← The Prof G Pod with Scott Galloway
The Prof G Pod with Scott Galloway
Prof G Markets: Meta’s AI Promise, Microsoft’s Disappointing Beat & Why Google Should Spin Youtube
00:56:16
Loading summary
Transcript105 lines
- [00:00]
Scott Galloway
Support for Prof. G comes from BetterHelp. What comes to mind when you hear the word gratitude? Maybe it's a daily practice or maybe it feels hard to be grateful right now. Don't forget to give yourself some thanks by investing in your well being. BetterHelp is the largest online therapy provider in the world, connecting you to qualified professionals via phone, video or message chat. Let the gratitude flow with BetterHelp. You can visit betterhelp.com profg today to get 10% off your first month. That's BetterHelp. H E L p.com profg food insecurity.
- [00:31]
Ed Elson
Still affects millions of individuals around the globe, and Nestle, a global leader in nutrition, health and wellness, understands the importance of working together to create lasting change. Nestle's partnerships extend beyond just financial support, from building urban hoop houses to producing custom seasoning for food banks. Nestle and their partners actively engage with local communities, listening to their needs and working together to find innovative solutions. Nestle is committed to helping support thriving, resilient communities today and for generations to come. Together, we can help to build stronger, healthier communities. Learn more@nestle.com.
- [01:10]
IBM Watson
Think scaling AI is hard? Think again. With Watson X, you can deploy AI across any environment. Above the clouds, helping pilots navigate flights and on lots of clouds, helping employees automate tasks on prem so designers can access proprietary data and on the edge, so remote bank tellers can assist customers. WatsonX works anywhere so you can scale AI everywhere. Learn more@ IBM.com WatsonX IBM let's create today's number.
- [01:41]
Scott Galloway
20 decillion dollars. That's how much Russia has fined Google for blocking its News channels. On YouTube. A sexual predator, a racist, and a Russian spy walk into a bar. Ed, the bartender says, what can I get you? President Trump?
- [02:07]
Ed Elson
Boom.
- [02:08]
Scott Galloway
A little election humor there. We're going to have a selection. We'll count some votes, says James Carville. That guy's got to be like 110 DLC. That guy. I like him. Do you like him? Do you like James Carvell?
- [02:20]
Claire Miller
I think I prefer your impression of him. I think that's sort of my highlight so far.
- [02:24]
Scott Galloway
I appreciate, appreciate that. It must be bonus season. Someone's being someone's kissing someone's ass. Hello. Pucker up, you little. You little podcast co host bitch. Today we're discussing earnings from Google, Microsoft, and Meta. But first, here with the news is Prop G analyst Ed Elson. Ed, what is a good word? How are you?
- [02:44]
Claire Miller
I'm doing very well. I didn't know that 20 decillion was a number but I looked into it. It's 20 trillion times a trillion times a billion. And the global GDP is 100 trillion, so that should put it into perspective. Just shows you the Russians have their head screwed on straight, is what I'll say about that.
- [03:03]
Scott Galloway
That's actually what our producer, Claire, requested as a bonus for managing young, irresponsible podcasters.
- [03:10]
Claire Miller
That's right.
- [03:10]
Scott Galloway
We can't quite get there. This is a profitable business. But no, I had never heard the term deciliant either. Where are you, Ed?
- [03:16]
Claire Miller
You're in New York, I'm in New York, as always.
- [03:19]
Scott Galloway
Wait, we're past Halloween. I need more banter. Pretend I'm interested in your. What are you doing for Thanksgiving?
- [03:25]
Claire Miller
I haven't made a Thanksgiving plan yet.
- [03:27]
Scott Galloway
I know what that's like. It's okay, little soldier. Things will get better.
- [03:29]
Claire Miller
I could go. I could go back to London, but it's kind of weird to celebrate Thanksgiving in London. It's not really.
- [03:34]
Scott Galloway
Well, yeah, they don't have Thanksgiving. We left them.
- [03:37]
Claire Miller
Yeah, exactly. What are you doing for Thanksgiving? Are you going to celebrate now? You live in London.
- [03:41]
Scott Galloway
No, I'm doing my world tour. I'm back in. I got back to London yesterday, and in two weeks I head to New York for a speaking gig, then to Los Cabos for Baja Summit, where I'm speaking and talking about vertical farming and doing mushroom chocolate at night and listening to some DJ who supposedly is hot. And then I go to Vegas or I go to LA for another writer's room, because I don't know if you've heard, I'm working on an original scripted drama for Netflix.
- [04:09]
Claire Miller
So what do you do in the writers room? Do you kind of, like, sort of shout over them at sort of things they're doing wrong or how does it work?
- [04:17]
Scott Galloway
No, it's. The guy, the showrunner and the lead writer will say, well, what do you think, Scott? And I'll say, no, they would never say that. Even though I'm not listening, I pretend that what they're saying is unrealistic.
- [04:29]
Claire Miller
Okay, so I'm kind of on the right track.
- [04:31]
Scott Galloway
I'm supposed to be the person that puts you in the room, that makes it feel authentic. And I'm supposedly the person that understands these people, which is kind of comical, but, yeah, it's fun.
- [04:41]
Claire Miller
It sounds very fun. You don't actually have to do the writing. You just kind of, like, opine on what's happening. It sounds.
- [04:47]
Scott Galloway
You know me. I don't like to actually work. There's no real work involved in this. Whole Prop G enterprise for the Prop G. It's actually a lot of fun. I get to envision scenes and I'm working with this really talented guy named Scott Burns and media res and all these super talented people. So you know, so far, so far we're in the honeymoon period. We'll see.
- [05:10]
Claire Miller
Sounds like the best job ever.
- [05:11]
Scott Galloway
All right, enough of that shit, Ed. Stop delaying. Get to the news.
