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  • feedwordpress 18:46:48 on 2022/01/10 Permalink
    Tags: blogs, , , , The Web As Platform, ,   

    On Building A Better Web: The Marlinspike Threads 


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    If you want to follow the debate about crypto’s impact on society, which I believe is one of the most important topics in tech today, you better sharpen your Twitter skills – most of the interesting thinking is happening across Twitter’s decidedly chaotic platform. I’ve been using the service for nearly 15 years, and I still find it difficult to bring to heel. When following a complex topic, I find myself back where I started – in a draft blog post, trying to pull it all together.

    That’s where I’ve been this past weekend as I watched the response to a thoughtful post from Signal founder Moxie Marlinspike.  (And yes, the fact that the Twitter conversation was driven by a blog post is not lost on me…)

    For those of you who might not use the Marlinspike’s service, Signal is an encrypted messaging platform favored by pretty much everyone in the tech and media world. Marlinspike’s post laid out several shortcomings of the current web3 world, all of it based on his own extensive “tinkering” with things like minting NFTs and building distributed apps, or dapps. It’s worth reading the whole thing, but to summarize, his critique has three key points:

    First, while web3 is supposed to be about a world free of centralized services, it turns out most of the well-known web3 platforms (OpenSea, Coinbase) are, in fact, centralized just like web2 (this echoes a criticism brought up earlier in the week by Ben Thompson (sub required, worth it).

    Secondly, technical protocols evolve slowly – and protocols are the basis for a lot of web3’s magic. Marlinspike points out that most web1 protocols – like SMTP for mail – are stuck in time and fail to evolve. This is often because the protocols are decentralized – no one is in charge of improving them.

    Thirdly, there’s a lot of room for error, mischief, or worse in how many of these services and protocols currently interact – particularly around fundamental issues of trust and privacy, two pillars of web3 philosophy. Marlinspike uses the example of an NFT he created which was banned by OpenSea and subsequently disappeared from his MetaMask wallet to make his point.

    If you’re still reading, congrats – that’s a lot and we’ve not yet gotten to the good stuff, which for me is the discussion that’s evolved since Marlinspike’s post. Watching the responses come in felt a lot like reading the early blogosphere – one by one, people I admire built on Marlinspike’s thinking, challenging some of it here, deconstructing other parts there. The tone was respectful, considered – no one reacted as if their religion had been impugned.

    The first response I noticed was from Vitalik Buterin, co-creator of Ethereum.

    Buterin challenges Marlinspike’s focus on technical grounds, particularly the term “servers,” and reminds us that there’s still a ton of infrastructure and foundational software work to be done. He points out that 2022 will be a big year for ETH,  given its shift from the slower and most costly proof of work to the more nimble and efficient proof of stake.

    I then realized I had missed Brian Armstrong’s response, which came a few hours after Marlinspoke’s initial post:

    Armstrong runs Coinbase, arguably one of the most centralized “web3” companies built so far. His last point is key: There’s a big difference between a company built to control data (Facebook) and one that acts as a useful wrapper for data owned and controlled by the end user. VC Chris Dixon elaborates in a thread the next morning:

    Dixon is pointing out a key distinction between web2 and web3 services, regardless of their potentially centralized nature: Ease of data portability. I’ve long argued that any apps or platforms based on leveraging our data should compete on the quality of service they provide, rather than the data they lock in. In 2008, I wrote “It’s time that services on the web compete on more than just the data they aggregate.” This is Dixon’s point in a nutshell: “web3 works like web1 did. There will be centralized services built in web3 — and many will be quite useful — but their economic power and overall control will be limited by the lower switching costs due to data portability.”

    The discussion continued later that day with Matt Mullenweg, the CEO of Automattic, the company behind WordPress. WordPress drives more than 40% of the current internet, and Mullenweg has long been a standard bearer for web2’s original philosophy – that of interoperability.

    Mullenweg name checks my former partner Tim O’Reilly, whose seminal “What Is Web 2.0” paper kicked off our Web2Summit conference series and has helped frame my thinking about the Internet for the past 15+ years. Mullenweg’s point is that many original web2 services are entirely consistent with web3 philosophies. That is still true today – whether or not web3 technologies are at the core of it (Mullenweg himself might best be described as “extremely crypto curious.”)

