We are seeing more of an overriding trend that I noticed last year. It is the devaluing of social media platforms as a destination. The latest example is the acquisition of X by xAI. It is a move that is more sideways since both entities are private with many overlapping investors.
However, until yesterday, they were two separate companies.
Last night, Elon Musk sent notice on X that xAI had acquired the social media platform. The purchase price was $45 billion less the outstanding debt of $12 billion.
One reason why this wasn't the biggest of moves is the fact that both companies were working closely together. Nevertheless, there was an arm's length interaction due to the fact that they were separate entities. That said, the fact they were private meant the accounting was easier since no SEC fillings are required.
Now, we are looking at a different situation. xAI is the owner of X. This means the social media platform is part of the AI company.
The Future of Social Media: xAI Purchases X
Over the last year, users of X saw the integration of Grok. The most recent update, Grok3, was implemented immediately upon release.
We cannot discuss AI without asking about the data. Where did xAI get what it needed to train its models? Naturally, the answer is found in X, which has 17 or 18 years worth of data.
The advantage here is that X keep providing more data on a daily basis. Each day, hundreds of millions of Tweets and posts appear. This is a continual flow.
It is now the property of xAI.
According to Musk, there are other benefits:
“Today, we officially take the step to combine the data, models, compute, distribution and talent,” he wrote.
“This combination will unlock immense potential by blending xAI’s advanced AI capability and expertise with X’s massive reach.”
Probably the most important component is compute. This is another crucial element in the AI equation. By having this under one company, the presumption is a gain in efficiency. This also held with funding since both companies were raising money separately.
It actually puts xAI on par with Meta and Google in the sense that it has both models and a large social media platform to keep feeding the system.
The Future Is Data
To me, it appears the future is clear. The world is going to be based upon data. It is really that simple.
When it comes to AI models, we are seeing the major technology companies emerging. Not only do they have the ability to pay billions for the hardware, they are sitting on mountains of data. It is a situation that is being repeated with the Chinese companies with firms like Alibaba and Baidu involved.
Social media is nothing more than a feeder system. Sure, there is still value in what occurs on those platforms. Meta and Google are still raking in billions in advertising dollars. X, before the merger, has reportedly achiever profitability. However, all of this could be a drop in the bucket compared to the value generated by AI systems.
My guess is this fact led to the purchase of X. The value of that entity, as a standalone, means little. It is nothing more than a component at this point.
The real value will not even be in the models. From a LLM perspective, these are already close to commodities. For the moment, there is a separation between them with regards to capabilities. However, in a couple years, it is likely they will be almost the same.
This means the applications that are tied to the models will matter. Here is where Big Tech can cash in. By developing the solutions on top of the models, they can offer those out on a subscription basis. This is where the entire business model shifts. No longer will advertising be the basis for profitability.
In an era where SaaS might be affected, this is a perilous path. However, one thing that provides a buffer is the continual feeding of data. Even if a model is open and downloaded, the data flow stops at that moment. In other words, it might be obsolete in a few days.
For many services, this might not matter. However, we are moving towards a time where instantaneous means even more recent. Often, information that is a few minutes old is outdated.
The race is on.
Does this move by xAI alter anything? On the large scale, probably not. The corporate structure is a bit different and internal operations might be streamlined. Nevertheless, the user experience for both X and Grok likely do not change much.
What this does is drive home the point that AI is the golden goose. Social media had its run yet it is now only a part of a larger system.