The Talk Show

00:00:00 ◼   ► Do you watch football?

00:00:02 ◼   ► Um...

00:00:04 ◼   ► Kind of.

00:00:06 ◼   ► I know you're a basketball guy. I know you're an NBA guy.

00:00:08 ◼   ► Football, um...

00:00:10 ◼   ► Like, I...

00:00:12 ◼   ► So, like, I like the idea of, um...

00:00:16 ◼   ► You know, like, I'm gonna boycott football because it's, like, killing people.

00:00:20 ◼   ► Um, and I can be all self-righteous about it and say, "Well, I don't watch football."

00:00:24 ◼   ► Uh, the problem is that, um, the main reason I watch football is because it's on in the middle of the night.

00:00:29 ◼   ► And I find football of all the sports the least amenable to watching not live

00:00:34 ◼   ► Which is weird because if you watch it not live you can watch it in like 30 minutes, right?

00:00:40 ◼   ► But because I know when I came to Taiwan the first time I like there weren't really any streaming things

00:00:47 ◼   ► It was much more difficult to do then

00:00:49 ◼   ► And then when I went back for four years, I was right back right right back on the couch on Sunday after dudes

00:00:55 ◼   ► So I know I'd be a bit. I'm I'm kind of a big hip-wracker about it

00:00:58 ◼   ► So, I do watch it some. I actually got the NFL package this year, but I'm terribly

00:01:04 ◼   ► conflicted about it. But it's so compelling.

00:01:07 ◼   ► So, did you watch the Super Bowl?

00:01:10 ◼   ► I did. I did.

00:01:11 ◼   ► And were you able to watch it live?

00:01:13 ◼   ► Yeah. I have the NFL streaming thing, which actually includes all the commercials and

00:01:21 ◼   ► all that sort of stuff. So, I was able to offer snide remarks along with the rest of

00:01:27 ◼   ► Twitter.

00:01:28 ◼   ► I feel the same way about you. I forget if I've talked about this on the show before.

00:01:32 ◼   ► I know I've linked to it, and I know Kottke has too, that it's like the NFL is so incredibly

00:01:39 ◼   ► popular in the United States, and it's, if anything, more popular than it ever was, especially

00:01:45 ◼   ► compared to other team sports. But yet, it really does seem like the sport as we know

00:01:49 ◼   ► it is completely doomed, ought to be doomed, and I do feel as like a semi-casual fan, somebody

00:01:56 ◼   ► who doesn't really watch as many games as I used to,

00:01:59 ◼   ► I actually feel like a complicit, like a guilt.

00:02:03 ◼   ► That the game as configured is literally killing people

00:02:08 ◼   ► and giving them, and not just killing,

00:02:11 ◼   ► but then making the last years of their life

00:02:13 ◼   ► absolutely miserable with this chronic traumatic

00:02:17 ◼   ► and cephalopathy, CTE.

00:02:20 ◼   ► In other words though, long story short,

00:02:22 ◼   ► for anybody who doesn't follow football,

00:02:23 ◼   ► there is massive evidence,

00:02:25 ◼   ► I mean, just overwhelming evidence like smoking is bad for your lungs and gives you cancer

00:02:30 ◼   ► evidence that playing football, even at like a high school level, even if you just play

00:02:37 ◼   ► in high school and then never play again, but let alone if you go on to play college

00:02:41 ◼   ► where people hit you harder and then go on to a pro career where bigger people hit you

00:02:44 ◼   ► even harder for more years, that the repeated hits to your head end up causing terrible

00:02:53 ◼   ► scarring that your brain is not meant to have and it causes depression and all sorts of

00:02:57 ◼   ► other problems. It's a really nasty, nasty degenerative brain disease and it really seems

00:03:04 ◼   ► like it's just unbelievable how many former pro football players have it.

00:03:08 ◼   ► Right, and that's the thing that, it's easy to say, well, these guys know what they're

00:03:13 ◼   ► doing, they're getting paid millions of dollars, that's the tradeoff they make, but the problem

00:03:16 ◼   ► is that oh you know like any pro sport only a very small fraction of people

00:03:22 ◼   ► playing actually you know make money from it and when you you know basically

00:03:28 ◼   ► start banging your head from the time you're a kid on that's you know there's

00:03:33 ◼   ► a lot of people that aren't that aren't winning that trade-off to say the least

00:03:37 ◼   ► and there were a couple of concussions in the Super Bowl I'm reading an article

00:03:41 ◼   ► here this is Panthers wide receiver Corey Brown suffer concussion and

00:03:47 ◼   ► Broncos linebacker Shaquille Barrett I forget his name I thought number 88 for

00:03:52 ◼   ► the Broncos clearly had a concussion he got like his clock cleaned in an early

00:03:57 ◼   ► play and then later like the next time he ran a route he just felt hold out I

00:04:02 ◼   ► hate to laugh but it really I don't know it and then just to have the word

00:04:07 ◼   ► concussion mentioned during the game you just know that the NFL there's somebody

00:04:11 ◼   ► The NFL is like I was really hoping to get through this game without that word coming up. Yep

00:04:15 ◼   ► Well, it's not just I mean, that's the serious one. But I mean there's also I mean

00:04:20 ◼   ► What what these people with these guys are doing to their to their bodies? I mean you have I

00:04:26 ◼   ► Mean like what was it Ben Ben Roethlisberger in the playoffs?

00:04:30 ◼   ► Dislocated his throwing arm and somehow managed to come in

00:04:35 ◼   ► You know as few series later in play

00:04:38 ◼   ► You know

00:04:40 ◼   ► Just just I don't think it magically healed itself in the meantime

00:04:44 ◼   ► You know there was like some horse tranquilizers being used or something like that. I mean

00:04:49 ◼   ► Who knows what they're these guys are shooting themselves up with for?

00:04:53 ◼   ► For our our entertainment, and yeah, it's it's definitely

00:04:57 ◼   ► It's it's one of those things that it's it's hard to think a lot about my theory

00:05:01 ◼   ► And I've said I think I've written this on during for but my theory is that the way the long-term way out is for football

00:05:06 ◼   ► to

00:05:08 ◼   ► Evolve into a more basketball like game that is mostly

00:05:11 ◼   ► Well more or less like professional flag football, but it's mostly like quarterbacks and wide receivers and athletic passing plays and

00:05:20 ◼   ► Defensive guys, you know who can counter that

00:05:22 ◼   ► But I because I feel like that's the part of the game that I like best

00:05:28 ◼   ► I love the passing game and I love you know, some of the just incredible athleticism of you know

00:05:33 ◼   ► Catching a ball at full speed while you're running 50 yards down a field

00:05:37 ◼   ► But I feel like there's way way too much of the popularity is tied up in the glad II

00:05:41 ◼   ► gladiatorial

00:05:43 ◼   ► Aspect of the violence you know that I say this and I might enjoy watching that game

00:05:48 ◼   ► and I like watching basketball, but that the reason the sport is so popular has

00:05:51 ◼   ► Way too much to do with the actual brutal violence

00:05:55 ◼   ► Yeah, I think that whether that's part of it too and the other thing too

00:05:59 ◼   ► I think part of what makes football so compelling is

00:06:03 ◼   ► is like it really is such a strategic sort of game tied into you know so much

00:06:09 ◼   ► violence and and part of that strategy is very much a sort of war of attrition

00:06:14 ◼   ► aspect like you like you do stuff in the first quarter like you you run plays

00:06:18 ◼   ► that achieve no gain in part to with the express purpose of wearing down the

00:06:24 ◼   ► defense so that you can you know pull off those plays you know later in the

00:06:28 ◼   ► game and you're like just a I mean the fundamental nature of it is so tied into

00:06:32 ◼   ► into getting a physical advantage.

00:06:37 ◼   ► And the other thing too is the trend,

00:06:42 ◼   ► what you say makes sense intellectually,

00:06:44 ◼   ► but the actual trend of the game is,

00:06:46 ◼   ► - Yes. - As guys getting bigger

00:06:48 ◼   ► and stronger and faster and hitting.

00:06:51 ◼   ► - Right, I fully acknowledge the wishful thinking aspect

00:06:55 ◼   ► of my make it more like flag football

00:06:58 ◼   ► and a basketball type athletic game.

00:07:00 ◼   ► Fully acknowledge that it really contrasts and is in the opposite direction of what is actually going on with the league

00:07:06 ◼   ► What did they say they said the one of the most interesting stats?

00:07:09 ◼   ► So there was they were making a big celebration about the fact that this was Super Bowl 50 and it's a nice round number

00:07:15 ◼   ► Cam Newton the quarterback for the Carolina Panthers is 6 5 and

00:07:21 ◼   ► 245 pounds

00:07:23 ◼   ► He he's bigger than every single player who is on the championship Green Bay Packers team from Super Bowl one

00:07:32 ◼   ► the quarterback

00:07:34 ◼   ► The quarterback was bigger than everybody on a legendary

00:07:40 ◼   ► Legendarily great and and sort of rough-and-tough big, you know running, you know three yards and a cloud of dust

00:07:46 ◼   ► Green Bay Packers team

00:07:50 ◼   ► Kind of unbelievable. Yeah, it is unbelievable. Yeah, I thought and and again

00:07:54 ◼   ► I think part of what makes football so appealing too is that the strategy is is very easily

00:07:59 ◼   ► Apparent to the lay layperson fan that specific tactics aren't right like the exact nature of what?

00:08:06 ◼   ► the precision of the play and the complexity of a given play is

00:08:09 ◼   ► You know obviously it's if you've ever seen like the size of an NFL playbook although

00:08:14 ◼   ► I guess now they're all the size of a surface tablet, but back when they were in a you're on brand

00:08:19 ◼   ► back when they were in a binder they were just like phone book size

00:08:24 ◼   ► but that you know that there it's complex tactics and very simple strategy

00:08:28 ◼   ► I thought the Super Bowl really

00:08:29 ◼   ► the Super Bowl was a perfect example of it yep yeah

00:08:34 ◼   ► no it's a I mean we're we're we're I don't know this is better or worse than

00:08:38 ◼   ► baseball

00:08:39 ◼   ► baseball talk but I'll it's it's got to talk about the Super Bowl

00:08:43 ◼   ► yeah no it was on you know I I'm so I'm so

00:08:48 ◼   ► It's so one of those things.

00:08:50 ◼   ► I mean, it's a perfect example of,

00:08:52 ◼   ► it's a reminder of about standing in judgment

00:08:59 ◼   ► on anything to anyone because there's no question

00:09:04 ◼   ► I'm a total hypocrite.

00:09:05 ◼   ► And I like to say I'm less of a hypocrite

00:09:07 ◼   ► because I don't watch that many games

00:09:08 ◼   ► or something like that.

00:09:09 ◼   ► But then actually that's just a matter of circumstance

00:09:12 ◼   ► if I'm being honest with myself.

00:09:14 ◼   ► - If you wanna think about it,

00:09:15 ◼   ► the long term the long term pessimist strategy about the NFL and football in

00:09:19 ◼   ► general the NFL from the top down at the professional level is a they're very

00:09:24 ◼   ► successful there and they're very effective you know like in terms of PR

00:09:28 ◼   ► and they have good lawyers I mean I mean they've effectively their lawyers are so

00:09:31 ◼   ► good they've gotten everybody who doesn't pay them a fortune to refer to

00:09:35 ◼   ► the game as the big game instead of the Super Bowl because I know that was

00:09:38 ◼   ► crazy it's absolutely nuts how bad or not bad but how effective they are

00:09:44 ◼   ► at having gotten rid of anybody using those the two words Super Bowl without paying them and it just shows how

00:09:51 ◼   ► Unbelievable the brand is for the Super Bowl that they want to do that right like most like the NBA

00:09:56 ◼   ► I don't think the NBA Finals is so

00:09:58 ◼   ► Or the World Series is anywhere near as as

00:10:02 ◼   ► Litigious about that because they want people talking about the World Series or they want people talking about the finals

00:10:07 ◼   ► Where's the Super Bowl the NFL is like we know you're talking about the Super Bowl. So you're gonna pay us for those words

00:10:14 ◼   ► No, I think it's from the bottom up where the game collapses, which is that high schools

00:10:20 ◼   ► and youth leagues are going to start getting sued more and more.

00:10:26 ◼   ► And I feel like lawyers and insurance companies are going to start telling, I don't know if

00:10:30 ◼   ► this is like a next few years thing or if it's a 10 years from now thing, but I think

00:10:34 ◼   ► it's absolutely within the next 15 years that, you know, insurance companies are going to

00:10:38 ◼   ► start telling schools, you can't have a football team.

00:10:42 ◼   ► Yep.

00:10:43 ◼   ► More and more even without that I think you've got more and more parents who are saying to their

00:10:51 ◼   ► athletic children and let's just face it quite frankly their sons I mean there's obviously you

00:10:56 ◼   ► know there's a few girls who play here and there but it's usually quite notable you know you can't

00:11:03 ◼   ► play football you know you're gonna play soccer in the fall and basketball in the winter and you

00:11:07 ◼   ► can play baseball in the spring but you're not playing football and I think with good reason I

00:11:12 ◼   ► I don't I don't think I would let my kid play in fact. I know I wouldn't definitely wouldn't let him play football

00:11:16 ◼   ► And I think it's gonna happen more and more and you start hearing it now from football players like Troy Aikman

00:11:23 ◼   ► I said he wouldn't let his kids play football

00:11:25 ◼   ► And once that starts happening and fewer and fewer athletic kids even play football the kids who are who are the

00:11:34 ◼   ► Extraordinary athlete to might go pro are gonna end up in different leagues

00:11:37 ◼   ► You know they're gonna end up pitching and baseball or playing basketball

00:11:41 ◼   ► Maybe we'll finally have a good US soccer team.

00:11:45 ◼   ► I mean, not that we have a good team, but if we get the best athletes.

00:11:51 ◼   ► I'm on board with that.

00:11:52 ◼   ► The other thing too is because football is such an American sport, like baseball has

00:11:57 ◼   ► lost a lot, particularly in the inner cities and certain parts of the country, baseball

00:12:03 ◼   ► has really fallen off.

00:12:05 ◼   ► But it's been, from Latin America in particular, there's been a huge influx of talent that

00:12:11 ◼   ► has really picked up the pace, but football's not going to have that. Once it loses the

00:12:17 ◼   ► American pipeline, that's the only pipeline.

00:12:20 ◼   ► Yeah. I think the long-term path is that it devolves into a regional sport in the U.S.

00:12:26 ◼   ► South.

00:12:27 ◼   ► Yeah.

00:12:28 ◼   ► Curious how it plays out.

00:12:33 ◼   ► It is amazing how popular and pervasive it is.

00:12:39 ◼   ► Even on something like the tech circles that we tend to live in and circulate in, there's

00:12:46 ◼   ► a lot of football fans, far more than basketball or baseball or any other sport.

