Hello and welcome to the Vergecast, the flagship podcast of ticking fees. For every minute this podcast goes, Neil owes me $1 million. I'm your friend David Pierce. Neil is here. Hello.
That works in the current state of things. That's actually a pretty good strategy.
Did you read the there's a New York Times story today about a town in California that had a recall election for the mayor and three county commissioners and they just won't leave? They're just like, "Yeah, we don't believe something illegal must have happened and they just didn't leave office." It's very good.
That rocks, man. You can just do whatever you want and it's probably you'll probably get away with it right now. It's like, "Yeah, it's fine. Whatever you want. I own TikTok now. Let's go."
Oh, we're going to get to it. We're coming to it. It's going to be a part of this episode.
Yeah. All right. We actually have a lot to talk about. We have a bunch of earnings stuff with some streaming news. The everybody wants to be YouTube phenomenon rages on. We have a lot of Paramount news. We have some car news. Neil's gonna have a lot of feelings about BMW at some point in this show, I think, which I'm very much looking forward to. But we should start with the news from Wednesday about Google's AI leadership shakeup, right? This feels to me like kind of the biggest newsy story of the week.
Oh, it's I think it is the story of the week.
Okay. I want you to explain why, but let me just quickly explain. So two things happened that my understanding is are happening simultaneously but not because of one another if that makes sense. So on the one hand you have Jeff Dean who was I think employee number 30 at Google along with a bunch of other respected AI researchers at Google going off and starting their own company. They are doing what a lot of people in AI seem to be doing right now which is realizing oh my god there's so much money in this space why am I doing this at a large tech company we're going to go start a startup presumably they will raise tons of money and that will be that. Right next to it you have a big shakeup inside of Google DeepMind which is the team that runs all of the AI stuff inside of Google. If you remember one of the reasons Google DeepMind is the way that it is is because Jeff Dean lost a fight to be in charge of AI at Google in a very straightforward way. Demis Hassabis sort of elevated to the top of all of Google's AI stuff. Jeff Dean did not. I think it is not entirely surprising that Jeff Dean after this time no longer works at Google. But anyway, Demis Hassabis who has been running Google DeepMind for some time is moving to a different job. He's now the chief scientist at Alphabet and has I think is the chair of Google DeepMind now. Some sort of honorific title that is basically he does not want to run the thing anymore, but he wants to keep going and being fancy and doing AI things. One of his sort of deputies, this guy named Koray, is now running Google DeepMind and there's a sense going around with all of this news that something is amiss or maybe just confused or wrong or in some ways very googly with Google's whole AI. So tell me what you make of all of this news.
First of all, you know, I love an org chart story, David.
I got a whole podcast over there that's basically like, tell me about your org chart and I'll tell you everything that's wrong with you.
And one of the cliches about org charts and products is you can look at a product and you always ship your org chart.
So if you look at Microsoft Word, you can see the political fights inside of Microsoft that led to all those buttons being there over time. And I would just say you can look at Google's suite of AI products and realize that there's no cohesion in what Google is doing with AI.
And I'll just give you three examples. I have a GM car that has Google built in it and it just got upgraded to Gemini.
Which sometimes goes away. This is probably GM's fault, but it's somewhere between Google and GM. Sometimes it just goes away and becomes Google Assistant again. Weird. That's just a weird thing that happens in my car. Sometimes the all powerful AI just disappears.
They get tired. What are you going to do?
Gemini in my car is supposed to be the same as Gemini in my phone, right? But it actually has a slightly different set of capabilities. And none of that is related to Google Assistant, Gemini on my Google Home devices in my home, right? And all of that is different than whatever appears in Gmail in Google Workspace. So today I asked my Google Home, "Hey, I got an email this morning. Can you find an order code for me?" And it was just like, "I can't read your email." And I was like, "The whole point of this is that you're supposed to be able to read."
No, you super can, Gemini.
Why did I turn voice match on and all this stuff and give you access to my email if I can't just say, "Hey, can you pull the order number out of my email for me?" Right? And it could not do that. But then the best part is randomly like your car might have been able to. Do you know what I mean? Like this is the Gemini story, right there. And this is all I'm saying is I can look at that mess of products and they've put AI everywhere across the Google suite at really high rates and they're very proud of this.
And in many ways they're winning, right? They're shipping more AI products to more people than anyone because they just have the most surface area.
Yep. And you can say, well, there's no strategy here. There's no vision for how all of this makes a Google ecosystem powered by AI. There's just different riffs on Gemini in every single place that can put them. And you know, Sundar was on Decoder at IO and his whole point of view was we've got the big foundational technology team that's Google DeepMind and then we're productizing it all these different ways. And I get the sense that the product that Demis Hassabis wanted to make at Google DeepMind was AGI.
This is Demis saying over and over again, we're in the foothills of the singularity. A phrase Sundar has now adopted which makes it a thing which he said it was in the blog post that like he's just paring this as like this is now the phrase we're using. It's like live laugh love the foothills of the singularity like this is what we're doing now.
