I’ve set (what I originally thought was) a reasonably modest goal for myself of writing 10 blog posts in April. Two more to go with one week left. Thanks for following along and please let me know what you think. Also, you can now subscribe to the blog by email. Sign up here.
Alright alright alright. Quick status check for me: Spent the week out in SF for Percolate’s Transition Conference where I gave a talk about how to use supply chain thinking and the Theory of Constraints to deal with the content marketing bottleneck (I’ll share the video when it gets online). We’ll be in London in early June, so if you’re around and interested in coming please reach out. I just finished the book Soldiers of Reason which is about the history of the RAND Corporation (I’ve got a half-written post I’ll try to get out about it). I’m taking a break from game theory and nuclear warfare with Andy Weir’s new book Artemis (which I haven’t heard was great, but I liked The Martian a lot and my library hold came through the day I finished the other book). Now onto the links.
The biggest story in advertising was Martin Sorrell’s departure from WPP, the largest holding company in the world. I spent a little time on Twitter looking back into the commentary around his original takeover of Wire & Plastic Products. The highlight: The company still makes wine racks.
Speaking of Wire & Plastic Products, here’s the history of the shopping cart, an under-appreciated invention.
On a more serious tip, The New Yorker had my favorite profile of Sorrell. For what it’s worth, I met him once or twice and emailed with him a few times and my takeaway were a) he knows his company and the ad industry inside out, b) he emailed me back immediately, and c) he was a good performer (it was a lot of fun to watch him interview folks on stage and make them wiggle a bit, especially media owners).
Two really excellent long-form pieces from this week:
- Wired on a group of video game hackers who took things too far.
- The Verge on the mostly failed One Laptop Per Child experiment (I’ve still got one somewhere around the house)
Matt Haughey (who, amongst other things, started one of my favorite sites Metafilter) wrote about his experience trying to recreate just one custom prop from Beyonce’s Lemonade as a way to illustrate her incredible attention to detail.
If you want to get a jump-start on my post about RAND, here’s an article from a few years ago by the author which covers many of the pertinent points (one of the amazing RAND facts is that they’ve had over 30 Nobel laureates as either employees or advisors in their ~70 years of existence).
A few weeks ago I shared an excellent Planet Money video about why Coke cost a nickel for 70 years. Well, here’s another about the economics of graveyards:
While we’re on videos, here’s one from Vox on China’s Belt and Road Initiative.
Continuing with the audio/visual theme, the best podcast episode I listened to this week exponent from a few weeks ago on Facebook.
Speaking of Facebook, I’m skeptical Zuckerberg doesn’t know what’s going on with the ad business as Wired suggests. The guy is very smart and runs a giant company who makes the vast majority of its money from advertising, I’d be pretty shocked if he just doesn’t know what’s going on as suggested (emphasis mine):
That isn’t to say the hearings went over perfectly, even at home. One mystifying thing to employees was that Zuckerberg frequently seemed to come up short when asked for details about the advertising business. When pressed by Roy Blunt (R-Missouri)—who, Zuckerberg restrained himself from pointing out, was a client of Cambridge Analytica—Facebook’s CEO couldn’t specify whether Facebook tracks users across their computing devices or tracks offline activity. He seemed similarly mystified about some of the details about the data Facebook collects about people. In total, Zuckerberg promised to follow up on 43 issues; many of the most straight-ahead ones were details on how the ad business works. It’s possible, of course, that Zuckerberg dodged the questions because he didn’t want to talk about Facebook’s tracking on national TV. It seemed more likely to some people on the inside, however, that he genuinely didn’t know.
My favorite headline this week: Someone Convince Me That an iPhone Wallet Case Isn’t the Dumbest Idea in the World.
The Register had a good primer on the current economics of bug bounty programs.
The always smart Tim Harford wrote about what made Stephen Hawking great. I particularly liked this bit, “First, he did not patronise his audience: presenting the most complicated ideas was a sign that he respected our intelligence. If we did not grasp everything, we would still be better off for having tried.” I have thought about this a lot in building Percolate, both internally and externally. It’s always been important to me to assume your audience is brilliant and work from there. At Transition over the years we’ve had talks on how cities grow like biological organisms, promise theory, and whether humans will follow the path of bacteria and hit the edge of the petri dish and die. The positive feedback I got on the most complex topics (told well) was always huge.
Finally, I wrote about The New Yorker, basketball, and the Gell-Mann Amnesia Effect earlier in the week and last week I wrote a piece about the idea of an information fiduciary and how it might be a good way to think about regulating Facebook. And, of course, here’s the Remainders post from last week.