00:12:52 ◼   ► Every Sunday, even if you only follow tech people on Twitter, all the people who are

00:12:56 ◼   ► going to complain about this podcast, I'm sure, are grimacing because they know exactly

00:13:00 ◼   ► talking about but it everyone's talking about the the play and and and what's

00:13:04 ◼   ► going on it's it's really quite remarkable I still think but in that

00:13:07 ◼   ► Super Bowl it just has this weird gravity I mean it really does and I know

00:13:11 ◼   ► it's corny and it's almost cliche that people say well I'll just watch it for

00:13:13 ◼   ► the commercials but it's true and because people have parties you know I

00:13:16 ◼   ► mean somebody says hey come over to my house I'm having a dozen people over

00:13:19 ◼   ► we're gonna have you know you know big platters of food and lots of beer people

00:13:26 ◼   ► come over and if you're not really into the game you take your bathroom breaks

00:13:28 ◼   ► when the game comes back on you know yep boy a lot of those commercials this year

00:13:34 ◼   ► were awful I don't know if you got the same commercials that we did in no I did

00:13:38 ◼   ► I got all the same commercials I think they they're usually always awful it's

00:13:42 ◼   ► it's this weird sort of every year it's the worst year ever and then but it's

00:13:48 ◼   ► just one of those things the one that stuck out to me the most was the one for

00:13:54 ◼   ► diarrhea medicine where the star of the commercial was a walking human bowel

00:13:59 ◼   ► abdominal pain yes they made a cgi human bowel with eyes and little legs and he's at the game

00:14:09 ◼   ► and he's he's got diarrhea and the line to the bathroom is too long and now he doesn't know what

00:14:16 ◼   ► to do because he's about to well he doesn't have pants so he's not gonna he's not gonna

00:14:22 ◼   ► He's gonna shit his pants, I guess. He's just gonna go all over the floor.

00:14:26 ◼   ► Like where are they?

00:14:28 ◼   ► What made it even funnier is that was the second, uh, that was the second Bob movement related to the game.

00:14:36 ◼   ► There was already one for constipation in the first half.

00:14:38 ◼   ► Right, they had a constipation one in the first half.

00:14:41 ◼   ► With the guy walking around watching people poop. Like he saw a dog pooping on the street and he felt very whimsical.

00:14:48 ◼   ► "If you need an opioid to manage your chronic pain, you may be so constipated."

00:14:53 ◼   ► "It feels like everyone can go, except you."

00:14:57 ◼   ► And he was jealous.

00:14:58 ◼   ► No, he was...

00:14:59 ◼   ► It was like a dog was enjoying a nice...

00:15:01 ◼   ► A nice... a nice dropping...

00:15:04 ◼   ► He's like, "I used to be like that."

00:15:05 ◼   ► He's like some old man watching the youngins.

00:15:08 ◼   ► Right, I remember when I could enjoy a nice crap.

00:15:12 ◼   ► Boy, those were the days.

00:15:15 ◼   ► It was not a good ad.

00:15:17 ◼   ► Not a fun ad.

00:15:18 ◼   ► Longing for a change have the conversation with your doctor about OIC and ask about prescription treatment options. I

00:15:24 ◼   ► Don't know like, you know, and it just followed right up by just you know, here's some kids having fun with a coke

00:15:33 ◼   ► My god

00:15:38 ◼   ► Real one so speaking of the Super Bowl the other tie into to our usual beat is

00:15:46 ◼   ► Tim Cook was at the Super Bowl and I'm sure you saw this right that

00:15:50 ◼   ► The so

00:15:54 ◼   ► The game is over. I guess he had really good seeds look like he had like sideline seats

00:15:57 ◼   ► You know, I know he was in a box. I saw some photos later

00:16:00 ◼   ► The photo so what happened is the game is over Tim Cook decides to tweet Congrats to the the championship Denver Broncos

00:16:09 ◼   ► and he took a picture of like the celebration on the field like fireworks going off and and

00:16:13 ◼   ► You know the on I don't know how that happens, but like at the Super Bowl when the game is over

00:16:18 ◼   ► There's seemingly like 1,500 people who stormed the field

00:16:21 ◼   ► So it's pandemonium on the field

00:16:24 ◼   ► And he posts a photo to Twitter, and it's you know it's not a great photo

00:16:30 ◼   ► It's dark

00:16:31 ◼   ► And it's blurry and I mean dark meaning like it's nighttime there

00:16:35 ◼   ► And there was they turn the lights down so you could see the fireworks and so

00:16:38 ◼   ► There's camera blur because it's you know there's not enough light to take a short picture

00:16:42 ◼   ► it I you know and then and then he got excoriated on Twitter it seemed like

00:16:49 ◼   ► you know and and people in the press were picking up on writing stories that

00:16:54 ◼   ► Tim Cook took a terrible photo at the Super Bowl yeah I mean I'm sure there

00:17:01 ◼   ► was there was you know explain perfectly fine reasons for it to be blurry I

00:17:07 ◼   ► thought it was I thought it's pretty hilarious the virgin like Casey Newton

00:17:11 ◼   ► The Verge had a funny post talking about people being mean to Tim Cook, and I think he just

00:17:17 ◼   ► used that excuse for his opening paragraph, which was hilarious and super mean. But I

00:17:22 ◼   ► mean, whatever. If you're Tim Cook, I think you can deal. You'll be okay.

00:17:28 ◼   ► So, he ended up deleting the tweet.

00:17:31 ◼   ► Right.

00:17:32 ◼   ► And then he posted a much better picture a few minutes later. But people still were making

00:17:37 ◼   ► jokes. I guess the joke everyone want to make was they were sticking his photo is

00:17:41 ◼   ► blurry sort of slightly up not quite squared up photo into shot with iPhone 6

00:17:49 ◼   ► billboard. Yes, yes that's exactly it. I got an email here's in the actual

00:17:55 ◼   ► actual email from an actual actual reader. I will not mention his name. No

00:18:02 ◼   ► subject of course this is the entire email I got from her daring fireball

00:18:08 ◼   ► reader not a word about the shitty photo you are a pig this isn't even mentioned

00:18:16 ◼   ► to cook that's all email not a word about the shitty photo return return you

00:18:22 ◼   ► are a pig so I just wrote back to him and said your message made my day thank

00:18:26 ◼   ► you that was that was graceful of you I like to pretend when I get an email

00:18:32 ◼   ► I like that I like to pretend that I just answer every email as though it's I love your website

00:18:38 ◼   ► And it's the best thing I've read all day

00:18:39 ◼   ► It's my first thing I read every day, and that's exactly how I write back to the people who write something like that I

00:18:45 ◼   ► thought

00:18:48 ◼   ► that

00:18:50 ◼   ► it I

00:18:51 ◼   ► Wonder what happened? I kind of I like the idea that that Tim Cook sometimes tweets like that

00:18:58 ◼   ► Just like a normal person right like you know he's excited. He's a sports fan. He's at the Super Bowl

00:19:05 ◼   ► He takes a picture. He's not a professional photographer

00:19:08 ◼   ► Whatever however much you want to praise the iPhone 6. I don't know what he's probably

00:19:14 ◼   ► What do you think he is a 6x think he's a plus guy?

00:19:16 ◼   ► No idea I wonder well it's a 50/50 chance

00:19:22 ◼   ► He's either got the success or the success plus if he had the ball probably the six because it doesn't matter

00:19:27 ◼   ► Right, maybe that's what he maybe needs the image stabilization

00:19:30 ◼   ► But either way even with the image stabilization as fine as the camera as it is and arguably easily

00:19:35 ◼   ► arguably the best of any cell phone and

00:19:38 ◼   ► Inarguably among the best of any phone. I think that's fair to say

00:19:43 ◼   ► It is going to struggle in

00:19:46 ◼   ► Certain lighting conditions and on the field that the Super Bowl is certainly after the game at nighttime is certainly one of them

00:19:52 ◼   ► I thought it it I thought that there was a tangible realness to it

00:19:57 ◼   ► And no this is not the type of photo you're gonna put on a billboard a shot with iPhone 6, but it

00:20:02 ◼   ► The photo itself wasn't great

00:20:04 ◼   ► But I thought that the whole hell even the CEO of Apple takes tweets after an exciting thing like this is

00:20:10 ◼   ► Was an interesting angle you know and it made I think he shouldn't have deleted it like he should have like it

00:20:16 ◼   ► Could have been a hilarious like segue in like the next Apple presentation or something yes

00:20:21 ◼   ► Yes, like own it let it play out and then and then and then you could you know

00:20:27 ◼   ► You can make a joke about it and a subsequent event

00:20:30 ◼   ► Right. No exactly exactly like people that's like that's what Twitter does Twitter Twitter is run on snark

00:20:38 ◼   ► Unfortunately, he can't quite pay the bills or snark yet. Anyway, but I know I mean it's it's people are gonna make fun of it

00:20:46 ◼   ► That's what people do.

00:20:48 ◼   ► I think the real mistake was in deleting it.

00:20:53 ◼   ► Then it reinforces, it takes away the credibility from things you say in the future.

00:20:59 ◼   ► If you do something like that, like you said, it makes you look real, it makes you look

00:21:02 ◼   ► human.

00:21:03 ◼   ► We've all taken crappy photos.

00:21:08 ◼   ► There's a benefit, a long-term benefit, even if it's very slight to being a regular guy

00:21:14 ◼   ► and not being a, you know, feeling like everything is run through PR and control and all that

00:21:19 ◼   ► sort of stuff.

00:21:20 ◼   ► Yeah. Yeah, that's exactly what I would like to, you know, avoid. Or I feel like the collect--that

00:21:27 ◼   ► collectively--and we can't--I can't--nobody's gonna listen to me just 'cause I'm saying

00:21:30 ◼   ► it on the show. And I'm not saying, you know, poor Tim Cook can't take it, but I just feel

00:21:35 ◼   ► feel like collectively Twitter's group behavior forces people in a higher

00:21:43 ◼   ► profiles to be as guarded on Twitter as they are anywhere else you know whereas

00:21:50 ◼   ► Twitter could be a place where you know somebody like the CEO of the biggest

00:21:55 ◼   ► company in the world could have a little fun but it's like yeah say we have to

00:22:01 ◼   ► ruin everything and it's like I'm sorry and I'm not trying to make excuses for

00:22:05 ◼   ► just because it's an iPhone.

00:22:06 ◼   ► And I mean, it was not a great photo, but it wasn't horrible.

00:22:09 ◼   ► It wasn't ridiculous.

00:22:11 ◼   ► And if you don't understand that that's a tough condition

00:22:14 ◼   ► to get a photo, I mean, it's like,

00:22:17 ◼   ► I don't know what to tell you.

00:22:19 ◼   ► Yeah, no, I mean, there is a--

00:22:22 ◼   ► yeah, I mean, this is one of those things where people like--

00:22:31 ◼   ► yeah, people like to be outraged.

00:22:32 ◼   ► and they like to make a big deal out of stuff that probably really isn't that big a deal.

00:22:40 ◼   ► And I think there's a sense particularly for someone like Tim Cook or anyone that has relatively

00:22:44 ◼   ► high profile, like there's a de-humanization that kind of occurs to it.

00:22:50 ◼   ► And again, I don't think that Tim Cook was losing sleep because people were making fun

00:22:57 ◼   ► of his photo.

00:22:58 ◼   ► But you know, it's like, unfortunately that's just the reality of being a public forum.

00:23:03 ◼   ► And I think this is, you know, it's a real, this is a real, a real challenge for Twitter.

00:23:07 ◼   ► I mean, beyond Twitter's all, all, all of other Twitter's problems.

00:23:10 ◼   ► Like is this, it's the, the virtue is being public.

00:23:14 ◼   ► The virtue is the fact you can connect and talk to anyone.

00:23:17 ◼   ► And that is the downside in spades.

00:23:21 ◼   ► Right.

00:23:23 ◼   ► Uh, how long after he posted that tweet do you think his phone jingled and he looks down

00:23:28 ◼   ► that says Steve Dowling.

00:23:29 ◼   ► What do you…you totally…you totally envision how this happened, right?

00:23:37 ◼   ► So he was…I think he was in the box.

00:23:38 ◼   ► He's down in the field.

00:23:39 ◼   ► It's very…like I'm sure it's very exciting.

00:23:41 ◼   ► The stuff we were on takes a picture.

00:23:43 ◼   ► He probably just posted with barely even looking at it.

00:23:46 ◼   ► And he has like a…it's darn it.

00:23:51 ◼   ► Without ever having been even…I've never been in this stadium for a Super Bowl, but

00:23:55 ◼   ► Just watching on TV, which I think almost makes it seem more sane because they have

00:24:00 ◼   ► cameras that are high up that are stable and the cameramen on the field are truly, truly

00:24:06 ◼   ► amazing professional photographers, that it's controlled, barely controlled pandemonium,

00:24:13 ◼   ► with no, not overstating it.

00:24:17 ◼   ► You just know that like 10 minutes later, Dowling had to call him.

00:24:22 ◼   ► And I bet it was a tough call.

00:24:23 ◼   ► I bet it was like, "Gee, you know."

00:24:25 ◼   ► I bet it wasn't like a clear-cut call.

00:24:27 ◼   ► Yeah.

00:24:28 ◼   ► I don't know.

00:24:29 ◼   ► I thought it was funny.

00:24:30 ◼   ► I just wish he should have owned it.

00:24:33 ◼   ► It would have made it as hilarious as such things can be, but sort of like 10-second

00:24:41 ◼   ► interlude at WWDC or something.

00:24:44 ◼   ► Like the next iPhone introduction or the 5SE or whatever comes with X amount of camera

00:24:51 ◼   ► on.

00:24:52 ◼   ► Good Lord, do I need it.

00:24:53 ◼   ► I think the problem is that, and maybe the problem is that the timing doesn't work because

00:24:56 ◼   ► new iPhones aren't going to come until September and they have at least two events between

00:25:00 ◼   ► now and then and then it'll be old news by September.

00:25:02 ◼   ► Well, whatever, you can still...

00:25:05 ◼   ► It would be perfect if they had like new high-end phones coming next month.

00:25:10 ◼   ► It would be perfect.

00:25:11 ◼   ► It almost would have been suspicious that they planned it.

00:25:15 ◼   ► People would be, all of a sudden it would be the conspiracy theories would come out

00:25:20 ◼   ► that they faked it on purpose.

00:25:23 ◼   ► Rubbed, rubbed, they rubbed, you know, rubbed some kind of grease all over the camera lens.

00:25:31 ◼   ► Yeah, so you saw this photo. I actually took two. Here's the one I took with the new iPhone 7.

00:25:36 ◼   ► Anyway, let me take a break and thank our first sponsor. It is our good friends at Squarespace.

