft products.