Pod Insights a16z Podcast What You Missed in AI This Week (Google, Apple, ChatGPT) About this episode Things in consumer AI are moving fast.
In this episode, Justine and Olivia Moore, investing partners (and identical twins!) at a16z, break down what’s real, what’s overhyped, and what’s next across the consumer AI space.
They cover:
- Veo 3: how Google's video model unlocked a new genre of content
- OpenAI’s Advanced Voice Mode: upgrades, realism, and... um, human-like hesitation
- Apple's AI announcements
- ElevenLabs' V3: expressive voice tags, real-time interruptions, and narrative tools for creators
- New data from a16z: AI consumer startups are ramping revenue faster than ever—and they show you how
- Justine walks through how she used ChatGPT, Ideogram, and Krea to launch a fully AI-assisted brand prototype (store photos and all)
It’s exhausting (in the best way) to be a creative in the age of AI.
Timecodes:
00:00 Introduction
00:28 Meet the Hosts: Justine and Olivia
00:45 Veo 3: The Game-Changer in AI Video
06:34 ChatGPT's Advanced Voice Mode Updates
10:22 Apple's AI Announcements and Siri's Shortcomings
12:18 ElevenLabs' New Voice Model: 11 V3
15:50 Report from a16z: AI Revenue Growth
23:14 Demo of the Week: AI in Brand Creation
Resources:
Read ‘What “Working” Means in the Era of AI Apps’: https://a16z.com/revenue-benchmarks-ai-apps/
Find Justine on X: https://x.com/venturetwins
Find Olivia on X: https://x.com/omooretweets
Tools Discussed:
Veo 3: https://gemini.google/overview/video-generation
OpenAI: https://openai.com/chatgpt
ElevenLabs (V3 voice model) – https://elevenlabs.io/
Ideogram (logo/image generation) – https://ideogram.ai/
Black Forest Labs/Flux Context (image editing via Krea) – https://www.krea.ai/
Flux Context demo (Krea launch post) – https://www.krea.ai/blog/flux-context
Hedra: https://www.hedra.com/
Stay Updated:
Let us know what you think: https://ratethispodcast.com/a16z
Find a16z on Twitter: https://twitter.com/a16z
Find a16z on LinkedIn: https://www.linkedin.com/company/a16z
Subscribe on your favorite podcast app: https://a16z.simplecast.com/
Follow our host: https://x.com/eriktorenberg
Please note that the content here is for informational purposes only; should NOT be taken as legal, business, tax, or investment advice or be used to evaluate any investment or security; and is not directed at any investors or potential investors in any a16z fund. a16z and its affiliates may maintain investments in the companies discussed. For more details please see a16z.com/disclosures.
Transcript Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.
0:00 Olivia Moore? AI video completely taking over our social feeds in the span of a week, which is absolutely insane.
0:06 Speaker 01 VO3 was sort of like the ChatGPT moment for AI video, where we were suddenly seeing all of these VO3 generations blowing up with millions of views.
0:17 Olivia Moore? It feels like between this and VO3, like a world of possibilities has been opened up for AI storytelling, especially in video form.
0:26 Speaker 01 Yes, it's an exhausting time for AI creatives. It's great, but exhausting.
0:30 Olivia Moore? The median ARR, annualized revenue run rate, is now $4.2 million at month 12 for consumer startups. Consumers back.
0:42 Erik Torenberg? In today's episode, we have a takeover. Justine and Olivia Moore, twin sisters, creators and partners on the A16Z consumer team. They're diving into everything happening in the fast-moving world of consumer AI, from the explosion of AI-generated video content across your feeds to the tools powering the next wave of creative startups. You'll hear them demo Google's new VO3 video model, break down major upgrades to voice tools like ChatGPT in 11 labs, and walk through how Justine used AI to create an entire frozen yogurt brand, complete with logo, product shots, and a storefront. It's a fast-paced look at what's new, what's working, and where things are going next for creators, builders, and consumer AI companies. Let's get into it.
1:24 Erik Torenberg? As a reminder, the content here is for informational purposes only. Should not be taken as legal, business, tax, or investment advice, or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any A16Z fund. Please note that A16Z and its affiliates may also maintain investments in the companies discussed in this podcast. For more details, including a link to our investments, please see a16z.com/disclosures.
1:54 Speaker 01 I'm Justine.
1:55 Olivia Moore? I'm Olivia.