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00:26:21 ◼   ► things you want to unveil just do it in one page right you do one big page you

00:26:26 ◼   ► got big artwork at the top you explain your main points next and then you can

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00:28:06 ◼   ► the show so anyway my thanks to Squarespace all right that's a good

00:28:10 ◼   ► segue to talking about Twitter right yes so we went from the Super Bowl to Tim

00:28:16 ◼   ► this could be a very seamless show this could be a bunch of good segues and see

00:28:20 ◼   ► we can keep it going Super Bowl Tim Cook at the Super Bowl in his tweet that he

00:28:25 ◼   ► that he deleted also by the way the second one he posted the photo was

00:28:30 ◼   ► beautiful it was a really good photo now let's talk about Twitter and you you

00:28:36 ◼   ► had a good piece I think it just went up yesterday as we record yes it's been up

00:28:43 ◼   ► for about 24 hours or so I don't want to paraphrase too much but just of it being

00:28:48 ◼   ► you quoted the thing that I wrote that and I've said this before I've said this

00:28:52 ◼   ► many times that the thing that really is unfair to Twitter and hurts Twitter is

00:28:55 ◼   ► that they're compared to Facebook maybe mostly by like that sort of Wall Street

00:29:00 ◼   ► perspective and they measure they come up short and as time goes on they're

00:29:07 ◼   ► coming up shorter and shorter because Facebook is killing it and Twitter is

00:29:11 ◼   ► sort of spinning its wheels and it it's unfair to Twitter because Twitter has an

00:29:17 ◼   ► amazing thing it just happens to be this amazing thing that seemingly naturally

00:29:22 ◼   ► is way smaller in Facebook and your argument is be that as it may they're

00:29:26 ◼   ► screwed.

00:29:27 ◼   ► Yeah, well the real problem for them and for any company is that they're the business model.

00:29:36 ◼   ► I mean Twitter made a choice to be an ad supported business and that choice has certain implications

00:29:47 ◼   ► to it.

00:29:50 ◼   ► Basically if you're an ad supported business you either have to have these extremely high

00:29:54 ◼   ► high performing ads that convert like Google or you need to have a massive audience that

00:30:01 ◼   ► you're very good at targeting, like a Facebook sort of thing, and Twitter doesn't really

00:30:09 ◼   ► have either.

00:30:10 ◼   ► And so the big problem is that yes, from a user perspective, to use Facebook and to use

00:30:15 ◼   ► Twitter are different experiences, but they're competing for the same customer, or by customer

00:30:22 ◼   ► I mean the same advertiser and the same advertising dollars. That's a problem because if you're

00:30:29 ◼   ► an advertiser and you have limited, not just money, but limited time, there's a time component

00:30:34 ◼   ► too. Twitter wants their custom ad campaigns. Facebook wants their custom ad campaigns.

00:30:38 ◼   ► Google wants their custom ad campaigns. Pinterest wants their custom ad campaigns. Snapchat,

00:30:43 ◼   ► all these sorts of things. Yes, there is a shift in money from other forms of media to

00:30:48 ◼   ► digital, but where are you going to spend your time, particularly when you can get pretty

00:30:57 ◼   ► much the same audience with better data, better targeting, better tracking, and they have

00:31:01 ◼   ► enough inventory to satisfy all your needs.

00:31:04 ◼   ► On Facebook, what's the point of even spending money on Twitter?

00:31:08 ◼   ► And so that's just a problem, and it's a problem from a long-term sustainability perspective,

00:31:15 ◼   ► and it's a problem absolutely from a stock perspective. Twitter's stock is down massively

00:31:22 ◼   ► from its highs and even from its IPO price in part because investors are rightly in my

00:31:30 ◼   ► estimation losing faith that there's any sort of real growth story for Twitter. A company

00:31:39 ◼   ► that is more than 10 years old and has yet to turn a profit.

00:31:43 ◼   ► And it's a bummer. It's a bummer. The thing with Twitter is, I think, back when Twitter

00:31:53 ◼   ► made this decision, there was still kind of the sense that, of course, all consumer services

00:31:59 ◼   ► will be ad-supported. And I actually think it's increasingly questionable to agree

00:32:05 ◼   ► to that's going to be the point. Because Facebook and Google are so dominant. And the

00:32:09 ◼   ► The big difference is they have so much inventory.

00:32:12 ◼   ► They can soak up so much of the spend.

00:32:15 ◼   ► So if you have a better product and all the inventory there, why are you going to go anywhere

00:32:21 ◼   ► else?

00:32:22 ◼   ► Twitter's format isn't as great for advertising.

00:32:29 ◼   ► What is Twitter good at?

00:32:30 ◼   ► Twitter is good at data.

00:32:32 ◼   ► Twitter has real-time data.

00:32:34 ◼   ► And the idea was the data they have about users who are building an interest graph as

00:32:41 ◼   ► opposed to a social graph, that would make the potential for targeting much more interesting

00:32:47 ◼   ► and attractive.

00:32:49 ◼   ► The flip side is the way you get a good interest graph is by going through the hard work of

00:32:53 ◼   ► building a Twitter feed, which is really difficult and is a big problem.

00:32:56 ◼   ► They didn't get new users.

00:32:58 ◼   ► But that data, the data that happens on Twitter, the fact that Twitter is so central to things

00:33:05 ◼   ► like the Super Bowl and things that are going on and you can get real-time understanding

00:33:09 ◼   ► of what's happening and what's pulsing and what's trending, it's too bad they didn't

00:33:15 ◼   ► explore a business model built around exploiting that.

00:33:18 ◼   ► Yeah.

00:33:19 ◼   ► Same thing for me last night as a political junkie, US national political junkie at least,

00:33:24 ◼   ► watching last night as we recorded the day after the New Hampshire primary, which wasn't

00:33:30 ◼   ► all that exciting.

00:33:31 ◼   ► I mean, it was kind of this is that was one that came out sort of as the polls got it

00:33:34 ◼   ► exactly right.

00:33:36 ◼   ► But as a political junkie, I'm still watching, you know, I'm watching MSNBC.

00:33:40 ◼   ► I'm, you know, on that second screen guy.

00:33:43 ◼   ► It's a it's a, you know, and I'm at the point now, where I can't even remember watching

00:33:47 ◼   ► as a political junkie watching something like the returns on an election or a primary election

00:33:54 ◼   ► without twitter

00:33:55 ◼   ► because one of the things i was made a frustrating to me as a news junkie

00:33:59 ◼   ► is that the news on an election night doesn't come in fast enough

00:34:03 ◼   ► the news doesn't come in

00:34:04 ◼   ► and so they just fill it with the punditry

00:34:07 ◼   ► but because that there's not much news coming in they're just going to multiple

00:34:11 ◼   ► people to

00:34:12 ◼   ► sort of say the same thing

00:34:14 ◼   ► right then

00:34:15 ◼   ► it doesn't go fast enough to satisfy my uh... attention addled

00:34:20 ◼   ► And so Twitter fills that in because all of a sudden that's where, you know, somebody

00:34:24 ◼   ► will come up with something that's actually an interesting observation or a funny joke

00:34:28 ◼   ► or something.

00:34:29 ◼   ► The snark we referred to earlier.

00:34:31 ◼   ► Yeah.

00:34:32 ◼   ► I think Twitter, it's funny you mentioned in the context of politics, I think the problem

00:34:36 ◼   ► for Twitter and the challenge for Twitter is actually kind of similar to the problem

00:34:42 ◼   ► faced by news in general.

00:34:43 ◼   ► I mean, news is very valuable and it's also worthless because…

00:34:48 ◼   ► Right.

00:34:49 ◼   ► It's fish wrap, literally.

00:34:50 ◼   ► I mean, it's an old joke if you ever worked in the newspaper industry, but today's news

00:34:55 ◼   ► is tomorrow's fish wrap.

00:34:56 ◼   ► That's exactly it.

00:34:58 ◼   ► But the problem now is today's tweet, like Twitter is so valuable because someone can

00:35:02 ◼   ► break a story with a tweet, right?

00:35:05 ◼   ► But the tweet is then worthless or the news in the tweet is then worthless, right?

00:35:14 ◼   ► It's out there.

00:35:15 ◼   ► There's no value.

00:35:18 ◼   ► It's a public good now.

00:35:20 ◼   ► It can't be captured.

00:35:23 ◼   ► And that's kind of the case for Twitter.

00:35:25 ◼   ► I mean Twitter, I mean it's almost impossible to read a news story about lots of things

00:35:30 ◼   ► without there being an embedded tweet for example.

00:35:33 ◼   ► But that doesn't make it worth something at least from a traditional sort of advertising

00:35:39 ◼   ► perspective where Twitter has to keep all the eyeballs and that sort of thing going

00:35:42 ◼   ► on.

00:35:43 ◼   ► Yes, you can recognize that Twitter is essential and appreciate the fact that Twitter can be

00:35:49 ◼   ► essential for someone who doesn't use Twitter because they're going to find out about

00:35:53 ◼   ► what happened on Twitter immediately anyways through some other channel or through a webpage

00:35:59 ◼   ► they read.

00:36:01 ◼   ► You almost have to think like the model that might have worked for Twitter and what's

00:36:07 ◼   ► the most successful news company.

00:36:09 ◼   ► Arguably it's something like Bloomberg, right?

00:36:14 ◼   ► The news is a means to sell a physical product and the physical product is in part about

00:36:20 ◼   ► utility, it's in part about status, it's in part about the internal social network

00:36:25 ◼   ► that Bloomberg terminals have and that all Wall Street uses to talk to each other.

00:36:30 ◼   ► And that is something that, like that sort of model, a platform model but a different

00:36:37 ◼   ► kind of platform model, not an advertising platform model.

00:36:40 ◼   ► It's something that might have made sense for Twitter,

00:36:41 ◼   ► but this is where you get back to the fact

00:36:43 ◼   ► that Twitter didn't even start,

00:36:45 ◼   ► Twitter spent so long, so many years at the beginning,

00:36:49 ◼   ► not developing the product, not developing monetization,

00:36:52 ◼   ► but basically trying to kill each other.

00:36:55 ◼   ► And I mean, you know, metaphorically speaking.

00:36:58 ◼   ► - I still feel like institutionally,

00:37:02 ◼   ► there is a uncertainty at the moment.

00:37:07 ◼   ► as to what the hell Twitter is.

00:37:09 ◼   ► - Yeah. - And it hasn't,

00:37:12 ◼   ► they had it when they came out.

00:37:13 ◼   ► When they came out in 2006,

00:37:15 ◼   ► or I don't know if there was something in 2005,

00:37:17 ◼   ► but 2006 is when I signed up,

00:37:20 ◼   ► there was a clear idea of what it was

00:37:23 ◼   ► or what it was supposed to be.

00:37:24 ◼   ► And it obviously evolved over the years.

00:37:27 ◼   ► I'm not saying they should go back to the original idea.

00:37:28 ◼   ► I mean, they didn't even have things like @replies.

00:37:31 ◼   ► There was all this stuff that came out of user behavior.

00:37:33 ◼   ► The original idea was tell people what you're up to.

00:37:36 ◼   ► It was, I think, in an elevator pitch, it was your AOL status combined with the old

00:37:45 ◼   ► Unix finger status.

00:37:49 ◼   ► Right.

00:37:50 ◼   ► Do you remember that?

00:37:55 ◼   ► I better explain that for anybody who doesn't remember.

00:37:58 ◼   ► No, because people would...

00:38:01 ◼   ► This was an advantage.

00:38:03 ◼   ► this was something, oh, there's some anecdote around messaging services about why someone

00:38:08 ◼   ► in some didn't. But yeah, people would set their, and this is back when we were in college,

00:38:14 ◼   ► like set their AOL status. That was the main...

00:38:17 ◼   ► That's how you were in college. When I was in college, you set your finger status. So

00:38:23 ◼   ► when I was in college, I mean, I don't know when this fell apart, but you'd get like an

00:38:27 ◼   ► account on a Unix machine and that's where you'd go to check your email and stuff like

00:38:32 ◼   ► But if you created an account in your home folder with the name dot finger now the dot made it like a secret invisible file

00:38:38 ◼   ► So you wouldn't see it all the time

00:38:39 ◼   ► You would just put like where you are like if you were home for winter break and you weren't around you could put it

00:38:45 ◼   ► In there and then if you wanted to check the status of somebody

00:38:47 ◼   ► You know you would just say finger Ben at

00:38:52 ◼   ► Whatever school Ben goes to dot ed you and then it would read back your key fan now

00:38:58 ◼   ► Who's the idiot who named the command finger? I don't know. Maybe they knew exactly what they were doing

00:39:03 ◼   ► There's actually a lot of stuff like this in like old tech sort of stuff that's just really questionable in retrospect

00:39:12 ◼   ► Right. There is naming conventions in like right. Uh, yeah, the idea was that you're like poking a finger at him

00:39:19 ◼   ► Like what's he up to and then you could just you would just update your finger, you know

00:39:22 ◼   ► And that's what Twitter was Twitter was like, what are you up to? What are you doing? And you would say I'm eating a sandwich

00:39:26 ◼   ► knowledge. I'm getting my first coffee of the day and then it evolved from there.

00:39:37 ◼   ► The way that I always thought about it is the thing is Twitter evolved really quickly

00:39:42 ◼   ► and actually most of the core conventions of Twitter like the @ reply and the retweet

00:39:47 ◼   ► and all that sort of stuff were in the product within like a year to a year and a half and

00:39:52 ◼   ► Basically the product has not evolved since then.

00:39:55 ◼   ► I think the one real big addition was the real retweet,

00:39:59 ◼   ► like where you could, not the manual retweet,

00:40:01 ◼   ► like where you actually did it.

00:40:03 ◼   ► I think that was 2009 or something like that.

00:40:05 ◼   ► But other than that, the product figured it out

00:40:09 ◼   ► pretty quickly, and the way I always characterized it,

00:40:12 ◼   ► I wrote a piece about this a little over a year ago,

00:40:14 ◼   ► was this was actually a big problem for Twitter.

00:40:17 ◼   ► And the reason it was a problem was,

00:40:19 ◼   ► they talk about product market fit for companies, right?

00:40:21 ◼   ► a company has to like, they have the idea for a product and it's not quite right,

00:40:24 ◼   ► but they've got to figure out who their core customer is and they get it right. And

00:40:27 ◼   ► then like once you get that right, you get your product and you know your market and

00:40:31 ◼   ► you have the right product for it, that's when you pour on the money and you scale and

00:40:35 ◼   ► you get a bunch of customers, that sort of thing. But you have to get product market

00:40:38 ◼   ► fit first. And almost the challenge for Twitter was the initial product was so powerful, it

00:40:47 ◼   ► was so good, they never had to go through that sort of struggle to figure out what it

00:40:52 ◼   ► is. It just took off. They never had to go through that internal process of figuring

00:40:58 ◼   ► out what their product is, who their customer is, what it does. It just happened. The problem

00:41:04 ◼   ► was it didn't happen perfectly enough to reach everyone. The utility was so good. Twitter

00:41:10 ◼   ► has always been hard to use, to get started, to get started from. The utility was so good

00:41:16 ◼   ► that all us geeks were more than happy to jump through all the hoops to figure out how

00:41:19 ◼   ► to use it because the utility was so massive. But you get down to what I call a marginal

00:41:25 ◼   ► user, right? Where is the utility that I might get from Twitter worth the cost it's going

00:41:30 ◼   ► to take me to get up to it? And they hit that marginal user after a few hundred million

00:41:34 ◼   ► and they just ground to a halt.

