For years, online advertising was this huge, money printing business for the internet giants. They still make a ton of money, of course, but fortunes appear to have dimmed. Part of the story is macro. But also part of it is the dominance of Apple over the entire ecosystem, and its decision to restrict data that can be collected on end users. On this episode, we talk about this dynamic with Bloomberg reporter Mark Bergen, who is the author of a new book Like, Comment, Subscribe: Inside YouTube's Chaotic Rise to World Domination. This transcript has been lightly edited for clarity.
Key insights from the pod:
Why YouTube is the “sleeeping giant” of social media — 3:57
How online advertising is like the financial markets — 8:40
The power of Google — 17:51
The future of brand advertising — 24:56
The real thinking behind ‘Web3’ — 31:53
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Joe Weisenthal: (00:10)
Hello and welcome to another episode of the Odd Lots podcast. I'm Joe Weisenthal.
Tracy Alloway: (00:15)
And I'm Tracy Alloway.
Joe: (00:17)
Tracy, remember in like the 2000s, or the financial crisis and everyone's...
Tracy: (00:21)
I can barely remember last year, but go on...
Joe: (00:24)
And everyone said, “Oh, it's such a tragedy. People could have been curing cancer. But then they were spending their time coming up with like more and more complex derivatives.” And then I feel like for the 2010s that morphs into “All the smart people could have been curing cancer, but they spent their time getting more ads onto tiny phone screens.”
Tracy: (00:43)
This is the whole like, ‘software sucking up the entire economy’ idea. But yes, I do remember that criticism. There was a lot of thought that went into how to best advertise on the internet. And in fact, I think we had an episode at one point about how the internet was actually powered purely by ads, right?
Joe: (01:00)
Yeah, so I guess people do pay for some things, but it also feels like that era, both from a macro standpoint and maybe a micro standpoint is coming to a close again. Another decade pivot. Because we have seen a lot of these internet mega companies, like meaningfully start to slow growth. The business models aren't firing on all cylinders as they once are. And then just sort of like tech in general for macro reasons, seem to have had better days.
Tracy: (01:33)
Interest rates are going up, and so a lot of the valuations of big tech companies are coming down. But also to the business model point, I think this is interesting cuz initially we talk about very smart people going to tech firms and venture capital and spending a lot of mental energy there, trying to figure out the business model.
But to some extent it feels like the easy gains are kind of behind us, right? It was “You create a product, you get everyone on your particular platform or using your product or whatever, and then you make a bunch of money” and now it feels like things are changing.
Joe: (02:10)
Absolutely. I mean, look at a company like Facebook for example is just this, you know, they're really having to work for it. Their model is stressed right now, and there is the rise of TikTok and so forth. Every one of these companies, it feels like to some extent, after creating a decade of the best money vacuuming up machines that were ever created are now really having to work from it.
Tracy: (02:34)
Right they have to come up with more creative strategies. And one of the things we've seen recently is something from Apple...
Joe: (02:41)
Right, Apple has this incredible position in the ecosystem because so many people own an iPhone and they pull out, the first thing they interact with is the iPhone to get to the internet. And they have a lot of power over these other companies in terms of, you know, what shows up on that iPhone.
Tracy: (02:59)
And again, they're having to be more creative in making money off of those products, right? The iPhone is getting more technologically advanced. You don't have to necessarily buy one every year. People are holding onto them for longer. So how do you rest more money out of that particular customer base?
Joe: (03:18)
Such a tragedy. Companies are having trouble resting more money out their customer base. What a terrible situation. Anyway, without further ado, I wanna talk more about online advertising, this world, the challenges all these companies are facing. We are going to be speaking with our colleague Mark Bergen, who's a reporter here at Bloomberg, and he is the author of a recently published book, Like, Comment, Subscribe Inside YouTube's Chaotic Rise to World Domination. So Mark, thank you so much for coming on Odd Lots and congratulations on the book.
Mark Bergen: (03:50)
Thanks so much. Thanks for having me.
Joe: (03:51)
So first of all, why a book about YouTube now? Why'd you do this project?
