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  • feedwordpress 18:53:51 on 2020/11/30 Permalink
    Tags: , , facebook, , , , , , , , the press   

    Media and Marketing Leaders: It’s Time to Stand Up For Truth 


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    Why “information equity” matters.

     

    An idea has been tugging at me for months now, one I’ve spent countless hours discussing and debating with leaders in marketing, media, and journalism. And as I often do, I’m turning to writing to see if I can push it into more concrete form. I’m literally thinking out loud here, but I won’t bury the lede: I believe it’s time for all major corporations – not just the companies that pushed for the #StopHateForProfit boycott – to call for a broader, more universal movement related to their marketing practices and their “Corporate Social Responsibility” efforts.This isn’t about punishing platforms, rather it’s about reimagining our relationship to them, and shifting our focus to the externalities our collective dependance upon them has created. For now, I’m calling the movement “Information Equity” – a rather dry and academic moniker, to be sure. Toward the end of this post, I’ll ask for your help in pushing the idea forward. But for now, let me explain what I’m on about.

    ***

    Some years back I helped start a company called NewCo, an effort to identify and promote companies that view business as a force for good. The idea sprang from an observation that the most successful companies often had purpose at their core, they were animated by a desire to make the world better in some measurable way. Lately the idea of business as a force for good has found broader appeal, to the point where the Business Roundtable recently revised its definition of purpose in business. No longer would the true north of business be the maximization of profit for shareholders. In its place would now sit a new lodestar: “Creating an economy that serves all.”

    It’s easy enough to dismiss such declaratives as lipstick on the soulless pig of capitalism, but these kind of statements shift societal expectations over time, and eventually they change outcomes as well. Large corporations are increasingly being held to account by employees, customers, and the communities they impact. It’s demonstrably true that business practices have changed in recent years. And the last nine months – replete with a global pandemic and a deadly serious racial reckoning – have deeply accelerated those changes. Driven by COVID, the Black Lives Matter movement, and an impending climate disaster, “Corporate Social Responsibility” has now taken center stage in American business.

    Now that the klieg lights are on, the question rightly becomes: What will corporations do with the microphone?

    It’d be tempting to claim victory, and point to the change that’s already here. Less than a generation ago, it would have been corporate suicide to take a stance on charged issues like race, gender, or the environment. But today, the world’s largest advertiser – Proctor & Gamble – employs its marketing budgets to create and promote powerful films decrying systemic racial and gender inequality. The world’s largest money manager – BlackRock – has put climate change at the center of its investment and governance decisions. For each of these formerly third-rail issues – race, gender, climate – hundreds of major corporates have declared similar intentions.

    But while  race, gender, and environmental equity have become rallying cries for mainstream corporate America – and rightly so – there’s another fundamental human right I’d like to see taken up by our newly woke business leaders. This particular right – or its absence – drives society’s comprehension, education, discussion, debate and ultimately, society’s actions related to resolving historically intractable issues of human rights.

    In short, if we are going to solve our largest problems, we must first solve society’s problem with the truth.

    ***

    Over the past ten or so years, American society has lost its faith in a shared truth. We simply don’t believe the same things anymore. And in the battle to defend our particular versions of truth, we have badly weakened journalism – our historical institution of truth-telling.  We’ve not simply undermined journalism’s economic models, but more importantly, we’ve marginalized its impact and primacy in helping us determine the facts upon which society determines progress. We have questioned journalism’s motives, its  business models, and the social compact granting journalism the right to determine fact, establish reason, and debate course of action.

    I am not arguing these questions should not be raised – journalism is imperfect at best. But in abandoning journalism, we might have forgotten a larger question: If a free and fair press is not the answer to finding our common truth then … what exactly is? Think for a moment on what might replace journalism in our society. You’ll likely find yourself in a rather dark mood.

    Over centuries, we have built journalism as an institution of truth telling – in concert, in opposition, and even in cahoots with institutions of power in government, religion, and business. This truth-telling organ is commonly referred to as the Fourth Estate, and its record is both speckled and glorious. But it’s also the only private institution empowered by a Constitutional name check – and in the First Amendment, at that. So as far as I’m concerned, if ever there was a purpose-driven business, it’s one built around a newsroom. The mission of a news business is to fulfill the right of the people to be informed by truth. To deliver as full and transparent an account of truth as is possible. To hold truth as a mirror to power. And to demand an accounting if, once put to power, those truths do not square with the powerful’s actions.

