C (3:10)

Well, I think at its heart this is the long awaited. You know. Yeah, we've all talked about how is Google under threat from AI? Because searches will move to AI. This is that playing out in theory? I'm skeptical though. For one thing, for now at least it is a closed garden. You're only going to get access to the people who part the retailers that partner with Chat, gtp, GPT, the ones that kind of accept their open protocol. Little names like Amazon and Walmart, at least for now, aren't involved. So you're only going. It's only going to be as good as kind of the choices that are there. The bigger thing though, and you know this is the big AI problem. It's garbage in, garbage out or you know, how good is. I mean if you ask for best running shoes under a hundred dollars, the AI isn't going to test running shoes, they are just going to find the reviews. Now I know like if you right now do a Google search like best gifts for an 18 year old girl going off to college or something, you're going to get a pretty generic clickbait list 300 times coming up. You know, like girls like flowers or it's just something silly like that. If that is what is feeding these models. If it's kind of just that clickbait that's all over the web anyway, is this really going to be your personal assistant or is it just going to be another sort of disappointing option? I don't know.

A (4:43)

The incentives are interesting too. You know, Google, the incentives are who is going to pay for the ad placement. You know, now when you do a Google search, whether you're on a mobile device or whether you're on a computer, the first things you're going to see are all ads. But generally those line up with what the top search results are from an organic search perspective too. They're just kind of squeezing more margin out. Same thing happens with Meta. I think that That's a company I want to touch on in a bit. But that's a discovery tool, you know, for things that I didn't know that I wanted that there, there does seem to be, you know, be some sort of tension here in the way that people naturally shop and the people. And the way that people have learned to shop online and how this is going to work. So, Rachel, how do you think that that. Is there going to be a learning curve sort of with using something like ChatGPT to shop and what. Where it's useful and where it's not?

B (5:38)

I do think there's a learning curve and it is interesting because you sort of see it taking what we as shoppers and consumers are used to with say, doing a Google search for a particular product, click on an item we like and then, you know, going to check out. I think it's taking that process sort of a step beyond what consumers are used to. And I think that's where it remains to be seen. You know, is that something that really resonates with people when they're shopping for various products? I think it could be very possibly sort of the next evolution in retail and what shopping looks like. But I don't think that that's something that would necessarily be exclusive to OpenAI's ChatGPT, which I know we're going to talk about more in a bit. In terms of how other companies are integrating these AI feature. I think that's important to note. It's not just OpenAI. I think they're just probably the most prominent example right now.

C (6:28)

The other real question here is I think this is incremental. It doesn't feel like a new paradigm. It feels like, again, like I say, a different form of Google search or maybe if it's done well, a better form of search. How do you, even if it is better, how do you change consumer behavior on something like this? And I, you know, I mean, as far as how, even if you've built a better mousetrap and the jury's out on that, how do you stop me from doing what I've been doing for 10 years? I. That that to me is the big challenge they face. They are really going to have to have a wow product, I think, to do that. And we'll see. Maybe it is.

A (7:07)

Well, we're going to see who Lou and Rachel think are the winners and losers of this announcement and how this is going to play out in the tech industry. In just a second. You're listening to Motley Fool Money introducing.

D (7:19)

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C (8:02)

Stay ahead.

A (8:03)

Welcome back to Motley Fool Money. I want to get to the positive side of the OpenAI shopping announcement and who we think the winners are. And Lou, I want to start with you. This is going to potentially be disruptive to a lot of companies, but there are going to be companies who are going to be able to take advantage and maybe it's that long tail of retailers who are have, you know, it's tough to find consumers if you're not in a big box retailer. Is that where there's opportunities for investors today with this kind of announcement and maybe other AI shopping agents coming on.

C (8:34)

The way, I can see why retailers would want to do this because yeah, you're right. I mean, right now, I mean Google AdWords searches, the ways they're doing it, there's no perfect way out there right now. So why wouldn't you try to extend things? I think jury's still out whether or not they are actual winners over time with this because, you know, again, a lot has to go right. I think there's a lot of ifs there. You know, I mean, if, if this catches on, if it drives more traffic, if it converts, there's a lot of potential. There's not a lot of clear things. The real winners for me are the consumers because I think, you know, if these agents do give you better ability to price shop, I don't know if that's great for the retailers, but I do see a world where a pretty, pretty simple thing for agents to do is to just monitor prices and to let you know when something that you looked at is cheaper. So that's great for me. It might crush margins elsewhere, but it's great for me as a consumer.