1:56 Speaker 01 And this is our very first edition of This Week in Consumer AI. So we are both partners on the investing team here at A16Z, and we are also identical twins.
2:06 Olivia Moore? Very confusing.
2:07 Speaker 01 Extremely confusing, but should be fun for a podcast. And we're excited to chat about some of the cool things we saw in the wild world of consumer AI this week, starting with VO3.
2:17 Olivia Moore? Yes, and things are moving so quickly that it feels like we went from exciting, but maybe not super realistic AI video to AI video completely taking over our social feeds in the span of a week, which is absolutely insane.
2:30 Speaker 01 Yeah, I've been following AI video for a few years now. You probably remember, I've been an early user of all these models.
2:38 Olivia Moore? Yes.
2:38 Speaker 01 And I have wanted them to work and to make cool things that everyday people would like for so long. And I would say VO3 was sort of like the ChatGPT moment for AI video, where we were suddenly seeing all of these VO3 generations blowing up with millions of views, channels only featuring VO3 videos, getting hundreds of thousands of subscribers within days.
3:03 Olivia Moore? Yeah. What's actually different about VO3?
3:05 Speaker 01 Yeah, so I should give the overview first. So VO3 is Google DeepMind's latest video model effort. So they released VO2 late last year, which was the first sort of breakthrough in showing that you could get really high-quality video, like a consistent scene, consistent characters, physics, like things that just looked good. And VO3 is the next iteration of that model series. And what's very different about it is it generates audio natively at the same time it generates video. So you can actually prompt it with a text prompt to say something like a street-style interview where a man and a woman are talking about dating apps. Or you can be even more specific and say something like, "A street-style interview where a man walks up to a woman and asks her, 'What dating apps are you on?'"
3:50 Speaker 01 And she replies, "Why are you asking?" And then gives him a suspicious look. And so you no longer have to go to another platform to do an audio voiceover or anything like that. You can get a full-featured, talking, human video with multiple characters in one place.
4:05 Olivia Moore? Yeah, it feels like a real unlock to me as someone who's been following AI video less closely and that people are now... Able to generate in one prompt, a full vlog, a full talking head video, something that looks like a podcast.
4:18 Speaker 01 Yes.
4:19 Olivia Moore? In one go. And I think that's why we've seen things like the stormtrooper vlogs completely blowing up on TikTok and Instagram.
4:24 Speaker 01 Yes. So the interesting thing about VO3 is it's limited to eight-second generations only. And it doesn't generate audio if you start from an image to video, only if you start from text, which means that it's really hard to have longer than an eight-second clip with character consistency, unless in your text prompt, you're referencing a character that the model already knows.
4:46 Olivia Moore? Okay.
4:46 Speaker 01 And so that's why we've seen all of these hacks of all the viral vlogs featuring like stormtroopers or a yeti.
4:52 Olivia Moore? Because you can't see their faces or cover by a mask.
4:54 Speaker 01 Yes. Or the yeti, the model knows what the yeti looks like, or a capybara. If it's not a human face, I think we're less sensitive to little changes between the eight-second clips. And so you have people generating minutes-long videos that look like a consistent vlog character.
5:09 Olivia Moore? Yeah, they've been super fun to watch. And then how do you actually use VO3? It feels like there's been some confusion.
5:15 Speaker 01 Yes. So when VO3 first came out, it was only available on the Google AI Ultra plan.
5:20 Olivia Moore? Okay.
5:21 Speaker 01 Very confusing, through Flow, Google's new creative studio. And you had to be on the $250 a month plan. So there was a lot of hype, a lot of FOMO. Now, the model is available via API.
5:32 Olivia Moore? Okay.
5:32 Speaker 01 So what that means is a bunch of consumer video platforms like Hydra or Crea are offering access to VO3 on their $10 a month plan. Or some of the more developer-oriented like API platforms like Fall or Replicate are offering generations where you pay per video. It's priced around like 75 cents per second today.
5:52 Olivia Moore? Okay.
5:53 Speaker 01 So it's still pretty expensive. You have to be careful about how you prompt it, but the results are amazing.
5:58 Olivia Moore? And then what do we expect next? Either from Google, from creators, like what does this mean for AI video?