- [05:14]
Claire Miller
Well, before we get started, just a quick reminder to subscribe to Prof. G Markets on its dedicated feed. Type in Prof. G Markets wherever you get your podcasts hit follow and tune in in to our interview with Anthony Scaramucci on Thursday. That interview will only be available on the dedicated feed. And now let's start with our weekly review of market vitals. The S&P 500 declined, the dollar fell, Bitcoin rose, and the yield on 10 year treasuries increased. Shifting to the headlines, US GDP grew 2.8% in the third quarter. That was slightly slower than the previous quarter and just below. However, economists were largely encouraged by the growth driven by strong consumer spending on goods. Reddit turned a profit for the first time ever, with revenue reaching almost $350 million in the third quarter. That's up 68% from a year earlier. The company also reached nearly 100 million daily users, and those strong earnings sent shares up more than 40%. Shares in drug maker Eli Lilly fell more than 6% after its third quarter profit and revenue missed analyst expectations. The company also reported disappointing sales of its WE and diabetes drugs. And finally, Elon Musk's artificial intelligence startup Xai is in talks for a funding round that would value the company at $40 billion. That's nearly double the valuation from its previous round. Your thoughts? Starting with this national economic data GDP growth in America 2.8% in Q3.
- [06:48]
Scott Galloway
A GDP number doesn't mean a lot unless it has a benchmark. So just some benchmarks there. Japan's annual GDP growth was up 0.3%, so we're growing nine times faster than Japan. France up 1.1% and Canada up 1.3. I mean, this is just the economy here. It's just really striking to listen to these kind of person on the street interviews about how people feel about the economy. It's so obvious that there's kind of a vibe session, as Kyla Scanlon called it. Or people again, have this habit of crediting their character and their grit for their raises and blaming everyone else or blaming the government for whatever price hikes there are. But our growth is impressive and 2.8% may not seem a lot, but what that means is about every 25 or 27 years, the size of the American economy would double.
- [07:37]
Claire Miller
In addition, we have this new inflation data that just came out. It's down to 2.1%. In other words, inflation has officially been dealt with. Meanwhile, you look at other developed nations that have struggled with not only higher inflation than we had, but also longer inflation. So it sort of makes the case. Well, not sort of. It does make the case for Kamala Harris. If you believe that Kamala Harris is just a continuation of the current administration and if you care about the economy, then this is a big reason to vote for Kamala Harris. But if you've made this point before, she should be making a way stronger argument about how she's sort of the economy vote. If you care about the economy, you should be voting for Kamala Harris. It hasn't really resonated, but for those of us that care about statistics, that care about what the data is actually telling us, and when you look at the US compared to other nations that have struggled with problems way worse than ours, you know the answer is pretty clear. Statistically speaking. Kamala Harris should be your answer.
- [08:39]
Scott Galloway
I so badly want to be head of comms for like 11 days for the Harris campaign.
- [08:43]
Claire Miller
I've heard people saying you should be by the way.
- [08:45]
Scott Galloway
I just think she should have in her back pocket. Every time someone starts complaining about the economy, saying the economy is saying, okay Sean Hannity, there's 190 sovereign nations. You're an intelligent guy. What economy globally is stronger than ours right now? Name it. Instead they, they always go to this democratic self hate of I know things are tough out there and we have work to do. It should be, bitch, we are on fucking fire. Get your head out of your ass. Anyways, okay, Reddit, why don't I listen to my own advice. I bought some stock here, but not enough. I believe the stock is now at about triple where it priced in its IPO about two months ago.
- [09:24]
Claire Miller
Can I ask how much you bought?
- [09:25]
Scott Galloway
You can ask, may you answer. I think I bought about $3 million worth of stock, but I pared some of it so I don't own nearly as much as I'd hoped, but I've done very well. But it popped so big the first day I trimmed some of my holdings and I just didn't listen to myself. I knew this thing, I still think it has more room to run. Anyways, it's revenue up 68% year on year, daily users is up 47%. They're going global, they're being really smart. They've translated their posts via AI into French, Spanish, Portuguese and German. And its international daily active unique visitors increased 44%, which was huge.
- [10:02]
Claire Miller
And it's just such a simple innovation. It's such a great use case for AI, just simply translating the language of your content. But it's so, so effective. It essentially just 10x's your total addressable market. And that is what we're doing, or at least we're trying to do it. We're using AI to translate this podcast into Spanish and Portuguese at the moment. But I think this is something that everyone in content should be looking at. How can we figure out a way to just overnight flip a switch and make this all available to the 8 billion people across the entire globe. It's just a really quick and nice way to just skyrocket your total addressable market. So that would be the first thing that I would commend Reddit on. The second key driver of their growth actually was not intentional, but it's very interesting, and that is Google recently changed the way it ranks search results. So they made this update called the Hidden Gems update. And what they've done with the algorithm is they're now preferencing what they call authentic content, which is the content that is generated by users content that you find on forums and on chat rooms. And so as a result, you will find that Reddit is showing up more and more when you search things on Google. It's also appearing higher in your rankings. And here's a great statistics. Reddit is now the sixth most Googled word in the us so it's this great combination of this intentional play with AI. But also the market dynamics are shifting to Reddit's benefit and it's just translated to this explosion in the business and in the stock. So incredible quarter for Reddit.
- [11:57]
Scott Galloway
But when you were talking about flipping a switch and accessing a global market using AI, and again the operative term there was flip a switch and go global. You sound like me in our all hands last week where at that point the person who runs the company, Katherine Dillon, said, bitch, you translate this shit into Farsi and try and find the equivalent of ZipRecruiter in Iran to advertise it's not quite flipping a switch is what the pushback I got.
- [12:23]
Claire Miller
It's flipping a million switches.
