Thinks 451

Matt Mullenweg on the biggest challenge to operating asynchronously: “Clarity of writing. If you don’t have that, you can have people thinking they’re on the same page when they actually have different understanding. We’ve been experimenting with classes and workshops and, of course, books that we recommend for people to improve their writing skills. We also have an editorial team that does our publications, but also does a lot of internal editing. It’s incredibly important in an asynchronous organization to invest in your writing. Every strength is also a downside. A strength of asynchronous work is that work can happen 24 hours a day. A downside is that it might take 24 hours to get five people to read and respond to something that they could do in a 30-minute synchronous meeting.”

Shaan, quoting Michael Saylor: “Diversifying is selling your winners to buy more losers. If you look at most industries, you get one clear winner, one guy that treads water, and a shit ton of losers. Ecommerce → Amazon clear winner ($1.6T+ company), #2 is Walmart is 5x smaller. Phones → Apple, clear winner ($2.88T), the #2 player Samsung is 7x smaller. Social Networks → Facebook, clear winner (~$650B), #2 player Snap is 10x smaller.When you bet on a winner, diversifying is likely to be a case of you selling the winner to buy the loser.”

Devangshu Dutta: “It’s easy to raise money for a political party, on a no-questions-asked basis and political parties are tax-exempt. There used to be two key limits on funding. Funding from abroad was banned. The other limit pertained to corporate funding — only a profit-making company could make political donations, and it could only donate up to a limited percentage of its declared profits. Both restrictions were removed by this government, and the innovative concept of electoral bonds, which are designed to prevent public knowledge of political donors, was introduced. So there are now multiple ways to donate money to a political party. One is to split it into small tranches. Cash donations of up to Rs 2,000 are not subject to oversight. A second is to bring in cash from abroad — this can be done several ways. A third is to set up a company purely for the purpose of political donations since loss-making doesn’t matter anymore. Plus, there is of course the whole electoral bonds route, which merits an essay in itself. The only catch with electoral bonds is that the government will know the origin. So in India circa 2022, the ease of doing business may be moot. The ease of doing charity is non-existent. But the ease of doing politics is as good as it could get and setting up a party is the smoothest route for money-laundering.”

Martech 2.0 and Web3: Solving Advertising’s 50% Problem (Part 4)

Past Writings – 1

I have been writing about the changes in adtech (which will create the opportunities for martech) over the past several months. Here are some excerpts:

Marketing: Disrupted and Simplified: “Seduced by the ease of spending on Google and Facebook, and the excitement of continuously acquiring new customers, they missed deepening relationships with existing customers. It is not just marketers but even CEOs who are at fault. The question that gets asked is: how many new customers did we acquire? There is little discussion about retention and revenue expansion from existing customers. (This is true for B2C and B2B brands.) In a competitive market, the focus shifts to landgrab and leads to an arms race of spending investor money or retained profits to show perpetual growth of website traffic or app installs. The rise of ad revenues of Google and Facebook testify to the marketers’ folly.”

Attention Messaging: Bridging Adtech, CPaaS and Martech: “Digital marketers find themselves trapped between new customer acquisition and re-acquisition of those whom they lose. The supply of new customers is not infinite – after a time, there are diminishing returns in acquiring new customers whose spending potential is low. And yet, for the business to show growth, they need to keep new customers coming in. Where do they find such customers? From their own pool of lost or dormant customers! This leads to what I call the “doom loop” of spending: customers get acquired, some of them become inactive, they are then re-acquired, some among them become inactive again, and they are re-re-acquired.”

Stop Loss: The Power of Attention Messaging: “Digital customers mean digital marketing. And digital marketing has been reduced to handing over money to Google and Facebook for acquiring new customers. And then re-acquiring them when they are lost. This creates a doom loop of spending which has meant that 90% of digital marketing budgets (which can be half of funds raised by startups and growing companies) is channelised to the tech giants. Marketers are getting locked into an arms race of spending for acquiring less valuable new customers and a growing pool of inactive customers, even as revenues and profits for the tech duopoly reach record highs. Even D2C marketers face a challenge – marketplaces like Amazon vacuum away budgets in hypercompetitive search placements.”

