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Marcus Johnson (00:00):

Are your brand campaigns as effective as they could be? No, Marcus, they're not. If you're only getting insights when the campaign is over, then the answer is no. To make better campaign decisions, you need real-time measurement. You need lucid measurement by Cint. That's what you need. Discover the power of real-time brand lift measurements at cint.com/insights. That's spelled C-I-N-T dot com slash insights and get yourself a demo today.

(00:37):

Hey, gang. It's Friday, June 27th. Rahul, Max, Blake, and listeners, welcome to Behind the Numbers, new market video podcast made possible by Cint. 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.

Rahul Chadha (00:54):

Hey, Marcus. Thanks for having me.

Marcus Johnson (00:55):

Is that right?

Rahul Chadha (00:56):

That is correct.

Marcus Johnson (00:57):

Yes. 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 Willens.

Max Willens (01:08):

Yo.

Marcus Johnson (01:08):

Hello, fella. And finally, we have one of our senior analysts covering retail living in New York, Blake Droesch.

Blake Droesch (01:14):

Good to be here. Going up the Eastern Seaboard today.

Marcus Johnson (01:17):

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.

(01:30):

Where does the word doctor come from? Okay, so a doctor comes from the Latin docare, 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 is a note from Johns Hopkins 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, philosophii, which is the Ph, the philosophii, 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, doctor. 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.

(03:01):

Anyway, today's real topic.

(03:08):

Very specific, but highly unlikely predictions for 2025, Shark Tank style round two.

(03:19):

Okay, 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 had three predictions from Paul, Susie, and Yuri on Monday's episode. We have three more for you right now. Max, go.

Max Willens (03:48):

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 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 J.A.R.V.I.S. 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.

(05:02):

And so this basically 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 rather, 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, 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.

Marcus Johnson (06:18):

What are some of those opportunities do you think? What's going to emerge from this space?

Max Willens (06:21):

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 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.

Marcus Johnson (07:17):

And do you think it's going to be that the first one or two are going to be ads, it's going to be kind of like with Google search results where it starts 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 results, the first thing that they reply to you, second, third, fourth, fifth will be just however advertisers have bid for those results and then it becomes organic? How do you think that will play out?

Max Willens (07:47):

I have a feeling that it'll be kind of a one sponsored component per reply because nobody is going to, as you say, sort of sit there politely while Alexa says, "There is also a 25% off one on." Nobody is going to tolerate that. And so 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 ask a question and then get an ad back as your reply. You want to have the conversation deep in and as you get 2, 3, 4 volleys in, some ads become part of it and hopefully the ads themselves spur still more volleys, still more ads, et cetera, et cetera.

Marcus Johnson (08:45):

That's interesting. Yeah.

Max Willens (08:46):

That's how I expect it would happen.

Marcus Johnson (08:47):

When to deliver it. Yeah, not the first response, second, third, maybe the fourth. Rahul, what do you think about this one?

Rahul Chadha (08:53):

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 advertising channel. I think the biggest challenge honestly is going to be the user experience. The platforms have to get figuring out how to serve the ads at the right time, and advertisers have to figure out the right creative basically to make it an additive experience for a user and not something that's, like Max already mentioned, just an AI agent reading a list of ads out loud to a user. I think that's going to be the trickiest part honestly.

Blake Droesch (09:30):

What I keep going back to 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 great forward order has been around for a while, and that hasn't really ramped up. And I think it's hard for me to sort of gamble on the 2.0 being successful because we haven't really seen that natural progression play out.

(10:06):

On the ad spending side, I think I completely agree with Max though. 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, advertisers are ready to jump in headfirst to this AI stuff. If it's something that Perplexity or Google or Amazon really starts rolling out to advertisers, I think the money is definitely going to flow into that situation. But I think it all really comes back to 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 ecommerce sales are still going to come from screen shopping. I think as long as that continues to be the predominant method that an Amazon search ad is always going to be way more impactful than a voice ad.

Max Willens (11:12):

Can I push back against these myopic and small-minded quibbles with my proposal?

Blake Droesch (11:17):

Max is really invested in this idea.

Rahul Chadha (11:20):

Have the floor.

Max Willens (11:21):

I bet my house on it. No.

Rahul Chadha (11:24):

His wife's like, "What the hell?"

Max Willens (11:27):

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.