    Without standard-bearers capable of this endless and grinding work, democracy is lost.  Without access to high-quality news reporting, the citizens of this nation will make decisions based on rumor, bias, self-interest, and fear.

    I’m all for Benkler’s concept of a “networked Fourth Estate” – that the rise of the Internet has added a multitude of actors – bloggers, non-profits, citizen journalists – to the category we might call “the press.” And the rise of social media has, indeed, given everyone with a voice an opportunity to speak. But we’ve failed to place guardrails around the institutional mechanisms which determine how these new voices are distributed in our society. At present, the inscrutable algorithms and powerful business models of our largest technology platforms determine the information diets of a growing majority of Americans. And I think it’s inescapably true that as things stand, these platforms have no incentive to change how they do business. That’s where corporations – and their advertising budgets – must come into play with a more long-term solution.

    ***

    Quality journalism at scale is under extreme duress. Yes, the Times, the Post, the Atlantic, the Wall Street Journal have all experienced a renaissance in the past few years. But all you readers of long form journalism, you devourers of words by the thousand, you are not the citizens of whom I speak. Your information equities are not in peril, your privilege is intact.

    What matters here is scale. Read Charlie Warzel or listen to Kevin Roose, and ponder the citizen who can’t afford (or simply doesn’t wish) to take their news from high-quality print outlets. When more than a hundred million Americans struggle to cover a $400 medical bill, society needs an advertising-supported model that brings quality information to the masses (this of course is Zuckerberg’s favorite defense for why Facebook is ad-driven, which is one of many examples of how the company has subverted the clothing of journalism without accepting its responsibilities). When the most convenient free service for news is Facebook, then Facebook will become America’s answer to news. As a result, tens of millions of our fellow citizens are caught in the jaws of systemic information bias, of institutionally-driven information pollution. One-quarter of Americans believe the recent election was possibly stolen, and a full third of us believe that the new administration may well enslave children for sexual favors. We’re in the grip of an information-driven disease – an information pandemic –  the cancerous externality of a society which has deemed the growth of our most profitable companies more important that the dissemination of fact-based information and truth.

    ***

    So what is business going to do about it?

    Boycotts are fine, but business must make combatting the lack of quality information in our society a primary and ongoing goal. Surely if corporate America can get comfortable with activism on behalf of racial, gender, and environmental equality, it can throw its support behind every citizen’s right to quality information.

    But how? How might business lead when it comes to addressing this fundamental issue?

    There are scores of ideas yet to be imagined, and plenty of think tanks, non-profits, and other organizations already working on important parts of this problem. But for all its skill at communication, the media industry has been far too silent in advancing solutions. It was just last month – last month!! – that the Global Alliance for Responsible Media, a working group comprised of leading platforms, media agencies, and brand advertisers, added “Misinformation” to its long list of “harmful content.”

    That’s progress, but democracy can’t wait for a committee report sometime next year. The most important step we can take now is to declare information equity an issue worthy of support by the business community. Marketers must dedicate a small but substantial portion of their budgets – which in aggregate equate to hundreds of billions of dollars each year – to a stated commitment supporting the creation and distribution of quality journalism at every level of society. I’ve written extensively elsewhere about how this is possible without abandoning the benefits of scale, targeting, and efficiency that platforms unquestionably bring to our industry. Not only is it possible, it’s also good for business results – and society at large.

    The media industry helped to create this problem of misinformation – by funding the rise of platforms, by ignoring the externalities these platforms foisted onto society, and by growing addicted to the results the platforms delivered to our bottom lines. If we don’t renegotiate the relationships between marketers, platforms, media companies and the audiences we all serve, how can we expect anything to change?

    Just as the planet can no longer tolerate the externalities of an economy driven by carbon, and just as our society can no longer tolerate the externalities of a culture driven by institutional race- and gender-based injustice, we can no longer whistle past the graveyard of truth.

    If you agree, please join me in an ongoing conversation. My email is jbat @ therecount dot com – hit me up, and I’ll add you to an engaged community of agency leaders, marketing executives, media entrepreneurs, and others who are interested in finding a path forward. I look forward to the dialog, and as always, thanks for reading.

