57. GEO vs AIO. Who will win the title fight?

0:00Welcome to The Difference Engine, the show for tech founders, investors and innovators.

0:08so paul what's coming up on the difference engine today 12 months on from the passing of the uk's bill gates that's mike lynch our reflections on corporate greed and missed opportunities and we also ask quo vadis quango crats that's a lot of first we'll be stepping into the naming ring for a shiny new ad tech category that will exist in the post SEO world.

0:38All right then, sir, it's time to educate ourselves. What have we got this time, Jonathan? Well, you know, there's a lot of buzz out there in tech about, unsurprisingly, new LLMs. You know, we're looking at Grok 4, ChatGPT 5. And it sort of reminds me, I don't know about you, Paul, but it sort of reminds me about what used to happen around iPhone models. You know, the BBC got its knickers in a terrible twist about this new tech that was coming. You know, what we're interested in here are actually not increments. I mean, there hasn't been any sort of significant leap in iPhone technology since the earliest days.

1:16But, you know, it's probably about iPhone 4, I think, it goes, you know, with the retina display. I don't know. I mean, like, all I know is I'm paying more and more. But the innovation's going down and down. Yeah, right. And, of course, this is the difference engine. And of course, what excites us is a category formation, not product launches. Yeah, we definitely don't get excited by that. Category formations, though. So that means that we're very focused on the battle now for the dominance of the post-SEO world, or as some are calling it, as we believe mistakenly, GEO. And in case you've missed this threat to the online dominance of Google, based on the fact that they own the world's biggest search engine.

1:59And of course, that is the de facto iPhone search engine, as we know. Let's go into the jargon a bit because as we all know, in the world of category, language matters. It matters a hell of a lot because she who defines the language defines the problem. You define the problem, you start defining the category. and language matters therefore so much more in brand new categories. So away we go. Can you give us some of the taxonomy then, please? Well, why don't we just kick off with good old SEO. Yep. And for those who have forgotten what it actually stands for, it is search engine optimization. Now, what does that do?

2:41Well, SEO describes how to optimize the copy, the graphics, and the markup language of a website. So it ranks better on, guess what? Google and its all-important search ranking page. Or the SERP, as they call it, Search Engine Ranking Page. Notice how the language is already defined by the category here. If you have search engine optimization, the thing you want to rank on, if you are in the category, is the Search Engine Ranking Page. Yeah, so tell us about ranking. Like so many things in tech in recent decades, ranking was notionally free in inverted commas yeah free great note that note those inverted commas because something's coming you know you could expect to boost your ranking um by paying practitioners um in these dark arts uh to work the magic on your behalf to increase your ranking certainly spent some money with um dark art practitioners yeah well we can talk later about whether that was money well spent.

3:45But because the problem with all of this is that Google always made up the rules. And they made up the rules because they owned what we think of as the spider, the spider, which went and crawled the so-called open web. Now, if you didn't like playing by those rules and paying the white-coated God SEO specialist to rank keywords for you, as if they knew that what they were doing, there was an alternative way to climb the ranks on the SERP page. What could that possibly be? Here's the real commercial nub of it. Yep, you can just pay Google to advertise in those annoying blue links. You mean the one where there was one and now there's about six before you get to anything meaningful?

4:29That's right, the ones that you completely ignore. Now, who could possibly have run that marketplace, maybe set the prices, and maybe report back on success or failure? Yep, Google. And Google did it by its demand-side platforms and Google Analytics tools. You know, talk about marking your own homework. Certainly. Now, ethical. I don't know. I don't know about that. But lucrative? Hell yes. Google Ads is said by some to make up to 80 % of Alphabet's profits, which brings us back to today. today, because today, most of us in tech at least, and increasingly all of us, don't use Google search, except to go straight to a website, which we already know.

5:17And so if I've got an existing relationship with a supplier, I might type that in, I might talk that in, and it takes me straight there. But all of this intent to buy stuff, hmm, not so sure. Hopefully, if you haven't been asleep for the last few weeks, let alone months, anybody in their right mind now to actually do proper early searches and to learn more quickly, which is vitally important as technology moves us to faster and faster economic cycles. We're just going straight to our local chatbots in Microsoft, which is actually, I think, OpenAI. I think so, yeah. Yeah, perplexity. Yeah. Kahir, perhaps?