Well if you think we're in the foothills of the singularity by the way which generally defined as a point by which you cannot see through or beyond who knows man that AGI is going to come about and that the super robots are going to be smart enough to do everything in the world and we'll just live a life of carefree fully automated communism whatever. If you think that's happening, you should spend all of your time focused on that. You should spend 0% of your time allocating GPUs to Gmail search, which was part of Demis's job, right? Like just fighting over who gets what access to what model when. And I think he wants to do automated drug discovery and bleeding edge frontier research. There's no question that Google is no longer at the frontier competing with OpenAI and Anthropic. Even on the latest benchmarks, they're way behind. Demis wants to go do that and the very prosaic let's put the Google Assistant here powered by Gemini over there connecting to your data source over here to make real products people might like and not hate AI that seems like someone else's problem.
And I don't know the new person who's going to run DeepMind. It's notable that they're not a CEO, they're an SVP in Google's structure.
DeepMind is now a business unit inside of Google that has an SVP, a chair, and it doesn't have a CEO like it doesn't have business results to contend with on its own. So, it's getting subsumed more into Google and all of the researchers inside of Google, Hayden has a great story about this, are pretty mad that Google is doing military applications with AI.
So, there's just a lot of turmoil inside of this organization that I think is reflected in the products. By the way, the products are the ones that have to make money while Demis goes and, you know, tries to escape the foothills to climb the mountain of the singularity.
I think I agree with almost all of that. I think the other piece of this that I've been thinking a lot about is where AI is interesting and where AI is actually finding real product market fit, right? Like if you look at Demis's office, I've talked to him a number of times over the years. And one of my favorite things about talking to Demis is you talk to Google executives or executives at almost any company and you usually talk to them in the course of talking about some new product, right? They're about to launch a thing, so they make demos available to talk about that thing. He never wants to talk about the news. He's like, "Look at this cool new thing we shipped. I actually don't care very much about that. Let me tell you all these other things that we're working on and all the reasons I think this is interesting." And he has been pretty straightforward over the years about not thinking that building an AI personal assistant to search your Gmail is the most interesting thing you can do with AI. I happen to think he's right. And he really believes, I mean, he won a Nobel Prize for some of the work that DeepMind has been doing for many years on this stuff to actually go and try to cure diseases and come up with new proteins and invent whole new things. Like, he just earnestly believes that all of the places we are pointing AI right now are the uninteresting places to put it. And especially you look at it right now, we're in earnings season, so we're learning how much all of these companies are spending on this stuff. Everybody's capital expenses are out of control. Everybody is spending like the world is going to end on AI infrastructure of one sort or another. And the only way any of that stuff is going to return for itself is business services, right? Like this is what we always talk about. AI is business software. The business of AI is business software. And again, if you're Demis Hassabis and you're really interested in curing cancer, like building B2B AI infrastructure to make it slightly easier for people to do accounting at their companies is not going to be very interesting to you. And there's been some really good reporting since this news in Semaphore and elsewhere that Demis Hassabis has actually been kind of disengaging over the course of the last year because he doesn't want to run a giant organization. He doesn't enjoy the politics of Google by all accounts. He doesn't care about any of this. He is a true believer in I think the truest sense of what AGI is going to be and what it could be and what it could mean. And I think it's exactly what you said. If you are all the way at the end of that spectrum, the hell are you doing working on business software? And I think the thing about this that I really enjoy is my joke about AI all the time is AI is going to cure cancer way before it builds you a good personal assistant. You know who believes that is Demis Hassabis. And like again, if that's what you believe, of course, you should give yourself a giant fancy title like chief scientist at Alphabet that lets you go be on stages around the world to proclaim what AI is going to be. It lets you go be influential all over Google instead of just at DeepMind. It lets you not spend all of your time dealing with people fighting for compute at Google Maps versus Gmail. And it lets you go invent AGI. Like, is that a weird decision that's going to make him do a lot of odd things with his time over the next few years? Like, yes, absolutely. But it makes perfect sense to me and I think is like pretty clearly where this is headed. So, they're going to replace him with somebody who is a much more normal operator of a business unit inside of Google who will spend all of his time talking about the new features of Gemini and that will be the job. I don't disagree with any of that. I think that is going to be fundamentally dangerous at a company like Google that does not have any top-down product strategy.
Yes. And who is losing the person in Demis who is maybe the single most credible person in the entire AI industry?
Yeah. We saw in the Musk v. Altman trial, they're all afraid of Demis.
Yeah. He is the boogeyman to every one of their competitors and he had the most resources and was in control of the most things. And I think part of having the most resources and being in control of the most things is you're also accountable to the most decisions. And at Google that means you're allocating GPUs, right? Even while Anthropic is showing up and taking up Google cloud capacity because Anthropic needs all the capacity in the world. I think one of the most interesting things here is Google is not competing at the frontier with Anthropic and OpenAI and
is true by the way but we can come back to that.
Oh, we'll come back to that. I mean I just look at the benchmark charts. It's however much you want to believe the benchmarks. But Koray Kavukcuoglu I think is how you pronounce his last name. He's the former CTO of DeepMind. He will now become the SVP of DeepMind. He'll report to Sundar Pichai. And the idea that he will also run the research lab which is what DeepMind is supposed to be and make it a business unit that feeds into everything else. That's what Google has to unwind. And this is what Sundar was describing to me on that episode of Decoder at IO which is DeepMind is the big research facility it creates all the core capabilities and they go out and get productized and I think if you're Demis you're like no the product is AGI.