     
  • feedwordpress 01:20:40 on 2020/10/14 Permalink
    Tags: facebook, , , , , , , speech   

    Facebook Is Finally Admitting It’s A Publisher 


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    The video above is from a conversation at The Recount’s SHIFT event last month, between Nick Clegg, Facebook VP, Global Affairs and Communications, and myself. If you can’t bear to watch 30 or seconds of video, the gist is this: Clegg says “Thank God Mark Zuckerberg isn’t editing what people can or can’t say on Facebook, that’s not his or our role.”

    One month later, with Trump down in the polls and the political winds shifting, well, let’s just say the company has changed its tune. Dramatically. Not only has it banned Holocaust denial, it’s also banned anti-vax advertising and taken steps to pro actively manage the disinformation shitshow that will be the Trump campaign post election.

    Witness this quote, from Zuckerberg himself, in his recent post framing why Facebook will now ban Holocaust denial from the platform: “Drawing the right lines between what is and isn’t acceptable speech isn’t straightforward, but with the current state of the world, I believe this is the right balance.”

    Excuse me while I point out the most fucking obvious thing in the world when it comes to what an editor actually does: We draw lines about what is is and isn’t acceptable, either as fact, as truth, as hypocrisy, or what is in the public interest. That’s the damn job of journalists: To call bullshit. And regardless of Facebook’s longstanding claims to not be a publisher or a journalistic entity, the truth is, these actions prove the company understands it is an arbiter of facts, truth, and the public interest. The  simple reality is this: The company has tried to have it both ways for Too. Fucking. Long. It’s time we treat Facebook for what it is: A media company, subject to the norms, responsibilities, and behaviors we all expect and demand from our media providers.

     

     
  • feedwordpress 15:31:31 on 2020/06/17 Permalink
    Tags: facebook, , , , , Recount Media, , The Recount, , ,   

    Marketers Have Given Up on Context, And Our National Discourse Is Suffering 


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    It’s getting complicated out there.

    Marketers – especially brand marketers: Too many of you have lost the script regarding the critical role you play in society. And while well-intentioned TV spots about “getting through this together” are nice, they aren’t a structural solution. It’s time to rethink the relationship between marketers, media companies (not “content creators,” ick), and the audience.

    So let’s talk about it. Grab your favorite beverage and read along. I’m heading into a bit of media theory for the next couple thousand words – I hope this will start an interesting conversation.

    For those of you who want a TL:DR summary, here it is: It’s time to get back to the work marketers used to be really good at: Deciding on the appropriate context in which to engage your audience. And it’s time to pull back from a habit most of you have fallen into: Letting the machines choose your audience for you. Thanks to new approaches which fuse at-scale ad targeting with high-quality editorial product, you can step into this renewed role without sacrificing the reach, precision, and targeting afforded by the likes of Facebook, Google, Twitter, and their kin. To understand how, let’s review some history.

    The Old Media Model

    If you read this site back when I wrote regularly on media (roughly 2003-2015), you’ll recall I laid out several basic tenets about how the media business works. It’s comprised of three core components: Editorial (the media company’s content), Audience (people who give their attention to the content), and Marketer (commercial actors who desire the Audience’s attention in the context of the Editorial). Of course, in the past ten years, a fourth component has eclipsed all three: The Internet Platform.

    Before the major Internet platforms deconstructed the media business, the three original components came together in what we’ll call a media product (I’m still partial to “publication,” but many think only of print when they hear that word). Print, television shows, and early web sites all served as vessels for a commercial relationship between  Editorial, Audience, and Marketer. The media company took the financial risk of creating and distributing the media product, and if successful, the marketer paid to run advertising inside the media product. In some cases, the audience also paid a subscription fee for the editorial. But for most media companies, advertising support was crucial to chin the bar of profitability and make a go of it as a business.

    A critical element of the media-product-as-vessel model for commercial transactions was that context matters. The media product created context for audience engagement, and if the marketer offered messaging that aligned with that context, it stood to reason that the audience would be more receptive to the advertiser’s message. Suffice to say that with the rise of audience buying on massive platforms, context has been lost, with nearly incalculable downsides across the media ecosystem (and society at large). More on that later on.