6:01Rufus? Woof! Woof, woof, woof. We happen to be Amazon shopping. Or Gould, help us, using a voice interface like the dreaded Siri. Oh, and to be fair, I've got to be fair here, Google's Gemini. That does an acceptable job. It does. But the key issue here, it's no longer a virtual monopoly. And you won't be surprised to know that Google clearly knows it. And despite still rising ad sales in the last quarter, an AI arms race. But what we used to think of as search is definitely on. Absolutely. I smell a new paradigm and new paradigms build new categories and subcategories, which will likely dominate our lives in tech and possibly, just possibly everyone else's lives going forward.

6:50And that new category broadly is AI overview consumption. Now, that's the sort of category fight we like. We do. Yeah, and it's a language fight. And as in any new category, number one or number two, the category leaders will emerge maybe quicker in this than others. And the rest, according to our good friends at Play Bigger, congrats, by the way, Chris and Al, on the new book, The Emerging Market Trap. Well done, guys. Great read. And according to Play Bigger and Harvard Business School, the rest will fight for the remaining 20 % or so of the profits, the scraps, if you will. Now, given what we're told about the size of the AI market, and got a few stats for you here, so get ready with your pens and papers, that's still a big prize.

7:35But to the victor go the spoils, including naming rights. You can think of the Gulf of Mexico slash America, the English channel, La Manche, British Columbia, and Quebec. And we could go on and on and on. So naming might seem like just a little addition, a bit of marketing, but actually it's critical to the category definition. According to some, the market here is growing from 10 to 15 billion this year up to as much as$65 billion annually by 2030. And I've seen estimates way above that. So this name is very, very important. So this is serious stuff, right? Serious stuff, pay attention. So our big question is, what is the name for this post SEO category?

8:24What is it that describes the market movement where customers search for information not via conventional browsers, but through AI chatbots or voice interfaces? Now, we think there are two current candidates. So the first one is GEO, a Golf Echo Oscar, Generative Engine Optimization, which is defined as the practice of optimizing digital content to be cited by AI-powered search engines and generative models. We tried to find out who first coined this, but as usual, success has many fathers and failures and orphans, so no one's put their hand up at this time. What's up with it? What do you think, GEO?

9:03Having thought about it, our view would be that this is frankly overly techy. It's a sort of compound of generative AI and SEO. And I think, you know, it is too close to other meaning of geo to stick. We've tried hard on this one. We've really, really tried. It's not it. It's us. We just don't love it. Don't love it. Now, we could be proved wrong. Let's see, because the second candidate currently, and there may others may emerge, right? The second is AIO. Right. Which stands for artificial intelligence optimization, which is defined as. The process of crafting and optimizing digital content for AI-powered ecosystems.

9:45Again, there's no clear owner which tells us this is a classic category naming wall. What's your thoughts? Apart from the fact that it could actually sound a bit like a jingle for a northern-based electrical appliance retailer. Nobody outside the UK will recognize that. Okay, but please, if you're listening to this in the UK, do enjoy that. Yes, but that AO Let's Go, which is what you're referring to, is based on a remote. And one of the best gigs I ever went to. Right, back to AIO. If we're trying to be objective about this, it just sounds fresher. It's definitely wider in its context, which we like, because we love a big town.

10:20It's about the ecosystem, and it more closely resembles the experience. I think we like to think about how people will talk about this in future. you know I don't think anybody's gonna go hey I found the answer with a generative engine you know they're much more likely to say I used AI to do it right in the same way as they now say generically oh I googled it so for that reason we currently much prefer AIO than Geo but we're loving the fight yeah of course this is early days now and there's definitely subcategories to build on these what are going to be uber categories but you know we know a good category dust off when we see one.

11:02Do not expect Google or any of the incumbents to sit on the sidelines here. There's way too much at stake to let anybody else define the game on the field, as our friends across the pond would say. Think there are too many lookalike tech companies chasing the same markets? We do. We think it's because so few tech startups are able to build and lead their own categories what matters most is to be different stop following and start building your own unassailable leadership position today working with the category design gurus at categorical brings decades of differentiation expertise to your team book a consultation from our website today and we will send you our one pager detailing how to start designing your own highly differentiated category.

11:54So what do we want to pass at this moment? Yeah, pass the popcorn. Pass that popcorn and settle down for some great category creation filmscapes.