- [12:25]
Scott Galloway
Yeah. And someone actually has to build the switch and manage it while I just. The podcast hosts say flip a switch and let's go Global.
- [12:33]
Claire Miller
This is strategy versus operations.
- [12:35]
Scott Galloway
Yeah. This is the difference between being front of house and back house. Right. So I interviewed the CEO at their annual advertiser event and they have big. They have big advertisers in the room. I saw the CMO of Mars. They had the biggest media agencies there. It feels to me a little bit like kind of, I don't know, Meta or Pinterest or Snap in the early days. One of the reasons I'm going to kind of kiss the ass of the CEO that he seems like a nice man is I bet my prediction is they're going to have an amazing party at Cannes in the next one or two years. They're going to decide we need to be, you know, stroking the hair of people who we are putting out of business and get. Bring them to some great party and get Dua, Lipa or Bad Bunny or somebody. Anyways, we're going. We're going to the Reddit beach party. That's what I take away from all of this.
- [13:24]
Claire Miller
I can't wait. I'm waiting for my invite. Let's move on to Eli Lilly. As many of our listeners probably know, Eli Lilly sells Zepbound and Mounjaro, which are these GLP1 drugs. They are the alternatives to Ozempic and Wegovy. And it's not selling as much as people had thought, or at least that Wall street had thought. And the obvious question is, of course, why? What is going wrong? Now, what's interesting is that the CEOs answer to that question was that there isn't a problem with demand, but there is a problem with supply. So supposedly the suppliers of the inventory for these drugs, those supplies, cut down on their stock and it affected Eli Lilly's ability to get the drugs out. But as a Barclays analyst pointed out, if that's true, that could only have accounted for around 20% of that drop off in revenue. In other words, there must be something else afoot here. Something else is going wrong in The Eli Lilly GLP1 drug story, and it can't just be this sort of chokehold on inventory. And certainly Wall street doesn't believe that story either. So I have a few thoughts of my own as to what might be going on, but I will throw it back to you. What do you think could be the problem at Eli Lilly that the CEO did a bad job of explaining or at least won't tell us?
- [14:48]
Scott Galloway
I wonder if we keep hearing about all these compounded GLP1 producers being able to sell. I don't know if you call it off market, but there's a bit of a glitch in the matrix or a loophole where if a product is sold out, you can build almost like a generic version of it that costs much less. I got to think that that's denting demand a little bit. And I would think that, and not only that you have a lot of these kind of upstarts are sort of scrappy and maybe don't take as institutional approach, but are great marketers and understand new mediums. So I wonder if it's some of the new guys or these compounded GLP1 producers maybe slowed their growth. What are your thoughts?
- [15:28]
Claire Miller
I was thinking that too. And if you look at himss, which we have discussed before, they have been getting into the GLP1 game. Yes. The compounded version, their revenue increased 52% last quarter and a large part of that was their weight loss drug business. And there are several other companies that are offering these compound alternatives. It's sort of becoming a growing space and I think it is possible that this duopoly that we've seen on Semaglutide that has been owned by Novo Nordisk and by Eli Lilly, it could be a little more fragile than we think. The other thing I think is worth mentioning, which one of our team members, Jessica Lang pointed out, and it's a simple but important point, is when you think of GLP1s, Manjaro and Zepbound do not come to mind. The two names that come to mind are Ozempic and Wegovy. And so it could be just a simple brand recognition problem that these products just aren't present in the public discourse enough. If you've been watching the World Series recently, you will likely have seen this WeGovy ad over and over. This new WeGovy jingle that is probably stuck in a lot of people's heads right now. WeGovy. So I think the other explanation here could be a very simple issue. It's just a marketing problem and a brand awareness problem. We know what Zepbound and Manjaro is because. Because we study this stuff for a living. But for the average American, just think Ozempic and Wegovian. You probably don't even know what GLP1 is either.
- [16:56]
Scott Galloway
It's interesting. I agree with you. I usually don't like the idea of. Typically when I walk into a brand and they say they want to show me a brand campaign and they're going to spend money on advertising, I usually say, well, if you're spending a lot of money on advertising, usually you have somebody who wants to hang out with really cool, interesting people. Which ad agency people are. Or you're out of ideas. Because the companies with the best products don't need a lot of brand marketing. In this case, I think an awareness campaign exactly around what you said around Zepbound and Mounjaro. Awesome. Mountaro is awesome. If I came back and in my next life as an MMA fighter, I want to be called Mounjaro. I think that's a badass name. It's a really cool name. Moonjado. So anyway, but I agree with you. I think they need fire up the ad budgets. Yeah. Get some awareness out of there. There's so much money on the line here. Also, supposedly there's a lack of scarcity that finally there's enough production here to meet demand. I wonder what's going to happen though, when it reaches into the markets it should be in. I'm just such a huge fan of this technology. Speaking of which, let's bring this back to me. Ed. I'm doing this NAD treatment. Have you heard of this?
- [18:02]
Claire Miller
Only from you mentioning it last week.
- [18:04]
Scott Galloway
Ed. That's it.
- [18:06]
Claire Miller
I'm fine.
- [18:07]
Scott Galloway
I'll leave no decillion dollar bonus for you.
- [18:10]
Claire Miller
I'll make my way out.
- [18:11]
Scott Galloway
Just Claire's getting a decillion dollars. Anyways, this NAD stuff is really, really powerful. But I wonder if it has a similar compound as GLP1 because I have noticed I'm losing my taste for the sauce and I don't. I'm going to fit right into Baja Summit. I told you about Summit last year. They all take drugs, but they don't drink. I would bet. Going back to Eli Lilly. I apologize. I'm all over the place. This fucking NAD was supposed to give me focus. Maybe it isn't working. I think this is probably a buying opportunity. I think anyone in this market with two great brands or one great brand. Monjato and zepbound. That's a terrible. You're bound for Zep. Zepbound. That sounds awful. That's like some rock climber started some bad ropes company or something. I think other than the CEO making lame excuses, I'd say on this one, kind of buy the dip.
