No one won the AI Bowl

0:05Today on Great Chat, Dan Stroud will join us to talk about Super Bowl commercials and whether startups should or should not consider investing in them. I'm Helen, and this week I'm joined by Ashley. Great Chat is brought to you by Mercury, radically different banking loved by over 300 ,000 entrepreneurs. We use Mercury to run this podcast and love recommending it to other founders and fund managers. It's free to get started. Try it for yourself. Visit mercury.com to learn more and apply online in minutes. Hey. Hi. Happy week after the Super Bowl. Now we can focus on the Olympics. Are you watching Olympics?

0:42Are you an Olympics person? You know, I'm normally such an Olympics person. I think I'm more of a summer Olympics person, which I don't think is, you know, that controversial. With Winter Olympics, I really mostly care about figure skating. Right. Because I grew up in like the Nancy Kerrigan era. I grew up in Buffalo. I figure skated. Yeah. Yeah, you really. You had no choice. Like the main event. Yeah. You had no choice. Well, I did gymnastics as a child. So I felt like, you know, like Summer Olympics was like gymnastics. And then like, you know, Winter Olympics figure skating is like gymnastics on ice.

1:21I didn't even know the Olympics were happening. I had like an LP call on a Friday and he's based in Milan. And he was like, oh, sorry, I'm going to be a little late because of the opening ceremonies. And I was like, what? What? Oh, my gosh. It's an Olympics year. And this is what's so crazy because I felt like, you know, two summers ago or whatever, the summer Olympics were like front and center. Like my feed was like all Olympic memes. And I've barely seen anything from this Olympics. Part of it is I think the time zone's really hard. Like all of the things, if you're on the East Coast, it's even worse on the West Coast, are like at like 3.05 a.m.

2:05or like 5.05. And I just don't care quite enough to wake up that early. But then also, you know, this is the era of conspiracy theories. And I was like, I read that a lot of the U.S. athletes are sort of speaking out about how ashamed they are about things in the country. And I'm like, oh, is this being suppressed? Like, I'm not. OK, mine's mine's slightly less conspiracy theory, but maybe more cynical. And mine was just, oh, yeah, the U.S. tends to not dominate in the Winter Olympics. So, like, maybe they just don't cover it because they don't care. I mean, they it's I mean, I think we dominate like snowboarding.

2:42But like, it's hard for me to think about. I do get like really attached to the medal counts. And it's been a little depressing. thing last I looked we'd won two golds and nothing else and like you know we were not in the top five um and yes we like to dominate so that that could be it also did you see the bobsled team did you see what happened oh yes that was a little messy I saw the memes as usual like you see the memes and you're like something must have happened okay let me read oh my gosh I felt so bad I felt so bad for the guy who had to go down by himself and then like scoot back at the end to do the breaks, which is normally not his job.

3:22But no, the only thing that's really broken through into my feeds is Lindsey Vonn. And, you know, like he had her big like comeback moment and then she had her injury, but she was going to ski anyways. And then and then, you know, I actually find I think it's like overall a very inspiring story of like perseverance. And her messaging has been amazing, but it sparked this whole debate around like, should she have been allowed to participate? And so, yes. Yeah. So speaking of her messaging, right, she wrote she took the time to like write a response to somebody who was like, how could she be thinking about competing at this age or something like that?

3:58It's like, excuse me. Also, you know, way a spot from someone else on the team. And she's like, oh, yes. You know what? Yeah. The first thing it reminded me of was like maybe like Ruth Bader Ginsburg, not to like go there. Oh, my God. people having strong opinions about when women should when women should step aside it's like also i don't know like there's such a history of athletes like playing hurt and accomplishing like incredible feats i'm actually i'm reading a book called endurance right now which is about like the limits of like the human body people have like broken records with like you know broken just crazy crazy things and I it feels a little gendered to me like I don't feel like if this had happened to a male skier people would be like oh he shouldn't be allowed to compete because he tore his ACL or whatever so anyways but Lindsay has handled it beautifully and has become a role model even in her failure um to you know secure another gold and so like sometimes you don't get like the version of the story you want but I think for anyone who is watching like very inspiring Totally.

