This week's essay is on Roblox - specifically on the economics of Roblox's proprietary currency, and the relationship to airline loyalty programs. You can read it here.
Onto the briefing:
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News/Follow-up
- Subscribing vs Following: What is the difference? Apparently 47% of people think that subscribing means you have to pay for something. So Apple is changing what happens when you “subscribe” to a podcast. Now you “follow” the podcast. Not to be confused with “super following” someone on Twitter, which WILL be a paid subscription…
- Fair Rules: The rules of life are not defined and the world is not fair. One of the appeals of sports is that the rules ARE defined in such a way that it attempts to make it fair to both teams. One exception is NFL overtime rules, where the winner of the coin toss has a significant advantage and has historically won 28-20-4. The Baltimore Ravens have partnered with Richard Thaler to propose a change where the winner of the toss gets to choose a location on the field, and the loser gets to choose if they start on offense of defense given that position. One kid cuts the cake, the other gets to choose the piece.
- Collision: A new law is being proposed that would allow media organizations to work together (“collude”) to negotiate as a group with Google and Facebook, but be exempt from anti-trust concerns. There are problems with this, but it seems like a much better solution than what was attempted in Australia.
- Clubhouse Awareness: As much as everyone seems to be talking about Clubhouse, it is easy to forget that it is still very very early, and most people still have no idea it even exists.
Marketing
- Wrestling, Fans and SuperFans: For a refresher on Fans and Superfans, check out my post from last August. Wrestling has traditionally been driven by FANS - large numbers of people who watched the sport because it was free and easy. But now fans are in decline. Viewership is down 55% since 2015. But… Superfans - people who will go out of their way and pay a premium for the product - are stronger than ever. About 1MM of these Superfans pay a premium to subscribe to the WWE Network. The result is the rights to broadcast wrestling in the US went for $150MM in 2018, but this year sold for ~$750MM. 2023 estimated value is $800MM.
- Accounting Treatment as Marketing:Matt Levine wrote about Greensill last week. Greensill allows companies to sell bonds based on the value of their accounts payable. The trick is that investors don’t want companies to have large amounts of debt (“risky and bad”), but they love companies with large amounts of accounts payable (“They have leverage over their suppliers. Negative working capital!”). But accounts payable is just short-term debt by a different name (and accounting convention). Greensill has found a way for companies to convert debt into accounts payable - and change a premium for it. As Levine says, “Effectively [the company working with Greensill] was lending itself the money to pay the payables, but in an accounting-efficient way. Not an economically efficient way, probably, since Greensill takes a cut for facilitating the trade. But, again, good accounting tricks are worth money, and presumably this one was worth Greensill’s cut”.
- Advertising supported Streaming:After many years of exaggeration, traditional, advertising-supported cable television is finally starting to die. It is mostly being replaced with ad-free streaming, but ad-supported streaming is the fastest growing category. There are a large number of potential customers who prefer the convenience of streaming, but are willing to sit through advertisements in order to get a discount on their monthly costs. The problem for advertisers is that the people who are not willing to pay the premium for “ad free” are generally less valuable than the people who are fine paying for the ad free product.
- Taxonomies:One of the least sexy, but most important parts of running advertising is building a smart “taxonomy”. Taxonomy is really just a naming-convention for your ad units, but it becomes very important if you want to aggregate your data. We had tens of millions of ad units on Google search at APFM, but only thousands of leads/month. Most ads never received a click let alone a lead or an attributed sale in any given month. The only way to understand what we should be willing to pay for an ad unit was to aggregate the data in different ways (i.e., Seattle terms might be worth 30% more than San Fransisco terms. Assisted Living terms might be worth 3x independent living terms. Adding the modified “facility” might be worth 10% more. And so on). Getting your taxonomy right is harder than it first appears. MotionApp has a good write-up on best practices for doing it on Facebook.
Marketing to Employees
- Teen Vogue:The incoming Teen Vogue editor has had to apologize for old tweets. The apology was forced after staffdemanded it in a public letter.
