What If? Google Broke Itself Up, Online Shopping Stopped Growing, and Audio Ads Exploded | Behind the Numbers
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Hey gang, it's Friday, June 27th. Rahul, Max, Blake and listeners, welcome to Behind the Numbers, a new marketer video podcast made possible by Synth. I'm Marcus. Today, I'm joined by three people. Let's meet them. We start with our director of reports editing living in Maryland, I think, Rahul Chadha. Hey, Marcus. Thanks for having me. Is that right? That is correct.

It's not that much of an accomplishment. You've been there for a long time now. Senior analyst covering digital advertising and media living in Philly, Max Willans. Yo. Hello, fella. And finally, we have one of our senior analysts covering retail living in New York, Blake Drosh. Good to be here. Going up the eastern seaboard today. Hello, sir. Indeed. We're keeping it local with these three fellas, and they're joining us for today's episode. We start with the fact of the day, though, of course. Yeah.

Where does the word doctor come from? Okay, so doctor comes from the Latin docere, which means to teach. In medieval universities, it was a title for elite scholars, especially in theology.

And for centuries, medicine was seen more as a craft than an academic discipline, closer to being that of a barber than someone who learned from books, according to the University of Cambridge. As medicine evolved from folk remedies to evidence-based science, doctors fought for respect in the academic world. And the Doctor of Medicine title helped with credibility and respect. That's a note from Johns Hopkins School.

School of Medicine and a PhD is focused on creating new knowledge. PhD stands for Doctor of Philosophy and PhD is an abbreviation of the Latin term, Philosophiae, which is the PH, the Philosophiae PH and then D is the Doctor and MD is trained to apply that knowledge in high stakes clinical settings, notes the Stanford Medicine Education Resources.

So it just means to teach. I'm not, I don't, I feel like I've reduced it to just, it just means to teach. It's not that big of a deal. It's still impressive. Anyway, today's real topic. Very specific, but highly unlikely predictions for 2025. Shark Tank style, round two.

Here's how this episode works. Each person, max first, will have 60 seconds to pitch a very specific but highly unlikely prediction for 2025. And then the rest of us, me, Rahul, Blake, and everyone listening will decide if we're going to invest in it slash believe it. We have three predictions from Paul, Susie, and Yuri on Monday's episode. We have three more for you right now. Max, go.

Wow, just jumping right in, huh? All right. So my prediction is that generative AI will help more than double the size of the digital audio ad market by 2029. And I am basing this on

Something that on a vision of AI that I think a lot of people have had thanks to science fiction and movies, which is of a conversational assistant who can

help you with lots of different tasks. This is one of the more famous examples is Jarvis, who helps Tony Stark in Iron Man. And what you see is all of the tech giants that are sort of leading the charge into AI, they are pushing to make this a reality. Google has started beta testing an ability to sort of

engage with gen AI in a conversational format. Amazon is clearly pushing hard to move in this direction by revamping Alexa. Apple, when it ever gets its act together, will have something similar in place with Siri and AI generally. And so this basically pits

puts together a perfect storm of conditions to grow an ad market really, really quickly. There's already about 148 million people using an audio assistant, excuse me, a voice assistant at least monthly in the US this year. That's 27% higher than the number of people that use Gen AI. It's nearly 40% higher than the number of people that use Spotify. And by 2027, more than half of all internet users are going to use one.

So, that takes care of the scale problem. And then the other piece of this is just going to be demand for generative AI advertising. We think in search, for example, that by 2029, I guess it is, there'll be the gen AI search ad market will be over 26 billion, up from barely 1 billion this year. And so,

Some of that money, I think, will wind up going into audio format. Some of that will be audio native as advertisers and platforms wrap their minds around the opportunities inherent in voice-first ads created by Gen.AI. So that's my story. That's my pitch. What are some of those opportunities, do you think? What's going to emerge from this space?