- [19:06]
Claire Miller
Our final headline is xai, which Elon. This is Elon's AI company, which he is supposedly trying to raise around at a $40 billion valuation. Just a reminder of what this company is. So people may remember. The premise of this company was to create a competitor to ChatGPT. That was more truth seeking. So For a while, Elon was calling it kind of jokingly truth GPT. He saw how successful ChatGPT had become and he wanted to make a competitor that was also less woke pretty much. So XAI did build that product and the product is called Grok. Many people may have heard of it and it's available to all paid users of the X platform, formerly known as Twitter. I've used it, it's fine. There was a period where it tried to be anti woke and funny and it felt like a not very funny guy who's trying to just crack jokes at every second. It wasn't a great product.
- [20:11]
Scott Galloway
Yeah, it's the Tony Hinchcliffe of LLMs.
- [20:14]
Claire Miller
It's exactly right. And they fall flat. So I'll get your reactions to XAI in this funding round. There are a few more details we can go into, but what are your thoughts on this round?
- [20:24]
Scott Galloway
So I think this is Musk's next opportunity to turn $40 billion into 10. My sense is this is now a distant fourth or fifth in the LLM market and he did some sleight of hand trying to give take the rights to the data, I think of Twitter and spin out xai and he got a disproportionate amount of the firm. I would have gone apeshit crazy if I was a shareholder in Twitter. But Il Grok right now is a distant fourth, fifth or sixth trying to trade at the same valuation as Anthropic. And that's the analog here. And I would imagine that Anthropic has dramatically more traffic revenues, better technology, et cetera. And what they keep leaking is that Jensen Huang did say that it's easily the fastest supercomputer on the planet. XAI has built its own data center. But I'm not sure if that ends up being much of a competitive advantage.
- [21:20]
Claire Miller
Anyways, I think that's an important point. Is that a competitive advantage? And I, when I look at, it's like there are three main differences that make it different from other AI companies. The first is that Elon Musk is leading. So that's a big deal. It means you can raise a bunch of money. The second is, as you said, they're building their own data centers and that's what sets it apart from OpenAI. OpenAI does not own any data centers. Instead they essentially rent their compute from Microsoft and that's why they have that partnership. And then the third big difference is that XAI is built building its own frontier models and that's where it's similar to OpenAI but not similar to a company like Perplexity, which is building models on top of the models that are built by other companies like OpenAI. So in other words, their sort of strategic differentiation is that they want to own everything that they create. They want to be a truly independent AI company, which is a little rare these days because it's developed into this massive supply chain where you have the chip manufacturers selling to the data centers and the data centers selling the compute to the model makers and the model makers selling their models to the app makers. It's a big supply chain and Xai has decided we're just going to own all of it ourselves.
- [22:41]
Scott Galloway
I just don't know if Xai is going to have the capital. They're starting from less than zero versus everybody else. And they want to raise at the same valuation as the number two or the number three player, Anthropic. So I have a bias because I'm not a fan of Musk. But on just a straight valuation standpoint, this feels to me like a bad deal.
- [22:59]
Claire Miller
Yeah, I mean, it sounds like the Elon Musk premium, but it's why, why he still deserves a premium like this to me is beyond me. The fact that he's destroyed 80% of the market value of Twitter, that was his last venture. I mean, it's, it's crazy.
- [23:15]
Scott Galloway
It's loco. He's gotten mungado on us.
- [23:21]
Claire Miller
We'll be right back after the break with a look at big tech earnings. If you're enjoying the show so far, be sure to give Prof. G Markets a follow wherever you get your podcasts.
- [23:37]
IBM Watson
Think scaling AI is hard. Think again. With Watson X, you can deploy AI across any environment. Above the clouds, helping pilots navigate flights and on lots of clouds, helping employees automate tasks on prem so designers can access proprietary data and on the edge, so remote bank tellers can assist customers. WatsonX works anywhere so you can scale AI everywhere. Learn more@ IBM.com WatsonX IBM let's create.
- [24:09]
Ed Elson
When it comes to SMB marketing, reaching the right small and medium sized businesses can be challenging. Intuit SMB Media Labs gives you the.
- [24:17]
Scott Galloway
Power to do more by connecting with.
- [24:19]
Ed Elson
The small businesses that need you most. With access to an audience of 36.
- [24:24]
Scott Galloway
Million, you can target effectively and at.
- [24:26]
Claire Miller
Scale by leveraging insights from small business audiences.
- [24:30]
Ed Elson
You can target businesses by industry size, maturity, location and more and drive growth across new and existing channels like Social Programmatic and ctv. Spend wisely and do more with audiences.
- [24:43]
Claire Miller
Tailored to your business.
- [24:45]
IBM Watson
Learn more@medialabs.int Tuita.
- [24:53]
Anthony Scaramucci
Support for the show comes from United for Business. Part of building a successful business is deciding what you stand for and to manifest that mission, you also need to figure out what you fly for. For all your business travel needs, turn to United. United offers the most diversified international route network among US Airlines based on the number of international destinations served and now you can get your whole company where you need to be With United for Business, get access to a suite of programs and services tailored to your business travel needs. With their business travel management tool, you can easily book travel and track expenses with programs with no minimum flight or spend requirements. It's designed for small businesses and large enterprises alike and you can connect with a dedicated team member who will help you find the best solution. Plus, while you save on business travel, your employees can earn miles as mileage plus members, so it's a win win for your company and your employees. United for Business works with people who are in the business of travel. Get started at uafly Co Podcast.