6:04 Speaker 01 Yeah, I think on the creator front, we've already started to see this explosion of basically, I think what people have called faceless channels. So this idea of like, now you don't have to put your own face behind a camera or on a screen to be able to talk about a topic or film a vlog or something like that. You can have a fully AI-generated character essentially telling your story or acting out your narrative for you, which is huge. And I think like people are using it to tell extremely funny jokes, have these narrative storylines, like Greg, the incompetent stormtrooper who's crashing all of the missions, things like that, that people are getting really invested in. In terms of from the model providers and the companies, VO3 is clearly very expensive to run.
6:44 Olivia Moore? Yeah.
6:44 Speaker 01 So I would imagine Google will want to train the next model that's even bigger and is able to generate longer videos. But we'll struggle with things like coherence and we'll also struggle with, honestly, the pricing of the model. Hopefully, we'll see more condensed, optimized, distilled models that are able to do similar things at a lower cost. Okay, so there was a lot of news last week. So this got kind of lost. But I heard there was a big update to ChatGPT's advanced voice mode.
7:11 Olivia Moore? Yes, they announced it on Saturday, which was an interesting choice.
7:14 Speaker 01 Weird time to drop.
7:15 Olivia Moore? Yeah, I think they actually dropped the improvements last Thursday or Friday. It was first only for all paid users and now I think it started rolling out across the broader user base. But essentially, they made advanced voice mode a lot more human. The really interesting thing was ChatGPT was the first one to do what I would call kind of real-time consumer voice, where you could have like a conversation. And this was like last September in the ChatGPT app. But then they didn't really improve the product or the model that much, at least from my perspective. And we saw Sesame and other open source providers come out with arguably better and way more human-like models. We saw Gemini, we saw Grok launch voice products that were much more realistic.
7:57 Speaker 01 Right.
7:58 Olivia Moore? So I think it was kind of a question mark for a lot of people, what ChatGPT was doing with consumer voice.
8:03 Speaker 01 And so what makes it better now? Or what were the main upgrades?
8:05 Olivia Moore? We should actually just maybe talk to it and see.
8:08 Speaker 01 It's live demo time, folks.
8:10 Olivia Moore? Hey, ChatGPT, are you there?
8:13 Speaker 03 Hey there, yep, I'm here and ready for the demo. What can I help you with today?
8:17 Olivia Moore? Did they make some improvements to your voice over the last week?
8:21 Speaker 03 Yeah, they did. They've been rolling out some updates to make my voice sound more natural and expressive. I'm glad you noticed.
8:29 Olivia Moore? Yeah, I can hear like your voice maybe inflex upwards when you're approaching a question or sometimes you'll say um or uh or something that sounds like a mistake but actually makes you sound more human.
8:40 Speaker 03 Exactly. Those little touches are all intentional to make the conversation feel more natural and relatable. It definitely makes things a bit more fun and engaging, I think.
8:49 Olivia Moore? Very cool.
8:50 Speaker 01 Amazing. Yeah, it's crazy to hear it's always wild when a voice model like coughs.
8:56 Olivia Moore? Yes.
8:56 Speaker 01 Or even funner things like taking on an accent or speaking in another language.
9:00 Olivia Moore? Yeah.
9:01 Speaker 01 Or things like that. But then also, I think, just the pure realism of the voice that that demonstrated is also extremely impressive.
9:08 Olivia Moore? It's so funny, too, because when advanced voice mode first came out, my feeling was like, wow, this is amazing. This is incredible. This is so human-like. But then like a month or two later, Notebook LM came out, and that was the first real voice experience that put in those ums, ahs, pauses, other things that are so human-like. And it felt like such a huge upgrade. And then when you use advanced voice mode, you're like, this is not that advanced anymore. And so now it's finally there, which is super exciting.
9:33 Speaker 01 So it went from advanced voice mode to basic voice mode to advanced voice mode again.
9:37 Olivia Moore? It's advanced voice mode again.
9:38 Speaker 01 Yeah.
9:38 Olivia Moore? I think one of my questions then has been like, what took them so long?
9:42 Speaker 01 Right.
9:43 Olivia Moore? Because they're on the cutting edge of so many models, and yet it feels odd to me that it took maybe six-plus months for them to roll out improvements that we saw from other model companies much faster.
9:53 Speaker 01 Yeah.
9:54 Olivia Moore? I honestly think a big part of it might have been when they first released advanced voice mode, if you remember all the controversy around her.
10:01 Speaker 01 Yes.
10:01 Olivia Moore? And was this going to be a companion that replaced humans and some of what people would think of as kind of scary implications of that?