Mark: (03:57)
YouTube is this kinda sleeping giant in social media. Someone described it as like this iceberg that no one ever really talks about as much for, for a variety of reasons. I see YouTube as both the past and now future of, of social media. And it was the first company to pay online broadcasters and invented the creator economy. And now we're seeing with TikTok, Instagram, Snapchat, you, Twitch, you name it, are all moving in this direction. Social media is no longer your friends and family and your acquaintances. It is influencers, it is celebrity. It is a game built around commerce. And this is a world that, that YouTube very much created.
Joe: (04:36)
Should we be telling Odd Lots listeners to “Like, comment and subscribe”? Other podcasts do that.
Mark: (04:41)
I mean, it's an effective call action.
Tracy: (04:42)
Okay. All right. Everyone like, comment and subscribe on Odd Lots, wherever you find it. Yeah. Okay.
But we were talking in the intro about this idea that the sort of the easy gains are over for social media, and it is true. We've seen all these new issues also come up like antitrust when it comes to Facebook and Google content regulation when it comes to YouTube, Who should be the arbiter of what's true and what isn't? Are the easy days over for social media?
Mark: (05:11)
I mean, YouTube's business has grown tremendously. And part of it was because they really didn't kind of lock into their commercial success until 2014, 2015. The only data we have available is beginning in 2017 for their ads business, but 2017, that was around 8 billion last year. It was close to 29 billion. They just took off.
Their viewership numbers and were all stuck at home watching YouTube during the pandemic. Studios were shut down, like YouTube became the default media aesthetic. The hours have just exploded. But the business has been crippled. I think you could make the argument more by Apple's changes than by any regulation thus far.
Joe: (06:01)
All right, let's jump right into it. So Apple, they say, “Oh, we're the defenders of privacy.” And now I always get these alerts on my phone. It's like, do you still wanna be broadcasting information to that app which I imagine is not great for those apps when I click no.
Mark: (06:17)
Yeah, I mean, there were people in Google and Facebook, less so at at Google, but they will gripe privately. Facebook started to do it publicly. Like Apple is now building out a search advertising business. They're starting to hire more people.
Like this is a really savvy move. They've marketed themselves as the privacy first company. They have restricted online cookies on iPhones and like knee capped a lot of potential digital rivals. I think the one way to to look at it is, you know, this is, they are making the, they are driving this, this force movement towards less behavioral and targeted advertising. This sort of foundation for the internet economy of the last two decades. The cynical view is that they have found a pretty effective way to build out a competing business to Google without the world really knowing it.
Tracy: (07:06)
So first of all, if you talk to Apple about this, they will say it's about privacy concerns. If you talk to their competitors like YouTube or Facebook, they will probably say, this is a revenue grab. How are you thinking about it? And what are the sort of like clues or evidence on either side?
Mark: (07:22)
Yeah, I think Google's a really interesting test case. It has this frenemy relationship with Apple. They're competitors certainly in smartphone markets. Google's kind of gone after them a lot around an iPhone. But Google's primary business of search advertising, Apples an extraordinarily convenient partner because for a long time, Google has been the default search engine for Apple.
And then now that it's the subject of a Department of Justice antitrust case. I think this is the chief reason why Facebook Meta has been griping very publicly about what Apple's been doing. And you haven't heard a peep from Google. In part because their search business is less Search ads in general are less reliant on the kind of third party cookies. YouTube, however, is heavily reliant on the fact that they they can serve much better and higher priced ads if they know all the videos that you've watched, all the other websites you've visited, you know, all the sort of granularity that this entire complex machinery of online advertising is built upon.
Tracy: (08:23)
So can we actually take a step back and can you maybe explain exactly how the market operated before Apple's big switch? Cuz this is not something that I am entirely familiar with other than, as Joe mentioned, you know, suddenly you get all these notices on your phone saying, “Do you wanna opt into data tracking?”
Mark: (08:40)
I think it is remarkably similar to financial markets in its like complexity and opacity. Like there are technically like two sided markets, right? There's a buy side and a sell side where you have publishers that are out there that have a lot of online real estate, and that's everything from Bloomberg.com in the New York Times to like very popular mobile apps like Snapchat and Twitter.
Like Twitter has real estate and then, there are a bunch of marketers that want to get in front of consumers. Google has the machinery on both sides, like they own both sides of the market. And Google has is the world's biggest digital advertising companies. They have been for decades now, the sort of primary way that public online publishers have have monetized, it's with Google ads. And it’s basically the same exact model on YouTube just taken over to video. So it is the world's biggest online video advertising service by far.