- [26:06]
Claire Miller
We're back with Profg Markets. Most of the Magnificent Seven reported earnings last week, bringing AI demand and spending into sharper focus. Google and Microsoft both reported cloud revenue growth above 30%, beating expectations. But while Google's stock rose, Microsoft's fell as the company advised its overall revenue growth would slow in the current quarter. Meanwhile, Meta's stock also fell after the company missed expectations on user growth and warned that its AI expenditures would continue to increase in 2025. So I think let's just start here. A lot of tech earnings telling slightly different stories. Let's just start with what Wall street thought about these earnings. So for Google, Wall street was very happy. Revenue grew 15%, cloud revenue skyrocketed and the stock rose 4%. And I think the main story with Google is there was nothing that you could really fault the company for in that earnings report. Everything. Microsoft and Meta, on the other hand, Wall street was not so happy with and it's a very similar story that we've seen before in tech, which is the top and bottom lines were very strong. They beat expectations at both companies. But there was just one tiny little pimple on the earnings report for both of them. And for Microsoft, it was that their guidance was a little bit soft, not as strong as Wall street wanted. And for Meta, the user growth was slightly weaker than expected, 3.29 billion active users versus 3.31 billion expected. I should remind you, that's daily active users, so it's still pretty incredible. As a result, Microsoft stock fell 4% and Meta stock fell 3%. So I think the summary with these earnings here is that it's very strong overall, but again, incredibly high expectations for these companies. Let's just start with your headline reactions to the tech earnings that have come in this week.
- [28:05]
Scott Galloway
What you said was really prescient and insightful a few months ago and that is the expectations are now that you're going to blow away expectations. So Meta actually their revenue and earnings beat expectations increasing 19 and 35% respectively. But investors were disappointed by weaker than expected daily active user growth. And also I think the thing that freaked everybody out is when Zuckerberg wasn't threatening to spend tens of billions of dollars in mixed reality headsets. He was promising and he did it and he, and he kept spending well beyond any evidence that this was working. And when Zuckerberg says, no, we're going in on AI and get ready folks, hold onto your hats. It kind of spooked, I think as investors a little bit just because relative to the earnings and the revenue beat the revenue and earnings were, were amazing here. And at the same time, let's go to the other end of the spectrum. Everyone's sort of waiting and anticipating Snap to start a death rattle. And even though their sales jumped 15%, not as much as the other guys, their stock was up 10% because the expectation people are sort of, when people listen to a Meta call, they're waiting to see just how fucking amazing it is. When people listen to a Snap earnings call, they're kind of a little nervous. Like is this the quarter that Snap announces that Meta is just putting them out of business? And the expectations here have gotten so crazy and I know I'm jumping around a lot, but let's talk a little bit about Microsoft. They also beat revenue and earnings expectations. The Stock was off 4% in after hours trading on weaker guidance. Good CEO's sandbag guidance. You always want to, in my opinion, under promise and over deliver. And when you start getting desperate or you're worried about losing your job, you start over promising. And under delivering, their total revenue increased. Get this, at 16% off a huge number, that means that they found another eight or $10 billion per quarter in incremental revenue. And also the revenue mix is getting more solid because their cloud offering Azure revenues were up 33%. And that is a business with incredible margins. And 12 points of growth came from AI services. So in sum, this was just, I just, this was just striking. And the only thing that, the only wrinkle here or the thing I would offer that I noticed and we've been Talking about this a lot is that if I were to ask you what comes to mind when I think of the. When I ask you who is the leader in the streaming market, who comes to mind?
- [30:50]
Claire Miller
Well, you know my real answer, but I think the average person would say Netflix.
- [30:55]
Scott Galloway
That's right. But it isn't right, it's YouTube. And YouTube's combined ad and subscription revenue over the past four quarters has surpassed $50 billion. So Netflix is at 37 billion over the same period over the last four quarters. So, so YouTube is a bigger streaming network, bigger revenue. I'd be curious what the growth rate is there. I'm not sure they break it out, but if you applied the same multiple to YouTube, you'd have a half a trillion dollar market cap company. And I wonder if there's opportunity for Alphabet to cut a deal with the doj and among other things in their remedy trial, say, look, what if we spin YouTube? But across all of these folks, you know, whether it was Reddit, which looks like it's becoming a truly big tech company, meta, all of them, Snap showing we're still here. Snap's like, hey, don't forget us. We're still here, we're still growing, we're still doing really well. And the other guys, the big guys, the Alphabets, the metas of the world, are just, you know, still on fire.
- [32:01]
Claire Miller
Yeah, a lot, a lot there. We'll start with YouTube. I just want to reemphasize that number. You said $50 billion in revenue in the past four quarters compared to Netflix at 37 billion. With the same multiple, YouTube would be a half a trillion dollar company in market cap. It'd probably be higher given the margins and given the growth rate. But if it were broken up into its own company, which you have just suggested, I just want to point out it would be one of the top 20 most valuable companies in the world. It would be more valuable than Oracle, it would be more valuable than MasterCard, it would be more valuable than Johnson Johnson. And yes, of course it would be more valuable than Netflix. So I'm, I mean, we've discussed why we believe YouTube is basically the most underrated asset in the market right now. I think this should really drive it home for people. It's something that people don't seem to talk about that much. And I think to your point, it's a little bit of the conglomerate tax. It sort of gets lost in the noise because of all of the other, other things that Google is doing. But this is just a juggernaut in the Entertainment space. I am just fascinated by this business of YouTube and they continue to crush it. One of the other things you pointed out there is the idea that Meta, you know, they spent, they spent really big on the metaverse and it freaked everyone out. And now they're spending really big on AI. And so the numbers are Meta is raising its CapEx forecast for 2024 to between 38 and $40 billion. And that is slightly freaking the market out. They don't love how much that expense line is going to grow. Having said that, though, all the other tech companies are doing it. So over at Google, their capex rose 62% from a year ago to $13 billion. Microsoft is doing it too. Microsoft's capex doubled from last year to $20 billion. And this is just for the quarter.