    Debate on Marlinspike’s post continued throughout the weekend, and by Sunday, former Dropbox CTO Aditya Agarwal responded elegantly to Marlinspike’s second point, that of protocols.

    Remember that Marlinspike’s criticism of protocols is that they are slow to evolve. Agarwal explains that while this was true of protocols in the early web, it’s not necessarily true in web3 architectures. …everyone’s mental model of ‘protocols’ is that of current ones like HTTP, SMTP etc. All of those protocols are *stateless*. That has been the accepted (and generally right) model of protocol design. The biggest difference for web3 is that they are stateful protocols. In that sense, I think that pace of protocol evolution isn’t really the right mental model. If the state is generally accessible, then it is much easier to remix and compose. There haven’t been too many instances of such ‘protocols’ which is why it isn’t surprising that all of us are unsure about how to compare this to traditional models.”

    —–
     
  • feedwordpress 23:27:09 on 2022/01/03 Permalink
    Tags: , , , , The Web As Platform, , , web2,   

    Let’s Argue About Web3! 


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    Popcorn in  hand, I’ve been watching the recent religious war between tech leaders, and I find it all quite…wonderful. It’s been a while since we’ve had this level of disagreement about the future of what we used to call “our industry,” and as long as the debate remains relatively civil, I’m here for it. Then again, we’ve already seen trolling (Elon Musk), blocking (Marc Andreessen), and shitposting (Jack Dorsey) from some of the biggest names in tech. But hey, at least the arguments are getting aired out.

    So what are we arguing about? In short, the future. Nothing is more sacred in the world of tech – the industry has defined and owned the future’s brand for as long as I can remember. Arguing about how that future might play out used to be a full time gig for many of us. It was at the center of our editorial mission at Wired – to paraphrase founding editor Louis Rossetto, our job was “to make a magazine that felt like it was mailed back from the future.” But around a decade ago, arguments about the future subsided – what was the point, given that future had consolidated into a handful of technology titans like Facebook, Tesla, Apple, Google, Netflix and Amazon? Whatever gifts or perils the future might bring, one thing was certain: The tech giants owned it. Where’s the fun in that?

    This turn of events was profoundly dispiriting for some, particularly those of us who had taken the red pill at the dawn of the commercial internet. Sure, I moderated a conference on Web2, and I wrote a book on search and Google, so watching Web2 businesses grow into the most successful firms in the history of business was … cool, for a while. But by 2012 or so, I had lost the optimism and excitement I once had for the industry. It felt like our dreams for a better world had been hijacked by centralized models of capital, and the future had become predictable again. Boring.

    But over the past few years, a renewed vision for the future has been on the rise. Yes, I’m going to call that renewed vision by the name absolutely no one can agree about: Web3*. The word itself has morphed over the years – for a brief minute, we thought Web3 might mean “the semantic web,” but by 2012, when I decided to stop producing the Web2 conference, it became something of a private joke between myself and my partner Tim O’Reilly. Whatever came after Web2, we agreed, it certainly wouldn’t take the nomenclature of a software upgrade!

    When we started Web2 in 2003, it was clear the tech world was in the midst of a huge transformation – the first iteration of the Web had bubbled up, gotten traction, been hopelessly over hyped, and then went bust.  A few years later, something new was rising – a second phase of the web that we believed would take all the goodness of what came before, and add a ton more value. The transition took about a decade – the Netscape IPO was in 1994, and the first Web2 conference was in 2004. It’s been 17 years since then. Might such a transformation finally be underway again?

    Well, that’s the rub of the argument. Just a few weeks ago, Tim kicked the debate into high gear with an essay arguing “it’s too early to get excited about Web3.” His core point quotes the technology cycles theory of economist Carlota Perez, whose work notes that technological progress is always accompanied by financial bubbles which over-invest in important new infrastructure. These bubbles always burst – and the true value of the revolution is consolidated afterward. So where are we on this cycle now?  Tim posits a key question: “Is abundant financial capital building out useful infrastructure in the way that we saw for the previous cycles?”