And effectively it's a very easy and increasingly automated system where if I'm a marketer, I'm P&G, you know, which spends billions of dollars of marketing I'm gonna go to Google and I'm gonna kind of give them a chunk of money, effectively goes through a bunch of ad agencies, and then Google's gonna allocate that based on “Oh, we're gonna give this to search in front of people whenever they type a keyword. We're gonna put this on display to put on the, Bloombergs of the world and we're gonna allocate this to video, knowing that we can actually reach in this very hyper targeted way the consumers we wanna reach.”
Joe: (10:17)
Are there speculators who might be the equivalent of a hedge fund or a trading desk who will buy add inventory just on the assumption that they could flip it and sell it for more than what that person was selling for?
Mark: (10:31)
I even heard of that one. There's certainly like all sorts of middle men in the industry and there are times in the era, I'm sure this still happens, but I used to go to all these advertising conferences and you know, all sorts of ad tech companies and you asked them what they do, and it's this, you don't really understand where they sit in the stack, right?
There's just like all sorts of complexities and, and they're programmatic advertising companies that just do one thing on mobile. And there was, Bluetooth advertising that was a big hot thing where you could actually like serve an ad to a consumer when they're in front of the Colgat aisle.
We were moving towards this world and, and certainly before Apple stepped in front of this ability to your cellular data and know your exact location and push alerts. And I mean this is why it's under so much privacy and antitrust scrutiny because it became quickly invasive and incredibly unregulated.
Tracy: (11:44)
So can you talk to us maybe about like how important data targeting is? Or targeting of an audience actually is because I think we hear these things like, “Oh it makes it harder for advertisers if they're not able to track your data.” Why is that so important? And like, can you maybe give us some numbers around how valuable a targeted ad is versus an untargeted one? I don't even know if untargeted ads exist on the internet.
Joe: (11:53)
Well, and just on on to sort of add on to Tracy's question. Like let's say I go to golf.com, the ads that I get, how much is based on the fact that I’m on golf.com as opposed to a reflection of the last 10 sites that I went on. How valuable is it for golf.com to be able to know that I also like pets.
Mark: (12:36)
I mean there, there is all sorts of open and unsolved questions about the value of precision of online advertising. And the classic example is like, you go and you buy a pair of sneakers and then all you see are ads for the same exact sneakers like this following you around the internet, right? It's like, I just bought these. Why the world's biggest tech companies that supposedly know a lot about you? Like, they can't solve that
Joe: (13:02)
Another one, right? Well, I do, but I definitely don't need a second stove.
Mark: (13:05)
I mean I think that that to a certain extent… YouTube is a really interesting example in part they built this very fantastic targeting model where they can show an ad to a viewer. You mentioned like if you watch a lot of golf channels, right? Like if you are an advertiser, you are going to probably want to get in front of that if you're selling golf gear or clubs, you want to get in front of that person that's watching a lot of YouTube videos. They have this feature, I'm sure the skippable ad format, which is a major part of their success was because, you know, if if the consumer's actually watching this because they didn't click the skip button, uh, that's worth a lot more money, right? And if Nike runs an ad that didn't skip Adidas is gonna want to pay more. And in this automated bidding system, and this is why Google search kind of works really well with scarcity too, where it's like they can drive up the, the cost per, per mill or cost per click, um, pretty high in these in these scarce markets.
Joe: (14:01)
Well, let's go back then to the Apple situation directly prior to this policy change. What was an iPhone user giving to various apps when they used them and when did the policy change? And what are they getting now from those users?
Mark: (14:17)
Some of it is really hard to trace, but if I was an iPhone user and I'm using maybe Chrome or even Safari you're getting a lot of background data. Like there's a lot of ad companies you probably never heard of or like serving a cookie on on your your mobile browsing some of it.
There are companies that have like invented ways to do deep linking between when you bounce from an app to the web, right? This is, this has always been Google's fear of Apple in some ways is that Apple is only if your only experience on an iPhone is just moving from app to app, right? Like that is you're no longer going through the turnsstyle of the internet, which is Google.
And so certainly amount of data about the websites you visited, how long you like, what you click on, all the sort of signals is my understanding is like the, with now that they've kind of fully eliminated third party cookies and, and Google is, has said they're doing the same for Chrome, uh, which is they own the, the Chrome browser.
