It was a structural issue affecting media and technology that caused markets to panic, but this time it’s artificial intelligence.
This was recently seen after education services provider Chegg’s stock nearly halved after admitting in its first-quarter earnings that students had started using AI rather than Chegg’s own products to meet their needs. strongly highlighted.
Chegg argued how AI could ultimately be beneficial to its business, but the market was clearly not convinced and it was seen as endangered by others. companies (such as education company Pearson and specialty publisher Relx) had their prices cut.
Meanwhile, the investment banking industry has been keen to find business opportunities, hastily releasing its own take on which sectors of media and technology will be most impacted by the rise of AI.
Of course, this was nothing new. Back in February, Alphabet (a.k.a. Google) lost more than $100 billion in market capitalization in two days after its AI presentation contained some fundamental errors (in China, a similar (Baidu, which had problems, suffered a similar drop.)
The market has sparked a frenzy as Microsoft’s Bing product, with less than 10% global market share outside of China, threatens Google’s natural dominance through its use of AI.
You can see from the way I use the language that I’m not entirely convinced that AI has the potential to disrupt many business models. More on that later.
But I have no doubt that the conversation will soon shift to the impact of AI on the agency sector. In fact, some analysts are already speculating that government agencies will be one of the most affected subsectors.
How should agency groups respond?
The first thing to do is don’t panic. It is argued that her Chegg, which provides students with tips on how to write essays, answer exam questions, and more, is a unique example given her model of business (and what students use it for).
But instead of taking a deep breath, some companies have rushed to hold conference calls with analysts and investors to tell the market that, while not always convincingly, AI will ultimately be beneficial. rice field.
However, you don’t have to do this. Markets are capricious. Management should keep in mind that the stock price response reflects, among other things, investors’ lack of knowledge about AI and a strong fear factor.
Alphabet’s stock is profitable in that respect. The company recouped all the losses from the demo debacle as investor attention shifted to more mundane matters such as corporate performance.
This is especially important because if a company reacts prematurely and doesn’t think strategically, they may not only make hasty promises, but make serious strategic mistakes.
One prominent example of this is streaming. The rise of Netflix and signs of pressure on the traditional US pay-TV model have persuaded incumbent media conglomerates to jump into his SVOD model.
As a result, not only have each of these companies posted staggeringly high losses (Comcast’s Peacock Streaming service, for example, is expected to lose $3 billion in 2023), but they’ve also invested in long-term success. Not only is there growing skepticism about the house, but they are abandoning a business model that structurally worked so well for them that they could probably have reformed it without the pain of pushing D2C all over. bottom.
Nonetheless, AI can pose risks to government agencies, and should we act now?
Most of the debate seems to be about whether the agency model is good (less staff) or bad (clients do the work themselves), as creative work is created by AI.
So there is an argument that the planner would not have to optimize the targeting of the customer and the AI would be able to select the appropriate media “efficiently”.
It can be argued that most of the industry is affected. Will that happen?
It’s going to take an article on its own (simply put, it probably won’t), but it’s very rare that technology develops in the way people expect it to at that point in time, and it probably will here as well. It’s worth pointing out that it would.
So managers don’t need to rush now and risk making mistakes that will haunt them for years to come. For now, the best course of action is to ignore the market reaction and accept Napoleon’s words: “Take time to think, but when the time comes to act, stop thinking and act.”
Now is the time to think, not act. When that happens, the companies that have prepared properly will be in the best position.
As always, this is not investment advice.
Ian Whittaker is the Founder and Managing Director of Liberty Sky Advisors. he writes a column regularly motion About the advertising environment from an economic point of view. It is not investment advice.
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