    And therein lies the fodder for the past few weeks of Web3 backlash.  Established VCs poured $30 billion into the crypto space this past year – more than in all prior years combined. The lead dog in the space? Andreessen Horowitz, one of the most profitable VC firms of the Web2 era. This has led many Web3 detractors (and purists) to proclaim that the same forces which begat Facebook (Marc Andreessen is a board member) will lead Web3 into yet another centralized corporate power grab. Here’s how Jack Dorsey summed it up:

    This tweet set off a firestorm – I’ll leave it to you to read the fractal threads and comments (it’s great fun) – a who’s who of crypto leaders, investors, founders, and pundits weighed in. The argument turned on one key idea: Decentralization. Proponents of Web3 wrote defenses of the core thesis – my favorite is Albert Wenger’s Web3/Crypto: Why Bother, which focuses on why “inferior” approaches to technology (in this case, decentralized blockchains/databases) might actually prove far more valuable in the long run. Opponents argued that Web3 is just more of the same bullshit, just with better marketing and, as Jack pointed out, the same VCs behind it all.

    Over the years I’ve become less of a starry eyed techno-optimist, and more of a “show me the results” kind of pragmatist when it comes to what technology can do. I can nod my head along to both lines of reasoning – but I see no value in maximalism at either extreme. If Web3 is really going to be a thing, it must incorporate the lessons of the many, many things we got wrong with Web2’s business models and governance. But that doesn’t mean we shouldn’t celebrate the billions of dollars of risk capital being injected into our industry, most of it with the express goal of building something utterly new. Oh, and by the way – most of the value in today’s crypto world was built with absolutely no venture investment (the same was true for the original internet, for what it’s worth).

    No matter what, it’s refreshing as hell to see our industry actually debate important ideas like trust, governance, and decentralization, and to fret – openly and loudly – about how the future might turn out.  Onward!


    *If you’re looking for a quick primer on why many are excited about Web3, read Chris Dixon’s “Why Web3 Matters” and “America Onchain” by Jarrod Dicker. Yes, I’m aware they’re both VCs, and I’m OK with that…

     
  • feedwordpress 18:19:42 on 2021/12/27 Permalink
    Tags: , , , , , carbon, , , , , Discord, disinformation, , , , , , , , , , SPAC, stock markets, , The Web As Platform, ,   

    Predictions 2021: How’d I Do? Pretty Damn Well. 


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    As has been my practice for nearly two decades, I penned a post full of prognostications at the end of last year.  As 2021 subsequently rolled by, I stashed away news items that might prove (or disprove) those predictions – knowing that this week, I’d take a look at how I did. How’d things turn out? Let’s roll the tape…

    My first prediction: Disinformation becomes the most important story of the year. At the time I wrote those words, Trump’s Big Lie was only two months old, and January 6th was just another day on the calendar.  A year later, that Big Lie has spawned countless others, culminating in one of the most damaging shifts in our nation’s politics since the Civil War. The Republican party is now fully captured by bullshit, and countless numbers of local, state, and national politicians are busy undermining democracy thanks to the Big Lie’s power.  A significant percentage of the US population has become unmoored from truth – and an equally significant group of us have simply thrown our hands up about it. Trust is at an all time low. This Barton Gellman piece in The Atlantic served as a wake up call late in the year – and its conclusions are terrifying: “We face a serious risk that American democracy as we know it will come to an end in 2024,” Gellman quotes an observer stating. “But urgent action is not happening.” I’m not happy about getting this one right, but as far as I’m concerned, this is still the most important story of the year – and the most terrifying.

    My next prediction: Facebook’s chickens come home to roost…2021 will be a dismal year for Facebook.  Oh my, was it ever. Facebook’s year was so terrible, the company decided to change its name as a result. Because I took notes all year, here’s a brief review of Facebook’s 2021:

    I’ve left off dozens of ugly narratives while compiling this list – and admittedly, I’ve also left off a fair number of pro-Facebook responses  as well.  But overall, I think this particular prediction was pretty spot on. Let’s call it a win and move on…