It is actually this, Google has pushed that timeline back several years. I think now it's, they say 2024. Um, and so the idea like basically like these third party sites that do the tracking, uh, will not, you effectively will not be able to know, um, uh, your internet history of like what, you know, if you visit golf.com and then you go to espn, ESPN doesn't know that you visited a golf.com, right? ESPN might just sees you as a sports fan. They don't see you as like a golf fanatic.
Tracy: (15:46)
What scope do companies have to sort of bypass Apple's restrictions on this? Is there a lot of leeway to still somehow track people even if they've opted out?
Mark: (15:57)
I'm not an expert, but Google and Facebook have both sort of invented these machine learning models that can like walk in backwards, right?
Tracy: (16:07)
They’re kind of building proxies of your activity...
Mark: (16:08)
Yeah. They both have different jargony names for the services, but effectively that's it. Like, “Oh we're gonna put you in a group of people.” I'm gonna keep going back to this golf example. “We're gonna put you in a group of, we don't know that, that you, Joe, are, are actually visiting this, but we know that there's enough like golf fans doing this activity or using this app. And so we can approximate.”
I mean the, the a real issue here is that there's Google and Facebook have been in a duopoly in this world for a very long time. TThe actual challenger now is Amazon, right? Like certainly not a small company like Amazon's ads business has grown tremendously in the past few years. And they're less threatened by this cuz it's all in house, right? Amazon's business is based on the activity on Amazon properties. So that's one way that, that that companies have got around it. The big push also that all the platforms you see, how much of ad tech companies have pivoted towards commerce, e-commerce, especially during the pandemic.
Joe: (17:06)
For what it's worth for listeners, I don't even golf and I don't have a pet. So I don't know why I use those examples. I just needed to get that out there. The ads that I've been getting on Instagram lately have been absolute garbage. The worst targeting. It's just unbelievable.
Tracy: (17:21)
Is that true? Okay. Cause the ads that I've been getting on Instagram, cuz I experimented with this cuz I got really interested and I was like, where are they getting this info from? Yeah. It seems to be coming in through Google. It's like if you do a Google search research, it shows up on
Mark: (17:33)
Instagram. Yeah. Or there's the one that they always have to debunk, which is like if you're talking the microphone...
Tracy: (17:38)
I tried that too. Yeah. My husband and I did baby carriages. We're not having a baby, but just as an experiment to see like what would show up. Nothing if you talk about them in front of Alexa, but if you Google search for it, they show up on Instagram.
Mark: (17:51)
Google, for a long time they had like a state and church and state separation from like search and the rest of the display internet. That started changing in 2015. In part that was just about a financial concern. Like they wanted to give more data to the ad tech industry. It was just a bigger growth.
But for a long time at least they said, people I've talked to the early days, like have this almost religious belief that like you are search. I mean, you know, Google has our most intimate data, right? Like the things we're searching for, we tell Google things that we wouldn't tell our spouses kind of, right?
And so like that search data is incredibly valuable to a marketer if they're trying selling pharmaceuticals or lawyers, right? Like those kind of, industries that typically have incredibly high search ads because they're people that are really in demand for a particular thing. Instagram, I mean, Facebook has, you know, it's so funny. People talk about how crappy the ad qualities are and yet like they're as business, you know, certainly has been suffering because of apple's changes, but it's still that, right? That like the, the one of the two kings of, of the industry. Well
Joe: (19:02)
Then talk about what we've seen specifically. So when you say, okay, their, because this is the core of the whole thing, when we talk about their businesses has started to suffer because of the policy changes that Apple has made, what are we seeing concretely in terms of how it's spilling over?
Mark: (19:17)
Yeah, I mean concrete, like the dollars, I think some of this was, you know, the other fact there like macroeconomic factors and for marketing, there's the war in Ukraine and, and then there's just the pandemic in general.
But if you are an advertiser and your choices are between say like television or billboard adand Facebook, Yeah. The argument for online has always been like, you know, the, there's a joke about TV. You put your ad up there and you have no idea who's watching necessarily. And, and um, that's just sort of like brand advertising, right?
And in the industry there's brand and there's direct response. And the direct response are the one where you want people to make an immediate action. Like you want them to install an app, buy a thing,this, so this is, you know, Apples changes have made it much more difficult to do that. And so there's, they're getting, you know, they're have to be more reliant on, on brand advertising.