And if your job is to make the frontier models and those get productized elsewhere that it just puts you in a different position than Anthropic which is you know every single day their product is the model.
Mhm. Like in big meaningful ways and they're not really making any money and they sometimes adjust their earnings to make it sound like they're making money. OpenAI isn't making a dime. Their product is a model too and I think Google just has to make a big decision about what the product is and right now they make money even though they're spending tons and tons of money out in the world. If they stopped doing that they would just start printing money again.
Yeah. Like this last quarter, I think they posted a net cash operating loss because they're spending so much money on data centers, right? They could just stop.
They could just stop doing it. And the only reason you're doing that is because you believe that there will be infinite demand for AI for your AI or you're going to sell the capacity to Anthropic, OpenAI. And then Demis is going to get to AGI.
He's going to chase this all the way down. And then that will unlock whatever Larry Page and Sergey Brin will ascend to the next level of sentience that they have long dreamt of.
And all that's a lot of bets, man.
And I think if the products aren't good along the way, all of that starts to teeter. Okay. But this comes back to is Google behind, right? Because one way to look at all of this news is Google flailing because it's losing, right? Gemini 3.5 was supposed to come out in June. Now it's August. It's not out yet. There has been some reporting that Gemini 3.5 is not up to the standards that Google was hoping for. Jeff Dean is leaving. Demis Hassabis is leaving. Like full panic everywhere is one way to look at all of this news. Another way to look at all of this news is actually Google continues to be in the strongest position in the AI industry and it's not super close. And maybe it doesn't matter if Google has the best model because it's going to win in every single other imaginable way. It has the distribution. It has the vertical integration that it needs. It has the sales team that it requires. Like Google can probably win without having the best model. But I do think among a set of people particularly in Silicon Valley, there is a real sense that Google is behind. And how you look at what's happening right now really depends on whether you think Google is behind or not. And it sounds like you do think Google is behind.
I again the bleeding edge of the frontier. I can't evaluate that. I think a lot of people have a lot of opinions about that and many of those people seem to think Google's behind. In terms of the things people are doing every day, the experiences people are having with AI that makes them hate AI and protest data centers. I don't think Google has as good of a product in AI Overviews as free ChatGPT or free Claude. And we can see it every day because AI Overviews are extraordinarily public. People keep using them and posting screenshots of how stupid they are.
Yes, we have one here. There's a really good one from this week.
So, I'll just offer you this one, which is I think the funniest bad AI Overview in quite some time. It's okay. Bill Gusen on Blue Sky posted he would clearly search for what does buying the dip mean and AI Overview spat out to him buying the dip means purchasing an investment like Dean's French onion dip or stocks after a price dip. And then someone went and checked it. It's real. And then, you know, there's bullets underneath it that says, "What is buying the dip?" Oh my god. And the three bullets under it are one, lower cost buying assets when prices fall from recent high. Two, long-term hope, expecting the price to go back up over time. And then the third bullet is just snack option, which is purchasing dairy or bean dips at the grocery store. This is incredible.
Bro, did you buy the dip? Is like there are a lot of possibilities there.
It's very good. It is incredible that this is just a thing that people are checking and seeing. I'm confident this is fixed now, but I've seen this in a bunch of places. Now you can say maybe it's fake. Maybe it got hoaxed. I've seen answers like this across Google over and over again.
And I think these are the experiences people are having with Gemini and AI Overviews. And obviously Google has to run AI Overviews as cheaply as possible because they serve millions upon billions of queries every single day. But I think the combination of maybe at the bleeding edge of the frontier, there's a class of people in Silicon Valley who think Google is behind and the next model will rocket them to the front and that race will just keep going. The experiences consumers are having with Google's free AI products and the sort of messiness of how AI is being smeared all over everything else in Google is a lot. And I would couple that to stories we ran this week about Reddit. Reddit being infested with AI slop to try to gain Google search results. Reddit trying to fight back against AI slop with AI moderation of its own. Publishers wanting to opt out of Google because there's still more traffic, which we keep talking about. And you're like, "Oh, the core business of Google is under a lot of risk from a lot of different places." And if people stop trusting Google as the primary source of information and it's not operating at the frontier and people turn to Anthropic or OpenAI or whoever else first, things get pretty shaky pretty fast.
Yes. Right. And like the fact that the company is printing money and doing all this stuff, it kind of doesn't matter if Google search is shaky because once that goes, all of your distribution advantages start to go with it.
Yeah. I mean, I agree with that and I do want to turn to Reddit, but I just before we do, I want to offer you one data counterpoint that I've been thinking a lot about this week. So, we've talked before on this show about the fact that OpenAI very proudly sort of touted every milestone on the way to a billion users for ChatGPT and has not yet announced that it had a billion users of ChatGPT. It did announce that it has a billion people using its models, which is not the same thing, but it's still a really big number. Meanwhile, Google at the end of July, I think in its earnings said that 950 million people use the Gemini app every month. Like there is a real chance in there that more people are using Gemini than are using ChatGPT. And if not, it is damn close.
And that is a thing that if I'm OpenAI is terrifying. Because that means your losing your first mover advantage has now disappeared and Google is just going to eat you alive by virtue of its overwhelming hugeness in every imaginable way.
