Tech Brew Ride Home - Wed. 07/31 – CapCut Ascendant

Episode Date: July 31, 2024

Another big pullback of a major AI tool. Microsoft earnings. How CapCut is taking over the creator tools space. Amazon speedy delivery is rolling out to the nooks and crannies of North America. And the startup taking a new run at AI wearable hardware. Links: Meta Scraps Celebrity AI Chatbots That Fell Flat With Users (The Information) The Rise of ByteDance’s CapCut Threatens Adobe and Canva (Bloomberg) Amazon Pushes Fast Delivery Into Rural Areas in Challenge to Post Office (WSJ) Wear This AI Friend Around Your Neck (Wired) Video Announcing the Friend AI device Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome to the TechMeme right home for the final day of July, 2024. I'm Brian McCullough today. Another big pullback of a major AI tool, Microsoft earnings, how Capcut is taking over the creator tools space. Amazon's speedy delivery is rolling out to the nooks and crannies of North America

and the startup taking a new run at AI wearables. Here's what you missed today in the world of tech. As part of that move to AI Studio, we told you about meta has officially scrapped its celebrity AI chatbot feature less than a year after launching it. Coding the information. The reversal, less than a year after META launched, the celebrity chatbots, shows how even the biggest tech companies haven't figured out how to transform breakthroughs in generative AI into winning consumer products. None of the AI chatbots amassed particularly big followings,

especially compared with the personal accounts of the celebrities. In some cases, META paid millions of dollars to license these celebrities likenesses. Links to the accounts of the celebrity chatbots on Facebook and Instagram, return to message Tuesday, saying the pages are not available. Meta is now taking a different approach to AI chatbots. On Monday, the company rolled out a new feature called AI Studio in the U.S., allowing any creator to customize AI avatars of themselves to answer common questions from fans, such as where they bought a dress or offering a link for a workout video.

This feature is similar to one offered by startup Character AI, which had an early lead in consumer chatbots, but has since considered research partnerships with companies, including Meta. A meta spokesperson confirmed the chatbot's takedown saying, in a statement, quote, we took a lot of learnings from building them and meta-a-I to understand how people can use AIs to connect and create in unique ways, end quote. The company expects people including celebrities to use AI Studio to customize their own AI avatars instead, end quote. Microsoft reported earnings yesterday. There's not really much that I can see in this to highlight.

Revenue was up 15%. Net income up 10%. Office commercial revenue, LinkedIn revenue all up, yada, yada. The all-important, intelligent cloud revenue was up 19%, Azure and other cloud services up 29%. The stock is trading down about 1% in pre-market. The only real news I can drag out for you, maybe signs of a gaming rebound. Gaming revenue was up 44% year-on-year, and Xbox content and services was up 61% year-on-year. Bloomberg takes a look at Capcut, a video editing platform that is huge. Like the reason TikTok and Instagram look the way they do is because basically everybody is using Capcut to make their short form videos.

Capcut is owned by ByteDance, which owns TikTok. But I also didn't realize how huge Capcut is. Capcut has more than 318 million monthly active users. And that's just outside of China. Compare that to Canva's 97.9.9.7.5.5.5.5.5.5. 4 million mouths, and Capcutt is making money, too, to get those pro-level video effects that everybody uses, quoting Bloomberg. The app is a streamlined tool for making videos, especially with effects popular on TikTok, the social platform also owned by BytDance. Since launching outside China in 2020, CapCut has picked up more than 300 million monthly mobile active users and commands 81% of the total active users for mobile video editing, according to market intelligence firm, sensor tower.

That sudden dominance is tough news for Adobe, the longtime leader in desktop creative software. Its investors have worried that users would leave behind complicated, professional-oriented applications like Photoshop for simplified tools made by startups like Canva or more recently OpenAI. Jalen, a lifestyle content creator with nearly 20,000 TikTok followers who asked to be identified by his first name, said he was drawn to Capcut because of its simple interface and popularity with other TikTokers. Capcut templates let users.

quickly match video formats and export finish content directly to TikTok. Posted videos are watermarked with a Capcut link inviting viewers to try the template themselves. The whole app is, quote, very user-friendly and ergonomic, Jalen said. Mass adoption of Capcut threatens the pipeline of new users to Adobe's Premiere Pro or After Effects, where video makers traditionally land when they need more advanced tools, said Tyler Radke, an analyst at Citigroup. The emergence of generative AI-based tools such as OpenAI Sura threatens to further complicate the picture, he added. For now, more seasoned video makers such as freelance advertising editor Brianna Thompson, still rely on Adobe for complex projects, but she and other professionals have started

using Capcut for simpler videos. In comparison to Adobe, it's not all the way there yet, but it's really accessible, she said. And with a new desktop app suite of tools for small businesses and a pro version priced at $999 per month in the U.S. Capcut is branching further into professional users. Sensor Tower estimates Capcut has made $125 million so far this year on mobile, a spokesperson for ByteDance declined to comment. Adobe has been developing a slimmed-down version of Premier aimed at casual users that would run in a web browser, according to a person familiar with the issue who asked not to be identified because they weren't authorized to discuss the topic, and Adobe spokesperson declined to comment.