- [34:06]
Scott Galloway
The ultimate business strategy has become capital as a weapon. Mark Zuckerberg goes, we have access to cheap capital, so I'm going to outspend you. I mean, there's kind of three or four. No one can keep up with these guys except each other. The biggest companies in the world that aren't big tech can't make these types of investments any longer. They're spending more money on, you know, on GPUs and Exxon spent on oil exploration at their peak.
- [34:32]
Claire Miller
I mean, so just some data here. Microsoft, Meta and Alphabet will spend more than $150 billion on CapEx in 2024. And more importantly, Microsoft Meta, Alphabet and Amazon account for roughly 40% of Nvidia's sales. So what we're seeing here is a dynamic where Nvidia is pretty much propping up the stock market. We've all kind of identified that. And Nvidia's entire top line is being propped up by the CapEx spend of Microsoft, Meta Alphabet and Amazon. So in a way, that CapEx number is the most important number in the entire global stock market right now. We should all care a lot about how much they're spending. But as you mentioned, the competitive aspects to this, the idea that they're all ramping up spending, I wonder to what extent this is becoming a little bit of a big dick contest where if you're Mark Zuckerberg and you're seeing Sundar Pichai invest billions and billions into this space and you've decided to get into the space too. I wonder to what extent they're just going to start outbidding each other, not because it necessarily makes sense for the business, but because they don't want to be caught out and they don't want to look to the world like the loser or like the coward who wasn't down to double down on AI. And you know, maybe I'm not giving them an enough credit, but I could certainly see if I were in their position how I could get caught in that dynamic. Google's doing it, Microsoft is doing it, so we better do it too.
- [36:11]
Scott Galloway
Well, I think correctly in hindsight, it looks like the stimulus plan during COVID that the Fed and the White House overdid it. They spent more money than was needed. And Janet Yellen, when faced with that question, did you ever do it? She said, we decided. She said, yeah, we probably did. But at the time the analysis was it's much riskier to underdo it than overdo it. And I think that's how these guys are approaching AI. And that is if they overdo it, they spend too much. That's not the same risk as being the company, one of the big tech companies that had all of the assets, all of the ip, all the customer interface, but got bested and saw their stock lag everyone else's because they underinvested in what appears to be the most seminal technology trend of the last 20 years. So I got to imagine that they're like, okay, we need 10 billion. The range of requisite capex to meet our plans is somewhere between, I don't know, call it 20 and 30 billion. You got to think, the CEO says with a stock at an all time high, with access to cheap capital, I'm not going to be the CEO that missed. On AI. You say 20 to 30 billion. Here's 32.
- [37:25]
Claire Miller
We'll be right back. And if you're enjoying the show so far, hit follow and leave us a review on profg Markets.
- [37:42]
IBM Watson
Think scaling AI is hard? Think again. With Watson X you can deploy AI across any environment above the cloud, helping pilots navigate flights and on lots of clouds, helping employees automate tasks on prem so designers can access proprietary data and on the edge so remote bank tellers can assist customers. WatsonX works anywhere, so you can scale AI everywhere. Learn more@IBM.com WatsonX IBM let's create support for the show comes from Polestar. Innovation is at the heart of every Polestar car and their SUV. Polestar 3 is no different from the intuitive infotainment system to its head turning design. Polestar 3 is for drivers unwilling to compromise. That means merging a spacious, comfortable interior with the torque and handling of a sports car. Now you can go from 0 to 60 in as little as 4.8 seconds and get an EPA estimated range of up to 315 miles per charge. Polestar 3 even allows the driver to optimize the powertrain between performance and range mode, depending on your drive's needs. Experience an uncluttered dashboard showing you everything you want to know and nothing you don't. The innovation doesn't stop there, because you can just have Google turn on your favorite podcast and be immersed in 3D sound by Bowers and Wilkins. Polestar has put in the time designing and refining Polestar 3, and that means the time you spend in it will be the best time of your day. Book a Test drive@Polestar.com.
- [39:14]
Anthony Scaramucci
Support for the show comes from the new season of Crucible Moments, a podcast from Sequoia Capital. What is a Crucible Moment? It's a turning point where we face a tough decision and our response can shape the rest of our lives. These decisions happen in business too, and Sequoia Capital's podcast Crucible Moments gives you a behind the scenes look, asking founders of some of the world's most important companies like YouTube, DoorDash, Reddit, and more to reflect on those critical junctures that defined who they are today. Tune into Season two of Crucible Moments today. You can also catch up on season one at cruciblemoments.com or wherever you listen to podcasts.
- [40:02]
Claire Miller
We're back with Profg Markets. So Meta's revenue jumped 19% to $40.6 billion. That's its record revenue staggering number. And you mentioned earlier about revenue mix the point that Microsoft has done a really good job of diversifying its revenue, which makes that revenue a little bit more stable. They're able to weather a storm. It's a great reason to diversify your revenue. Just want to point out this one stat about Meta. 96% of their revenue still comes from advertising, so they're not in a very strong position from a longevity perspective. But it sort of highlights just what a juggernaut this advertising business is. The fact that this company is one of the top 10 most valuable companies in the world and it's all just from all of that advertising. You talked about how they've been getting into AI, which has been massively increasing their ability to accumulate users and also monetize those users. I'm just amazed that that Meta is worth this much and making this much money and it's still just a pure play ad business. I just thought that was quite fascinating.
- [41:15]
Scott Galloway
I mean, these companies combined probably have ad driven revenue growth of somewhere between, I don't know, 20 and 40 billion dollars in incremental ad growth. And I had dinner the other a week ago with this iconic broadcast anchor. And this is someone who likely, I don't know what this person makes, but I imagine it's tens of millions of dollars, household name outstanding at what they do.