Joe: (20:11)
But just to be clear, have they put a dollar amount or did they say, you know, what is what it would cost them?
Mark: (20:16)
I don't have it off the top of my head. I mean, their market cap has taken a huge hit and some of it is regulation, but have they really been regulated? It's not like Congress hasn't gone after them. The only real tech regulation, an I talk about in the book is the FTC went after YouTube illegally targeting kids, collecting data on children under 13.
And that's another area where like there's this whole online academy that's been unregulated and you know, you're not allowed to, to collect data on children under 13. And you yet a lot of companies have done that. I mean, we don't know the numbers for YouTube in part cause they don't share their financial data. Uh, but what was, what was Meta's mark drop valuation drop in the past?
Joe: (21:05)
I don't know. A lot. Definitely see a lot. I'll just say this, the the stock went from around 360 to 160 and the market cap at the peak of 2021 was about 1.06 trillion and now it's $420 billion. It’s cheap. And so, so, so then okay, of that roughly half a trillion dollar market cap, has anyone made an attempt to say, how much can we ascribe this to Apple and and that change in the online network?
Mark: (21:33)
So Facebook's business is primarily mobile advertising. And iPhones in there was in the new stat, I think recently that they're, now that the, they just leap product Android in the us It's the most popular operating system.
Apple has historically been Apple phones just to make, make a lot more money per user than Android phones do. And so we can assume that if Facebook makes a lot more money on iPhones than on Android. And so that is a bulk of their business and, and I think it's, we could say a significant impact.
Tracy: (22:03)
So you mentioned antitrust a number of times, and also the sensitivity of Google complaining about what Apple is doing given that they have a slightly different relationship with Apple than someone like Meta and also given that they're under, um, antitrust scrutiny themselves, but what are the chances that we do get some sort of antitrust action when it comes to Apple and their transparency push?
Because it seems a little difficult. It's like on the one hand you own the product, you're making it a walled garden, you're cutting people off from it. But on the other hand, you say you're doing it for privacy reasons. That should sound good to regulators, right?
Mark: (22:39)
Apples certainly had more pressure around the app store and the accusation that they're running an app store monopoly. And if you own an iPhone, then basically Apple is the gatekeeper. And I think this digital advertising, there's certainly companies in, in the advertising space to complain about that. Like Apple's one movement from Cupertino has single handed, like has huge ripple effects for this multi-billion dollar digital advertising world.
I think that as far as I understand, Apple has faced some in Congress and, uh, the Epic lawsuit, the, the creators of Fortnite has sued Apple. I've also sued Google, but they've really gone after Apple. Um, about, this is about app in store app fees for, for Fortnite games. I, I think that like for Google's case, the, the most likely outcome from any antitrust might be to kneecap some of their ad tech and, and like the way their digital advertising forms.
Joe: (23:49)
So what about for small businesses that, I mean, this is the argument in favor of hyper targeted advertising that it's like I can get ads that are like, “are you looking for a new dentist in the East Village or teeth whitening or something like that?” They could be like hyper targeted. Oh my God, how did they know? I need a teeth white. I'm doing video for Odd Lots now I'm doing, I need teeth whitening. You hear about these complaints, but sometimes you can't tell if it's AstroTurf, like some group that Facebook like may have like encouraged like, how real is this for the company? Is they were able to like find a model because they're really good at like finding their exact potential customers.
Mark: (24:23)
Facebook part of the, the success of Facebook and Google has been the long tail Yeah. Of like the mom and pop advertisers. Uh, Facebook has leaned into this a lot as a response to con like Google as well. They're going to, to Amy Klobuchar office and Congress and saying like, why are you trying to hurt small businesses? Right? And like that might be a compelling argument. Um, certainly it has political cause like
Joe: (24:46)
For a P&G, like everyone is gonna buy laundry detergent or something, right? So for them, I don't know if they need as much hyper targeting…
Mark: (24:56)
I mean like P&G level, they have all these ad agencies that effectively operate as consultancies and they're running ads with spreadsheets and algorithms and like moving the numbers .
And so, yes. I think that is somewhat compelling. They’re probably gonna continue to, like they know the argument that Facebook and Google will make despite these changes around we, we lose some of our, our targeting and richness.