The Coming Martech Era: Driving Exponential Forever Profitable Growth: “The past two decades have been the golden period of the Adtech Era. The platforms, Google and Facebook, have seen their market cap grow immensely on the back of creating an easy point-and-click approach to targeting ads and acquiring new customers. Every business wants a continuing pipeline for conversion, and the tech platforms have done this amazingly well. Aided by the big ad agencies, the duo sucks away an increasing percentage of revenues from companies hungry for growth. New customer acquisition has never been easier, thanks to Google and Facebook. As VCs, PEs and public markets have rewarded growth over profits, companies have channelled resources for new customer acquisition.”

The Coming Martech Era: Driving Exponential Forever Profitable Growth: “The big mistake brands have made is to let these two giants [Google and Facebook] get in between them and their customers. It is time to reclaim the direct relationship and exit the arms race of ever-increasing new customer acquisition costs. This is the key to simplifying marketing.”

Thinks 450

Fred Wilson: “I have learned that on any team there are always a few members who are extremely difficult to replace. While most team members are “fungible”, there are always a few “non-fungible people” and retaining these NFPs can be incredibly important to the long-term success of the business. The first, and most important, NFP is the founder. The person who originally conceived of the opportunity, recruited the first few team members, scoped (and often built) the first product, brings immense value to the business, mostly around long-term vision, setting the culture and values, and knowing when something is “off.” Retaining the founder’s interest in and involvement with the business is critical. There are times when the founder is bringing more difficulty to the business than value and they should depart. But those situations are to be avoided if possible because of how important a founder is to the business. NFPs are usually individual contributors, not managers. The management function is much easier to replace than a uniquely skilled individual. A common mistake that I and others have made is to promote an NFP into management when they are much happier not managing people. A classic role for an NFP is the CTO of the business. In this role, the person sets the overall technology direction of the business, makes the hardest technical decisions, builds technology themselves, but does not manage the engineering function. In many companies, the CTO has no direct reports.”

FT on Wordle’s virality: “A single design choice took the game viral. After noticing a group of players in New Zealand sharing their results online using coloured emoji squares, Wardle wrote code in December allowing players to copy their daily results on to Twitter. The resulting graphical maps are a deceptively smart invention: they make the game immensely shareable, each readable as a miniature story with its own emotional arc. When I see a row of incorrect grey letters followed immediately by a correct answer, I feel the swooping uplift of that player’s luck. Conversely, seeing a player guess four letters correctly every time but never uncovering the fifth is a classic tale of frustrated ambition — the almost of it all…While most tech products try to capture as much of the user’s time and attention as possible, Wordle does the opposite. Nothing is monetised. Wardle has designed the game so players can spend no more than a few minutes daily on his site. The shareable emoji grids don’t even include a link for promotion. It runs counter to the wearisome trends towards addictive and ethically dubious monetisation strategies in tech. Wordle succeeds because it genuinely respects its players.” Leher Kala: “The shrewd Wordle developer releases just one game a day, ensuring a hooked audience is anxiously waiting for it to drop.”

ThePrint about youth in UP: “Afternoons are for charging phone batteries up to 100 per cent, evenings are for playing digital games in sportsgrounds, and nights are for climbing rooftops to catch the network signal. This is when mobile data is the cheapest and fastest, and so it’s the perfect time to plunge into the three Ps: political propaganda, pornography, and potboilers like the action-drama Pushpa, which is currently all the rage. This is how many among Uttar Pradesh’s “generation nowhere”, a term that scholar Craig Jeffrey has used to describe educated, unemployed youth in India, spend their days. There are few job prospects, college degrees gather more dust every year, and there is usually no family money to bank on, but these youth do have something to keep the abyss at bay: their standard daily quota of 2GB of data…The more pervasive trend in the 2020s among unemployed youth, however, is the pursuit of distraction. When anger or despair do arise in this brave new world, they are usually quickly scrolled away and quietened by hours on Instagram reels.”

Martech 2.0 and Web3: Solving Advertising’s 50% Problem (Part 3)

Rising CAC

The problem marketers are increasingly complaining about is rising customer acquisition costs (CAC). This is no surprise because the past two years have seen an acceleration of digital growth in part forced upon all of us by the pandemic and ensuing lockdowns. This has been happening not just on media platforms but also on marketplaces. The biggest beneficiaries of this have been Google, Facebook and Amazon.

