Growing Ecommerce – The Retail Growth Podcast

Google vs. Amazon vs. TikTok vs. Meta: Welcome to the AI Ad Wars

• Smarter Ecommerce • Season 4 • Episode 8

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In this week’s show, Mike Ryan and Chris Scharmueller dive headfirst into the "PMAXification" of the advertising landscape, a term Mike coined to describe how platforms from Google to TikTok are rushing to automate your ad spend. 

But just as we thought the black box was here to stay, Google is making a surprising U-turn, opening up more control and data for advertisers. We'll break down if the other platforms, like TikTok with its mandatory GMV Max campaigns and Meta with its "AI-first, no control" strategy, will follow suit.

Don't go anywhere because things get even spicier. Mike starts a "crusade" against Google's Search Partner Network, exposing why some of the "partnerships" are a little unsettling and what brands need to watch out for. 

And finally, in a lightning round you won't want to miss, the hosts go head-to-head on the most important question in tech right now: is AI a bubble, yes or no? One of them is a believer, and the other is a skeptic, and it's not who you think.

About smec (Smarter Ecommerce):

At smec - Smarter Ecommerce, we specialize in transforming business goals into optimized ad campaigns. With over 16 years of experience in Google & Microsoft Ads, our intelligent software and expert services help retailers achieve superior results.

We're committed to giving you the tools and insights needed to stay ahead in the ever-evolving world of digital advertising.

Make sure to follow smec - Smarter Ecommerce for more performance marketing insights:

Speaker 1:

Welcome to another episode of Growing Ecommerce, brought to you by Smarter Ecommerce. We are your hosts. I'm Mike, head of Ecommerce Insights, and this is Chris, chief client officer at Smart Ecommerce.

Speaker 1:

All right, Chris, we've got an exciting episode today. We've got a few topics in kind of two clusters. First theme is about these highly automated AI campaigns from the platforms. A little bit we'll talk about PMAX and something going on at TikTok, and then we also want to. We have a few little items around the intersection of e-commerce and ai, so and one glaring question right is ai a bubble or not, and, surprisingly shockingly, mr bull market himself christian charmillo no, it is not a bull mark.

Speaker 2:

Uh, it is not a bubble. That's what I can tell you but I'm looking forward to to the debate. I know you're sharp, but I think I have good arguments on my side.

Speaker 1:

Let's go for it.

Speaker 2:

Let's start with the debate now.

Speaker 1:

Let's warm up the best for us, we'll warm up.

Speaker 1:

So yeah, I mean first I just want to set the scene a little bit. We've talked about, we've touched on PMAX and then all the PMAX clones that are out there. I think that Google has been very pioneering on this technology for years, going back to automated bidding and every single step of the way forward. It's made it easier for other platforms to just pick up where the last one left off, and so TikTok became a very automated platform in a very short time, because, of course they were. They just picked up, they were looking at. Okay, how does Google do this stuff? Google is the biggest advertising platform in the world. Facebook, yeah, at 100 plus. Exactly, they've all done it. Even LinkedIn has their own PMAX. It's crazy.

Speaker 2:

So you call it rightfully so, the PMAXification of the advertising landscape.

Speaker 1:

Exactly.

Speaker 2:

What a quote mate. Thanks, I mean it's, it's, it's all. But Okay, yeah, sorry, go ahead.

Speaker 1:

There's a there's a, there's a, there's a, but coming here, though. But you know, there was this clear trend where Google was rolling more campaign types into PMAX and it was becoming increasingly a black box and every other platform was headed in the same direction. And this is where I don't know. I still think PMAXification is very relevant as a trend.

Speaker 1:

Google we've gone through this kind of you could picture it as an hourglass kind of shape this narrowing funnel where there's a loss of control and possibilities and degrees of freedom on the advertiser side. Google was taking those degrees of freedom on their side and enjoying them to deploy budget where and how they see fit. And now I think we've passed through this most narrow point and more campaign technologies are opening up, at least at face value, like DemandGen, ai Max for search, and also more options and controls are coming back to these, like, if we look at DemandGen, there's channel controls. If we look at AI Max, the way this is set up, it's very customizable in the way you can implement it. And if we talk about Performance Max, most recently, there's the channel report.