The audience is still here. This has been like YouTube's argument for, for, uh, over a decade now is like compared to television, there are so many more people and so many more hours spent on YouTube and that the amount of money marketing dollars spent on television is not proportionate. Right?
Like if you are a challenger brand in CPIG... Like the challenge, the real smart challenger brands will like be where the kids are and will be like, get in front of the audience and do like sponsored content deals and lean into digital advertising. That's, that's effectively what works, right? Like these companies have grown because that argument has worked and money is moving over from TV to the internet.
Joe: (26:09)
What exactly is Apple's search and advertising business like. What exactly are we talking about when we talk about Apple’s search business.
Mark: (26:17)
I mean there is, there's Siri, which is an Apple search engine in some ways. There's the app store, uh, which I think is, that's where the, like if you look at the tea leaves on where they're hiring and putting resources, it is to run like effectively like a search advertising business in the app store within the app store. Yeah. Like you wanna promote I don't know, like you're searching for like Uber and Lyft's, like I wanna like spend money to be up the top result when you search for Uber and then people are gonna click on Lyft.
Tracy: (26:50)
So what's the sort of like game plan from the Facebooks of the world or the YouTubes of the world? Like what can they do to actually try to offset this? And I guess a very extreme example I don't know, could Facebook like launch its own phone or something? Like if the idea is to get as close to a customer as possible?
Mark: (27:10)
Well, I mean, Google has. I have a Google Pixel in front of me in part because the company I cover and Google Pixel was a response because Google has Android, the open source software model, they give away their software for free to Samsung and like a Galaxy of pun intended, a galaxy of handset makers. And for a long time Google was like, Okay, these will be rivals to Apple and it hasn't really happened. And Apple has this premium.
People spend more money on iPhones. And then I think Google saw in part, they're investing in Pixel because they saw this world. They're like, “Our digital advertising model is not gonna last for a long time. We need to own and operate the actual hardware.”
We've reported on this quite a bit. Facebook has tried several times. I, it looks like, I mean, their company is now pivoting towards like, I think Mark Zuckerberg's bet is that we're gonna stick a phone in our face , and he's gonna own that, right? They've renamed the company meta, like Facebook's existential crisis has always been like Google and Apple own the operating systems where they make him most of their money. And so the, the move in the Meta versus Facebook will have the, why are we
Joe: (28:23)
Even recording this all together at a studio? We could be like curious
Mark: (28:26)
Legless avatars, legless
It's a frightening thought. So Google and YouTube and the rest of social media is commerce like pushing commerce pretty aggressively? And this looks like, I think more ways to purchase directly buy something directly in Instagram, for instance buy something directly in a YouTube video. Like I think they're running into the uncanny valley of how much do you want social media to look like the home shopping network.
But YouTube... And part of the reason I wrote this book cuz really fascinating. There are about 2 million, over 2 million creators that make money on YouTube. That number is actually down from when the company had to make it a little bit harder. But that's a whole economy. So many of them are now comfortable because the, uh, of, because of it's been harder increasing, the harder to make money and then to make now with, with apple's changes, uh, higher ad rates online.
So they're moving towards, and you can, if you watch enough YouTube, you'll like, a lot of 'em have sponsored content deals, right? Or they're just like trying to sell their merch and their merchandise like tabs and they're looking in the channel. I think they're, they're experimenting. TikTok is also moving in commerce. Like that is a direct response to Apple and to privacy regulation, um, cutting out, carving out the like, uh, the, the profitability of, of online ads.
Joe: (29:53)
Ads. So just big picture, does it feel like this is a turning point? Because then, and I don't wanna even like talk about, I don't even wanna say the, say the word, but like web three and this like idea, like there's gonna be like something else that's like, we have to like buy coins for, I'm
Tracy: (30:19)
Actually surprised we made it like 30 minutes...
Joe: (30:22)
We just buy coins from Marc Andreesen in to use the internet. Is that what we're turning into...
Mark: (30:29)
The possibility of Web3 notwithstanding like the criticism of the Andreesen of the world is like, look at this, this kind of way we built around online advertising is not the world we want. And like, I think I'll share an anecdote from the book, which is,YouTube started like a decade ago. YouTube was not making money. It was unprofitable, right?
