Hello, cherished TechCrunch readers. We know your time is precious, so beginning next week, we’re going to make it a lot easier for you to read our best stuff.
For starters, we’re adding a morning newsletter, with the startup and venture and broader tech news we think you want to be tracking more closely. The newsletter — TechCrunch AM — is being authored by TC veteran Alex Wilhelm, who many of you already know and about whom we think pretty highly. Alex helps to keep work around TechCrunch fun and interesting; he’s going to bring that same energy (and occasional snark) to you every morning at 7 a.m. PT.
We’re also rebranding our afternoon newsletter to TechCrunch PM. Authored by another of our beloved colleagues, Christine Hall, this daily missive, which hits inboxes at 3 p.m. PT every day and was heretofore called Daily Crunch, will also continue to bring you the news you need to know, and we’ll tell you not just what we’re working on but also what our friendly rivals are producing. (Right now, for example, we’re reading about the rise of Zynfluencers; you might want to check it out if you have a Times subscription. It’s . . . pretty illuminating.)
Also, if you haven’t checked out StrictlyVC, you’re missing out. It’s the ultimate insider newsletter if you work in VC, want to work in VC, work with VCs, or want or do work for a VC-backed company. There is a reason Yahoo brought this one into the fold last fall. StrictlyVC hits inboxes closer to midnight PT, and it’s the perfect tech “nightcap.”
And there’s more! We’re making our weekly emails a little easier to read, both by condensing them to save you time and by making them easier for you to find what you want to read about. Think TechCrunch Space, TechCrunch Crypto, TechCrunch Mobility and TechCrunch Fintech. Sign up for it all right here.
Finally, if we have something really breaking or compelling, just check your inbox. Up to twice a day, we’re going to send you something that’s worth opening. 🎁
Hope you have a great weekend. Thank you as always for reading.
Image Credits: Jaap Arriens / NurPhoto (opens in a new window) / Getty Images
TechCrunch primarily covers the startup world, but we keep at least one eye on Big Tech at all times. And there’s perhaps no story more interesting in the world of technology giants than a changing of the guard: Microsoft has stolen the “most valuable” crown from Apple and things are getting interesting.
The changeover is not an idle one. Microsoft’s tie-up with OpenAI and its rapid deployment of AI tools into its various software products has earned it favor with investors, who anticipate that it’s going to manage to extract revenue, growth, and profits from all the AI-related work. The release of Copilot Pro is a good example of what Redmond is up to.
The Exchange explores startups, markets and money.
Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.
At the same time, Apple is seeing its most critical market, smartphones, shrink as it runs into legal challenges around the world. The smartphone market shrank 3.2% last year after declining by a massive 11.3% in 2022, according to International Data Corporation (IDC). The good news for Apple, however, is that the iPhone once again became the top-selling smartphone last year.
Still, you can’t build toward long-term growth by leading a shrinking market.
In contrast, Microsoft recently helped resolve a governance and leadership explosion at OpenAI, allowing Redmond to retain near-majority ownership of the for-profit arm of the AI company. That means Microsoft is intent on bringing more AI goodies to its users.
Meanwhile, the U.S. Supreme Court has declined to hear Apple’s appeal of the antitrust case brought by Epic Games, and in the EU, the company is reportedly preparing an App Store to suit local regulations. Both of these developments could affect the company’s ability to generate revenue from mobile commerce and its hardware and software.
Apple is very big
First, a little context. In its fourth quarter ending September 2023, Apple’s revenue fell 1% to $89.50 billion from a year earlier, and the company’s revenue also shrank in the first nine months of 2023 compared to 2022.
But all the same, Apple’s net income in its Q4 2023 alone amounted to a whopping $23 billion. That’s a simply bonkers amount of money. Nothing that we are discussing today risks the company’s scale or ability to make lots of money. But small cuts can add up. Apple’s shares are down more than 1% today; they’ve fallen 6% in the past month, and over the past 12 months, they have climbed 35%.
Is Apple losing ground?
Apple’s appeal of the ruling in the Epic case wasn’t only a question of principle; there are billions at stake here. The crux of the issue is its App Store, and whether Apple device owners can bypass it. Or: Whether app developers can tell redirect users to complete their payments outside the App Store, thus avoiding Apple’s cut, which can be as high as 30%.
Seeing its appeal dismissed means that Apple will have to live with the previous judge’s decision: That while Apple had not engaged in anticompetitive practices, it will have to let developers point customers to their own websites and take payments outside of the App Store.