00:41:37 ◼   ► Right. And don't you think that it's the case that it's just too hard to guess and when

00:41:43 ◼   ► you're inside and like you work at Twitter and you're therefore have a reason to be optimistic

00:41:48 ◼   ► and you get it because you actually work there. It's easy to maybe even lie to yourself a

00:41:52 ◼   ► little bit that during that growth spades space early on while the product is still

00:41:58 ◼   ► evolving and there's clearly enthusiasm and you know you've got something electric on

00:42:03 ◼   ► your hands that it's very unclear what how you know while the growth is going on how

00:42:09 ◼   ► much growth there is ahead of you. I think that Twitter guessed wrong. I think a lot

00:42:15 ◼   ► of investors guessed wrong in terms of it being too optimistic.

00:42:20 ◼   ► David: Well, the other thing too is I would say two things. One, Twitter's growth really

00:42:26 ◼   ► – it happened in 2009 where the growth just suddenly stopped. That was also the time where

00:42:32 ◼   ► Twitter was having massive technical problems. The site could not stay up. People don't

00:42:37 ◼   ► get the fail whale. Actually, I have a fail whale clock. So they had their hands full

00:42:46 ◼   ► basically rebuilding the service on the fly.

00:42:49 ◼   ► It used to – you could count on it like clockwork that it would fail during an Apple

00:42:53 ◼   ► event.

00:42:54 ◼   ► Oh, well, it used to fail almost every day. I mean, that was an improvement when it only

00:42:58 ◼   ► failed during big events.

00:42:59 ◼   ► Well, there was a time where it was on the verge of complete collapse. Then there was

00:43:05 ◼   ► a time where on a daily basis they were up but something like an Apple event could make

00:43:08 ◼   ► a collapse which is totally but which is and again for me and you and the folks who listen

00:43:14 ◼   ► to the talk show yeah that's a big deal but compared to the Super Bowl or the Academy

00:43:18 ◼   ► Awards or an election night that's nothing like however much attention Apple gets compared

00:43:25 ◼   ► to any other technical company they don't get that much for a Tuesday morning at noon

00:43:30 ◼   ► Eastern press event and yet Twitter would just be...

00:43:35 ◼   ► And that was a big reason why Dorsey got forced out the first time.

00:43:39 ◼   ► And so they have management upheaval, they have the site barely staying up, they have

00:43:42 ◼   ► to rebuild the whole thing from scratch.

00:43:43 ◼   ► I mean Twitter started out like being a Ruby on Rails application, right?

00:43:48 ◼   ► Which is all well and good but it's not the framework you would choose to handle hundreds

00:43:54 ◼   ► of millions of tweets a second or whatever.

00:43:58 ◼   ► And that happened at the exact same moment they hit this marginal user.

00:44:02 ◼   ► And so it was bad luck from that perspective in that it happened at that time.

00:44:09 ◼   ► And then, I don't know if I remember what it was, but they – oh, the other thing too

00:44:14 ◼   ► is I don't think at that time if you were to tell someone in 2008, 2009 that a user

00:44:20 ◼   ► base of 300 million users, I question how many of those are actual people using it.

00:44:27 ◼   ► Even if you say it's 100 million, 150 million, it would be hard to tell someone back then

00:44:33 ◼   ► that that would not be a big enough user base to have an ad-supported service.

00:44:37 ◼   ► Yes, that's a very good point.

00:44:39 ◼   ► Now, before I forget, because if I forget this point, I'm going to shoot myself and

00:44:44 ◼   ► want to re-record the whole episode, because I thought one of the most interesting things

00:44:47 ◼   ► I read in your piece, and I knew this.

00:44:49 ◼   ► I've known this before.

00:44:50 ◼   ► I've read this before, but it's one of those facts that goes in one ear and out the other

00:44:54 ◼   ► for me and I think for a lot of other people but I almost feel like the situation this

00:44:59 ◼   ► whole situation we're talking about with Twitter struggling LinkedIn having some tough times

00:45:06 ◼   ► and only Facebook and Google really thriving in this market where people previously foresaw

00:45:12 ◼   ► Wow lots and lots of companies could have this free with ad supported business and succeed

00:45:17 ◼   ► is the fact that very very consistently over I'm not even sure you could tell me the time

00:45:23 ◼   ► frame but decades at least about 1.2% of GDP gets spent on advertising.

00:45:29 ◼   ► Yep, it's amazingly consistent. Like so there's a everything was on a recession. It goes down to

00:45:36 ◼   ► it goes on as GDP goes down. It's amazing how consistent it is.

00:45:40 ◼   ► Right. Advertising is and I, you know, I'm not gonna say I'm a big shot on advertising,

00:45:45 ◼   ► but I do run a business that's fundamentally based on advertising. I think that the nature of it,

00:45:51 ◼   ► but knock on wood, even 2008, during Fireball,

00:45:55 ◼   ► actually did pretty well through the recession,

00:46:00 ◼   ► maybe because I'm a boutique publisher.

00:46:04 ◼   ► But there's absolutely no question

00:46:06 ◼   ► that the adage that advertise-- in any kind of recession,

00:46:10 ◼   ► advertising is the first thing to dry up.

00:46:12 ◼   ► It is the first thing, always, because it's

00:46:14 ◼   ► the first thing any company, when they say we might

00:46:16 ◼   ► need to tighten our spending, advertising's always

00:46:20 ◼   ► the first thing to go. Right. And then when times are flush, it

00:46:23 ◼   ► is one of the first things to come rushing back, where they're

00:46:26 ◼   ► like, wow, we've got a little money to spend. Let's fuck,

00:46:29 ◼   ► let's dump it in some ads and and really accelerate what you

00:46:32 ◼   ► know, we've got something good going on right now. Let's spend

00:46:34 ◼   ► some advertising to make it go even better. But it's amazing

00:46:38 ◼   ► that it's very, very consistent that it's like, just a little

00:46:40 ◼   ► over 1% of GDP, which means that it's not necessarily that the

00:46:45 ◼   ► pie can't grow, but the pie can only grow as the overall economy

00:46:50 ◼   ► grows. Right. And it's, there's no way to make that go. And I

00:46:53 ◼   ► feel like a lot of the stories, I'm not even saying that I'm

00:46:58 ◼   ► that I'm not wrong about it that I didn't think I'm a little

00:47:01 ◼   ► surprised at this situation right now where the only big

00:47:04 ◼   ► companies that really seem to be thriving financially and

00:47:06 ◼   ► growing are Facebook and Google, the only ones I don't think I

00:47:09 ◼   ► would have foreseen that. But I think it makes some sense when

00:47:13 ◼   ► you think of the fact that the ad spends is sort of a fixed

00:47:16 ◼   ► amount of money and Facebook and Google are clearly growing and…

00:47:21 ◼   ► David: And they frankly have superior products. I mean they have the best targeting especially

00:47:27 ◼   ► Facebook. I mean Facebook is growing much faster than Google is particularly on mobile

00:47:33 ◼   ► and all their growth is on mobile. They have superior targeting. They have a superior ad

00:47:38 ◼   ► placement like people don't appreciate like a Facebook ad literally takes over the entire

00:47:44 ◼   ► screen of your phone. Maybe only for a split second or whatever, but it's the most immersive

00:47:51 ◼   ► ad we've come up with in tech, beyond the pre-roll on a video. But that pre-roll on

00:47:56 ◼   ► a video is kind of annoying, right? That's getting in our way. Whereas we're willingly

00:48:00 ◼   ► ... Not you, since you're on Facebook, but we're willingly immersing ourselves in this

00:48:06 ◼   ► feed and just scrolling through it. And the feed is so clear. That's why it works so well

00:48:11 ◼   ► for doing Fireball, right? I mean, I always give you credit for actually being a real

00:48:15 ◼   ► pioneer when it comes to this sort of native advertising. Feed-based advertising is the

00:48:21 ◼   ► advertising that works on mobile.

00:48:22 ◼   ► I came up with it before native advertising was a word.

00:48:26 ◼   ► I know, you did. And it's like it is the ad format that works. Like every time there's

00:48:32 ◼   ► a new sort of medium, it takes time to figure out the ads that work, right? The initial

00:48:38 ◼   ► like TV ads where people reading radio scripts, right? They had to figure out, "No, you

00:48:43 ◼   ► should actually, TV is for scripted drama, so how about we do a 30-second scripted drama?"

00:48:47 ◼   ► Exactly. Right? And make a little 30, the best ads are always little 30-second shows.

00:48:51 ◼   ► Right, exactly. And so, when we started out, you see when we started out with webpages,

00:48:56 ◼   ► we were just like plastering on these banner ads because that's kind of what we do with

00:49:00 ◼   ► newspapers, right? Which is a terror.

00:49:02 ◼   ► Who better the be the protagonist of your little story than a bowel?

00:49:08 ◼   ► This is a very tightly, we're putting a real bow on it.

00:49:12 ◼   ► An anthropomorphic human bowel infected with diarrhea.

00:49:18 ◼   ► There's a lovable character.

00:49:19 ◼   ► No, but you're right, you've got to find, and sometimes it's natural and sometimes it's

00:49:23 ◼   ► not and they always try to cram the last one onto the new, I mean, that's a banner ad.

00:49:29 ◼   ► Banner ads were basically lifting newspaper type advertising and putting it on the web.

00:49:33 ◼   ► And it was dumb, it made no sense.

00:49:34 ◼   ► Well, especially it made no sense because if you think about it, I would say it's a

00:49:37 ◼   ► bit more like magazines and newspapers. First thing, just because the shape of the rectangle

00:49:42 ◼   ► is a little bit the rectangle of a web page is a little bit more like a magazine, especially

00:49:47 ◼   ► in the 90s, when the format was invented and screens were smaller. It was a little bit more

00:49:52 ◼   ► like a magazine. It's but magazines and newspapers are kind of two sides of the same coin when it

00:49:56 ◼   ► comes to advertising formats, right? There's a whole page ads, but the banner ads were like the

00:50:02 ◼   ► the ads in the back of the magazine, right? The little shapes of rectangles with content

00:50:08 ◼   ► flowing around them. In magazines and newspapers, the ones that made all the money were the

00:50:15 ◼   ► full page ads, right? The back page ads.

00:50:17 ◼   ► Well, right. If you think of a magazine in particular and you think of the classic examples

00:50:22 ◼   ► like fashion magazines and sort of thing, it actually is more like a feed if you think

00:50:26 ◼   ► about it, right? Because you're not jumping around like you flip through those, right?

00:50:31 ◼   ► Yeah, exactly. It's very analogous to like an Instagram feed

00:50:35 ◼   ► Exactly. This is why this is why I've always been a

00:50:39 ◼   ► I think native advertising got a really bad rap because of some really egregious examples of people like, you know

00:50:47 ◼   ► Be you know abusing it and doing dumb stuff advertorials, right?

00:50:52 ◼   ► Things that were written to sort of conflate what was actually the content of

00:50:58 ◼   ► The publication and the this thing that was written by a sponsor. I mean the famous

00:51:02 ◼   ► I've always been terrible right on all formats, right?

00:51:05 ◼   ► But that doesn't mean the idea of having an ad that is a similar of a similar type

00:51:11 ◼   ► To the content that is around it is a bad thing. That's that's how effective advertising has always been

00:51:18 ◼   ► I mean no one's up in arms because you flip through a fashion magazine and on one page

00:51:23 ◼   ► There's there's editorial on the next page

00:51:25 ◼   ► there's an ad, that's a good thing.

00:51:29 ◼   ► Same with TV.

00:51:30 ◼   ► I mean, yes, you may be annoyed by it,

00:51:33 ◼   ► but no one is up in ethical arms because,

00:51:37 ◼   ► oh my gosh, they also scripted this television commercial.

00:51:40 ◼   ► I mean, that's just the way it is.

00:51:43 ◼   ► And the feed is really the key to digital advertising.

00:51:47 ◼   ► You immerse yourself in it, you go through it.

00:51:49 ◼   ► The problem is, this is why it works for Daring Fireball,

00:51:52 ◼   ► people go to Daring Fireball, right?

00:51:54 ◼   ► your percentage of people who go straight to the homepage.

00:51:57 ◼   ► I don't know what it is, but I'm sure it's much higher

00:51:59 ◼   ► than the vast majority of websites

00:52:00 ◼   ► who are getting their traffic through social

00:52:03 ◼   ► or through other feeds, basically.

00:52:06 ◼   ► And I think that's the real key to making advertising work

00:52:08 ◼   ► is you have to own a destination that people go to

00:52:12 ◼   ► and willingly immerse themselves in that feed.

00:52:14 ◼   ► They scroll through, they read your advertisements

00:52:18 ◼   ► just like they read your other pieces,

00:52:20 ◼   ► so they're actually consuming them

00:52:21 ◼   ► and they're habituated to click on the link

00:52:23 ◼   ► follow through and that's the advertising that works. The problem is particularly on

00:52:30 ◼   ► mobile where do people start? They start on Twitter and this is why Twitter still has

00:52:36 ◼   ► potential but the vast majority of people, the vast, vast, vast majority of people start

00:52:41 ◼   ► on Facebook. That's the app they open when they're doing nothing. The other thing too

00:52:46 ◼   ► is advertising works best when you're not doing something, right? If I'm sitting down

00:52:52 ◼   ► to do a job or to accomplish something. I'm focused and I don't want to be distracted.

00:52:57 ◼   ► That's why I think the pre-roll ads on videos I think is going to turn out to be less effective

00:53:03 ◼   ► a format than people had hoped they would be. I mean, it's video, so it's going to be

00:53:07 ◼   ► effective, but it's an interruption, which puts you in a bad mood.

00:53:11 ◼   ► Dom it always does and it often I often stop and

00:53:15 ◼   ► Yeah, just close the tab. I and especially and I know

00:53:20 ◼   ► My tolerance for it has grown slightly

00:53:24 ◼   ► Like but the ones when they make you say you have to watch the whole 30 then it's instant close

00:53:30 ◼   ► I don't care what it is. I don't know that I may be like once or twice a month

00:53:34 ◼   ► I'll wait through the whole 30 because it really seems like something I have to see but it it doesn't and

00:53:41 ◼   ► And when I can skip it after three seconds,

00:53:46 ◼   ► I skip it every time.

00:53:47 ◼   ► I can maybe remember once in this,

00:53:50 ◼   ► like the last two or three months,

00:53:52 ◼   ► where there was something that was so compelling.

00:53:54 ◼   ► There was, I don't remember, I'll never remember this,

00:53:56 ◼   ► but there was like, there was a YouTube ad the one time,

00:53:59 ◼   ► and I could have skipped it within three seconds,

00:54:00 ◼   ► but I was instantly like, oh, I have got to see this.

00:54:03 ◼   ► And it was really pretty clever.

00:54:04 ◼   ► And I was like, wow, that was well done.

00:54:06 ◼   ► - Right.

00:54:07 ◼   ► - But yeah, no one started a TV show

00:54:11 ◼   ► with the advertising at the beginning, right?

00:54:13 ◼   ► It was always, it would be in the middle, right?

00:54:15 ◼   ► You'd have the cliffhanger and then it'd go to commercial

00:54:17 ◼   ► and then you'd, you know, stick around and go back.

00:54:19 ◼   ► - You know who has great pre-rolls?

00:54:20 ◼   ► Geico.

00:54:21 ◼   ► Geico has a series of pre-rolls that are,

00:54:25 ◼   ► the gist of it is this ad's gonna be,

00:54:27 ◼   ► this ad for Geico's gonna be over

00:54:29 ◼   ► before you can even skip it.