Well, I think a lot of it will be oriented around pushing the conversation forward or offering up sponsored results. So if you go and ask your Alexa what kind of camping stove I should be buying to go on this camping trip that I'm going on next month,

Alexa will say, I found a lot of results. This one from Coleman is on sale right now and it has 600,000 five star reviews. Should I add that to your cart? That's an audio ad. And I think that that's kind of the very obvious kind of fattest, lowest hanging fruit. But I think that there's all kinds of possibilities there as people start to sort of examine the space more carefully.

And do you think it's going to be that the first one or two are going to be, um,

ads it's gonna be kind of like with google search results where it started off with just one and now a lot of times you have to scroll down through 10 different results to get to the organic ones do you think that eventually it will become you know results the first thing that they reply to you second third fourth fifth will be just um however advertised advertisers have bid for those results and then it becomes organic how do you think that will play out

I have a feeling that it'll be kind of a one sponsored component per reply because nobody is going to, you know, as you say, sort of sit there politely while Alexa says there is also a 25% off one on, you know, like nobody is going to tolerate that. And so that, that is going to be, I think,

that's going to keep the market from tripling, say. But the other idea here is, and this is something that you already are seeing in the kind of nascent

ad strategies of things like perplexity where what they want the advertising to fit into is kind of a conversation that continues you don't want to sort of ask a question and then get an ad back as your reply you want to you know have the conversation deepen and as you get two three four volleys in some ads uh become part of it and and hopefully the ads themselves spur still more volleys still more ads etc etc so that's interesting yeah that's how i expected

When to deliver it. Yeah, not the first response, second, third, maybe the fourth. Rahul, what do you think about this one? I mean, the first thing I thought of was the challenges that smart speakers faced serving audio ads to users. And that was kind of like a new like advertising channel. I think I think the biggest challenge, honestly, is going to be the user experience, you know.

The platforms have to get figuring out how to serve the ads at the right time. And the advertisers have to figure out the right creative basically to make it an additive experience for a user and not something that's like, you know, Max already mentioned, just have like, you know, an AI agent experience.

Reading a list of ads out loud to to a user. I think that's gonna be the trickiest part Honestly, what I keep going back to is basically is what Rahul was saying about just sort of how Amazon has really been pushing out audio voice shopping for so long and it still hasn't really caught on and the technology for

basically placing a very straightforward order has been around for a while and that hasn't really ramped up and i think it's going to be it's it's hard for me to sort of gamble on the 2.0 being successful um because we haven't really seen that natural progression play out uh on the ad spending side i think i could i completely agree with max though like advertisers are going to

be really quick to throw money at this if it's one of the big components that the AI platforms start rolling out. I think they're all really ready to, you know, advertisers are ready to jump in headfirst to this AI stuff. If it's something that, you know, Perplexity or Google or Amazon really starts rolling out to advertisers, I think the money is going to

definitely going to flow into that situation. But I think it all really comes back to, you know, what is the real percentage of voice shopping that's going to

take place because of advancements in AI versus how much of, let's say, Amazon's e-commerce sales are still going to come from screenshotting, right? I think as long as that continues to be the predominant method that, you know, an Amazon search ad is always going to be way more impactful than a voice ad. Can I push back against these myopic and small-minded quibbles with my proposal? Max is really invested in this idea. Yeah.

I bet my house on it. So, okay. I think that those points are fair. If we were operating under the presumption that the audio experience would remain what Alexa is what I think most of us on this call remember, right? Which is this kind of

stilted, not terribly responsive, buggy thing, then I would agree with you that there's probably not a lot of there there. But I look at the rate of adoption of Gemini as a shopping assistant. And I will cede the fact that with visuals, you can do a little bit more. But I do think that there is a level of

kind of dynamism and a convincing quality to what Gen AI is capable that just was not part of the experience with Alexa at all. And so I think that once people get used to the idea that like,

oh, Alexa really gets me or, you know, chat GPT enabled this voice on this new, you know, Johnny I've built device actually understands me. I think that we could see a kind of stair step in, you know, the amount of that people are using this technology for that purpose. I'm in, Rahul. Yeah, why not?

He's all in. You can be half in. I feel like I'm playing with health money, so, you know. That's right. That's true. It's the future, baby. Ruins the game if you think about that, but sure. Why not? Just to make believe. Blake, how about you? Wait, Max, one clarifying question. When is this prediction going to come into fruition? Oh, 2029. 2029. Yeah.

