Tag: Google

Disrupting Google

Posted on by Steve Sammartino

Business disruption is not caused by technology alone. For it to occur we need 2 things to arrive simultaneously.

(1) A new technology

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(2) A new business model

If we only have one, the incumbents can usually adapt. They can plug the new tech into the existing business model. Or, they can revert the old technology into a new business model.

For example:

The Music Industry had 3 new technologies before they got disrupted. They had the phonograph, the tape and the CD. Each time they sold the new tech in the old business model. It wasn’t until the mp3 arrived until the industry changed. When that happened, the business model shifted with the tech, which resulted in disruption: Napster (stealing music) and Apple iTunes (buying music one song at a time). Then when streaming arrived, a further disruption occurred as both the tech and business model shifted once more. No one buys music, they subscribe to it.

Likewise, when the Airline Industry had low cost airlines arrive. A new business model emerged, but because it was utilising existing technology: planes, airports and booking engines, legacy players could plug in low cost sub-brands. No real industry disruption transpired.

Most Successful Consumer Product Launch in History

Chat GPT is the fastest-growing consumer product in history. It had over a million users in its first week and more than 100 million in two months. Previous technology juggernauts haven’t come close: TikTok took nine months to get to 100 million users, Instagram took nearly three years and Google took nearly two years to reach this milestone. It isn’t just the rapid growth of users of the platform that’s interesting. It’s that it demands a review of internet Search as we know it, how we perform searches literally and the resulting business model which underlies it. It may even redirect us away from advertising and the prevailing surveillance capitalism model.

The technology and business model just changed for search. Sounds crazy to say it, but Google could be in trouble. If there was ever a company which looked dominant and unstoppable mere months ago, it was Alphabet. Their Google search engine commands a 90%-plus share in most of the markets it operates in. Then along came ChatGPT.

Will your company be the Disrupter or the Disrupted with AI ? Get me in to share my mind blowing new Keynote Speech – and win in the new AI era.

Bing v Google

At the moment it looks like Open AI, the developers behind ChatGPT, have everything to gain, but behind the scenes is tech overlord Microsoft. If all goes to plan they could be the unexpected winner in AI, and there are literally trillions of dollars in market capitalisation at stake. Microsoft’s 23 January $10 billion investment in Open AI may well be the tech deal of the century. As a part of it Microsoft will have exclusive access to Open AI’s product suite, and will gain a 49% share of Open AI. However, Open AI will need to give back Microsoft 75% of the profits until Microsoft recoups its initial investment. Microsoft have already plugged ChatGPT into their Bing Search engine, and it is pretty damn good. I’ve switched already. But is isn’t just the product which puts google at risk, it’s the costs and business model.

The cost per ‘prompt’ on ChatGPT is currently around $0.02c. This is vastly more than the $0.00001 per Google search, and probably couldn’t support a pay per click or display advertising model. The recent option to subscribing to ChatGPT for $20 per month is a clue as to where the business model of Generative AI is likely to go – subscription rather than advertising. This would both remove the ‘free rider’ problem, and temptation to compromise product quality to appease the advertising model supporting it. Subscription is also needed because AI is far too expensive per prompt to run a pay per click model. This is a major problem for Google – which people use for free.

The market is likely to bifurcate into two segments: Search (Traditional web links) and Creation (Generative AI).

Think about it – if we shift our search habits to ask questions and getting an actual answer, rather than a page of links and options – the pay per click model could die alongside it. Bing might just become the world’s first Premium Search engine – a pay to play for a different kind of search.

The Code Red which was called in through halls of the GooglePlex hasn’t resulted in anything that seems like a worthy response to ChatGPT. After a failed demo last week of the Google AI chatbot Bard, it lost more than $100 billion in market cap. But I also wonder if the market senses that Google has far more to lose even if (and most likely when) it develops a competitive AI product. 58% percent of Alphabet’s revenue comes from search, which is driven by pay per click advertising, which simply can’t survive with generative AI – there are literally no clicks when you get a direct answer. Currently Microsoft only generates 5% of its revenue from Bing pay per click advertising. In real terms, it has a potential ten-fold search revenue upside, with near zero downside all the while potentially adding a new weapon to its already strong enterprise offers of Windows, Office and Azure. AI inside your own laptop, generating answers from your own personal data. That would be super powerful, personally and at an enterprise level.

Just when we thought we thought a one tech firm could never be usurped, a new technology comes along which potentially changes everything.