Thanks for everything and have a great weekend.
I’ve set a reasonably modest goal for myself of writing 10 blog posts in April. Let’s see if I can get back on this bike (since I really miss it). This is post number 5!
Over the last few weeks I’ve been asked a lot about my take on the Facebook news and I’ve struggled to add much to the conversation. I’m not shocked (this story has been around since 2015 in almost exactly its current form, a fact I don’t think nearly enough people understand), we shouldn’t be calling it a breach or a leak (that’s not what happened), and I think it has a lot more to do with the new European data regulations called GDPR than most are mentioning. Outside of that I’m mostly left pondering questions/thought experiments like what is the minimum amount of targeting Facebook would have to hold on to in order to maintain 80% of its ad revenue (aka minimum viable targeting) and did they actually end up in this mess in an effort to directly make more money (the FB wants more data to sell to advertisers argument) or in an effort to drive engagement (which, of course, helps make more money). Not sure that second one matters, but it’s interesting to me nonetheless.
Anyway, mostly I’m left looking for opinions that go beyond the recitation of facts.
On Sunday morning I was reading the Times opinion section and ran into an idea that felt new. Here it is from Jonathan Zittrain’s op-ed “Mark Zuckerberg Can Still Fix This Mess”:
On the policy front, we should look to how the law treats professionals with specialized skills who get to know clients’ troubles and secrets intimately. For example, doctors and lawyers draw lots of sensitive information from, and wield a lot of power over, their patients and clients. There’s not only an ethical trust relationship there but also a legal one: that of a “fiduciary,” which at its core means that the professionals are obliged to place their clients’ interests ahead of their own.
The legal scholar Jack Balkin has convincingly argued that companies like Facebook and Twitter are in a similar relationship of knowledge about, and power over, their users — and thus should be considered “information fiduciaries.”
Information fiduciary is one of the first things I’ve read in all the morass of Facebook think-pieces that felt both new and useful. The basic idea is that Facebook (and other similar platforms) have a special relationship with users that resembles the kind of fiduciary responsibilities doctors and lawyers have with our data (critically, Balkin makes a distinction between the responsibility for data and advice, the latter of which Facebook obviously doesn’t have).
In his much longer and surprisingly readable paper on the idea he lays out an argument for why we should take the concept seriously. The paper starts by replaying a question Zittrain posed in 2014 New Statesman article after Facebook ran a get out the vote experiment that drove impressive numbers:
Now consider a hypothetical, hotly contested future election. Suppose that Mark Zuckerberg personally favors whichever candidate you don’t like. He arranges for a voting prompt to appear within the newsfeeds of tens of millions of active Facebook users—but unlike in the 2010 experiment, the group that will not receive the message is not chosen at random. Rather, Zuckerberg makes use of the fact that Facebook “likes” can predict political views and party affiliation, even beyond the many users who proudly advertise those affiliations directly. With that knowledge, our hypothetical Zuck chooses not to spice the feeds of users unsympathetic to his views. Such machinations then flip the outcome of our hypothetical election. Should the law constrain this kind of behavior?
Balkin argues that we don’t really have any way to stop Facebook from doing that legally. The First Amendment gives them the right to political speech. We could hope that they wouldn’t do it because of the backlash it would likely create (and it’s true that it would probably be enough to prevent them), but do we feel good relying on the market in this case?
After going through a bunch of options for dealing with the situation, Balkin lands on the fiduciary concept. “Generally speaking, a fiduciary is one who has special obligations of loyalty and trustworthiness toward another person,” he writes. “The fiduciary must take care to act in the interests of the other person, who is sometimes called the principal, the beneficiary, or the client. The client puts their trust or confidence in the fiduciary, and the fiduciary has a duty not to betray that trust or confidence.”
In a more recent blog post Balkin argues that Facebook has effectively confirmed the idea with his response to Cambridge Analytica when Zuckerberg said, “We have a responsibility to protect your data, and if we can’t then we don’t deserve to serve you. I’ve been working to understand exactly what happened and how to make sure this doesn’t happen again.”