12:11While we were talking the other day, we realised, looking at our diaries, which we seem to spend most of our time looking at these days, that were coming up to the anniversary of the tragic death of UK serial tech entrepreneur Mike Lynch. He died in the sinking of his yacht, the Bayesian. This happened as part of a very, very long-running legal dispute with HPE. And we found out in recent days that HPE has been awarded£730 million damages as part of the case erodes through its acquisition of Mike Lynch's second initial breakthrough company, Autonomy. Yeah, so champagne all round for those briefs, I'm sure.

12:58But English judge Mr Justice Hildyard awarded the damages, which could be a lot higher if interest is as that is. Of course, the good news is this is a far cry from the utterly ridiculous 4.6 billion that HPE's leadership were rubbing their hands with glee they thought they were going to get, but missed out in the US court. Yeah, but Hilliard, in his judgment in the UK under English law, said that if autonomy's accounts had been properly stated, it would the valued autonomy shares at£23 each, as opposed to the£25.50 that HP paid. Haven't we always all somewhat overpaid at times and learn our lessons?

13:43But hey, isn't this the same judge whose prolonged procrastination the Court of Appeal in the UK allegedly described as inexcusable? He took a mere 22 months to make a ruling in a case involving a Russian banks. So that's nice work if you can get it paid by the hour, 22 months. Lovely. They do say justice delayed is justice denied. But maybe a little bit longer thinking this through in this case, perhaps allegedly could have been better. Yeah, but there's some basic points here. This isn't about whether this is true or defensible or there's innocence or not. It's about the totally unfair way Lynch, and let's not forget other defendants like his CFO, Sheshovan Hussain, who actually served time in jail thanks to HPE's efforts.

14:33It is about the way they've been treated by HP. It is about the UK justice system and the US-UK extradition treaty, which is very, very lopsided. Well, should we not call it the US-UK extradition treaty? Should we just call it the UK extradition treaty to the US. Yeah. Well, let's remember, Mr. Lynch was found not guilty last year in the US courts. You're an M &A advisor of some note. Yeah, I mean, apparently I am, but I'm also a 40 plus year veteran of the IT industry. I can't think of any case when suing anybody for getting your valuation wrong by 10 % where it got any attention at all, let alone led to the sort of things that Lynch and Hussein and others have had to deal with over the over recent years you know it's this is about caveat emper, emper, you know buyer beware for those that don't know they're latin and adequate due diligence which is a major part of any M &A process you know this should have been applied here in the first place and any company with a backbone would consider this normal commercial risk yeah and and back to the hilliard just judgment this 730 million pounds award against mike's uh state is estimated to make the um the family go bankrupt yeah because we think his estate has been estimated to be a little less than 500 million so you know basically we can do the maths on that so great and so what you know what happens then well you know this is a so distastefully venal that HP might even go after Mike's wife Angela Baccarus and her assets.

16:19On a personal note I think some of Mike's friends really need to look at themselves and I use the word friends loosely. As a fellow traveler in tech I shared a stage with Mike 25 years ago when autonomy was just starting out. I've also via a school connection met the man personally and had the great pleasure of personally congratulating him on what seemed like a total exoneration in the US courts. But some of the folks that were writing about this, I'm looking specifically at wise tech analysts. I think they need to have a little look at themselves, not claiming any personal relationship or insights here, but just looking at the coverage Mike received.

17:03With friends like that, who needs anybody else? Just as a personal view, I thought some of that was less than supportive at the time. And if we cannot, as a sector and as a country, stand up for a man who many said was Britain's Bill Gates, I just think that's what we Brits called slippy-shouldered. Let's not forget that Mike also lost his daughter, Hannah, in the Bayesian disaster last year. For a personal note, she happened to attend the same school as two of our kids and was an actual classmate of one. Can you imagine what it felt like in the classroom when the kids heard that news? If we put our hats on as communications and category experts, which have also spent decades doing in the tech industry, we think that the reputational damage that this has done and is still doing to HP by continuing to pursue this case for the last decade is way higher than the damages currently awarded.

18:06I'm not going out to buy any more HP printers, that's for sure. And, you know, let's think about a so-called leading company and its responsibility to the tech ecosystem. You know, this has a considerable ability to cause entrepreneurs and investors, you know, British or otherwise, to be very careful if you're selling to a large US corporate. Absolutely. So, I mean, the thing here about Mike is, you know, he was a Brit. We're all about, in the difference engine, promoting European category creation and European category dominance. This is a clear warning. If you've got a deal on the table with one of these companies, the prestigious companies, striking the deal, even staying for the earn out might not be the last you hear of it.

