TMW #045 | Algorithm-as-a-Service, the ubiquity of e-commerce and the time we spend online

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👋 Hello and welcome to new subscribers from The United Kingdom, Australia, The United States, Germany, and Singapore. Algorithms are the new tech products, where the few get to build for the many, but what does this mean as the world’s largest AI company announces an out-of-the-box AI you can purchase and use with your company? I tackle algorithms-as-a-service today in TMW #045, along with examining the ubiquity of shopping, how much time we spend online, and 15+ links of everything that mattered this week including an open letter about targeted advertising in people’s dreams. 💭

👨‍💻 Algorithm-as-a-Service. I don’t think I’ve seen the concept of algorithm-as-a-service anywhere on the web, so I’m claiming it. My only downside is the unfortunate acronym (AaaS). Despite the silly-looking acronym, the concept of algorithm-as-a-service is that many of the largest tech companies are doing what they do best, taking their existing infrastructure, packaging it up, and selling it to other companies to use, and nowhere does this make the most sense than algorithms. From Amazon (SageMaker) to Google (Vertex AI), and most cloud suites like Salesforce (Einstein), Adobe (Sensei), and Tealium (Predict) the commoditization of algorithm-based capabilities are becoming commonplace. This week a new entrant has entered this game, ByteDance. The Chinese company behind the wildly successful TikTok has announced the Volcano Engine. It’s the recommendations engine that flipped the script on almost every other major social algorithm by weighting music preferences, sounds into a model that optimizes for new content. The Volcano Engine is one of the major factors of Tiktok’s success and a major breakthrough in algorithmic content suggestions. What’s interesting is that although Tiktok is a social media app for consumers, ByteDance is classified as an artificial intelligence company, and in a way, TikTok was the first real global beta of what Bytedance has been working on. And now they’ve validated that their algorithms can power huge commercial upside (Tiktok has been the #1 app in the Apple App store for almost 18 months running), this technology is now being packaged up and sold to other companies for things like product predictions, content recommendations, and gamification. When you look at the largest AI companies in the world, nothing even comes close to Bytedance on valuations. Research from CB Insights looks at industry categories and the number of companies that reach “unicorn status” which means that they’ve reached a $1 Billion valuation. AI is now the fourth-largest category of company unicorns, of which ByteDance has a staggering $140 billion valuation, about 11 times larger than the next largest AI company, and about half of all valuations for this category. If anyone is in a position to package and sell their algorithms, it’s ByteDance. And the other top three industries - software, e-commerce, and fintech will eventually become reliant on the capabilities AI companies will create and sell. And that’s a problem.

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