SOPHIA: Today on Flip the Switch. Amazon go is open for business and no humans work there. Toys R Us closes stores and Facebook is finding new ways to gather information from you. Our main discussion is on Instagram’s algorithm updates and best practices to maintain brand engagement.
We wrap things up with a discussion on why crypts are tanking but why you shouldn’t panic. Let’s get into it.
00:53 AUSTIN: Welcome to Flip the Switch presented by Power Digital Marketing. You are joining us for episode number 21.
01:00 PAT: We could not be more excited to have you guys here with us today. We have some awesome business news and trends to go through with you all as usual. So news with Amazon, Toys R Us, Facebook… all that good stuff. And awesome discussion with one of our paid social specialists, Sophia Pollock. You might recognize her voice from the intro.
01:16 AUSTIN: A big tip of the cap to Sophia for joining us today.
01:19 PAT: And for sticking around as long as she has. But first, let’s get into some business news and trends.
01:22 AUSTIN: Right you are, Patrick. All right, so starting us off, as we discussed just now, Amazon is making a very massive debut. They came out with Amazon Go. Some of you might have heard about this. It’s been in R&D for the past couple of years. And what it is is their very own type of grocery store. Which has zero employees and you do not pay at all when you checkout.
01:43 PAT: Yeah, this is a super-interesting development in the retail space. You think of retail as this kind of antiquated industry. You have a lot of brick and mortar costs. You have capital that’s really high because you have to rent out your commercial space. You have a lot of POS data that you need to leverage that way. And all of that costs money. It’s a huge amount of overhead. And the employee count is really what will get you because that’s a fixed cost. So it doesn’t matter how much money you’re making, you have a certain amount of fixed cost based on your employee count.
02:09 AUSTIN: And we know that the minimum wage issue has been very daunting for businesses. Especially large enterprise corporate businesses. So Amazon, what they have done, is eliminated a lot of these costs that we’re discussing. And the way they did that is by creating a “Smart” Chain of places for you to shop. Of places for you to get your normal groceries, your everyday groceries and they just opened their first one in Seattle right outside their headquarters.
02:34 PAT: Yeah, exactly. And I think the reason this is so interesting to us and why we wanted to bring it to you is we typically portray Amazon on this show as the thing that is taking down retail. We think of it as this channel that replaces retail, that is causing and is a big factor for the closing down of several retail chains, stores and things like that due to better value, better customer experience and convenience.
But it seems that Amazon has found a way to get into the retail space while maintaining the same identity that they have in the online space.
03:06 AUSTIN: Yup. So just to bring you guys up to speed on how it works… So before you go to the store you’re supposed to download an app for your phone. And after that you are now allowed to go into the store once your credit card is updated. So you can just walk into the store and start browsing. And you just start pulling the things off the shelf that you want. You put them in your shopping cart, the same way that you would possibly would.
The massive difference here is you just start walking out the door. So they have a sensor on the door that automatically will charge your credit card for every single item that’s in your bin.
I guess they have more cameras in the store than the cap, which is 90 persons that are allowed in the store per fire code. They have more cameras throughout the entire thing, to make sure that 1) people aren’t stealing, and 2) so that they can scan each item individually to make sure it’s paid for.
03:52 PAT: It’s super-interesting because you hear about the functionality of how that works, and it’s so reminiscent of Amazon Prime. But it’s just a real-life, in person version of that, right? You load in your card info, you start shopping, and you come and go as you please. And it’ll bill me later. It’s basically like pay on delivery type of thing.
I think this is super-interesting. And another thing that we have seen just kind of as the trend is that retail has lost touch with enhancing the consumer experience. There’s a lack of convenience there. Which is why as we’ll get into, there’s some retail stores that have been struggling.
Toys R Us one of the many. I think this is a way to circumvent that.
04:26 AUSTIN: I think you’re totally right about that. We’ve entered into this age of convenience as you’re saying Patrick, where people don’t want a lot of interaction. They just want their goods. That’s why online shopping has become so important.
But on the flip side, the one industry that hasn’t done that well with online is the grocery store chains. Which we see that changing a bit, but people still love to go and get their items in person because it’s food. It’s good. It’s something you’re going to be putting into your body. And it’s just a traditional aspect of humans to go to the store.