A (9:30)

So Lou has the consumer as the winner. Rachel, where do you think there's opportunities?

B (9:34)

I think there's opportunities in a few different ways. I mean, obviously the first companies that come to mind here are the ones that were mentioned in this announcement. Etsy, Shopify. I'm quite a lot more bullish on Shopify just as a business as a whole and as a direct beneficiary of these trends than Etsy, really, for a variety of reasons. And we also saw shares of Etsy go up really significantly, about 16% after this announcement, and then sort of plunge down by the end of the day. I do think that there's a lot of opportunity here for really traditional retailers, too. I mean, there was a study that came out this last. Last month that showed that generative AI platforms are already driving a lot of referral traffic to some of these companies. So ChatGPT accounted for about 21% of Walmart's incoming traffic in August. You could think of companies like ebay that could benefit here, maybe Target. Right. That could foreseeably be winners from adoption of this technology on the back end. Right? Helping to really, I think, automate some of their infrastructure behind the scenes. And, you know, there's a payment angle to this too, right? Companies like PayPal, Visa, MasterCard, they're developing a lot of specialized infrastructure and toolkits for AI agents to process secure autonomous payments. So for me, and maybe this is where I differ from Lou a little bit, I think there's a real benefit here to improve the infrastructure of retailers and payment processors. I don't think we're living in a world where most consumers want, for example, an AI agent to do their shopping for them, but if you want to automate that core infrastructure or make maybe shopping easier, there's a value proposition there.

C (11:00)

But is this winning or is it just a shift? Because, like, I mean, for the payment people, MasterCard, Visa and PayPal, are they going to get more business out of this or is it. It just they're already getting a ton of business? It seems like same volumes from a different source, kind of similar to the retailers. It has to be. Right now the source of traffic is shifting. Is the traffic higher quality? Does the traffic convert more? Or is it just that? Yeah, this is a story of maybe simple search losing share to AI. To be a winner here, I think there has to actually be incremental gains either in volumes and conversions, something like that. It could be that AI just gives you better recommendations, so therefore they convert to sales better. Again, I think a lot of that's going to be the data that it's training off of, and that is sort of what the search data, you know. You know, so there's a fine line there. Etsy was up 16% of the news, but then gave up most of that the next day. Shopify was on that same press release, went up less. I don't think that is because Shopify would, would benefit less. I think it's just, it's kind of more just, you know, Etsy investors are more desperate to hear they're involved in this. I think there's a lot of hype here. There's a lot of potential, but I'm, I, we, I think we just have to see.

A (12:20)

Lou, do you think there's an opportunity for a lower take rate from that discovery side of things? If you think about Etsy and Shopify in particular, they've grown a lot on things like Instagram ads. The problem is that Instagram is really good at monetizing their business and squeezing out a lot of that margin for themselves. You know, leaving with, leaving these smaller retailers in particular with, you know, relatively modest margins. You can decide what your margins are going to be based on what your ad spend is going to be. The initial launch is going to have a relatively low take rate for, for chat, GPT and OpenAI. From everything that we've heard that could help those margins short term. Then the question becomes, do we see the squeeze that we've had with something like Meta's family of apps over the past 10 years where they just keep increasing that take rate over time? So is there almost like a short term benefit potentially because this is a new distribution, new discovery model that's relatively low cost and then maybe those, those dynamics change over the next decade.

C (13:24)

That's very possible. I mean, I do think that what I feel more certain about is that if there is a margin expansion it's going to be temporary because that would imply that the OpenAI product actually works. OpenAI has what commitments to spend it? I don't know, a trillion dollars or so in the years to come. It's not like they can afford to let other people get fat off margin. So yeah, I mean, maybe. But again, I think all this is premised on the fact that it is a good enough product that gets us to SW our habits and that that by itself is a big hurdle.

A (14:02)

We're going to talk about the companies that are going to be negatively impacted in just a moment. You're listening to Motley Fool Money.