18:53There might be this reach back via the law courts, and it's just negative in so many ways. Yeah, so the corporation appears to be been surprisingly quiet about going and suing those that allegedly did a poor job on due diligence. Again, this is absolutely central to any M &A process. And then why don't you just go and quietly settle with Mike's estate for a reduced amount and then disappear off forever, putting an end to this whole sorry and frankly disgusting affair. leaving what's left of the Lynch family well alone. Do the right thing, please.

19:41So as we know in tech, timing is everything. And recently, in the last few weeks, a post dropped with somebody who had become a bit of a quangocrat, which is something which seems to affect a lot of British tech entrepreneurs and managers as they go through their career. The much-fated and clearly very accomplished and highly intelligent Prime Minister's advisor, Matt Clifford, was outside the famous black door, number 10. What Matt said in this little post was, today was my last day at number 10 as the Prime Minister's advisor on AI. It's been a privilege to serve over the last year, that's 12 months, might not even be 12 months, but let's just call it a year, and I hope to make a small contribution on being an AI winner.

20:34The modesty was somewhat in contrast with the, was it back in March 2023, when Matt was appointed by the previous regime? Could you remind us about what he said there, Paul? I'd be delighted to. So Matt said, I'm delighted to have been appointed by Act 10 Downing Street and at SciTechGovUK to scope the UK's work on sovereign capability in AI. AI is the, asterisk asterisk, the transformation technology of this century. And the UK is uniquely positioned to play a leading role. That was then, and this is now. So then in signing off recently, Matt admitted, there's a lot to do. And I'm delighted that the government is committed, blah, blah, blah, blah, blah, blah.

21:21I'm excited to watch their progress. Hold on a sec. Weren't you jumping in to make that progress? But as usual, when anybody puts out something like this, there's a vapour trail of praise from friends, well-wishers, and let's call them fellow travellers. In some high places. In high places. Including some colleagues. What did they say, Paul? So, you know, the sorts of things. Congrats, Matt. I'm very excited for your next journey, as are we. More on that later. Congrats, Matt. You should be very proud Union Jack emoji. And this one from a Seattle-based fan. Congratulations, Matt! Please note that your work has inspired many individuals and organizations on how to position their countries in the AI map.

22:04Good luck on your next endeavor. But also, there were some people who were really not so kind, weren't they? Oh, yeah? What were they saying? This one. On behalf of copyright owners and creatives, thanks for nothing. Ooh! Ouch. wow handbags uh love another one uh thanks for helping throw craters under the bus to serve authoritarian u.s slot machines wow that's slop with a p as an internet slot not slot as in one armed bandits in vegas although that possibly could apply and then there was this one which was this is this is daniel this is really opinionated and i have to read this as it was written because i think somebody wrote this in a hurry in a bit of a rage so the english is a bit dodgy Unless your advice was to automate 80 % of the bureaucracy and then pass the savings to the taxpayer, you were still thinking small.

22:57Grok can generate longer monologues than Sir Humphrey Appleby. So even that has been automated. Now, for listeners who are not familiar, Humphrey Appleby was a famously vacillating senior civil servant in a British satirical comedy called Yes Minister, Yes Prime Minister, and was played by an amazing South African actor, no longer with us, called, in the end, Sir Nigel Hawthorne, I think. So, but the point being, when I'm leaving a job, I don't want people referring to comedy characters, much rather they took me a little bit seriously, which caused us to question, perhaps not unreasonably, after nearly a year of volunteering his services as an AI expert, why is now the time to leave?

23:44What's been achieved by this private sector co-founder who raised$158 million just three years ago for a Series C in his advisory firm, Entrepreneurs First? Hmm, this is where we struggled a bit. And as ever, we're trying to be fair. So what did we think, Paul? I think a lot of people are saying there's no economic growth and an exodus of wealth creators. Now, that's not necessarily the fault of AI, but we have the largest and the sickest civil service ever taking the most amount of time off of anyone in Europe. And there are now more civil servants paid. No comments on what an AI advisor gets paid.

24:24But there's more civil servants paid at a higher level than our good old prime minister. And most importantly for this podcast, we still have zero AI category leaders. Ah, don't worry. Do not worry. There is a plan. 50 point plan on AI, no less. 50 points. We always thought that brevity was the soul of wit and made for a better plan. But hey, 50 points, what could go wrong? As this is all about AI, we asked AI to rate Mr. Clifford's tenure. And it mentioned that Clifford had drafted all 50 recommendations and recommended a government pledge, if you believe such things, of£2 billion, which included£750 million for a new supercomputer, which they'd already cancelled.

