(Preview) A Spring Break Mailbag: RIP Sora, Ads and Surplus, F1 Going in Reverse, Elon Inc., Smartphone Parenting, and More

Ben and Andrew interrupt Stratechery’s spring vacation with a mailbag. First, they discuss the end of Sora, the difference between Sora and Instagram, and where the OpenAI/Microsoft parallels break down. Then: A great take on advertising, ChatGPT engagement farming, Formula 1’s new era, the NFL’s world takeover, and how NBC solved tape delay at the Olympics. At the end: A question about Vision Pro and wives, whether elementary schoolers should have smart phones, Elon’s continued adventures with xAI, a Netflix dating show, LLM-aided dogfooding etymology, and Ben’s (admittedly boring) Taipei routine.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Andrew Sharp?

  Hello and welcome to a free preview of Sharp Tech.

• 0:08Andrew Sharp?

  Hello and welcome back to another episode of Sharp Tech. I'm Andrew Sharp and on the other line, Ben Thompson. Ben, how you doing?

• 0:20Ben Thompson?

  I'm doing okay, Andrew. How are you?

• 0:22Andrew Sharp?

  Deep sigh, mid-vacation, deep sigh. I'm good. It's great to be back to our roots here.

• 0:28Ben Thompson?

  Yeah, I've done, done a couple, did an update, did an interview this week.

• 0:33Andrew Sharp?

  Yeah.

• 0:33Ben Thompson?

  I mean, just a real stark contrast to you sitting on the beach a few weeks ago. Completely taking the week off. Like, like, who's the grinder here?

• 0:42Andrew Sharp?

  I, look, all I can say is I did it right and you took the weirdest, most disjointed vacation I've ever seen. But I figured in honor of that, we would keep it light tonight and go all mail today.

• 0:53Ben Thompson?

  It's, I know, everyone keeps asking you all the vacation is. I'm like, does this really look like a vacation?

• 0:58Andrew Sharp?

  It's not really a vacation. Let's just be honest. Let's call it what it is.

• 1:01Ben Thompson?

  This is a very functional trip to Asia and the days off are working around my travels. So, um, but I usually take, I do usually take a spring vacation every year. So I'm calling it a spring break, but yes, it's kind of ridiculous.

• 1:13Andrew Sharp?

  And next year, I'll be right there on the first weekend of March Madness in your basement, preventing you from traveling anywhere next year.

• 1:20Ben Thompson?

  We're gonna do it next year. Yes. I was annoyed that it was the same week this year, but yes. I've already looked. My son's spring break does not line up with March Madness next year.

• 1:29Andrew Sharp?

  Oh, perfect. There we go. Okay. Well, as for the show, a lot of-

• 1:34Ben Thompson?

  This is what grinders have to do, Andrew. We have to plan like a year in advance. Not like three hours in advance or whatever you need to sell.

• 1:41Andrew Sharp?

  A day before I tell you I'm going on vacation. I'm gonna be out all week. Deal with it. But no, um, here we are, Ben, and I gave you a couple of weeks heads up on my vacation. At least 50% nonsense questions is the promise on this episode. We are going with a spring break mailbag today. Before we hit mail though, we do have to read this note at the top. A note from at Sora Official App on Twitter. We're saying goodbye.

• 2:08Ben Thompson?

  I think, I think the problem is right there. I saw one of the most, uh, who's it Bob, Bob, something or other, the guy who writes the email newsletters about the music industry. That we, I've referenced him before, uh, Taylor Swift's song, "Me" knows about him because he wrote a thing about how she can't sing.

• 2:24Andrew Sharp?

  Oh, boy.

• 2:25Ben Thompson?

  And one of the more devastating takedowns of a publication that I ever heard was when Recode went out of business. Bob Leflitz, I think is his name.

• 2:33Andrew Sharp?

  Yeah.

• 2:33Ben Thompson?

  And he's like, it was recode.net. Um, if you didn't have a dot com, uh, sorry, you weren't in business.

• 2:40Andrew Sharp?

  I don't take you seriously.

• 2:42Ben Thompson?

  I hesitate to say that to you because it is sharptext.net.

• 2:45Andrew Sharp?

  Right.

• 2:46Ben Thompson?

  Which I think is fine. I'm fine with it.

• 2:48Andrew Sharp?

  Shots fired from Bob Lefkowitz.

• 2:50Ben Thompson?

