MBI Daily Dose (July 03, 2025)
Companies or topics mentioned in today's Daily Dose: Digital advertising, semiconductor cycle, Kevin Kelly
Eric Seufert from Mobile Dev Memo published quite an insightful podcast making a compelling case that the golden age of digital advertising is likely ahead of us. A key excerpt from the podcast:
"...Generative AI will similarly create competitive friction for the discovery of all forms of content. If every advertiser is operating at maximum creative efficiency through the use of shared platform-centric creative production tools, and creative iteration takes place at the blinding speed unlocked by generative AI, then the only recourse an advertiser will have to improve performance in auctions is through increased bids.
But this dynamic might actually justify lower ad load more broadly. As ads become more effective at generating conversions, it makes sense that platforms would show fewer of them per session given an upper bound on consumers’ discretionary income and appetite for various goods. People can only buy so many things.
Advertising outcomes in a product session or across product sessions within a given time period do not follow a Bernoulli process. The ad exposures are not independent and the probability of conversion is non-stationary. If a user converts early in the session, subsequent ads are likely to be less effective. So if the effectiveness of early ads increases due to AI-enabled targeting or creative platforms, they may optimize by reducing total ad volume."
MBI Note: If conversion keeps improving, and ad load, in fact, goes down, this can lead to a win-win-win scenario for all stakeholders involved: improved conversion may increase ROAS for the advertiser (although as Seufert mentions “satisfier’s regret” may always be there), and lower ad loads can improve user experience-both of which can eventually lead to longer growth runway for the advertising platform itself since it can create not only more advertisers over time but also unlock ad budgets further.
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Byrne Hobart makes a convincing case why the current GPU mania is destined to experience some sort of cyclicality at some point:
"The only way for the GPU industry never to have a down cycle, even if the face of growth, is some combination of:
Every single person who can make big capital spending decisions chronically underestimates long-term AI demand. (If even one of them doesn't, that person is a larger share of the next round of capital allocation decisions.)
It's a straight shot from here to the Singularity.
In any other case, there will still be an air pocket or two; even if spending rises 30% annualized, there will be times when it's closer to 25% and the capex for that period supports something more like 35% growth.
And a good working explanation for why cyclicality won't go away is that Mag7 executive who had read the above description of cyclical dynamics in AI capex a few years ago, taken it to heart, and decided to spend less than planned would have ended up regretting that choice.
Many cyclical industries were born as growth industries. Airlines had great returns in the 1960s, automakers did similarly well in the 1920s (in the aggregate, with many failures made up for by a few huge success stories), and in the chip industry the slowest growth from 1950-60 was just over 40%, in 1960. (The next year, the industry shrank year-over-year for the first time, and settled into a cycle thereafter)"
I enjoyed Brie Wolfson's piece on Kevin Kelly. Loved the title of the piece- "Flounder Mode":
"I asked him the difference between “following your interests” and being scatterbrained or having shiny object syndrome, like I sometimes worry I do. “The people who become legendary in their interests never feel they have arrived,” he said. When he talked about the power of passion and obsession in that process, I asked him if passion is enough. “Enough for what?” he asked, somewhat rhetorically. He had an impression of what I meant. “I think one of the least interesting reasons to be interested in something is money,”
Current Portfolio:
Please note that these are NOT my recommendation to buy/sell these securities, but just disclosure from my end so that you can assess potential biases that I may have because of my own personal portfolio holdings. Always consider my write-up my personal investing journal and never forget my objectives, risk tolerance, and constraints may have no resemblance to yours.