- [41:41]
Claire Miller
You have to tell us.
- [41:43]
Scott Galloway
No, I can't. I can't in this instance because we're good, good friends and I don't like to prostitute my relationships.
- [41:49]
Claire Miller
I'm imagining it's Anderson Cooper and I'll just let you not comment.
- [41:52]
Scott Galloway
What I will say is it wasn't Anderson Cooper. I have a second friend. I have a second friend now in the media ecosystem. Anyways.
- [41:58]
Claire Miller
Oh, Tucker Coulson. Got it. Okay.
- [42:00]
Scott Galloway
Me and Tucky, yeah, we fisted each other and we were screaming out the ghost of Rick Santorum. I don't know where I got that name. That's an image. That's an image. Anyways. And he said that every contract renewal that's coming up across the biggest anchors, the biggest stars in broadcast television, the conversations are going something like this. As you know, it's a stressed ecosystem. We know you are making 10 million a year. Now we're going to pay you three and a half. And it's directly correlated to these earnings because the economy is growing 3% a year and all of these companies are growing 18%. Ad spending is not up 18%. This has become a bit of a zero sum game. And that is say ad spending is up because it's a strong economy. Say, okay, fine, it's up 5%. Ad spending isn't up 15. So that incremental 10% is coming from somewhere else. And I can tell you where it's coming from. It's coming from, generally speaking, ad supported media. That isn't one of these guys. And so whereas if you hosted the ultimate morning show program and they were just printing money, they could pay Hoda 7 or 10 million a year. And now they're like, hoda, we love you. But revenues are down 30%, profits are down 60%. We're going to pay attuma. And it's like, fuck that. I'll just go drink white wine all day. Also, just more generally speaking, I have spoken to two individuals. I like to think I'm trying to be good about my word. And I'm coaching young men. I've had two men reach out to me and ask to speak to me. And they've both been men who are my age who are both very successful in the media market. And they've either quit or been laid off. And they have no idea what to do right now because the motion picture and television market in Los Angeles, and generally speaking, the media market is really strained. If you're not working for one of a handful of companies that are just killing it, it strikes me that these folks haven't connected the dots. There is real pain on the other side of these revenue numbers. And that is it is a terrible time to be a CBS or an mtv. Does anyone even remember what MTV is? Or newspaper revenue is off 80% in the last 30 years. Billboards drive time. If it wasn't for the election, local news stations would be just gone.
- [44:29]
Claire Miller
Yeah, that's a great point. And you think about the other beneficiaries of that revenue growth. Where is that advertising going? It's going to the people who are creating content on Instagram and on TikTok and on YouTube. Those are the beneficiaries. Granted, they're not getting multimillion dollar contracts, but the reason you're seeing those millions getting shaved off of the Anderson Coopers of the world is because frankly, it's going to the Scott Galloway's of the world and people a lot less famous than you, people who are creating content on Instagram, who are making videos, who are commentating on things in the news, there are thousands, probably millions of these people out there who are making a living and who are making real money by creating on the digital platforms. And what I just can't wrap my head around is how those people continue to not be taken seriously by the mainstream media. It's been almost like mainstream media just sort of covers their eyes and pretends like they're still in their heyday while what's happening is we're seeing the social media companies having this explosion in growth and meanwhile, legacy media is completely drying up.
- [45:37]
Scott Galloway
Well, it's really so election night and I'm bragging right now, but I was asked to appear on a variety of cable networks, right? They want to bring in. They go for 12 hours straight. They have a lot of time to fill. So they're like, oh, bring in the guy on young men. Just tell him not to tell dick jokes, right? So almost every network called and said, do you want to come on and election night? And the one I chose, I'm going on Amazon with Brian Williams. And that's kind of telling, right? It used to be you go on CNN or Fox or CBS or abc, because those are the high prestige. Now I'm like, no, I'm going with the new guy. And today on Pivot, we interviewed Margaret Brennan Who I just think is so talented and sober. And as I was listening to Margaret, I thought, she's going to get hired by YouTube or Amazon and she's going to be positioned with the right technology in the right format in one of these mediums, and she's going to drive so much more economic value for the parent company and herself. And even our little podcast, we just started posting our videos on YouTube. We're now making 40 or $50,000 a month in incremental ads from YouTube just by putting our stuff on YouTube.
- [46:49]
Claire Miller
Not to mention all the stuff that's happening on Instagram, where you'll post an Instagram reel and it'll go viral and then you'll get speaking engagement requests. I mean, the flywheel is up and running.
- [47:01]
Scott Galloway
It's flying.
- [47:02]
Claire Miller
Yeah. In social media, one of the things.
- [47:04]
Scott Galloway
I've learned over the last 10 years, we're in an attention based economy, full stop. If you can command attention, you can get revenue. Otherwise the person running the firm should be let go. And what you want to find is companies where there's a delta between the two. So newspapers used to get 30% of the advertising and they were getting 10% of the attention. You knew they were in trouble. And the web was getting 30% of time and had 8% advertising. You knew those two were going to true up. Right now the greatest delta in terms of attention to revenues is podcasting. Total consumption is up 15 or 20%. And revenues are solid and growing, but they're nowhere near the attention. And in addition, I think if you collapse that with the following, and that is there are very few ways or increasingly fewer ways for an advertiser to reach you. You're the great white rhino for advertisers. And that is at the age of 26, you're what I would affectionately refer to as stupid. And that is you're in your mating year. So you'll spend 150 bucks on that stupid Crew Net shirt you're wearing. You'll join Soho house, you'll spend $7 on coffee.
- [48:20]
Claire Miller
You, on the other hand, would never do any of these things.