Speaker 1:

By the time this episode airs, it might already be general availability. It's expected to be. It was expected to go GA by mid-quarter. Google has revised that and said end of the quarter. But you know, we see this kind of opposite trend now and then the question is will other platforms follow that trend or will they stay on the trajectory that they were on?

Speaker 2:

So, first of all, to share some I would say insights how our relationship with Google is. We are one of the biggest partners for Google in Europe, managing a lot of advertising spend. So, given that relationship, we're very close to Google. We appreciate Google because it's just a great company and a great tech platform. However, we are one of the few players, I think, which challenges Google in a lot of things by the way, most of the time rightfully so, and I can remember when this whole PMAX thing popped up, we were rightfully so very critical of it because it was this black box. It diminished a lot of leverages and freedom for not just the, the retailer, but also for agencies, saas providers and so forth.

Speaker 2:

So we challenge Google a lot and I think it's time to yeah share some roses with them because, at the end of the day, google, I think, listened to the market and did a lot of things right the last couple of months and if you look at the roadmap what they plan to do I think we look at a completely different trend to what PMAX was perceived at the beginning and I think you have a lot more freedom, leverages again and the controlling opportunities with regards to your campaigns are really coming back, and I think it's a great thing. I think pmex is the way superior product compared to smart shopping campaigns and I think you see the same trends with all these new, new campaign types.

Speaker 2:

So I just want to put on front straight google is doing a lot of things right here, yeah, and I know to how many episodes you listened, guys, but we weren't too fond of Mr Mark Zucker. Maybe rightfully so, I don't know, maybe not so rightfully. However, if you compare the strategy of Google with the strategy of Meta, it's for me pretty clear, based on the statements, that Google wants to leave some control in the hands of either the agency or the retailer, whereas Meta, I think, it's black box AI first, no control strategy all in, and I think this is, at the end of the day, it's a good thing, because Google listened to the market and a lot of good things happening here, so I'm pretty positive about it.

Speaker 1:

And, by the way, I'm about to be in our next bit, I'll be critical of Google's search partner network in just a couple of minutes. So hang on your hats if you think that we're just and by you know the thing that irritates me most. Again, a little ahead of myself, pmax has had so many things rectified. There's now search term reporting real search term reporting. There are negative keywords real negative keywords.

Speaker 2:

It would be awesome to prioritize them, but that's another story. Yeah, campaign priorities would be great, there's channel reporting.

Speaker 1:

Now you can see actually where am I appearing on YouTube and all this stuff. They had the best placement reporting on PMAX, which is now just coming to some other campaign types. But what drives me crazy is that there's no opt-out for Search Partner Network. I mean, maybe I'll just take this chance and go into Search Partner Network Right away. Are we ready?

Speaker 2:

Let's keep it moving. We can come back to first agenda point, but we want to do this now. I feel it.

Speaker 1:

Let's go let's go and chris. Let's go and chris pmax. You cannot opt out other campaign types. You can opt out of search partner network if you want to, and that is not possible in google. Yeah, it is I. I I'm on a crusade. I want, I want google to give an opt out option on pmax and and I it's important to me, it is ladies and chance if this is going to happen.

Speaker 2:

It it was him. You can send your thank you cards to me.

Speaker 1:

I I'm committed on making it happen and um uh, you know I'll be publishing data and stuff like that just to poke the bear. Google has done they've done a couple of of good steps here, and the most recent one is that they made search partner network placement data available also for shopping and search campaigns. It's actually been available for PMACs for over a year. My big complaint there is that you can't segment this data, so it's just mixed in with a lot of other kind of data. But now you can view this also for search and shopping and I've been looking at it. It and it's not good and and it just reinforces my view that search partner network I mean, in case anyone is not familiar, what I'm even talking about these are in the original sense.

Speaker 1:

It was great. The idea was like when someone is searching for products on ebay, for in the search bar on eBay, then text ads or shopping ads could be displayed in eBay's search results, powered by Google, by your Google ads campaigns. It was wonderful partnership between those two companies and for advertisers as well. It was really attractive. But that network has grown and grown and grown to include and it's not it's also a lot of image and display like ads in there. It's not just text ads or shopping ad formats, and I don't think I just I'm missing the word partner now in the in the search partner network. To me, these are not partnerships anymore. They've they've just included everything that they can in there. And I'm talking about everything because I'm going through and looking at this placement data and there are websites on here that lots of them that I can't even click on them because Chris and Alex over in IT would slap me across the face.