So, what Amazon has done, is just created a Smart environment for a traditional task. And that is where we’re at today where Amazon–who continuously innovates–has taken something that we know to be true. Something that may seem impossible to make Smart. And it has the ability to do so.
05:11 PAT: Maybe I’m taking Joe’s place here as the podcast Amazon guy, but I think this is such a genius move for a couple reasons. 1) The consumer experience, like we’re talking about. 2) That convenience factor, and 3) you look at some of the details here. Customers don’t even need a Prime membership to shop there. So what is this, essentially? It’s a lead funnel to get people to sign up for Amazon Prime and eventually take them online.
So even though they’re still helping the retail space and kind of enhancing that retail presence of theirs, at the same time–I think the long-term play here is still taking those users online and introducing them to Amazon there, by showcasing in a retail location the breadth of the reach they have in terms of their product SKU selection.
05:53 AUSTIN: And also they still have a lot of their own brand. So just like they do online with Amazon Prime–which is their own brand of shipping–they’ve done this with the goods in their store. So you can buy branded liquids. Water, for instance. Where it just says “Amazon” all over it. “Amazon Go.” It’s all private label.
And also, what from my understanding, they’ve acquired a lot of the same look and feel from who they just acquired recently, Whole Foods. So they’ve used a lot of that concept in that look and feel and they’ve adapted that into Amazon Go. Which seemed to be the final piece before they rolled this out to the public.
06:25 PAT: Which is what they do. We’ve seen that when they sell sports apparel for instance. Nike, Puma, Under Armor, you name it. What does Amazon do when they see those kinds of searches come through? They contact the same manufacturer in China and have them produce essentially the same, exact product under the Amazon private label. And when that happens their employing vertical integration. They own the supply chain. So they can sell these at a lower price point, for a higher margin than these retailers because they don’t have to anticipate a 3rd party like Amazon taking a cut of theirs.
06:57 AUSTIN: And Patrick nailed that right there. We talk about this. We’ve discussed this with other ways that Amazon makes money, is they have razor thin margins on the big products that you buy every day. So when you walk in there, and you buy milk… everybody’s buying milk to this day. And you see a very competitive low price. You think you’re saving a ton of money.
But little do you know on something that’s very obscure. That maybe you just choose randomly as you’re exiting the store. That’s extremely marked-up, but you’re already at the point where you feel like you’re saving on these things. Their so essential to your life. You don’t even realize that you’re paying this mark-up. And in hand, they also turn a larger profit.
07:30 PAT: Yeah. And Austin touched on something really smart there too. This is a market share play purely. You look at the Amazon stock as it shot up over the year. The end of Q3 earnings reports, they made their stock at one share went up by $300 in value in a day. One Friday. I think we covered it. It was them, Microsoft, Apple and a few others, Google included. Their share prices just went through the roof.
This is what Amazon does. They get into an industry, they portray themselves as having the lowest prices in town by finding the commonalities among the competitors and cutting down the price. They gain market share aggressively. Squeeze others out of the marketplace. And then jack the prices back up.
And if they can do that in unison with getting more Amazon Prime subscribers using their retail locations as a lead funnel, that’s only going to increase their… not their margins, but their overall revenues. Which is what their shareholders and Wall Street cares about.
08:20 AUSTIN: Market share. As you said. That is correct right there.
All right, let’s go on the inverse here and discuss a negative business. Negative business being one that’s gone bankrupt. And Toys R Us–as we’ve discussed earlier on this show. The first ever episode actually. They have already gone bankrupt but we’ve had some new roll-outs, or should say some new closings. That’s what we should say.
08:39 PAT: Yeah. Exactly. So when we covered this initially, it was a Chapter 11 bankruptcy. Which is corporate restructuring filing. Which means that typically they try to move around some of their assets and the way they manage them. To make their company profitable again.
But what we touched on was that this was a reflection of the retail space as a whole. You look at retailers like Target and Walmart that have a much bigger breadth of product variety, they’re able to go online more effectively than a specialist like Toys R Us when people would rather shop at an Amazon, a Target or a Walmart, where they can one stop shop for everything.
