A new video by Inspired by Iceland pushes back against experiencing life through the “metaverse,” as described by Mark Zuckerberg during Facebook’s rebranding to Meta on Thursday, Oct. 28, 2021.
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Wall Street is bracing for disaster in online advertising.
Following disappointing results from Snap last week and a 28% plunge in the stock price that sent the company’s value to its lowest since early 2019, investors are now turning their attention to ad giants Meta and Alphabet as well as reports this week from Twitter and Pinterest. They’ll also hear from Amazon and Microsoft, which have big ad businesses of their own.
The flurry of reports comes at a time of extreme skepticism in web and mobile advertising. Facebook parent Meta shares are down more than 60% this year, and the company is expected to report a second straight drop in revenue. Alphabet, which has slid 30% in 2022, is forecast to report single-digit sales growth. Aside from one quarter at the beginning of the pandemic, that would mark the weakest period for Google’s parent since 2013.
The economic downturn and fears of a recession have many marketers reining in spending. At the same time, Apple’s iOS privacy change from last year continues to punish companies — notably Snap and Facebook — that have historically relied on user data to target ads.
“Sentiment in the online advertising space has softened of late, with more anecdotes of budget cuts as well as advertisers holding back some budget in hopes of a 4Q flush,” UBS analysts wrote in a report last week. “Looking into ’23, we think planning amidst this level of macro uncertainty sets the stage for below-consensus growth in ’23, even if macro does not significantly deteriorate from here.”
UBS said it would “reduce estimates and price targets across the online advertising group” due to both the economic environment and a strong U.S. dollar. Through discussions with digital ad agencies, the analysts said they learned that “many advertising directors are pulling back certain budgets, particularly among smaller advertisers.”
In Snap’s report on Thursday, the company said results are being hit by a combination of platform changes, economic challenges and competition. For a second straight quarter, Snap said it wouldn’t be providing guidance for the coming period because of difficulty in predicting the economic trajectory.
Digital ad stocks in 2022
CNBC
“We are finding that our advertising partners across many industries are decreasing their marketing budgets, especially in the face of operating environment headwinds, inflation-driven cost pressures and rising costs of capital,” Snap said.
If the third quarter mirrors the second, Snap’s brutal report could spell dismal results for its industry peers. In July, Meta, Twitter, Pinterest, and Google all reported weaker-than-expected results following Snap’s miss.
Investors started planning ahead last week, sending Pinterest shares down more than 6% on Friday after Snap’s report. Twitter fell almost 5% and Meta dropped more than 1%. Alphabet rose over 1%, but still underperformed the tech-heavy Nasdaq, which jumped 2.3%.
CNBC’s Jim Cramer and the Investing Club said there’s a chance Snap’s poor results won’t reflect the overall online advertising market. Meta and Alphabet “have built multifaceted digital ecosystems” that dwarf the smaller Snap, thus making those companies “more immune from weaker digital ad spend,” the Investing Club wrote.
The industry drama this week isn’t limited to earnings reports.
Tesla CEO Elon Musk has until Friday to close his proposed $44 billion acquisition of Twitter if he wants to avoid a trial. After changing his mind on the deal multiple times and being sued, Musk said earlier this month that he wanted to complete the transaction at the originally agreed upon price of $54.20 a share. Twitter wants to make sure the financing is in place before backing off the lawsuit.
Twitter shares closed last week below $50, suggesting investors still aren’t convinced the deal will close. Meanwhile, the business has been struggling. Analysts are anticipating a drop in third-quarter revenue in the company’s earnings report, which is expected this week.
One bright spot in the online advertising space could be Amazon after its digital ad business grew 18% in the second quarter, topping all of the major players in the industry.
While retailers may be pulling back on spending on Facebook and elsewhere, Amazon is a stickier platform for them because people who use it are shopping for stuff. For companies to keep their brands visible on the largest e-commerce site, they have to pay the platform.
But even Amazon’s core business has suffered this year, with growth slowing dramatically from its boom days during the pandemic. Overall revenue expansion was in the single digits for three straight quarters and the stock is down 28% for the year.
By the time Amazon closes out Big Tech earnings week on Thursday, investors should have a much clearer picture of the online ad market and how much companies are tightening their belts heading into the holiday season.
Ryu Young-sang, CEO of South Korean telecoms giant SK Telecom, told CNBC that AI is helping telecoms firms improve efficiency in their networks.