    Meanwhile, back in those pre-platform days, distribution was important, but it was also a constant. Most media companies consolidated distribution by acquiring broadcast licenses or cable networks (for television) or print distribution networks (if you were a magazine or newspaper company). And if you were a media startup, you could leverage those distribution networks for a relatively predictable rent – often without spending any capital up front. When we started Wired, for example, we secured newsstand distribution by agreeing to split the revenue earned by our nascent magazine with our distribution agent.

    I call this old-school model “Packaged Goods Media.” Fifteen years ago I noted that “PGM” was giving way to a new model, which I termed “Conversational Media,” or CM. CM, of course, was the precursor to “social media” – Twitter, Facebook, YouTube – and as I thought out loud about this new phenomenon, I noted several crucial distinctions between it and Packaged Goods Media. I predicted that the economics of Editorial, Audience, and Marketing were all going to change dramatically. In many ways I was spot on. But in several others, I was dead wrong. Here’s a summary of a few key points:

    • Editorial models would evolve from “dictation” to “conversational,” where the audience – and knowledge of the audience through data – became a central driver of editorial creation.
    • Distribution would become nearly free, obviating the rent-seeking monopolies held by major media companies. In fact, I wrote: “economic differentiation based on the control of distribution – the very heart of PGM-based business models – is irrelevant in CM-based services.”
    • Online, publications become more like a service, rather than a product. I noted that software, which was still largely a packaged product, was also heading in this direction. That means media will have different economics and different advertising models over time (I called them “native advertising” at the time).

    I’d argue that over the next ten years I got the first and third predictions relatively right, but I entirely whiffed on how distribution would play out. I simply failed to imagine how Facebook, Google, and others would leverage their newfound control of audience attention. In one piece from 2006, I wrote:

    “…finding massively scaled Conversational Media companies [besides Google] is a rather difficult search … it’s unclear whether CM companies will mature into massive conglomerates like Time Warner.”

    Well, it’s certainly clear now. Facebook, Google, and their peers are among the most powerful and well-capitalized companies in the world, and they got that way by doing one thing very well: Capturing the attention of billions of us. That gives them a near monopoly on digital distribution, which they’ve leveraged into a near monopoly on digital advertising. In the process, these tech platforms have eliminated the traditional role of publishers as a proxy for audience interest and engagement. I used to believe this trend spelled the end of high-quality independent media brands – indeed, it’s why I didn’t start a media brand after selling Federated back in 2013. But media models are always evolving, and I now see a new way forward. To understand that, we must first review where we stand today. And to do that, we must examine arbitrage.

    The Arbitrage 

    If I were writing a sequel to “The Search” focused solely on how digital media models have shifted in the past 15 years,  I’d probably title it “The Arb.”

    It would not be a pretty story. In the past ten years, audience arbitrage has become a dominant model of the digital media business. It’s an awful business practice that erodes trust, devalues media brands, and dilutes the importance of marketing. What follows is a bit of a rant, but hell, you’re still reading at this point, so refill your glass, and let’s get to it.

    The dictionary definition of arbitrage is “the simultaneous buying and selling of securities, currency, or commodities in different markets or in derivative forms in order to take advantage of differing prices for the same asset.”

    In media, the asset being arbitraged is audience attention. The arbitrageurs are publishers. Their enablers are the major tech platforms, fueled by dollars from advertisers.

    Here’s how it works. A big publisher like Buzzfeed or Cheddar sells a million-dollar advertising deal to a marketing brand. The media company guarantees the marketer’s message will collect a certain number of audience impressions or views, charging the marketer a “cost per thousand” for those impressions. (Known as “CPM,” cost per thousand pricing ranges widely, from a few pennies to $25-40 for “premium” placements). Utilizing a Packaged Goods media model, the publisher might fulfill those impressions on its “owned and operated” properties, but over the past ten years, doing so  has accrued significant drawbacks. The top three:

    • It’s expensive. Acquiring and retaining audiences on a media company’s own property is often far more costly than finding those same audiences on an at-scale platform like Facebook or Google.
    • It lacks sophisticated targeting. In the past decade, marketers have grown accustomed to the data-rich precision of large platforms. They don’t want to pay for just any old Buzzfeed or Cheddar audience member. They want their messaging to reach exactly the target they specify, and most publishers don’t have either the technology or the audience scale to fulfill the data-driven demands of modern marketers.
    • It forces extra work on the marketer. I am not the first, nor will I be the last to note that marketers and agencies don’t like to do extra work. While plenty of larger publishers have built high-quality advertising solutions on their owned and operated channels, marketers view these point solutions as  just one more channel they have to manage, analyze, and report on. It’s just So Much Easier to buy Facebook, after all.