00:54:30 ◼   ► - Right.

00:54:31 ◼   ► - They just buy like a four second spot.

00:54:33 ◼   ► - No, I think that's the way to do it.

00:54:36 ◼   ► Right, and it really leaves me with this incredibly...

00:54:40 ◼   ► You're grateful to them for not wasting your time.

00:54:42 ◼   ► Right, they didn't waste my time, and I think, "Hey, that was pretty clever."

00:54:49 ◼   ► They get a little bit of my gratitude and they get a little bit of my admiration for

00:54:52 ◼   ► being clever.

00:54:53 ◼   ► Yeah, I agree.

00:54:55 ◼   ► But the thing that's so compelling about Facebook is, I made this joke on my podcast, Exponent,

00:55:04 ◼   ► like people don't schedule Facebook time, right? They don't put in their calendar,

00:55:08 ◼   ► this is when I'm going to go check Facebook. They check Facebook when they're standing

00:55:12 ◼   ► in line at the store or they're sitting on the couch or whatever. It's found time.

00:55:18 ◼   ► And your posture is you're not doing anything. You're just kind of mindlessly going through

00:55:23 ◼   ► it. And that sounds bad but that actually makes it an incredible advertising platform

00:55:29 ◼   ► because your mind is open. You're open to whatever is in your feed, right? That's

00:55:36 ◼   ► when advertisers, particularly brand advertisers that want to build sort of an affinity for

00:55:40 ◼   ► their brand and a positive association, that's when they most want to reach you. That's

00:55:45 ◼   ► what makes Facebook's market so incredible. It's not just there's so many devices

00:55:49 ◼   ► out there. It's not that they have so many users. It's not just that there's more

00:55:53 ◼   ► time spent on mobile than other devices. It's the kind of time that is spent and they

00:55:58 ◼   ► They have this feed and they have this great ad format and frankly if you're an advertiser

00:56:03 ◼   ► like why would you want to go anywhere else?

00:56:07 ◼   ► And that's the challenge that everyone else, and Facebook is still growing the user base

00:56:11 ◼   ► and there's still, Facebook last quarter, and this shouldn't be able to happen but it

00:56:15 ◼   ► happened, they got more users, their users used the product more than they ever had before,

00:56:22 ◼   ► they increased the ad load per user so people were seeing more ads and they increased the

00:56:28 ◼   ► price charge per ad because they're so effective they can do that. They're just this gargantuan

00:56:35 ◼   ► monster that's going to eat all the stuff up and if you're LinkedIn and you want to

00:56:41 ◼   ► have your own ad network or your Yelp and you want to have display ads or like how can

00:56:47 ◼   ► you compete? I don't know. Advertisers don't care. Advertisers just want a return on their

00:56:53 ◼   ► investment and so one, Facebook is providing the best returns and the best ads but also

00:56:58 ◼   ► Also there's an investment standpoint, Facebook's offering an end-to-end product.

00:57:01 ◼   ► You go in, you can do a video ad on Instagram.

00:57:06 ◼   ► Anyone who sees it will show them ads in their Facebook feed that kind of reminds them of

00:57:10 ◼   ► the product and then if you have a promotion, you can have, you know, do some things.

00:57:13 ◼   ► You can follow the messenger.

00:57:14 ◼   ► Like it's an end-to-end offering so you could master the Facebook ad interface, get

00:57:19 ◼   ► really good at it and then like, "Oh, you really want to go create a custom ad for Pinterest?"

00:57:24 ◼   ► I mean like there's a degree of people are busy and why do they want to waste their time

00:57:33 ◼   ► if they can just, their time is better spent spending more on Facebook.

00:57:39 ◼   ► In Google, I mean Google is obviously the other one here.

00:57:41 ◼   ► I think Google is less compelling on mobile generally but they also, Google has even better

00:57:45 ◼   ► tools, advertising tools like an end-to-end offering from YouTube to DoubleClick to AdSense

00:57:50 ◼   ► like it's all one interface.

00:57:51 ◼   ► You can do one by doing all at the same time.

00:57:54 ◼   ► very, very compelling.

00:57:59 ◼   ► Speaking of sponsorships, let me take another break here and tell you.

00:58:05 ◼   ► It's so funny. Let's jump to you. As someone's working with me, I'm finally trying to get

00:58:10 ◼   ► my archives in order and categorize them and stuff. She remarked that while you have a

00:58:15 ◼   ► lot of posts on advertising. The whole premise of Checkery is to be more about the business

00:58:21 ◼   ► and strategy of tech. I don't really do product reviews and all that sort of thing. But that

00:58:26 ◼   ► entails I talk a lot about advertising. It's kind of amazing how little people think about

00:58:32 ◼   ► and talk about that side of it when it's so fundamental to the experience of technology.

00:58:40 ◼   ► So I'm sure people probably get bored, but I find it fascinating.

00:58:44 ◼   ► let me tell you about a good friend at igloo so igloo is the internet you'll

00:58:54 ◼   ► actually like there's a way that what is an internet even just think about it

00:58:58 ◼   ► it's a website that is internal for you that's the intra you have a website for

00:59:05 ◼   ► your team your your company you go there and this is where you can communicate

00:59:13 ◼   ► you can share files, you can contact each other,

00:59:16 ◼   ► you can have shared calendars, all this sort of stuff

00:59:18 ◼   ► that you might want to do.

00:59:20 ◼   ► And instead of having it spread across seven different products

00:59:23 ◼   ► and different things you have to log into, it's all in one place.

00:59:27 ◼   ► And it is configurable.

00:59:30 ◼   ► So if you only need the microblog and the calendar

00:59:35 ◼   ► and the file sharing, that's all you really need.

00:59:37 ◼   ► And you can set it up like that.

00:59:39 ◼   ► And you can have-- what's the microblog?

00:59:40 ◼   ► It's like a little internal Twitter just for your team.

00:59:43 ◼   ► really, really clever. And their stuff, it's all in the web. It's all web based. You don't

00:59:48 ◼   ► have to host it yourself. They host it. It's private to you, though. And it everything

00:59:52 ◼   ► works from phone, tablet, big, big desktop browser that spreads across your 27 inch iMac,

01:00:02 ◼   ► whatever you want, it's gonna look great. And they can help you keep doing your way

01:00:07 ◼   ► better. You don't have to like work like with the igloo system or whatever. Your team just

01:00:10 ◼   ► keeps working the way it wants to work like you share your files where you want to just

01:00:13 ◼   ► igloo is where you put them it's a really really it's really just about making collaboration

01:00:20 ◼   ► not be painful it's an internet you'll actually like it's a good they've embraced this word

01:00:25 ◼   ► it's it's it's and like a lot of their advertising stuff and there's talking points you know

01:00:29 ◼   ► this whole internet you'll actually like is based on the fact that you most people work

01:00:33 ◼   ► at a place where they have a quote unquote internet and it's this thing that people hate

01:00:37 ◼   ► and that they try to work around.

01:00:40 ◼   ► Igloo is like embracing the word,

01:00:41 ◼   ► and they're trying to like just flip it on its head

01:00:43 ◼   ► because it's really, really clever software,

01:00:46 ◼   ► modern stuff that is really optimized

01:00:49 ◼   ► for the way people wanna work

01:00:50 ◼   ► and making the people who use it happy,

01:00:52 ◼   ► as opposed to having this thing

01:00:53 ◼   ► that just makes like the IT guys happy

01:00:55 ◼   ► for whatever reason that they chose

01:00:58 ◼   ► whatever crappy internet throughout there

01:00:59 ◼   ► other than Igloo.

01:01:00 ◼   ► So where do you go to find out more?

01:01:03 ◼   ► It's easy.

01:01:04 ◼   ► software.com slash TTS the slash TTS is the talk show very, very

01:01:10 ◼   ► easy to remember. You can try it for free. Anyway, it doesn't

01:01:14 ◼   ► even it's not even like a special offer just because

01:01:16 ◼   ► you're listening to the show. You can try it for free. But go

01:01:19 ◼   ► there, go to the slash TTS version though. And then they'll

01:01:21 ◼   ► know you came from the show my thanks to igloo longtime

01:01:25 ◼   ► sponsors of the show with a great, great product that I know

01:01:28 ◼   ► a lot of people who listen to the show are already using so my

01:01:30 ◼   ► thanks to them.

01:01:32 ◼   ► David Kupiec I am, there is a degree of, I mean I've been

01:01:37 ◼   ► writing, one area I've been writing about advertising is from a publishing perspective

01:01:42 ◼   ► just because I mean publishers are, they're the least equipped. I mean if Twitter can't

01:01:48 ◼   ► compete with Facebook I mean what chance does like your local newspaper have? And so I've

01:01:55 ◼   ► been writing for a few years now there's going to be kind of a shakeout, you know,

01:01:59 ◼   ► just it's been happening in newspapers for a long time but with digital first platforms

01:02:03 ◼   ► as well. The hope is that in the long run, there's going to be figure out new ways of

01:02:10 ◼   ► monetization things that are, you know, things that work well.

01:02:15 ◼   ► Well, in the long, in a bit, just I keep thinking about that. Like I said, I wanted to mention

01:02:19 ◼   ► that 1.2% of spending thing. Maybe that will change in the future. Who knows? Maybe it

01:02:25 ◼   ► will go up, maybe it will go down. But it's been consistent for so long that you've kind

01:02:28 ◼   ► to count on it and therefore go back to the 90s and the web is erupting if there was any

01:02:33 ◼   ► idea in your head that the web was going to get some amount of advertising money then it was

01:02:38 ◼   ► obviously going to come away from existing sources and i think it was obvious that the most you know

01:02:43 ◼   ► most obvious place where it's going to come away from his newspapers and if newspapers wanted to to

01:02:51 ◼   ► maintain any kind of even stagnation, let alone growth, but at least not deflate. They

01:02:58 ◼   ► needed to immediately embrace it and make sure that they were selling as much money

01:03:02 ◼   ► on advertising on the web as possible, and very, very few of them did.

01:03:05 ◼   ► David

01:03:05 ◼   ► Well, not just ... It's hard. It's easy to sit and armchair quarterback, but it's hard

01:03:11 ◼   ► to really change your fundamental business, particularly given the better rates they could

01:03:16 ◼   ► always get for print. But I think one thing that's potentially exciting in the very long

01:03:22 ◼   ► run and I always hesitate to use the word exciting because this is excitement that entails

01:03:27 ◼   ► a lot of creative destruction along the way, is Twitter would be better off today if they

01:03:40 ◼   ► would have not pursued an ad-based business model. Like if they would have figured out

01:03:44 ◼   ► some way to, because again, they, what they have is incredibly valuable. And I think the

01:03:52 ◼   ► real danger for tour now actually, this is kind of, I've changed my tune a bit, is like

01:03:55 ◼   ► they need to not lose what they have, right? They, they need to be very careful. The big,

01:04:01 ◼   ► the big problem for Twitter is one over a billion people or around a billion people

01:04:06 ◼   ► have tried the product and left it. And it's really hard to get people to come back. Like

01:04:10 ◼   ► it's much harder than you know, the first time. It's an amazing number, right?

01:04:13 ◼   ► It really is an amazing number.

01:04:16 ◼   ► That's incredible.

01:04:17 ◼   ► One, it's questionable if they can even get them back.

01:04:21 ◼   ► But two, Twitter is competing in a very different environment now.

01:04:29 ◼   ► When Twitter came along right when the iPhone came along or a year before and it really

01:04:34 ◼   ► took off once there were clients on the phone because it was such a perfect mobile product.

01:04:39 ◼   ► It had the feed and it was small bite-sized sort of stuff.

01:04:42 ◼   ► You could dip in and dip out so easily.

01:04:46 ◼   ► It fit mobile so well.

01:04:47 ◼   ► There was a real opportunity where people were forming habits.

01:04:51 ◼   ► They were forming the way they interact with these devices.

01:04:55 ◼   ► It wasn't just when Twitter was competing for users in 2009, 2010.

01:05:00 ◼   ► They were competing for that mobile habit.

01:05:04 ◼   ► Today that people's habits are well established.

01:05:08 ◼   ► It's mostly Facebook.

01:05:11 ◼   ► Facebook has expanded far beyond who you know, like to what you're interested in.

01:05:15 ◼   ► Facebook knows more about what you're interested in than Twitter does.

01:05:22 ◼   ► It's very legitimate to question like, "Is it really realistic to expect Twitter to ever

01:05:28 ◼   ► grow its user base?"

01:05:30 ◼   ► And if it's not, and I would contend it's not, then Twitter should actually be focused

01:05:37 ◼   ► first and foremost on preserving its user base, which would argue against changes that

01:05:43 ◼   ► are too extreme, would argue for addressing abuse issues and stuff like that that drive

01:05:48 ◼   ► people away from the platform. And I'm not sure that Twitter agrees with that. And so

01:05:57 ◼   ► it's a real danger for the company that they pursue an unobtainable goal and then lose

01:06:03 ◼   ► what they have in the meantime.

01:06:04 ◼   ► I kind of feel like even with Jack back at the helm, which I do feel like if anybody

01:06:10 ◼   ► can fix it, it's him.

01:06:12 ◼   ► But I do feel that there's just this inherent conflict between their internal ambitions

01:06:18 ◼   ► and a realistic measure of what it could and should be.

01:06:23 ◼   ► Yeah.

01:06:24 ◼   ► And you also have to feel like at this point, you almost have to kind of hope they get acquired.

01:06:28 ◼   ► That's where I was going to go.

01:06:30 ◼   ► Yeah.

01:06:31 ◼   ► They're arguably still overvalued based on their potential revenue.

01:06:42 ◼   ► I'm not a stock analyst.

01:06:47 ◼   ► But with under someone else, if they could be free from that restraint, either one, build

01:06:52 ◼   ► a new kind of business or two, just be part of a portfolio.

01:06:57 ◼   ► A big problem is, the only two requires that really make sense are Google or Facebook,

01:07:03 ◼   ► who already have scale, already have all the infrastructure, could plug Twitter in.

01:07:07 ◼   ► The problem with Google is Twitter did this big deal with Google to give them access to

01:07:13 ◼   ► the tweet, to the fire hose, and integrate DoubleClick with their ad buying platform.

01:07:19 ◼   ► So in many respects, Google already has everything from Twitter that they need.

01:07:24 ◼   ► don't necessarily need to buy them to get what they already have.

01:07:27 ◼   ► I think the--

01:07:28 ◼   ► Well, then couldn't they just unplug the Fireplug now?

01:07:32 ◼   ► Well, no, no.

01:07:33 ◼   ► I mean, Twitter-- no, Google is getting-- Google effectively has Twitter both from a

01:07:39 ◼   ► product perspective and from an advertising perspective.

01:07:42 ◼   ► Because Twitter is building in this deep double-clicking--

01:07:45 ◼   ► Integration.

01:07:46 ◼   ► --integration.

01:07:47 ◼   ► you know integration and so you can you use your double click data and buying all sorts

01:07:52 ◼   ► of stuff. So Facebook, I think Facebook is actually the more likely acquire in less Google

01:08:00 ◼   ► does it to prevent Facebook from buying Twitter. But that's really the two candidates.