E (14:09)

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A (15:12)

Change, if we do move to more AI agents, whether it's in ChatGPT or another AI agent engine, there are going to be some losers out there. And we saw this. With the shift to more online shopping over the past 20 years, companies like Sears that used to be dominant are now effectively almost gone. Rachel, I want to start with you. Where do you see companies that could potentially be under threat because of something like OpenAI shopping?

B (15:40)

I think one of the things that we've been hearing a lot is that this could be a major type of disruptive technology to some of the big tech players, right? Like Alpha of its Google and like Amazon. And I'll talk about that a little bit. You know, I'm personally very bullish on these companies but I do think as a long term investor it is good to look at the bear side of things, right? So there's this concept that AI agents that handle foreseeably the entire search to purchase process that could erode the search ad revenue that powers Alphabet's Google. Now I will say Alphabet has predicted this threat. You know, Google's been developing a new shopping assistant experience using AI that's accessible within their search products AI mode. They have, you know, their Gemini AI that they've combined with their shopping graph which indexes over 50 billion product listings, that they have been working to sort of develop their own feature. So I think that that's something to bear in mind when you're looking at that company. Another one, of course there's this idea that agentic AI shopping could present really unique threats to Amazon's dominant position, maybe weakening the walled garden. This idea that maybe if external AI agents could crawl the catalog, compare prices without a customer even visiting Amazon, that they would lose control over their journey. But the argument I would say to the flip side of that is first of all, Amazon has incredible economies of scale and they're building their own native AI shopping tools and I think that that includes as well their agentic checkout feature. So I think the issue will be that retailers or companies that lack robust AI strategies, they're going to struggle to compete. But you've got businesses like Alphabet, like Amazon and others that have tremendous capital backing them up, incredibly well known and trusted platforms. I don't think we need to be sounding the alarm that these, you know, entities are just going to go away because of OpenAI's ChatGPT rolling out new features.

A (17:25)

Lou, a couple of things that I want to just highlight that Rachel kind of pointed to is, you know, Amazon has been talking for years about the growth in their ad business that is basically capturing a larger percentage of the shopping that's going on on the Amazon platform. So this could potentially, you know, you don't need an agent, doesn't need to see ads. Google's entire business is basically ads. So is the, is that where the threat is? Is we go from a world where advertising is really important to the agents don't need ads. And it's how the, how the crawler works, how the, how the model works that's more important. And some of these big tech companies do see pressure.

C (18:07)

So let's, let's separate them because I think it's a different answer for both, for, for Google. Google's core business, yes, it's ads, but it's basically Google's core business is funneling consumers to a retailer or to, to a destination. I think that that can cross over into an AI world using, using Gemini, using Google's products. So I, you know, yes, right now that is, that, that is in the form of ads. That's how they monetize it. It could easily be just kind of referral or whatever we're talking about.

A (18:37)

This would be the, the example of their, they were founded on just giving you the answer, not serving you ads. We're almost moving more to that direction. Hey, I want a great pair of shoes, just go buy it for me. Maybe Google is the best place to do it.

C (18:50)

At the end of the day. Google's about connecting someone who has a desire to someone who can fulfill that right. You know, and whether, I think that can take different forms. Amazon though is interesting. As the name implies, Amazon is supposed to be that one stop shop. Why do we use Amazon? Because I can get everything I can get everything from roach traps to the new sweatshirt to, you know, to the kids, new bike all at one place, you know, and so, you know, I do think that sort of there could be a foundational threat here. Just if your chatbot, you know, is that same Amazon, it has all of the world in there and you can do a one stop there, you know. A couple other thoughts for retailers. I don't know if I'm worried about retail losers. If they don't have a good AI strategy. I feel like this is almost allowing them to punt their retail strategy. I mean, their AI strategy. They can just sign up with OpenAI or something like that and they can outsource that and that's good enough. A couple of other losers I worry about. I mean, I mentioned, I think retailers could be losers if this just becomes a price, a margin destruction tool. I think I said consumers are a winner. The one thing to watch here is say we end up in a world where Etsy and Shopify sign exclusives with OpenAI and they aren't exclusives now. And then Gemini comes along and signs an exclusive with, I don't know, Target or someone like that. And so all of a sudden we have just walled gardens. Like right now I can Google search and kind of get the universe. What if these things kind of become a turf war and you have an effect like a bunch of different walled gardens? So I have to go check OpenAI and then I'll go over to Gemini to see what happens.