  It's a top three. It's a top three sort of domain. Uh, but if you are at Sora official app.

• 2:56Andrew Sharp?

  Yeah.

• 2:57Ben Thompson?

  As opposed to Sora, uh, maybe you were not long for this world.

• 3:01Andrew Sharp?

  Well, they weren't long for this world. We're saying goodbye to the Sora app was the announcement earlier this week. To everyone who created with Sora, shared it and built community around it. Thank you. What you made with Sora mattered. And we know this news is disappointing. We'll share more soon, including timelines for the app and API and details on preserving your work. The Sora team. Um, what you made with Sora mattered. Fact check on that particular statement.

• 3:32Ben Thompson?

  Did anything made with Sora matter? That's exactly where I was going.

• 3:36Andrew Sharp?

  Uh, well, look, at least you can pop champagne mid-spring break over there because Vibes is still alive, you know?

• 3:43Ben Thompson?

  Look, Vibes won. Um, yes. Uh, look, just a lot of L's all around. I was, I think, proven correct, although this is probably one of those things where, oh, congratulations, you made the most obvious call ever. Sora wasn't necessarily it, although it did look sketchy for a while. It was at the top of the app store. It was ultimately proved to be a novelty. Um, again, this is the guy who liked Vibes and then honestly has never looked at Vibes in like months. So, uh, I really do not.

• 4:10Andrew Sharp?

  Announced how much you like Vibes like 12 hours before the entire internet was like, this is the most antisocial product we've ever seen. Uh, but hey, Meta has so much money that they're keeping Vibes alive, at least for the time being.

• 4:24Ben Thompson?

  I, they will claim that actually the, the numbers are pretty good, which I don't believe. Um, then actually show some numbers here, but, uh, but yeah, Sora.

• 4:34Ben Thompson?

  It was kind of a, it's interesting because we talked about, or I think me and John talked about at the time, to watch this capability, not in ChatGPT, but to sort of watch it as a standalone thing. And with real sort of community, social network type features. And it was pretty audacious, sort of, you know, particularly you look back in retrospect, stuff like this usually doesn't work. Like, Facebook has watched a bunch of additional social networks that really haven't worked. The ones that have worked are the ones they just ended up buying because they sort of came out of the ether. And so this is, you know, in retrospect, pretty audacious. And it's interesting to consider, was it a good or bad thing in retrospect? That they didn't just put Sora functionality into ChatGPT?

• 5:19Ben Thompson?

  And I think the critique why that was a mistake is they just, maybe they didn't ever get sort of critical mass. The good thing is, this is a very bloodless killing.

• 5:30Andrew Sharp?

  Yeah.

• 5:31Ben Thompson?

  I mean, I think the, the primary casualty seems to be Disney of, of, of all entities.

• 5:36Andrew Sharp?

  That's right.

• 5:37Ben Thompson?

  But if no one was using it.

• 5:38Andrew Sharp?

  Rolled back this week as well.

• 5:41Ben Thompson?

  Right. If no one is using an app in the App Store and the app goes away, uh, does it make a sound?

• 5:45Andrew Sharp?

  Well, and this app scared the crap out of Hollywood. I mean, there was like a whole frenzy. I'm sure everybody listening to this show remembers it, but Hollywood was all freaked out about copyright and what this could mean. And then Disney was forward thinking for embracing it. And I do think in retrospect, it reflects good product instincts at OpenAI. Like the choices they made, the way they promoted it was all good. It's the product itself, is it really a business for them? And they're now focusing on business.

• 6:11Ben Thompson?

  Well, here's the thing, uh, you could make the case that the reason why Sora died is because they started cracking down on copyright. Like, in the first few days, it was going nuts is because people were doing stuff with recognizable figures. And I think we talked about this at the time, but the, maybe that is one of the biggest takeaways is it's sort of a theory that I put forward consistently. It's a reason why I feel optimistic about our fortunes, sort of in an AI world, that things that people have in common are going to matter.

• 6:44Ben Thompson?

  Matter more and more. I mean, at the far extreme, there's like live events, like live events, more and more important, tremendously profitable, going up almost everywhere in sort of all cases, except for like NBA games for tanking teams, but that's another discussion. But you it's a similar thing with like these copyright bits. When you could do Pikachu doing crazy things, people found so very interesting.

• 7:04Andrew Sharp?

  Using it on a semi regular basis. It wasn't going to be an everyday thing, probably, but would we still resort to Sora to make videos featuring movie characters we all know? I think that's a good question.

