John Battelle’s top annual business predictions are in and, from his point of view, 2023 is going to bring some upbeat surprises. Whether it’s new launches from some well-established players in the tech space or businesses that finally get their IPO due, Battelle is practically buoyant about adtech, artificial intelligence and the enterprise space.
For some sectors, though — we’re talking about you crypto — staying afloat may be the best they can hope for in 2023 if Battelle’s forecasting bears fruit.
Signal360’s Lauren Barack talks in detail with Battelle about his picks this year, and the reporting and indicators behind his reasons. We won’t give too much away here, so listen to the full conversation below, or scroll down for the lightly-edited transcript:
TRANSCRIPT
Lauren Barack
Hi everyone, and Happy New Year and welcome to signal 360. I’m Lauren Barack. Today we’re speaking with John Battelle, co-founder and co-editor in chief, about his annual predictions. Welcome, John.
John Battelle
Thanks for having me.
Glad you’re here. So I think this is your 20th year of your annual predictions. Is that right?
Yeah, I’ve been doing this for 20 straight years, which is crazy to think it’s been that long. But that’s when I started blogging and writing on my own site, 20 years ago, in 2003.
You’ve had a pretty good run on these. We’re going to talk later in the month about your scorecard for 2022. But if you don’t even have a pen and paper yet, go grab one, because you’re gonna want to take down some notes for 2023. John has a pretty good track record.
I had a good year, last year, let’s see if we can keep going.
Definitely. So I read through them, and tell me if I’m wrong, but I felt like they had a little bit of a positive spin this year.
You know, that’s not wrong. It’s generally true. As a matter of fact, there’s been a couple of years where I’ve reviewed the first draft of my predictions, and I’m, like, I’m being too positive. Then I go back and mess them up with it, so to speak, and then I ended up being wrong. So I’m gonna stick with my gut here. I tend to be a pretty optimistic person, even though you know, I’m a journalist, which means I’m supposed to be cynical.
I get that. Well, I want to start right off at the top, because your first one’s definitely a positive one. You start talking right off the bat about ChatGPT and its business model, which I thought was really interesting. Could you talk a little bit about that and where you sort of imagine this going for 2023.
ChatGPT burst on the scene a month or two ago and prior to that it had an an image generator that got a lot of attention. But it really was its text generation feature, the ChatGPT, where you could prompt it, and then it would come back pretty quickly, with a chunk of text that sounded like there was somebody behind the screen, who is a sentient person writing stuff for you. Of course, the press being generally writers went bonkers for this. We saw so much coverage of this breakout artificial intelligence application. But the question for me was okay, but where’s the business in all of this. And the company that made chat GPT is really not a company. It’s a research, nonprofit research laboratory called Open AI. But what a lot of people didn’t really know when they covering ChatGPT is that Open AI had changed their business model to become a for-profit company. Not only that, the original technology and a lot of original researchers came from Google. And the big round of financing that valued the company at over $20 billion came from Microsoft. So here, we’re talking about two titans of technology who are deeply embedded into a new company, with a lot of other well-known people who have been involved in the open AI effort, and a big mission, a very positive mission, which is, in essence, to figure out how to do artificial intelligence in a way that doesn’t harm humanity.
Here is a big Silicon Valley story with all of the elements, lots of money, lots of well known backers, a big open-ended, optimistic mission. So my first prediction, and my second and third really have to do with how does Chat GPT make it through the gauntlet of the Silicon Valley business model gambit, and that’s really a big deal. Google didn’t become Google until it figured out AdWords. Microsoft didn’t become Microsoft until it figured out software licensing. Both those companies I think, are going to play a role in the future business model of Chat GPT and I predicted this is the year where we’ll see that business model emerge for all three.
How will Google react? And what is it going to be sort of producing to step forward from what’s happening right now with Chat GPT?