Speaker 2:

if I did, I would immediately get an email.

Speaker 1:

And I'm saying because there are malware sites, what can only be malware. These sites are not fit for human visitors, let alone to have ads on them, and the idea that there might be any trickle of genuine commercial intent that could be captured, like these are. These are bizarre domains, like just the top level domains. They're not used by real websites, they're almost just used by hackers and malware, and there's a ton of it in there and in general. May I ask a question? Sure, right?

Speaker 2:

here, my sure, sure. I mean. The interesting thing is why is google opening up this now? Because a question to you now in theory, I could look up basically every website now where my ad was shown in whatever way, shape or form, exactly. So is there some risk implied for Google now? Because, let's imagine, someone is really digging into this thousands of websites, and there are some really shitty websites in there. Why is Google? I mean, by the way, I think it's the right move, but why is Google doing this?

Speaker 1:

So when they first rolled out search partner network placements, like a year ago, and they offered In PMax, you can exclude individual placements and domains but you can't opt out of the whole program. But the action of including that placement data and giving the opt-out, the narrow opt-out possibility, both came because of incredibly damaging reports. So independent researchers including probably in this case most famously, this company called Analytics they were able to demonstrate that. You know, search partner networks included sanctioned iranian websites and there was a little bit of. They were kind of gaming it a bit, but they were causing, for example, I think, like they caused a us army ad to be shown on a sanctioned iranian website or something like this. So they published these super damaging reports. Brands, big spenders, were pissed.

Speaker 2:

They wanted out.

Speaker 1:

And so that was way more threatened because they're like they can't opt out of PMACs, out of SPN on PMACs, so they were going to just turn off PMACs. So Google immediately had to cool down that fire. They did not want to lose their PMACs adoption and so instead they enabled this reporting. And I guess that this is a follow-on effect of that, because people have been demanding this data for years and Google is listening, and so of course, there's a risk to them in exposing the data, but there was a risk in them not exposing it too, because someone can find it out anyhow, by the way, circling back now to the pmx features, which are a great thing search from performance, robot channel reporting.

Speaker 2:

Might I be right that google is doing this? Maybe also not for the ethical reason to really apply to the wishes of retailers, but also for reasons, let's say, for they saw some stalling in their PMAX adoption. Might this be a valid argument?

Speaker 1:

I would say 100%, because we see that PMAX adoption has stalled and PMAX cost like share of wallet of advertisers' budgets. It came a lot at the expense of shopping, of course, because these are very comparable campaign types in many ways, that's where the most overlap is. But it also came a lot at the expense of search campaigns and, in particular, dynamic search. Now, this new solution from Google called AI Max is very similar to dynamic search as well, like I think they've. Just they saw it plateauing in shopping. They saw it plateauing in shopping. They saw it plateauing in terms of taking over shop.

Speaker 1:

Uh, just give me search and they just needed to look for new ways to get to that same result of having high levels of automation. So, like, one thing that they do is develop new features like ai max, which, instead of migrating search to to pmax, basically brings pmax to search. Another thing that they do is try to just, you know, eliminate complaints about PMAX so that people will keep spending on there, not revert to shop being or et cetera. So I think they're doing everything that they can to keep that level of adoption high and growing, and they'll do it through a combination of tactics.

Speaker 2:

But that's how it should be right, given the fact that this is a very much monopoly-like situation. It shows us that Google is still A listening to the market and reacting to the market itself. Right, they saw a stall in the PMAX adoption. They understood the reasons and are now moving in the right direction again. So I think, bottom line, I think it's good for us as a tech provider and working together with the biggest retailers in the world to help them bring the MAX out of Performance. Max and good news for every retailer in the world, because you can again separate you from the pack by being smart.

Speaker 2:

Yeah, that's right, so I think it's good news all the way. Still some way to go with the search partner network.

Speaker 1:

Yes, you will keep fighting. I got you covered, everyone, I got you covered. I'm taking this, I'm taking this one on Wait, sorry, go ahead. No, yeah, no, I just wanted to say no, forget it. I lost my thought Mike.

Speaker 2:

another thing, because I think it's a good segue, talking about Google listening to the market and then opening Blackbox up again. What about TikTok, our friends?