In 2021, Google’s advertising revenue grew to $210 billion, up 42% from the previous year. Facebook (Meta) grew its revenues 37% year-on-year to $115 billion. Amazon’s ad revenues in 2021 stood at $31 billion, growing at 32%. Tally up all three and their 2021 take comes to $356 billion. According to Digiday: “Together they accounted for more than $7 in $10 (74%) of global digital ad spending last year, which is 47% of all money spent on advertising over that period … The rest of the online ad market is growing at a combined growth rate of 3% year-on-year in comparison.”

Where is this growth coming from? From marketers competing against each other to grab customers. It is little wonder then that the cost of acquiring new customers is rising so rapidly. Massive inflows of venture capital into startups have also fuelled this spending mentality. The result is spending on new customer acquisition like there is no tomorrow – creating what I have called as the “doom loop” of ad spending.

My assessment of the waste is that it happens in two ways: reacquisition and wrong acquisition. Reacquisition is about those customers who have churned. As I wrote earlier: “This is because the pool of available customers is limited. Outside of the loyal cohort, the lifetime of other customers with brands is perhaps no more than a couple years – which means half of them churn each year. And since they were valuable at one point of time, they are more likely to get retargeted for acquisition.” Wrong acquisition is about new customers who churn quickly. It is estimated that half of those who install an app uninstall it within the first 30 days. While no formal estimates are available, I believe that each of these two categories sucks away a quarter of the ad spending.

Apple’s new privacy framework and the rising backlash against cookie tracking are also going to create hurdles and increase cost of acquisition. Marketers therefore face a leaky bucket with their ad spending.

Thinks 449

FT on what 5G offers consumers: “The one clear application that 5G is poised to augment is gaming. Soderstrom argues that for virtual and augmented reality, “5G is the secret sauce.” The idea is that the 5G network allows gamers to fully immerse themselves in the virtual world without any lag, and without heavy battery backpacks that last about 20 minutes. The processing instead takes place at the edge of the 5G network so that, as soon as a player moves their head, the image changes imperceptibly.”

The Generalist on solo (venture) capitalists: “What explains the rise of the solo investor? A handful of factors seem particularly critical, though it’s worth noting that no trend of such altitude operates discreetly. Rather, they mingle, influencing each other. Here are the five I find most critical: individuals can amass distribution power directly, venture capital has grown as an asset class, knowledge has formalized and best practices have emerged, tech and investing have hit the mainstream, infrastructure has made going solo simpler.”

Andreas Kluth: “New research suggests it’s good, even better, to start shallow before going deep. That’s useful advice no matter where you are in your career…While you’re exploring — as when you’re searching for water in a desert — you have to be patient and to persevere. Something will turn up. Your job is to recognize that moment, and trust the depth of the well. It could take the form of a PhD thesis, a startup, a book, or whatever. This is when, as Satchidananda put it, you should “use dynamite and keep going down. If you leave that to dig another well, all the first effort is wasted.” The good news is that the cycles of exploration and exploitation don’t have to end. Potentially, they can recur throughout life. When you’re feeling midlife burnout, for example, it may simply mean that you’ve been exploiting too long and have drained one particular well. So get out that dowsing rod, but bring the spade. Scratch a bit here and there. And eventually — but not too soon — start digging again.”

Martech 2.0 and Web3: Solving Advertising’s 50% Problem (Part 2)

The Waste

The problem of wasted ad spends has been there for a very long time. MediaVillage writes: “Imagine any other profession, and I use the term advisedly, tolerating the belief that half of its effort is wasted? Who would work with an accountant who files tax returns that are right only half the time? Who would work with a lawyer who loses half of his cases? Who would seek out a doctor whose diagnostic hit-rate is only 50 percent right? The advertising industry loves to perpetuate the myth that half of its spend is wasted — and that’s just how it is; you can’t win all the time. Is the click real or fraudulent? Human or bot? Who cares? It’s a flip of a coin, heads or tails, wasted or not. It’s the 50 percent rule.”