    My third prediction: AI has a mid-life crisis. This one bears a bit more explanation. From my post: “2021 will be the year society takes a step back and thinks hard about where this is all going … by year’s end, the AI narrative will be as much about hand wringing and regulatory oversight as it is about revolutionary breakthroughs.” I think I got this right as well, but I can’t prove it. The year started with a leading AI researcher calling the entire space a “dumpster fire.” Numerous fatal crashes with Teslas in self driving mode gave observers pause – perhaps this technology was not as ready as Elon Musk had claimed (and who the fuck is stupid enough to sleep in the back seat of a driverless Tesla, but…people are stupid sometimes). Furthermore, AI’s great proof – that it was better at reading X-rays than trained radiologists – was debunked. Academic journals continued to question whether “super intelligence” can ever be contained. Meanwhile, the bloom came off the “smart home” rose – “Alexa has turned out to be a voice-activated clock/radio with low retention” quips noted tech analyst Benedict Evans.  This AI stuff is hard – and while the tech is hard enough, the policy issues are even harder. 2021 was the year legislators were pummeled with Silicon Valley lobbying around how China is about to kill the US with its insurmountable lead in artificial intelligence. (And hey, China’s got the Minority Report market in the bag!) But it certainly wasn’t the year legislators did anything about AI, other than voice concerns. So, yes, we got the hand wringing and the focus on policy, but it’s a bit of a push on the prediction overall. Not enough proof points to give myself either a passing or a failing grade.

    Prediction #4: A wave of optimism around tech-driven innovation takes root. Yep, it’s pretty bold to predict a rebound in tech optimism when Big Tech is taking heavy fire, but I think I got this one right as well, thanks in large part to the world of crypto. It’s been three decades since I’ve seen an outburst of pure technology euphoria like the vibes coming off the crypto/web3/blockchain space. I’ve been monitoring crypto for years (one of my 2018 predictions was “Crypto/blockchain dies as a major story”), and went pretty deep this past 18 months or so. I am a cautious proponent of crypto’s technology,  philosophy, and new governance models, but there’s a hell of a lot of bullshit in there as well. Then again, the same was true three decades ago, back when the web was young. The difference this time? Scale. In the early 1990s, the web was an anomaly, and you could count its adherents in the tens of thousands. It took five years for that to scale to tens of millions, and the industry represented a tiny percentage of overall GDP. But in 2021, web3 scaled to impressive (some might say scary) numbers. Total cryptocurrency holdings rocketed from roughly $500 billion to more than $3 trillion this year. Crypto wallet Metamask, often (roughly) compared to the Netscape browser of Web 1, zoomed from half a million monthly active users to more than 21 million.  And NFTs – the web3 equivalent of dot com stocks – grew into a massive market as well, clocking more than $10 billion in purchases last quarter. The overall vibe of the crypto space is summed up in one catchphrase: “We’re all going to make it (WAGMI).” Perhaps (and yes, I do see a crash in our future), but if WAGMI doesn’t reflect a “wave of optimism,” I don’t know what does.

    Prediction #5: Google does in 2021 what I predicted it would in 2020: It zags. And what does a zag look like? From my piece: “Google will make a deeply surprising and game changing move.” And in fact, Google made two game changing moves in 2021, either of which might defend my assertion. In March, the company announced it would, as the WSJ covered it: “stop selling ads based on individuals’ browsing across multiple websites, a change that could hasten upheaval in the digital advertising industry.” This was a major shift in how the world’s largest advertising platform plied its trade, and while I’ll leave it to others to opine on the impact (and timing, which remains in flux), the reasoning behind it is crystal clear. As I wrote in my prediction “Google is fighting off a terrifying array of massive regulatory actions, and desperately needs to avoid looking like Facebook in the eyes of its employees, consumers, and business partners.” Changing the core of its data policies is a move designed to do just that.

    The second big move targeted Apple. In March the company lowered some fees that developers pay to use its Play store. And in October, it slashed all fees in half, effective next week. This is a major ecosystem shift – one that may well drive new and existing developers into building for Android first. And again, it positions Google to be the good guy in the eyes of developers, customers, and critically, regulators, who have been sizing up Apple for its monopolistic control of the iOS app store.

    My sixth prediction? Nothing will get done on tech regulation in the US. This one was far too easy to get right – with a pandemic raging, Congress deadlocked, and an agenda that included multiple trillion-dollar pieces of legislation, there was no way tech legislation would have passed this year. The Biden administration did heavy up on anti-Big Tech talent (Khan, Wu, et al), but they’ve not had either the time or the support to get much done, yet.