And with online being as present as it is, that convenience is only accentuated and it hurts the user experience more when it’s not present. So what we’re seeing now… the new development is that Toys R Us announced that they are closing 180 stores nationwide. My childhood is over.
09:28 AUSTIN: And to put that in perspective for you guys, they currently have 880 stores in the US. And 183 of those, are closing. That’s a very substantial amount of stores to be closing for any company at all. And this is just a sign of… they just don’t have the money to keep these open. They’ve already gone through the restructuring. And this could have been part of their plan the whole time.
Or this could be an indication that things are getting worse. We’re not totally sure yet. But for them, it’s about stopping the bleeding and their debt. So they have a lot of debt. They had a lot of debt to begin with, and that’s why you go through a restructure to begin with. And one of the ways that they’re trying to close the door on the debt, is by closing down these stores and focusing more on their e-commerce.
So they want to get competitive on e-commerce, because that’s where their competitors are going. We talked about Target and Walmart. Those are direct competitors at this time. Because of their ability to supply the same amount of products, but also supply a much wider range of products for everyone, not just kids.
10:24 PAT: And here’s the key. They can provide it to everyone, but specifically they operate within the exact same demographic niche that a Toys R Us does. We talked about this before. A kid is not buying toys. It’s their mom, it’s their dad, it’s their uncle, aunt, grandma, grandpa. These are the people with the purchasing power.
And people with purchasing power also go for convenience. They want to be able to express as much of their purchasing power in one location as they can. Which is what Walmart and Target were able to provide.
I’m looking at this right now seeing that Toys R Us is trying to transition to online. They restructured some of their debt through the Chapter 11 filing. They don’t own their property. They’re leasing all those commercial properties. So those are not assets. So they’re liquidating a lot of that to try to get some cash flow, right?
Okay, they’re going to invest this in online. My take on that is it’s way too little, way too late.
11:14 AUSTIN: Completely agree. I think that this is something in our industry that we notice. Being in Internet marketing, the brands that were ahead of this are roughly 2 years ago are sitting in a spot now where they’re so dominant with the market share of the Internet that it’s almost impossible to take away from them.
The way that Google works is it does allow websites to be authoritative. So Google will see you as the authoritative figure on a certain subject. And it’s borderline impossible to take that away from them without just time. You have to have a certain amount of time showcasing to Google that you’re more important, more authoritative than whoever is the leading brand.
And Target, for instance, has been way ahead of this. And are just absolutely just crushing them when you search for the same toys that they offer.
11:55 PAT: And here’s the key. This ties into another industry that we’ve covered pretty closely with Microsoft coming out with their Cortana Home Solution in conjunction with Amazon Echo, and Google Home. Target and Walmart’s entire inventory is available on Google Home. And you can make your shopping lists right there. They’ve already gone out of their way to partner on that because they’re being eaten by Amazon. And these are bigger players in the space than Toys R Us, because of that skew breadth that they have. So when I see that Toys R Us is trying to go online and really enhance that online presence, all I’m really seeing is that people are going to have a nicer place to price shop before they go and buy it at discounted wholesalers somewhere else.
12:34 AUSTIN: Yup. You nailed it. Toys R Us is in trouble. We don’t know how else to say this. I’m sure that they have some very brilliant people on this restructure to cut down on their debt. And they’re just really going to have to hone on what makes them different from these larger retailers. And it’s going to come down to the experience they can create for the child.
12:50 PAT: And the branding…
12:52 AUSTIN: And the brand that is going to play into that. So they really said that they want to focus on their branding. That was the word that was coming down from their C-level executives. And one of the ways they’ll do that is their rewards program.
So they’ll wanna revamp a rewards program to get more parents to come in. And they’re going to really have to reward the children.
Because at the end of the day, these parents will go to the store if their kids are really, really, really wanting them to. And right now, there’s no difference between Target and Walmart. The kid can get the toy there, and then the parent can also get their milk there. So you’re covering all the boxes… Toys R Us needs to be unique.
13:24 PAT: Exactly… Couldn’t have put it better.