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Keep Thinking,

Steve

Don’t Be Evil? – COVID-19 series

Posted on by Steve Sammartino

Don’t be evil…? To your shareholders, at least.

You may have noticed on the homepages of Google and YouTube this week an announcement claiming that the way you search on Google and use YouTube is at risk. The number of alarmed people who forwarded it to me was astounding. If anything, it highlights the importance of Google’s services to our daily lives, how much people love the products, but above all, how powerful Google actually is. Therein lies the problem.

Like everyone, I use their products all day, every day. They are incredible. As far as tech goes, I love it more than most people and have built an entire career around it. In my view, Google is the most powerful organisation in the world by far. Just think about this for a second:

The only thing you never lie to is your search engine.

Really, think about the implications of that for a few moments. It knows all your habits, locations, ideas, proclivities, and your deepest and darkest secrets. I can promise you that none of your searches are anonymous.

Google (owned by Alphabet) is the fabric that holds together modern society. If this power were to be left unchecked, it wouldn’t end well for anyone. Absolute power never does. So you can regard this post as a quasi public service announcement from the Sammatron.

What happened: The ACCC has put forward a new regulation called the News Media Bargaining Code. This code says that Google and Facebook, who collectively control almost 60% of digital advertising revenue in Australia, will have to negotiate and pay news content creators for their contribution. The reasoning behind the mandatory code is to ensure we have a healthy news media sector and that the financial rewards of creating such journalistic content are not redirected towards the gatekeepers.

How Google responded: This week Google put out an Open Letter to all Australians to scare them into believing this proposal would fundamentally change their services for the worse. Which, quite frankly, was propaganda.

The letter: The appeal from Google Australia’s CEO Mel Silva was placed on the homepages of Google services search and YouTube. This reached 95% of Australian internet users. Google has more reach to Australians than any other media organisation, or commercial entity, in our country’s history. Of course, the irony is that the placement of this call to arms was on the homepages of its key services – an archetypal demonstration of their absolute power. The letter claims that the proposal for Google to pay news content creators is unfair!

The letter is incredibly misleading and in my opinion, deceptive conduct – a view echoed by the ACCC.

Here are my rebuttals to verbatim quotes from Google’s open letter:
  • “Dramatically worse search results” –  Not true. A lie. (News is a tiny percentage of search. In fact, only 20% of Google search terms is new, ie never been searched for before by anyone.
  • “Data being handed over to big news business” – Not true. A lie. Nowhere in the proposed regulations states that Google is required to hand over user data. By comparison, Google is now valued at $1.3 trillion (AUD), while Australia’s two biggest news organisations have a combined value of only $13 billion (AUD). They are not even 1% of the size of Google. It turns out Google is the big news company trying to trick people into thinking it is a cute little startup. (See financials below.)
  • “Free services at risk’ – Very unlikely. Google chooses to its own usage policy and decides whether its services are free. Their entire business model is built around data surveillance to sell to advertisers. I’d bet my net worth that this won’t change.
  • “Artificially inflate news rankings” – Well, it’s their search engine. They control the algorithms to decide their rankings. This is a classic red herring.

Since Covid, the power of big technology firms has only increased. Alphabet’s share price is actually up 50% since April. As I’ve said before, opting out isn’t an option any more.

The world is watching: Google fired such a heavy-handed response because the world is watching. What happens here could influence policy around the world and further focus regulatory scrutiny on the behemoth. This is an important global play for Google, as the issue of dematerialising news resources is being raised in every democracy. Rather than caring about the citizens they purport to serve, they’d rather maximise their short-term profits. We should be very suspicious.

Monopoly power: The real issue of course is that the internet is broken. The web we grew up to love and believed would make the world more equal has become very unequal indeed. It’s essentially become five giant websites with screenshots from the other four, each with monopoly powers in their dominant sectors. Not only are they monopolies, they contribute little to our country as corporate citizens. Google has earned more than $5 billion (AUD) revenue from the Australian market place, yet only contributed $40 million to our tax coffers last year. That’s right, not even 1% of their revenue. A reminder here that the corporate tax rate in this country is 30%. At their global gross margins of 19%, its tax bill should’ve been closer to $1 billion (AUD). That would build a few new hospitals and schools.

Is the ACCC code the right action? I am of the view that the ACCC has got it wrong here. If they believe there has been a monopolistic abuse of power, then they should act to prevent that power. The shape of the Australian news ecosystem, while affected by Google’s revenue redirection, shouldn’t be propped up by transferring money from one behemoth to a select number of local news arms. The real solution should be anti-trust action and other forms of data and algorithm regulation.