Speaker 1:

Yeah, well, we mentioned earlier that TikTok immediately picked up where the other platforms left off, so they jumped right into automation and they even TikTok shop has its own campaigns and they have their own PMAX version. It's called gmv, max max, and if grow gmv is is, if you're not familiar with the acronym, it's gross merchandise volume and yeah, I love the the rocket.

Speaker 1:

It has to be, yeah, these these are big brains that name these campaign types like I also. I'm sorry, but tikt shop like to me most. I don't think that most brands and retailers talk about their GMV. They talk about their, their revenue and stuff like that and more typically, a marketplace will talk about their GMV. It's almost like they said the quiet part out loud because TikTok shop is concerned about maximizing its GMV as a marketplace.

Speaker 2:

Which is the wrong signal.

Speaker 1:

I think, and they name the campaign GMV Max. It almost just sounds like it's designed to maximize the top line revenue of the TikTok shop marketplace, not of individual advertisers. But they are, as of, I think, september 1st, they're forcing everyone who's advertising on TikTok shop to exclusively advertise through GMV Max.

Speaker 2:

GMV Max. Yes, by the way, I think product marketing slept on this big, big, big time, but that's another story. So, you're literally forced to use that P-Max-ificated campaign type Exactly.

Speaker 1:

Exactly PMAX-ificated campaign type.

Speaker 2:

Exactly, exactly. And I think. One question, mike if you compare it to PMAX on Google, are there any differences in terms of freedom, leverages you?

Speaker 1:

have I'm not as familiar with the technology, but in broad strokes it's highly automated, just like these others, but it's similar, like there have certainly been signs from meta that Advantage plus could become mandatory at a point or or that it is quasi mandatory and that, like that's where they want to go. Like he, he's made statements that they basically just want people to look at the numbers, go up at the end of the day, or stuff like that, and not do anything else I'm really sorry to shit on mark again, but no, really.

Speaker 2:

The statement he made was pretty clear he doesn't believe in any vendors whatsoever. So, whether it's a SaaS provider or an agency, I mean, nor in-house teams. Nor in-house teams. He believes in AI, end-to-end and you, as an online shop retailer, just look at the number and trust me.

Speaker 2:

So, I really think this Google has a different strategy. It might change by the way Google will do what drives shareholder value in the end, but I think they understand, or understood, that for the next couple of years it's not the right way and I think this is good news for everyone.

Speaker 1:

Yeah, definitely, I mean I wrote about this back in 2019. Yeah, definitely, I mean I wrote about this back in 2019. I talked about a hypothetical end state where, basically, these platforms would be fully automated and it would be kind of like a drip feed, a hamster in a cage with a drip feed, um, and you can't really competitively differentiate more or less. All you can do is perhaps spend more, but it's just as very. You know, it's just this drip system, and that, that, I think, is the risk of where meta could go.

Speaker 2:

Yeah, of course, because the end game probably will be that the AI knows best. Which ad is the best for me as a as an advertiser? I don't know. This is not a good, a good place to be.

Speaker 1:

Yeah, we have to see. I mean, I think that I'm not an AI hater either.

Speaker 2:

No, by no means I believe in AI, you will see.

Speaker 1:

That's right you say there's not a bubble. But I just want to say that I still think for the foreseeable future human plus AI is better.

Speaker 2:

No doubt about that. Yeah, mike, talking about one of the bigger AI players in the market, amazon. They are blocking AI crawlers.

Speaker 1:

Yeah.

Speaker 2:

Massively overdue, by the way. But why do they do that and what's your take on it?

Speaker 1:

Yeah, I mean they've been doing it for a bit but they keep adding to that list and they start blocking Google, obvious rival. I mean they don't want that. Basically, I actually Hold on. I'm going to make a thesis statement first, because everyone talks about Google search being threatened by AI, and I think that's to a certain extent the case. But I actually think that marketplaces are highly threatened by AI because there's the chance that that chatbot itself can serve as a marketplace, and I think we'll talk about that in a second.

Speaker 1:

But knowing that, why should Amazon help support the shopping experience on Perplexity or in Gemini or ChatPT or anywhere else, by feeding their data? And they're not in a position where they need the traffic from those platforms yet they're not big enough and they want to stop them from getting big. So that's what this is all about. They don't want these models training further, any further on them. They don't want them pulling and getting fresh data that can be displayed. They don't want any pulling and getting fresh data that can be displayed. They don't want any of this and they don't even want the referral traffic. It's not worth it to them Because it's basically a double threat.