Yeah, but I'm saying to change the voice in my EV, I had to download the Gemini app and change it in the app. Like Google can play a lot of games that OpenAI cannot play.
Yeah. I think Google's also in more countries with Gemini than OpenAI is.
Yeah. And again, I think Google has these are the intrinsic advantages I'm talking about, right? But this is how you get people into the ecosystem. And Google just has moves upon moves that no one else has. And so I kind of think Google can be third best and still win.
Yeah. And I also think there is a strong chance that as keeps happening, Google will find a way to leapfrog the other two for 10 minutes until somebody leapfrogged. Like this is just what these three companies have done for years. And I don't know of a reason to assume that Google is like out of this fight.
Oh, I don't there's no way I would say it's out of this fight. All I'm saying is if you want to lead AI at Google, a good question is what does that mean?
Does it mean you're in charge of the models? Does it mean you're in charge of how it shows up in Gmail? Does it mean you're in charge of whatever bad voices Gemini has, which are not as good as the voices Google Assistant has? By the way, Apple's about to put out a home device with Siri AI and it powered by a distilled version of Gemini that is probably going to be better than the Google Home device.
Yeah. And I'm only saying that because they will have paid any attention to it at all.
Yeah. No, I agree with that. I think Google shipped this home speaker and then I think promptly forgot that it existed, which is a very Google thing to do. So, if you're in charge of AI at Google, like there's an all powerful robot voice assistant in everyone's kitchen. Well, I think that's what OpenAI is going to ship first, too. So, are you in charge of that? I do not know the answers to these questions.
I don't either. I've been reading a bunch about Plus again recently, as I am wont to do from time to time.
You love reading about Plus. I think Google+ is one of the most fascinating moments in certainly my career covering technology because it was the other time that Google did what it is doing right now, which is take a thing that it believes in and try to smush it into every other product that it made. Social was the future of everything. They were going to rebuild every single one of their products around this social network that was not going to just be a social network. It was going to invade every other like what if we make Google Calendar a social network was the Plus plan. Like that was literally what they were doing and it didn't work and it cratered spectacularly and it hurt Google for a really long time. And the bare case for a lot of this is Google repeating exactly that mistake. And instead of saying we have a bunch of successful products, maybe this is a new one. They're saying we need to reinvent every single thing that we do around this other thing that now exists. And they might break it all again in the process. Except, and I think this is the error, it's not all the same thing. If I could reliably count on Gemini to be the same Gemini in every place where I encounter a Google AI service, I might feel differently about it, but it is often just like nerfed in extremely confusing ways.
Yeah, that's such a fun UX question. Like, should you be able to ask Google Maps about your email is such a fun weird question. There was some announcement this week that you can now like order food directly through Google Maps. You can say, "I have this long drive. Order me some Chinese food to be picked up along the way." Boy, can I not wait to test that out in a bunch of deeply weird ways that are going to screw me up. Like the Starbucks app can't figure out that I don't live in California anymore. I don't have a lot of faith in Google Maps to get this right. But this is the sort of thing that I think like beyond all of the technology questions, Google is sitting in front of a million complicated user experience questions about actually is the AI supposed to be the same thing in your speaker and your house and your email and everywhere else. I don't know. But it's a super fun weird question that Google is going to have to answer kind of before anybody else.
No, I think everyone else has already answered it and the answer is yes.
Yeah. I mean, Claude is essentially the same Claude everywhere you encounter Claude. And whether that's on the app on your phone or your computer, like these are all cloud services.
That's true. And you can kind of remote control Claude from your phone if it's running your laptop and doing laptop stuff. I guarantee you Apple, we haven't seen how Siri will come to other devices, but they really want Siri to be a unified AI across their devices. And some stuff happens locally and not and we'll just like figure out where that gets to, but I think everyone else has decided it's the same AI. And Google, for I think a variety of cost reasons, has made the AI on Google Home a different thing than the AI that shows up in AI Overviews than Gemini, which shows up in all these other places.
Yeah, I think at some point that's got to come together or in classic Google fashion, maybe get even farther apart. Who knows?
Well, that Yeah. Or actually, I think the classic Google fashion would be for them to almost work together but never actually quite work together. That's the true Google way is like we all acknowledge that these other products exist. We just don't really do anything about it.
Before we get off the subject, let's talk about Reddit just for a minute because you brought Reddit up. Reddit also reported earnings, had some interesting stuff to say about their sort of ongoing case to exist in a world where Google is extremely reliant on Reddit. This whole turn has been really fascinating, right? We've been talking about it a lot. Google has understood that it is being overrun by AI slop, which is very funny because Google is also contributing to a lot of this AI slop. AI Overviews are a disaster for all the reasons you're talking about. But Google has made several turns over the last couple years to more emphasize human stuff on the internet. There's the section of Google search results that's now all like creator-made stuff.
Yeah, there has been an increasing focus on Reddit. Mia Sato on our team wrote a great piece and she said that according to data from Semrush, Reddit was the most cited domain in May by Gemini and AI Mode on Google like it is looking for these human things and yet at the same time Reddit is turning around and saying, "Oh my god, we have a massive AI problem. We are being completely overrun by AI slop, AI generated posts, and importantly people trying to game these AI systems."
Yeah. Particularly brands.