Thus far, though, Adobe's attempts to gain share in the mobile editing market have not panned out. It's two apps that can edit video have less than 2% of the active users of Capcut, according to the sensor tower data. Canva, an Australian software firm that is among the world's most valuable startups, has been viewed as a disruptor in creative software, but the company's efforts to build the definitive all-in-one visual media editor may be stymied by the rise of Capcut. Canva has been, quote, continuously investing in video, head of products, Rob Kowalski said in a statement, social media video creation on Canva is up 44% compared with last year, a spokesperson said. BytDance's better-known app, TikTok, has been the subject of long-running concern from lawmakers

about potential security threats to users from the Chinese government. In April, President Joe Biden signed a law to give TikTok 270 days to find a buyer or be banned in the U.S. with some possibility of an extension. That divest or ban law was written to include cap-cut, according to an aide to a House Democrat, who worked on the bill and wasn't authorized to speak publicly. As part of TikTok's appeal to the U.S. Justice Department against the potential ban, multiple creators touted the ease of use of Capcut. While the Capcut development team is separate from TikTok, U.S. employees share office space in Los Angeles, according to a person familiar with the company who asked not to be

identified. The division is led by Bight Dance executive Kelly Zhang, who in her previous role headed TikTok's domestic sibling, Doyen. Content creator and video editing instructor Camilo Castaneda said a Capcut ban would provide an obstacle for those starting out with video making or balancing it with a different job. He has already seen the effects on his students in India where TikTok and Capcut have been banned since 2020 over data privacy concerns. Those tools have allowed people to, without friction, create content. For those apps to go, you're literally losing a whole revenue stream, he said, end quote. If you're listening to me right now from a rural location, and guess what, you might be getting your Amazon orders a lot faster.

That's because Amazon is expanding its one-to-two-day delivery capabilities to U.S. rural areas using hyper-efficient warehouses, contracted drivers, and mom-and-pop shops. Quoting the Wall Street Journal, Amazon's goal is to increase its shipping volume and have more control over its deliveries. The company is seeing demand in more remote pockets of the country, and betting that offering faster delivery to rural customers increases the rate at which they purchase items. By increasing its volume, it can offset the higher delivery costs with the fees it charges its sellers. Amazon isn't trying to deliver itself to 100% of its customers in the U.S., but as of now, is targeting around 90% people familiar with its plans said.

Amazon said it now delivers more than two-thirds of its own packages in America. Maya Voltaire, an Amazon spokeswoman, said, expanding the rural delivery network, quote, will help cut delivery times for customers in smaller towns and more isolated parts of the country. The rural push comes as Amazon has pinned down what customers want and where demand is. Many people moved to live and work remotely during the COVID-19 pandemic, and the company is pushing to expand categories such as medicine delivery. As Amazon has gotten better at delivery, it has become economically practical to do it in more places, said Josh Lowitz, co-founder of Consumer Intelligence Research Partners, which studies Amazon Prime members. They have learned that they can do it,

he said. Amazon is opening optimized delivery centers that are smaller than its traditional warehouses and closer to rural areas and increasing the level of automation across its delivery network. It is using contracted drivers and enlisting small businesses to at times handle deliveries and store packages for customers to pick up. Amazon's remote expansion includes small cities and towns in Arizona, Minnesota, Louisiana, and Texas. Amazon's outreach is also a way to lessen the company's exposure to the U.S. Postal Service. The U.S.PS has been raising rates and reducing pickups in some areas. To compel shippers to use more of the Postal Services Network, the USPS has said it wants to modify contracts to end discounts to shippers,

dropping parcels off at delivery units just for the difficult final mile of deliveries. Amazon's deeper dive into remote pockets is a strategy to maintain a competitive edge against its fiercest rivals. Walmart, which has thousands of stores in rural areas, has been expanding a service called Go Local that delivers packages for other retailers, quote, anywhere in the U.S. Through third-party contractors. E-commerce company Temu, which has risen in popularity in the U.S. because of its bargain prices, relies on carriers that include the U.S.PS. Duluth, Minnesota is an area where Amazon is expanding.