10:08 Speaker 01 Right.
10:09 Olivia Moore? It seemed like that maybe spooked them a little bit, and so they didn't want to put anything out there that sounded too human.
10:15 Speaker 01 Yeah, I mean, that. And then also, I mean, OpenAI has been super busy. This has always, I think, been the question about the frontier largely LLM labs, which is like, how do they balance priorities between the North Star of like text-based AGI, then what they're doing in video with Sora, all the image stuff they did, which we'll talk about a bit later with the 4O image model.
10:34 Olivia Moore? Yeah.
10:35 Speaker 01 Reasoning, all of those sorts of things.
10:37 Olivia Moore? Yeah, totally. It reminds me a little bit, actually, of one of the other, I say big tech, like OpenAI is now big tech in some ways.
10:44 Speaker 01 It counts.
10:44 Olivia Moore? But the other big tech consumer update this week, which was the Apple Developer Conference.
10:49 Speaker 01 Yes.
10:49 Olivia Moore? And all of the things that they announced around AI.
10:52 Speaker 01 Or didn't announce.
10:52 Olivia Moore? Or didn't announce. And the fact that I think that people have been so far somewhat disappointed by Apple Intelligence, which is their bundled set of AI features.
11:01 Speaker 01 Yep.
11:01 Olivia Moore? I think we've all been waiting on like the AI version of Siri or some kind of true personal assistant on mobile.
11:07 Speaker 01 Yeah.
11:08 Olivia Moore? So.
11:08 Speaker 01 I had this the other day where I asked Siri, "Okay, tomorrow's Monday. What Monday is it of the month?" Because SF Street cleaning, I had to know if it was gonna be the second Monday of the month. And it said, "I don't know that. Can I search ChatGPT for you?" And I was like, "Siri, how can you not answer this basic question?"
11:25 Olivia Moore? Well, okay, it does seem like from a lot of Apple's updates that they put out, they're kind of outsourcing a lot of the true AI features to ChatGPT just running on your phone.
11:34 Speaker 01 Yeah.
11:34 Olivia Moore? And I think a similar story, it seemed like when they rolled out those AI-powered notification summaries.
11:39 Speaker 01 Yes.
11:40 Olivia Moore? Where they would group like three or four sets of notifications into one.
11:43 Speaker 01 Yeah.
11:43 Olivia Moore? And they got a little jumbled and people got upset. It seems like that spooked Apple a little bit and they keep kind of retrenching on the timeline of releasing AI Siri.
11:51 Speaker 01 Yeah.
11:52 Olivia Moore? So we'll see what happens. They were, at least in the announcement yesterday, leaning into things like updates to Gen Moji and call transcription. I think the coolest thing I saw was real-time translation of calls and FaceTimes.
12:03 Speaker 01 Yes.
12:04 Olivia Moore? Across languages.
12:05 Speaker 01 I've been surprised we haven't seen more on that because that feels like a really natural and obvious use case.
12:10 Olivia Moore? Yeah.
12:10 Speaker 01 Especially, I think, did Google, I think Google might have done a real-time translation, but I haven't seen a ton of adoption yet. I did see for the first time a viral Gen Z TikTok featuring Gen Mojis, which I'm surprised it took that long to hit because Gen Z loves Gen Mojis.
12:25 Olivia Moore? Yeah, holding out hope for those to make it really big.
12:27 Speaker 01 Yes. Okay, and before we get too far off voice, should we talk about 11v3?
12:32 Olivia Moore? Yes.
12:33 Speaker 01 So 11 Labs, the text-to-speech company, actually broader AI voice company, released their third-generation model called 11v3 also last week.
12:41 Olivia Moore? Yep.
12:42 Speaker 01 I believe maybe last Thursday or Friday. It was a very busy week on the voice front. And what makes 11v3 really special is it does a bunch of stuff with voice that you used to have to do via speech to text-to-speech. So before, if you wanted to have a character that was crying while talking or had some sort of emotion or even had like a weird inflection, you would have to record yourself saying it like that, upload it to 11, and then they would translate it into the AI voice.
13:10 Olivia Moore? Yep.
13:10 Speaker 01 And now they essentially take all of the weird inflections, emotion, even accents, and they turn it into Text prompting.
13:19 Olivia Moore? Yep.
13:20 Speaker 01 Through these things called tags. So basically, the 11 interface is an editor where you can take a sentence that you want the character to say, you pick your voice, you write your sentence, and then you can tag it, like sadly, or resigned, or whispering, or something like that.