01:08:06 ◼   ► I did Josh Topolsky's podcast a couple days ago, a week ago tomorrow and you know it's

01:08:11 ◼   ► always fun doing a show with him but because I feel like we fight so much and

01:08:16 ◼   ► we talked about this and I just said in broad terms Facebook has been one of the

01:08:24 ◼   ► things I'm surprised about in the last few years is that Facebook has been a

01:08:27 ◼   ► very good steward of acquisitions and Instagram is my favorite example because

01:08:31 ◼   ► when Facebook bought Instagram I thought well there goes a thing I you know I

01:08:35 ◼   ► really like Instagram I'm sure it's gonna go downhill and they're gonna wreck

01:08:39 ◼   ► And instead, they've more or less left it alone and let them evolve it in a way that's

01:08:46 ◼   ► very natural to what Instagram set out to be from the get-go.

01:08:51 ◼   ► If anything, all they've done is just add support, better tech on the back end, and

01:08:56 ◼   ► they've let them grow very organically.

01:09:00 ◼   ► And that Google is not so good as an acquisition that they hire a lot of things in Wreck-em.

01:09:07 ◼   ► And some people pointed out to me that actually I think maybe I'm overlooking that.

01:09:12 ◼   ► And maybe I'm also overlooking the transition from Google to Alphabet.

01:09:17 ◼   ► In that there's companies like Nast that Google, now Alphabet, acquired and has let stand alone

01:09:23 ◼   ► as their own entity and let them be their own thing and not have to answer to the Wall

01:09:29 ◼   ► Street on their own.

01:09:30 ◼   ► And that maybe it would be, you know, don't think of it as a Google acquisition of Twitter,

01:09:33 ◼   ► think of it as an alphabet acquisition to Twitter and they let Twitter be Twitter.

01:09:37 ◼   ► But the value is being a part of Google though because you can't forget the money making

01:09:47 ◼   ► part of it. The ad part of it. Unless Google wants it as some sort of fashion project.

01:09:52 ◼   ► Frankly, Facebook would be a better acquirer. Facebook is an unbelievably well-run company.

01:09:59 ◼   ► The acquisition points you made are part of it. Mark Zuckerberg has been very explicit

01:10:05 ◼   ► about how he thinks about growing and developing products and where they get the product right

01:10:10 ◼   ► first. They grow the user base. Only when it's at a certain level do they slowly figure

01:10:16 ◼   ► out. Then they build a business presence and then they monetize that business presence

01:10:21 ◼   ► in a way that makes sense. It's easy to say, "Oh, well, it's easy for Facebook to do that

01:10:25 ◼   ► because they're making money so they can afford to take their time with Instagram. They can

01:10:28 ◼   ► afford taking the time with WhatsApp. But people forget that Facebook was under a lot

01:10:33 ◼   ► of pressure after their IPO. Their stock was also down by like half. They were getting

01:10:38 ◼   ► a ton of pressure and Facebook did not do the easy thing. They didn't just start slapping

01:10:42 ◼   ► up ads. They took time, they rebuilt their entire mobile stack, they redid everything,

01:10:48 ◼   ► they realized that they had taken the wrong approach with the HTML5 approach. They rebuilt

01:10:53 ◼   ► made a great experience, got people on board, and then they figured out how to monetize

01:10:58 ◼   ► it. Again, it's the best digital ad unit we've ever seen, and now it's a money

01:11:06 ◼   ► spigot. The point is, even when times were hard, they were disciplined and focused on

01:11:12 ◼   ► getting the experience right first. The company, they understand this space. They understand

01:11:19 ◼   ► social. I think they'd be the best stewards of Twitter as much as that rankles Twitter

01:11:25 ◼   ► and Twitter users in particular. But, I mean, who knows?

01:11:30 ◼   ► Here's – this to me is a sign of how run – and again, I say this and I feel like

01:11:34 ◼   ► I'm in an interesting position because it's somebody who does not use Facebook. But I

01:11:39 ◼   ► do admire them and I do recognize that they are a very well-run company. Dustin Curtis

01:11:44 ◼   ► had a tweet last week. This is after everybody released earnings. I'm going to trust his

01:11:47 ◼   ► numbers I didn't double check them so there's an area of published a

01:11:50 ◼   ► correction next week but I trust Dustin Curtis that he went through all these

01:11:54 ◼   ► companies you know the the you know the revenue the the financial things that

01:11:58 ◼   ► they filed last week and it's revenue per employee for calendar year 2015 yahoo

01:12:04 ◼   ► was 419,000 Twitter 462,000 Microsoft almost double that 789,000 Google 1

01:12:14 ◼   ► million one hundred sixty one thousand per employee facebook one million four

01:12:22 ◼   ► hundred twelve thousand dollars per employee in revenue and then at the top

01:12:27 ◼   ► of the pile was Apple with a little bit over two million in revenue right her

01:12:33 ◼   ► employee which is a really I mean it's basically closer to Apple than they are

01:12:38 ◼   ► to Microsoft in revenue for employee.

01:12:41 ◼   ► That is very true and they're well ahead of Google.

01:12:46 ◼   ► And they're growing.

01:12:47 ◼   ► Their revenue was up like 40% last year or something.

01:12:51 ◼   ► So they're catching up.

01:12:52 ◼   ► That to me is a really, really...

01:12:56 ◼   ► Those numbers really fit with my gut feeling of how well run these companies are and how

01:13:03 ◼   ► efficient they are, how well organized they are.

01:13:06 ◼   ► I hear about Twitter's headcount, I'm just blown away. Like, 4,000 or something like

01:13:11 ◼   ► that. Well, just little things like I've heard, and this might have been reduced recently,

01:13:16 ◼   ► but at one point last year, they had 100 iOS engineers. And their iOS apps, quite frankly,

01:13:22 ◼   ► are shit. I mean, maybe that's why. There might be a very strong—

01:13:26 ◼   ► That's my committee, yeah. Yeah, and too many chefs spoil the stew or

01:13:31 ◼   ► whatever the hell you're making in the mythical— I feel like we butcher life metaphors.

01:13:36 ◼   ► force which is butcher them all you know throw in a what's his name's mythical

01:13:41 ◼   ► man month month yes you know that a hundred iOS engineers really it not only

01:13:46 ◼   ► does it not get you a better app faster it gets you a worse app but I it's it's

01:13:52 ◼   ► almost mine the Instagram has like 10 right or something like that I it's not

01:13:56 ◼   ► a big my understanding at least is that it's not a big engineering crew at all

01:14:00 ◼   ► and at the very least they up until the point where Facebook acquired them

01:14:05 ◼   ► their engineering team was easily fit around a conference table.

01:14:13 ◼   ► Really interesting numbers and Facebook's numbers are really astounding.

01:14:16 ◼   ► And if you think about it, it's not profit, it's revenue per employee.

01:14:20 ◼   ► And that's where the one company that sticks out here is Apple because Apple is a hardware

01:14:25 ◼   ► company.

01:14:26 ◼   ► And so it is easier in some ways for Apple to generate revenue.

01:14:32 ◼   ► And it's, you know, there's a remarkable story with Apple's, too big of a tangent to go into

01:14:37 ◼   ► here, but that Apple's profit is so high because their margins are so, probably the most abnormal

01:14:43 ◼   ► thing about Apple is a company.

01:14:45 ◼   ► And there's a lot of things that are abnormal about Apple.

01:14:47 ◼   ► Are there profit margins on hardware?

01:14:50 ◼   ► And in all of these industries, maybe other than watches, where the margins are notoriously

01:14:57 ◼   ► small. The margins are notoriously small in the PC market. They're notoriously small in

01:15:03 ◼   ► the phone market. I mean, they're negative for some of these companies in the cell phone

01:15:07 ◼   ► market. But it is easier for Apple to generate just revenue because they're selling $800

01:15:15 ◼   ► phones and $1500 MacBooks. Whereas Facebook is making all that revenue on a buck or two

01:15:23 ◼   ► at a time on these ad views.

01:15:25 ◼   ► Yup. No, it's a remarkable stat. You actually, Dustin posted the profit per employee as well.

01:15:33 ◼   ► Oh, did he?

01:15:34 ◼   ► Yeah, it's right below it. So Apple, start at the top. Apple, 465,000 per employee. Facebook,

01:15:41 ◼   ► second again, 290,000 per employee, which is again a fantastic number. Google, 250,000

01:15:47 ◼   ► per employee. Microsoft, 102,000 per employee. Yahoo, 54,000 per employee. And Twitter, negative

01:15:53 ◼   ► 130,000 per employee. The problem is Twitter's 10 years old in a month. That's the problem.

01:16:03 ◼   ► People think about, "Oh, Twitter could do this. Twitter could do that." The "could

01:16:07 ◼   ► do" should be happening when you're 3 years old or you're 4 years old, not when

01:16:10 ◼   ► you're 10 years old in a public company.

01:16:12 ◼   ► It is true. I mean, I still kind of chalk them up as sort of a newbie. Somehow Google

01:16:19 ◼   ► is established and Facebook even though it's of a similar vintage like it acts so mature

01:16:27 ◼   ► that it it you give them credit for it and there's some part of me that has been tricked

01:16:32 ◼   ► into giving Twitter a little bit more slack on they'll figure it out there you know they're

01:16:37 ◼   ► still new whereas yeah it's true I remember I started my Twitter account in 2006 so it's

01:16:42 ◼   ► it's ten years

01:16:45 ◼   ► yahoo's just inexcusable i mean that's good

01:16:48 ◼   ► i mean

01:16:48 ◼   ► the more i think about it the more i

01:16:51 ◼   ► i've rolled my eyes at the fact that the basic

01:16:54 ◼   ► story of yahoo's stock price is that it's entirely based on their holdings in

01:16:59 ◼   ► alibaba

01:16:59 ◼   ► and if you subtract what their holdings in alibaba are worth

01:17:03 ◼   ► yahoo's worth nothing

01:17:05 ◼   ► just did there's no there is no value in that

01:17:08 ◼   ► and i almost feel like i've rolled my eyes at that like come on lots of people

01:17:11 ◼   ► to use Yahoo for stuff. And now I'm starting to think, you know what, I think the market

01:17:14 ◼   ► has that exactly right.

01:17:16 ◼   ► Yeah, well, I mean, there's just no, there's no growth there at all. It's just shrinking.

01:17:21 ◼   ► It's these numbers, the revenue and earnings are going down every single quarter, you know,

01:17:25 ◼   ► of the core business. And they're probably going to be acquired by Verizon, which acquired

01:17:32 ◼   ► AOL last year. AOL actually, instead of a misguided, probably Yahoo is, Yahoo hired

01:17:40 ◼   ► Marissa Meyer, which doubled down on the core Yahoo problem, which was thinking that they

01:17:48 ◼   ► were a tech company. Yahoo's never been a tech company. Yahoo started with guys making

01:17:53 ◼   ► a list of sites on a page. It's always been a media company from the beginning and thinking

01:18:00 ◼   ► that it was a tech company when it wasn't--

01:18:02 ◼   ► It's maybe the problem is that they hired the wrong people to accelerate the growth

01:18:07 ◼   ► as a media company. What was the guy who was the CEO? Terry Segal, right? The Hollywood

01:18:11 ◼   ► guy.

01:18:12 ◼   ► Kevin Carter Yeah, Semel. Terry Semel. Yeah, I think he,

01:18:13 ◼   ► yeah, no, I think he, and that was the vision that he had and I think that's one that would

01:18:17 ◼   ► have made more sense. But that's also, you have to remember, media companies are also

01:18:23 ◼   ► all having trouble. So, say, either they would have gotten it right, it's not clear that

01:18:27 ◼   ► they would be, I mean, the Verizon acquisition makes sense. AOL, to their credit, spent a

01:18:33 ◼   ► lot of money developing their programmatic advertising technology. You know, this is

01:18:36 ◼   ► kind of like the Android of ad buying relative to like Facebook, if Facebook's the iPhone

01:18:42 ◼   ► or Google's the iPhone, where your target, and this is what really slaughtered newspapers

01:18:47 ◼   ► and sites in general, right? It used to be you would buy, if you wanted to reach someone

01:18:52 ◼   ► in Dayton, Ohio, you would buy an ad in the Dayton newspaper, right? Now you can just

01:18:58 ◼   ► do a programmatic buy where you want to target someone that's in Dayton, Ohio and you can

01:19:01 ◼   ► do all these sorts of things and you don't even know where your ad's going to show up.

01:19:04 ◼   ► it's going to show up on whatever site it might be.

01:19:07 ◼   ► And this is a reason why web pages suck.

01:19:09 ◼   ► We talked about this last summer because of this misalignment between the publishers and

01:19:16 ◼   ► the advertisers and this sort of thing, but just so much more efficient to reach people

01:19:20 ◼   ► that way.

01:19:22 ◼   ► And so AOL has the technology.

01:19:24 ◼   ► Verizon has lots of interesting data about customers.

01:19:29 ◼   ► adding Yahoo just to add scale to that product makes sense. I'm sure they'll pay

01:19:36 ◼   ► some people will be shocked at how well the price will end up being. Yeah and then

01:19:42 ◼   ► you know I know I've mentioned this before too but it's kind of a fascinating

01:19:46 ◼   ► story but the way that newspapers got squeezed at both ends like where

01:19:50 ◼   ► newspapers made fundamentally made most of their money in two ways at the very

01:19:54 ◼   ► biggest ads the full-page ads that were in a section of the newspaper like page

01:19:59 ◼   ► three as a full page ad page five and six as a two-page spread and for naysies

01:20:05 ◼   ► and around the comics in the lifestyle section yeah and then the other huge

01:20:10 ◼   ► source of money were the tiny little text classified ads all the way in the

01:20:14 ◼   ► back of the newspaper because it was two different things the big ones up front

01:20:18 ◼   ► was okay Macy's has a lot of money and they want to tell everybody in

01:20:21 ◼   ► Philadelphia that they're having a two-day Memorial Day sale how do you

01:20:25 ◼   ► tell everybody in Philadelphia you're having to sell you put a two-page spread

01:20:28 ◼   ► ad in the Philadelphia Inquirer. The back of the the back of the

01:20:32 ◼   ► newspaper ads where the reader is looking for a job. Where do

01:20:37 ◼   ► you go to look for a job, you go to the back of the Philadelphia

01:20:39 ◼   ► Inquirer, and you find a tiny little text ad that that, you

01:20:44 ◼   ► know, has a job listing. And the those classified ads were

01:20:48 ◼   ► incredibly lucrative, the prices on them were most expensive, most

01:20:52 ◼   ► expensive ink in the world. And I and I and they used to price

01:20:55 ◼   ► them super smart. I when I worked at the Philadelphia

01:20:58 ◼   ► Enquirer, you know, I worked with the promotions or the

01:21:02 ◼   ► classified department, I used to do graphic design for the little

01:21:05 ◼   ► promotional things where they would, they would need like if

01:21:07 ◼   ► they needed like a flyer for something, whatever I do design

01:21:10 ◼   ► work. They were priced all over the place. So like a three,

01:21:14 ◼   ► three lines of text in exact, you know, the classified ads are

01:21:16 ◼   ► all just the same font, you don't get to style it at all,

01:21:18 ◼   ► although they would charge you extra if you wanted like bold.