But how would it all work? Well, Zittrain and Balkin tackled that too. In a 2016 Atlantic article, they present a theoretical framework for application in a similar way to the Digital Millennium Copyright Act (DMCA) which, while it has its flaws, is a solution that seems to generally work for the various parties involved. Here’s their proposal for a Digital Millennium Privacy Act (DMPA):
The DMPA would provide a predictable level of federal immunity for those companies willing to subscribe to the duties of an information fiduciary and accept a corresponding process to disclose and redress privacy and security violations. As with the DMCA, those companies unwilling to take the leap would be left no worse off than they are today—subject to the tender mercies of state and local governments. But those who accept the deal would gain the consistency and calculability of a single set of nationwide rules. Even without the public giving up on any hard-fought privacy rights recognized by a single state, a company could find that becoming an information fiduciary could be far less burdensome than having to respond to multiple and conflicting state and local obligations.
This feels like a real idea that has value for all parties involved and a legitimate framework for implementation. I don’t know that it will ever come to pass, but I’m excited to continue paying attention to the conversations around it.
Interesting point of distinction between Google and Facebook’s approach to the world in this long feature of Zuckerberg and Facebook’s approach to wiring the world. Specifically in reference to Facebook and Google buying drone companies as a possible approach to getting internet to rural areas:
Google also has a drone program—in April it bought one of Ascenta’s competitors, Titan Aerospace—but what’s notable about its approach so far is that it has been almost purely technological and unilateral: we want people to have the Internet, so we’re going to beam it at them from a balloon. Whereas Facebook’s solution is a blended one. It has technological pieces but also a business piece (making money for the cell-phone companies) and a sociocultural one (luring people online with carefully curated content). The app is just one part of a human ecosystem where every-body is incentivized to keep it going and spread it around. “Certainly, one big difference is that we tend to look at the culture around things,” Zuckerberg says. “That’s just a core part of building any social project.” The subtext being, all projects are social.
This is a pretty interesting point of difference between how the two companies view the world. Google sees every problem as a pure technical issue whereas Facebook sees it as part cultural and part technical. I’m not totally sure I buy it (it seems unfair to call Android a purely technical solution), but it’s an interesting lens to look through when examining two of the world’s most important tech companies.
I wrote a reasonably in-depth post over at the Percolate blog on my thoughts on the marriage of Google+ and Android. Here’s a snippet:
As we all know, Google has very publicly announced its intention to build G+ into a massive social platform at any cost. For awhile I think many simply nodded and metaphorically patted Google on the head, as if to say, “sure Google, whatever you say.” However, as Android has continued to grow, I’ve noticed something very interesting: It seems that Google’s plan to turn G+ into a platform is to hitch its wagon to Android. With over a billion users it’s hard to argue with that strategy.
I was going to write something in response to the post about Mark Cuban leaving Facebook for MySpace (he doesn’t like that you have to pay to reach 100% of your audience), but Dalton Caldwell beat me to the punch with a well-put take:
We can expect to see Facebook deemphasizing traditional advertising units in favor of promoted news stories in your stream. The reason is that the very best advertising is content. Blurring the lines between advertising and content is one of the most ambitious goals a marketer could have.
Bringing earnings expectations into this, the key to Facebook “fixing” their mobile advertising problem is not to create a new ad-unit that performs better on mobile. Rather, it is for them to sell the placement of stories in the omnipresent single column newsfeed. If they are able to nail end-to-end promoted stories system, then their current monetization issues on mobile disappear.
The only thing I’d add to this (which I tweeted yesterday) is why would brands be treated differently than people on Facebook? If any of us post something to FB it will only reach a portion of our friends, so why should a brand be able to reach 100% of their fans? It’s a filtered platform and that’s what makes it different than Twitter and Tumblr.
I’ve been saying the ability to build awareness is the biggest strength of Facebook (and more broadly social). Intent is great and Google has built an incredible advertising machine, but most brands need to create intent, not harvest it. Interesting to see that Fab agrees with me:
Forbes says retail site Fab it’s spending $25 million in Facebook ads this year. CEO Jason Goldberg is adamant on his company’s “digital ads” preference according to Forbes. “Facebook ads are more effective than Google search or display ads, because Google ads are based on intent, while Fab is designed for people to discover new items they aren’t searching for. Fab is designed to be a site people sign up for and browse around and eventually make purchases, Goldberg says.”
Two interesting nuggets in Ezra Klein’s story about studying economics in video games. First, a question I’ve asked myself many times about Facebook and currency:
“Just for example,” Castronova says, “Facebook has an entire currency system that isn’t taxed or regulated. At what point does that threaten what the Federal Reserve does?”
Next it’s a broader point about what effect video games have on the economy-at-large:
There’s also a question of whether actions in online worlds count as real-life economic activity. “Say someone is playing Eve Online for a whole week and not providing services in real life,” Guðmundsson says. “That would hurt GDP [the measure of real-life economic growth], but it would increase the Gross User Product in the virtual world. So did overall value creation really decline?”