5:09Are you working on a SaaS is dead blog post like every other investor? Oh, my gosh. You know, it's funny. I was chatting with an LP. I guess it's what one does as a fund manager. And they were like, how are you thinking about SaaS investing? And I was like, oh, this is so funny. I haven't made like a SaaS investment in like a really long time. Like, you know, it's kind of felt like, and I mean this in a non-hyperbolic sense. The writing has been on the wall for a while that like these business models are going to shift and pricing is going to shift. And like, you know, most most founders building today aren't building like, you know, box in this era.

5:49The SaaS that I the SaaS that I knew and loved. So but I certainly have have seen the sort of. It's hard to keep up now. Yes, there are so many. It is truly like a fire hose. of yeah and i think that i think it's important that at the start of all of these blog posts hot takes cries whatever and that like they define what specifically within sass is is over and i think it's just like the idea of seat based like license or subscription you know pricing and that was even or even like maybe that will continue but the margins won't be what they were Right. Like maybe seat based is still going to make sense for some types of tools, but you're not going to have those super sexy, like 90 percent software margins because, you know, it won't be the highest value tool that people are using.

6:44I know some people read it as like software is over. Everyone's going to vibe code. Like what do you mean? HR system is a good example that keeps coming up. And I'm like, no, that's not what people are saying. It's just that I think that there was a lot of like, you know, sort of like seat tripping or like, you know, sort of ways to to to to grow recurring revenue that like agents should quickly be able to kill. Like, oh, here are all your unused licenses. Let's cancel, you know, and bring that down. But then also, yes, just the general cost of software is eating at the margins. And I think people are pointing to basically what seems like freefall of SaaS company, you know, public stocks right now and making really, really wild sort of conclusions on what that means for like any software startup right now.

7:32And I don't necessarily, you know, agree with that either. I think that there's just sort of like this catch up and transition that's happening right now. People are excited. And I think like, you know, our minds are continuously blown by what is possible to do with some of these AI tools. And it's kind of fascinating because there's a parallel to like the sort of stock market crash for SaaS stocks on the individual level. Like just over the past week, there were so many people who are like, you know, software engineers, developers by training who have expressed like this real grief that the craft they've built over decades has been kind of made like abundant in a way that, you know, this is a bit of a stretch.

8:17So call me on it if it makes no sense. But it actually reminds me of how a lot of people felt about their lives at the beginning of COVID. It was like, oh, this like old way that we used to that we used to be is gone. And it is like a feeling of grief. And I think that there I know of like a lot of people who are having a bit of an identity crisis right now. And it's hard for me to feel that. I mean, I certainly feel the like, oh, man, the ground is shifting from underneath us. And I need to think about like where this could go. But it's less personal because I'm not a software engineer. I'm not a developer.

8:55That's so interesting. Yeah, yeah. I think that to me, the group of people that are having the biggest crisis are investors. Because I think that if you think of all of the people and the entities, like who really won with SaaS? Like who are the biggest winners? I think it was the investors who invested in SaaS companies. I feel like a very, very deep grief for them. But from like a marketing standpoint, because I thought of this too, I'm like, oh, well, B2B marketing teams and enterprise marketing motions and, you know, like the sort of like SaaS marketing playbook for the last 10, 15 years or whatever, something that I know pretty well.

9:31No, I don't think it's any less interesting. I think that it's still going. And in fact, there's a hyper reorientation around in-person engagement that has not existed before. And I think that's pretty exciting, which means like events are back and executive programs are back. And that's pretty cool. You know, I'm just sort of like mapping out like who is really impacted and who is really sad about this. And I just keep coming to this conclusion that like, oh, investors, investors are really sad about this. I was talking to a friend who's like kind of in the belly of the beast in AI. and she was saying that it's going to be like technical people, software engineers at tech companies who are the most impacted by, you know, all of these incredible new tools we have, whether it's like Cloud Code or CodeWork or Codex or whatever.