That changes things for me. You guys didn't even ask about. We're talking about. He said in the beginning. Four years. Four years. Yeah, four years. All right. I guess I'm in. It's enough time for things to radically evolve, which is what this depends on. All right.

Three points for Max's. Rahul, what do you have for us? What prediction do you have? My highly unlikely prediction, I want to underscore that, is that Google will preemptively break itself up. If folks don't know, Google basically lost two antitrust cases that were brought against it by the US Department of Justice. One focused on its basically its search offering and one based on its ad tech offerings.

And they're in the midst right now in the courts of hashing out what exactly the remedies will be, meaning what are the fixes that the court system, the justice system are going to force Google to implement to becoming compliant with antitrust law. So my prediction is that Google will preemptively break itself up. Now, the arguments in favor of this are that, you know, when you look at Google as a whole, it's basically a collection of like,

completely disparate services. You've got the most popular browser in the world in Chrome, YouTube, which is a video distribution platform, cloud computing services, and outliers like the likes of Waymo, which is a self-driving taxi service. So you really have to wonder what's the value in having all these companies with different business models, different goals,

all under the same umbrella. And wouldn't it be better to break them up, break them out, generate a lot of like return and shareholder value? You know, by one analyst, it was Gil Luria, an analyst at D.A. Davidson and Company in May said that Google's separate parts could be worth more than three point seven trillion dollars. So it was roughly double its valuation at that time. And so wouldn't it be better to generate more efficiencies that way? Hmm.

Stock price down, was it like 9%, 10%, 9%, 10% this year for Google? Things not going well, these decisions made. And so it does seem like they're heading in that direction. This does seem like the kind of ultimate power move of like, I'll break up with you before you break up with me. Max, what do you think? I definitely understand that I'm sympathetic to, I remember Gil Luria, you said? Yeah.

- Yeah, I mean, I definitely think that, you know, separately they would, several components would fetch, you know, pretty handsome sums, but I'm out. - We didn't even get to that part yet, Max. - Well, I just, I'm so hyped. No, let me explain why. So the big reason is PMAX, right? So like over the last, I guess it's two years, we could quibble about timeframe. Google has been,

setting up this highly automated ad placement system where it basically takes the advertisers ads and it pipes them everywhere. It puts them in search results, it puts them in YouTube, it puts them in its display network. And the amount of money that advertisers have been pouring into PMAX keeps going up and up and up. If you cut one of these pieces off,

uh particularly the ones that are sort of under uh threat because of the lawsuits that you mentioned that breaks one uh distribution point that's that's going to be quite valuable and especially as they they tilt more and more in the direction of trying to uh you know assert their position in in shopping that becomes even more dangerous right so all of a sudden if you know you're looking for

you know, a pair of sneakers, if you can, as an advertiser, if you can catch somebody on search on YouTube, on, you know, almost any website on the internet, that's pretty powerful. If buying that only gets you into search and YouTube, it's still good. It's just not as good. And the sort of, you know, efficiency of that AI system starts to suffer. And I think that

They Google is not going to be would rather cut off or pay some hefty penalties or potentially lose some of its dominance and search rather than than break itself up. So for that reason, I'm out. Yeah. I'm wondering if the preemptively is more beneficial. So because if you do it.

ahead of time, then you can kind of dictate to a certain extent what you're doing as opposed to here's the punishment. And so now you have to do what you're being told. However, there is a danger. I don't know, Ro, do you think that maybe is a danger that

Google breaks itself up more than the DOJ would have requested. Yeah, absolutely. Harking back to the highly unlikely part of this, you know, I think you mentioned, you know, companies tend to self-regulate because they're trying to stave off regulation by the government. So they want to probably hit what they consider to be a like less onerous threshold of regulation for themselves, for the government gets involved.

Google is opposed to this. It's published several blog posts arguing against the proposed remedies. The DOJ has proposed remedies for both of these cases, and Google is arguing in favor what they describe as behavioral remedies instead of structural remedies, the latter being basically divesting or selling off pieces of its empire like Chrome or its mobile OS Android, aspects of its ad tech system like ADEX.