Losing that cut is obviously a concern for Apple, and its persistence to keep it is proof of it. But it is probably even more worrying given that consumer spending may have slowed down on the App Store in 2023. Again, owning a huge slice of a shrinking cake isn’t typically what tech giants aim for. Even if the said dessert is worth $171 billion.
App economy recovered in 2023, with $171B in consumer spending, but downloads were flat
Today’s news only adds to Apple’s mounting list of worries regarding its App Store. Indeed, the EU’s Digital Markets Act (DMA) and its measures to curb Big Tech could force Apple to allow sideloading — that is, third-party app stores, albeit on the continent only. And to make matters worse, we learned last year that Microsoft is planning to build its own mobile games store.
Yeah, but
Apple is hardly going to let Microsoft remain the biggest tech company in the world without a battle. The company’s upcoming Vision Pro headset and platform could become a lucrative venture, and there’s supposed to be an Apple car out there somewhere. Also, it’s no question Apple will have its own AI-powered tech in time.
In fewer words, Apple likely has lots on the way that should keep it in the game. But with nearly all of tech fighting to become the first to win the AI race while smartphone sales slow and court cases chip away at its legacy revenue streams, the iPhone maker has its work cut out for it.
Hello, cherished TechCrunch readers. We know your time is precious, so beginning next week, we’re going to make it a lot easier for you to read our best stuff.
For starters, we’re adding a morning newsletter, with the startup and venture and broader tech news we think you want to be tracking more closely. The newsletter — TechCrunch AM — is being authored by TC veteran Alex Wilhelm, who many of you already know and about whom we think pretty highly. Alex helps to keep work around TechCrunch fun and interesting; he’s going to bring that same energy (and occasional snark) to you every morning at 7 a.m. PT.
We’re also rebranding our afternoon newsletter to TechCrunch PM. Authored by another of our beloved colleagues, Christine Hall, this daily missive, which hits inboxes at 3 p.m. PT every day and was heretofore called Daily Crunch, will also continue to bring you the news you need to know, and we’ll tell you not just what we’re working on but also what our friendly rivals are producing. (Right now, for example, we’re reading about the rise of Zynfluencers; you might want to check it out if you have a Times subscription. It’s . . . pretty illuminating.)
Also, if you haven’t checked out StrictlyVC, you’re missing out. It’s the ultimate insider newsletter if you work in VC, want to work in VC, work with VCs, or want or do work for a VC-backed company. There is a reason Yahoo brought this one into the fold last fall. StrictlyVC hits inboxes closer to midnight PT, and it’s the perfect tech “nightcap.”
And there’s more! We’re making our weekly emails a little easier to read, both by condensing them to save you time and by making them easier for you to find what you want to read about. Think TechCrunch Space, TechCrunch Crypto, TechCrunch Mobility and TechCrunch Fintech. Sign up for it all right here.
Finally, if we have something really breaking or compelling, just check your inbox. Up to twice a day, we’re going to send you something that’s worth opening. 🎁
Hope you have a great weekend. Thank you as always for reading.
Image Credits: Jaap Arriens / NurPhoto (opens in a new window) / Getty Images
TechCrunch primarily covers the startup world, but we keep at least one eye on Big Tech at all times. And there’s perhaps no story more interesting in the world of technology giants than a changing of the guard: Microsoft has stolen the “most valuable” crown from Apple and things are getting interesting.
The changeover is not an idle one. Microsoft’s tie-up with OpenAI and its rapid deployment of AI tools into its various software products has earned it favor with investors, who anticipate that it’s going to manage to extract revenue, growth, and profits from all the AI-related work. The release of Copilot Pro is a good example of what Redmond is up to.
The Exchange explores startups, markets and money.
Read it every morning on TechCrunch+ or get The Exchange newsletter every Saturday.
At the same time, Apple is seeing its most critical market, smartphones, shrink as it runs into legal challenges around the world. The smartphone market shrank 3.2% last year after declining by a massive 11.3% in 2022, according to International Data Corporation (IDC). The good news for Apple, however, is that the iPhone once again became the top-selling smartphone last year.
Still, you can’t build toward long-term growth by leading a shrinking market.
In contrast, Microsoft recently helped resolve a governance and leadership explosion at OpenAI, allowing Redmond to retain near-majority ownership of the for-profit arm of the AI company. That means Microsoft is intent on bringing more AI goodies to its users.