• 7:17Ben Thompson?

  Well, the other thing that's interesting is you go back to Instagram back in the day. And Instagram started as a photo filter app. And in Instagram, when you would take a picture and you would apply the filter, then there were buttons right there to easily share to other social networks.

• 7:34Andrew Sharp?

  Yeah.

• 7:34Ben Thompson?

  And it's sort of become a very well chronicled sort of strategy. I think Chris Dixon wrote the sort of the canonical argument about this, like come for the feature, stay for the network or something along those lines. Where they they were independently useful.

• 7:49Ben Thompson?

  And then sort of got permission over time to layer on the social network aspects and then became, you know, also lifted the Twitter graph sort of wholesale back in the, you know, uh, everyone wants to bemoan the end of open and open APIs and open social graphs. Well, there's a very good reason why stuff's not very open anymore as Instagram basically bootstrapped itself off Twitter social network.

• 8:10Andrew Sharp?

  Yeah.

• 8:10Ben Thompson?

  But for Sora, you know, probably the most sore videos people did see were on other social networks. And it's just really hard, maybe even having the social stuff at the beginning was a mistake. I mean, there was the cameo bit, all those bits and pieces. I think probably the takeaway is just, it's hard.

• 8:30Andrew Sharp?

  Yeah.

• 8:31Ben Thompson?

  Look, there's been so many attempts to build social networks and the reality is the vast majority of them fail. And if you want to be a good prognosticator, if you want to have a good track work record, just come out and say every single one is going to fail and you're gonna have a great hit.

• 8:46Andrew Sharp?

  Nine out of 10 times, you're gonna come out looking pretty smart.

• 8:49Ben Thompson?

  The thing that was striking to me though, is just like when you hear it, OpenAI talk about focusing. I was like, well, the Sora app's got to go. It's not just that the Sora app needed to go. The amount of compute this appears to have been using even now with no one's using it feels astronomical and that's in the end that's maybe the biggest critique of this.

• 9:14Andrew Sharp?

  Yeah.

• 9:14Ben Thompson?

  Which is um.

• 9:16Andrew Sharp?

  Who greenlit this if it was that expensive? Apparently I saw fifteen million dollars a day thrown out. I don't know what the actual number is, but yeah, I mean, it was it was obviously compute intensive on day one and people had questions about how much compute was being dedicated to this project.

• 9:31Ben Thompson?

  Yeah, I mean, this probably gets to the broader questions about where's OpenAI's sort of business in general, but I'm I don't I feel like I don't want to bag on it too hard.

• 9:39Andrew Sharp?

  Yeah.

• 9:39Ben Thompson?

  Like, I'm not going to, again, you could get the a very high batting average predicting everything's going to fail and that's not a very fun world if no one tries because they assume everything's going to fail. So um, I will give Sora a parting salute.

• 9:53Andrew Sharp?

  Well, and look, we're all living through the early innings of the AI era here and there are going to be misses and weird experiments and all sorts of things that are charming in retrospect. Sora is already one of those things. I'm always going to remember that first week when every everyone thought that Sora was taking over the world and I do think if you were still allowed to use copyrighted movie characters and insert yourself into the matrix.

• 10:18Ben Thompson?

  Right, or like modify like actual scenes.

• 10:21Andrew Sharp?

  Right.

• 10:21Ben Thompson?

  Right to like, you like, like, you'd be, no, it has the potential to be at the greatest meme maker of all time.

• 10:25Andrew Sharp?

  Exactly.

• 10:25Ben Thompson?

  But that's interesting.

• 10:27Andrew Sharp?

  And that was always plausible. That was more plausible to me, just for the record, than it turning into its own social network that rivals Instagram or TikTok or Twitter.

• 10:37Ben Thompson?

  Well, but if, again, to go back to the Instagram example, if you have heavy usage.

• 10:42Andrew Sharp?

  Yeah.

• 10:42Ben Thompson?

  Then you have the sort of ingredients to to do a social network. One thing that is important to note, though, and this gets to the infrastructure cost angle. To go back to the Instagram example, it was applying filters on your phone, using your local camera, your local compute, and then you were posting stuff to other social networks. The actual costs for the initial version of Instagram on a marginal basis were basically zero.

• 11:13Andrew Sharp?

  Yeah.

• 11:14Ben Thompson?