Speaker 2:

It threatens their core business, which is buyers on their platform, which is the marketplace, amazon, and, of course, their advertising business, which is a whole other threat. So fully understand that, yeah, let's see, but I think strategically it's the right move. I think it will hurt a lot of business models which are which are depending on this, this crawling information yeah, I mean it's not good for for those platforms, for those ai platforms, platforms, but we'll find out.

Speaker 1:

And I mean the funny thing yeah amazon is partly invested in some of these companies, but and we talked about that previously about the tactic of kind of coming up with limited scope or deals with these companies instead of buying them or anything like that, to avoid regulatory scrutiny, but what I want to say I mean the funny thing, though is that Amazon has that luxury. They don't need that traffic. They are in that dominant position. They want to keep those players small, but if you are an smb or a normal advertiser, just a median e-commerce business, things look a lot different for you. You take a risk when you block yourself from these, from these, these crawlers and bots. You want to make sure that you're visible there, even if it's a devil's bargain in the long term. We don't know.

Speaker 2:

Quite interesting. We will follow up on that, Mike, given the time. Box OpenAI.

Speaker 1:

Well, it's highly related to what we're just talking about. I mean, I know where you're going with this. Openai is looking at a commission based model where, yeah, basically, if someone is using OpenAI as a shopping assistant and bear in mind they're working on integrations with Shopify they might be starting their own merchant center. They're taking this quite seriously to build up a proper shopping experience inside of ChatGPT. Perplexity making similar moves idea is that you know someone who you could just buy in open ai or in chat gpt in the middle of your chat and that there's a, like you know, there's a checkout experience natively in there and then a retailer or a brand pays a commission for any sales that occur through that checkout experience. And this is exactly what I'm talking about in In that case, the AI acted as a marketplace, of course, and it's also and the brand got almost nothing out of that Nothing.

Speaker 1:

They haven't really acquired a customer per se. They didn't get any first-party data from that person visiting their site. They didn't necessarily collect an email address. I guess they'll probably receive that data, but they're acting as basically the warehouse for ChatGPT.

Speaker 1:

It's the warehouse, yeah it used to be, people talked about Best Buy or these box stores being Amazon showroom. Someone would go and look at a TV in Best Buy and buy it on Amazon, and now you're ChatGPT's warehouse.

Speaker 2:

In a scenario like this, If you put aside the risks for, of course, all the brands out there. As chief revenue officer working for OpenAI, do you think it's the right strategy and the right model long-term?

Speaker 1:

For OpenAI. It makes perfect sense and I think Google they had their buy on Google feature and I think that will come back to life in an AI form in an. Ai shopping form. So I think we'll see more of this.

Speaker 2:

That's where I wanted to circle back to because the shop on Google. I think there were some tests running in Europe. I think it was France, right.

Speaker 1:

Yeah, and it was in the US as well.

Speaker 2:

It didn't materialize, for whatever reason, but now with I think and this is, I think this is on a meta level that the probably one of the biggest risks for brands and online shops, I think we are we're going down that direction again, for sure and I have no answer that answers whatsoever right now, but I think this is something brands, online shops, will discuss very, very intensively next one to two years because, like you said, what do you get out of it besides a revenue, of course?

Speaker 2:

but customer loyalty, first party data. You can't control the customer journey. How can you alter the results in chpd? Very much a black box this. This is a big big thing and I think not talked about, I don't know, regularly enough. It's a massive threat. It's a massive threat, by the way. One last question before we jump to the impact of AIOs on e-com who is positioned the best when we talk about that type of business model? This AI platforms act as search agent, as marketplace itself. If you had to bet on, is it ChatGPDE?

Speaker 1:

No, it's Google.

Speaker 2:

It's Google. And it always has been, so we reinforce our buy rating for Google. Exactly no financial advice.

Speaker 1:

I mean these other platforms are experimenting with merchant centers for the first time. They're experimenting with Shopify integration for the first time. These things have been around for years at Google. Their merchant center base is vast and they have it all already. They already have a universal checkout experience. They have all these little Lego bricks laying around. All they have to do is assemble it in the correct way.