13:37 Olivia Moore? And you can do sound effects, too, right?
13:39 Speaker 01 That is huge. Okay, so I made this one.
13:42 Olivia Moore? And what's the prompt on it?
13:43 Speaker 01 Oh, it's a text prompt. It'll say, hey, y'all, my name is Austin. I'm coming to you live from our family farm in Fort Worth. Then he's gonna walk through milking a cow, and someone's gonna interrupt him.
13:53 Olivia Moore? Great.
13:54 Speaker 04 Hey, y'all, my name is Austin. I'm coming to you live from our family farm in Fort Worth.
14:03 Speaker 04 Today, I'm gonna walk through what it's lacked.
14:05 Speaker 01 Austin, are you faking an accent again?
14:07 Speaker 04 It's not faking. I was born here.
14:09 Speaker 01 If everyone knows, you don't talk like that. So my favorite thing about that is it showcases a couple of things about the model.
14:17 Olivia Moore? It can do bad accents.
14:18 Speaker 01 It can do terrible accents. It can do great accents. That was two different characters. At first, I prompted the Austin character of having a thick Texas accent. Then I prompted the cows mooing. And then you can also prompt interruptions, which is really cool. So a tag is literally like starts talking and gets interrupted. And then the next character that comes in, you can say, cuts the other character off. And so for narrative storytelling, for ads, marketing, anything, it makes it sound like a natural conversation, which we've never had with AI voice before.
14:50 Olivia Moore? It feels like between this and V3, like a world of possibilities has been opened up for AI storytelling, especially in video form.
14:58 Speaker 01 Yes, it's an exhausting time for AI creatives. It's great, but exhausting, because there's just way too many fun stuff to test.
15:03 Olivia Moore? Yeah.
15:04 Speaker 01 I think 11's actually doing a competition now, where they're soliciting the best examples of people using V3 from all around the world. So I'm gonna be very curious to see, we've made all sorts of fun stuff, but how the professional narrative builders and storytellers are using it, because I think we've just scratched the surface of what's possible here.
15:23 Olivia Moore? Amazing.
15:25 Speaker 01 Okay, so you put out some data last week about AI revenue ramp and how fast companies are growing. Let's chat through the main takeaways from that.
15:32 Olivia Moore? Yeah, so basically the methodology here, or maybe even back up, the purpose here was, I think we all have this idea in mind, or maybe we have that idea because we've heard it a billion times, that like, we're in a new era of growth now. Thanks to AI, companies are scaling faster than ever before.
15:49 Speaker 01 Right.
15:49 Olivia Moore? But my question was like, what does that really mean? And how fast is that? Is it 20% faster? Is it 50% faster than what we saw pre-AI?
15:57 Speaker 01 Right.
15:58 Olivia Moore? So we are blessed to get to meet tons of companies here every day. We meet dozens of companies a week. So we went back and essentially just pulled all the data from companies we've met in the gen AI era, which I would say is the last 22 to 24 months.
16:12 Speaker 01 Right.
16:12 Olivia Moore? And we looked at, once they started monetizing, how fast are they growing? I would say, pre-AI, if you're a B2B startup selling to enterprises, if you got to $1 million in ARR in the first year, that's like, amazing, best in class.
16:27 Speaker 01 That was like the rule of thumb. I remember that. It's the known metric.
16:29 Olivia Moore? Very exciting. If you were a consumer startup, you would not make money for three, five years, maybe longer.
16:37 Speaker 01 Yes.
16:37 Olivia Moore? The whole idea was to build up a user base and then probably monetize them directly via ads.
16:43 Speaker 01 Or transactions for like a marketplace, maybe.
16:46 Olivia Moore? Yes, down the line. And there were counterexamples to that, some subscription companies, but that was definitely not the dominant model.
16:51 Speaker 01 Yeah.
16:52 Olivia Moore? That has fully shifted in the AI era, and most companies are now making money directly from consumers via subscription. What we found was actually pretty surprising, which is that the median ARR, annualized revenue run rate, is now $4.2 million at month 12 for consumer startups. The bottom quartile is $2.9 million.
17:13 Speaker 01 Yeah.
17:14 Olivia Moore? And the top quartile is $8.7 million.
17:16 Speaker 01 Wow. So like a median company, median B2C company in the age of AI is getting to $4 million ARR after a year.