  Like, and so the, because everything was happening locally, you built the app, is distributed through the App Store, so Apple's taking care of that aspect for you. It's running on people's local phones. And over time, then you could layer, layer on the, now, the cost for Instagram today is astronomical, right? Because it's basically a cloud, you know, it's a front end for a cloud service. And everyone has their own customized feed, and there's obviously lots of video and all these bits and pieces. But it was a very sort of natural progression from basically zero marginal cost to layering on it. As the value of the app itself and the network increased, the costs also increased, but it was a match.

• 11:52Andrew Sharp?

  Yeah.

• 11:52Ben Thompson?

  And that is a fundamental problem with Sora and is going to be a fundamental problem for anyone that tries to do something similar. If the, this just gets like, this is why Forster Techery, from the very beginning, I've always been on and on about zero marginal costs and why that makes all these new things possible. AI, generally, you know, there's a whole discussion to be had about local versus in the cloud computation and the question of marginal costs. But for video generation in particular, we're nowhere close to a world of zero marginal costs. But this is, this almost makes the point that I make continuously about zero marginal costs in reverse. We, like, not having zero marginal costs is sort of debilitating.

• 12:37Ben Thompson?

  And it, it ends up in an all or nothing scenario where either this takes off and is a huge deal, or within a matter of months, it's dead.

• 12:45Andrew Sharp?

  Right. Well, and if it takes off and it's a huge deal, well, we haven't really figured out how to make money from this, so how are we benefiting more than we're hurting from all the costs?

• 12:54Ben Thompson?

  Yeah, maybe should have had an advertising business.

• 12:56Andrew Sharp?

  Right.

• 12:57Ben Thompson?

  Yeah, I mean, it, it really speaks to, that was probably like peak OpenAI in terms of they could do no wrong. They would make a deal with a company, that company's stock would go to the moon. And it, it's incredible. Like that was only a few months ago. Um, so it's

• 13:12Andrew Sharp?

  Most takeable company in history. It's all part of the ride here. Well, speaking of

• 13:17Ben Thompson?

  Yeah, go ahead.

• 13:18Andrew Sharp?

  Adrian, who emailed last week saying that OpenAI pivoting to the enterprise was a mistake. He followed up on our discussion and said, guys, how many great companies did well at consumer and enterprise in the first decade? Microsoft was able to dominate the consumer market, not just because they were good in enterprises, but because they had an early enterprise monopoly and were a default. Will OpenAI be able to build a monopoly in the enterprise today against Microsoft, Google, Oracle, Anthropic and Amazon and leverage that to remain the default for consumers? In the consumer market, they only have to compete with Google, but keeping up with Google

• 14:00Andrew Sharp?

  will take laser focus. Any thoughts on the follow up from Adrian there?

• 14:05Ben Thompson?

  Well, this gets to what is honestly going to be a theme for a huge majority of this podcast. I'm going to warn you right now. Maybe this is the quote unquote, don't call it a vacation laziness kicking in.

• 14:15Andrew Sharp?

  Okay.

• 14:16Ben Thompson?

  But one thing, this is just a thing about AI in general. My answer is, I don't know. Like, the degree of uncertainty is so high and, and OpenAI is, is a great, is a great example. I mean, it, it does speak to this cost issue really sort of screwing with things.

• 14:35Andrew Sharp?

  Yeah.

• 14:36Ben Thompson?

  In a, you know, in sort of a more traditional compute environment, which a lot of my analysis with OpenAI maybe unwittingly has sort of incorporated. It's like, well, you have a billion users or close to a billion users or whatever it might be. Consumer, consumer is like the great, the great prize. Like you only get a big new consumer company like every 15 to 20 years. There's usually like one defining one per paradigm.

• 15:03Andrew Sharp?

  To launch, really.

• 15:05Ben Thompson?

  Well, even, I mean, I'd really go back to Facebook. Uh, it's sort of like the category that you sort of have in mind for, for an OpenAI. And that is the biggest. Prize sort of in the world and part of the whole thesis around why they need to be monetizing, they need to have an ad model and all these, all these pieces is because then that gives you this revenue flywheel that no one can sort of compete with because it's so hard to, it's, it's hard enough to get consumers. It's even harder to build a thriving advertising business, but they had seemed to have such a lead and they had so many consumers. It's like surely they can figure this out. And once they figure this out, then they're getting revenue from

• 15:49Ben Thompson?

  this model that they feed back into their R and D and they can push further, further ahead.

• 15:55Andrew Sharp?