Speaker 2:

It's all about assembling, maybe, if you'd say Mike to impact of AIOs on e-codes. Maybe just a reminder everyone we talked about the risks of this disruptive AI technology to the core business of Google, which is the paid search and is AI, in which way, shape or form whatever, eating into this, this, this revenue line of Google. Aios are one of the the AI products embedded into search. What do we see here in terms of impact on on on the core business of Google?

Speaker 1:

yeah, I mean last episode we talked about quarterly earnings of Google and they're very positive, and so you know, until we start to see some of these line items broken out or understand, like, monetizing AIOs is new at Google, so right now I think it's mostly a cost center, but they're going to be serving ads on AI overviews from shopping campaigns, search campaigns, pmax campaigns, etc. So they will be monetizing these and in the meanwhile, I would say it's probably rather neutral for Google. It's very bad for publishers on the open web because you know, google is summarizing your website's content, particularly on these informational queries, your website's content, particularly on these informational queries, and then someone has to be really interested or motivated to then go ahead and click through to one of these sources anyway. Like, instead of presenting results, sources are presented, and that's a very negative experience for information publishers. And then, of course, the advertisers who are downstream of that mostly open web display advertising and stuff like that, you should pass one.

Speaker 2:

And because you mentioned the earnings call, call review, the last episode, again, numbers, numbers based. I can remember when you talked about that ai in combination with paid search it's not not a zero-sum game. There will be massive synergies. Right now I think it's rather a zero-sum game, but, by the way, which is fine for Google, because the share of commercially intended search queries remain at the very comparable level to 2024. So, aios I think they increased the value of the product of Google, because I love the AIOs, I mean they're a great thing. But it seems like they are not eating into the commercially intended search queries. They stay stable and the overall perception of the product increases, which I think will drive engagement and will bring new users to Google. So I think they're managing it quite well. The open question is when there is this monetization strategy for AI yeah, shop on Google, for instance.

Speaker 1:

Sure, I mean, I think they're moving at their own pace till then. And yeah, just generally, when you make informational queries, you're going to see an AI overview almost every single time and, at least in my experience and what we can see from some people trying to publish data about this topic or gain insight into this topic, that's not the case with, like shopping related, product related queries. They're sticking on their classic experience, that's it, and they can't control it. That's totally in their control. And the first signs that we start to see is that there are organic product carousels that can appear True, based on your structured data on your website. It's not based on a product feed or anything.

Speaker 1:

Even someone who doesn't have a merchant center, doesn't advertise on Google, can appear in these, in these carousels and we're starting to see the first signs that some of those experiences are moving to AI overviews instead. But they they're, you know those would anyway be served on top to or additional to paid listings and they're not touching the paid listings yet.

Speaker 2:

No, fair enough. By the way, I did some research. I don't know, because there are a couple of sources here, but, like I said in the last episode, 90% of all commercial searches are still belonging to Google and the share of all search queries happening on Google which have a commercial intent are roughly 15%, and that share stays stable. Yeah, so all the click volume, search query volume, grows and the share stays stable for Google, which is a good thing.

Speaker 1:

Let's see, definitely let's see.

Speaker 2:

Okay, Mike Dan. Last agenda point, Save the best for last. A little debate with my favorite American AI. Is it a bubble, yes or no?

Speaker 1:

All right, chris. Mr Mike Ryan, I'm not running from this topic, but I'm looking at our time box today. I think let's keep it a lightning round. Okay, give me your I'm prepared anyway. I'm just not anyway man at any rate, man, I'm going to get smoked. I'm going to do my best. No, I'm not running from a fight, but let's keep it brief and if we feel like it's not settled, we'll pick it up next time, okay?

Speaker 2:

I think, look, I mean, you're right. It's certainly a very interesting discussion beyond e-commerce. So, I think we should have enough time. What we could do now is maybe everyone briefly explains his stance.

Speaker 1:

Yeah.

Speaker 2:

Either is it a bubble, yes or no, and we have a perfect cliffhanger for the next episode. All right, let's see, let's go for it.

Speaker 1:

Who wants to start? That's a million dollar question. Chris, I will start.

Speaker 2:

Okay, I'm prepared. I took some notes, mate. You know me, I'm not the note taker in general, but when I'm up for a discussion with you I do. I'm more of like a vibes guy Not this time, no, just kidding.