(11:52):

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 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 ChatGPT enabled this voice on this new Jony Ive built device actually understands me." I think that we could see a kind of stair step in the amount that people are using this technology for that purpose.

Marcus Johnson (12:43):

I'm in. Rahul?

Rahul Chadha (12:45):

Yeah, why not?

Marcus Johnson (12:47):

He's all in. You can't be halfway.

Rahul Chadha (12:48):

I feel like I'm playing with house money.

Max Willens (12:48):

That's right.

Marcus Johnson (12:52):

That's true.

Max Willens (12:53):

It's the future, baby.

Marcus Johnson (12:54):

It ruins the game if you think about it that way, Rahul, but sure. Why not? Just a make believe. Blake, how about you?

Blake Droesch (13:03):

Wait, Max, one clarifying question. When is this prediction going to come into fruition?

Max Willens (13:08):

Oh, 2029.

Blake Droesch (13:10):

2029. That changes things for me. You guys didn't even ask about, we're talking about-

Rahul Chadha (13:16):

He said it in the beginning.

Blake Droesch (13:17):

Four years?

Rahul Chadha (13:19):

Unbelievable.

Max Willens (13:19):

Four years.

Marcus Johnson (13:20):

Yeah. Four years.

Blake Droesch (13:22):

All right. I guess I'm in. That's enough time for things to radically evolve which is what this depends on.

Marcus Johnson (13:30):

All right. Three points for Max's. Rahul, what do you have for us? What prediction do you have?

Rahul Chadha (13:37):

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 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 become in compliance with antitrust law. So my prediction is that Google will preemptively break itself up.

(14:21):

Now, the arguments in favor of this are that when you look at Google as a whole, it's basically a collection of 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 out, generate a lot of return and shareholder value? By one analyst, it was Gil Luria, an analyst at DA Davidson and Company, in May said that Google's separate parts could be worth more than $3.7 trillion. So it was roughly double its valuation at that time. And so wouldn't it be better to generate more efficiencies that way?

Marcus Johnson (15:23):

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 you up with you before you break up with me." Max, what do you think?

Max Willens (15:44):

I definitely understand that I'm sympathetic to, I remember, Gil Luria you said?

Rahul Chadha (15:44):

Yeah.

Max Willens (15:52):

Yeah, I mean I definitely think that separately several components would fetch pretty handsome sums, but I'm out.

Rahul Chadha (16:02):

We didn't even get to that part yet, Max.

Max Willens (16:03):

Well, I just, I'm so hyped.

(16:08):

No, let me explain why. So the big reason is PMax, right? So 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.

(16:43):

If you cut one of these pieces off, particularly the ones that are sort of under threat because of the lawsuits that you mentioned, that breaks one distribution point that's going to be quite valuable. And especially as they tilt more and more in the direction of trying to assert their position in shopping, that becomes even more dangerous. So all of a sudden, if you're looking for a pair of sneakers, as an advertiser, if you can catch somebody on search, on YouTube, on 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 efficiency of that AI system starts to suffer. And I think that Google is not going to be, would rather cut off or pay some hefty penalties or potentially lose some of its dominance in search rather than break itself up. So for that reason I'm out.

Marcus Johnson (17:52):

Yeah, I'm wondering if the preemptively is more beneficial. So if you do it ahead of time, then you can kind of dictate to a certain extent what you are 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, Rahul, do you think there maybe is a danger that Google breaks itself up more than the DOJ would've requested?

Rahul Chadha (18:20):

Yeah, absolutely.

Marcus Johnson (18:21):

I mean take it way too far.

Rahul Chadha (18:23):

Hearkening back to the highly unlikely part of this, I think you mentioned 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 less onerous threshold of regulation for themselves before the government gets involved.

(18:38):

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's arguing in favor what they describe as behavioral remedies instead of structural remedies and 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 AdX. So it doesn't want to do that. It wants to implement the behavioral remedies for sure.

Max Willens (19:11):

I do think that if their legal team got the impression that a divestiture or a breakup was going to be forced upon them, then they might 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.

Blake Droesch (19:33):

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, 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's 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 all our user base across these channels, these are all things that Google really needs in order to stay competitive with the other ad giants.

Rahul Chadha (20:39):

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'd be just cutting off its access to capital that it could use to invest in new generative AI technologies really is everybody's expecting to be the next major shift in our technology in the next 5, 10 years or whatever timeline you want to spell out.