A (20:38)

But then you just have an agent to check the agents.

C (20:41)

It would come to that. So I mean, there's a lot of ways this can go wrong. And this, we are early days. At the end of the day, this again, I mean, maybe I just don't. Maybe I'm not visionary enough, but I just see this as a subtle shift from kind of how we search for products that we're interested in today versus how we will. And I do think companies have to adapt to that. But I do think that most of the incumbents are more than capable of doing that.

A (21:09)

I want to get quick thoughts on. One of the things that has been interesting over the past 20 years is companies like Shopify enabling retailers to reach a wider audience that they wouldn't otherwise have in physical stores. But that actually came with a different need, which is reaching customers through things like ads on Instagram, ads on Google. So there was a huge business in that advertising space. Does this potentially enable new business models where maybe I can have a product and all I have to do is put a Good description. Maybe an image or two on the, you know, on the web or on ChatGPT's servers and now it gets indexed and, you know, we don't have to go through this advertising kind of layer that we have in the past. Is that potentially something that we're moving to, Lou, or am I overthinking this?

C (22:01)

I think we're a ways off. I mean, like I said, I'm not going to go sell my Shopify on the idea that we don't need it anymore. You know, I think that there is still retail is a complex business and shop. There are a lot of tools that serve. I think we're a long way off till OpenAI just becomes my go to or any of these become my go to vendor. I still think just that again, to use the word, that foundational vendor that's going to provide a ton of different services, including access to chat to agents. I think that's the way of the near term future anyway.

A (22:36)

Well, this is definitely something we're going to have to watch going forward. I do want to ask you quickly and I'll start with you, Rachel. We got a couple of announcements of AI kind of social video products. OpenAI's Sora came out yesterday. As we're recording Metas Vibes are out. These are actually only AI videos. Sora is a little bit goofy because they're trying to make it a social video that are made with AI. So we could, we can make videos that are, you know, having Lou dancing in the streets or something like that. But is this potentially, you know, an interesting way for them to grow in, in media and in video or these kind of throwing spaghetti at the wall and nothing's gonna stick, at least quite yet.

B (23:20)

I think it's somewhere in the middle. Yeah, the Sora app and then Meta Vibes is the app that launched from Meta. It's basically these feeds of AI generated videos. With Sora, apparently you can insert yourself into a video and can include synced audio. But essentially this new idea of social, AI generated videos on these social media platforms, I think it is a little bit of spaghetti to the wall. We've talked about this before. It's giving me a little bit of Metaverse vibes. I mean, is this something that users are actually going to want to adopt?

A (23:49)

And that's not a compliment.

B (23:51)

No, it's not. And you know, I could be wrong now there could be use cases here, say for advertisers. Right. Maybe this is a great platform for advertising. I think right now this is very much in the experimental stage, I think companies are trying to see what works, what resonates with consumers. And I would expect a lot more of that in the next few years.

A (24:09)

What we can tell right now is these companies are trying to figure out what they're going to do with all these AI models. They're getting better, but what does the future look like? It feels like we're kind of in that, you know, early smartphone days we're figuring out how apps work and how to make money, or early Internet days where there was a bunch of ideas. Yeah, flu.

C (24:28)

Can I just say to Sam Altman and to Mark Zuckerberg, the same thing I used to say to my daughter, just because you can doesn't mean you should.

A (24:36)

But we're happy that they're trying something.

B (24:38)

It's true.

A (24:39)

Well, this is obviously something we're going to be talking about a lot in the future because AI is definitely not going anywhere, given the, like Lou said, trillion dollars or so of investment that's going in just to, just to keep, keep open AI Fed. Tomorrow, we're going to talking be talking about why you shouldn't panic about the government shutdown, which officially happened overnight. As always, people on the program may have interest in the stocks they talk about, and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal finance contract content follows Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes for Lou Whiteman, Rachel Warren, Dan Boyd, behind the glass, and the entire Motley fool team. I'm Travis Hoyam. Thanks for listening to Motley Fool Money. We'll see you here tomorrow.