Meanwhile, the U.S. Supreme Court has declined to hear Apple’s appeal of the antitrust case brought by Epic Games, and in the EU, the company is reportedly preparing an App Store to suit local regulations. Both of these developments could affect the company’s ability to generate revenue from mobile commerce and its hardware and software.
Apple is very big
First, a little context. In its fourth quarter ending September 2023, Apple’s revenue fell 1% to $89.50 billion from a year earlier, and the company’s revenue also shrank in the first nine months of 2023 compared to 2022.
But all the same, Apple’s net income in its Q4 2023 alone amounted to a whopping $23 billion. That’s a simply bonkers amount of money. Nothing that we are discussing today risks the company’s scale or ability to make lots of money. But small cuts can add up. Apple’s shares are down more than 1% today; they’ve fallen 6% in the past month, and over the past 12 months, they have climbed 35%.
Is Apple losing ground?
Apple’s appeal of the ruling in the Epic case wasn’t only a question of principle; there are billions at stake here. The crux of the issue is its App Store, and whether Apple device owners can bypass it. Or: Whether app developers can tell redirect users to complete their payments outside the App Store, thus avoiding Apple’s cut, which can be as high as 30%.
Seeing its appeal dismissed means that Apple will have to live with the previous judge’s decision: That while Apple had not engaged in anticompetitive practices, it will have to let developers point customers to their own websites and take payments outside of the App Store.
Losing that cut is obviously a concern for Apple, and its persistence to keep it is proof of it. But it is probably even more worrying given that consumer spending may have slowed down on the App Store in 2023. Again, owning a huge slice of a shrinking cake isn’t typically what tech giants aim for. Even if the said dessert is worth $171 billion.
App economy recovered in 2023, with $171B in consumer spending, but downloads were flat
Today’s news only adds to Apple’s mounting list of worries regarding its App Store. Indeed, the EU’s Digital Markets Act (DMA) and its measures to curb Big Tech could force Apple to allow sideloading — that is, third-party app stores, albeit on the continent only. And to make matters worse, we learned last year that Microsoft is planning to build its own mobile games store.
Yeah, but
Apple is hardly going to let Microsoft remain the biggest tech company in the world without a battle. The company’s upcoming Vision Pro headset and platform could become a lucrative venture, and there’s supposed to be an Apple car out there somewhere. Also, it’s no question Apple will have its own AI-powered tech in time.
In fewer words, Apple likely has lots on the way that should keep it in the game. But with nearly all of tech fighting to become the first to win the AI race while smartphone sales slow and court cases chip away at its legacy revenue streams, the iPhone maker has its work cut out for it.
Image Credits: Olivier Douliery (opens in a new window) / Getty Images
Evan, a high school sophomore from Houston, was stuck on a calculus problem. He pulled up Answer AI on his iPhone, snapped a photo of the problem from his Advanced Placement math textbook, and ran it through the homework app. Within a few seconds, Answer AI had generated an answer alongside a step-by-step process of solving the problem.
A year ago, Evan would be scouring through long YouTube videos in hopes of tackling his homework challenges. He also had a private tutor, who cost $60 per hour. Now, the arrival of AI bots is posing a threat to long-established tutoring franchises such as Kumon, the 66-year-old Japanese giant that has 1,500 locations and nearly 290,000 students across the U.S.
“The tutor’s hourly cost is about the same as Answer AI’s whole year of subscription,” Evan told me. “So I stopped doing a lot of [in-person] tutoring.”
Answer AI is among a handful of popular apps that are leveraging the advent of ChatGPT and other large language models to help students with everything from writing history papers to solving physics problems. Of the top 20 education apps in the U.S. App Store, five are AI agents that help students with their school assignments, including Answer AI, according to data from Data.ai on May 21.
There is a perennial debate on the role AI should play in education. The advantages of AI tutors are obvious: They make access to after-school tutoring much more equitable. The $60-per-hour tutoring in Houston is already much more affordable than services in more affluent and academically cutthroat regions, like the Bay Area, which can be three times as expensive, Answer AI’s founder Ric Zhou told me.
Zhou, a serial entrepreneur, also suggested that AI enables more personalized teaching, which is hard to come by in a classroom of 20 students. Chatbot teachers, which can remember a student’s learning habits and never get grumpy about answering questions, can replace the private coaches that rich families hire. Myhanh, a high school junior based in Houston, said her math grades have improved from 85 to 95 within six months since using generative AI to study.