17:23 Olivia Moore? Yes.
17:24 Speaker 01 And the best in class companies are getting to $8 million in a year.
17:27 Olivia Moore? Upwards of eight, almost nine.
17:28 Speaker 01 In the pre-AI era, like, we never would have seen anything like that.
17:31 Olivia Moore? And the even more surprising thing is, those numbers are twice as high as the B2B benchmarks in the AI era. So consumer companies are actually ramping revenue faster.
17:42 Speaker 01 Yep.
17:42 Olivia Moore? Which again, is like a total reversal from what we saw before. I think there is a couple of reasons why this was happening. First, it's like, why have consumer AI companies adopted subscription? They were kind of forced to because especially in the early era of models, they were so expensive that you, as a company, had pretty high costs of goods sold.
18:02 Speaker 01 Right, the inference costs, you mean?
18:03 Olivia Moore? Yes.
18:04 Speaker 01 Of running the model. Historically, software, the benefit was like there was no marginal cost.
18:09 Olivia Moore? Yes.
18:09 Speaker 01 So you made an app, there's no additional cost to serving the next user.
18:12 Olivia Moore? Yeah.
18:12 Speaker 01 In AI, that is actually not true at all.
18:14 Olivia Moore? Yeah.
18:14 Speaker 01 Especially if you're running inference on a model, it costs you cents.
18:19 Olivia Moore? Yeah.
18:20 Speaker 01 Maybe even dollars for each query. So each user could be costing you dozens of dollars a month.
18:25 Olivia Moore? Yeah, absolutely. So a lot of companies had to at least try to charge.
18:28 Speaker 01 Right.
18:29 Olivia Moore? And it turns out that these new products that are AI-native are so powerful that consumers are willing to pay.
18:34 Speaker 01 Right.
18:34 Olivia Moore? So we also ran some additional data analysis that shows that, on average, consumer AI startups are charging $22 a month
18:42 Speaker 01 Wow.
18:42 Olivia Moore? across the average user, which again is like more than double
18:46 Speaker 01 Yeah.
18:46 Olivia Moore? what they were able to charge pre-AI for subscription companies on average.
18:50 Speaker 01 Right. And do we have theories? I mean, on the creative tool side, what I've seen is like, for people who weren't creative, AI tools allow them, like I can make photos
19:00 Olivia Moore? Yeah.
19:01 Speaker 01 or images or art for the first time. I can make videos, I can make animations. And then for creative people, like we have a cousin who's a creative, they can genuinely use this to
19:10 Olivia Moore? Yep.
19:10 Speaker 01 supercharge their workflows and do their job a lot faster. So they're willing to pay for it.
19:14 Olivia Moore? Yep.
19:14 Speaker 01 Have we seen examples of that outside of creative tools yet?
19:18 Olivia Moore? It's a good question. We've seen some of it around companion apps, I would say.
19:21 Speaker 01 Yes.
19:22 Olivia Moore? Where, again, the products are just so powerful to have a friend with you 24/7
19:26 Speaker 01 Yeah.
19:26 Olivia Moore? that people are excited to pay. We've also seen this around categories like language learning.
19:31 Speaker 01 Right.
19:31 Olivia Moore? Teaching your kid how to read, other things that previously you'd have to pay a human being, I don't know, $50 an hour, if that,
19:38 Speaker 01 Yeah.
19:38 Olivia Moore? to get access to, that now $22 a month with AI feels pretty cheap.
19:43 Speaker 01 Totally. I mean, I'm even thinking some of the things I've seen monetized while are in like nutrition
19:48 Olivia Moore? Yep.
19:48 Speaker 01 or coaching, where for the first time, thanks to vision models, you can take a picture of what you're eating and have a vision model pull out, how many calories are in this?
19:55 Olivia Moore? Yeah.
19:56 Speaker 01 how much protein? And then at the end of a day or a week, can summarize insights about
20:00 Olivia Moore? Yeah.
20:00 Speaker 01 what you should be eating more or less of.
20:02 Olivia Moore? Yes.
20:02 Speaker 01 Which is something that pre-AI people, like, I don't know, you could take a picture and upload it to a forum.
20:08 Olivia Moore? Yes.
20:08 Speaker 01 But like, it was not consistent.
20:10 Olivia Moore? Or you'd have to find a nutritionist, wait weeks to book an appointment, maybe get a referral from your doctor, like it would take forever. So it's really exciting. I think it's monetizing people who never would have paid for that before.