Digital sovereignty: Australia lacks sovereignty over the most important technology in the modern era – digital infrastructure. If we want to remain a sovereign nation, then we must hold corporations to account, by having a thriving news sector and not permitting monopolies mislead consumers. We need to get better at ensuring all companies pay their fair share of taxes like we residents do.  To go one step further, our country needs to start investing in its own digital infrastructure for key products like search, social, maps and video platforms.

If we don’t own and control the connecting fibre of our modern economy, then we sure as hell should not be afraid of regulating it. If there’s anything this country doesn’t like, it’s a bully – and Google is being one. At times like this, we should never confuse services we like with the behaviour from the companies who provide them. Stand tall and push back. We need you to speak up.

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Keep Thinking,
Steve. 

Privacy as a Luxury

Posted on by Steve Sammartino

Here’s some light entertainment to end the week. Our latest Future Sandwich Now-Soon-Later episode. In this episode we take a look at in big tech’s move to infiltrate our homes (ironically when we are spending more time in them)  Smart speakers, sorry, microphones, smart homes and surveillance capitalism. You’ll learn about the one thing we all used to have, that we’ll have to pay for to get back.

I’d love it if you could subscribe to our Future Sandwich Youtube channel, make a comment (feel free to disagree) and share with someone who has let Big Tech spy on them inside their house! There’s a free Google Nest Mini for the best comment. Oh, before I forget, this was recorded pre Social-Distancing.

I hope you’re all keeping safe, healthy and minimising contact. Just like business, if we do more than we’re asked, we might get a better result, and out of this situation sooner.

Steve.

P.S. Due to many requests I’m currently writing up how I see the world changing forever post Corona – which I’ll share here at a later date. 

The Technology Cold War

Posted on by Steve Sammartino

You may have heard the Donald instituted a trade war with China this week. What you probably didn’t hear, is that we’ve now officially entered The Technology Cold War.

The headline reads that this new ‘trade war’ amounts to $200 billion USD of tariffs to rebalance the trade scale in favour of the US. But it runs much deeper. As part of Executive Order, Trump proclaimed another National Emergency and ordered a ban against US tech companies from using or supplying foreign telecom entities (Such as Huawei) who are deemed to be a national security risk. This is going to have massive implications for the entire world. This is part of the shift I’ve predicted to countries de-globalising and re-nationalising their information infrastructure, and to put it bluntly – closing borders and retreating from open trade. It’s a response that’s easy for students of history to see. The most common behaviour to change and uncertainty is a fear response – ‘we’ batten down the hatches.  So, what can we expect to see from here?

Immediately, Google (Alphabet) announced it won’t support new version of Huawei handsets. This means that Huawei won’t be able to use Android for its new 5G handsets. It also means they can’t use Youtube, Google Maps and Gmail. It could spell the end of Huawei’s operations outside of China. If we only step one layer deeper, and we consider the fact that China is the supply house of all things tech for the USA it gets very interesting indeed.

Major hardware brands, including Apple, Intel, Qualcom, Broadcom and Microsoft all manufacturer in China. In fact most chips made in the world currently come out of China. So where would this ‘ban’ start and end? Worse still, as it stands the US doesn’t have the manufacturing capacity, price competitiveness, or supply chain to transition production back to its home markets. But Çhina, doesn’t only make hardware, it also has its own local versions of all the software and apps we use daily.

Unsurprisingly, it does seem like Donald Trump hasn’t fully thought through the consequences. As far as I can tell The Donald has just handed over the mantle of global economic supremacy to China in one flawed decision. The first thing anyone should do before they go to war, is carefully assess the relative resource advantage each party has.

What’s next?

From here I’d expect to see both China and the USA scale up the Technology Cold War in a series of tit for tat moves. We can expect the USA to ban Chinese social media and technology giants on their soil – WeChat and others will get closed down. As a response, China is likely to throttle the supply of USA hardware manufacturing on their soil. More significantly China may also reduce the USA’s access to important rare earth materials they have relative monopolies on. Materials used to produce things like advanced grade weapons, smart phone components, advanced battery materials and wind turbines to name a few.

Prediction

The next 10 years will continue towards a path of de-globalisation with countries closing borders to foreign entities. As a result the most important economic policy countries must pursue today, is to ensure they can make and build all the materials and technology their citizens rely on, because yesterdays international trading partners might just shut the gate.

