Rick Webb

Rick Webb (RLW) used to be my boss (and Colin’s too) during our time at The Barbarian Group, which he co-founded. He is a prolific writer, thinker, podcaster, and consumer of media. He’s also the only person I’ve ever met who thinks and speaks in bullet points. We’ve been bothering him for months to write something for us and we finally broke through. Thanks Rick! - Noah (NRB)Rick here. For nine years or so, I have been reading virtually every advertising economics paper written in an endeavor to write the authoritative book on the economics of advertising (while I haven’t managed to sell this book to a publisher, I did manage to get several pieces out a few years back for NewCo).From a research perspective, all of these studies fall into two camps: The “old school” and the “now”. Old school economics papers are hugely useful for learning some basic truths about advertising economics—many of them forgotten or ignored in today’s industry. The “now” is, clearly, more relevant to our jobs today as digital marketers. Unfortunately, since the 1980’s, with the symbiotic merging of corporate marketing departments and marketers (our marketing bible How Brands Grow comes out of a corporate-funded research institute at the University of South Australia Business School, for example), getting the “now” research became more difficult. And with the rise of the tech giants, and their formidable in-house research departments, it has gotten harder still. So it was with some excitement I read a new piece in The Correspondent by Jesse Frederik and Maurits Martijn that spoke to many of the behind-the-curtain ad researchers at some of the most sophisticated tech companies in america. Their conclusion? “Is online advertising working? We simply don’t know.” And, as they point out, few involved have much incentive to figure out the answer.Why is this interesting?Though they don’t say it quite this way, the authors explain the problem in terms of endogeneity. Put simply, most digital advertisers don’t know if it’s their advertising or something else that is doing the trick. The article uses the parable of the pizza flyering kids. A pizza parlor has three kids flyering for them. One of them performs way better than the other two: Customers keep showing up at the pizzeria with his fliers. His secret? He distributed fliers inside the restaurant’s waiting area. Noah, in suggesting I write about this piece, told me the story of remembering “being in a presentation from Tim Armstrong in 2008 where he convinced the room they had to bid on their own brand keywords based on very shaky data. In the moment I remember thinking what a masterful sales job it was.” Frederik and Martijn tell a similar story happening at eBay, only for them to discover that if they stopped paying for the keyword “eBay,” their users would—wait for it—click on the next link down, the free organic search link back to the site. In the older, peer-reviewed ad economics studies, endogeneity was a huge concern, and conclusions were scrupulously not drawn, or at the very least caveated, if they could not control for it. I have often wondered how this is playing out in the breathless case studies I read from digital marketers. Frederik and Martijn do little to assuage those concerns. The piece is remarkable, and calls into question many of the assumptions of digital marketing that have long irked me and my peeps who have ingrained suspicion of big data’s usefulness in marketing. They also point out that many marketers simply don’t care: When these experiments showed that ads were utterly pointless, advertisers were not bothered in the slightest. They charged gaily ahead, buying ad after ad.  Even when they knew, or could have known, that their ad campaigns were not very profitable, it had no impact on how they behaved.This is perhaps not surprising given that the largest drivers of ad spend have nothing to do with effectiveness, but rather the industry in which you’re operating, and GDP—something referred to as the Relative Constancy Hypothesis. The piece provides a much-needed reality check for the digital ad industry—and one that, paradoxically, may prove reassuring on the eve of the California Consumer Privacy Act (CCPA), the latest salvo in an ever-more-restrictive data marketing environment. If big data doesn’t help much in your marketing, maybe things will be okay when it goes away. However, as is often the case with these pieces, I find myself nitpicking. Much like marketers treat Byron Sharp’s maxims as law for all businesses when he is specifically referring to large consumer brands, Frederik and Martijn are equally sloppy. They conflate data and digital—ignoring data-free “brand” digital. And their anecdotes tend to stick to large tech platforms and big brands, ignoring B2B, where targeting matters much more, and small and challenger brands. There exists no shortage of small and nicheconsumerbrands who are making good money on the internet, advertising exclusively online. It beggars belief to claim that all of thesebrands would be doing just as well without the digital advertising to get them off the ground far more cheaply than television. Frederik and Martjin concede as much, concluding that “we simply don’t know,” which is a far cry from the title “the new dot com bubble.” It seems to me what’s going on here is a new iteration of our ever-present ad friend, Wanamaker’s Dilemma. Evidence that digital advertising works is all around us if we use common sense. But measuring that, and being confident enough in the measurements to improve our advertising, remains ever-challenging. Indeed, the growth curve of these niche consumer brands, launched on the back of savvy digital marketing, provides all the evidence we need: When Casper, Airbnb, Wayfair, and so many others got big enough, they moved on to Television ads. (RLW)Shipping Box of the Day:Bike company VanMoof kept finding the bikes they shipped to the US damaged. So they made the box look like a flatscreen TV instead of a bike. “That small tweak had an outsized impact. Overnight our shipping damages dropped by 70-80%. We sell 80% of our bicycles online, which means we still print TVs on our boxes. More than 60,000 of them have now been shipped directly to our riders worldwide.” (NRB)Quick Links:Billy Corgan owns a Wrestling League (RLW)Rwanda’s approach to low-footprint tourism (CJN) The immigrants who took on Amazon (CJN) Thanks for reading,Noah (NRB) & Colin (CJN) & Rick (RLW)Why is this interesting? is a daily email from Noah Brier & Colin Nagy (and friends!) about interesting things. If you’ve enjoyed this edition, please consider forwarding it to a friend. If you’re reading it for the first time, consider subscribing (it’s free!).