20:20 Speaker 01 Yes.
20:20 Olivia Moore? And then people who would have paid for it are switching over to the AI version, or they're willing to pay even more, which is super exciting. The other thing that I think people have questions about, or maybe doubts about, would be like, okay, great, they're growing fast, but they're not retaining a lot of users.
20:35 Speaker 01 Right.
20:36 Olivia Moore? We did some analysis on this, too. There's definitely a lot of tourism, we call it AI tourism behavior in terms of free users, which means you get a lot of hits on your website, essentially, and most of those users don't stick around.
20:48 Speaker 01 Yep.
20:48 Olivia Moore? But if you look at it on a paid user basis, so once you actually subscribe, consumer AI companies are retaining, at the median, pretty much just as well as pre-AI consumer companies, which is really exciting.
20:59 Speaker 01 I feel like what we've seen, especially on revenue retention, which is fascinating, is like, you might have more tourists, so you might have more people who subscribe and then cancel. But then, for the first time, you have like real sort of upsell activity in consumer subscriptions, whereas you're not just paying $10 a month for the app, you're paying $10 a month for the image model. But then, if you love it and you run out of credits, you're paying another $10, $12, $50 for additional credit packs before the next month of your subscription starts.
21:28 Olivia Moore? Yes.
21:29 Speaker 01 And so that means you see revenue expansion opportunity now in consumer that we only used to see in enterprise.
21:35 Olivia Moore? Absolutely.
21:36 Speaker 01 Or honestly, in games, what they call like monetizing the whales, the people who were the really high spenders, which is, to me, one of the most exciting things about consumer AI products right now.
21:46 Olivia Moore? Yeah. And we're seeing, I would say, companies convert consumer revenue to enterprise revenue
21:51 Speaker 01 Yes.
21:52 Olivia Moore? way faster than they ever did before. Like, companies like Canva previously took five, six, seven-plus years to really move from consumer, prosumer to enterprise.
22:02 Speaker 01 Right.
22:02 Olivia Moore? And now we're seeing companies like 11 Labs is a great example.
22:05 Speaker 01 Yep.
22:05 Olivia Moore? Where someone might start using it as a $10 a month plan to make their own fun videos at home.
22:10 Speaker 01 Yeah.
22:11 Olivia Moore? Make voiceovers for their fun videos at home. And then, turns out, they work at some big entertainment company.
22:17 Speaker 01 Yes.
22:17 Olivia Moore? And they bring it in there to work, and then they convert to a really high ACB enterprise contract, which is super exciting.
22:23 Speaker 01 I mean, I feel like we even saw that in the very early days of consumer AI. I remember our friends at ad agencies or entertainment companies would tell us that they were using Midjourney to mock things up, or even using the images in their final work products.
22:35 Olivia Moore? Totally.
22:36 Speaker 01 So it was like a true enterprise use case, but growing bottoms up, which is a fascinating motion.
22:42 Olivia Moore? Yeah, it's exciting. Consumer's back.
22:46 Speaker 01 All right, awesome. We're moving on to our demo of the week. So one fun fact about us is that we genuinely love, at least for me, it's probably my number one hobby now.
22:54 Olivia Moore? Yeah.
22:55 Speaker 01 Trying out all of the AI creative tools especially, but also AI like consumer products more broadly. Figuring out how to make cool things and then sharing the workflows to other people whose number one hobby is not doing this and who do not have hours. So this week, we are going to talk about brand creation and ideation using AI. I made this new frozen yogurt brand called Melt that I iterated on with ChatGPT. Then I took to Ideogram and then I took to Kria to kind of do the final touches and to make these really cool product photos and even store photos.
23:28 Olivia Moore? Yeah.
23:29 Speaker 01 And I think that the initial idea about this was seeing Flux Context come out, which is the new image editing model from Black Forest Labs, which is hosted on Kria. And Flux Context, you can kind of think of it like the GPT-4O image model where you can upload an image and then you can say, you know, make this Ghibli style was the viral example. You can also say like, take the person from this photo and put them in a new environment or take the logo and change it slightly.
23:57 Olivia Moore? Yeah.
23:57 Speaker 01 Add or remove objects.
23:58 Olivia Moore? I've seen it described as kind of like Photoshop, but with natural language prompts.
24:03 Speaker 01 Yes.