10:21And that is kind of wild to think about because these are the people who've been the most prized. And, you know, I think, again, it's very easy to like overcorrect in these moments. and you know there are plenty of examples throughout history where like gangs and productivity have actually just moved the work like up a level versus eliminated roles but I think it's very clear that this is going to be disruptive um maybe disruptive from a labor perspective but the identity piece is the piece that is so fascinating to me and I think I would feel that way not at the same level because I'm not like a professional writer but I love writing and I still get to feel smug about like, I think my writing is better than the slop that I see that, you know, chat GPT like generating for people who are endlessly on LinkedIn.

11:05And I think the day that like chat GPT is writing something like more thoughtful and more beautifully articulated, like I will be experiencing a form of grief where it was like, oh, this thing that I liked doing and liked feeling like I had some skill and some craft is suddenly kind of evaporated. So that makes me think of our conversation around like storyteller, the storyteller era, right? That we were having last year. And that takes us to like the Washington Post layoffs. And sort of what does it mean when a lot of these roles are being eliminated? You know, is the storyteller era here to stay?

11:46Does it make just a fewer number of roles more important? Yeah, it's really I was thinking about this because like the like hundreds of writers, journalists at The Washington Post roles have been eliminated. And from, you know, from the ones that I recognize and know and I'm comfortable extrapolating across the rest, like these are like very high quality, talented people. And there just aren't enough open roles in the industry to absorb them. Right. And so. So yes, I guess like the default be like, oh, they can go in-house and become storytellers. And I was thinking about, you know, that that has always been a path for journalists.

12:25There are plenty of examples of like tech journalists who are tech bloggers who like went in-house. I was just thinking about how jarring that would be in this moment when there's so much more antagonism between like media and then like, you know, sort of the go direct. We want to control our narrative. And so I think it'll be fascinating to see like who who makes that transition and and stays there and is happy there because it feels maybe more jarring to me than it would have been like 10, 10 years ago to go from like a journalism role to like an in-house content role. But we will see. Should we hop over to our big topic today?

13:02Yeah, let's do it. Let's do it. All right. So this is the episode after the Super Bowl, and naturally we're talking about ads, specifically startups doing ads. So today we're joined by Dan Stroud, managing partner of Squaro, a former in-house design and creative team turned studio that helps startups ship what actually works. I love this positioning, by the way. Dan, we're so excited you've joined us on the group chat today. At Squaro, you've worked on TV ads for companies like Grammarly and Abbott. Prior to that, you worked in-house at Thumbtack as well as Dropbox, where you and I work together on a marketing team.

13:38You worked with the team that did the Space Race and the Campus Cup, which let university students compete for signups from their EDU addresses to get more free Dropbox storage for their schools. So many startups have wanted to copy this brilliant campaign. And they asked me, did you work on that? I'm like, no, not me specifically, but smart people who did. Ashley, did you guys see that at Vox? I have like vague memories of this. And it's so funny to think back to that time when like gigabytes were so precious. And like Moore's Law eventually made that like not a thing. I remember Dropbox did that.

14:14And then Box made like unlimited storage or enterprise plan. And because it was such a different media environment, every time you did one of those things, it got covered. And so I miss those days. That was fun. Totally. Okay. Well, thanks for joining us, Dan. Hello, hello.

14:29Dan Stroud:Yeah. Thanks for the lovely and pro intro. Love it. Okay. So let's get started. Why are startups doing Super Bowl commercials in the first place? Many of them not profitable yet. Hard to imagine when they will be, but we have seen projections lately. And then, you know, I think something that we've talked about before is like B2B startups doing terrible ads. That's another interesting one, too. Or like B2B use cases of some of these startup companies. Thoughts there? Well, I'd love to hear the kind of investor take on it and then get a little more into the marketer take. Good punt. I mean, when you've raised like tens or hundreds of billions of dollars.