    Lucky #7:  A “new” social platform breaks out in 2021. I’ll admit, I was scratching my head around this one for months, nervous I’d take a whiff here. But then I got on Discord. From my original prediction: “Given the handcuffs 2021 will place on the traditional players in Big Tech, this coming year presents a perfect opportunity for a breakout player to redefine the social media category… It won’t be some ripoff version of what already exists. I’d either look to something like an evolved Signal, an app that already has a growing user base, or a from-nowhere startup that gets super hot, super fast.” Discord is kind of a combination of the two – a six-year-old startup with a dedicated user base that is focused on communications. The platform rethinks nearly everything about the “social graph,” and yes, it’s kind of a hot mess. But by summer of this year, Discord had reached 150 million daily users, putting it within spitting distance of Twitter (200m+) in terms of size. Discord is now valued at $15 billion – and it does not take advertising. For a deep dive on the company, I recommend reading Casey Newton and Packy McCormick.

    Unlucky #8: The markets take a breather, and SPACs get a bloody nose. Well, I was right on the latter, but wrong on the former. The markets only got hotter all year long, taking only the shortest of breaks to dip and then roar right back. But SPACs most definitely got bloodied – as early as as February, I noticed the concern in the financial press, and that narrative built all year long, with many high profile SPACs either failing or limping across the finish line. When the bright spot in the SPAC world is Donald Trump’s mostly fictional “social media company” – and that deal draws the interest of the SEC – well, the space ain’t exactly crushing it. But as I said, the markets did not take a breather – the Dow Jones and the S&P delivered nearly 20 percent gains. So I got one part right, and one part wrong. A push.

    Prediction #9: 2021 will be prove to be the last year of growth in gas-powered automobiles. Well, there’s no way I can prove this until the numbers come in for 2022, so I won’t bother trying to grade myself on this one. Call it a push, but I’ve been monitoring related news, and I’d say the prediction is certainly on trend. As usual, the Nordic countries led the way. In Norway, EV sales now account for an astounding 90+ percent of new car sales. Cities around the world are banning new gas stations. And GM, one of the largest automakers in the world, announced it will phase out the combustion engine by 2035.  NB: One of the best places to get and stay smart on EVs and de-carbonization in general is Azeem’s Exponential View. 

    Proving I should really stay away from geopolitics, Prediction #10: Africa rising, China…in question. I got the headline right – Africa is certainly rising, and China is a big question mark – but my detail was very wrong: “the breakout continent of 2021 will be Africa, home to many of the fastest growing countries in the world, and the focus of years of Chinese investment and diplomacy. After four years of US neglect, the Biden administration will realize it’s dangerously close to losing Africa altogether, and announce a massive investment in the continent.” Nope, did not happen. In fact, Biden decided to counter China in Africa with…an initiative in South America. Whiff. Moving on to my last, and possibly most depressing prediction:

    Prediction #11: Everyone loses their shit, in a good way. This was my way of saying that we’d get through the pandemic, and we’d all party like we deserve to party after 18 months of isolation and fear. We had the “hot vax summer” memes but….Delta and vaccine hesitancy killed that cold, then Omicron smacked us once more, even as we looked forward to what could have been a relatively normal holiday season. Ending on a rough note, but – this one was a whiff as well. I’m optimistic we’ll get through this, but I’m done trying to predict the course of this wily virus.

    So that’s the scorecard: Two whiffs, three pushes, and six scores. Not bad, in fact better than my average over these past 17 years. Maybe I should do this again. Look for my 2022 musings sometime later this week. And have a happy, safe, and sane New Years everybody. Thanks for reading.

     


     

    Previous predictions:

    Predictions 2021

    Predictions 2020

    2020: How I Did

    Predictions 2019

    2019: How I did

    Predictions 2018

    2018: How I Did

    Predictions 2017

    2017: How I Did

    Predictions 2016

    2016: How I Did

    Predictions 2015

    2015: How I Did

    Predictions 2014

    2014: How I Did

    Predictions 2013

    2013: How I Did

    Predictions 2012

    2012: How I Did

    Predictions 2011

    2011: How I Did

    Predictions 2010

    2010: How I Did

    2009 Predictions

    2009 How I Did

    2008 Predictions

    2008 How I Did

    2007 Predictions

    2007 How I Did

    2006 Predictions

    2006 How I Did

    2005 Predictions

    2005 How I Did

    2004 Predictions

    2004 How I Did

     
  • feedwordpress 16:12:31 on 2020/06/29 Permalink
    Tags: , , The Web As Platform,   

    Marketers: Your Role In Social Discourse Is Critical 


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    How Brands Can Fix the Relationship Between Platforms, Audiences, and Media Companies (Hint: It’s Not a Boycott)

    (Second of a series. The first post reviews the media and platform ecosystem, and laments the role brand marketers have played in its demise.) 