- Burger King: The QSR has leveraged “controversial” media for the last few years (see: Burger King vs McDonalds). They have gotten away with showing moldy whoppers and mocking the Royal Family, but last week they ran an ad in the NYTs (and a tweet) that said “Women belong in the kitchen” followed by, “If she wants to of course!” and then, “Yet only 20% of chefs are women. We're on a mission to change the gender ratio in the restaurant industry by empowering female employees with the opportunity to pursue a culinary career… [we will be] launching a scholarship that will help female Burger King employees pursue their culinary dreams!” It was arguably a positive message (women have the the ability to do whatever they want - even follow stereotypes should they so choose) and a positive program (scholarships) to help women in an under-served area (chefs), all told with humor. But it was unacceptable to employees, and so the tweet has been deleted and the company has apologized.
- McKinsey: The consulting firm has a new managing director. He is in for a tough balancing act. He was “hired” by the other senior partners who were not happen with the paternalism of the previous MD. But he still has to appeal to the junior (and potential) employees who were generally supportive of the firm moving away from serving authoritative governments and “problematic” companies. In his first Q&A he attempts to walk that tightrope. He focuses on how he is going to trust the other partners to do the right thing, “We are a global firm that works in local context, and I think this notion of trust and empowerment enables speed”. But he wants the junior employees to know that he won’t abandon their principles, “I don’t sense that there’s a rejection of our journey to work more responsibly... I also reject the “or” in this notion that you can have a faster or safer firm... I’m eager to build on the progress we’re making through initiatives like the Institute for Black Economic Mobilityand our 10 Actions to combat racismin the workplace. Diversity and inclusion shouldn’t be treated as a separate initiative—it must be embedded into everything we do”.
- Unilever:The company is removing the word “normal” from all of its messaging and packaging.- i.e., Dove Shampoo will no longer have a version for “normal or oily hair”
- Amazon and Transgender: Amazon is banning the sale of books that frame transgender identities as mental illness.Some people will be upset at “book banning” but Amazon is a private company and can do what they like (the books will still be available at the other bookstores that are “only a click away”). What is more interesting is that Amazon has decided these book are inappropriate on their platform, but Hitler’s book, which “explains” his rational for genocide is fine. It comes down to what Amazon employees care about, and Hitler is too far away (in time and space) to matter. Transgender issues are more front and center.
Privacy
- T-Mobile:The telecom company is partnering to run targeted ads using location and browsing data. Customers will all be opted-inautomatically, “We’ve heard many say they prefer more relevant ads so we’re defaulting to this setting”. I guess they got the message that customers really don’t care about privacy (or even PREFER invasion if it makes the ads more targeted). No one is going to switch to AT&T over this.
- Google Alternatives: Meanwhile some ex-Googlers are trying to create a subscription-based search engine with no ads called Neeva. And Brave, an ad-blocking tool, is expanding into search. Good luck I guess….
- Facebook vs Apple:The two are at it again. In an MSNBC interview Cook slammed Facebook for its privacy issues. Zuckerberg spoke with Voxand told them that Cook’s comments were “extremely glib” and “not aligned with the truth” - and then in private told colleagues, “We need to inflict pain”. This looks like it will be THE tech battle for the next few years… Related: Microsoft and Google are continuing to face off over support (or lack thereof) of journalism.
- Trust: How much do people trust tech companies to use their data?It’s not about use of data at all - it is about the general halo effect and likability of each company.
- Notice the similar ranking for “should the company be broken up”. All of these questions are really asking the same question…:
- Unlocking phones: Researchers asked 100 people whether a “reasonable person” would unlock their phone and allow a researcher to search through it. “Most” of these forecasters said no. But then the researchers actually asked 103 subjects to do just that, and 100 said “no problem”. People think other people care about privacy, but they really really don’t….
