Why Alphabet Wants $80 Billion for AI, Twitch’s Ad Plan & Self-Aware AI Models

0:05Thank you.

0:31Thank you.

1:13Welcome everyone to the information's TITV. My name is Akash Pasricha. It is Tuesday, June 2nd. First up today, the information published exclusive reporting about Amazon's increasing reliance on outside firms to sell ads on its media properties. We'll talk about that with our Amazon reporter. We'll then dig into Alphabet's plans to issue$80 billion in equity tied to AI investments. We'll also unpack the latest on the Anthropic and SpaceX IPOs. We also had news this morning that Anthropic is expanding its Project Glasswing program, putting Mythos in the hands of more organizations. We'll talk with the former chief product officer of CrowdStrike about that news, and we'll wrap the show with some reporting on Cognition's new strategy in the AI coding race, and separately, why evaluating AI models could be more difficult given the models might know that they're being watched.

2:13It's going to be a great show, so let's get right on into it. While OpenAI tries to create its own advertising business, older tech giants who have now become legacy advertising engines like Amazon are finding new ways to keep their own ad sales growing fast. Our Amazon reporter Catherine Perloff wrote a deep dive on that today, and I want to bring her on to share with us what she has found out. Catherine, welcome back to the show. It's great to have you here. Give us the update here on Amazon's ad business. How is it going? Well, they still make a lot of money, but... They gotta keep it going then.

2:52They gotta keep it going. But on the news we reported... So basically, you know, like, you think of Amazon, you might think of the ads on their website, you might think of Prime Video, you might think of Thursday Night Football. Their ad kind of empire is pretty big, pretty varied, and the strategy for ad sales for some of those different properties is different. And so what we reported is that Twitch, which is their video game streaming, it's not just video games, but that's what it's known for. Live streaming. Live streaming. There you go. I'm not a big Twitch user. I don't use that much either.

3:33Yeah. That's the problem. I mean, people use it, but they can't sell ads on it. I mean, that's the issue, right? Yeah. So they're working with ad tech companies to help them. to sell ads on Twitch. They've also worked with ad tech companies to sell ads on two sites you might have not even thought about Amazon owning, Goodreads and imbd.com. And they've also approached ad tech firms to sell ads on Alexa. So, you know, I think we're kind of taking a look at the fact that, like, they kind of position themselves as this everything store for media, where you can buy any type of advertising you want.

4:10They've even expanded recently more so into selling ads for other media companies like Spotify and Netflix, but sometimes they might need a little bit of help with this kind of sprawling media empire. Okay, so the big issue is, so they've got all these different ad properties, Goodreads, IMDb, Twitch, Prime, as you said, Alexa, the ad sales in aggregate are doing quite well, but segment by segment, it's a bit of a different story. How are they addressing this then? What is their plan here to kickstart ad growth, or I guess make it more uniform throughout. Yes. And, you know, I mean, I wouldn't say that necessarily these companies are doing, these other businesses are doing like badly.

4:50It's just that like, you know, Prime and like the ads on the website, those are kind of more must buys for advertisers. Whereas some of these other media properties, they're a bit more niche or depends on like, you know, what you need to do with your advertising budget. But yeah, so they are, they're bringing these outside ad tech firms, which you know i think is you know partially notable because the other two big ad businesses google and meta do not work with outside ad tech firms you can't use them you know you can't use outside ad tech to buy ads on facebook or instagram or you know youtube uh and they're used to they're partnering with these outside tech firms uh also with twitch they've added new uh sales people to their sort of dedicated twitch ad sales team which can help because um twitter is kind of hard to explain to advertisers.

5:36They don't know if it's a social media company. They don't know if it's a streaming service. They're worried about their ads, you know, showing up against something embarrassing on a live stream. So having more kind of dedicated ad sales staff can help. They've actually devoted more resources or kind of like time in their pitch, at least to one advertiser I talked to, to Twitch. So they're trying to sort of like, yeah, beef up some of the efforts, you know, with Twitch specifically. And then with some of these other properties, relying on sort of other companies to help them. Do we know which ad tech companies they are working with at all?