So it doesn't want to do that. It wants to implement the behavioral remedies for sure. I do think that if, you know, their lawyer, if their legal team got the impression that that a divestiture or a breakup was going to be forced upon them, then they might, you know, try to

decide what angle they throw themselves in front of that. So that's definitely worth positing. But I'm sorry, Blake. Go ahead. No, I think that's a really good point. I think they...

are willing to continue to play chicken with the DOJ basically as long as it is going to take. And I think they could still have a fair degree of confidence just because of how difficult it is to actually force a breakup through that they will be able to withstand it. But I completely agree with Max's point. I mean, anything that's going to threaten its ability to compete as an ad network, I

any it wouldn't be it's not really going to be willing to give any of those pieces away. And I think they're all pretty crucial when you think about Google being able to compete with Amazon and Meta in the long term, having media, having sort of a tried and true search ad platform, having

a large customer base across our user base across these channels. These are all things that Google really needs in order to stay competitive with the other ad giants.

Yeah, and I think, sorry, I'm arguing against my own case now, but I think just looking at this shift to AI, it's like when you're mentioning who are the people Google keeps company with, you need deep pockets is the bottom line. And if Google were to break itself up, it's just cutting off its access to capital that it could use to invest in new generative AI technologies. It really is everybody's expecting to be the next major shift in our technology in the next whatever, five, 10 years or whatever timeline you want to spell out.

You turned Rahul against you, sir. I'm not good at this game, clearly. I was nearly going to give you half a point. You should call my segment Chum Tank. Alright, Rahul got nothing because he ended up deciding his initial thought was terrible. Blake, what do you have for us?

So my unlikely prediction is that U.S. e-commerce sales are going to fall flat in 2025. And I think it's a fairly simple prediction, but just to give some context, we revised our forecast last month for retail e-commerce sales. We're now predicting growth will come in at about, oh, sorry, at 5% flat.

And that's down from, I think, our predicted roughly 8% growth that we had forecasted at the beginning of the year. Obviously, tariffs, the tariffs are the major reason behind why we've slowed down our forecast for growth. But it's not really the only reason.

reason that I think that this is the case. I mean, obviously, tariffs are the catalyst. However, we have and other outlets have been really just pulling back on our estimates for e-commerce growth, both annually and also in terms of, you know, penetration. We've we've

forecasted that, you know, we are probably three or four years out from e-commerce reaching 20% of all retail sales for a very long time. And we keep sort of like moving the goalposts down the line. And what really is the case for that is there were, you know, categories like grocery that were pushing growth forward at the beginning of the decade. And that's really started to dry up first because of inflation, you

because of more uncertainty around tariffs. And the growth going forward seems to be sort of reaching a plateau. So sort of take that long-term trend and now compound it with the fact that the three largest categories of e-commerce, which are apparel, consumer electronics, and home furnishings, which make up about 47% of U.S. e-commerce sales, are all

all expected to grow like between two and 3% this year. Um, there, and that is basically dependent on like if the economy and consumer confidence stays where it is now. Um, but you know, there's a lot of crazy stuff going on in the world. Um,

uh, the lot of, you know, reason to believe that, uh, consumer confidence is probably is could, could really take a steady decline, which will put those discretionary categories, make them quite vulnerable going into, uh, the end of the year, particularly the holiday season. And if we see, uh,

those categories go from, you know, two or 3% growth, which are already, it was already pretty low down into, you know, the, the one to 2% growth territory, uh, that it really wouldn't be, you know, a far cry from really dragging down our, uh, total e-commerce number of 5%, uh, into, you know, a very, very, a really risky area of basically hitting, uh, 0% growth.

Yeah, consumer confidence wise, we've seen it hit record low. I think the second lowest on record, the University of Michigan's index, 52 points. I believe that was the April reading. And so it's already low. And that's

before the full effect of the tariffs has really hit. So it's not looking good for the consumer confidence. So we had, as Blake was saying, we've got different scenarios here. We've got the limited tariff scenario, which is before we made these adjustments. That was 8% growth this year. For context, last year we saw retail e-commerce sales in the US growing 8%. So we thought it would grow a similar speed this year initially.