The company plans to open its first delivery site in the city in an industrial park area that was once the home of a steel plant. The greatest beneficiaries of the new Amazon site will be the areas near Duluth, said Daniel Fanning, Vice President of Strategy and Policy of the Duluth Area Chamber of Commerce. He pointed to places in Minnesota like Ellie, which has a population of about 3,200, and Grand Marais, with a population of roughly 1,300, according to the latest census figures. Customers in those and similar remote areas sometimes wait three to five days for some Amazon packages, Fanning said. That time could be soon cut in half, he said. Some people that order

medicine or other important things could benefit, he said. A search of Amazon's products makes the company's ambitions clear. A pack of water wipes, baby wipes, one of Amazon's most in-demand products, can take a day or less to get to San Francisco area zip codes. The same item showed several days to get to Ellie. A pack of Charmin toilet paper showed similar results. Amazon wants to bridge that gap, end quote. Finally today, there's a new startup looking to take on the AI wearable space, despite the recent high-profile failures in that space. A company called Friend has prefued a $99 AI pendant with an always-on microphone that's designed to provide the wearer with companionship. This is set to ship in January.

Quoting Wired. Avi Schiffman shows up at the Wired offices with a friend hanging around his neck. It dangles there like a pendant on a necklace. It's about the size and shape of an air tag, a soft, round little puck that rests right now. next to Schiffman's heart, just atop the dark side of the moon logo on the t-shirt behind it. The friend, to be clear, is an AI wearable. It's a pal, a buddy, but mostly an AI chatbot that lives inside the pendant. It always has an opinion to share about what's going on around it, which it communicates using text messages and push notifications on the phone it's paired to.

Schiffman and his friend, this one's named Emily, have come to Wired San Francisco office to meet with me and my colleague Reese Rogers to talk publicly about this new AI wearable, for the first time. Always listening is one of the main taglines of Schiffman's as-yet-unreleased AI device. The friend has an onboard microphone that listens to everything happening around the wearer by default. You can tap and hold it to ask a question, but sometimes it will send messages, commentary about the conversation you just had, for example, unprompted. It is powered by Anthropics AI-Claude 3.5 large language model, which can engage in helpful conversation, offer encouragement, or rebu for being bad at video games. The Friend gets around 15 hours of battery life and comes in an array of colors

that look almost exactly like the color palette of the first Apple IMac computers. Schiffman says that wasn't intentional. The design comes from a partnership with Bold, the company that designed Nest thermostats. The Friend is available for pre-order now from friend.com. A domain Schiffman says he paid $1.8 million for, and the devices are slated to start shipping in January 2025. They cost $99 a piece, and there is no paid subscription attached yet, anyway. If the notion of a wearable AI device makes you feel like your eyebrows have risen high enough to be seen from space, you'd be forgiven for your skepticism. In recent months, the nascent product category has had a couple very prominent and spectacular flameouts. Humane, which promised

a wearable pin that could accomplish tasks that would free you from your phone, turned out to be barely competent and also unable to function properly in sunlight. The rabbit-arbit R1 is a gorgeous, colorful little device designed by the Godtier gadget design company teenage engineering that wound up being a frustrating dud that probably should have just been an app all along. It feels to me like the crown of AI hardware and AI companionship is lying in the gutter, Schiffman says. Like all these companies just shat themselves. Schiffman wants the friend to be something very different. While the humane AI pin and Rabbit R1 both aimed to automate and accomplish tasks and increase productivity,

the friend doesn't try to automate or optimize anything. As my colleague Reese put it, it's much more vibes-based than productivity-focused. The friend purely offers companionship. It's meant to develop a personality that complements the user and is always there to gas you up, chat about a movie after watching it, or help analyze how bad a date went. Not only does Schiffman want the friend to be your friend, he wants it to be your best friend. that is with you wherever you go, listening to everything you do, and being there for you to offer encouragement and support. He gives an example where he says he recently was hanging out, playing some board games with friends he hadn't seen in a while, and was glad when his AI

friend chimed in with a quip, end quote. So there's lots of snark around this story, along the lines of what Keaton Englis tweeted, quote, raised 1.9 million, spent 1.8 million of it on a domain, built a Bluetooth microphone that listens to everything that you say, and sends it to an AI wrapper, end quote. Yeah, but I don't know. I might have taken a swing on this one as an investor, but I'm also including the link to the launch video as of the last link in the show notes today, because I would also give you even odds that this is just some sort of elaborate art project or prank. Nothing more for you today. Talk to you tomorrow.