The Sunday Times - UK (2022-04-03)

8 The Sunday Times April 3, 2022

BUSINESS

You can

generate

millions

of faces

very

quickly

crude deepfake video within a day. For businesses, the risks are immense. DiResta found some 60 fake accounts connected to RingCentral. The company said they were created by a third party it had hired to generate sales leads and it was unaware of the contractor’s tactics. If people responded to the fake accounts’ solicitations, they would then be passed to real people to try to close the deal. RingCentral said: “We do not believe this is an acceptable practice, and is counter to our commitment to our customers. We are taking specific steps to update our approach and to educate our people on what is and is not acceptable.” But visual fakery is just one part of a powerful, and growing, fraud ecosystem. In 2019, a British energy executive trans- ferred €220,000 (£185,000) to what he thought was a Hungarian supplier after a phone call with his chief executive. Fraudsters had used an AI audio pro- gramme to impersonate his boss’s voice. The money was never recovered. The written word is also in the firing line. OpenAI, a research lab co-founded by Tesla’s Elon Musk and run by former Y Combinator chief Sam Altman, this year released an updated version of GPT3, the world’s most powerful language model,

Mocked-up digital faces can achieve startling levels of realism but may have giveaways, such as hints of a pair of glasses (1), a strange earlobe (2) and a missing earring (3). “Deepfake” video victims include Kim Kardashian, left

Dollar Shave Club made $100m for Michael Dubin

The ease with which false digital identities, images and videos can be made is threatening commerce and society alike

Falling for the faker-makers

anyone to download a fake face. The implications are profound. Bryan Vorndran, the FBI’s assistant cybersecu- rity director, warned Congress last week of alarming improvements in the “speed, believability, scale, and automation... of high-quality videos, pictures, audio and text of events which never happened”. Industry observers warn that technol- ogy has created a “liar’s dividend” in which, say, a political figure can plau- sibly dismiss a video or photo that might otherwise end their career. West added: “It is another way of eroding trust in our information environment.” In addition to still pictures, “deepfake” video software, where one person’s face is convincingly trans- posed onto another’s body, has come on leaps and bounds. Supply a video, a handful of pictures of the person you want to impose and pay a few tens of dollars, and numer- ous websites can deliver a relatively

I

t may not appear so but Vladimir Bondarenko, a Ukrainian blogger, has a lot in common with Keenan Ramsey, a “growth specialist” at Sil- icon Valley communications firm RingCentral. Bondarenko is a former aviation engineer with a square jaw, close-cut brown hair and grey eyes who apparently took to writing anti-government screeds after Ukraine’s aviation industry “col- lapsed”. Ramsey, with her straight, pearly teeth, brown hair that falls past her shoulders and a flawless complexion, studied at New York University and is a fan of Bill Gates’s ex-wife Melinda. The common ground? Keenan and Vladimir are both fakes: digital faces generated by artificial intelligence software. Facebook discovered — and eliminated — the Bondarenko account in February, tracing it to a Russian troll farm. Ramsey, a LinkedIn profile, was the creation of marketeers hired by $11 billion (£8.4 billion) RingCentral to drum up business. Renée Diresta, a specialist in disinforma- tion at the Stanford Information Observa- tory, outed the Ramsey profile and more than 1,000 other fake Linkedin profiles fronted by software-generated faces. Fakery on the web is, of course, nothing new. Yet the means to create personas as good as indistinguishable from real people has been democratised to an astonishing degree. “It’s essentially off-the-shelf now,” said Jevin West, a professor at the Infor- mation School at the University of Wash- ington. “You can generate millions of faces very quickly.” Software freely available on the web can turn your com- puter into a face-gen- erator. Websites such as this-person-does- not-exist.com allow