Right. If you can get yourself onto a list of best skincare products, that's the example of Mia's piece in some Reddit community, the chances that your products will be recommended by a Google AI Overview or Perplexity AI review or ChatGPT or whatever goes up and that is a gold mine, right? So all of this stuff is being flooded by branded content, like masquerading as real people, which is crazy and nothing you can do with AI. So Reddit has to deploy AI to stave that off. Google is doing nothing. Reddit doesn't think Google's paying enough money to license all the data on Reddit. And you're just like, why is Google's biggest dependency one platform, right? This is not actually the web you want, right? Google's power over many many many years has been able to say to any one web provider we don't need you. Yeah. Right. Like if and this is the dynamic of you have to be indexed by Google. You can never body up to Google and say we want terms. We want business terms for you to index us. Google will say we don't need you anyway. Someone else will show up and we can index them and that's fine. And or the converse to lift something out of obscurity and be like this is a good and valuable and useful source. We are going to give it real shine.
Yeah. I mean, and this was the power of Google search was that it accessed the whole web. Sundar would always say to me, it's the richness of the web that makes Google go. And if you're like, now we're just in a fight with Reddit. Our whole business is like, can we find a way to thread the needle so that Reddit is healthy so that AI Overviews can surface some combination of YouTube Shorts and Reddit? You're like, what has search become, right? What will Reddit become at the end of that, right? If it is just brands firing AI slop at communities that don't want it in order to sell more shampoo in AI aggregated summaries on other platforms. All of that seems very unhealthy. And I don't think any of these companies, Reddit or Google included, are thinking about it holistically. I think they're just trying to get through the next term. They're all caught in the same spiral, too, which is that the more important your platform becomes, the more AI stuff gets pointed at it, which makes it worse for actual humans, so the humans leave. So, the AI becomes more powerful. Like, it all just kind of death spirals as soon as you add AI creation into the process. Like, I spend a lot of time on productivity subreddits because this is the particular kind of disease that I have on the internet. And one of the things that has started happening is there are two kinds of posts you see all the time now. One is a post from somebody being like what's your favorite note-taking app and then a thousand people all essentially hawking their own app at various levels of subtlety. Some people will bury it in a list of like here are the five that I really like and number four like three are like the three everybody knows and then number four is a weird bizarre one that sucks that there's no way anyone would actually recommend and is clearly being or you just get people who will just paste a link to their thing in and hope that that's enough. And what it turns out is that a lot of this is an effort to game the system so that when Google's crawlers go looking for best productivity app, they find the thing that says what's the best productivity app? Scans the list and fights it back to you on Google's AI Overview. And it's like we've just completely poisoned the well because Google's crawlers believe Reddit is full of humans and Reddit is demonstrably no longer full of humans. And B, this is now a disaster for both of these platforms.
Yeah, it has made them both worse to the point where I don't really trust anything I see on Reddit anymore because everybody is either trying to sell me some weird thing that they vibe coded or is astroturfing for some brand or another all over these platforms.
Yes, I agree with that. Let me challenge you. Put an over/under on this. Okay, Google buys Reddit.
Oh, interesting. I would say no only because it having Reddit be independent gives Google better reason to prize Reddit. Like interesting. I think Google goes really far out of its way to not remind you that it owns YouTube. You know what I mean? It's really important to Google that you forget that Google owns YouTube. And in such a way that I think Google buys Reddit just changes that relationship in a way that is hard for Google. It's also in an ongoing antitrust violation kind of way. It would be very hard for Google to be as kind to Reddit as it currently is if it owned Reddit. Every case for Google only caring about sending you to other Google sites sort of dies on the but Google loves Reddit so much vine and if Google owns Reddit that falls apart. Would it make Google's results better to own Reddit? I don't actually I don't think so. All you're doing is making it more obvious how to game the system.
All right, let me spin it out for you. I'm not saying I believe this. I'm saying I can spin it out for you.
Big publishers are all mad at Google. They all start de-indexing themselves from Google because they don't get any traffic and they don't want to participate in AI Overviews for free. Google says, "No, we're never going to pay you. We're just you can de-index. You're out of Google." The amount of information in Google starts to plummet. It gets replaced mostly by branded content on the web.
Uhhuh. Right. E-commerce providers start publishing lists of best sunscreen and there's the Wirecutter is not there because the New York Times is mad at Google and de-indexes itself.
Yeah. And so Google looks at the incoming information that it has and says we don't want to surface a bunch of e-commerce information either. We need our own first-party platform like YouTube that is full of something approximating real. At the same time, Reddit says, "Our AI costs are skyrocketing because we're spending more money on AI moderation to battle the influx of AI bots, and this is getting unsustainable at our current burn rates and advertising rates. We need a buyer." And Google says, "Screw it. We're done with the web. We're just going to index Reddit." The same way that YouTube is not really an open ecosystem. It is a totally closed ecosystem, allows you to link out, but is only really indexable
Okay, that's a good theory. I think Google pays Reddit what, $65 million a year. That's probably...
That's probably... threw in an extra five. Like, Steve Huffman, shut up.
Exactly. I think that's probably a better deal than buying Reddit outright. Um, and B...
Well, Reddit thinks that's not nearly that funny.
True, but what's Reddit going to do? You know what I mean? Like, Reddit has kind of played itself here in the same way.