Marcus Johnson (21:06):

You turned Rahul against himself.

Rahul Chadha (21:08):

I'm not good at this game clearly.

Marcus Johnson (21:11):

I was nearly going to give you half a point.

Rahul Chadha (21:13):

You should call my segment Chum Tank.

Marcus Johnson (21:19):

All right, Rahul got nothing because he ended up deciding his initial thought was terrible. Blake, what do you have for us?

Blake Droesch (21:30):

So my unlikely prediction is that US ecommerce 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 ecommerce sales. We're now predicting growth will come in at about, oh sorry, at 5% flat this year. And that's down from I think our predicted roughly 8% growth that we had forecasted at the beginning of the year.

(22:09):

Obviously the tariffs are the major reason behind why we've slowed down our forecast for growth, but it's not really the only 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 ecommerce growth both annually and also in terms of penetration. We've forecasted that we are probably three or four years out from ecommerce reaching 20% of all retail sales for a very long time and we keep sort of moving the goalposts down the line. And what really is the case for that is there were 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 now because of more uncertainty around tariffs, and the growth going forward seems to be sort of reaching a plateau.

(23:23):

So sort of take that long-term trend and now compound it with the fact that the three largest categories of ecommerce, which are apparel, consumer electronics, and home furnishings, which make up about 47% of US ecommerce sales, are all expected to grow between 2 and 3% this year. And that is basically dependent on if the economy and consumer confidence stays where it is now, but there's a lot of crazy stuff going on in the world. The lot of reason to believe that consumer confidence could really take a steady decline, which will put those discretionary categories, make them quite vulnerable going into the end of the year, particularly the holiday season. And if we see those categories go from 2, 3% growth, which is already pretty low down into the 1 to 2% growth territory, then it really wouldn't be a far cry from really dragging down our total ecommerce number of 5% into a very, very, a really risky area of basically hitting 0% growth.

Marcus Johnson (24:45):

Yeah. Consumer confidence wise, we've seen it hit record low. I think the second-lowest on record of 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 with regards to consumer confidence.

(25:08):

So we had, as Blake was saying, we've got the 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 ecommerce 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 eight to five, 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 even past our heavy tariff scenario to 0%.

Blake Droesch (25:46):

Yeah. It doesn't have to be the worst case scenario with tariffs playing out in order for that to happen. I mean it just could be for instance, just the uncertainty of what the tariffs will be, right? So 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 what people go into the stores and buying stuff particularly around the holiday season, which is crucial for ecommerce.

Max Willens (26:27):

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

Blake Droesch (27:09):

I figured this is the Friday show, so let's try to keep it as dark as possible.

Max Willens (27:15):

Bottoms up.

Marcus Johnson (27:18):

Rahul?

Rahul Chadha (27:19):

I don't think my cynicism goes quite as far as Max's does. High bar.

Marcus Johnson (27:23):

Thank goodness.

Rahul Chadha (27:24):

But I mean, yeah, I'm buying here. I think even just separating all of the eloquent reasons that Blake spelled out just in the ecommerce sector, just when you look at the bigger picture of people in their pocketbooks, they're facing a lot of uncertainty. Grocery pacers go off, you're just thinking about their core needs and what they're going to have to spend money on. It's groceries, energy, transportation, that sort of thing. And 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 who knows what range of goods. So yeah, 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 their online purchases.

Marcus Johnson (28:15):

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'd booked it and then Liberation Day, April 2nd, tariffs hit, the stock market had its biggest drop, was it since the pandemic? And also the financial crash wiped about 3 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've 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 to expect." And I think it's that kind of mindset of people might have the money there, but they just don't know one day to the next.

(29:07):

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 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 ecommerce 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.

Rahul Chadha (29:57):

Thanks for having me, Marcus.

Marcus Johnson (29:58):

Thank you to Blake.

Blake Droesch (29:59):

Yeah, thanks for having me.

Marcus Johnson (30:01):

Now of course to Max.

Max Willens (30:02):

Always a pleasure, Marcus. Thank you.

Marcus Johnson (30:03):

Yes, indeed. And to the whole editing crew, thank you. And to everyone listening in to Behind the Numbers, the new marketing video podcast made possible by Cint. Subscribe, follow us, leave a rating and review if you have a moment. We really, really appreciate that. And we'll see you on Monday again for Behind the Numbers. Happiest of weekends.