- [48:22]
Scott Galloway
No, no, I'm much more down to earth, Ed. I'm much more. By the way, did I tell you about the Global Express? I flew back here from Miami. Anyways, I'm not nearly as superficial as you, Ed. Anyways, but advertisers love young people because they're stupid and they're in their mating years. So they will spend a ton of money on high margin products trying to attract a mate. They are the ultimate target. And the problem is MSNBC's average viewer is aged 70, MTV is like 52 or 54. And you or your cohort is listening to podcasts. So you not only have growth and attention, but you have growth and attention across a group that is increasingly difficult for advertisers to reach. So I think you're going to see in one of my predictions, I'm doing predictions act. I think that podcast revenue is going to grow faster than every digital platform's revenues. Maybe with the exception of TikTok who align claim their numbers are lower. But I think you're going to see next year revenues, ad revenues grow 25% plus I think 2025 is going to be the year of podcast busted open by these election or candidate interviews. Attention and advertisers are figuring out the media landscape is dramatically shifting under our feet.
- [49:41]
Claire Miller
Let's take a look at the week ahead. We'll see the Fed's interest rate decision for November. We'll also see earnings from Palantir, Novo, Nordisk, Airbnb and Paramount. I doubt we will care about any of that because we'll have bigger fish to fry tomorrow. Scott, your predictions.
- [49:58]
Scott Galloway
Well, look, it's the election, Ed. I'm predicting that Vice President Harris is going to win the election. The gambling markets say that it's 2 to 1 in favor of Trump. You correctly pointed out that that might be skewed because of these markets overindex young men who are much more biased towards Trump. A lot of people think these markets are being manipulated to send a signal of confidence around the Trump campaign. I also want to recognize I have huge confirmation bias here. I'm very emotionally caught up in this. I could not get over. I was happy to get back to London. I don't know if you've noticed it and maybe you don't notice it when you're in boiling water, but I cannot get over how tense things are. I wonder and again, confirmation bias here that people are just fucking exhausted and think how can I take some of this temperature down and distinctive the policies distinct of whether, you know, perfect is not on the menu. I think a lot of people are going to go, you know, I'd just rather not go back to that shit. So anyways, my prediction, simply put, is that it's not only going to be a Harris win, but I think it's going to be a decisive win. And all of the odds and all of the data say that that's unlikely. But anyways, in sum, I'm predicting that In January of 2025, we're going to inaugurate Vice President Harris.
- [51:22]
Claire Miller
People forget how much it sucked. Not from a policy perspective, but from just a day to day discourse perspective. Having that guy plastered over the news, people freaking out about him 24 7. Every single conversation is about politics and about how the US Is in decline. And whether or not you believe any of that, that is true. Are you really down for that? To just dominate your life all day, every day for the next four years? That, to me is just, that was the big nightmare of the Trump presidency is how I just. We could never escape him. And we had four nice years of some kind of boring politics, and I really hope that we can have four more of them.
- [52:11]
Scott Galloway
My favorite thing about Senator Bennett, I did a fundraiser at my place for him and he said, they said, what would you be like as president? Someone asked him, he's like, I'm going to be the president you never hear about. And I thought, jesus Christ, wouldn't that be refreshing? I absolutely love that he said, I want to be the president you don't think about. I'm going to do the job. I'm not going to say incendiary things. I'm not as charismatic as some of these other people. I'm just going to be the guy that gets the job done. Anyways, I hope that the guy that gets the job done is a she. And I really hope that when I move back to the US it feels less tense, less anxious that we keep this economy going. That young men recognize that their default operating system should be one of protection and that I genuinely do believe that women are under threat here and that men don't recognize how much this could affect us. So I'm hoping, I'm hoping and trusting that some of these things enter people's brains as they enter the voting booth. And I'd also just like to highlight, I acknowledge that a lot of people don't come to this podcast for politics. I endorsed Harris in my newsletter, no mercy, no malice. We had the greatest number of unsubscribes we've ever received. And as I've said before, there's no point in having economic security and people who love you unconditionally if you can't speak your mind. And also to all the people who unsubscribed, I just want to tell you a full refund is coming your way. Why don't you read us out, Ed?
- [53:35]
Claire Miller
This episode was produced by Claire Miller and engineered by Benjamin Spencer. Our associate producer is Alison Weiss. Mia Silverio is our research lead, Jessica Lang is our research associate, Drew Burrows is our technical director, and Katherine Dillon is our Executive producer. Thank you for listening to Profg Markets from the Vox Media Podcast Network. Join us on Thursday for our unpack on the election with Anthony Scaramucci only on the Prof. G Markets feed.
- [54:37]
Ed Elson
Support for the show comes from AT and T. What does it feel like to get the new iPhone 16 Pro with at and T? Next up Anytime. It's like when you first light up the grill and think of all the mouthwatering possibilities. Learn how to get the new iPhone 16 Pro with Apple Intelligence on AT&T and the latest iPhone every year with AT and T. Next up anytime ATT connecting changes everything. Apple Intelligence coming fall 2024 with Siri and device language set to US English. Some features and languages will be coming over the next year. $0 offer may not be available on future iPhones. Next Up Anytime feature may be discontinued at any time, subject to change additional fees. Terms and Restrictions apply. See att.com iPhone for details.
- [55:26]
Anthony Scaramucci
Thanks to Huntress for their support. Keeping your data safe is important. However, if you're a small business owner, then protecting the information of yourself, your company and your workers is vital. In comes Huntress. Huntress is where fully managed cybersecurity meets human expertise. They offer a revolutionary approach to managed security that isn't all about tech. It's about real people providing real defense when threats arise or issues occur. Their team of seasoned cyber experts is ready 24 hours a day, 365 days a year. For support, visit Huntress.com Vox to start a free trial or learn more.