What if Reddit de-indexed itself from Google?
Reddit dies. This is the problem. This is the place everybody has landed: Reddit failed to make itself enough of a destination so that it doesn't have to rely on Google for people to find things. Have you ever tried to search something on Reddit? It sucks, dude. Like, Reddit Answers — I don't even know if Reddit Answers is still a thing. It's bad. They tried to do their own AI search and now they're like, 'Well, Google is our discovery engine.' And it's like, 'Buddy, have you seen the media industry for the last 20 years? Like, we tried this. It didn't work.' But now they're sort of existentially reliant on Google, which makes the fact that all of the data coming from Reddit is less and less useful a problem for Reddit as well, because it makes it easier for Google to be like, 'Well, this is not giving us what we wanted. Why would we continue to license this from you at huge money?'
They're stuck in this weird mutually assured destruction, but it's all dying anyway sort of moment that just strikes me as very complicated. But the other thing I want to say, and then we should actually take a break here because we have other stuff to talk about, is that there is going to be someone at Google who's listening to this and thinking, 'God, what a great case Neil just made for why we should resurrect Plus.' And I want to tell you, it's always...
Don't resurrect Plus or Google Buzz or Google Wave or any of the other times you have kind of sort of tried to do this thing. Neil's right, but you Google can't do it, so stop trying. I just want to correct you lightly. One, it's not on Google+. Don't resurrect Plus for Buzz.
We're being a little apocalyptic here because I think we see the endgame of all this circular bot activity and the rise of the dead internet.
Right now, these companies are making money. So, Reddit just had earnings five, six days ago. They beat the street. They posted revenue of $85 million. Their daily actives are up 18% year-over-year. Their weekly actives are up 24% year-over-year. This is a platform that is growing, right?
And it's growing because of a massive influx of Google traffic.
Because Google is existentially dependent on Reddit and Reddit feels like it's existentially dependent on Google. And all we're spinning out is not calamity today. It's, boy, if Reddit is overpolluted by AI and Google search is thus overpolluted by weird AI overviews sourced by AI and Reddit — like, actually, this is all pretty precarious.
It is pure dead internet theory stuff. You get bots that make bot stuff on Google happen. The Google stuff sends you back to the bots. The bots have more incentive to post bot things that go back to Google. Like, it is just a death spiral of AI everything all the way down. But right now it works. There are a lot of corners of Reddit that are still really great, but there's a lot of stats out there about how much of both Google search and Reddit activity is commerce-based. And boy, can I tell you that everybody trying to do anything in the AI world is going to desperately try to destroy that with optimization and bots. It is just going to happen.
We will end here. If you want the most striking counterargument to the crisis in men in this country, just go to r/smoking, which is just men being very kindly supportive to each other about smoking meats.
Everyone's like, 'You did such a good job.'
Oh, that kind of smoking.
Oh, okay. Now I'm in favor. I like it. Our smoking.
I'm sorry. It's like a lot of people being like, 'I up a brisket.' And everyone's like, 'It's going to be okay.' And it's like, it's just very sweet and tender.
That's so nice. The meat and the vibes.
See, that will not get polluted by AI. No commerce in smoking.
Trust me.
All right, we should take a break. Then we're going to come back. We're going to talk about all the weird stuff happening to Disney Plus. We'll be right back.
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All right, we're back. Neil, can I interest you in the following app from Disney? One place to manage all of your cruise plans, your theme park rides, your toy purchases, and all your favorite shows and movies from Disney. I'm talking about the Disney everything app. Also sports, also all the stuff on Hulu. What if everything that ever happened that anyone at Disney had ever done in their entire lives all lived in an app and we called it Disney Plus? This appears to be Disney's plan. What do you think?
You know, it's like they watch Succession and they think it's a documentary about success, not death.
Like, success... and it's like, no, succession. It's like a...
That's what I got. That's my hot take on what is happening with Disney. Tell me more.
Well, I just feel like the idea that you run a big empire and you should have one interface to that empire is very tempting to a certain class of suits who don't know how to make anything.
Broadly, I think that's how you view these kinds of grand ambitions.
And everyone looks at China and is like, 'WeChat is the everything app.' And you're like, 'Well, yeah, but the Chinese government kind of pushes everyone into using an everything app, and it's really a messaging app with all these other components built into it.' Disney Plus doesn't have that. You probably don't want a messaging app in Disney Plus. And you're just like, did you stop and think about how they got there, or do you think people love Bluey so much they're going to do their banking here? I think they think it's the second thing. I really honestly do. I think a bunch of people, and I include like Elon Musk and the X everything app in this, believe that everyone wants to do everything all in one place and that there is something inherently simple about that that is good and beautiful and lovely. And so if we can have one thing that you like, whether it's, you know, yelling racist things at strangers online or it's watching Bluey, then we have an obligation to put as many other things that you do in your life right next to that thing because it makes it easier and better for you to do.