Switching gears a little bit here and going into some social media. So news came out on Tech-crunch earlier this week that Facebook acquired a biometric identification/verification start up called “Confirm.io.” Facebook making moves. And one can only think that this is due… cause we saw this change come out. We saw the change last week with the algorithm update to be more friends and family focused. This is directly in response to the scrutiny that they’ve been placed under by not just the general public, but by members of the US Justice Department for their involvement in the 2016 election scandal.
14:03 AUSTIN: Yeah. So what we’re seeing with this is they want to be able to verify individuals at a quicker rate and a lot of people at the same time. That’s one of their poor understandings, right now, of their clientele. Of you and I. Is who it is.
Is it a real person? Is it not? And they ran into a lot of issues like we said, with the Russia issue. So what they want to do is guarantee that the individuals using their product are actually real people. And one of the ways they can do that is by having people scan in their information. A visual scan of their face, of their license, and then that would verify them as the actual user.
14:33 PAT: I agree. And again, going back to that, it’s totally in response. So taking a look at Confirm.io as a stand-alone. They raised 4 million dollars from investors including Cava Capital. And after launching only 3 years ago. And this has a lot of different applications in terms of what it can do to verify identities.
The thing that I’m most excited about with this acquisition is the possibilities of how to utilize it outside of the capacity that they have told us that they’re going to as of now. What I mean by that, there’s places like… delivery services like Postmate, Doordash, things like that. They can easily identify and verify whether or not their drivers are real people to using this plugin. Using this app.
And it… to me it begs the question down the line, is it totally outside the realm of possibility to think that maybe you’d be able to use Facebook’s ID integration in lieu of a passport. In lieu of driver’s license?
15:27 AIUSTIN: Yeah, that’s a great point. What they want to do with this is completely take over the way that people are verified. So whether they use this as a stand-alone app, whether confirmed you can also download it on your phone. Or if they integrate it straight into Facebook and make it part of their process for you to be a user. They’re going to benefit from that greatly, because they’re setting themselves up as a unique offering service of the most efficient way to verify who you are as a human. And that’s a big niche right there, because we know that that will never go away.
Whether you’re traveling. Whether you’re signing on online, there’s always going to be a need for people to understand if they’re interacting with a real person.
16:04 PAT: Exactly. And so you think of some of the applications for it in the online space. Like applying for… Like, the other day, I had to apply for Edward Jones. Something to do with my online banking. I had to verify my identity. The way that I had to do that was I had to take my physical ID card out of my wallet, scan it, send it to them in a PDF and wait for them to confirm it for me. Whereas, moving forward, I’m going to be able to have them do that for me automatically.
And I really think that with the release of things like Apple Pay, Smart Wallets, things like that… this is the end of having to carry around a physical wallet. The only reason that people still have a physical wallet is to house their ID card. Because they get asked for it so often.
16:46 AUSTIN: Right. Facebook is… as they continue to do… trying to be more user friendly and interact with humans on a more personal level. And the way you do that is get into everyday traditions. So we talk about consistency with the way people shop, right? They don’t want to give up going into the store. People probably also don’t want to give up a wallet.
If you can find a way to make them give up that wallet to use your product instead, you’ve just completely took over an entire market.
So that’s what they’re trying to do with just being more personal. Allowing you to have security. You’re still an individual and you’re more secure because you can prove that you are a real person.
17:18 PAT: And I think that the timing of this is so perfect too. Because you look at the use of biometric ID verification and the latest pieces of technology, right? Take for instance the iPhone X. Like, you sign in with your face. Their target market… people that use smartphones primarily because that’s the easiest way that this can be done. People that use smartphones and mobile devices have already… the whole public has already been educated on how to utilize this type of technology.
So that education piece is gone. They don’t have to do R&D and focus groups into what’s going to work and what’s not.
This makes so much sense. They acquired this company at the perfect, perfect time and I’m just interested to see where it all goes.
17:59 AUSTIN: Absolutely Patrick. Thank you for all your insights onto that.
Moving into our main discussion for today, we’re staying in the Facebook realm, but discussing their other very important product. And that is Instagram.