And after the financial crisis, they're like, “Okay, we need to make money from this thing.” And there was an ads manager who gave a presentation on stage about how they were gonna do it. And Sergey Bren who and this is not confirmed, but Sergey Brin one of the world's wealthiest men, largely based on a search advertising business. Made a joke about how YouTube ads were like disruptive...
The founders have like notoriously never loved advertising as a business model. Like, it, it has clearly been successful for them. Like they will make a lot of them will be like, search ads, search ads. You're delivering a thing that you really want and the rest of the ads it's kind of icky. And like there's this sense, it's this weird irony in the fact that they're the biggest online advertising company and yet a lot of people that work there like, don't love this. It's kind of sleazy mark. Like people in marketing know this.
Tracy: (31:49)
Right? Yeah. I think they think of it as like old economy, right? Yes. That's like ad sales
Mark: (31:53)
Sales. Absolutely true. And so Wb3 or whatever, like, uh, I, I think that you can, the sort of case inside Silicon Valley is like, here's a chance for us to reinvent ourselves. And Google's history, they've been just trying to find a business that's not reliant on ads. Cloud computing is the main one. You know, YouTube has subscriptions, there's YouTube tv, there’s .com.
They've been always searching for ways to move past this in part for all the reasons we talked about. And in part because they don't love it. But at the same time, YouTube was once competing with Netflix, Amazon Prime, Disney on original programming and subscriptions, they mostly dropped out. They're like, let these companies like bury themselves competing for subscribers. We're just gonna continue to dominate a pretty good margin heavy business even after Apple changes, like on ads can remain a pretty successful business in Google's testament for that.
Joe: (32:54)
Mark Bergen, congrats on the book and thank you so much for coming on the show.
Mark: (32:58)
Thanks for having me.
Tracy: (33:12)
So I thought that was really interesting, Joe. And the whole transparency push by Apple was not something that was really on my radar other than I sort of clocked it a little bit when I was using my phone, but I hadn't thought of the impact on other businesses. But I thought it was interesting what Mark was saying about this idea that for a lot of these big tech companies, they want to get away from the business of ad sales. And it feels like that almost from inception, there's almost an aversion to anything to do with media from the tech companies, even though ultimately they're in the business of selling media, right? No one actually wants to be a content producer. At least YouTube does it. And when you, you know, this idea of actually having to go out and sell ads, like it does seem kind of old fashioned.
Joe: (33:57)
And I remember thinking about that too because right when like Google came on the scene, it was like this sort of wow factor. It's like this magical money machine because you tell the computer what you're looking for and then that's the most amazing form of ads. But then a few years later, and they probably have like whole teams internally dedicated to like taking ad salesmen from Proctor and Gamble out to the US Open or like taking them out for wine and stuff. This is kind of like old school. This doesn't seem very techy to me.
Tracy: (34:27)
And I guess my other big takeaway from that conversation is we should be telling people to like, comment and subscribe, right?
Joe: (34:33)
We should definitely be telling people to like, comment and subscribe. So please do that if you're listening, you know, just one other thing, you know, it always seems, and Mark was talking about like the sort of the incredible ecosystem of ad tech companies and how there's like nine middle men, right? And I've always thought there's an interesting analogy between online ads and financial markets. Where you might find an edge at some point, like “space is really cheap here” Or “I found a really cheap way to get in front of these high dollar clients and then everyone discovers it, right?
Tracy: (35:14)
Then someone closes the arbitrage really quickly.
Joe: (35:16)
And then the search for the new one. And so you think why has there this like endless parade of ad tech companies and it's like everyone like trying to find that arb, but look, if data is gonna be harder to come by, that's gonna, people are gonna have to really do put into more work.
Tracy: (35:30)
Yeah. And then the question is, what is the new edge? Because people got so into targeted advertising, like what comes next?
Joe: (35:35)
You know, we don't talk about like tech business a lot. Maybe we should talk a little more because these companies are obviously so important in our entire lives.
Tracy: (35:45)
Like for many, many years we haven't really had to talk about tech business. The share prices...
Joe: (35:49)
They just went up. They just went up. But now I guess the question is, in the future to use the internet, we’ve got to buy a coin from Andreesen Horowitz.
Tracy: (35:57)
All right. On that happy note, shall we leave it there?
Joe: (36:00)
Let's leave it there.
You can follow Mark Bergen on Twitter at @mhbergen.