I think that is just straightforwardly backwards. I have been yelling about how everything apps are a bad idea for a very long time. WeChat is a product, like you said, of the Chinese government. It's also a vastly different economy and culture and way of interacting with each other. Like, the only way for an everything app to work in the US is for every single thing about the US to be different. Like, go back 50 years and change a whole bunch of things, and that's how we do this. But there is something about this idea that is so tantalizing and so sort of explainable, which I really enjoy, right? Like, you can imagine the meeting at Disney where they're like, 'Well, we have theme parks, and the people who go to our theme parks like our movies. What if when you were watching a movie, you could buy a ticket to the theme park?' Like, I swear to God that's how that meeting went. I wasn't there, I don't know, but I am certain that's how that meeting goes. Yeah, we want to put offers here, and then if we're going to have offers, you might as well complete the transaction in the app. And now we're just going to add a ticket screen, and then you've got the wristbands at Disney. You got to manage those. You might as well manage those in Disney Plus. And we just have one app on the phone. We don't have to deal with trying to get anyone to download a new app. And certainly we don't have to deal with the cost of maintaining many apps. Let alone that all these different screens inside these apps will actually just be cost centers on their own, but it's one app and it's self-contained, right? I get it. Somebody yells efficiency, and it's like meeting over. So, I guarantee you the thing that scares all of these companies, maybe Disney most of all, and I have some evidence for this, is the social platforms. As I keep saying, if you run a Hollywood studio, you have to contend with the fact that your real competition is TikTok and YouTube and Instagram, and those platforms don't have to pay for content. There's just an army of teenagers who work for free, and you just have to stare at them. You have to think about them every day. And that means that TikTok and YouTube and Instagram always have something new to deliver somebody. And that means they win a spot on your home screen because if you're bored in line, you can just push one of those buttons and something will happen, right? Some new thing, some new rage-bait controversy will appear at you.
And TikTok didn't pay a dime for it. If you're Disney, you're like, 'We got to make another MCU show.' And like, that's a disaster. Like, it just...
It means you have to try hard. You have to do good, expensive things over and over and over.
Now you're like, how do I beat Instagram? And doing it with the cost model of Hollywood content is just fundamentally upside down. How do I get you to open Disney Plus at the same rate as Instagram, but I have to pay Robert Downey Jr. every time he sneezes, and TikTok doesn't have to pay anybody anything? You can't win that fight. You will never have enough content. So, you can do things like you can explore adding a free tier to Disney Plus, which is something Disney announced. You can make it the app that everyone at the parks has to use. That's going to jack up your DAUs because everyone in the park is going to be using your app all the time. You can put Disney cruise deals in it, so you can send notifications to the sorts of people who like to go on cruises, whoever they are. I'm just not one of them, but there appear to be many, many, many millions of people who love them. And then lastly, this is my evidence: you can try to split the difference and you can go to TikTok creators and give them official access to Marvel, Star Wars, and Pixar characters to make TikToks with that you then license back into the Disney Plus app so that you have free content in your app made by other people using your IP, and maybe you're just going to click the Disney button on your phone and you're going to watch some Star Wars cosplay nonsense. This is desperation.
Yes. So, okay. You know what you're making me think? This is what you might call the time-spent epidemic. We spent a long time railing against engagement as the main metric, right? That the thing that you needed was to make people do something — that if people clicked a button or responded in some way, that was a success, right? This drove social media into what it is now: that if you can make a lot of people angry such that they comment, that post was a victory and you've done a good job and we should show it to more people. And I think you can make a real case, and I have made it before, that engagement kind of broke the internet. And we have moved on, or at least all these entertainment companies have moved on, to time spent. Time spent is the thing they all talk about, and it is the race. It's why, you know, Reed Hastings said they compete with sleep. It's why YouTube is competing with video games. It's why everybody is trying to be everything all the time. The goal is just to get you to look at their app more often for more time, and what it takes to get there is utterly irrelevant. This is just the place we are. Anything that looks like time spent wins. 'Fans will enjoy a shared Disney experience with TikTok videos that will be refreshed regularly to engage subscribers more deeply in timely fan conversations, build stronger communities, and ultimately help them engage with more story formats across Disney Plus.' It's in the press release. The thing you're describing is nakedly in the press release. We're trying to increase time spent in the app. This is also Facebook testing the thing where it's just vertical video when you open the app because everybody knows that when you show people a video, they stick around longer, they scroll more. Like, all of it is just time spent.
I will say, we'll see how real this is. There's a nice part of this where they're going to run the Disney creator ambassador program. And if you opt into this partnership with TikTok and Disney, you might find yourself a creative who gets a job at Disney because they're going to do career development for creators.
Great. Maybe this is the solution to your AI apocalypse of entry-level jobs. You have to do your own free animation for Disney, and then they will pluck you from obscurity, and then you will run Pixar one day.
MrBeast Imagineer. The power of short-form video thoughtfully curated to increase time spent.
I'm telling you, all these platforms are terrified of this, and they're all going to launch stuff like this. The everything-app approach to whatever — you can buy tickets here — is just one way to increase engagement and increase transactions inside the app. Putting fan content licensed with TikTok officially inside the app is another way to do it. And all of them are chasing the economics of the social platforms themselves. TikTok does not have to do this. They just showed up, right? And in fact, maybe the most important thing that TikTok and Instagram and YouTube and all the rest provide is a suite of music licensing deals without which they cannot operate. And that's really the only money they spend out in the world. And the labels know it. And every now and again, the labels bend them over a barrel to extract more concessions. But AI music is coming for that, too. And you're just like, 'Oh, this is a big spiral, right? We're all chasing the economics of they don't have to pay for anything.'