    Because of all this and more, publishers have become audience buyers on Facebook, Google, and other networks. Enterprising publishers began packaging their own content with marketing messages from their sponsors, then they got busy promoting that bundle to audiences on Twitter, Facebook, and Youtube, among others.

    This is where “the arb” comes in: The publisher will charge the marketer, say, a $15 CPM, but acquire their audiences on Facebook for $7, clearing an $8 profit on every thousand impressions.

    You might ask why the platforms or the marketers don’t put a stop to this practice, and you’d be right to ask. But consider the economic incentives, and things get a bit more clear. The platforms are getting paid for what they do all day long: the delivery of precise audience impressions at scale. As far as platforms are concerned, the media brands are just advertisers in different dress.  Over the years, Facebook and Google have even accommodated the arbitrage by connecting all parties directly through their advertising technology systems.

    OK, so the platforms get paid to deliver audiences to marketers on behalf of media companies, but why on earth do the marketers put up with being arb’d? Couldn’t they just pay the same $7 CPM directly to Facebook, eliminate the middle man, and save the $8 spread?

    Well, indeed they can, and in most cases when it comes to buying audience on Facebook or Google, that’s exactly what they do. But remember my comments about context way up toward the top of this article? Some marketers still believe that the context of a media brand can help their messaging perform better, and they’re not wrong in that belief.  So they’ll pay a bit more to have their messaging associated with what they believe is quality editorial. And if that media brand does the work of acquiring that audience for them, so much the better – that’s less work for the marketer to do.

    But let me be clear: arbitrage sucks. Arbitrage is only lucrative in markets with imperfect information. It’s usually a great strategy in the early stages of a new ecosystem, when media buyers are less familiar with how advertising technology works. As those buyers get smarter, they start to squeeze the media company’s margins, devaluing content and context, and pressing ever closer to the price they could get directly from the platform. A good example is Demand Media – a company that, a decade ago, managed to insert itself between Google’s search algorithms and an advertiser’s desire to be associated with content around a particular topic. Demand pulled off a billion-dollar IPO based on creating advertiser-friendly “content farms” around popular Google searches. But advertisers figured out the arb, and Demand’s once billion-dollar valuation fell more than twenty fold in the past five years.  A similar fate has befallen the once high-flying arbitrageurs  of social media. Cheddar, Vice, BuzzFeed, and many others all played the game, but over time, markets will root out an arb. (Cheddar was smart enough to sell before its arb was uncovered – but it sold at a fraction of the sky-high valuations its peers once held).

    But wait, one might ask – aren’t the media companies adding true value? What about that context, which makes a marketer’s message more relevant and engaging? Isn’t that worth something?

    It certainly is, but this is where the lack of transparency around ad buying on platforms comes into play. Audience buying is cloaked in opacity – the major platforms are deeply invested in making sure no one truly understands how attention is priced. That means a media company buying audience on Facebook or Google will always be at an informational disadvantage – exposing them to a new kind of arbitrage, one executed by the platform’s own algorithms and benefiting the platform’s bottom line. Again, arbitrage works best in markets with asymmetric information features – and informational asymmetry is built into how Platforms operate. Over the past five or so years, most major media companies have come to realize they’re the ones being gamed.

    Audience arbitrage on platforms has even more destructive attributes. Because media buyers have outsourced their audience acquisition to either the media company or the platform itself, the marketer becomes disconnected from the context of its audience. Millions of impressions are scattered across millions of tiny content bundles, all of which are lost in a sea of endless posts on nearly every imaginable topic. The context and meaning that holds all brands together is lost.  Media companies, pressed by ever-thinning margins, will cut corners, buying “junk traffic” or worse, creating junk content that titillates or tricks audiences into false engagement. On the surface, boxes get checked, audiences get served, impressions get logged. But over time, editorial content deteriorates, deep relationships between brands and audiences attenuate, and the media ecosystem begins to fail.

    So what can be done about it?