Speaker 2:

I think, like I said, I'm really interested in I would say the stock market, because I believe the stock market is somehow reflecting what big institutional investors believe in. And what I also believe in is that big institutional investors have massive advantages when it comes down to information. Right, whether I'm right or wrong, we it's just just just an intro statement, yeah, and when you look at, at, at, at the money flowing into this ai idea, it's just, it's just staggering, right, but massive money, money in flow, and I have four strong reasons why I think it's not a bubble. We jump into that. The next episode.

Speaker 2:

One thing I would like to start, or put on front street, however, is that if you look at the last big bubble we were in, it's probably the dot-com bubble, early 2000s, if I remember correctly. And if you look at the price earning ratios of these dot-com bubble companies we were talking about probably price earningearning ratios from 100 to 200. It was not consolidated. A lot of small players were pouring into this dot-com bubble idea and, I think, with not a big surprise, a lot of these companies just didn't deliver on it.

Speaker 2:

If you look just from that perspective on the AI bubble or on the AI business opportunity right now, it's way more consolidated. I think it's way more dominated by big players, first and foremost, amazon, meta, google, and if you look at these companies and media, not to forget and if you look at the financial stability and the business cases behind these companies, we look at and this is just purely a numbers game, we look at very healthy price-earning ratios, although all the money is already flowing into their businesses. I mean, nvidia is the most progressive company in terms of price-earning ratio, at a 58, alphabet roughly 22. So I think from a purely financial perspective, it's certainly not a bubble and I still see, three to five years at least, a massive growth story here. And there are other qualitative reasons, I believe, why it's not a bubble. But I will leave it there.

Speaker 2:

That's my statement and I hand it over to you.

Speaker 1:

Okay, boy, I don't know if I should just offer a rebuttal on your points or speak, because I would have gone a different direction, because then the conversation starts and we can't stop.

Speaker 1:

Yeah, I know, although I have a rebuttal, but we'll save it for another time maybe, okay, I come at this basically from the technology side and and I just think that we are at a point of diminishing returns on what these models are capable of, where we'll increasingly see that they get faster, cheaper perhaps, and these are, of course, very positive things, but are we going to get better on intelligence or overall capability? I'm not sure about that. I think that really, the next horizon won't come from this idea of scaling AI, but rather from, like what we saw from DeepSea, like they innovated really more on the software side than on this infra and hardware side. I'm just not convinced that there's that much headroom on intelligence and overall scaling as we might expect. But another thing here I just look at this agentic side, which is very hyped and is, I think, considered sort of where this starts, because a lot of people are saying, okay, this is really interesting and it's kind of valuable, but not really. Or like, where are the productivity gains if this is so valuable and revolutionary Stuff like that? And a lot of people are saying, well, wait till I tell you about agents and I'm so bearish on agents that I can't even describe it. Okay, because I just see a huge security ceiling on there.

Speaker 1:

And just as one example okay, just as an anecdote, perplexity has this new agentic browser called Comet and there was this massive security flaw in there where you could embed a malicious prompt inside a website and then you could tell the browser summarize this website for me, and it would read all the text on the whole website, including the malicious prompt that is in there, which would then cause it to start looking at your other browser tabs, which could have banking information in there or whatever, and completely compromise that information.

Speaker 1:

And that is such an obvious attack vector. And problems like that are fundamental and they're not going away anytime soon, because AI is like a child. It's very naive, it's very gullible. Time and time again, we're jailbreaking the AI. We're doing prompt injection and prompt insertion on the AI. It's so easy to manipulate and when you take that naivety and that ease of manipulation and you combine it with the access that you need for an agent to be useful, it is a security risk that is not going away anytime soon and I think it's just too dangerous and too immature of a technology to have a near-term future. That's my take on it.

Speaker 2:

Great statement and it's still not a bubble, but we discussed it the next time.

Speaker 1:

Yeah, yeah, we're just beginning to scratch in the surface. Well, let's leave it at that. So thanks everyone for tuning in to another episode of Growing E-Commerce. This is a production of Smarter E-Commerce, also known as SMEC. You can learn more at smarter-ecommercecom. And, as always, if you enjoy this podcast, please give us a review, give us a star rating, recommend us to a friend or a coworker. We really appreciate it. See you all next time.