    ***

    In my first post of this series, I laid out a fundamental problem with how digital media works today. Large digital platforms like Facebook and Google have cornered the market on audience attention, often with devastating impact on our national dialog. Along the way these platforms have developed sophisticated prediction and targeting engines which give marketers the ability to buy audiences with precision and scale. While this has been a boon for marketers’ businesses and the platforms’ profits, it’s also drained resources from independent, high-quality editorial outlets and stripped our national dialog of much-needed context.

    The loss of that context is at the core of an ever-growing #StopHateForProfit  social media boycott, which now includes huge brands like Unilever, Coca Cola, Verizon, and Honda. I’ll be writing about that next, but today I want to focus on how we got here, and what we can do about it.

    Over the past ten years, media companies have responded to their loss of audience by creating “viral” editorial that performs well inside the platform’s engagement-at-all-costs ecosystem.  Predictably, however, quality editorial – the context  journalists create for a living – rarely qualifies as viral. Besides flooding the platforms with videos of slippers which double as mops and two-second beer bongs, media companies have embraced Facebook and Google in other ways – selling them programming that never seems to gain audience or get renewed, building expensive and often unprofitable versions of themselves on each platform, or becoming platform advertisers themselves, a practice I call arbitrage in which media companies buy audience impressions wholesale and then mark them up to their marketer customers. In that first post, I spent a fair bit of time on arbitrage – mainly because I believe it’s a particularly despicable and self-defeating business practice.

    If we’re being honest with ourselves as media companies, none of our strategies of engagement with platforms have proven to be long-term business model winners. However, platforms own audience, and no amount of wishing it was otherwise will change that fact. If we want independent and quality editorial to maintain a vital place in our democracy, we have to imagine a new set of relationships between platforms, editorial, marketers and audiences. A promising innovation is already in place at one platform: Twitter.

    Twitter’s Unique Path

    Twitter has always been the underdog of the social networks – smaller, messier, less hell bent on conquering the world. But the service’s fast-twitch nature meant it quickly became an indispensable place for people to discover What’s Happening Right Now. Anything live and worth discussing – sports, news, gossip/culture – thrives there. News breaks on Twitter, but the rise of digital video ten years ago presented a significant barrier to growth. Given Twitter’s roots as a text-based service, the company needed to convince major media companies to view Twitter as a home for video content. Facebook and Google had YouTube and Instagram, and Twitter was playing from behind.

    In response, Twitter adopted a media-company friendly solution they called Twitter Amplify. Amplify has a unique model that fundamentally changes the power relationships between players in the media ecosystem. Most who use it give those fundamental changes little thought – they just see Amplify as a partnership tool, pure and simple. But once you grok Amplify’s unique approach, you realize its potential is wildly overlooked.

    In traditional media business models – which I call Packaged Goods Media – media companies create editorial, which attracts audience, which then attracts marketers, who pay media companies for access to the audience’s attention. Simplified, the ecosystem looked like this:

    In this simple model, marketers place their advertising messages inside the media companies owned and operated product, which the media company distributed itself. The advertising message was delivered in the context of quality editorial – editorial that the marketer had chosen proactively (within limits of church and state, of course) as part of a media planning process.  A critical assumption of this early model was this: Pairing relevant advertising messaging with quality editorial was vastly more successful for marketers – particular brand marketers – than advertising messaging delivered devoid of context. Before platforms, in fact, there were really only two channels for context-less advertising: Billboards and direct mail. Neither were particularly effective for building brands, though both had their place in the media ecosystem.

    But the rise of platforms created a new gatekeeper in this once-stable environment. Platforms quickly gained enviable audiences, but advertising models were slower to adapt.  Early in their development, Facebook and YouTube realized that to win even larger audiences, they needed to accommodate media companies’ editorial product on their platforms. To do so, they adopted a Packaged Goods Media model that looked an awful lot like the picture above.