Yeah. Well, and I think the other trend we've seen a lot of during this season of earnings is ads. I mean, this has been the trend for a couple of years now. All of these companies, instead of jacking up subscription prices, or in addition to jacking up subscription prices, are desperately trying to get people to switch to plans with ads because they make more money on users who watch stuff with ads than from your subscription. It's not exactly like that, but it is often like that. And you just put those things next to each other. And there has got to be this belief running everywhere around this industry now that if we can just get you to spend 90 minutes a day in our app, we will inevitably make tons and tons of money. Yeah, that there is enough demand for these ads and enough supply for them that if we can get you to open our app for 60 minutes every day, which is like the Instagram, TikTok level of engagement and time spent, we will suddenly just absolutely open the money funnel. And how we get you there, not important, right? And it's going to be licensing the content from TikTok.
Yeah. Which TikTok doesn't have to pay the money.
Oh god. And this means we're like one small turn from TikTok videos being turned into Disney World rides, which is just like not a world I'm ready to live in.
I'm ready to live in that world.
Like some obscure, extremely dirty rap bridge showing up as a Disney ride.
Yeah, meme rides is not a thing I'm fully prepared for. What do you make of this free Disney Plus thing? This is being asked of every streaming service, right? Tubi just reported it's growing like crazy, and now every streaming service is being asked, when are you just going to go free and ad-supported as a giant growth mechanism? Disney — Josh D'Amaro, the CEO of Disney — said they don't have anything to announce in the way that you say it when you're going to announce it in five minutes. So, like, I'm confident Disney is at least down the road of figuring out whether this makes sense. Is this the next big thing?
Yeah. If you're chasing engagement and you're openly announcing deals to increase engagement, then the last thing you can do is make the thing free to get people in the door. And I think Disney's initial thesis was, we're Disney and everyone pays. You don't go to Disney World for free. You pay a lot of money, more all the time. And yeah, an ever-increasing amount of money. And I think they're just up against the reality of, well, the entire Spider-Man movie leaked onto TikTok for free. Yeah, it made a lot of money. It made a tremendous amount of money, but the reality is no one's opening Disney Plus for it because they can just steal it. And their subscription fatigue is real. And if they're paying us money and they're not opening us every day, and if the way to get them to open us every day is to have TikTok videos in here, then the money is not worth it, right? We're just going to shut this down. And we'll just see what we'll see. But I think the incentives are aligning for a free tier full of user-generated content and a paid tier full of Disney content. And if they're smart, they will do that and leave the...
...ticketing experience to some other app.
So, like, Disney Talk essentially becomes free as a curated reason to open Disney Plus, but then if you want the shows and movies, you have to pay for it.
Yeah. All that shoulder content, you know, like behind the scenes of the new Marvel show, like make that free in the Disney app, let people have at it.
Yeah. But when you want to click over and actually watch the movie, make that the subscription fee. And no one's really tried that kind of approach.
But again, if you're desperate to get people to open your app every day, you are going to have to make some stuff free just to increase the number of people who have that app on their phone.
Totally. I think that's right. And I think it's interesting to see all of this happening next to the biggest box office weekend in history at the movies. Like, you have this audience telling you they are desperate for, like, tentpole reasons to go out into the world, and it's like, oh, actually, if you make a kick-ass movie, lots and lots of people will go see it, which five years ago nobody thought was true anymore, right? Like, we were declaring the death of the movie theaters and the box office and in-person experiences in general not that long ago. And I think you can trace a lot of these decisions these companies are making kind of back to that. But there is this resurgence in people wanting to have big, exciting, high-budget shared experiences right next to this just clear race to the bottom from all of the streaming services. And it'll be interesting to see if anybody can pick themselves up out of that, which is an accidentally great segue into what is going on with Paramount.
Because one of the... So the thing that's happening right now is Paramount is trying to buy Warner Bros. Discovery in an effort to, as Neil keeps saying, tank the company, as everyone does who tries to buy Time Warner or anything like it. But David Ellison, the CEO of Paramount, has been running around to everyone who will listen throughout this whole process saying, 'My goal is to make bigger, better, more expensive stuff. We're expanding the slate of movies that we're making. We're going to not join this race to the bottom where everybody's trying to be TikTok and YouTube, but we are going to be and save Hollywood all by ourselves.' And overwhelmingly, it seems every time any US regulator or judge is confronted with this, they say, 'No, thank you. We are not interested in this.' The latest news was that basically this deal has been halted. It's going to go to trial over some of the questions about the antitrust implications of all of this. And that trial has been set to begin next March, which is a long time from now. And it's a particularly long time if you are Paramount, and what you agreed to do is start paying what's called a ticking fee if the deal doesn't close by September 30th, which I will remind you is well before March of 2027.
So, this is earlier than I think they wanted. They had proposed to kick it down the road and settle basically, and the judge said, 'No, we're just having a trial.' So now you got to prepare for a trial. This is like you're not negotiating against a bunch of state attorneys general. You're preparing for a trial that they are all pretty motivated to win because you are the boogeyman. Yes.
I don't think Ellison is wrong in saying a lot of this is about concern over who will run CNN and CBS News. I think...
Do you want to read the quote? You should read the quote. It's a good quote.