For now, AI tutors are mostly constrained to text-based interactions, but very soon, they will literally be able to speak to students in ways that optimize for each student’s learning style, whether that means a more empathetic, humorous, or creative style. OpenAI’s GPT-4o already demonstrated that an AI assistant that can generate voice responses in a range of emotive styles is within reach.
When AI doesn’t help you learn
The vision of equitable, AI-powered learning isn’t fully realized yet. Like other apps that forward API calls to LLMs, AI tutors suffer from hallucinations and can spit out wrong answers. Answer AI tries to improve its accuracy through Retrieval Augmented Generation (RAG), a method that finetunes an LLM with certain domain knowledge — in this case, a sea of problem sets. But it’s still making more mistakes than the last-generation homework apps that match user queries with an existing library of practice problems, as these apps don’t try to answer questions they don’t already know.
Some students are aware of AI’s limitations. Evan often cross-checks results from Answer AI with ChatGPT, while Myhanh uses Answer AI in an after-school study group to bounce ideas off her peers. But Evan and Myhanh are the types of self-driven students who are more likely to use AI as a learning aid, while some of their peers may handily delegate AI to do their homework without learning anything.
Answer AI’s screen-grabbing feature through its Chrome extension / Image: TechCrunchImage Credits: Answer AI
For now, educators aren’t sure what to do with AI. Several public school districts in the U.S. have banned access to ChatGPT on school devices, but enforcing a ban on generative AI outright becomes challenging as soon as students leave school premises.
The reality is, it’s impossible for teachers and parents to prevent kids from using AI to study, so it may be more effective to educate kids on the role of AI as an imperfect assistant that sometimes makes mistakes rather than prohibit it completely. While it’s hard to discern whether a student has learned to solve a math problem by heart based on the answer they write, AI is at least good at detecting essays generated by AI. That makes it harder for students to cheat on humanities assignments which require more original thinking and expression.
Chinese dominance
The two most popular AI helpers in the U.S., as of May, are both Chinese-owned. One-year-old Question AI is the brainchild of the founders of Zuoyebang, a popular Chinese homework app that has raised around $3 billion in equity over the past decade. Gauth, on the other hand, was launched by TikTok parent ByteDance in 2019. Since its inception, Question AI has been downloaded six million times across Apple’s App Store and Google Play Store in the U.S., whereas its rival Gauth has amassed twice as many installs since its launch, according to data provided by market research firm SensorTower. (Both are published in the U.S. by Singaporean entities, a common tactic as Chinese tech receives growing scrutiny from the West.)
ChatGPT solving an arithmetic sequence problem / Image: TechCrunch
The success of Chinese homework apps is a result of their concerted effort to target the American market in recent years. In 2021, China imposed rules to clamp down on its burgeoning private tutoring sector focused on the country’s public school curriculum. Many service providers, including brick-and-mortar tutoring centers and online study apps, have since pivoted to overseas users. The U.S. is unsurprisingly their most coveted international market due to its sheer size.
The fact that tutoring apps are likely to be using similar foundational AI technologies has leveled the playing field for foreign players, which can overcome language and cultural barriers by summoning AI to study user behavior. As Eugene Wei wrote in his canonical analysis of TikTok’s global success,”[A] machine learning algorithm significantly responsive and accurate can pierce the veil of cultural ignorance.”
The reliance on the same group of LLMs also makes it hard for these study apps to differentiate solely on the quality of their answers. Some of the legacy players, like Zuoyebang and PhotoMath, can use a combination of generative AI and search in their extensive libraries of problem sets to improve accuracy. Newcomers will need to find alternative ways to set themselves apart, like enhancing user personalization features.
“An AI agent needs to proactively engage with students and tailor its answers to individual learning needs,” said Zhou. “A raw language model isn’t a ready-to-use AI agent, so we try to differentiate by fine-tuning our AI to teach more effectively. For example, our AI bot would invite students to ask follow-up questions after presenting an answer, encouraging deeper learning rather than just letting them copy the result.”
Meanwhile, the U.S. Supreme Court has declined to hear Apple’s appeal of the antitrust case brought by Epic Games, and in the EU, the company is reportedly preparing an App Store to suit local regulations. Both of these developments could affect the company’s ability to generate revenue from mobile commerce and its hardware and software.