    Well, at The Recount we’re exploring a way forward, through a brand new partnership we’re launching on Twitter this month. We’re calling it “Real-Time Recount,” and in the next installment of this post (I’m pushing 2500 words here, after all), I’ll explain more about the theory of the case behind it. For now, you can read more about what we’re doing in this Ad Age piece (paywalled, alas), or over on Fred’s blog. Thanks for coming along, and I look forward to the conversation I hope this will spark.

    Image: http://shop.drywellart.com/product/bourbon-empty-glass-print
     
  • feedwordpress 03:10:56 on 2020/04/30 Permalink
    Tags: , , facebook, , , , , saas, , ,   

    Zoom Is YouTube, Instagram, and WhatsApp – All in Two Months. 


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    If you’ve read Shoshana Zuboff’s Surveillance Capitalism, you likely agree that the most important asset for a data-driven advertising platform is consumer engagement. That engagement throws off data, that data drives prediction models, those models inform algorithms, those algorithms drive advertising engines, and those engines drive revenue, which drives profit. And profit, of course, drives stock price, the highest and holiest metric of our capitalistic economy.

    So when an upstart company exhibits exponential growth in consumer engagement – say, oh, 3,000-percent growth in a matter of two months – well, that’s going to get the attention of the world’s leading purveyors of surveillance capitalism.

    And in the past week, Facebook and Google have certainly been paying attention to a formerly obscure video conferencing company called Zoom.

    As I’ve already pointed out, Zoom has become a verb faster than any company in history, including Google. The COVID-19 pandemic shifted nearly all of us into a new mode of video-based communication – and Zoom just happened to be at the right place, at the right time, with … a better product than anyone else. As of this writing, the company’s user base has grown from 10 million users a day to 300 million users a day – that’s two times bigger than Twitter, and nearly 20 percent of Facebook’s entire daily user base.

    That, my friends, is an existential threat if you’re in the business of consumer engagement. Which is exactly why we saw news on the videoconferencing front from both Facebook and Google this week.

    Item #1: This past Friday, Facebook announced Messenger Rooms, a video conferencing app that allows up to 50 people to have Zoom like experiences for free.

    Item #2: Not to be outdone, Google today announced that its Meet videoconferencing tool, which formerly came with its paid G Suite service, is now free and will support 100 simultaneous users.

    Item #3: Zoom’s high flying stock has lost 13% of its value since those two events.

    Both companies are attacking Zoom’s core business model: paid software as a service. As I’ve explained in earlier posts, Zoom offers a limited free service, and is in the business of convincing folks to pay for more premium features. This SaaS model works well in the world of enterprise (business to business) but when it comes to us consumers, well, the only place we’re willing to pony up at scale is entertainment (think Spotify, Netflix, etc.). Anything else, we’re fine with ads, even if they’re annoying.

    All of this forces Zoom’s hand. It’s now squarely in the crosshairs of the two most valuable advertising companies ever created. Will it pivot to an advertising model, as I speculated earlier? Will it succumb to an acquisition offer, as engagement traps Instagram, YouTube, and WhatsApp did before it? Or will it find a third way, and build an entirely new consumer behavior based on a paid service, free of the surveillance capitalism model that has dominated consumer apps for the past ten years?

    Pass the popcorn, folks. This is going to be a great show.

     
  • feedwordpress 22:01:00 on 2020/04/19 Permalink
    Tags: , , facebook, , , , , , , , , ,   

    New Research Shows Why and How Zoom Could Become an Advertising Driven Business 


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    As the coronavirus crisis built to pandemic levels in early March, a relatively unknown tech company confronted a defining opportunity. Zoom Video Communications, a fast-growing enterprise videoconferencing platform with roots in both Silicon Valley and China, had already seen its market cap grow from under $10 billion to nearly double that. As the coronavirus began dominating news reports in the western press, Zoom announced its first full fiscal year results as a public company. The company logged $622.7 million in revenue, up 88% from the year before. Zoom’s high growth rate and “software as a service” business model guaranteed fantastic future profits, and investors rewarded the company by driving its stock up even further. On March 5th, the day after Zoom announced its earnings, the company’s stock jumped to $125, more than double its price on the day of its public offering eleven months before. Market analysts began issuing bullish guidance, and company executives noted that as the coronavirus spread, more and more customers were sampling Zoom’s easy-to-use video conferencing platform.