Manaure Quintero | Afp | Getty Images
South Korea has tasked some of its biggest companies and promising startups to build a national foundational AI model using mainly domestic technology, in a rare move to keep the country apace with the U.S. and China.
The project will feature South Korean technologies from semiconductors to software, as Seoul looks to create a near self-sufficient AI industry and position itself as an alternative to China and the U.S.
The Ministry of Science and ICT (MSIT) for Korea announced that five consortia have been selected to develop the models. One is led by SK Telecom, a telecommunications giant in Korea and includes gaming firm Krafton and chip startup Rebellions among other companies.
There are other teams led by some of the country’s other prominent firms including LG and Naver.
“We are going through an important juncture in terms of our technological development. So Korea, at the national level, is focusing on ensuring that we lay the technical foundation to have our competitiveness,” Kim Taeyoon, head of the foundation model office at SK Telecom who also leads the company’s consortium, told CNBC.
“Korea has many entities that would excel at creating a big AI industry. And we could clearly see the possibility that we are very capable of creating a good AI stack,” Kim added.
A “stack” refers to various technologies that make up a product or other technology.
South Korea’s forte
The initiative aims to draw on the strategic position of some of South Korea’s firms and the technology they develop that are crucial to AI.
For example, SK Hynix makes high-bandwidth memory (HBM) which is critical to Nvidia’s products. Samsung is also another major memory player. SK Telecom has been expanding its business into data centers. While Rebellions, which is part of SKT’s consortium, is developing chips designed to handle AI workloads.
Samsung, meanwhile, has its own chip manufacturing business, also known as foundry.
“This means the country possesses the entire AI stack, from chips to cloud to AI models, and also benefits from a robust community of advanced AI researchers who are actively publishing papers and securing patents,” Nick Patience, practice lead for AI at The Futurum Group, told CNBC.
Given the intricacies of technology supply chains, no one country can do it alone. The consortia will still rely on graphics processing units (GPUs) from American firm Nvidia which have become the gold standard for training AI models.
Meanwhile, SK Telecom will train the models it develops on its own Titan supercomputer, which is made up of Nvidia GPUs, as well as an AI data center the company is developing with Amazon.
AI model roadmap
SK Telecom is not new to the AI model game. The company launched a beta version of its first chatbot based on its own large language model in 2022 called “A.” which is pronounced “A dot.” Since then, it has developed more advanced versions of the model and chatbot.
SK Telecom’s consortium plans to release its first model by the end of the year, Kim said. It will be initially focused on the market in South Korea, but could be used globally. The model will be open-source, meaning it will free for developers to use and build on, potentially with some licensing requirements.
Any AI models coming out of South Korea’s project will face intense competition from players including OpenAI and Anthropic as well as many of the strong open-source offerings out of Chinese firms like Alibaba and DeepSeek.
Creating an AI model won’t be a problem, given SK Telecom and other companies’ already-proven track record in doing so.
The bigger challenge will be putting forward models that can compete with those coming out of frontier AI labs, which are pouring billions of dollars into research and development. Another issue will be getting traction among developers to build upon these models. That has what has made a success of other open-source models, like those from Alibaba.
SK Telecom’s Kim said the goal is to create models that can rival these other companies.
“Our first goal is to create a very strong state-of-the-art open source model and we already have an example of those open source models which are on par in terms of performance with those large tech (players) like OpenAI or Anthropic,” Kim told CNBC.
He added that there will be models of different sizes that can be used by different industries.
An open-source national AI model could also provide benefits by giving businesses across the country access to the latest technology without having to rely on a tech giant from abroad.
Meanwhile, South Korean AI models could be positioned as an alternative to U.S. and Chinese-developed systems.
“Beyond domestic benefits, a proven sovereign AI model presents significant export potential. Just as Korea excelled in memory chips, this could become a valuable product for other nations seeking alternatives to U.S. or Chinese systems, strengthening Korea’s position in the global AI landscape,” Patience said.
AI sovereignty
Underpinning this push from South Korea is the concept of “sovereign AI” that has gained traction with many nations.
This is the notion that AI models and services, which governments see as having strategic importance, should be built within a country and run on servers located domestically.
“All major nations are increasingly concerned about AI sovereignty as the US and China vie for AI dominance,” The Futurum Group’s Patience said.