Why is this interesting? - The Digital Advertising Edition

Rick Webb (RLW) used to be my boss (and Colin’s too) during our time at The Barbarian Group, which he co-founded. He is a prolific writer, thinker, podcaster, and consumer of media. He’s also the only person I’ve ever met who thinks and speaks in bullet points. - Noah (NRB)Rick here. Sometime soon, maybe by the time you read this (no one knows exactly when), after months of delay, Apple will begin enforcement of its new, much-vaunted App Tracking Transparency (confusingly, ATT—sorry AT&T) framework and protocols. In the world of in-app advertising, this is a very big deal. You may have heard about it. Forbes has called it “stunning.” This may be hyperbole, but only just. Keeping this WITI in the language of the layperson, Apple’s privacy changes come in three main parts: Requiring apps to gain explicit consent to “track” users across the internet with their advertising. Revamping what’s called in the biz attribution: the way in which advertisers confirm who was really responsible for a purchase, or a click. App privacy “nutrition labels,” visible in the app store, clearly explaining to people how and when an App uses their data. Of the three, the nutrition labels are perhaps the most clear-cut and least controversial. The other two have brought about significant amounts of blowback from the industry. Perhaps best-known is Facebook’s five-barrelled ad campaign against Apple’s privacy changes. Apple itself has stepped into the fray with marketing touting how evil everyone else is, and positioning these changes as nothing less than a moral crusade. Most of us like the idea of data privacy, and most of us find the concept of “ad tracking” creepy, so Apple probably has the moral high ground here.  Why is this interesting?Generally, I am a huge proponent of data privacy and applaud the general gist of Apple’s efforts. Yet there are few quirks to Apple’s implementation of ATT that is not widely understood, and leave one questioning their true motives. First, Apple already offered the ability for users to control ad app tracking. For the last decade, iOS has included the IDFA—Apple ID For Advertisers—the primary method with which advertisers can “track” users. This has, since iOS 10 in 2011, been an anonymous ID, that can be turned off or reset (prior to this Apple let apps access the device ID, which could not be reset). Apple has not actually offered a new ability to “turn off tracking” in iOS 14.5, rather, what used to be opt-out is now opt-in. They’ve also updated the granularity with which users can control this choice: previously the option was universal for all apps, but now it can be turned on or off for each individual app. To me, this is hugely fascinating and under-discussed. Most news articles present this feature as new, but I find it far more interesting than a simple change in choice architecture (from opt-out to opt-in) can, potentially, threaten an entire industry. No one knows exactly how many people will opt out, but everyone assumes it will be much higher than it was in the past. If you choose to not opt out, you will still get an ad. It will probably be a “worse” ad, of the punch-the-monkey variety. But that’s just a guess. As I said, no one knows. Next, in perhaps the weirdest move, Apple has made no provision for GDPR, the EU’s robust, opt-in based, plain-language requiring privacy regulation. This leaves every EU iPhone user now facing the somewhat absurd task of opting in twice on every app. I am not an engineer (anymore), so I can’t say if this was a technical limitation or what. But it’s hard to see how this furthers privacy (GDPR is a very solid privacy law), and it’s hard to see how this holds up Apple’s famously user-centric design simplicity. Most controversially, Apple has decided to prohibit users from opt-in to ad tracking in order to gain new functionality within an app. In the paid-app ecosystem, a user playing a game on their iPhone may decide to pay extra cash for a new level in the game (with Apple taking a cut). In the free app ecosystem, Apple has decided that users cannot do the same, paying with their personal information (via ad tracking) rather than money. The app has to have the exact same functionality, whether or not the user opts-in to ad trafficking. One can envision a world where the user is in complete control of their data, and only lets certain apps use it. But it’s very odd that Apple has unilaterally mandated that I can’t get something in return for letting an app use my data. Some people find exactly this mechanism of exchange to be a worthwhile vision for the future of data privacy. Yet Apple has decided to forbid this. Apple’s defense of this is that “apps should allow a user to get what they’ve paid for” even though… the app is free? And Apple’s not letting users pay with opting-in. Regarding attribution, Apple has made a fantastic new privacy-first attribution framework called