Of course, this is the opposite of what we all expected in a globalising economy, but human behaviour always has a bigger impact than the technology we employ, and sometimes it’s this fact we should really be paying more attention to in business.

These here are crazy times.

The Age of Digital Colonialism

Posted on by Steve Sammartino

For the first time in Australia’s history, we no longer own or control all of our critical infrastructure. And to that list we can add any country which isn’t the USA or China. Welcome to the age of digital colonialism.

Show me a rich country and I will show you a rich infrastructure. For anyone who has travelled to a less developed economy, we see it right in front of our eyes. Electrical wires scrambled like spaghetti linking up houses. Water only the locals will dare to drink. Roads that scare the most adventurous driver. Hospitals that make you want a helicopter lift out after an accident and education which isn’t a right, but a bonus for the fortunate few. The simple and clear difference between wealthy and poor countries is their infrastructure. It’s the platform which invents the economic possibilities of its people.

It’s easy to forget that wealthy countries didn’t just click their fingers and get their wonderful infrastructure. They had to invest billions of dollars over decades and centuries. When new technology arrived they had to embrace it, and very often build out the projects using government funds in large capital works, and at times, even take over private firms who got too powerful (antitrust). This is only ever possible in a moderate democracy. A country governed by people with its constituents’ best long-term interests at heart. It’s very difficult indeed to build the physical structure required for a wealthy economy in a corrupt state.

The infrastructure we so often take for granted is what businesses and the populace have danced on top of for the past 200 years. And in this time we’ve also had the greatest ascendancy in living standards in human history.

But now in this digital age we are building a new form of infrastructure. I like to call it the metastructure.

Metastructure: The data and algorithms which now preside over how we organise people, infrastructure and physical assets in the post-industrial era.

Some ‘non-exhaustive’ inclusions would be:

  • Search and Artificial Intelligence (Google is really just an AI engine)
  • Social Media – tools of connection with the general population.
  • Transport and logistics organisation platforms
  • Large data centres

China and the USA are the only countries that we know of on the globe who are building these pieces of metastructure at a Nation State Scale. In fact, they are going well beyond their own boundaries and are now deeply ensconced in a period of Digital Colonialism. Every other country it would seem is now renting their metastructure from the new overlords.

The funny thing is that we can’t really blame anyone or any Government for being complacent. This happened a lot faster than anyone expected, and unlike other infrastructure – it doesn’t reside in the country in physical form. The nature of data is that it doesn’t need a passport to enter a country and can colonise a market by stealth – a little like a virus would.

Its easy to say here – how is this any different to Coca-Cola becoming a global corporation or General Motors selling their cars around in every market the world over? The difference is simple. These things can’t swing an election, lead to ethnic cleansing or influence how your population thinks, feels or acts 200 times a day – but the metastructure can.

I think the smartest country in the world right now is China. They had the presence of mind to remove Google, Facebook (and their digital business units) from operating in their country so they could build out their own versions of them. They also understand that the new arms race is in Artificial Intelligence – rather than explosive fire power which defined the 20th century military industrial complex.

Any country that wants to maintain its sovereignty in the coming decades needs to invest heavily in the Structural Digital tools which will define the next 50 years. Not owning or controlling your own infrastructure can only every mean you’ll be subservient to those who provide it.

 

Algorithmic Bias

Posted on by Steve Sammartino

It’s easy to think machines have some kind of impartiality to them given they are, well, machines. But anything built by humans has a human inside it. Algorithms are no different, and just like us, they are filled with bias.

Algorithm – a word once confined to University mathematics departments and computer labs – now takes pride of place in every second tech news article, determines what you see online and why you received this email at 7am Australian Eastern Standard Time. So it pays to understand what they are, the impact they have and the biases they’re so often driven by.

So let’s go back to the start – what are algorithms in simple terms?

Algorithms 101 – An algorithm is a set of step by step instructions used to do something or make a decision.

With a definition this broad you can see that we humans use them everyday. Even sorting the laundry into darks, colours and whites, and washing them each separately is technically an algorithm. The steps to cook something (a recipe) is an algorithm. Where computers come in is that they can follow a very large number of steps, on a very large data set, and make decisions quickly and precisely. (In the clothing example above – the data set is the clothes and their colours, and the steps are where to sort each piece of clothing).

Algorithmic bias occurs when a computer system reflects the implicit values of the humans who are involved in coding, selecting and collating data to execute the algorithm. The emergent problem with the algorithms in big tech is that they’re designed to achieve corporate outcomes, not societal ones. Their values are simple: to make as much money as possible.