  Yeah.

• 15:55Ben Thompson?

  And you're, it's sort of like becomes an insurmountable lead. And I think I probably made this case most clearly around, I want to say like 20 months ago. I think it was at like the MFA Nations conference or something along those lines, talking about this flywheel and why that would give them this big advantage. And it's so frustrating to the point of being a table company. We, we don't know if that would have worked.

• 16:19Andrew Sharp?

  Yeah.

• 16:19Ben Thompson?

  Because they were so late to get started. And now we're in a situation where for sure, the best way to make money in the short to medium term, where you can just really turn the spigots on is in enterprise. We talked about it last week. Enterprise is willing to pay for productivity gains and what they have with Codex is very compelling. And yes and no, I should say, it's not a monopoly. Like they're, it's tooth and nail with Anthropic. Obviously they're gonna be fighting with Microsoft. They're be fighting with all these folks, but at some point, the computation costs are, are what they are. You have to pay for these servers.

• 16:59Andrew Sharp?

  And when I think about Microsoft succeeding in the consumer space, a lot of that was because basically everyone, I mean, they did have an airtight monopoly on the enterprise space. And so everybody learned to use computers by using Microsoft at work. And that's a huge advantage as you're trying to get a foothold in the consumer space. OpenAI, their story is going to be more complicated than that in terms of enterprise adoption, because I'm sure there are going to be a lot of different tools. That are used at enterprises over the next couple of years here. And Anthropic does have like a real share of that market. How big of a share is anyone's guess? Because these are private companies.

• 17:38Ben Thompson?

  Yeah, it is. It was guess. I got a lot of pushback when I shared like I talked about before that ramp data as far as Anthropic. There's a story in the information this week too. That Anthropic is basically when they're talking about their skyrocketing annual recurring revenue numbers. That's actually like the total that people are paying. Like it's kind of like with e-commerce, like what do you calculate? Like there's, there's a, oh, what's the word? Gross merchandise volume, I think, GMV. Which is like how much you pay for all your items? Do you calculate that as your revenue? Or do you calculate like the actual, like, do you subtract away the cost of the item itself? Right in Amazon, actually, one of the challenges with Amazon's business is traditional. Amazon is in a wholesale model. It's like a retailer.

• 18:21Ben Thompson?

  They actually buy the items and then they sell the items. And so for that business, Amazon's revenue is the whole item. And they have a very large cost of goods sold because they had actually had to buy the item from whoever sort of made it. Whereas the third party business, Amazon's revenue is much smaller because they're not including the cost of the item in their calculation. Because it's a third party merchant that's selling it.

• 18:46Andrew Sharp?

  Right.

• 18:46Ben Thompson?

  All they're doing is sort of their skim on top as far as their percentage of fees and their, you know, how much.

• 18:51Andrew Sharp?

  But they're not assuming any of the risk in that scenario either, right?

• 18:54Ben Thompson?

  Right, but what, no, exactly. But as far as like an understanding of the company, what you kind of want to know is gross merchandise volume, which is like the total value of everything they're selling. But that's a very different number than like what your actual meaningful revenue is that's actually coming into your company. And so anyhow, this report of the information is that Anthropic's numbers are basically the GMV version. It's like everything, whereas OpenAI's numbers is like the percentage on top of what's going to the clouds. Who knows? To your point, not them not being public companies is frustrating, but they're.

• 19:26Andrew Sharp?

  But they're different methodologies, like they're stated different methodologies.

• 19:31Ben Thompson?

  But trajectories are are real. I don't think anyone denies that the anthropic trajectory is more vertical at this point than maybe the OpenAI one, even if it's possible the OpenAI lead is larger than you might think.

• 19:43Andrew Sharp?

  Yes, well, and both of them may not be private companies for much longer. So stay tuned. We'll see whether they go public in the next couple of quarters here.

• 19:52Ben Thompson?

  I mean, it is actually the the public company concept working as it should. It just had to get as large as these companies are. They need money.

• 20:00Andrew Sharp?

  Yeah, exactly. Richard said, I have a take for your review. All right, and that is the end of the free preview. If you'd like to hear more from Ben and I, there are links to subscribe in the show notes, or you can also go to sharp tech.fm. Either option will get you access to a personalized feed that has all the shows we do every week, plus lots more great content from Certechery and the Certechery Plus bundle. Check it out. And if you've got feedback, please email us at email at sharp tech.fm.