SKAdNetwork. It seems legitimately great, and will hopefully go a long way toward curbing some of the abuses in this area. One thing that seems very odd, however, is Apple’s seemingly arbitrary declaration that a purchase or click can only be attributed to one source. If you read a blog post about a camera, and it embeds a Youtube review, and that Youtube review includes a link to buy, under the old system, the blogger and the Youtuber could (theoretically) share the credit (and potential affiliate revenue). Now? Only one can. There may well be technical reasons for this—Apple hasn’t elaborated on the decision—but, in real-world marketing, most modern attribution ties to multiple sources. Tim laying down the law at Brussels’ International Privacy DayTo me, the most interesting thing about all this is no one knows what’s going to happen. Many ad tech companies (like Facebook!), and some app publishers (like me), worry that this may decimate their revenue or even put them out of business. Then again, maybe it won’t. Yet Apple has decided there’s only one way to find out, and they’re gonna go for it. Damn the torpedoes. The end justifies the means, etc., etc. Most of the anti-monopolists out there seem to support Apple’s moves, which seems… odd. That one of the world’s largest companies is going to maybe (or maybe not! who knows!) put a bunch of smaller companies out of business and is generally being applauded for it, and no one seems to find it anti-competitive is, I think, unprecedented. This is also interesting since many observers—such as Eric Benjamin Seufert over at Mobile Dev Memo—have placed these changes squarely within the larger narrative of Apple’s ongoing battles with Facebook. He’s also posited that Apple’s moves may have profound unintended consequences, leading to further media consolidation and what he calls content fortresses.  And it’s going down all while Apple implicitly encourages companies to maybe reconsider their business model and switch to a model where Apple can get their cut. (RLW)Mask of the Day:We’re friends of Outlier here at WITI. This one is “bank robber from the future chic.” Described by the brand as, “An experimental non-medical mask. Soft Ultrasuede against the face for comfort and, as best we can tell, great filtration. Open yet opaque Injected Linen on the outside for breathable coverage. A magno-mechanical Fidlock closure for easy donning, doffing, and adjustment.”  (CJN)Quick LinksFabergé is making a new egg: A dragon egg inspired by Game of Thrones. (RLW) Heat pumps! (RLW) Toyota unaffected by car microchip shortage thanks to a business continuity plan instituted after Fukushima (RLW) Thanks for reading,Noah (NRB) & Colin (CJN) & Rick (RLW)Why is this interesting? is a daily email from Noah Brier & Colin Nagy (and friends!) about interesting things. If you’ve enjoyed this edition, please consider forwarding it to a friend. If you’re reading it for the first time, consider subscribing (it’s free!).

The Apple ATT Edition

Rick Webb (RLW) is a prolific writer, thinker, podcaster, and consumer of media. He’s also the only person I’ve ever met who thinks and speaks in bullet points. He previously contributed The Digital Advertising Edition. - Noah (NRB)Rick here. Happy November 12, or, if you’re a Swifty, release day for Red (Taylor’s Version), as well as the accompanying 13-minute film, “All to Well.” “But wait a minute,” you say. “Didn’t Taylor Swift’s Red come out in 2012?” Why yes, yes it did. Good memory! Today, Taylor is releasing a new, completely re-recorded version of Red, the third album she recorded during an extraordinarily productive pandemic. To understand why this is happening, we have to delve into the world of music licensing. But first, some back story. In 2005, a young 16-year-old Taylor Swift signed her first recording contract with a label named Big Machine, headed by a man named Scott Borchetta, and co-founded by relative unknown Toby Keith, who rapidly disappears from our story. Big Machine and Taylor released beautiful, wildly popular music together, making her one of the top-selling artists of all time. Taylor’s deal with Big Machine was a standard record label deal, insofar as Big Machine owned the masters to Taylor’s recordings. If you’re not steeped in music licensing, any song you hear on the radio, on television, in a movie, or a Tik Tok has two royalty streams: a songwriting stream and a recording stream. Taylor is a co-songwriter on virtually all her songs and that revenue stream is a separate deal. The recording revenue stream, or “masters,” for her first six albums is owned by Big Machine. This even includes the artwork. In 2018, Taylor’s deal with Big Machine was ending, and she was keen to a) obtain ownership of her first six masters, and b) retain ownership of any new masters going forward. It was clear Swift could accomplish the latter with a new record deal, but abandoning Big Machine would mean abandoning her first