One of the things that’s really interesting about Google in the last five or 10 years is it’s been one of the most remarkably profitable, high-growth companies over the past decade, but it hasn’t had that many breakthrough innovations lately. It hasn’t had something that make people go, ‘Wow, that’s amazing.’ You may recall, sort of 2000 to 2010, Google was throwing a lot of stuff against the wall, they were experimenting in almost every field. Now, they still have a lot of those experiments running, but they’re not well-known. I think they should probably be a little bit embarrassed the ChatGPT didn’t come out of Google, and instead it came out a little bit to the side of Google. What I predict is that they’re going to come up with a new search interface that that feels like ChatGPT. A lot of the first hot takes on ChatGPT were, ‘Oh, my goodness, this is going to hurt Google’s search business model.’ Because now you can have this conversational interface with a intelligent agent, and have that answer come to you not from a bunch of blue links that come from Google, but instead a better answer that is sort of assembled from the internet using ChatGBT. Well, ChatGBT can’t really do that. Right now, its database is based on information gleaned from the internet before 2021. Doing that at scale is insanely expensive. There are there’s really very few companies who can afford to do that. One of them is Google. And of course, Google means search. So I predict that Google is going to experiment with a ChatGPT-like search interface, which I just gave a moniker to it of conversational search.
Which I think is super interesting, and I think would be something that absolutely change the nature of what how we use Google.
We don’t like to go back and forth, when it seems like we’re interacting with machines. You know, it’s called these modal dialog. But if you’re talking to someone or feels like you’re talking to someone, we’ll do it forever.
Exactly. And I think that’s been a big draw down of what we’ve seen in a lot of other spaces, where we think or we’re being told, we’re talking with these artificial AI, conversational interfaces, and they’re not necessarily what we really want to be talking to. So I’m really excited about that one, the conversational search concept.
You mentioned earlier about some of the big companies and how ChatGPT might have an impact on them, and one you mentioned was Microsoft. In your prediction, you talk about what you see as Microsoft’s reaction to this new player on the field. You talked about something you ping E2 and called Enterprise Explorer. Maybe you can just talk a little bit about that too.
Explorer was Microsoft’s response to the consumer phenomenon of the web browser many years ago. But Microsoft in its core is really an enterprise company. It’s a company that services the software needs a very large organizations. It has a consumer search business, a distant number two, called Bing. But I don’t think that’s where it’s going to use this technology going forward. It already has a large artificial intelligence practice and software practice that’s integrated with its enterprise platform business, which broadly is lumped under the brand name Azure, their cloud offering. But I got to thinking and was wondering, and one of the things that’s sort of frustrating about the internet at large is number one, it is an almost infinite data set. There’s just so much information. Number two, it’s very hard to make arbitrary sort of executive decisions about how things should be right. When you try to do that you get into the content moderation problems the past few years that all the social media companies have had. So what’s an environment where you can both have sort of a top down mandate, a set of rules, and a structured set of data, that is meaningful? That’s the enterprise, that’s a big company that has lots of data, way more data than they can manage. Wouldn’t it be great if you could ask that data questions in a structured way? That’s been the goal of what’s known as the executive information system business. As far as I can tell, you still can’t ask the enterprise any questions. But that ChatGPT interface is pretty interesting. I think it’s possible that Microsoft with that billion dollars they invested in Open AI could create a product that allows people to query their own enterprise data, and even more interestingly, query related data that partners might make available.
So if your United Airlines and Hertz, right, two big companies in the travel business, they might share their back-end consumer data, hopefully in a way that’s privacy compliant, and then ask questions of it in an interesting way that could help them do any number of things from manage their supply chain, to manage their marketing campaigns going forward. I think that that’s a big opportunity. So that’s my next prediction is that Microsoft’s gonna take advantage of that and turn that into a licensing software licensing business. That could get quite large.
I think Microsoft’s listening, so let’s see how that plays. All right, I’m gonna move away from AI to an area that you are semi an expert in. And I’m saying that obviously, in a funny way, because you’re incredible expert in this. One of your next prediction is, actually a few of them are, some of the big winners in advertising for 2023. The first one you talk about is a duopoly war. And maybe you’ll say who you’re seeing that for?
So the duopoly that’s really controlled digital advertising for the past 10 plus years is Facebook and Google. Both of them changed their names to Meta and Alphabet. But Facebook and Google have been the big winners of the past 10 years. But I think the big winners in the next 10 years could well be Apple and Amazon. Amazon has already really hit the radar of almost everybody in the advertising business, because in the past five years, they’ve gone from sub billion dollar advertising business to $30+ billion dollar advertising business. But Apple is about to do the same thing. And Apple’s advertising business last year was reportedly around $4 billion, they were not breaking it out in their reporting yet. That’s just exactly what Amazon did. They didn’t break it out either. But it once it gets over $5 billion dollars, Wall Street wants to know about it.
So next year is the year I think we’re all going to realize that there’s a new duopoly in town, Apple and Amazon. The reason is, is that they are much closer to the customer, which is what matters to advertisers, then Google and Facebook are. You may say, wait a minute, how much closer can you be than Google search or Google’s Chrome browser or Gmail? Well you could literally be as close as the piece of glass in someone’s hand and the operating system, that’s Apple, or what they buy, which is what really matters in commerce and capitalism, which is Amazon. This also is a big phenomenon that’s sort of a sub part of this, the advertising-related prediction, which is the rise of retail networks. Retail media networks, where large retailers like Target or Walmart, they’ve already built these retail advertising networks, but the granddaddy of them all is really Amazon. When you think about it, who knows everything about you, even though they call themselves a privacy company? Apple. So those are two to watch. And I predict there’s going to be some big fights between the old duopoly and the new duopoly.
Another winner, which I’m gonna let you say who you think it is, had a little bit of a stumble. There was news around them last year. But you think 2023 is going to a big year for them in terms of advertising.
That would be Netflix, and Netflix did have kind of a less than great launch of their advertising business. Of course, this is the company that said they would never do advertising, ever. And this is a company that CMOs have been just very eager to partner with ever since they realized that Netflix equated with an entirely new consumer behavior. Of course, all advertisers want to do is follow consumers’ behavior. And when streaming became something that was obvious, and seemingly irreversible, advertisers wanted to be there. But almost all the other streaming networks were not at scale. Netflix was at scale, but did not take advertising. Then, of course, growth started to slow. The company last year announced that they would launch an advertising business, and they did. By the end of the year, it was kind of universally, you know, declared a dud. So my prediction is that in fact, it will not be a dud by the end of the year, because there’s too many smart people working on the problem, and they’re far too motivated. And it is still an open field, and oftentimes a smart Company with really smart executives from the advertising industry, who are very motivated to solve a problem on behalf of advertisers, I say their chances of success are pretty high.
That’s gonna be another good one to watch. So we’re gonna get off advertising and move into something that I know a lot of investors are going to be interested in, and there were two areas here that you really did touch on. One is one of the big hot stories for a number of years now, which has been crypto. You have a prediction about crypto for 2023. Let’s jump into that.
Yeah, crypto started the the year off as super hot, everybody wanted it and everyone wanted to buy an NFT and make a bunch of money. Then at the end of the year no one wanted to touch it. I don’t think either of those things are going to be true in 2023. Where we are right now in crypto is that it’s sort of lying on the ground. You know, nose bloodied, barely has a pulse. I think that’s where it’s going to be at the end of the year, I think it’s gonna go sideways, I don’t think there’s going to be a run in the markets. I also don’t think it’s going to go away. I think in between now and the end of the year, there might be some pretty crazy roller coaster rides for anyone who is involved in the cryptocurrency marketplaces. But otherwise, there’s going to be a year where the original folks who got into this business because they saw a new approach to managing data, those people are going to be building all year long. So there’ll be some really interesting new projects and older projects that are, finally getting some of the features that make them valuable. But generally speaking, I wouldn’t want to be a crypto investor this year.
Okay, that’s very good to note. But you’re definitely a little bit more upbeat on something that I think is going to be exciting for people who’ve been certainly watching this space for decades, you think it’s gonna be a good very, very good year for….
For technology IPOs. It was a terrible year for tech IPOs this past year. And I think a lot of people are saying it’s gonna be another terrible year. But the fact is, when you have a full year, and really a bit longer than that, where good companies that have solid businesses and strong backers, and a lot of potential for growth, when they can’t get out, asking them to not go public for two or two and a half straight years is not good. We don’t forget, we also had a pandemic prior to that. So there’s a lot of pent up demand. A lot of good companies, valuations have been reset, capital wants an exit, right? Capital likes liquidity. So do the employees and founders of these companies. So I expect that by the end of the year, we’ll see a lot of good technology IPOs. And they may well lead us out of a recession entirely.
Well, thanks so much, John, for giving us a kind of a roadmap to follow for 2023. I guess we’ll check back in with you next year to see how you did on your predictions.
I’ll look forward to it.
Again, given your track record, these have a good tendency to follow through. So thanks so much for joining us. It was fun to do this reversal thanks everybody, also for joining us. Hope your new year is off to a good start. And we’ll see you guys soon.