My problem with this “should Zuckerberg be CEO” story (beyond the fact I think he should) is that there’s only one real reason given and it doesn’t even belong to the author, but instead to Reuters blogger John Abell: “Facebook needs its spiritual leader and chief innovator in a hoodie. But it doesn’t need him as CEO, placating investors in a collared shirt.” Do we really believe Facebook’s stock is sliding because Zuckerberg is spending too much time worrying about investors?
For what it’s worth (and it’s probably not worth much), my feeling on Facebook is that it’s still early and that a) they’re not yet where they need to be with their business (let’s remember the company is only around 10 years old) and b) the market is so caught up with Google and “intent” that they’re still not seeing the bigger opportunity with brand advertising (I wrote a bunch about this right around the IPO). Facebook is still a gamble, but even they’d admit that. They believe (and need to convince the market) that they have the best years ahead of them and that they plan to fully realize the giant (and unprecedented) opportunity staring them in the face.
This is sort of interesting. Gizmodo is paying $20 per-photo for new pictures of Mark Zuckerberg (and asking some real questions about privacy):
For someone who doesn’t believe in privacy, Mark Zuckerberg is awfully guarded. He has made Facebook public by default, and yet his own public posts are few, far-between, and tend towards the anodyne. Facebook’s share-everything CEO even went so far as to keep his recent wedding a secret from his own friends, presumably to avoid public scrutiny. For all his bluster about public sharing, Zuckerberg reveals very little of himself. That needs to change.
This is a cross-post from the Percolate Blog. I thought you all might enjoy reading it here as well.
Let me get something out of the way before we get started: In case you haven’t heard, Facebook is going to IPO this week.
Okay, seriously, all this IPO talk has driven people to dive into Facebook’s business model and lots of folks are coming up with doubts. As Peter Kafka points out, even Facebook has its doubts, mentioning as much in their IPO filing: “We believe that most advertisers are still learning and experimenting with the best ways to leverage Facebook to create more social and valuable ads.”
But what does that mean really? And what’s the opportunity? And, most importantly in many people’s eyes, does Facebook really have the opportunity to be a bigger company than Google?
While I don’t know the precise answers to those questions, I do have lots of opinions and since it happens to be Internet Week in NYC, I’ve been having these conversations a lot (mostly on panels). The bulk of the argument against Facebook revolves around their lack of “intent” data. This, of course, is what Google has in bulk and is the reason they are a multi-billion dollar business. Being able to target people at specific points in the purchase process changes the way marketing works. It allows advertisers to do something that was all but impossible (you could buy in-store and outdoor around stores, but that’s a whole lot less efficient). This is an amazing thing for marketers and Google’s market cap reflects it.
But if you ask most advertisers why they spend millions (and sometimes billions) on traditional ads, it’s not to harvest people who intend to buy, it’s to create demand: continuing to grow a business requires continuing to bring in new customers constantly. However it makes you feel, most ads exist to remind you that you need something new. That shoe company with billboard isn’t trying to get you to buy their shoes over a competitor, they’re trying to remind you that you need new shoes and, they hope, when you walk into the store you’ll spring for their brand.
That’s where brands spend real dollars. When startups show off “the chart” (you know, the one with the gap on time spent versus ad spend), they are looking at the effect of digital platforms not having a good answer to intent creation.
That, I believe, is where the opportunity for social is. We’re not there yet, but the promise is that you can use your understanding of a user’s interests to present them with messages that let them know about things they want before they want them. If Facebook figures this out it will be a bigger company than Google.
So how does content fit in?
Using the traditional purchase funnel, I think you still have a gap between awareness and intent. Once someone knows about your brand or product, how do you create need? One really good way of doing that is to remind them you exist (a large portion of CPG ad spend is used for just this). The way to remind people you exist is to create content they’ll see. To create content they’ll see on Facebook you need to a) be engaging enough that it builds organic activity and pushes beyond the base distribution you get through EdgeRank or b) buy Reach Generator. The two big goals (awareness and intent creation) have paid actions associated with them in Facebook, Twitter and Tumblr. If these companies continue to build on these ideas and find better ways to target users based on their interests they will be solving a real problem for advertisers, something that hasn’t really been done on the web since paid search in the early 2000s.
Of course, there are lots of ifs here. The products are not quite there yet (targeting, for instance, is still largely based on social connections instead of interest connections), but I think these platforms will get there and I think they’ll succeed.
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