18:15 PAT: Yup. So we covered last week that there was some algorithm changes on the Facebook side. But what we’re learning this week is that there’s some new developments with Instagram. So again, we thought what better way to showcase some of the experts that we have here than to bring one in and introduce her to you. So this is Sophia Pollock. She works in paid social here at Power Digital Marketing. And she’s going to run us through some of the new current events. Sophia, what’s going on?
18:36 SOPHIA: Hey guys. Thanks for having me on. So with Instagram, I think that the talk has just been all about Facebook and the algorithm update. Advertisers are freaking out.
But really the goal is that they want to create a better platform for users. Because a lot of things have gotten overrun by advertisements. But as Facebook has kind of made all these changes, I feel like Instagram has kind of fallen into the background. And no one’s talking about what’s changing there.
19:01 AUSTIN: And that’s totally the key here. So they did roll out and have an official update to their algorithm for Facebook. But they did not for Instagram. And I think the big reason why… it’s actually negative for users. They are just making sure that you see more ads, not less, like what they did with Facebook.
19:16 SOPHIA: Yeah, so it’s really interesting. Over the weekend, I was on my phone and watching stories. And typically you get like one or two ads when you’re on there. But nothing too major.
And every time I would click to the next one I would get an ad. And it was bizarre. It was like none of it was relevant. None of it… I don’t know what is going on with the targeting, but I think they just upped the frequency. And I even checked with some campaigns that I was running. Same budget, same targeting, everything. But 10,000 more in reach.
So they’re definitely increasing the frequency of advertisements. But I spent a good couple hours today digging around their help center. Trying to see if there were any updates on it. And they have not put out any information about this.
19:54 AUSTIN: So when you say you get a bigger reach, is that equating to more cost for the client? Or what does that entail for you as an advertiser?
20:02 SOPHIA: So actually, as an advertiser in terms of reach its good, because we’re reaching more people with the same budget we were using previously. But my concern here is that we might be over-saturating Instagram stories with advertisements because you know, originally it was kind of like my secret weapon. I had certain clients where Instagram stories were converting like crazy. Which I really didn’t predict would happen.
And now, suddenly, there’s so many that I’m worried they’ll get lost in the noise. So I think it’s really important to make sure that we’re optimizing our creative to be as engaging as possible, so that they stand out when users are getting served 5 to 10 ads in the couple minutes that they’re clicking through stories.
20:41 PAT: Just hearing that a little bit, to me this kind of sounds like they’re almost getting advertisers used to having to put in the effort to create ads for Instagram. Because it’s proven to be so potent.
And what they’re hoping is that people will then opt into the other ad types that Instagram offers, and end up… that will cost them more money. If you’re adding new ads to your campaigns, it’s just going to cost more money. It’s just a way to monetize even faster.
21:06 AUSTIN: Right. And tricky, tricky Facebook. They come out and say, “Oh, we’re making the user experience better by eliminating ads. You’re going to have more personal activity occur on Facebook…
21:17 PAT: Yeah, so what does a business have to do to get in front of people now?
21:19 AUSTIN: Now they can just go to Instagram. They are not going to lose any sort of profit. They want to continue to generate more revenue, so they have to look. And for them the big opportunity is with Instagram, because as Sophia was saying, there was just a real lack of ads in people’s faces. It was very unique. It’s very individualized. It’s very personal, but hey. Guess what? Now Instagram is getting more user activity per day than any other app on the market. So they need to capitalize on that via revenue.
21:45 PAT: I think it’s so smart too at the same time. Because you look at Facebook… yeah, they took some organic posting abilities away from businesses or corporations that are trying to push to users. So even on Facebook, those businesses are going to need to pay to play. They’re going to need to pay for ads to get in front of people.
And now with Instagram, they’re kind of beckoning the exact same thing. It’s just a way for Facebook as a whole… since they own Instagram… to up their share prices. Because we saw over the course of the last quarter it fluctuated a lot. Came out with all the new news and everything.
22:17 AUSTIN: Sophia, do you… I’m just asking a question here… Organic versus paid Instagram, do you see a bigger difference with your advertising? Or what tends to work better when you’re an advertiser and doing maybe an ad or just an organic post?
22:33 SOPHIA: So with that, I think that there’s a couple things you can do to kind of get around these algorithm changes and make sure that people are still seeing your posts.