    But as anyone paying attention to business news for the past month knows, it’s been a tumultuous ride for Zoom ever since. As the virus forced the world inside, demand for Zoom’s services skyrocketed, and the company became a household name nearly overnight. Zoom’s “freemium” model – which offers a basic version of its platform for free, with more robust features available for a modest monthly subscription fee – allowed tens of millions of new users to sample the company’s wares. Initially, Zoom was a hit with its new user base – stories of Zoom seders, Zoom cocktail parties, and even Zoom weddings gave the company a consumer-friendly vibe. Here, again, was the story of a scrappy Valley startup with just the right product at just the right time. According to the company, Zoom’s monthly users  leapt from a high of 10 million to more than 200 million – an unimaginable increase of 2,000 percent in just one month.

    Just as quickly, however, Zoom became the subject of controversy. Like Google and Facebook before it, Zoom’s success as a product comes from an unwavering focus on convenience. Zoom makes it as easy as possible to use its platform. Employing invisible technical tricks, Zoom engineers made the platform easy to install, easy to share, and … easy to hack. Press reports about “Zoom bombing” began dominating the headlines, and as reporters dug in, so did reports of significant (and long ignored) security failings. Large corporations, state governments, and school districts banned the company’s products. Media outlets began to investigate the company’s Chinese roots – only to discover that the young firm had mistakenly routed user sessions through its servers in mainland China. Zoom responded quickly, freezing product development and focusing entirely on responding to critical security issues. The company then updated its privacy policies, in response to criticism that it might use user data in the same ways that Google and Facebook currently do (more on that below).

    But with China and the United States entering a third year of an increasingly heated trade war, and now blaming each other for the origin of the novel coronavirus, Zoom finds itself in an extraordinary position that no amount of crisis communications can overcome.  Zoom’s founder and CEO, Eric Yuan, is a Chinese ex-pat and naturalized American citizen. More than 700 of his 2,500+ employees live and work in China. Until March of this year, Yuan was held up as an example of the best that global capitalism can offer – an ingenious immigrant who bootstrapped his way to America and leveraged hard work, smarts, and venture financing into a multi-billion dollar fortune.

    Now Zoom’s brand – and its future – live under storm clouds of suspicion. In just four weeks, the company has inherited the full force of the American “techlash.” And the companies previously at the center of that storm – in particular the “Big Four” of Apple, Facebook, Google and Amazon – are  happy to pass along that unpleasant mantle. What might it do next?

    * * *

    As some readers know, I’ve been a student of the “Big Four” for more than two decades. For the past 18 months, that work has focused on the terms of service and privacy policies of the Big Four. Thanks to the work of researchers and faculty at Columbia’s School of International Public Affairs and Graduate School of Journalism, we’ve published a study of the underlying architecture of the Big Four’s core policies, a visualization we call “Mapping Data Flows.” This tool breaks down and compares each company’s core privacy and data use policies, with a goal of giving both ordinary consumers and academic researchers insight into the architecture of control currently dominating our economy’s relationship to data.

    Given its very recent and extraordinary rise as a consumer tool, we decided to apply this approach to Zoom’s terms of service and privacy policy as well. You can find our initial findings here.

    As with every research project, our study of Zoom’s policies began with a working hypothesis. One of the most interesting findings from our initial study of the Big Four was how similar their policies were – they all collect vast sums of data, and their terms of service allow them nearly unlimited usage of that data. And of course, all four granted themselves the right to collect, process, and employ user data for the purpose of pursuing advertising businesses – a multi-hundred billion dollar industry driving what Harvard scholar Shoshana Zuboff calls “surveillance capitalism.” We therefore asked ourselves two questions: First, would Zoom’s current terms of service and privacy policies allow them to join the Big Four in the pursuit of an advertising business? And second, given Zoom is (or was) an enterprise facing (focused on business users), as opposed to a consumer facing platform, would its privacy policies and terms of use be markedly different from the Big Four?

    The short answer to that first question is yes. And for the second? That’d be a no. As the first image below demonstrates, Zoom collects a ton of data, and its policies are quite similar to those of its Big Four cousins.

    Figure 1 – Zoom’s Data Collection visualized

    But exploring that first question – whether Zoom might become an advertising-driven business – yielded even more interesting insights:

    Figure 2 – Zoom’s data collection for purposes of Advertising.

