Without shifting perception, today’s AI companies might suffer the same fate as companies of the dot-com bubble era.
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Many a talking head has gone on TV or published an article about how similar the dot-com bubble is to the current state of things with AI. This makes sense on a number of levels. After all, these are both technology-related items, and since the dot-com bubble left such a spectacular mark on the economy and AI is poised to do the same thing, it’s natural that they would invite comparisons.
However, there is a big difference between those pundits and me. While they may have been alive during the dot-com bubble and seen its effects, I was right in the thick of it. And, if it weren’t for some outside-the-box ideas, my company would have been on the trash pile, too.
Let’s see if there are any lessons from what happened to me that could apply today.
A Little Background
Way back in 1995, I started a company that would eventually become 24/7 Media. We had investors pouring millions of dollars into the organization, and at one point, we were valued at close to $2 billion. Then, at another, just nine cents per share. Needless to say, we went through some things.
Once the bubble burst, we had to figure out a way to keep the business afloat. We made a lot of hard decisions, and in the end, we not only came out on the other side better but were eventually acquired by WPP for $649 million. It wasn’t easy by any means, and it was only possible thanks to the hard work and dedication of our team.
So, what caused the dot-com bubble? Back then, every company saw the internet as an untapped resource with billions of dollars in potential. Investors came on board, and instead of demanding results, they were happy to give us more and more money as long as we got bigger. The thesis seemed to be that once we reached a certain level, we would be too big to fail. Then we could worry about making money.
Any of this sound familiar?
How AI Factors In
AI companies, like the dot-com companies in the late 1990s, are today’s hot ticket. They’re making investors millions, and the technology is considered to be so important that it could not only change the way we interact with computers, but even who is employed and who isn’t. However, some AI startups have some of the same problems as we did at 24/7, including that they’re not concerned about making money.
While they do have some income, all of the independent AI companies that didn’t already have an existing business (see Google and Meta, for example) not only have very little coming in but also owe billions. Servers are expensive. Compute power is pricey. There are no quick shortcuts to a world-changing technology, and that much is clear. But will they ever make money?
And that’s just one problem.
What the Market Demands
While the public at large saw the power of the internet back before the dot-com bubble burst, not everyone is as keen about AI.
A recent commencement speaker for the University of Central Florida was booed for claiming that AI was the next industrial revolution. Some view AI as a method for big companies to shed employees, which recent firings seem to indicate may be the case. How do you convince people to embrace a technology when they see it as a threat to their livelihood?
And yet, while I may sound pessimistic about AI, I find myself using it every day. Just recently, I used it to do some research about a new pet, and I frequently ask Gemini or ChatGPT for information about everything from current events to future plans. These models can do amazing things and will continue to do so, assuming the companies running them learn from those of us experiencing déjà vu.
First, the conversation should change about profit. They absolutely need to find a path to profitability and fast. This isn’t a new idea by any means, but the more data centers that are being built across the country, the more the population turns against AI. If they can cut costs and make a legitimate profit, then they can get through when their competition can’t.
Second, AI leaders need to stop talking about AGI (Artificial General Intelligence) and how they’re creating a digital god. This doesn’t help them seem relatable to the average Joe and creates a scenario where the public questions whether or not they’re right in the head.
And finally, do some education. Allay people’s fears about AI and how we’re not one click away from Armageddon. We all have seen too many movies designed to scare folks, and telling them that they’re going to lose their jobs because Skynet has become sentient doesn’t help anyone. Teach them about the good things that AI can do. Show them the benefits of this ground-breaking technology and keep them engaged.
See, the dot-com bubble existed because the companies involved were focused on the wrong things. Their idea was solid; people did want to buy their dog food online, but Pets.com wasn’t implementing the product in a compelling way. Today, Chewy.com does.
AI does have a compelling pitch. But today, the way it’s being implemented seems to be pushing consumers and the general public away. It’s not going away, just like the internet didn’t go away. But what companies survive depends on how they change perspectives.
By doing those things, you will help usher in this new era in a positive way and get your company through any bubble pop that could occur. Otherwise, you risk becoming another casualty of a good idea.