Business/Strategy
- Kayak:Expedia and Booking.com were the leaders in online hotel bookings. Companies like Kayak and Tripadvisor were what was called “metasearch” - they allowed for searching just like Expedia and Booking, but then pushed the user to actually make the transaction somewhere else (like Expedia and Booking, but also direct with the airlines or hotels). That has changed as both companies have moved to allow booking direct on their sites. Now Kayak has gone even further down the funnel and is actually operating hotels.
- Podcast Ad Networks: Entercom, a national radio operator, has acquired Podcorn, a podcast ad network. Whoever can find a way to manage programatic, self-serve podcast advertising is going to do very very well…
AI/Maching Learning/GPT-3
- Multimodal Neurons: OpenAI (the creators of GPT-3) are at it again. This time they explain their techniques for using “multimodal neurons” to have the AI render unique visual depictions using written descriptors. Some examples:
- Facebook: We have known the social media giant has been investing heavily in AR/VR, but we did not know the extent until now. The Information has Facebook’s newest org chartand it includes ~10,000 people working on AR/VR and they have put some very senior, long-tenure executives in charge. This bet is looking bigger and bigger (and another place where Apple and Facebook will go head to head…). Related: FB’s blog post on what they are planning with VR.Also: Mark’s interview with The Information on why he believes VR/AR will move beyond gaming to become the next big platform.
COVID and the New World Order
- Commuting: Commuting was down last year for pretty obvious reasons. Inrix has quantified the impact: “Nationwide commuters spent an average of 26 hours sitting in traffic, down from 99 hours in 2019”. I expect most of that saved time was spent on childcare for those with kids, and Netflix for those without.
- Psychics:Yelp has looked at how interest in various business-types changed last year. The winner was drive-in movie theaters (up +329%), but other outdoor activities also did well (Horseback riding +41%, Disc Golf +73%). More surprising (to me) was that interest in psychics and astrologers was way up (+74%, +63%). Humans have a need to be in control, and when they can’t be in control, they need to pretend they are in control. Perhaps we will see a a similar pattern if someone quantifies general acceptance of conspiracy theories last year as well?
- College Admissions:Applicationsfor September 2021 are up 11%, but applicants are up only 2.4% . The small increase in applicants is a little surprising given the number of deferrals in 2020 (but perhaps the students who deferred did not need to re-apply?). If deferrals don’t count this year might be a challenging one to gain admittance - which is definitely what the candidates are thinking as they applying to a lot more schools!
- Zoom Interruptions: Kids interrupting zoom calls has become pretty commonplace this past year, but four years ago when it happened to Robert Kelly while he was being interviewed by the BBC it became a global meme. For the four-year anniversary he posts a short Twitter thread on the common questions he gets about the event.
- Lifestyle changes: Sleeping more, exercising less. Related: Smokers quitting attempts dropped by 27%.
Careers
- YipitData: The PNW company is looking for a head of marketing. Venture-backed. >$50MM in revenue, growing at +60%/year. Needs someone with a spike in lead gen. Location agnostic. Contact me if interested.
- Mimetic Traps:Good essay on what “mimetic traps” are and how to deal with them. The concept is that we often get trapped doing someone without knowing why we are doing it - other than that we have always been doing it. I think the idea is closely tied to “sunk cost”, but it is not exactly the same. The essay is about academia, but I think many professionals get stuck this way. Worth reading.
- Pushing hard: How hard do you push before you give up and say something is impossible? This from David Goggins is interesting (as he teaches himself how to swim with his hands and legs tied behind his back).
- One-way interviews:The CBC in Canada writes about a new “trend” where employers are screening candidates with “one-way interviews”. Candidates are expected to answer questions on video under time limits. People are offended and stressed about it. But I think the bigger picture here is understanding the signal this sends to candidates (not a good one). I expect the companies that do this are not the ones that are trying to find the best people.
Fun
- Maps:Here is the map that influenced Columbus(he did not have access to the America highlight):
- Maps 2: I came across Peter Atwood’s website that highlights some unique maps he has created. The entire set are worth looking through if you like this sort of thing. Here was one of my favorites:
