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- Is the Internet as We Know It About to Change? 🤯
Is the Internet as We Know It About to Change? 🤯
And also: FTC Microsoft-Activision acquisition blocking, AI news bonanza, Netflix price cuts.
Tech 🐘
Supreme Court heard arguments to determine whether changes should be made to a 1996 law protecting service providers and publishers from being sued over the content their users post.
The Gonzalez v. Google case is the first time this law has been tested before the Supreme Court.
The plaintiffs argue that YouTube should not get Section 230 protection for its “recommendations” as it makes them part of creating the content.
Supreme Court justices discussed distinguishing between “recommendation” and “endorsement” deliberated on what implications revoking. Section 230 protections would have, and debated whether artificial intelligence-generated content should be protected.
Nvidia reported better-than-expected fourth-quarter earnings results and discussed the potential of artificial intelligence with its new service, DGX Cloud.
During the earnings call, CEO Jensen Huang said AI had reached an inflection point and that companies worldwide are looking to capitalize on generative language models.
DGX Cloud offers customers an AI supercomputer accessible through web browsers in partnership with major cloud providers.
Nvidia CFO Colette Kress commented positively on the gaming division and data center business outlook.
U.S. FTC to Block Microsoft-Activision Blizzard Deal; Sony, Google Express Concerns (6 minutes read)
Microsoft and Sony failed to reach an agreement at EU court hearing on the purchase of Activision Blizzard by Microsoft.
To address regulators' concern, Microsoft has struck deals with Nvidia and Nintendo to bring Call of Duty, Xbox games, and other Activision titles to their gaming platforms.
Sony has opposed the deal as it could lead to higher prices, fewer choices, less innovation, and stifling competition in cloud gaming. Google has followed suit in also expressing concerns to the FTC.
The US FTC is suing to block the $68.7 billion acquisition of Activision Blizzard, while a UK decision may require its divestment from parts of its business.
Netflix has cut prices in over 30 countries globally, including countries in the Middle East, Sub-Saharan Africa, Europe, Latin America and Asia.
This contradicts the trend of many other streaming services raising prices recently.
The price cuts come as Netflix experiments with revenue and subscriber growth for its global markets.
The company is rolling out a paid account sharing feature which allows users to share login credentials outside their homes with a monthly fee ranging from $8-$6, depending on the country. The feature is available in Canada, New Zealand, Portugal and Spain.
Netflix also recently introduced an ad-supported service in 12 countries.
Intel announced that it is cutting the dividend per share from $0.36 to $0.125 to help conserve cash during a challenging economic climate.
The cut signals Intel's outlook for the year ahead. It is part of an effort to reduce costs by up to $10 billion by 2025 through operations phase out, layoffs, compensation cuts, and internal foundry investment.
Intel reported a 32% revenue decline in Q4 2022, and there are reports of upcoming job cuts and executive pay cuts, while the company has yet to confirm the exact number.
Recent reports alleging chip delays have been dismissed as "rumors" by CEO Pat Gelsinger.
The Federal Trade Commission (FTC) has decided to allow Amazon.com Inc.'s $3.49 billion acquisition of One Medical parent 1Life Healthcare Inc., with a warning letter noting that the antitrust investigation remains open.
The FTC, led by Chair Lina Khan, is still probing whether Amazon has used its market power to gain advantages over rivals in concierge medicine and if consumers have given full consent for any new uses of their health information.
This is the second major deal that the FTC hasn't blocked this year: It declined to challenge Amazon's buyout of film studio Metro-Goldwyn-Mayer last year.
Amazon has made a number of major acquisitions in recent years, including buying Whole Foods Market in 2017 and iRobot Corp. in 2020; the FTC is still examining the latter purchase.
SaaS and Cloud ☁️
22 public SaaS companies have been acquired since December 2020 by primarily private equity firms, with Thoma Bravo leading the way at 6 acquisitions.
The median acquisition price was $7.1bln, with the median multiple being 8.3x trailing twelve month revenue. EBITDA margin for these companies was 3%.
Salesforce's acquisition of Slack had the highest multiple of 33x revenue.
In the sample. 98 SaaS co’s have an average net dollar retention rate of 114% at time of IPO. The top 5, 10 and 20 had a higher than average NDR rate of 163%, 153%, and 142%, respectively. Net Retention is a critical metric that should be monitored; if it's below 100%, issues should be investigated.