15:21A Super Bowl ad looks pretty cheap. Actually, I saw someone make the joke that given how much they're paying these AI researchers, like a Super Bowl ad is nothing. Oh, yeah, it's pennies. Helen and I invest the early stage and we'd probably be pretty pissed if one of our companies took all their money and did a Super Bowl ad.

15:40Dan Stroud:And they're not cheap. I mean, it looks like their 30-second spots for$8 million this year, give or take, if you're doing the full streaming and national TV buys. And then on the production itself, I mean, places that aren't going the full AI route, they're spending millions of dollars on these ads. So yeah, that's your whole Series A check. I think Coinbase spent$5 on production. So there's a spectrum. Yeah. Totally. But like, I mean, some of the tweets I saw recently, likes uh who who is that mercore is it mercore who's like doing the salary plus sign-on bonus and that's like several million and so you know maybe it is just really one one ai engineer for these super bowl spots but i read this thing over the weekend um from anna barber who just joined everywhere ventures and i wrote it down she her quote was when startups behave like brands before they behave like businesses, it's fair to ask whether this is still venture capital or something new we haven't named yet.

16:47Some are calling it asset allocation, others are calling it kingmaking. And I think that's really interesting because she's speaking to the point that, you know, like some startups are just so well funded that this is just no big deal, right? And maybe there is too much capital adventure right now. And maybe it's too concentrated. I know Ashley and I as emerging managers were like, where's the capital in venture? But the fact of it being really concentrated, I think people have called out. And it not only being concentrated in several mega funds, but also being concentrated across just a few companies, right?

17:22So this idea of kingmaking becomes real that it's truly the haves and the have nots. And when you have like, yeah, Super Bowl commercial is just nothing. Why not?

17:33Dan Stroud:Yeah, I love that article you shared. And something else that stood out from it was historically funding used to de-risk product development and technology. We want to put all of our money in this stuff and de-risk that aspect. But now with it being easier to build and ship products, it's almost like you see venture capital also de-risking the competitive mode and the marketing aspect. Oh, we got to pay to play, not just to build a great product, but also to get it out in front of people earlier. And so you think back 15, 20 years, maybe a little more pre.com, boom and bust. It was profitable companies, the Budweiser's, the soda companies of the world running suitable ads.

18:23Dan Stroud:And like you said, now you have companies that aren't profitable and maybe still figuring out their business model, having to do that just to compete because there's so much at stake to get that mind share? Well, I think that this time the Super Bowl ads, like we started to get this, we started talking about this like pretty much right after our last episode, because Anthropic rolled out their, their four spots, they debuted them on Good Morning America, and, you know, also Twitter. And we were talking about Super Bowl ads, you know, many, many days before they actually aired during the Super Bowl.

18:59So a quick recap of the Anthropic ads, Basically, they had four spots. Were they 30 seconds or 60 seconds?

19:07Dan Stroud:They had a mix. They had a mix? Okay. And basically, they're saying they did like a spoof on like the open AI, excuse me, the chat GPT sort of like voice. And then, you know, started to, the voice started to read ads, incorporated sort of into the responses. And, you know, they're basically saying that Claude will never have ads. And I don't know. Like it was so interesting, even just watching the sentiment change over time. And I felt like originally it was like, you know, criticisms of, oh, that's pretty bold that Anthropik would declare they're never going to have ads on Claude. Like that's wild as like the ad stan of the group chat, like ads are a great business model.

19:51Like that's pretty bold to do that. But then again, like, you know, the consumer part is not Anthropik's like bread and butter, right? And then somebody, you know, lots of people pointed out like this sort of felt like bait in some ways that like the open AI executives responded with like many, many, many paragraphs of sort of, you know, why Anthropic was not being honest on this and this and that and sort of drew more attention to it than I think was might have happened had they not touched it. And so that sparked debate and like brought up the whole thing of like when you are the number one player, you know, do you even acknowledge number two in this case?

