Sunday, December 3, 2023

Go read this report on an AI shopping app that was actually just using humans

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If you can’t bother filling out your credit card and address details when you buy jeans online, the Nate app sounds like a service you might want. The company advertises itself as a “startup of artificial intelligence,” which uses AI to automatically fill in customer information for $ 1 per transaction, saving buyers a few minutes when they complete purchases with the Nate app.

But instead of using high-tech methods to complete purchases, Nate transactions have often been handled manually by workers in the Philippines, according to a deep dive of The Information. Speaking to two people with direct access to Nate’s internal data, The Information reports that “the share of transactions that Nate handled handled rather than automatically varied between 60 percent and 100 percent” during 2021. One person with knowledge of fundraising efforts told the outlet that the company did not share its manual process with any potential investors during the company tried to raise money.

People with direct knowledge of the technology used by Nate told The Information that bot blockers in retail stores were a problem. “Nate’s software needed to figure out how to locate specific buttons on the page, like the one that adds an item to the shopping cart,” according to the report, which resulted in a large number of transactions going through manual entry of real people. . Some orders were placed hours after Nate users pressed the “buy” button. The Information reports.

That didn’t stop Nate from raising millions in his quest to do something that is already very easy even easier. Venture Capital Coatue Management and Forerunner Ventures have invested $ 50 million in Nate over the past two years:

One consequence of the pandemic-fueled shopping spree is that venture capitalists – facing fierce competition for deals and paranoid about losing the next Stripe – have started throwing money at startups that have promised to make e-commerce smoother, even with dubious business models or technology. . Today, amid a slowdown in e-commerce and macroeconomic challenges, many start-ups are facing reckoning.

“Throughout the start-up landscape, it’s a fact that many companies have had a great history, but their reality has not been,” said Keval Desai, an investor at InterWest Partners, which previously supported e-commerce companies like The RealReal. “People are waking up and saying these assessments can’t be continued.”

At the end of last year, with only about 100 transactions a day, Nate decided to do advertising to boost his business and presence by buying ads on TikTok, television and public transportation. Users received $ 50 to spend on selected websites when they downloaded the Nate app and created a profile, and transactions swelled – up to 10,000 a day.

But users have figured out a way to play the system by creating multiple accounts with the same bank information but using new email addresses and phone numbers. After the company removed duplicate users and ended the advertising, daily transactions returned to 75 to 100 per day.

A Nate representative recounted The Information those numbers – as well as the 60 percent to 100 percent range – were wrong, “and the claims question [Nate’s] own technology is completely baseless. “But it wouldn’t be the first time a startup has claimed that machines are responsible for man-made work – and casts”the magicBy Nate in a whole new light.

Read The Information report here.


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