Algorithms now run so deep and cross-reference so much data that what we input has little to do with the outputs we receive. What we now have on the web is ‘the illusion of choice‘. It isn’t just our feeds on social forums which are decided by algorithms. Even what we search for is biased towards corporate algorithmic design parameters. Just search for anything on google you want to buy, in any category and the first bias is plain to see – it assumes you are after the cheapest version possible of every item: clothing, sneakers, airline tickets, hotel rooms, you name it. Apparently we all want to cheapest version of everything no matter what it is. Even if you put the word ‘high quality‘ before the primary search term you’ll still be guided by price. It’s not before we get very specific with words like expensive or search specific brands before we can find what we might need. Another in search is recency bias. Search will always show the latest version, or story of anything and anyone unless a clear time stamp is included.

When we look at social feeds – it’s clear that their algo-game is built on emotional leverage: birthdays, parties, engagements, births, deaths, family events and of course, controversy. These stimulate engagement and keep us on the site longer. Our desire to feel loved, important and often enraged are all that matter to them.

While these examples seem innocuous enough, the proliferation of an algorithm-based society is reinforcing many social biases such as gender, race, ethnicity and economic status to name a few. The canary in the coal mine is dead, the miners are still digging, and yet Silicon Valley are still making bank unfettered. So what should we do?

Like all technology, algorithms are neither good nor bad – they’re just tools. Tools that need to be civilised with some metaphorical workplace health and safety guide rails. They are here to stay, and so our best bet is to make them better. I see two paths forward:

  1. Change – We need to push for transparency on algorithms. Know what’s in them and have to ability to turn them off on demand. I don’t care if the algorithm owners are for-profit corporations – we can and should be able to regulate their output as much as we can a box of cornflakes. No company ever made a decision which reduced its profit until society made it so. It’s time we pushed for big tech to air their dirty laundry.
  2. Opportunity – We need to remember that every flaw in an industry, every broken promise or self-serving design leaves the door ajar for a nimble entrepreneur to make a more respectful version of the product we’ve got little choice on. Algorithm-based tech is no different. Maybe it’s just me, but I think the world is waiting for a social platform we can trust that isn’t designed around extracting unlimited hours and outrage from the people it’s supposed to serve.

Above all, we should never forget that capitalism works best when it is guided by society, not the other way around.

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If you like this blog post – forward to a friend who will dig it.

Get ready for ambient computing

Posted on by Steve Sammartino

The best sign of technology maturity is this – it becomes invisible. It’s there in our everyday lives, but fades into the background, it requires less attention and it forms part of our everyday ambient environment. Like electricity does. It’s just there, in the background waiting and acting on our behalf with the minimum of attention required.

The announcement of the Apple HomePod is more significant than a music player, or a competitor to Alexa and Google Home. It’s the start of the shift to ambient computing. A world where computers and the internet are no longer a thing that we go to, or attend to, or dig out a device to access, but something we literally live inside of.

  • We talk to it, and it serves up answers.
  • We talk in general and it listens and learns our language and desires.
  • We do things and it observes our behaviours and interacts to our advantage.
  • It’s just there, in every room.
  • It becomes the operating system of our lives, without us having to caress a screen or ignore the people around us.

It might seem that Apple haven’t really given us an innovation. I mean lets face it their HomePod is late to the market and is mostly about playing music in the home. But I think they’ve just dealt a stealth move doing less. I think they’ve got a better chance at getting in more homes than Amazon and Google. A harmless little music player which looks nice, and allays the fear of big brother. That my friend is the big trick. Get in the house first, widen the scope later.

This is the start of a wider shift to the ears and mouth replacing the eyes and fingers as the killer interface. It might mean the world around us gets a littler noisier, but it might also mean we can start to look each other in the eye again.

Here’s a closing thought for businesses who rely on SEO as part of their strategy. Once we start asking the computers in our life for a recommendation, we better hope they ask by brand, or we’re the first verbal answer the device gives back. We are very quickly going to move to a world where being on the first page was good, to one where being the first, and only recommendation is vital.

If you’re interested in making yourself future proof, come join me in Melbourne on June 20th and get your mind around ‘The Lessons School Forgot’. 

I’ll be doing a talk on how to hack your way to a radical future, and answer all the questions you might have about finding a path to independence. It’s going to be a great night.

Click here to reserve your Free seat. 

See you then, Steve.