25:10But hey, 50 recommendations,£2 billion of pledges. Can you actually buy much of a supercomputer with 750 million? Maybe a British Leyland one. But for UK listeners, you would not be surprised that we'd think a British Leyland supercomputer would be sleeping on the night shift. Also, allegedly, a note, in fairness again, AI can hallucinate, but I quote, No primary legislation was enacted solely as a result of Clifford's plan. However, the plan has driven regulatory debates and paved the way for future laws. As is the way of the British civil service. Yeah, lots of talk. It also noted a potential conflict of interest about the 500 tech firms in which Entrepreneur First has allegedly got financial interests.

25:57No kidding. So there you have it. So there you have it. Yeah. Eight months of service according to LinkedIn and a 50 point plan. You know, that's more than a point per week. That's more than a point a week. Talk about productivity. Growth, growth, growth. So, yeah, I mean, what's next for Matt? A New Year's honour, maybe? Place on the board of a quango. Why not? We'll watch with interest. But don't worry. If you do want to see Matt, he'll be at the Palantir-sponsored Europe Builders Retreat on the 10th and 13th of October this year. Wouldn't that be the same Palantir who is the alleged, alleged beneficiary of a£330 million NHS England federated data platform contract?

26:36Yeah, which is the largest AI and data infrastructure contract to date. And as it happens, very coincidentally, there are a lot of Palantir contracts with government. So the UK has, as you said, 330 million, sent 330 million their way to look at the NHS federated data platform. And we know that British companies bid for that. But hey, well done, Palantir. They also have an MOD enterprise agreement for a mere 75.2 million pounds, which will be renewed this year, most likely. In the States, they're doing way, way better. So they have the US Army contract, which is up to 10 billion over 10 years.

27:16And the Maven AI extension, a mere 795 million. So, yeah, better circles and civil servants. None of this is to suggest that Matt Clifford has any connection to Palantir in any way. Palantir is a company that does very specific things which are of interest to government. What it does underline is the fact we are spending a lot of time and money trying to develop AI, and competitors outside the UK are way ahead. And government, on one hand, while saying we need to develop stuff, putting frameworks in place, is actually spending its money with the competition. And speaking of advisors and all things AI and US, as a side note, we noticed that a co-founder of Entrepreneurs First is that longtime shit talker of the UK, Reid Hoffman, ex of LinkedIn, now a Founders Forum, who we personally watched in London talk down the UK as a home for startups, claiming France was a much better place.

28:18Thanks. Thanks, Reid. So, so long, Matt. Hope things go well for you in future. but it's also worth pointing out listeners that Matt's departure comes just a month after Ilan Gore the man who could once boast of having 800 million pounds to spend for the low-profile Quango area the UK's advanced research and innovation agency sort of like the US DARPA but with proper tea he brought a tear to our eye. He did he brought a tear on his valedictory tweet, citing his achievements of 16 visionary program directors appointed and over 200 research teams. And I quote, serving as ARIA's founding CEO has been the most important and fulfilling role of my career.

29:05It's hard to imagine stepping away, but with a strong foundation and amazing team and a clear runway of funding, this is exactly the right moment to bring in new leadership and this eight-part uh tweet thread carried on from the start the ci ceo role was bound uh was designed to be time bound a deliberate commitment to keep area dynamic and constantly reviewed with fresh ambition we're we're approaching a natural inflection point and it's the right time to make this transition with intent is he protesting too much we thought this is an odd way to announce that you're leaving a gig but hey this is the quangocracy um this time the comments thanks to a PR disaster about a swacky plan to prevent the UK warming with cloud seeding are not so kind.

29:53Yes don't know what was going with that cloud seeding idea but here is one of the responses. Aria has received£1 billion from the taxpayers to spend over the next four years to dim the sun in the UK. We have acres of solar panels which are there to catch the sun's rays. Not for our skies to be covered in cloud. No No wonder you are leaving the company. Ooh, that wasn't the only one, was it? A once-in-a-lifetime opportunity to engage in the most insane and potentially destructive experiment in the world. Sun-dimming! Who wants to be the one responsible for the, all caps, massive public backlash these experiments are set to bring?