Earlier, it was in the context of print and TV advertising. Now it is the same with digital advertising. While the belief was that targeting online would eliminate waste, that has not happened. Even with programmatic advertising, the waste has continued. A 2018 post by Timothy Taylor pointed to a 2016 study by Interactive Advertising Bureau (IAB) and quotes Judy Unger Franks: “The IAB identified ten different value layers in the Programmatic ecosystem. I believe they are being overly generous by calling each a “value” layer. When you need an ad blocking service to avoid buying questionable content and a separate verification service to make sure that the ad was viewable by a human, how is this valuable? When you add up all the costs associated with the ten different layers, they account for 55% of the cpm (cost-per-thousand) that an advertiser pays for a programmatic ad. This means that for every dollar an advertiser spends in Programmatic Advertising over half (55%) of that dollar never reaches the publisher. It falls into the hands of all the third parties that are required to feed the beast that is the overly complex Programmatic Advertising ecosystem. We now know which half of an advertising investment is wasted. It’s wasted on infrastructure to prop up all those opportunities to buy individual audiences across the entire Programmatic Advertising supply chain.”

Despite all this, the power of the digital platforms has grown rapidly. Ben Thompson summarised the reasons for their success:

…The traditional marketing funnel made sense in a world where different parts of the customer journey happened in different places — literally. You might see an advertisement on TV, then a coupon in the newspaper, and finally the product on an end cap in a store. Every one of those exposures was a discrete advertising event that culminated in the customer picking up the product in question in putting it in their (literal) shopping cart.

On the Internet, though, that journey is increasingly compressed into a single impression: you see an ad on Instagram, you click on it to find out more, you login with Shop Pay, and then you wonder what you were thinking when it shows up at your door a few days later. The loop for apps is even tighter: you see an ad, click an ‘Install’ button, and are playing a level just seconds later. Sure, there are things like re-targeting or list building, but by-and-large Internet advertising, particularly when it comes to Facebook, is almost all direct response.

This can make for an exceptionally resilient business model: because the return-on-investment (ROI) of direct response advertising is measurable to a fantastically greater degree than traditional advertising measurement, advertisers can spend right up to the level they place on a particular customer or transaction’s value.

It is the combination of ease and measurability which propelled the success of the digital ad platforms. And so far, marketers have been largely oblivious to the waste that has been happening. But going forward, I believe they will have to look at these spends critically because the problem of rapidly rising costs of acquisition is going to become a serious drag to profitability.

Thinks 448

Raph Koster’s real talk about a real metaverse. “I’m here to just share some high level lessons, some mistakes that have already been made, in hopes that it saves you from making future mistakes. We’ve had online worlds for 44 years, and any vision of the metaverse is built on top of the idea of online worlds, whether you call them online worlds, MUDs (multi-user dungeons), virtual worlds social worlds — it doesn’t matter…I would urge everyone here because I do believe everyone is idealistic. Everyone has high level dreams about what this can be. I urge all of you who are listening to this, please go back, look at the history, learn from it. Find the ways to get around these key problems.”

Johann Hari: “You can only consciously think about one or two things at a time. That’s it. This is just a fundamental limitation of the human brain. The human brain has not significantly changed in 40,000 years. It’s not going to change on any time scale any of us are going to see. You can only think about one or two things at a time. But what’s happened is we’ve fallen for a mass delusion. The average teenager, according to Professor Larry Rosen’s research, now believes they can follow six or seven forms of media at the same time. So what happens when scientists get people into labs is they get them to think they’re doing more than one thing at a time. And what they discover is you’re not. What you’re doing is you’re very rapidly juggling between your tasks. You’re going from, what did it say on WhatsApp, what’s this on Netflix, what’s that notification I just got? You’re switching, switching, switching…When you try and do more than one thing at a time, you will do all the things you’re trying to do much less competently.”

Jonathan, Lord Sumption: “Democracies depend on two things. They depend on an institutional framework, and they depend on a cultural background. It isn’t usually the institutional framework that fails. That’s still there. What fails is the cultural background, which is the desire of people to make it work, the desire of people to respect plurality of opinion, and to accept that sometimes they can’t get their way, however important the issue and however right they think they are. In most countries which have lost their democratic status, the institutions are still there, there are still elections of a sort, there are still parliaments—but they are largely meaningless because the culture that sustained them disappeared.”

