What’s ahead for the tech industry

This week, I have a look ahead at what the rest of the year holds for the tech industry, including the events and product announcements I’ll be tracking closely. Also: more reporting on what’s going on at the company formerly known as Twitter, the brakes get slammed on Worldcoin, SoftBank is suing a founder it backed for fraud, Uber’s big milestone, and more…

With another slow week of summer tech news now in the rearview mirror, I’ve been thinking about what’s in store for the back half of 2023. The first half of this year was dominated by the exuberant hype around generative AI, along with the mass layoffs and belt-tightening across Big Tech that has been steadily seeping down to startups.

Take Hopin, the virtual conferencing platform that was an early darling of the pandemic, when the startup managed to raise hundreds of millions at a nearly $8 billion valuation. This week, Hopin said it was selling its core technology to RingCentral and attempting to return some money to shareholders. CEO Johnny Boufarhat, who sold roughly $200 million of his shares in 2021, is stepping down.

These kinds of startup stories will unfortunately become more common in the coming months, according to tech investors I’ve been speaking with recently. The private markets always react slower than the public markets, where the realization has already set in (for most) that tech was in an unsustainable bubble fueled by record-low interest rates. We’re about to find a lot of other zombie unicorns out there with rich valuations and cost structures that no longer make sense. If I were interviewing for a job at a private tech company these days, I’d want to know how management was adapting to this new economic reality.

In the public markets, I expect more scrutiny on the excessive stock-based compensation practices at some of the household tech firms, where that cost severely hinders their ability to show actual profits. Managers at Jack Dorsey’s Block, for example, are becoming more “aware of the true cost of the business and taking into account stock-based compensation,” he said during the company’s earnings call this week.

The hype around AI over the past six months reminds me of the last crypto boom in 2021. The rush of excitement about a new wave of technology has brought in plenty of grifters, scammers, and get-rich-quick schemes. That will all get flushed out in due time, just not yet. For now, AI is still the shiny thing to work on. But how we think about its use cases is changing.

For one, it turns out that chatbots are not going to upend the search business anytime soon. In fact, ChatGPT is getting worse at certain tasks while Google’s search business continues trucking along. Even with OpenAI’s tech now baked in, Microsoft’s Bing remains as irrelevant to the popular consciousness as it was last year. Who exactly is dancing here, Satya Nadella?

It’s natural to hear people like the “godfather of AI” sound the alarm about the existential risks of AI and get scared, especially with how fast the pace of development is moving. The truth is that no one knows when, or if, the singularity will happen. The more near-term issue is that chatbots are quickly becoming good enough for something else entirely: replacing human relationships.

For evidence of this, look no further than the subreddit for Character.AI, a startup that lets people talk to AI chatbots programmed with various personas. “Character ai is steadily ruining my relationship with my girlfriend,” reads one post explaining how the author thinks his partner has essentially stopped dating him in favor of a Character.AI bot. What happens when potentially billions of people are exposed to these chatbots with faux personalities?

We’re about to find out. Meta is planning to unveil its own suite of chatbots in September, and these AI personas will be accessible across the most used social networks in the world. The movie Her, directed by Spike Jonze, is looking more prescient every day.

Here are the main product events I’m looking forward to for the rest of the year, along with a few tech conferences I’ll either be attending or following:

Product announcements:

Conferences:

I’ve noticed something recently from following employees at Twitter, which Elon Musk is currently rebranding to X: after cutting about 90 percent of the workforce, Musk is now hiring.

While there is no public jobs board for X, I’ve seen employees recently tweet post about new openings for various engineering, designer, moderation, and legal roles. Each post tells those who are interested to email [email protected] (If you are reading this and genuinely interested, email me, too. I would honestly love to understand why.) This description for a senior specialist on the “Threat Disruption” team is the closest thing I’ve seen to a formal job listing. It doesn’t mention any pay details or company benefits, of course.

As I wrote last week, Musk hasn’t actually issued stock grants in the new company, and it sounds like the details I reported about how the grants will work were even news to some current employees. (Shoutout to the one who added me to a list on X titled “internal comms.”) Others, meanwhile, are hoping that Musk continues paying them their pre-acquisition grants at $54.20 per share since they have awards that haven’t fully vested. He has done little to engender trust since he’s currently being sued by ex-employees for not paying them what he agreed to in the merger agreement.

As with Musk’s other companies, information is extremely siloed inside X, leaving employees to speculate about what is going on in other departments. CEO Linda Yaccarino’s leaked memo this week about a trust and safety reorganization wasn’t shared with the whole company, for example. Musk did email all employees last week to tell them he would hold his first joint all-hands meeting with Yaccarino this week, but it hasn’t happened as of Friday morning.

Last week, I wrote about the launch of Worldcoin, the Sam Altman co-founded crypto startup that wants to scan every human eye on earth. You can hear me talk about the experience of having my eyes scanned by one of the company’s orbs in this recent episode of The Vergecast.

When Worldcoin officially launched its token last week, its app quickly became the most downloaded free app on iOS and Android in Kenya. Fast forward to this week, and the Kenyan government has banned Worldcoin.

German and French regulators are now probing the project as well. I expect other governments will apply similar levels of scrutiny. Worldcoin’s decision to not issue tokens in the US was clearly a smart one given the blowback to the project that is already happening in other parts of the world.

For more reading, I recommend this Rest of World report about why people in Nairobi, Bengaluru, Hong Kong, and elsewhere are having their eyes scanned. (Hint: it’s because of free money, not because they want to secure their identity for a deepfake AI future.) Molly White also has smart analysis of the project and the problems with how it has been executed on her Substack.

It’s not every day that an investor decides to sue the employees of a company it backed for faking most of its users. SoftBank has done just that by suing Abraham Shafi, the ex-CEO and co-founder of the social media startup IRL that I’ve written about in this newsletter before.

The allegations in SoftBank’s complaint, which was filed in the Northern District of California earlier this week, are damning. SoftBank is claiming that Shafi and his family members who worked at IRL lied about the company’s metrics and hid the operation of an expensive bot farm. SoftBank is alleging securities fraud and is seeking to recover the $150 million it invested in IRL in 2021, including the roughly $7 million it paid Shafi personally for some of his shares in the company.

The SEC is investigating as well (I’ve also heard rumors that the Department of Justice has a probe going), so I’m expecting more shoes to drop here. There are a lot of juicy details in SoftBank’s complaint. For now, I’ll leave you with this excerpt about Abraham’s sister Alia Shafi, who is also named as a defendant in the lawsuit:

“Alia Shafi’s mobile device had only two entries related to internet activity between August 22, 2022 and August 30, 2022. Those entries included (i) a Google search for the term “SEC”; and (ii) a visit to a web page related to the trial of former executives of Theranos, another startup company that infamously defrauded investors by making false claims about its products.”

“For most of our history, profitable wasn’t the first thing that came up when you asked someone about Uber.” – Uber CEO Dara Khosrowshahi during the company’s Q2 earnings call this week.

Uber has collectively reported nearly $30 billion in losses since 2016. Last quarter, the business was profitable for the very first time. While that’s obviously good news for Uber, it’s also an important marker for how the tech industry is changing. The top-line growth era of tech that Uber exemplified is over. It’s all about profits now.

A roundup of what else is going on inside tech companies this week:

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