6:13We don't get into that in the story. Okay. But this idea that they're using outside firms, you said the Meta and Google, for example, they don't use outside ad tech firms. They stick to their own infrastructure. Yes. What are the trade-offs here? Why is this such a big deal for an ad giant to look to outside firms? I mean, at the end of the day, you just want to sell the ad, right? So however you do it can't be that bad. I think like, I mean, the big thing is like it's about control, right? So if you can control your own ad sales, you can control the price it's sold at. And you can also control all of the data that comes like with it, which is like, you know, the audience data.

6:55And Amazon's most valuable asset as an advertiser is like all the data they have on what people buy. And that's what they get from the ads that run on their website. So I don't see them giving so much access to other firms, you know, for that anytime soon because that's sort of their crown jewel. But, yeah, with some of these other media properties, it's sort of a calculation. Well, you know, like we can make more money on ads and maybe we'll lose a little bit of control. I think the other maybe cost is, you know, and I, you know, maybe different people would say this different ways, but like they've been positioning themselves recently as a big ad tech firm in their own right.

7:32They've been partnering with like, you know, announcing these partnerships with Netflix and Spotify and trying to get like lots of other media companies to be the technical infrastructure to sell ads. Right. So if you're saying, hey, we can't even really use our own ad tech to sell our own ads, it sort of makes the pitch to other companies less compelling for the product. Potentially, yeah. That's sort of the con. And then it also sort of highlights this idea that Amazon's such a big company and it kind of almost functions like a holding company where it's like, you might want the help of ad tech so you can make more money.

8:05But then there's kind of these broader kind of priorities. And we talk about this in the article that they vacillated with Twitch over the years of whether they should use ad tech or not. Like when they acquired it, Twitch used ad tech and they shut it down. Now they're going back to it. So I think, yeah, it kind of shows like there's a lot of competing priorities. And, you know, you have to sort of sometimes make some tradeoffs if you want to sell ads. Is AI going to change any of this? You know, it's an interesting question. I think, well, AI, like, I guess, you know, to the extent, like, I think that, like, the kind of goal for AI, especially in advertising technology, and we've talked about this a little bit before, is to just simplify the media buying process, which is very complicated.

8:48Um, what has been the biggest roadblock though to that simplification is the fact that most, um, uh, big media companies like meta, like Google, and for most of its, you know, properties, Amazon kind of function in industry jargon, like a walled garden. Like they don't let other, um, ad tech companies access their media. So if more companies took the approach like Amazon and sort of opened up their walls, It can make it easier for like an AI Asian, for example, to sort of put together a media plan and quickly buy across a bajillion media channels and, you know, not have to use all these different separate buying platforms to buy different media.

9:28But I do think the kind of potential of AI and advertising technology is sort of handicapped by the fact that a lot of businesses want to control the whole ad sales process themselves. um and so so what the the walled garden thing just help me understand this so you're saying that uh amazon would now would not allow its ads to be purchased by other third-party ad tech software is that is that what you're saying or so the point of the story is that they're opening up to some media property yeah but just to others like prime video or like the ads on its website like those function more like a walled garden in which like other ad tech can't sell that media and you can't buy it via those other ad techs.

10:13So I guess - So for AI to work here at all and make the advertising buying process easier, you know, a media property like Prime Video would have to open up its ad buying process basically to other companies essentially. Yeah. And I mean, so would Meta, so would Google. So that's kind of my opinion on it. I think, you know, people who are trying to sell lots of different like agentic solutions and ad tech might say there's lots to be gained without it. But I do think like, yeah, the most complicated part of buying media today is the business relationships and the kind of vested interests of all these media companies to have as much control as possible.

10:52So I don't know if AI can solve that. Great. Well, yeah, AI interests and business interests are not always aligned, but I mean, not to figure it out. So thank you, Catherine, for coming on. That is Catherine Perloff, our Amazon reporter, here at The Information. Google is raising$80 billion in equity, the company said yesterday, to invest in AI infrastructure and resources for compute. The stock has been down on the news. I want to bring on CJ Gustafsson, founder of Mostly Media, to help us break it all down. CJ, welcome back to the show. It's great to have you here. Great to see it. Okay,$80 billion in equity is what Google says it wants to raise.

11:38Investors don't seem to like it. What does CJ think of it? Well, if you take a step back, if you want to buy something, in this case compute, you really have three options, Akash. You can use cash you generate from your business. And Google has quite literally the best cash generation machine in the world, maybe in the history of business, which is ads. and this produces about 46 billion in operating cash flow per quarter so every three months but 36 of that 46 gets plowed back into capex to go and buy more compute and so that leaves 10 billion in free cash flow that they can do whatever they want with it so more mature companies may grant dividends or they may just keep it for a rainy day in their bank account and so the next option is debt you can only take on so much debt they've issued a ton of corporate bonds and don't want to get the debt to equity ratio so high that it actually hurts the rating on those pristine bonds.

12:31And the third is equity or selling a portion of yourself. And this dilutes the current shareholders who now own a smaller chunk. But the idea is that you're doing it to make the entire pie worth more via whatever you're funding. So you're just seeing this balancing act in the capital markets between these three levers. And Google doesn't want to overweight the debt portion, but they also don't want to run out of cash. So, I mean, look, you write every week from the perspective, you write for an audience of CFOs. You take the perspective of a CFO as someone who studies the calculus of these decision makers.

13:10I mean, you think it's a good move? I think it's just what they have to do at this point. You have to use every lever at your disposal. And it's like truly unprecedented how much this is as an add-on offering post IPO. Because usually you will dilute your shareholders when you're still private, right? Because you really can't tap into the debt markets as much. But I was looking at the numbers this morning, Akash. And the number two largest follow-on equity raise of all time was Boeing back in 2024. They raised about$24 billion. and before that it was bank of america which was in 2008 and we all know why that happened and that was for just under 20 billion so this is like a number that dwarfs every other so like from a capital um capital markets perspective and like a resource allocation perspective it makes sense it's more just i think like for like uh if you go back to the primaries of it like is this the decision for the company overall so tell me about you know do you think other tech companies will follow suit here with uh with equity raises i mean it opens the door because if you look at what google is doing their market cap is over four trillion right they're basically weaponizing that four trillion um to go out and fund these builds so i would say only companies that have a really chunky valuation and are able to use their float to do so.

14:45But they're kind of like only one out of a couple who have a market cap large enough to sustain this. And we already saw this stock go down already, but at least they're up a good amount on the air. Right. I want to ask you about the other uh big news that came yesterday so anthropic uh confidentially filed to go public it's always funny when they say we've confidentially filed you know the details are confidential but the filing itself is they came out very loud about it um you know the the language i guess in this press release seemed to suggest that they wanted to get the things started but they're sort of undecided when they actually will go public.

15:32It's, you know, our co-executive editor, Martin Peers, made the point last night in his newsletter that, you know, some companies, when they say we've confidentially filed, they say based on market conditions afterwards, you know, we will make a decision. Here it was like, yeah, you know, we just want to get things started. How likely do you think it is that Anthropic does go public in the next year? And how much of it do you think depends on the SpaceX IPO? I don't think it's truly linked to the SpaceX IPO. I think it would be more linked to the OpenAI IPO, if anything. I think they'd actually want to beat them out of the gate to soak up as much demand as possible because that capital has to come from somewhere, like it travels in pools, and it's going to go to its best use case.

16:15And I think it's very likely that they IPO before end of the year because they just did that Series H at$965 billion. And it's very common for a later stage company to do one final private fundraise right before IPO because it gives their current investors a bit of a discount to say, hey, you're underwriting the business now. I don't know how much is going to change between now and then with Anthropic. Maybe it's the only case if they keep adding like 20 billion each quarter. But you're getting in at a good price now. but you also have to get in on the IPO to help us build the book out. So it helps both parties where the final late stage crossover funds like a Dragoneer or an altimeter, they get a nice bite at it at a price that's lower than what they'll IPO at.

17:04And on day one, if it pops, they're already in the money and they clear their carry hurdle on this huge amount of capital they're deploying. And then, um, and, and then Anthropik gets to fulfill part of that book that they have to build out. And so they're already partway there. So this is common then finishing, you know, doing a large private funding round and then going straight into the IPO process. That's not an anomaly here. Not at all. Like if you look back at a snowflake or a crowd strike, they all raised private rounds pretty like a couple of months before they IPO. So this is a tried and true method to also, Akash, set a floor on what the valuation will be.

17:45So what you're doing is you're saying these important investors who are really smart said that the floor is 965, right? That's your jump off point. And so I think that number is very important heading into the IPO. When you think about Anthropix business here, we're all eager to see the S1 whenever it comes, you know, it's still probably a while away. Again, this is the confidential filing. But when you think about all the different parts of the business, I sort of think about all the different cost structures that they have in place, all the different investments they're making, what part of their business do you think is most likely to get scrutinized?

18:22Or, you know, I'm thinking about these big cloud deals that they structure. What questions do you have? Are you eager to get answers to throughout the IPO process? I want to know what their true capacity is to generate revenue if they weren't so constrained by, like, you just saw that XAI ideal they just tapped into if they weren't constrained by how much compute was out there like how much revenue could they possibly do and then how many long-term agreements do they have to lock down that compute capacity right you're kind of measuring for two things hypothetically how big could the engine be but then also how much gas can you put in it and i think that's like the only thing that that could possibly be scrutinized that you are trying to get to these lofty revenue targets, but you're not able to fill up the tank and have enough compute to get there.

19:14And so in other words, the disclosure that we saw this week from SpaceX, that it sounds like their deal with Anthropic, they've actually extended it. Or maybe, I mean, they just disclosed that it was a bit longer, I think, than what was previously thought. That didn't surprise you, sounds like that. Well, like, first of all, are they subleasing a Boston apartment? I don't know of terms this fluid for such a large amount. What do you mean by that? Well, at first it came out that any party can terminate it within 90 days, right? So we're talking about$1.2 billion in commitment and spend per month.

19:50If you annualize that, it's over$14 billion a year, and they're saying within 90 days. So then they come out, people start to panic, and they say, oh, actually, the first 180 days are locked in. It's like, okay, but I don't even know if this is going to last for a year. So, I mean, we could come at this from the anthropic side, like great for them. They locked in some more capacity, I think, at least for the next 180 plus 90 days, right? Like 270 days. But you could also come at it from the XAI, like is this true revenue? So it kind of goes both ways. Well, and I don't know, it seems to highlight to me just like you said, how fluid the situation is.

20:25I mean, you know, we know that all of this relies on demand and then needing demand and the game right now is we are uh we are supply constrained basically you know we we we basically have standing orders for our ai and i guess the calculus is it might you know if the situation changes on either side we got to be ready to to adapt which is scary i mean that's going into an ipo i mean i can't see how that's like you know the most predictable situation to be in? Not at all. Not at all. And like, it's throughout the ecosystem, it's pervasive. It's not just anthropic and XAI. If you trace it back to cursor, that whole deal is predicated on them needing more capacity, right?

21:10Like, I'm sure all things equal, XAI would rather be selling like their own stuff and their own large language models and using the data centers for that. I don't think they built the data centers to be a landlord, you know, but everybody is buying up access capacity. And it's kind of like a beg, borrow and steal whatever you have to do in order to keep these things rolling. CJ, let me ask you one last question. So here, as you think about the SpaceX IPO, Anthropic and OpenAI, I mean, the dialogue has been these are three monstrous IPOs. To what extent does the market have capacity to absorb these new offerings?

21:48What do people sell to get into these companies, given how big they are. I mean, where do you think the pain could come from? Like, how do you think this overall could change the structure of, you know, the multiples that companies have? I mean, this is not just OpenAid Anthropic and SpaceX on its isolation. You have the Saspocalypse happening in the background, right? You have the chip company. Like, what do you think people sell to get into these companies? Akash, if you like Salesforce at 3X, you're going to love it at 1.5X. But seriously, the capital has to come from somewhere, and the capital travels in pools.

22:27And so if you take the OpenAI, IPO, Anthropic, and SpaceX, and if you assume they're each raising between$50 and$100 billion in funding, there has to be$500 billion to come from somewhere, right? And it gets pulled from places that you don't have as much confidence in the long-term viability of it, regardless of the short-term metrics. And that's what's scary to me because I was looking at net dollar retention rates, which I think is the best metric to measure durability of revenue. And in SaaS, it's fallen in every quartile by between 14 % and 15%. So say it used to be 130%, it went down to 115%, 114%.

23:11And every quartile dropped by about the same amount. the company since 2022, like they haven't degraded all that much. It's just, there are better uses with more confidence in the long-term outlook and, uh, ability to grow revenue than what we had before. So it's kind of like, um, there's just a better option coming along. And, um, it's kind of scary for companies that don't have a true AI story. Um, but if, if you buy into that AI I saw you also have to buy into the incineration of capital that these companies are undergoing. Right, right. Great. Well, CJ, I want to thank you for coming on. That is CJ Gustafson, founder of Mostly Media, here on TI TV.

23:56Anthropic said today it is expanding Project Glasswing, the program through which it is giving select organizations access to its powerful mythos model. We've reported on how expensive, but how powerful, early participants of Project Glasswing have found Mythos. To talk more about all of that and the cybersecurity ecosystem at large, I want to bring on the co-founder and CEO of Jetstream Security, Raj Rajamani. Raj, welcome to the show. It's great to have you here. Thanks, Akash. Thanks for having me. So we saw the news today that Anthropic is expanding Project Glasswing. What was your reaction to that headline?

24:33I think Anthropic is doing a terrific job, not just in pushing technology boundaries, but also in terms of how they market it. So by creating a certain level of exclusivity as well as scarcity, they are driving this FOMO factor amongst all the others that were not part of the original group that had access. And by just slowly expanding it, they just keep mythos in the news and, you know, they're just definitely fanning the flames of their marketing engine as well. So you think it's just market? I mean, does Mythos not scare you? It doesn't scare me. I think it's just a natural evolution. Every model over the last few years have been significantly improved or have greater capabilities than the previous one.

25:18So it's just a matter of time that we had something like Mythos. And I'm sure there will be something that comes post-Methos that's even better than Mythos, right? So I don't think there is anything unnatural here. This is just to be expected. Okay, so this is kind of interesting, Raj, because I mean, look, I sort of thought Anthropic was being the adult in the room here. They were saying, look, we've developed this thing. It's crazy, you know, like you should really scare you. And we're taking a cautious approach here. It sounds like the perspective you're bringing is it's just a marketing strategy.

25:54No, I'm not saying it's just marketing. I still have friends with many of the companies that have access and I compare notes with them. And they do say that it does find stuff that were not previously obvious, both in terms of identifying new vulnerabilities as well as chaining together new exploits or exploits in a novel way to actually get through their defenses. So it's definitely real, but at the same time, you have to give them some credit for the great marketing that they've been using at the same time in parallel, driving into their IPO. Right. Tell me about Jetstream, your new company.

26:31You were the former chief product officer of CrowdStrike. What are you building at Jetstream and why couldn't you build it within CrowdStrike? We are building an AI governance platform, and we are building it here because, you know, for various reasons, George and I had a conversation and he suggested that I do it outside. But we are doing it with their backing and partnership. Both Falcon Fund and George are investors in Jetstream. And so AI governance, what does that actually mean? Like, what is the product here? The product is something that gives you much better visibility and control over all form factors of AI that are being used within your enterprise.

27:10When you look at large enterprises archives, what you realize is that there are some very interesting trends, like every user, every employee turning into a citizen developer, the insider threat of AI systems is far greater than external threats. And we are also losing institutional wisdom because the pace of automation increase is actually far greater than what we are able to document. So these are things that, unless addressed, creates a real trust gap between the systems that we are trying to deploy and the enterprises that are trying to govern them. So we are trying to fill that gap by building an AI governance platform.

27:52If I understand you correctly, Roger, is what you're saying that the threat from inside, meaning that if I'm a developer and I am creating these applications myself, the threat that I develop something that could go wrong or is susceptible to some kind of an attack, that threat is greater than the probability that you get an outside attacker coming in and hacking the system. Is that what I'm understanding? Yes, and this is absolutely real, and I'll give you many examples. Let's start with the example you brought up, which is a citizen developer going and building something. Which is just any individual developer.