Martech 2.0 and Web3: Solving Advertising’s 50% Problem (Part 1)

Overview

“Half the money I spend on advertising is wasted; the trouble is I don’t know which half.” This was a statement made by John Wanamaker about 100 years ago. And it still holds true. The modern equivalent of the first half of the statement would be: “Half the money I spend on adtech is wasted.” If marketers actually did some analysis, the second half would say: “I know exactly which half.” But few do it; most are happy to keep the spending going on Big Tech (Google, Facebook – now Meta –  and increasingly Amazon) to have new customers flowing in – even if the bucket is leaky. To make matters worse, almost every marketer is worried about the rising cost of customer acquisition. All of this hurts profits. The day when easy money stops is when marketers and CEOs will need to face up to the harsh reality that unless they curb their ad spends, there is no path to profitability.

In this series, I will argue that for the first time it is possible to cut the waste in advertising on tech platforms. Given that the total spending in 2021 was $400 billion, this comes to eliminating $200 billion of waste being spent on reacquisition and wrong acquisition. This $200 billion is perhaps one of the biggest opportunities in tech. And yet, very little attention is paid on solving it because the focus has been in the wrong place.

The industry has been guilty of the streetlight effect: “A policeman sees a drunk man searching for something under a streetlight and asks what the drunk has lost. He says he lost his keys and they both look under the streetlight together. After a few minutes the policeman asks if he is sure he lost them here, and the drunk replies, no, and that he lost them in the park. The policeman asks why he is searching here, and the drunk replies, “this is where the light is”.”

To solve the 50% adtech waste problem, a good starting point is to remember two quotes. Albert Einstein said: “We cannot solve our problems with the same thinking we used when we created them.” Buckminster Fuller: “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” These have to guide us in the search for the solution.

In my view, the solution can be found by shifting our thinking from trying to optimise adtech spending to focusing on martech and existing customer. It is only by increasing focus and spends on current customers that marketers can reduce the adtech waste. Making martech successful needs a full-stack solution encompassing CDP, automation, engagement, analytics, personalisation, search, product experience, omnichannel two-way communications, AI, APIs and more. It also needs to consider new ideas like Velvet Rope Marketing (VRM), a rethinking of how referral marketing is done, a “progency” (product-led agency), and an adtech-martech bridge. This is the world of Martech 2.0.

The new model that needs to be incorporated into Martech 2.0 is that of Web3 – a decentralised platform powered by crypto tokens to power “Atomic Rewards” – for attention, engagement, and habit creation. Only by first solving the problem of Attention Recession can marketers make Martech 2.0 work. This twin combination of Martech 2.0 and Web3 is the secret sauce that can solve adtech’s waste problem and power brands to exponential forever profitable growth.

Thinks 447

Gal Beckerman: “Saul Alinsky, the famed community organizer who wrote “Rules for Radicals,” had a useful metaphor: For a revolution to be successful, he argued, it has to follow the three-act structure of a play. The first act establishes the characters and the plot, the second act sharpens the conflict, and in the third act, “good and evil have their dramatic confrontation and resolution.” From women’s suffrage to the midcentury civil rights struggle, movements mastered this narrative, leaving a permanent mark on society. But by the early 1970s, Alinsky had started to worry that overeager revolutionaries were jumping straight to that third act — a losing proposition. Those first acts matter because that’s where activists hammer out ideology, define goals, set strategy and build lasting identity and solidarity. It’s also where the essential work of organizing occurs…The question is how to create the conditions those first two acts demand: the closeness and heat and passionate whispering.” FT: “In place of a “social contagion” model for the spread of ideas, Beckerman advocates the “intense heat of incubation”, as bold visions mature far from the limelight thanks to “embedded patience”. In this perspective, “going viral” tends to bring not triumph but disaster. So the virtual communities of first-wave cyber space appear here as a paradise now lost.”

Bill Waterson in 1990: “You’ll be told in a hundred ways, some subtle and some not, to keep climbing, and never be satisfied with where you are, who you are, and what you’re doing. There are a million ways to sell yourself out, and I guarantee you’ll hear about them. To invent your own life’s meaning is not easy, but it’s still allowed, and I think you’ll be happier for the trouble. Reading those turgid philosophers here in these remote stone buildings may not get you a job, but if those books have forced you to ask yourself questions about what makes life truthful, purposeful, meaningful, and redeeming, you have the Swiss Army Knife of mental tools, and it’s going to come in handy all the time.” [via Atanu Dey]

Adam Kirsch about America’s history wars: “In debates about monuments, curricula and renaming, the facts of the past matter less than how we are supposed to feel about our country.”