Contrary Research Rundown #51

Every company is an advertising company, plus updated memos on Cohere, Canva, and more

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Research Rundown

Early in Amazon’s life, Jeff Bezos hated the idea of advertising. In 2009, Bezos famously stated that “advertising is the price you pay for having an unremarkable product or service.” Despite his dismissal of ads, Amazon started selling ads through the Amazon Advertising Platform (AAP) in 2012. But it wasn’t until 2019 that Bezos admitted to changing his mind on ads. In Q4 2022, Amazon generated $11.6 billion in ad revenue. In Q1 2023, Amazon’s ad revenue was its fastest-growing segment (+21% Y/Y), surpassing even AWS (+16% Y/Y).

Sooner or later, it seems like every tech company becomes an advertising company. This year, Microsoft plans to double its advertising revenue to $20 billion. Meanwhile, Uber is rolling out full-length video ads that play in-app while users wait for rides. So, why is there a seemingly unavoidable push for tech companies to build out advertising in their platforms?

In 2021, Apple released iOS 14.5, and iPhone users were notified that they could opt out of being tracked for targeting across apps and websites through application tracking transparency (ATT). As many as 90% of users chose to opt out of tracking after the update. The resulting aftermath created an attribution problem for advertisers, where it has become more difficult to understand the effectiveness of advertisements.

For the last decade, Google and Meta have dominated digital advertising. However, the attribution problem that arose from iOS 14.5 has contributed to a new trend: brands are diversifying digital ad spend across multiple platforms to better understand the effectiveness of campaigns. Elijah Schneider, CEO of social marketing agency Modifly, noted that in 2019 and 2020, at least 80% of their client spend was on Facebook products. In 2021, client spending on Facebook products had dropped to 55%, with the remaining 45% on alternative social platforms including TikTok and Snapchat. Additionally, Schneider noted that clients are pushing for “serious ad dollar diversification.”

Headwinds like Apple’s ATT have forced more platforms to look for advertising alternatives, and more demand invites more supply. For example, look at companies like Instacart. Instacart, which is planning to go public any day now, generated $740 million in advertising revenue. That represented nearly 30% of its total revenue, despite being most well-known for grocery delivery.

Why is advertising such a powerful source of revenue? One reason could be that awareness is one of the most under-monetized resources that a large company has. Instacart has 10 million monthly active users (MAUs); TikTok has 1 billion MAUs; Snapchat has 750 million MAUs; Uber has 131 million MAUs. Those companies have already done the hard work to acquire those eyeballs; why wouldn’t they try to monetize them?

Cohere builds general-purpose language models and provides access to them via an API. To learn more, read our full memo here, dive into this podcast episode with Cohere CEO Aidan Gomez, and check out some open roles below:

• Partner Manager - SF (Remote)

• Senior Software Engineer, Data Infrastructure - Toronto (Remote)

Canva is an online design and publishing platform that provides user-friendly design tools for non-designers. To learn more, read our full memo here and check out some open roles below:

• Graduate Engineer 2024 - Backend, Frontend - Sydney (Remote)

• Graduate Data Scientist 2024 - Sydney (Remote)

Bowery Farming is a vertical farming company growing produce in controlled indoor environments using autonomous hydroponic farms for the cultivation of leafy greens. To learn more, read our full memo here and check out some open roles below:

• VP of Data & AI - NYC (Hybrid)

• Agricultural Science & Operations Talent Network - Kearney, NJ (Hybrid)

Check out some standout roles from this week.

• Airplane | SF - Frontend Product Engineer, Product Designer, Backend Product Engineer

• WorkOS | SF - Product Designer, SWE, SWE (Frontend)

• Check | SF - Product Marketing Manager, SWE

• Hebbia | NYC - Product Manager, Partnerships and Growth Manager, SWE (Backend)

• Tropic | Remote - Business Operations Manager

• Meta is reportedly having an internal feud regarding its large language models, Llama and Llama 2. The internal feud has resulted in many scientists and engineers quitting, despite the praise that the projects have received. To learn more, check out our deep dive on The Openness of AI.

• Once again, Cruise is in the news. This week, San Francisco protestors rallied outside of the driverless car taxi company’s headquarters in response to a Cruise robo-taxi blocking an intersection, preventing an ambulance from passing. The patient inside of the ambulance later died.

• The Information released an article discussing how bootstrapped AI company Midjourney generated $200 million in revenue without raising outside capital.

• Travis Kalanick’s ghost kitchen startup, CloudKitchens, reportedly fired staff and closed sites. The former CEO of Uber is now aiming to stabilize finances for his food venture.

• China has reportedly developed a large language model to compete against ChatGPT. Ernie, the Chinese LLM, faces difficulties, partly due to China’s internet censorship.

• The Information released an article discussing how Deel, the HR software startup, became the payout provider for Prop Trading Firms. To learn more about Deel, check out our memo.

• AI startup Hugging Face began offering a ‘training cluster as a service’ product. Businesses can train custom LLMs at scale utilizing Hugging Face’s infrastructure. To learn more about Hugging Face, check out our memo.

• Software and DevOps startup, Replit, announced the release of Deployments, scalable hosting infrastructure directly from the editor. To learn more about Replit, check out our memo.

• Dave Clark resigned from his role as the CEO of the tech-enabled logistics platform, Flexport. The former senior executive at Amazon is now considering running for Governor of Texas. To learn more about Flexport, check out our memo.

• Anduril is reportedly acquiring Blue Force Technologies, the company that designed the unmanned fighter jet Fury. To learn more about Anduril, check out our memo.

• AI startup Anthropic announced the launch of a paid plan for its AI chatbot, Claud Pro. To learn more about Anthropic, visit our company profile page.

• Cloud Security company Tenable has announced its intent to acquire startup Ermetric. To learn more about cloud security, check out our series of deep dives.

• AI leader, Jakob Uszkoreit, raised a $100 million Series A for an AI biotech startup aiming to discover new therapies and vaccines.

• Car-sharing platform Turo has reportedly restarted its plan to go public and could list shares as early as this Fall. To learn more about Turo, check out our memo.

• In response to a two-day return to office policy, nearly half of Grindr’s employees resigned. The CEO noted that although the firm is smaller than ideal, the news is positive for margins.

Join us on Thursday, October 5th for our first Tech Talk — an evening of technical demos and conversation featuring senior leaders from Hugging Face, Graphite, Replit, Slingshot AI, and Nomic.

Space is limited - register here for the chance to attend this in-person event in NYC.