    As the illustration from our new visualization above demonstrates, our research shows that nearly all data collected from Zoom user sessions may be used for the purpose of advertising. Despite the clarification of Zoom’s privacy policies posted on March 29th around usage of data from user sessions, nothing material changed in its actual policies. Indeed, the company writes that “We are not changing any of our practices. We are updating our privacy policy to be more clear, explicit, and transparent.”

    To be clear, Zoom does not currently run an advertising business along the lines of Facebook, Google, Apple, or Amazon’s (and yes, both Apple and Amazon have significant data-driven advertising businesses, they just don’t like to talk about them). So why, in their own policies, do they reserve the right to use all collected data for the purpose of “advertising”?

    As any lawyer will tell you, words are slippery things. Certainly in the context of Zoom’s current business, the word “advertising” covers the company’s role as an advertiser – as a brand that uses data to market to current and potential customers using platforms like Google or Facebook. But a careful reading of the company’s policies reveal how easily the same words could allow the company to pivot from advertiser to provider of advertising, should the company wish to. In other words, there’s nothing stopping the company from joining the Big Four as a major player in the provision of advertising services, should it wish.

    How might Zoom do such a thing? And  given its current privacy backlash, why would Zoom ever consider such a move?

    Let’s start with the How, then we’ll cover the Why.

    As I mentioned at the start of this piece, Zoom’s current business is based on what folks in the tech industry call a freemium SaaS (software as a service) model. The company makes a version of its platform available to anyone for free, and then “upsells” those free users to a paid version that has more bells and whistles, like the ability to record, larger numbers of participants on a videoconference, and so on. Pricing starts at $15/month, scaling up to thousands a month for large customers. This model is most often employed for enterprise customers (Slack is a good example), but it’s also found success in consumer-facing applications, where more often than not users pay to get rid of ads (think YouTube or Hulu). Regardless of whether the service is enterprise or consumer focused, free users always outnumber paying ones by an order of magnitude or more.

    One of the most difficult elements of a freemium SaaS model is luring those free users “down the funnel” into paying for a monthly subscription. So how might Zoom convince its bumper crop of roughly 190 million new consumers to start paying up?

    By now you’ve probably figured out where I’m going with all this. Zoom could implement a free service that’s supported by advertising, then encourage users to pay for a version that’s ad free. Doing so would be ridiculously simple: Just as with YouTube, Zoom could force its users to watch a “skippable” pre-roll video ad before the start of each videoconference (and it could use its data trove to make those ads extremely targeted).  Well aware that such an interruption would be an annoyance at best, Zoom could then offer to strip the ads out for customers who paid a small subscription service of, say, $5 a month. If just one quarter of its customer base decided to do so, Zoom’s revenues would jump by $250 million a month – adding a cool $3 billion a year to its top line revenue, nearly all of which would be pure profit. The resulting advertising business could easily add hundreds of millions, if not billions more. That’s five times more revenue than the company reported in its last fiscal year.

    Which brings us to the “Why” of this admittedly speculative (but nevertheless quite reasonable) exercise. And that why comes down to capitalism. Zoom is a public company with a massive valuation – more than $40 billion at the time of this writing. That gives it an unsustainable price to earnings ratio of roughly 1,750 – 76 times larger than the S&P average. The pressure to “grow into” those outsized expectations is enormous. Zoom is staring at a multi-billion dollar business model just begging to be implemented. For its shareholders, board, and senior executives, the question isn’t why it should be adopting the business model that made Facebook, Google, Apple, and Amazon the most valuable companies in the world. Instead, the question is simply this: Why shouldn’t it?

    In another post, we’ll explore answers to that question (and how Zoom, if it’s thoughtful, could help reimagine the core architecture of surveillance capitalism). For now, take a spin around our newest visualization, give us input in the comments below. Thanks for reading, and take care of yourself – and others – out there.

    ###

    The Mapping Data Flows project is seated at Columbia SIPA – we are grateful for the support of Dean Merit Janow, as well as the support of the Brown Institute at Columbia’s Graduate School of Journalism, the Omidyar Network, and faculty and staff including Mark Hansen, Juan Francisco Saldarriaga, Zoe Martin, Matthew Albasi, Natasha Bhuta, and Veronica Penney. Hat tip as well to Doc, who’s been focused on these issues for decades as well. 

     
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