    The bargain was simple: If you were a media company, you set up shop on the platform, acquired your own organic audience there, and once you got to a certain scale, you sold ads there – either on your own or in partnership with the platforms. Media companies early to these platforms – major TV networks, large newspapers, digital pioneers like Buzzfeed and Vox  – quickly built large audiences. But after a while, media companies realized that maintaining those audiences would prove difficult and expensive. Facebook and YouTube now controlled distribution. The media companies had built on the platform’s land, and if there’s one truth in capitalism, it’s this: landlords will always demand their rent.

    Media companies found themselves increasingly subject to the whims of the platforms’ algorithms and business models. They replicated a Packaged Goods Media model on top of the platforms, and discovered – shocker! – that they no longer owned the audiences they were trying to sell to marketers. Instead, they had to buy audience from the platforms, and resell it to marketers – again, on the platform. That deal wasn’t very good for anyone (save the platforms), and as marketers realized they could go direct to platforms to get their audiences more efficiently, the decline of traditional media was accelerated.

    How Amplify Works, And Why It (Really, Really) Matters

    Twitter’s Amplify points to a powerful new narrative. It works like this:

    1. Media company partners with Twitter to become an editorial partner, stands up editorial on platform (Twitter).
    2. Media company partners with marketer to support editorial on platform.
    3. Marketer and editorial use platform tools to identify both editorial and audience the marketer wishes to reach.
    4. Marketer uses its dollars to distribute both editorial and marketing messaging to audience.
    5. The platform and the editorial company split the revenue. All parties are aware of and read into the terms of the deal, no arbitrage is possible.

    In some ways, this feels similar to Packaged Goods Models of old. The marketer is wrapping its advertising message around editorial, just like in the pages of a magazine or a website before platforms dis-intermediated editorial from audience. And the results speak volumes: Campaigns that are contextually paired with good editorial tend to perform far better than campaigns without an editorial pairing.*

    But what gets missed is the revolution inside step #4 above. Amplify allows the marketer to use Twitter’s massive investment in advertising technology and audience development to define what audience it wants to reach, and then use a media company’s editorial as a lure to draw that audience through its marketing messaging. Let that sink in: The marketer – not the media company, not the platform, but the marketer – is responsible for putting the audience together with editorial. 

    The result is that on Twitter, a marketing partnership like the one The Recount has with Bank of America is a four-way win for every participant in the media ecosystem. The marketer gets scale, precision targeting, its choice of editorial (which allows for brand safety), and the resultant lift on the performance of its campaign. The editorial gets a direct revenue and business relationship with the marketer, and is exposed to audience members it otherwise would have to pay the platform to reach. The audience gets contextual advertising wrapped in content the audience finds interesting. And the platform, in this case Twitter, has a happy marketing partner, quality content distributed across its platform, and a revenue split with editorial.  Win, win, win, win.

    Amplify’s model puts the power of connecting audience and editorial in the hands of marketers – highlighting the crucial role marketers have always played in determining which editorial thrives in the media ecosystem. As I argued in my last post, far too many marketers have abdicated their responsibility as arbiters of which editorial deserves their financial support, opting instead to let Facebook and Google’s algorithms choose their audiences and their business results. Those algorithms will always favor a platform’s bottom line over the context and healthy dialog that quality editorial can provide. Programs like Amplify finally combine the power of a platform’s scale, data, and precision with the marketers’ responsibility to support editorial’s crucial role in social discourse.

    Finally, and importantly, the best Amplify partnerships deepen what have become attenuated relationships between large brands and the media companies that depend on them. If companies really are serious about  “multi-stakeholder capitalism” and becoming a “force for good,” they have to start engaging with – and supporting – the story at a deeper level. It’s time for marketers to lead again.

    As I write this, the media world is embroiled in a multi-layered narrative involving hate speech, platform boycotts, health crises, and economic catastrophes. But the way forward is not to pull back spending indiscriminately and walk away. Instead, marketers must do the work of understanding the problems at hand, then actively lean into solutions that can address them. Memo to all you marketers out there: Don’t sleep on Twitter Amplify.

    The third post in this series will explore the current “social media boycott” in light of the first two posts. 

    * Far, far better. If you are marketer, please be in touch and we’d be happy to share just how much better – jbat at therecount dot com. 

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

    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
     
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