“Given AI’s growing influence on critical sectors like healthcare, finance, defense, and government, countries cannot afford to cede control of their digital intelligence to foreign entities.”
The launch of an Instagram feature that details users’ geolocation data illicited backlash from social media users on Thursday.
Meta debuted the Instagram Map tool on Wednesday, pitching the feature as way to “stay up-to-date with friends” by letting users share their “last active location.” The tool is akin to Snapchat’s Snap Map feature that lets people see where their friends are posting from.
Although Meta said in a blog post that the feature’s “location sharing is off unless you opt in,” several social media users said in posts that they were worried that was not the case.
“I can’t believe Instagram launched a map feature that exposes everyone’s location without any warning,” said one user who posted on Threads, Meta’s micro-blogging service.
Another Threads user said they were concerned that bad actors could exploit the map feature by spying on others.
“Instagram randomly updating their app to include a maps feature without actually alerting people is so incredibly dangerous to anyone who has a restraining order and actively making sure their abuser can’t stalk their location online…Why,” said the user in a Threads post.
Instagram chief Adam Mosseri responded to the complaints on Threads, disputing the notion that the map feature is exposing people’s locations against their will.
“We’re double checking everything, but so far it looks mostly like people are confused and assume that, because they can see themselves on the map when they open, other people can see them too,” Mosseri wrote on Thursday. “We’re still checking everything though to make sure nobody shares location without explicitly deciding to do so, which, by the way, requires a double consent by design (we ask you to confirm after you say you want to share).”
Still, some Instagram users claimed that that their locations were being shared despite not opting in to using the map feature.
“Mine was set to on and shared with everyone in the app,” said a user in a Threads post. “My location settings on my phone for IG were set to never. So it was not automatically turned off for me.
A Meta spokesperson reiterated Mosseri’s comments in a statement and said “Instagram Map is off by default, and your live location is never shared unless you choose to turn it on.”
“If you do, only people you follow back — or a private, custom list you select — can see your location,” the spokesperson said.
Tesla’s vice president of hardware design engineering, Pete Bannon, is leaving the company after first joining in 2016 from Apple, CNBC has confirmed.
Bannon was leading the development of Tesla’s Dojo supercomputer and reported directly to Musk. Bloomberg first reported on Bannon’s departure, and added that Musk ordered his team to shut down, with engineers in the group getting reassigned to other initiatives.
Tesla didn’t immediately respond to a request for comment.
Since early last year, Musk has been trying to convince shareholders that Tesla, his only publicly traded business, is poised to become an an artificial intelligence and robotics powerhouse, and not just an electric vehicle company.
A centerpiece of the transformation was Dojo, a custom-built supercomputer designed to process and train AI models drawing on the large amounts of video and other data captured by Tesla vehicles.
Tesla’s focus on Dojo and another computing cluster called Cortex were meant to improve the company’s advanced driver assistance systems, and to enable Musk to finally deliver on his promise to turn existing Teslas into robotaxis.
On Tesla’s earnings call in July, Musk said the company expected its newest version of Dojo to be “operating at scale sometime next year, with scale being somewhere around 100,000 H-100 equivalents,” referring to a supercomputer built using Nvidia’s state of the art chips.
Tesla recently struck a $16.5 billion deal with Samsung to produce more of its own A16 chips with the company domestically.
Tesla is running a test Robotaxi service in Austin, Texas, and a related car service in San Francisco. In Austin, the company’s vehicles require a human safety supervisor in the front passenger seat ready to intervene if necessary. In San Francisco, the car service is operated by human drivers, though invited users can hail a ride through a “Tesla Robotaxi” app.
On the earnings call, Musk faced questions about how he sees Tesla and his AI company, xAI, keeping their distance given that they could be competing against one another for AI talent.
Musk said the companies “are doing different things.” He said, “xAI is doing like terabyte scale models and multi-terabyte scale models.” Tesla uses “100x smaller models,” he said, with the automaker focused on “real-world AI,” for its cars and robots and xAI focused on developing software that strives for “artificial super intelligence.”
Musk also said that some engineers wouldn’t join Tesla because “they wanted to work on AGI,” one reason he said he formed a new company.
Tesla has experienced an exodus of top talent this year due to a combination of job terminations and resignations. Milan Kovac, who was Tesla’s head of Optimus robotics engineering, departed, as did David Lau, a vice president of software engineering, and Omead Afshar, Musk’s former chief of staff.