AI 🤖
The U.S. Copyright Office has ruled that images in a graphic novel created with AI-based system Midjourney should not be granted copyright protection. Still, the text and arrangement of elements written by author Kris Kashtanova are protected under copyright law.
The decision is one of the first by a U.S Court or agency on scope of copyright protection for works created with AI and comes amid rise in generative software like Midjourney, Dall-E and ChatGPT being used to create artworks.
The Copyright Office will reissue its registration for "Zarya Of Dawn," omitting images not product of human authorship.
This decision was welcomed as “great news” by Kashtanova, while Max Sills from Midjourney said it was victory for artists who use creative control over image generating tools.
Notion has released its AI features to the public, allowing users to refine text, summarize key points and generate task lists.
The AI is meant as a “thought partner” for writing articles and improving existing text. It can also translate texts and create summaries of notes or articles.
Notion is partnering with OpenAI, Anthropic among others in order to power the feature; it comes with 20 free responses per workspace user until April 5th 2023, when it will become a paid service at $8/month billed annually or $10/month billed monthly.
Other companies, such as Microsoft (Bing), Raycast (Apple Spotlight replacement), will also integrate OpenAI's tech into their products while Google works on its chatbot technology.
OpenAI is releasing a developer platform, Foundry, allowing customers to run their machine learning models like GPT-3.5 with dedicated compute capacity.
Foundry provides static allocation of compute, model version control, and fine-tuning for latest models.
Service level commitments from OpenAI are included in the offering.
Instance costs for 3 months or 1 year rental (dependent on a customer's needs) start at $78K and $264K, respectively, with a 32k context window max for one model listed in instance pricing chart.
OpenAI is under increasing pressure to turn a profit after multibillion dollar investments and is considering various monetization paths such as introducing 'pro' versions of ChatGPT and Mobile ChatGPT app, working with Microsoft on Bing Chatbot, and leveraging Azure OpenAI Service and Copilot code-generating service.
Funding, M&A and IPO 💰
Cloud optimization startup ProsperOps has secured a $72 million investment round, led by H.I.G. Growth Partners, with participation from Active Capital and other investors.
ProsperOps aims to leverage automation, AI and algorithmic management to assist customers with cost savings on the public cloud service provider of their choice.
The company provides software for automatically optimizing resources and managing savings plans, and is one of the few that considers customer return on investment and focuses on committed-use discounts.
ProsperOps plans to grow its current 30-person workforce and expand into other cloud services soon.
Tome, a San Francisco AI-powered storytelling format, raised $43 million in Series B funding, bringing its total funding to $81 million.
The round was led by Lightspeed Venture Partners and featured other existing investors: Coatue, Greylock Partners, Audacious Ventures, Wing Venture Capital, and new investor 8VC.
Funds will be used to hire top machine learning and engineering talent and build value for the storyteller community.
A multi-year roadmap is planned to equip creators with collaborative AI augmented through workplace tools integrations.
Michael Mignano (co-founder of Anchor & former head of Spotify's talk audio business) has been appointed to Tome’s board of directors.
Shared micromobility giant Lime has achieved full-year profitability on both an adjusted and unadjusted EBITDA basis, making it an outlier in the industry. The company reported adjusted EBITDA profitability of $15 million and unadjusted profitability of $4 million in 2022, which has put them in a position to consider an IPO.
The success of Lime's financials could be a sign of good things for other companies in the industry and investors considering taking part in their upcoming IPO.
Educational 🎓
Public software companies with mainly enterprise customers have constantly declined growth rates over the past six years, while SMB businesses have seen a post-COVID surge.
Product-led companies are still outperforming sales-led companies in terms of growth, but there was a 9 percentage point drop in Q2.
Economic downturn has impacted the entire industry similarly, and companies should consider this when planning for 2023.
Quick news ⚡️
Bain and OpenAI have partnered to help companies apply generative AI. Bain assists in identifying the most value-creating use cases, deploying proofs-of-concept, implementing capabilities, and crafting a change management strategy. These efforts are improving customer experience for retail banks, telcos, and utilities; enabling personalized ad copy/messaging for product/service marketers; and boosting advisors’ productivity with automated dialogue/literature analysis.
Amazon Web Services Inc. is partnering with AI startup Hugging Face Inc., as the market for AI systems heats up. Hugging Face's products, including a language generation tool in competition with OpenAI's ChatGPT, will be made available to AWS customers. The new version of the language model from Hugging Face, titled BLOOM, will be built on AWS.
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