DANNY FORTSON

TECH TALK

which can respond to natural prompts and pen entire philosophical essays. It is being used by 300 applications to generate more than 4.5 billion words a day. GPT3 sometimes produces clunky phrases or falls into racist diatribes, but it is improving. Upon its initial release in 2020, Stuart Russell, the University of Cal- ifornia Berkeley professor seen as a founding father of artificial intelligence, called it “a foretaste of what it will be like to have AI that has read and understood everything the human race has ever written”. Fake faces are created by “generative adversarial networks”: a pair of compet- ing programs, one that produces the image based on millions of real faces cop- ied from the web, another that hunts for flaws. Often only a missing earring, blurry hair or eyes perfectly set in the middle of a headshot give the game away. On Keenan Ramsey’s image, DiResta noticed a missing earring and strands of hair that did not look natural. Another faked face sported a strange ear indent. Regulation is lax. The UK’s proposed Online Harms Bill, for example, does not outlaw deepfakes. DiResta said: “As AI gets more sophisticated, whether it’s a generated face or generated text, the question of whether you are engaging with a real person or a wholly made-up entity becomes more interesting.” In the absence of a hard line from regu- lators, enforcement often falls to compa- nies. LinkedIn’s terms of service, for example, strictly bar “false identities”. The result is an arms race between bad actors and tech giants seeking to stay ahead of the fakes. Facebook last year unveiled a system that hunts down changes to the “digital fingerprints” of altered images. Microsoft, Google and LinkedIn run similar policing efforts. West said: “It’s a new age that human- ity is going through, where seeing is not believing and hearing isn’t believable.”

Cut-throat ad rates

kill off direct sales

Michael Dubin was a pioneer in more ways than one. The company he founded back in 2011, Dollar Shave Club, quickly became the poster child of a new wave of “direct- to-consumer brands” that used quirky Instagram posts and YouTube videos to attract customers. Dubin, 42, eschewed the traditional retail routes, such as elbowing onto store shelves or opening bricks- and-mortar locations. All he needed, it seemed, were some funny ads on the web, a warehouse full of razors — and gumption. It worked. Five years after the founding of Dollar Shave Club, Unilever excitedly paid $1 billion in cash in 2016 for Dubin’s “disruptive” but heavily loss-making “leader in the direct-to-consumer space”. Thousands of DTC firms have followed in its wake, promising to dominate certain demographic or product categories. Venture capitalists funded them on that basis. In the UK, prominent examples include furniture-maker Made.com, grooming products seller Birchbox, and Abel & Cole, an organic grocery delivery firm. For many, however, life has proved much harder than anticipated — including Dollar Shave Club. Unilever’s chief executive Alan Jope told investors in February: “We didn’t always get it right. Dollar Shave Club did not deliver as expected.” Indeed, the revolution that promised to turn retail on its head is fizzling out with astonishing speed. DTC has been caught out by a number of factors. Principal among them, ad rates on Facebook and Instagram have, by one measure, more than doubled since 2015, when the average “cost-per-click” (CPC) was in the low 20 cents. Precise figures vary widely based on time, day, month, and size of the intended audience, but last year those same CPC ads cost as much as 50 cents each, according to figures from AdEspresso. The upshot: the single biggest cost for many DTC brands has ballooned, fundamentally altering the businesses’ core economics. The fallout from this shift is playing out on public markets. A bevy of much-hyped brands, from connected fitness company Peloton to

shoemaker Allbirds and Hims & Hers Health, a purveyor of erectile dysfunction treatments, have floated in the last year. Their shares have all since dropped like stones. Hims has seen its stock plunge nearly 80 per cent from its high last year to $5.20 after reporting an annual $107 million (£81 million) loss on $271 million in sales, a 66 per cent increase over the previous year. Marketing spend, however, surged 130 per cent to $136 million. In short, its ad bill is growing at twice its sales rate. Peloton’s stock has plunged 82 per cent from its 2021 high amid a dramatic slowdown in demand for its connected exercise bikes as pandemic restrictions eased. In the three months to the end of December it racked up a $425 million loss as sales flatlined at $1.1 billion, despite a doubling of ad spend to $350 million. Brian Wieser of ad agency GroupM said the “growth hack” that DTC brands used, which relied so heavily on targeted Facebook ads, “was never going to be a mass-scale business”. That reality is dawning on investors and upstarts alike. “The best way to make a billion dollars in DTC is to start with $2 billion,” Wieser said. “With enough venture capital flowing into the space, and if you’re OK with paying $200 for a customer with a lifetime value of $100, that’s an alright result. You might get a great exit from that.” A great exit for venture capitalists, however, often makes for a terrible bet for public market investors. Stitch Fix, the $1.1 billion subscription styling service that sends customers boxes of clothes, went public in 2017. Yet last month it surprised Wall Street with a warning that the difficulty it was seeing converting customers into paying subscribers would hurt growth. The news sent its already beaten-down shares to new lows. On Friday they traded at barely $10, an 85 per cent drop since June and below the $15 at which it floated five years ago. Not everyone is struggling. Dubin, who pocketed nearly $100 million from the Unilever sale, lives in southern California and likes SEASON FOUR OF to tell people he is “retired”. DANNY IN THE VALLEY

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