Tech giants like Google and Microsoft and Israeli tech leaders like Wix and Fiverr see AI as an opportunity. It is a technology that has been at the center of their endeavors for years but recent developments in the field, most notably by OpenAI, represent a threat to many tech companies.
Since OpenAI launched DALL-E last summer, which generates digital images, and even more so in recent weeks after the hype surrounding its AI chat ChatGPT, it seems that the industry is in the midst of an earthquake. The promises that have been heard in the field for several decades are ready for use and being extensively distributed to private users. At the click of a button, anyone can get information or structured design, at a high level, on any subject. In a few years, the industry promises, we will be listening to musical compositions, playing video games, building websites and maybe even entire companies through one written command and within minutes.
Microsoft has understood the scale of the opportunity. After a series of reports from abroad, last week the tech giant confirmed a multiyear multibillion dollar investment in OpenAI, extending its partnership with the ChatGPT developer, whose expenditure is four times its revenue. The investment will reportedly total $10 billion, which would enable Microsoft to integrate the smart technology into its products. Such an investment gives OpenAI a valuation of $29 billion, and Microsoft will earn 75% of its profits until its investment is returned, and after that it will hold 49% of its shares. In 2019, Microsoft invested $1 billion in OpenAI.
Google, on the other hand, has adopted a different strategy. More than a decade ago, the tech giant already hired thousands of AI experts from academia, and according to expectations this will lead to the launch of a rival technology, which some believe will be even more advanced than the next generation of ChatGPT. But its challenge is mainly regarding investors and shareholders. The intelligence created could disrupt the interface presenting its ads - instead of a page with 10 search results and paid links, there would be a paragraph or more of structured text.
In addition, the new technology allows AI to run on every computer - a decentralized model that challenges the nature of Google's centralized calculations, where everything is conducted in closed and remote server farms.
Social networks have a problem as well as Google
The new developments also pose an existential threat to social networks, such as Twitter, Instagram and Tiktok. Companies and intelligence agencies may use AI chat and the like in order to spread false information or echo content as they wish through a network of tweets, shares, reactions and likes by setting up smart bots that write as humans at inhuman rates for a range of profiles.
Beyond content flooding, this is also a financial threat to Twitter, Facebook and other social networks. Flooding the network with more and more automated content can disable the servers, or at the very least cause malfunctions.
Genuine threat posed to image design market
AI-based image generation, like those of Midjourney and Stable Diffusion may also significantly harm companies engaged in designing and editing images. Adobe, for example, might find itself struggling to keep customers and users who leave for the free engines that produce basic collages and change lighting for an image artificially.
Business users seek quality results that already today can produce quality advertisements generated by Israeli customized visual content at scale company Bria, or use different tools according to the products and their brand language to create advertising ads using another Israeli company Astria, which allows users to produce a series of high quality fictional images based on the input of existing product images or presenters, after a brief selection process.
Israeli company Lightricks, which is mainly known for its selfie editing app Facetune, has been compelled to rethink its way forward following this technological earthquake. Lightricks CEO Zeev Farbman told "Globes," "We are in the midst of a revolution. In every board of directors or management meeting we talk about AI - there is a paradigm shift here, even at the level at which our cloud resources are used."
Maybe due to the fact that its managers came from the field of image processing in academia, Lightricks's entrepreneurs were exposed to AI even before the hype. Based on Stable Diffusion's open source code Lightricks is developing its model to perform several effects, such as options to alter hairstyles virtually after a photo has been taken, or changing the color and texture of clothing. More recently, the company has even begun advertising its Photoleap design software, as a kind of self-generating AI engine for desktop computers that offers similar capabilities to those of Midjourney and Stable Diffusion.
Farbman says, "It's a wakeup call for the industry. Everyone understands that they must integrate the closed box that they have supposedly produced or developed and seamlessly combine it with advanced AI tools. If they don't do this, and if they don't change deeply, it will be very easy to disrupt what they are doing."
Wix has reasons for concern and also for security
Israeli company Wix.com Ltd. (Nasdaq: WIX), which allows small and medium-sized businesses to set up their own websites for selling their products has for a long time been thinking how it can digest the new technology. The company is ostensibly under threat. Startups are currently raising millions of dollars for services that allow sophisticated websites to be set up at the press of a button. Durable, for example, from San Francisco recently raised $6.5 million for "services to set up websites within 30 seconds." Its AI engine locates relevant keywords, writes paragraphs, locates free images to use and integrates forms for registering potential customers. Israeli company SPIRITT, which allows companies to set up an app within a week, is also apparently taking a bite out of Wix's market, although it mainly challenges software houses.