20:29I saw a tweet that was like, there are more people in Texas that use ChatGPT than there are like people who use. I mean, that was in the OpenAI exec tweets. Okay, gotcha. There we go. Yes, yes. They were trying to put Anthropic in their place. Right, right. So that was like an interesting sort of debate. And then I feel like the day actually of the Super Bowl and then the sort of reactions from like everybody watching the Super Bowl, you know, millions and millions of people. It doesn't really sound like any of the AI ads really landed, but it sounds like the open, the anthropic ads especially did not land.

21:06So like, I don't know, where are we today, several days after the Super Bowl? Who won that debate?

21:12Dan Stroud:I mean, I think it's definitely a time will tell thing. The next like year or two are going to be really interesting. I know immediately someone had shared on LinkedIn about the Google trend and the search history for the two brands after and not a meaningful blip by any means. I think part of that has to do with they're already relatively established. People know them generally. But yeah, I mean, I'm with you, Helen, on being a little bit thrown off by the messaging and the strategy. And it's very easier as an outsider to critique and say, hey, what are they doing? I'm sure there's something internally that makes sense.

21:54Dan Stroud:But I think of Claude as being positioned as the AI tool for work. I think maybe a lot of people do. They've been in the press a lot recently for that exact fact. And so to see an ad come out where the message is, hey, AI is coming to ads, not ours. It's like, is that something that business users of this product? Yeah. even think about at all, like I said, even cross their mind. Why are you bringing that up? So I thought it was interesting that instead of doubling down on their strength, being a bit more positioned for work, integrations, privacy, it was like introducing a totally new message.

22:36Dan Stroud:But I think you teed this up. Maybe they're trying to play catch up on the prosumer side, right? Where ChatGPT has kind of been eating their lunch, you know? nationally, with getting more individuals to use the product, more consumers to use the product. So I guess that must have been more of the angle to grow that audience size there. My joke is like, if you use AI, you enjoy tech rivalries, and you watch Pluribus, you were like so primed to love that ad because it's so dystopian. I don't know. I think like just based on the the big reveal them being able to bait um sam and kate the cmo into their very like defensive corner and they had their sort of big morning show unveiling i feel like they got their money's worth um and then i was looking at the um usa today ad meter rankings which are like from actual audience members.

23:37Yeah, yeah, yeah. And trust me, all the agencies are refreshing and watching that. That has been like the official scoreboard of Super Bowl ads for decades. Yeah. And OpenAI and Anthropic were numbers 45 and 46. I mean, they were at the very, very bottom. And it's such a good reminder. Actually, my husband made a really funny joke. He's like, this is what happens when you try to do founder mode for ads. He's like, ads should be manager mode, like outsource it to an agency who knows the formula. And like, you know, like the Budweiser ad was number one. And it was about like a baby horse and a baby eagle, like growing up together on the farm.

24:14And it's like so formulaic and it just works for like, you know, the vast majority of the audience. So, so I don't know. I feel like, I feel like neither of these companies had like a mandate to appeal to like the largest number of mainstream viewers and were maybe a little bit more in their own, their own bubbles. And like, I personally like loved the Anthropic ad. I found the OpenAI ad very vanilla and boring. It's just like, oh, if you like tinkering, you can like build things. And so, and so to the extent that OpenAI needs to have more broad consumer awareness and certainly has far, far more users than Anthropic.

24:54And Anthropic has really like nailed it with tech insiders. I would say Anthropic did a better job with this ad because they delighted its like core customer base, whereas OpenAI probably didn't land as well with the mainstream audience that it really needs.

25:08Dan Stroud:I'm with you, Ashley. I think they got people talking about them. And we can talk a bit about why B2B companies do this in the first place. But I saw, I think it's the head of brand at Anthropic post, they're two primary goals for the ads. One was just introduce Claude to the world, which they did, right? They ran multiple spots. People were talking about it. It might make more sense later as they see ads show up in their chat GPT. So, I mean, if anything, they accomplished that goal. The ads were funny. They're great. Think like, yes, there's some mixed signals on the messaging, but they're playing on a big stage.