01:21:22 ◼   ► Right. So like a help wanted ad was super expensive might be

01:21:27 ◼   ► like $150 for like a little three line help wanted ad in the

01:21:30 ◼   ► Sunday Enquirer. But if you had if you found somebody's wallet

01:21:34 ◼   ► and wanted to just put like a loss in order to you lost your

01:21:36 ◼   ► wallet, you wanted to put like a little loss and found ad in they

01:21:38 ◼   ► would charge you like $7 they would just take like seven bucks

01:21:41 ◼   ► for you to do it. But they had every ad was sold by human being

01:21:45 ◼   ► who transcribed everything and they could they very, very, very

01:21:50 ◼   ► they were like, they were like the police to make sure that nobody tried to sneak a

01:21:55 ◼   ► help wanted ad into the lost and found. Right. Just to get away. You know, there was a go

01:21:59 ◼   ► no way, you know, like, and they knew, you know, each one was way more exposed price

01:22:04 ◼   ► right at the pain point for anybody who wants to do something. Totally. And then of course,

01:22:08 ◼   ► that business just completely washed away. Nobody's looking for a job now buys it Sunday

01:22:12 ◼   ► newspaper. Yep. No, I'm young enough that I found jobs to classify it. Um, oh, yeah,

01:22:19 ◼   ► Oh yeah, it was the only way to find a job. And it was the only way to find an apartment.

01:22:24 ◼   ► Yep. Yeah, no, it's, yeah, the newspapers are screwed.

01:22:30 ◼   ► I mean, I guess the only other way you could find an apartment was to walk up and down the streets of Philadelphia

01:22:36 ◼   ► and see if anybody had like a "rooms for rent" sign in front of their building. That was the only other way. There wasn't anything else.

01:22:42 ◼   ► We looked like savages.

01:22:45 ◼   ► Let me take one more break and thank our final sponsor of the day and it is our

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01:25:17 ◼   ► at fracture me calm so my thanks to them what else we have what else has been

01:25:25 ◼   ► going on I was I was on vacation last week so I miss some stuff but there was

01:25:31 ◼   ► I mean, there's earnings, which I spend a lot of time on.

01:25:36 ◼   ► Yeah, we might as well. I talked about it a little bit last week, but it's interesting.

01:25:41 ◼   ► Oh, well, Apple. I'm a little bit on a whim here, but I thought the Apple earnings were

01:25:52 ◼   ► fine. I think the, what I did, I did this in a daily update, but I went back and I charted

01:26:03 ◼   ► all or I put down all of Apple's earnings starting from I think 2010 on, because I think

01:26:09 ◼   ► that was, no 2011 is when they changed. But basically I did, no I did the iPhone all along,

01:26:14 ◼   ► but I did annual earnings, the amount they earned each year. Because it's hard to do

01:26:17 ◼   ► quarter on quarter comparisons with the iPhone because Apple shifted when they launched it

01:26:21 ◼   ► in 2011 and also China in particular changed the dates, the quarters that it launched in.

01:26:28 ◼   ► So I just did annual revenue for Apple or for the iPhone specifically.

01:26:37 ◼   ► And if you charted revenue from 2008 to 2014 and then you used that to forecast 2015 and

01:26:48 ◼   ► 2016, Apple significantly outperformed what you would expect them to in 2016. So their

01:26:57 ◼   ► earnings that they just reported, 2016 quarter one, were something like 20 billion or the

01:27:04 ◼   ► revenue was like some significant number. I should probably open the – I wrote it

01:27:07 ◼   ► all down – was well above what you would expect it to be. The "problem" was that

01:27:16 ◼   ► the first quarter last year was so unbelievably massive, it was like $50 or $60 billion more

01:27:23 ◼   ► than you would expect or something like that. The year over year comparison, they barely

01:27:29 ◼   ► beat last year. And actually, if you look at the inventory numbers and the sell through

01:27:33 ◼   ► numbers, they probably slightly underformed. It was very close. And they're going to

01:27:38 ◼   ► under reform next quarter. And I look at that and I don't buy the iPhone has peaked narrative.

01:27:49 ◼   ► I think that Apple, there was a one-time event that there was a combination of pulling sales

01:27:54 ◼   ► forward, like people upgraded earlier than they would have. But if that was all that

01:27:58 ◼   ► was happening, then the sales this year would have been significantly less than they were.

01:28:05 ◼   ► The fact that they managed to stay the same and, if looking backwards, were well above

01:28:10 ◼   ► what you would have expected in 2014, suggests that they really did take a huge chunk of

01:28:16 ◼   ► non-iPhone customers.

01:28:17 ◼   ► They had a bunch of new customers to Apple.

01:28:21 ◼   ► Those customers, Apple has fantastic retention numbers.

01:28:24 ◼   ► People who buy an iPhone buy another iPhone.

01:28:26 ◼   ► That suggests that the iPhone's growth is going to continue.

01:28:32 ◼   ► I think that this year Apple, I'm not a stock analyst, I say that a lot, I don't want to

01:28:38 ◼   ► get in trouble, but I think it's going to be down this year because the year over year

01:28:43 ◼   ► comparison is going to be tough.

01:28:44 ◼   ► But actually I think that they're in a lot better shape than people think and that 2017

01:28:50 ◼   ► is going to be a much better year for them.

01:28:54 ◼   ► And I feel like they go through this on a regular, cyclical basis because the last downturn

01:29:00 ◼   ► was around sometime in calendar 2013.

01:29:05 ◼   ► And it's like a year after Steve Jobs died

01:29:08 ◼   ► and everybody was banging the drum on,

01:29:11 ◼   ► they're doomed without Steve Jobs.

01:29:14 ◼   ► And Samsung was putting in record numbers

01:29:18 ◼   ► and there was this narrative that,

01:29:20 ◼   ► and there wasn't even a little bit of truth to it,

01:29:26 ◼   ► which is that there was clearly consumer demand

01:29:29 ◼   ► for big phones and Apple's biggest phone was four inches,

01:29:32 ◼   ► which wasn't big.

01:29:34 ◼   ► So that was actually a true part of it.

01:29:36 ◼   ► I mean, that even came out in the lawsuit

01:29:39 ◼   ► where there was an email, I think from Phil Schiller,

01:29:42 ◼   ► that was like entered into evidence, but it said,

01:29:45 ◼   ► people want big phones and we don't have big phones

01:29:47 ◼   ► right now.

01:29:48 ◼   ► And this narrative was that Apple's time at the top

01:29:52 ◼   ► is over and Samsung's eating their lunch

01:29:54 ◼   ► and the stock was really depressed.

01:29:55 ◼   ► then all of a sudden you know the the iPhone 6 comes out and it's a huge hit

01:30:01 ◼   ► and it's like oh the Apple's back but it's really you know it was all very

01:30:04 ◼   ► predictable it was you know they just sort of got there there the long

01:30:09 ◼   ► timeframe that they have to you know the downside of wow they sell 75 million

01:30:16 ◼   ► phones in the first quarter when they're that they've been made available is that

01:30:20 ◼   ► the way that you can do that is by having the pipeline be like 18 months

01:30:23 ◼   ► long and they got caught behind that the pipeline on when they could come out

01:30:27 ◼   ► with close to five inch phone and a over five inch phone was behind that the

01:30:34 ◼   ► market moved faster than they did and there was an aw but then the rumors came

01:30:37 ◼   ► out and therefore there was also this clearly a lot a lot of casual people not

01:30:43 ◼   ► people like us you know who go and check out Mac rumors calm everyday and see

01:30:47 ◼   ► stuff like that but just normal people who were like I hear apples coming out

01:30:51 ◼   ► or the big phone, I'm gonna wait.

01:30:53 ◼   ► - Yeah, the thing that where it's different now,

01:30:58 ◼   ► I think those are all spot on,

01:31:00 ◼   ► and that year, 2014, was down a bit, relatively speaking,

01:31:04 ◼   ► but Apple was still growing, right?

01:31:07 ◼   ► The difference now is it is an objective fact

01:31:13 ◼   ► that iPhone sales are flat,

01:31:15 ◼   ► and next quarter, we're going to go down.

01:31:17 ◼   ► So I think that the narrative back then I think was fueled by this misguided understanding

01:31:28 ◼   ► of why Apple is able to maintain those margins and profits and I think people are a little

01:31:34 ◼   ► smarter about that now.

01:31:35 ◼   ► I mean that's where I really got my start.

01:31:39 ◼   ► You know I wrote a big thing saying like why disruption advocates got Apple so wrong and

01:31:45 ◼   ► Actually, one of my earliest pieces was predicting that Samsung was in for a big fall.

01:31:53 ◼   ► Relatively speaking, for people who understood Apple and how it worked, there was a little

01:31:56 ◼   ► bit of shooting fish in the barrel.

01:31:59 ◼   ► The numbers were on our side.

01:32:00 ◼   ► Apple was still growing.

01:32:01 ◼   ► The big difference now is, objectively speaking, the numbers are going down.

01:32:05 ◼   ► But you can't ignore the fact that last year was so unbelievably extraordinary.

01:32:13 ◼   ► The numbers were just off the charts and on one hand, it's going to always be hard to

01:32:22 ◼   ► compare to other numbers.

01:32:24 ◼   ► But if you take out that one year, this year is still better than would be expected.

01:32:28 ◼   ► And I think that key point is being missed.

01:32:32 ◼   ► And so...

01:32:33 ◼   ► Yeah, so like what you're saying, let's just say we take out the 2015 numbers.

01:32:38 ◼   ► We take them out.

01:32:40 ◼   ► we leave in 2012, 13, 14.

01:32:44 ◼   ► Yep, 15's a blank.

01:32:45 ◼   ► And now we go and we show the first of 2016.

01:32:48 ◼   ► And then we say, now you draw an imaginary line

01:32:50 ◼   ► for where you think 2015 went based

01:32:53 ◼   ► on what you saw at the end of 2014 and where we are now.

01:32:56 ◼   ► And you probably just draw like this--

01:32:58 ◼   ► it looks like a real nice slope.

01:32:59 ◼   ► Yeah, I have the exact numbers, actually.

01:33:01 ◼   ► If you forecast linearly from 2008, 2014, then 2015,

01:33:05 ◼   ► you would have expected to sell 200 million.

01:33:08 ◼   ► if you do logistic regression like an s-curve which it actually the data would

01:33:12 ◼   ► suggest

01:33:13 ◼   ► uh... then you would expect a hundred seventy eight million

01:33:17 ◼   ► uh... apple actually sold two hundred and thirty million so they they they

01:33:20 ◼   ► exceeded what you would have forecast by thirty to fifty million iphones which

01:33:25 ◼   ► would like a really strong quarter like an entire really good for iphones that's

01:33:29 ◼   ► more five phones they sold in twenty ten right and like more than they sold in

01:33:33 ◼   ► any quarter other than the holiday quarter

01:33:35 ◼   ► Right. It was insane.

01:33:37 ◼   ► It's like they just added a quarter to their calendar.

01:33:41 ◼   ► Yeah, in a single quarter. And so if you did that same sort of thing and you projected

01:33:46 ◼   ► – again, you only had data up 2014. You said, "What do you think is going to be

01:33:49 ◼   ► in 2016?" Again, if you do a linear – it'd be $230 million. If you do a linear regression,

01:33:58 ◼   ► it would be – sorry, a logistic regression – it would be $184 million because sales

01:34:03 ◼   ► were peaking and they were flattening out in 2014. Apple is on pace to sell about $230

01:34:12 ◼   ► million so either they're right on track with growth if you use Winear or they're vastly

01:34:16 ◼   ► exceeding it if you think that growth had peaked in 2014. Regardless, the fact of the

01:34:21 ◼   ► matter is there's actually not much evidence that – the only way this story makes sense

01:34:26 ◼   ► is if Apple got a bunch of new customers in 2015 in a one-time event and it's like,

01:34:32 ◼   ► Is there any explanation for that to happen?

01:34:34 ◼   ► In fact, I'm glad you asked, there is.

01:34:36 ◼   ► They finally got big screen iPhones and 4G really came online in China is the other real

01:34:41 ◼   ► big factor.

01:34:42 ◼   ► Yeah.

01:34:43 ◼   ► Yeah.

01:34:44 ◼   ► And China, the basic economy, I mean, I know it's not having a good time right now, but

01:34:49 ◼   ► in the grand scheme of things, though, it's doing well.

01:34:52 ◼   ► Yeah.

01:34:53 ◼   ► And the grand scheme of things, I mean, there's hundreds of millions of people entering the

01:34:57 ◼   ► middle class.

01:34:58 ◼   ► I mean, like the scale of China is hard to comprehend.

01:35:01 ◼   ► but it's very large. Tim, actually this is a point of satisfaction, Tim Cook now always

01:35:07 ◼   ► quotes this McKinsey study about the number of middle class people coming in China, which

01:35:13 ◼   ► he never quoted until earnings call a couple of quarters ago. And I happen to have included

01:35:20 ◼   ► it in a daily update before then. So I don't think he read it, but I like to think that

01:35:24 ◼   ► someone found the link and then it's been in every earnings call ever since. It's a

01:35:30 ◼   ► relatively obscure study. But that's how I put myself to bed at night.

01:35:37 ◼   ► So here's an iPhone-related thing. And I wanted to shoot it past you and see what you have

01:35:43 ◼   ► to say. A reader, let me try to paraphrase it. A, let's accept that the rumors about

01:35:52 ◼   ► next month's new iPhone are true, that there's a new four-inch model that's supposedly called

01:35:58 ◼   ► the 5SE. It doesn't really make a lot of sense to me, but let's just say it.

01:36:04 ◼   ► A lot of Apple's names don't. Yeah. And it's four inches and it has the specs

01:36:12 ◼   ► more or less of an iPhone 6, meaning it has an A...wait, what are we up to? That 6S...

01:36:20 ◼   ► A8? Yeah. 6S has an A9 processor, so that's the

01:36:24 ◼   ► state of the art. It has, so what it has is an A8 processor. The current 5s, the 4-inch

01:36:33 ◼   ► phone that you could go in and buy today has, has the A7. It has the first 64-bit A7. So

01:36:43 ◼   ► it goes to an A8 processor and has a camera roughly equivalent to the iPhone 6. It's more

01:36:50 ◼   ► or less like a four inch version of the iPhone 6 and it'll probably sell for you know same

01:36:55 ◼   ► price point $100 less. So the question from the reader is have they backed themselves

01:37:02 ◼   ► into a corner and they have to use this year old a 8 processor and camera specs because

01:37:12 ◼   ► they have to hit this $100 less than the iPhone 6 price slot or is this was this part of the

01:37:20 ◼   ► painted themselves in the corner or have they deliberately chosen to set up that

01:37:24 ◼   ► corner because that's what they wanted all along I mean I think that there's

01:37:30 ◼   ► the idea of of having the better specs and the more expensive phone I think

01:37:35 ◼   ► you're asking why don't they make a a right price $650 5 inch or 4 inch phone

01:37:42 ◼   ► right I think that that what's underlying the the question did the

01:37:46 ◼   ► Because they've always priced by size. Right. Sort of thing. Yeah.

