AI: Meta's Amazon AWS size opportunity. RTZ #456

...Zuckerberg-led Meta shapes more Business with Open Source AI lead

I’ve been suggesting for a while now that Meta, led by founder/CEO Mark Zuckerberg, has a unique opportunity in this AI Tech Wave, with its open source Llama LLM AI models, and Pytorch family of AI software infrastructure. The company has established its leadership amongst the ‘hyperscaler’ LLM AI foundation players like OpenAI/Microsoft, Google, Anthropic and others. In my view, Meta has many possible AI futures to be shaped.

Meta’s AI approach is distinctive of course with its open source commitments vs ‘closed’ approach by its rivals, AND Zuckerberg’s accelerated commitment to the tens of billions in annual commitments to Scale the AI models from the current Llama 3.1 to 4 and beyond.

And Meta’s been aggressive in leveraging its unique status of NOT having a direct Enterprise focused AI Cloud business like its peers Amazon AWS, Microsoft Azure, Google Cloud, Oracle Cloud and others. That is what has allowed the company to throw ‘Sand in the Gears’ of its competitors, while partnering with them in recent months.

All while leveraging its industry leading LLM AI models to deploy Meta AI across its multi-billion global user platforms of Instagram, Facebook, WhatsApp and others. And as I described yesterday, use its AI Tools to empower its Advertisers to create ad strategies that in turn generate billions in AI powered revenues for Meta’s platforms.

Of course, Meta has partnered with ALL the afore-mentioned AI Cloud data center vendors to distribute its Llama 3.1 LLM AI models in all sizes. To be packaged and sold to businesses large and small, for use with their own Data in their customized large and small AI applications and services.

But there may be a bigger opportunity at hand. As The Information highlights in “Meta’s Search for AI Clout Takes It Into New Terrain”:

“Meta Platforms knows how to get brands like Away and Temu to buy advertisements on Facebook and Instagram. If the company’s CEO, Mark Zuckerberg, is to succeed at his goal of becoming a leader in artificial intelligence, though, Meta’s going to have to quickly learn a new skill: how to pitch software to big businesses.”

“Zuckerberg wants to turn Meta’s large language model, Llama 3, into the industry standard for AI. Initially he has relied mostly on other tech companies to handle selling the software to customers, with mixed results so far.”

“Llama has struggled to gain traction on Amazon Web Services, the No. 1 cloud provider, which offers a variety of LLMs to businesses. Anthropic’s Claude is the most popular model on the platform, according to a person with knowledge of the situation. Salespeople at Microsoft, meanwhile, typically pitch Llama only to customers with existing data expertise, such as companies with their own in-house engineers and data scientists, according to a Microsoft employee.”

“Those factors could put pressure on Meta to figure out how to build its own enterprise sales and marketing team to pitch its products directly to business, something it has shown little stomach for in the past. For a time it pitched its Workplace communications platform to businesses through a dedicated sales team, but Meta didn’t consider Workplace a business priority and this year said it would shut the platform down.”

The whole piece is worth reading to understand how Meta is working with the major Cloud providers to scale its AI assets for the business and enterprise markets. In my view it’s just the beginning of the beginning. Especially as this AI Tech Wave has barely gotten started.

Last year, I recounted how Amazon under founder/CEO Jeff Bezos faced a similar moment and opportunity in the early 2000s with Amazon AWS. It was initially designed as an innovative ‘API Software’ factory for Amazon’s burgeoning ecommerce businesses, mandated by Bezos. But Bezos quickly figured out that it could also be a platform for businesses directly, and under current CEO Andy Jassy, Amazon AWS managed to execute to that opportunity. Today it’s the largest Cloud services provider ahead of Microsoft, Google and others, and the cash flow and profit fountain for Amazon proper.

Amazon AWS uniquely is one of the four distinct Amazon businesses amongst many others, that makes Amazon what it is today. They all executed on the now famous ‘Amazon Flywheel’, as I outlined last year.

These businesses besides Amazon AWS are Amazon’s First AND Third-Party ecommerce platforms, and Amazon Prime. These four businesses make Amazon unique amongst the big tech companies and peers. They’re highlighted in the chart above.

Google and Meta, who owe their multi-trillion dollar market cap global prominence, to timely acquisitions of YouTube in Google’s case, and Instagram/WhatsApp in Facebook/Meta’s case. Building large scale ORGANIC businesses from scratch is HARD, and relatively not the norm for most big tech companies. The one other company that has managed that feat of course, is Apple, with the iPod, the iPhone, iPad, AirPod ‘Wearables’ amongst others.

The current trends in commercializing open source AI software and services are promising in this AI Tech Wave. It’s a rising conviction for me, based on decades of professional pattern recognition in these tech waves.

I’ve been involved with execution of win/win opportunities around commercializing open-source software since my Goldman Sachs days in the 1990s. We took Red Hat public in 1999, one of the first open source software companies to build commercial scale software and services for businesses. It was eventually bought by IBM in 2019 for $34 billion, in the heyday of the enterprise cloud era.

Meta with its current AI assets and execution disposition, may be in the right place at the right time. Much like Amazon was with AWS in 2004. The opportunity to scale its LLM AI software and compute infrastructure assets into an entirely new business is palpably similar.

The closest model is of course Amazon AWS as I outlined above. And culturally distinct of course from Meta’s current businesses focused on the consumers and advertisers.

But there are many possible ways to leverage their AI assets on the enterprise side. Possibilities included extended partnerships, Joint Ventures, and even ‘Spin-off’ opportunities. And it helps that the company is not afraid to try new things and change their minds if they don’t work out.

So Mark Zuckerberg, is uniquely empowered to make these opportunities happen.

He along with Nvidia founder/CEO Jensen Huang, are playing the long game in technology curves amongst the big tech companies. With the advantage of their companies being led by their original founders. Elon Musk with his flotilla of tech companies, is another example, with a myriad irons in the AI fire.

But for Meta, this AI Tech Wave is the palpable next opportunity to shape them into viably big, new directions. I’ll have a lot more to say on these opportunities. Stay tuned.

(NOTE: The discussions here are for information purposes only, and not meant as investment advice at any time. Thanks for joining us here)