six recordings. Around the same time, Big Machine was put up for sale. Swift hoped to acquire her recordings and entered negotiations with the label. Stories differ as to exactly what happened next, but in July 2019 Big Machine was sold to record exec Scooter Braun for $300 million.Taylor was not happy, both with being shut out of the sale and to whom, specifically, the catalog was sold. Swift and Braun clearly have some irredeemable bad blood. After she signed a new deal with Universal Music Group—one that would allow her to retain her future masters—she announced she would completely re-record her Big Machine-owned back catalog. Because she already had control of how her songs are used, but not these recordings, she could make new versions of all the songs—versions that would be both better recordings and 100% owned by her. The goal was to deprive Big Machine of its most lucrative revenue stream—its royalties from Swift’s first six albums. Many at the time believed that this was primarily a negotiating tactic. It was not. If anything, it shows a profound commitment to a stance. In November 2020, Braun sold the rights to Swift’s catalog to a PE firm fund named Shamrock Capital, earning from the sale more than he paid for all of Big Machine (there is a separate story to be told about the financialization of recording rights). There was briefly some hope that these new owners could end the dispute. But after learning that Braun would still be participating in the profits of her catalog after the Shamrock acquisition, Swift pledged to continue on with her re-recording project. And so, in spring of 2021, Taylor’s re-recording project began to see the light of day. The first album Fearless (Taylor’s Version) was released on April 19. The original Fearless was still number 19 on the charts that week. Taylor’s version debuted at number 1 and the original eventually fell off the list. Released on the heels of Swift’s pastoral pandemic albums Folklore and Evermore, Fearless (Taylor’s Version) was her third number one album in less than a year. After Fearless (Taylor’s Version), many fans assumed the next record to be re-recorded would be her follow-up album, Speak Now. However, on June 18, Swift announced that the next album to get the re-recording love would be Red. Swift’s logic is her own, but Red is her best-selling album in America, and would thus have the largest potential impact on royalty receipts. Subscribe nowWhy is this interesting?While the initial sales of Taylor’s versions are promising, her success in the larger battle is still not assured. There are serious obstacles to Swift successfully closing off revenue from Braun and Shamrock. Will Spotify, Apple Music, and other streaming services highlight Taylor’s versions in preference of the originals? Will fans stop buying original Red merch? Replace the old versions in their hearts with the new ones? TBD.Many artists have had disputes with their record labels, and many artists have attempted to re-record their albums in an attempt to redirect a royalty stream back towards them. Electric Light Orchestra, Squeeze, Def Leppard, and Blondie have all made the effort. It has usually failed. However, given her unprecedented star power, rabid fan base, savvy use of the internet, clever use of unreleased B-Sides, merchandising sophistication, and the initial promise of Fearless (Taylor’s Version), Swift may be the artist to finally break the curse. (RLW)Quick Links:Erin Griffith’s ongoing coverage on Twitter of the Elizabeth Holmes trial. (RLW)Knight Rider Historians, doing the important work of meticulously preserving the history of this seminal sci-fi/artificial intelligence TV show. (RLW)Mr. Beast, Mark Rober, and many other YouTubers are raising $30 million to remove 30 million pounds of trash from our seas. (RLW)Drummer Damon Krukowski on piracy and Japanese psych legends Les Rallizes Dénudés. (RLW)[Sponsored: Atlas Bars are GMO-free and keto-friendly with 15 grams of protein and just a gram of sugar. We’ve tried Atlas and they are very good. Use this link for WITI readers to get 20 percent off. Get started with the sample pack.]WITI x McKinsey:An ongoing partnership where we highlight interesting McKinsey research, writing, and data.The future of climate tech. One crucial component in facing the climate crisis? New technologies, such as better batteries for electric vehicles, meat alternatives, or improved energy storage. While significant progress still needs to be made, the drive to develop and scale climate tech is accelerating. A new article lays out five themes that could attract $2 trillion of annual investment by 2025. --Thanks for reading,Noah (NRB) & Colin (CJN) & Rick (RLW)—Why is this interesting? is a daily email from Noah Brier & Colin Nagy (and friends!) about interesting things. If you’ve enjoyed this edition, please consider forwarding it to a friend. If you’re reading it for the first time, consider subscribing (it’s free!).