01:37:49 ◼   ► And I think that it speaks to people that there's some number of people out there who

01:37:53 ◼   ► really still want a four inch phone but they also want that the top of the line specs.

01:37:57 ◼   ► Yeah. There's probably an aspect to that. I mean, Apple has always gone for the sort of like easy

01:38:03 ◼   ► to explain pricing. You know, like iPods were, you know, or even iPhones by memory, right? Like,

01:38:09 ◼   ► which is right. Which is very easy to explain and very profitable.

01:38:14 ◼   ► It doesn't make a lot of sense given that.

01:38:18 ◼   ► It doesn't make any sense at all.

01:38:20 ◼   ► It makes a ton of sense actually.

01:38:21 ◼   ► Well, it makes a ton of sense from a business perspective because…

01:38:24 ◼   ► Right, but it doesn't make sense that it's being priced – fairly is not quite the right

01:38:29 ◼   ► word, but commensurate with the price of the components.

01:38:32 ◼   ► Right.

01:38:33 ◼   ► Well, this is something people always get tripped up on, right?

01:38:35 ◼   ► Price is what the market will bear.

01:38:36 ◼   ► It has nothing to do with what goes into the products.

01:38:40 ◼   ► I think that's probably, yes, I think you can look at that Apple's in a corner and that

01:38:47 ◼   ► they, given the way they do their pricing, it should be less and that sort of thing.

01:38:56 ◼   ► You know, that said, I think it's fair.

01:39:02 ◼   ► It's a fair thing to say, but I think it also fits their strategy.

01:39:05 ◼   ► I mean-

01:39:06 ◼   ► Yeah, I don't think that they found themselves here accidentally though and that they're

01:39:09 ◼   ► Ooh, you know like they you know like the the analogy of painting yourself in a corner is that you turn around you realize oh?

01:39:15 ◼   ► I did not leave myself a way out here, and you didn't think about it when you got started

01:39:18 ◼   ► I think they knew exactly what they were doing and they know that yes that this means that anybody who wants a four-inch phone

01:39:24 ◼   ► With top-of-the-line specs does not get that but why are they watching it in the spring? That's kind of weird

01:39:31 ◼   ► Was it just not ready or I?

01:39:34 ◼   ► Wait here. I'll tell you what I'll tell you what I'll tell you one thing. I think it's interesting

01:39:37 ◼   ► I think that Apple did have the strategy to,

01:39:42 ◼   ► 'cause when they did the 5C,

01:39:45 ◼   ► the 5C was cheaper to produce than the 5 was.

01:39:51 ◼   ► I don't think that was any question,

01:39:54 ◼   ► that was an important part of it.

01:39:56 ◼   ► And I think, I suspect Apple wanted to keep the 5C

01:39:59 ◼   ► around longer than they did.

01:40:02 ◼   ► But I think what Apple learned from that

01:40:05 ◼   ► is that it screamed that this is a cheap iPhone, right?

01:40:10 ◼   ► It was obviously a cheap iPhone.

01:40:14 ◼   ► Whereas if you bought the $450 iPhone,

01:40:17 ◼   ► the lowest one that was available,

01:40:19 ◼   ► no one knew if that was, you bought it

01:40:21 ◼   ► because it was a cheap iPhone

01:40:23 ◼   ► or it was just your expensive iPhone

01:40:24 ◼   ► that was two years old or one year old or whatever, right?

01:40:26 ◼   ► But it was still an iPhone.

01:40:28 ◼   ► The 5C was never an iPhone in the way

01:40:31 ◼   ► that every other iPhone has been an iPhone

01:40:32 ◼   ► 'cause it was never the flagship.

01:40:35 ◼   ► - And, sorry, go ahead.

01:40:36 ◼   ► - No, you go ahead.

01:40:37 ◼   ► - And so I think Apple wants to,

01:40:40 ◼   ► I think there's things to lend itself to the 5C strategy.

01:40:44 ◼   ► It was cheaper to produce.

01:40:45 ◼   ► They're using components that have,

01:40:49 ◼   ► they've all left the learning curve.

01:40:51 ◼   ► They're producing them super cheaply.

01:40:52 ◼   ► I think they want that from an operational perspective.

01:40:55 ◼   ► They want to go lower market.

01:40:56 ◼   ► I think they would like to have like a $350 phone

01:40:58 ◼   ► for like India, for example.

01:41:01 ◼   ► But they've learned they need to retain

01:41:04 ◼   ► the "this is an iPhone" sensibility. I think they're trying to figure that out.

01:41:09 ◼   ► I suspect that goes into the 5SE and they're trying to find the right balance where how

01:41:14 ◼   ► can we get all the benefits of building a phone from scratch to be cheaper as opposed

01:41:20 ◼   ► to just using an expensive phone and selling it forever, but still maintain the "this

01:41:26 ◼   ► is the iPhone" sort of aura.

01:41:27 ◼   ► I think that the timing is exactly on plan and I think it makes a ton of sense. I think

01:41:31 ◼   ► It's because at the low end, at the high end,

01:41:34 ◼   ► these phones very, ever since they moved

01:41:37 ◼   ► to releasing them in September instead of late June

01:41:40 ◼   ► or early July, they have an almost clockwork

01:41:44 ◼   ► 12 month cycle.

01:41:46 ◼   ► Ever since they moved to September,

01:41:47 ◼   ► it's the exact same week of September

01:41:50 ◼   ► that they have the event, somewhere around September 10th,

01:41:52 ◼   ► and then they come out 11 days later,

01:41:54 ◼   ► like the 21st or something like that,

01:41:56 ◼   ► which within a week, every single year, it's 12 months.

01:41:59 ◼   ► You have a 12 month clock ticking on top of the line.

01:42:02 ◼   ► The bottom of the line does not have a 12 month cycle.

01:42:05 ◼   ► Right now, the 5S has been there for 18 months.

01:42:10 ◼   ► Or it's been out--

01:42:13 ◼   ► - More than that, 30 months.

01:42:15 ◼   ► - Well, but it's been at the spot where it's at for--

01:42:18 ◼   ► - Oh, got it, got it, okay.

01:42:20 ◼   ► - Right?

01:42:21 ◼   ► - No, six months, because it was the 5C.

01:42:25 ◼   ► The 5C was sold until last September.

01:42:28 ◼   ► Well, I just...

01:42:32 ◼   ► No, but your point holds.

01:42:35 ◼   ► No, no, I think...

01:42:36 ◼   ► Well, anyway, my point is that I think that this new phone that they're coming out with

01:42:39 ◼   ► in March, they expect to be there for at least 18 months.

01:42:41 ◼   ► It'll be there for a long time.

01:42:43 ◼   ► I agree.

01:42:44 ◼   ► I agree.

01:42:45 ◼   ► No, that's exactly what I was trying to say.

01:42:46 ◼   ► I think they want to go below the 450 price point.

01:42:49 ◼   ► I think it's going to be there if the 5C was supposed to do that, but it was a flop, and

01:42:53 ◼   ► so this is the second attempt at it.

01:42:56 ◼   ► I'm curious, still curious. I'm really curious about this event

01:42:59 ◼   ► next month. I'm more more interested in it than any event

01:43:02 ◼   ► in the last year, I think, because I have no idea how

01:43:06 ◼   ► they're going to sell this stuff. Because to me, it's the

01:43:10 ◼   ► rumors are of stuff that could easily be released by press

01:43:14 ◼   ► release. You know, it's there's here, here's a, you know, camera

01:43:18 ◼   ► quality you've seen before and performance quality that you've

01:43:21 ◼   ► seen before in a size that you've seen before. And I think

01:43:25 ◼   ► it's an important part of their product lineup to have it there.

01:43:27 ◼   ► And I know that part of the reason that they're doing this is

01:43:30 ◼   ► it is a nicer phone at four inches than the current five s

01:43:33 ◼   ► and it fits their overall strategy because now this one

01:43:36 ◼   ► will work with Apple Pay. And the five s that does have touch

01:43:39 ◼   ► ID, but it does not support Apple Pay. So now they've got an

01:43:42 ◼   ► entire lineup of phones that supports Apple Pay. And you know,

01:43:48 ◼   ► and I think it can be on the market for a while. And they

01:43:51 ◼   ► don't have to distract from last September's. Hey, here's the

01:43:54 ◼   ► brand new success and success plus and we have to take five

01:43:57 ◼   ► minutes and tell you about this thing that we're not even that

01:43:58 ◼   ► excited about. And they don't have to do it again, this

01:44:02 ◼   ► September when they have this iPhone seven, which you know,

01:44:05 ◼   ► who knows what it's going to do and who knows what the selling

01:44:06 ◼   ► points will be, but they don't have to mention it. All they

01:44:08 ◼   ► have to do is the only time it'll get mentioned is at the

01:44:11 ◼   ► very end when they talk about pricing, and they'll say this,

01:44:15 ◼   ► the seven plus starts at this price, the seven starts $100

01:44:19 ◼   ► less at this price, and $100 less, here's the you know, we

01:44:23 ◼   ► still have the 5SE or 6C.

01:44:26 ◼   ► - What will be fascinating to see is will the iPhone 6

01:44:29 ◼   ► still exist next September, right?

01:44:32 ◼   ► - Yeah, that's a good question.

01:44:32 ◼   ► - Will it be 7, 6S, and 5SE?

01:44:35 ◼   ► - Right.

01:44:36 ◼   ► - I do think that's where they wanna go.

01:44:38 ◼   ► - Right, that might be what they do.

01:44:40 ◼   ► - Right, they would rather have the low-end phone

01:44:42 ◼   ► be built to be a low-end phone.

01:44:44 ◼   ► Because if you build it from scratch,

01:44:47 ◼   ► again, using known technologies,

01:44:50 ◼   ► but I bet you can produce it cheaper,

01:44:52 ◼   ► and they can build it to be a phone

01:44:54 ◼   ► that's meant to go even further to our market.

01:44:56 ◼   ► And I wouldn't be surprised if a year later then,

01:44:57 ◼   ► you have the 7S, the 7, and then a new, like a 6 SE,

01:45:02 ◼   ► and then you still have the 5 SE.

01:45:06 ◼   ► I really think they wanna go below that 450 price point.

01:45:09 ◼   ► It just needs to be an iPhone.

01:45:12 ◼   ► - Yeah, and I kind of feel like they,

01:45:14 ◼   ► and again, everything gets old and slow at some point,

01:45:18 ◼   ► but I kind of feel like A8 with a 64-bit CPU,

01:45:22 ◼   ► and the NFC for Touch ID, I mean for Apple Pay,

01:45:27 ◼   ► with Touch ID, that it's a camera that could remain relevant

01:45:32 ◼   ► as the price point slowly dips over the next 18 months

01:45:36 ◼   ► to 24 months, it'll still be a credible phone.

01:45:40 ◼   ► - Yep, totally agree.

01:45:41 ◼   ► - Anything else?

01:45:44 ◼   ► Did you see that while we were recording,

01:45:45 ◼   ► they came out with Twitter has a new feature

01:45:48 ◼   ► that was rumored that they're going to let you

01:45:51 ◼   ► have a setting that you can flip that will show you tweets that they think are relevant

01:45:57 ◼   ► to you at the top of your timeline.

01:45:59 ◼   ► Yeah, I tried to get I haven't gotten the setting on my account yet. I don't know if

01:46:05 ◼   ► I'm international.

01:46:07 ◼   ► Jack Jack's tweet says just keep hitting refresh. Just keep refreshing. It's like just keep

01:46:14 ◼   ► refreshing until you get the setting.

01:46:19 ◼   ► funny. Yeah, I mean, we'll see. It's opt in for now. I think it's going to be opt out

01:46:28 ◼   ► after a few weeks after some testing. I like while you were away personally. I long ago

01:46:36 ◼   ► gave up on reading all my tweets.

01:46:38 ◼   ► Yeah, me too.

01:46:39 ◼   ► And I think people who read all their tweets, you probably use third party clients anyway

01:46:42 ◼   ► because trying to read all your tweets in the regular Twitter client is a hopeless cause

01:46:46 ◼   ► because it doesn't save its spot. So, yeah, I mean, again, I think it's fine and it would

01:46:55 ◼   ► have been sorely needed seven, eight years ago. I think they need to be careful about

01:47:01 ◼   ► losing what they have now. Again, I like the newspaper comparison, again, because newspaper

01:47:09 ◼   ► news is more widespread and popular and valuable than it has ever been.

01:47:19 ◼   ► The reason we talk about Twitter, the amount of verbiage spent on Twitter relative to its

01:47:24 ◼   ► importance from a business perspective or all that sort of stuff is way out of whack.

01:47:32 ◼   ► I love it.

01:47:33 ◼   ► I know you love it.

01:47:34 ◼   ► And it's so much part of a fabric of everything, particularly politics and sports.

01:47:39 ◼   ► I'm a huge NBA fan and NBA Twitter is amazing.

01:47:42 ◼   ► It's like this whole...

01:47:43 ◼   ► It's really the best possible manifestation of what Twitter could be.

01:47:49 ◼   ► But again, it's hard to get into.

01:47:50 ◼   ► You figure out who to follow, you get all the things in order.

01:47:55 ◼   ► But man, just how do you make money off that?

01:47:59 ◼   ► I don't know.

01:48:02 ◼   ► Let's face it, figure it out.

01:48:06 ◼   ► Ben Thompson, thank you for your time.

01:48:09 ◼   ► I'm blown away.

01:48:10 ◼   ► I don't know about you.

01:48:11 ◼   ► I mean, you're just for people who don't know, we're recording from Philadelphia and Taipei.

01:48:18 ◼   ► I know.

01:48:19 ◼   ► So it's 1230 noon here.

01:48:23 ◼   ► And we were talking about in our lives, we had to find jobs by reading three line tiny

01:48:31 ◼   ► bits of text in the back of the newspaper. Right, it is what like 1 30 a.m.

01:48:34 ◼   ► in Taipei and this Skype call has had zero latency. It's unbelievable. It's just

01:48:43 ◼   ► even if it fell apart now I could just stop the recording and we could have to

01:48:46 ◼   ► just have the show but I don't even have to knock on wood but I'm actually kind

01:48:51 ◼   ► of blown away at the living in the future aspect of the recording of this

01:48:55 ◼   ► episode of the show. People can find your stuff at the excellent

01:48:58 ◼   ► Stratechery.com. You could also probably just Google Ben Thompson and it's gonna take you

01:49:05 ◼   ► right there. And your Twitter account is @BenThompson. And podcast exponent exponent.fm. Yeah, if

01:49:17 ◼   ► you like the sound of Ben's voice, if you go to exponent.fm, there's a pretty good podcast

01:49:22 ◼   ► right there. Thank you for your time and thank you for your insight.

01:49:26 ◼   ► It's always a pleasure.

01:49:28 ◼   ► If you think you have IBS with diarrhea, talk to your doctor about Newsyphaxin.

01:49:33 ◼   ► [BLANK_AUDIO]