1. Regulatory Uncertainty Around Digital Assets Puts Innovation In The United States At Risk
Major trading firms, including Jane Street Group and Jump Trading,[1] are curtailing their participation in US crypto markets in response to regulatory uncertainty and risks. Once populated by well-established and credible institutions, the crypto ecosystem in the US now faces a void that is likely to put interest among other institutional investors on hold.
As a result, crypto liquidity in the US has diminished considerably and the volatility of crypto prices has increased. According to CoinMetrics, bitcoin trading volume has dropped 75% from $20 billion per day in March to ~$4 billion last week. Furthermore, last week on Binance.US the bitcoin price was ~$600 higher than on other exchanges, a signal of weaker price discovery.
In the US, regulatory uncertainty seems to be discouraging both existing firms and new entrants in the crypto space. As a result, the United States risks ceding its position at the forefront of a transformative industry to countries like the United Arab Emirates, South Korea, Australia, and Switzerland.[2]
[1] Yang, Y. 2023. “Crypto Trading Takes a ‘Few Steps Back’ After Jane Street, Jump Retreat.” Bloomberg. Available here.
[2] Reguerra, E. 2023. “UAE infrastructure for crypto is more ‘business-friendly’ than the US, says exec.” Cointelegraph. Available here.
2. What’s In Store For Meta’s Ad Platform?
Meta recently announced new ad tools that use generative AI[3] to create alternative ad copies through its AI Sandbox offering.[4] Meta’s new product follows the launch of its Advantage+ tool announced last August, which enables advertisers to upload up to 150 creatives for automated A/B testing, allowing Meta to select the best creatives to align audiences with advertiser campaign goals.[5] The use of data collected through Advantage+ could place AI Sandbox at an advantage against the generative AI tools by other digital ad platforms through a compelling positive feedback loop: the company can generate alternative copies, A/B test them to discover the best performing AI-generated ads, and then train reward models on new observations. Because most of Meta’s ads pair image/video creatives with corresponding text, Meta could enable advertisers to generate ad creatives through natural language queries alone and without any manually uploaded examples. In the future, Meta could offer end-to-end AI-generated campaigns with minimal human intervention, lowering the barriers to entry for small- and medium-sized businesses.
We wonder if its breadth of data will put Meta at a competitive advantage to TikTok, which relies on an ad creative dataset that mostly comprises short-form video content. We also wonder if Meta’s relatively homogenous user experience will give Meta an advantage over Google, which seems to rely on specific ad formats for different properties: search ads for Search, video ads for YouTube, and display ads on third-party websites. In our view, as AI enables more campaign automation, the consistency of ad formats across Facebook and Instagram could give Meta a competitive advantage to Google and others in generating creatives that perform across platforms, providing Meta with a larger, more platform-agnostic dataset.
Meta’s ad platform follows its meaningful contributions[6] to the open-source AI community, development of in-house AI chips[7] and an AI supercomputer,[8] and early experiments[9] with consumer-facing AI. Again, we wonder if Meta can stave off competition from TikTok and other burgeoning social media platforms. Growth in Meta’s total monthly active user base decelerated[10] from 11% in 2020 to 7% in 2021 and 2% in 2022 to nearly 3 billion last quarter. Its commercialization of AI clearly has benefited advertisers, but will Meta remain compelling for consumers?
[3] Mehta, I. 2023a. Meta Announces Generative AI for Advertisers.” TechCrunch. Available here.
[4] Google also recently released similar offerings. See Elias, J. 2023. “Google plans to use new A.I. models for ads and to help YouTube creators, sources say.” CNBC TECH. Available here.
[5] A/B testing in marketing or product development entails randomized experiments that compare two or more versions of some feature to assess which version performs best with a target audience.
[6] MetaAI. 2023a. “Introducing LLaMA: A foundational, 65-billion-parameter large language model.” Available here.
[7] MetaAI. 2023b. “MTIA v1: Meta’s first-generation AI inference accelerator.” Available here.
[8] MetaAI. 2022. “Introducing the AI Research SuperCluster — Meta’s cutting-edge AI supercomputer for AI research.” Available here.
[9] Mehta, I. 2023b. “Meta Says It Is Experimenting With AI-powered Chat On WhatsApp and Messenger.” TechCrunch. Available here.
[10] Meta Investor Relations. “Quarterly Earnings 1Q.” Available here.
3. The FAA Has Grounded Amazon’s Drone Delivery Ambitions, As Peers Soar
A pioneer in the drone-delivery space, Amazon is falling behind competitors as it struggles to scale operations. This year, according to CNBC, Amazon has completed only 100 drone deliveries,[11] below the 10,000 it had planned and significantly below Wing’s ~330,000 and Zipline’s ~600,000 cumulative global deliveries.[12] Apparently, Federal Aviation Administration (FAA) regulations have restricted[13] Amazon’s ability to fly over people and roadways.
In 2015, ARK highlighted [14] Amazon’s potential to revolutionize parcel delivery with drone technology costing ~$1 in 30 minutes. In 2016, the protracted regulatory approval process in the United States pushed Amazon toward the United Kingdom for testing, an effort scaled back[15] with no tangible results in 2021. Given a $1-2 trillion global addressable market for real-time autonomous delivery, including drones and robots, the US could miss an immense opportunity as drone delivery competitors elsewhere surge ahead.
[11] Tarasov, K. 2023. “Amazon’s 100 drone deliveries puts Prime Air far behind Alphabet’s Wing and Walmart partner Zipline.” CNBC Tech. Available here.
[12] Chun, C. 2023. “Drone maker Zipline, on track for 1 million deliveries, adds vitamins, pizzas and prescriptions to cargo.” CNBC Disruptor 50. Available here.
[13] Davis, W. 2023. “Amazon Prime Air hoped for 10,000 drone deliveries this year — it’s only done 100.” The Verge. Available here.
[14] Keeney, T. 2015. “Amazon Drones Could Deliver a Package in Under Thirty Minutes for Less Than One Dollar.” ARK Investment Management LLC. Available here.
[15] Kersley, A. 2021. “The slow collapse of Amazon’s drone delivery dream.” Wired. Available here.