Good morning,

Yesterday’s Article was quite the manifesto, plus I’m a bit under the weather today, so I’m going to keep today’s Update short and follow-up only.

On to the update:

Digital Advertising Follow-up

First off, in Digital Advertising in 2022, I mistakenly referred to Google as being the default browser on Safari — I meant default search engine.

Secondly, with regards to Apple and a potential advertising network, a reader writes:

What you’re describing for Apple’s ad business sounds more like a competitor to Unity, not Facebook, no? Where is Apple going to serve these highly targeted app discovery ads? Doesn’t it need some kind of consumer surface area? Maybe they could do it as an ad network in other people’s apps, most likely games, but FB still gets to monetize the users within its own apps… or am I missing something?

It’s a good observation — the reader is correct that an Apple ad network would be more akin to Unity than to Facebook. And of course Facebook could still serve their own ads. The challenge from Apple is twofold: first, if Apple were to move in this direction — and to be clear, all of this is speculation about the opportunity, nothing more — its focus would be on apps, not e-commerce; that makes other apps, particularly games, an attractive place to advertise (and thus the Unity comparison). The more pressing concern is that Apple, should they leverage all of the data they have access to, could in the long run have superior ROIs to anyone else; given that advertising is an extremely liquid market where price is determined by supply-and-demand on a second-by-second basis, this would hurt everyone else’s pricing, from Facebook to Unity and everyone in-between.

As for the Facebook part, it seems likely that the company will figure out how to fix its e-commerce advertising stack to a greater degree than the app install advertising stack by doubling down on its ongoing efforts to incorporate storefronts within the company’s apps, thus allowing it to have perfect visibility into conversions (Shopify is in the middle of this shift). Games, though, will always be in different apps, which will make them a greater challenge (this is the flipside to games being a greater opportunity for Apple).

Third, Eric Seufert has a good Twitter thread here expanding on my preference for Facebook-style display advertising over many kinds of search advertising; the fact that people know what they are looking for means that many search ads are pure value transfers:

In other words, search ads often succeed by making search worse, or at least de-prioritizing organic results so that even the most relevant results feel compelled to pay. This isn’t a new realization of course, but as I’ve noted over the years with Google, it’s particularly effective on mobile given the smaller screen size, which means organic results aren’t even viewable without scrolling.

Finally, I should have noted that Amazon has display ads as well, not just search ads; indeed, given the extent to which ads are made to look like normal recommendation carousels they are impossible to avoid. Small wonder ads are increasingly seen by third party merchants as just a cost of doing business on Amazon; on the flipside, it’s interesting how Amazon increasingly looks less like Amazon the retailer and more like Alibaba, which has always primarily monetized via advertising and sales commissions. Or, in Stratechery terms, more like an Aggregator whose largest asset it being the place that customers go for discovery (in fact a Super-Aggregator, given the advertising model).

Spotify-Rogan Follow-up

As you can imagine I got a lot of feedback about this Daily Update, and I wanted to make three points in response.

First, I was very sloppy when I discussed the likelihood that more Facebook users supported Trump; what I was thinking is that more people who use Facebook as their primary social network, news source, etc., probably supported Trump, even though Trump had fewer votes than his opponent in both 2020 and 2016. This is an important distinction because the nature of Facebook is such that basically everyone is an active user even if they spend more time on Twitter or TikTok or some other part of the Internet. Still, I should have been a lot more careful given how fraught the topic is.

Second, speaking of being careful, a lot of folks emailed me about the second sentence in this quote, and ignored the first:

Ek is right — the slope is slippery — and the fact of the matter is that we are, at least in terms of the elite culture dominated by U.S. media, at the bottom of the hill. Yes, the First Amendment still exists as a law, but it is hard to argue free expression still exists as a value.

Of course musicians like Neil Young are exercising their free speech rights, as is anyone else leaving Spotify or clamoring for them to take more actions than they have; what I was noting is that elite culture, which includes musicians and many media institutions, has moved away from the sort of absolutist defense of free speech in a way that may seem surprising to executives like Daniel Ek.

I do think perspectives on this are guided by how old you are, and where you grew up. I was born in 1980 and grew up in an atmosphere where it was mostly social conservatives trying to ban and boycott everything from video games to TV shows that depicted gay people in a favorable way; at that time musicians and media tended to deride these folks as being against free speech, and I don’t remember many arguments being made in those institutions that boycotts were simply an alternative means of free expression (even though, as noted, it is!).

Matthew Yglesias summarized this shift very well in a Twitter thread:

In the 1990s, censoriousness (not formal censorship) was understood as having a mostly right-leaning valence — Republicans spent a lot of time yelling at Hollywood and the music industry for being too smutty and the Democrats who joined them were specifically the moderates. (link)

Relatedly, at the time public opinion was very very very conservative. People with genuinely left-wing views were desperately outnumbered and marginalized so belonging to a broader coalition of “eh people should do whatever” was in their interests. (link)

Today “eh do whatever” helps a much-weakened conservative movement find allies. There’s clearly no majority for imposing traditionalist Christian values, but you can fight alongside distinctly NON-traditionalist comedians for the right to say things others find offensive. (link)

For people under a certain age, the new alignment feels very natural and it’s just been their life. But for me and, certainly, for anyone who’s older than me, it’s been a somewhat dizzying set of changes. (link)

Matt and I are almost the same age (and so is Ek for that matter), and yeah, I can certainly agree with that sentiment. To that end, my goal with the middle part of that Update was to convey that that change has happened; there is no “get out of jail free” card when it comes to invoking free speech. I do have to say that this tweet strikes a chord:

Finally, several folks asked me about Spotify’s attempt to distinguish between being a platform that licenses content versus a publisher. A reader asked:

Re Spotify and Rogan, do you believe ‘licensor’ (the position that Ek is trying to claim) is actually a different position on the platform, media, etc spectrum or is it dancing on the heads of pins?

I think it is technically different and also dancing on the heads of pins in a way that just doesn’t work. It might have worked a decade ago, but it doesn’t now, which, to go back to the previous point, is exactly the argument I was trying to make.

(One more Twitter thread, since that is today’s theme: Derek Thompson expanded on the third section of that update, explaining how would-be Aggregators inevitably run into these kinds of controversies here).

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