But DisruptiveAI venture capital fund general partner Tal Barnoach, who has recently made several investments in AI, stresses the unique power of Wix. He says that the Israeli company has successfully positioned itself as ca brand, in contrast to many of its rivals. "The number of brands in the field is very limited and Wix is one of them. A brand has major importance in any decision by a business in where to set up their website. They seek a safe brand that will guarantee the existence and stability of the site."
Despite that Wix could be harmed by a long list of complementary services that can to a certain extent be replaced by a machine such as the field of design and marketing content.
Wix has tried to preempt any damage by launching the DreamUP image, through its DeviantArt online art gallery subsidiary, which is used by a large community of artists. But the launch ran into an unexpected obstacle: several artists attached Wix to a class-action lawsuit in the US, which was also aimed at other image generators, alleging that it allowed their works to train the generator in order to push them out of the market. The lawsuit has not yet been approved by court, and Wix can argue in its defense that the launch of the tool opened up the possibility for artists to block the use of their protected works in image generators.
The immediate winners and the rise of freelancers
The creative AI market is still in its infancy but according to DisruptiveAI general partner Yorai Fainmesser, no few startups of which dozens are Israeli have already succeeded in establishing themselves in the industry and some of them are profitable. Most of them are based on high-level creative AI to improve processes for businesses and organizations. After an extensive period in which these companies wandered in the "desert" due to the skepticism in the market for such technologies, the hype of the last few months has brought many customers to look for more and more AI solutions, which has led to the rapid growth of those companies.
Another market that may fundamentally change following these latest developments, and in particular those in the field of text and image production, is that of consultants, contractors and freelancers. The new technologies may bite into the market of companies like Fiverr (NYSE: FVRR), which mediates between freelancers around the world. First, the time and cost savings brought by the new technologies may make the services offered on Fiverr's online market cheaper. Secondly, potential customers may give up using a service provider through Fiverr and produce content and images themselves using AI generators.
Fiverr readied for this revolution earlier this year by launching several tools that will help service providers enhance their work, such as a logo generator and graphic design, as well as a system for narrators that reads entire texts aloud. This week, Fiverr became the first freelancer platform to open a service providers category in AI. Customers can find content editors, illustrators and designers there, as well as developers who use AI tools.
Fiverr CEO Micha Kaufman told "Globes," "Fiverr does not need to hand out tools like Midjourney or DALL-E to users or freelancers. But a layer of artists and experts for these tools has formed here, talents who know how to use them much better than me and you. We will help them reach a market that is currently thirsty for such service providers."
The developments already biting into the gaming industry
New trends in the gaming and 3D worlds also threaten the existence of the gaming giants, including Playtika (Nasdaq: PLTK), Moon Active, and King.com. The success of such companies depends more on a particular game going viral rather than engineering achievements. Also behind some of the innovations in this field is OpenAI, which developed the Point-E engine that is capable of creating 3D objects with a single written command.
US startup Latitude raised $3 million for an engine that allows users to create relatively simple adventure games based on ChatGPT and image generators. Players choose at each stage one of the options presented textually to them, and then the reality is brought to life by the graphics generator. Scenario raised $6 million to make it easier for game developers and to shorten design and animation processes that until now were done manually, by improving machine training processes.
The big Israeli gaming companies are in no rush to join the wave and do not yet produce games using creative AI, but are exploring its internal use - such as through the "CoPilot" software development product of GitHub and Microsoft, or in the field of marketing in the personalized accessibility of creative for different types of users. In the gaming industry, there is currently a lot of skepticism regarding the ability of creative AI to replace the existing industry. It is not sensitive to complex issues such as content adapted to different ages, or issues of race and nationality. At the same time, the gaming companies claim that the animation and image generators will definitely serve the existing industry and help improve its products.
Playtika VP AI Assaf Asbag was familiar with the technology and its capabilities long before it became well known due to the engines that were opened to the public last summer. "Creative AI is not a new phenomenon. Admittedly, we gave it a name recently, but it's an amazing process that has been going on here for many years." Asbag does not fear new wave of creative engines: "It's an exciting time, and I'm curious to be a part of it. There is no doubt that AI will bring about a revolutionary change in the world of entertainment and games, as in many other fields such as autonomous vehicles, drug discovery, robotics and space exploration."
Published by Globes, Israel business news - en.globes.co.il - on January 31, 2023.
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