24:03 Olivia Moore? Like you can edit with words for the first time.
24:05 Speaker 01 And I think that is what makes it different than the 4O image model, which is the consistency to which it retains the item or the character or whatever is much, much better. We'll show some examples here, but basically if you're taking a photo of yourself and uploading it to GPT-4O and saying like, put me in a podcast studio, you will likely end up looking completely different in the new photo than you did in the initial photo. Or maybe some similar features, but quite different. Whereas this model does an amazing job at maintaining consistency. And so that sparked this idea for me of, oh, that means that this can actually be used for like brands to do product photos or other sorts of marketing collateral because the logos and the products can be consistent.
24:46 Olivia Moore? Awesome.
24:46 Speaker 01 And you know, I'm a huge Froyo fan. I feel like Froyo has gotten an unfair shake in recent years. It's kind of seen as the little kid thing. And so I wanted to make a cool, hip, modern twenties, New York Froyo brand.
24:59 Olivia Moore? Okay.
25:00 Speaker 01 I went back and forth with ChatGPT on this idea to land on the name Melt, which I love, and to land on the branding of like, this is sort of what the font of the logo will look like. And then this is the color of the packaging. And then I took that prompt for the logo to Ideogram, which is an image generation and sort of editing canvas. And it's super good, I think, at logos, typography, anything sort of product or word related. And I had it generate this photo of this fro yo cup that is floating in the air with the melt logo and branding.
25:34 Olivia Moore? Yep.
25:35 Speaker 01 Then I downloaded that photo and I took it to Kria, where I used the Flux Context new editing model to run all different kinds of scenarios. So what's really cool about that is you can upload the photo and then you can say, take this fro yo and put it sitting on a counter at a trendy restaurant. Put it in the hand of a woman at a park. Or even make the fro yo cup, instead of blue, make it white and give it a pink border. Make the fro yo itself purple if they're having like an ube fro yo special. And then I think the next step, which I didn't do here, I kind of stopped at the product images. And I actually made an image of the store too. I took the logo and I superimposed it over a store I generated. I know, it's like you want to go there. But the next step even further would be video.
26:20 Speaker 01 So my idea is to take all of those sort of product shots, take it to VO3 or Higgsfield, which does really cool special effects stuff, and have the fro yo cup in action. See how good the model-
26:31 Olivia Moore? And have it actually melting over the side.
26:33 Speaker 01 It has to melt. I'm very curious to see, do the models understand the physics of fro yo? Like if it tosses the cup in the air, how does the fro yo land? Does it kind of plop like we all know fro yo would in real life? And obviously, this was just like a fun, fun experiment for me. I'm not, unfortunately, actually going to be starting a fro yo brand. But it sort of makes you start thinking about like, why, if you work at an ad agency, for example, and you were mocking up a deck for your client about your latest campaign, why would you not use something like this to show them what it might look like?
27:05 Olivia Moore? And you did it in, I mean, less than a couple hours? And honestly, the branding- Does look more exciting than a lot of kind of professional brands that we see out there. And so it makes me think about the next generation of entrepreneurs are going to be completely AI assisted in a lot of these assets that they're putting together. And I think they're going to be able to make full stack AI brands. There's also products where you can design with AI. You can make ads with AI. Like, I think there'll be no reason for any person not to have their own product line, small business, open a store if they want to. Like, AI is assisting with these kinds of things, too.
27:40 Speaker 01 Totally, yeah. I think we'll see brands that are like logo, product photo, maybe even product itself designed by AI, vibe-coded/vibe-designed website or mobile app, and then kind of dropship to the end consumer.
27:53 Olivia Moore? Social media ads also generated with AI. An avatar that holds it up for you and sells it on TikTok.
27:59 Speaker 01 Yeah, it's promoted by AI influencers who are VO3. They don't actually exist. I think that sort of thing is going to be really fascinating to see because it kind of, like, you no longer have to know how to work all of these technical tools that you had to be able to use. Like, even Photoshop, there's so many buttons. It's like very complicated. And now you can just ask for what you want in a text prompt, get something generated, and iterate on it until you end up with something that you really love, which I think is crazy powerful.
28:27 Olivia Moore? Awesome.
28:31 Erik Torenberg? Thanks for listening to the A16Z Podcast. If you enjoyed the episode, let us know by leaving a review at ratethispodcast.com/a16z. We've got more great conversations coming your way. See you next time.
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