Then the moderate tariff scenario takes it down from 8% to 5%. And then the heavy tariff scenario that we have is closer to 1%. So, Blake, you're basically saying that you think this is going to be on the extreme end of the heavy tariff, even past our heavy tariff scenario to 0%. Yeah. You know, it doesn't have to be...

the worst case scenario with tariffs playing out in order for that to happen. Right. I mean, it just could be, for instance, just the uncertainty of what the tariffs will be. Right. So if that if this continues to play out and it spooks consumers, then it doesn't matter

what the tariff scenario is. It's just if the vibes are bad, then that could really impact, you know, what people go into the stores and buying stuff, particularly around the holiday season, which, you know, is hugely is crucial for for e-commerce. Well, in the uncertainty, too, is is

gumming everything up, right? It's not just consumers. I mean, in his most recent comments, Jerome Powell basically said, like, there's no cut because we don't know what the hell is going on, you know? And that eventually starts rolling downhill and affects a lot of things here, too. I...

I appreciate you, Marcus, flagging that what Blake is predicting is even worse than what we forecasted as the worst case scenario. I love that because my glass is half empty and I sprinkled a bunch of arsenic in it this morning. So I'm in on Blake's unbelievably bleak scenario. I figured this is the Friday show, so let's try to keep it as dark as possible.

Bottoms up. Sorry. I think my cynicism goes quite as far as Max's does. A high bar. But I mean, yeah, I'm buying here because I think even just separating all of the eloquent reasons that Blake spelled out just in the e-commerce sector, just when you look at the bigger picture of people in their pocketbooks, they're facing a lot of uncertainty and

You know, grocery prices go up. You're just thinking about their core needs and what they're going to spend money on. It's groceries, energy, transportation, that sort of thing. And they're, you know, uncertainty in the Middle East with potential conflict there spreading could easily make energy prices go up. Everybody's still bracing for what the tariffs are going to yield in terms of the costs of food.

Who knows what range of goods? So, yeah, like people are definitely going to cut back on their discretionary spending and tighten their wallets. And I think across the board and that just includes like their online purchases. Yeah. Yeah. There's a good anecdote in the journal from a chap who'd booked a holiday vacation at the start of the year and he booked it. And then Liberation Day, April 2nd tariffs hit. The stock market had its upsides.

biggest drop since the pandemic and also the financial crash, wiped about three trillion off the books. So he managed to cancel it and get most of his money back. He think it came out to about two and a half thousand dollars that he would have been spending on his vacation, but he canceled it, got the money back. And then they asked him, are you going to book it again now that the tariffs got rescinded? A lot of them got rescinded a month or so after April 2nd. He said, no, because I don't know what

what to expect. And I think it's that kind of mindset of like people might have the money there, but they just don't know one day to the next. And so, yeah, I think I'm half in because I don't think it's going to be zero. I think maybe I'm going to go with the forecasting team and not just because I used to be on the forecasting team, but 1% growth. I think pretty anemic is a safe bet. So I'm half in. So that's two and a half points for me.

For Blake's prediction. Not bad. All right. So we've got everyone's all in on the audio ad market. More than doubling in size thanks to Gen AI. That's Max's prediction. So three points for that. Blake's flat e-commerce sales in the US gets two and a half points. And Rahul, who would make a terrible lawyer, start arguing against his own client in court, got no points at all for Google preemptively breaking itself up.

but interesting to talk about regardless. Thank you so much to my guests for hanging out with me today. Thank you first to Rahul. Thanks for having me, Marcus.

Thank you to Blake. Yeah, thanks for having me. And of course to Max. Always a pleasure, Marcus. Thank you. Yes, indeed. And to the whole editing crew, thank you. And to everyone listening in to Behind the Numbers, the marketing video podcast made possible by Sint. Subscribe, follow us, leave a rating and review if you have a moment. We really, really appreciate that. And we will see you on Monday again for Behind the Numbers' Happiest of Weekends.