I actually read earlier today that only about 10% of your followers actually see your post in the Instagram feed. So you have to kind of get creative in how you’re going to drive those users to go look at your post. Especially as a brand.
So one way to do this is boosting posts. Which doesn’t quite fall into the category of being an ad campaign, but you do have to put a budget behind it. This has become increasingly popular even with some of our organic channels. We typically encourage people to include a budget to do this. Because that way you can push your posts to the top of the feed.
23:13 AUSTIN: So when you do that, does that say “sponsored” or “Advertisement” above it?
23:16 SOPHIA: Yeah. So it will say “Sponsored.” So typically people can’t tell the difference if it’s just you boosting your post or a full-blown ad campaign. But typically, it’ll just push it to the top. So you could advertise to your followers. And make sure that you get a greater reach within that group.
Or you could do interest-based targeting, as well.
23:33 PAT: That’s so interesting. So just from what I’m hearing too, this sounds like if I’m an advertiser, it’s a great opportunity right now to get into Instagram. Because we’re able to reach more people at the same budget.
Sophia, I know that you work, obviously, a lot on the advertising side. But you have some creative abilities too. And you’re creating a lot of the ads that we’re posting.
If I’m an advertiser and I’m looking to launch some story ads and things like that, what are a few best practices I should be keeping in mind so I can capitalize on this opportunity?
24:02 SPHIA: So in terms of best practices… and this goes for both the organic posting and the posts you’re putting a budget behind… I would suggest video. Video is always going to be the best choice. It’s more engaging. It catches people’s eyes.
Even just a little bit of movement in your imagery is going to completely change it for you. Because if it’s just a static image, they’re going to click past that.
24:23 AUSTIN: That’s good. I like that.
What about the swipe up thing? Do you do a lot of that? I don’t know if that’s a good visual for people, but if you know what I mean, you’ll see someone talking in the video and they’ll say “swipe up now for this offer.” Swipe up… do you guys do a lot of those?
24:36 SOPPHIA: Yeah, so we definitely encourage if you are an organic page, you can only do that if you have more than 10,000 followers. And then if you’re running an ad, you always have that swipe up feature, because ads always have the opportunity to link out.
So a good way to encourage people to swipe up and make sure that they know that’s what they’re supposed to do with the ad is you can include arrows, or some kind of text that says, “Hey, swipe up.” So say you’re running a promotion and it’s 20% off of all of your products, you could say, like, “20% Swipe up,” with an arrow pointing towards the bottom.
So those users can understand that’s what you’re trying to get them to do.
25:10 PAT: That’s so interesting. And then staying on that creative vein, I know with Facebook there’s some regulations around how much text versus imagery you can have in your ad. I believe it was 20% text limit for a while. What does that look like on Instagram? Is that the same thing? Are we going to have to be very visual with this? Or can I include some more text? Especially as stories go on, you’re almost just adding text to the same image sometimes to show that it’s dynamic. What are the best practices and what are some of the rules and regulations around that?
25:40 SOPHIA: So as of right now, I haven’t seen a ton of limitations in terms of text in Instagram story ads. But typically the best practice is 20% or less just to keep it as engaging as possible. Sometimes when there’s too much text, Facebook has a lot of trouble tracking to see what is in the image. They can’t read through all that text and make sure that it’s all within the guidelines. I think that’s a big reason why they do that.
And then additionally, just because big blocky text ads aren’t interesting for people. And they really do… at the end of the day… care about that user experience.
26:13 PAT: Absolutely.
26:15 AUSTIN: That’s some pretty interesting stuff. I’m very interested on the user side what this is going to do for Instagram because they’ve had that very unique aspect where there’s not a lot of ads. I don’t think about the ads when I go onto Instagram even though they’ve rolled that a bit more.
26:27 PAT: It just looks like content…
26:28 AUSTIN: Right. And it just… They do have that also unique aspect. But now if the advertising becomes more apparent, how is that going to affect the user? Is this going to stunt growth?
Or what do you guys think is going to happen with individuals using the app?
26:41 SOPHIA: So I think I’ve noticed a lot of pushback from Instagram users. Even today I saw a tweet that said something along the lines of “We need to have an intervention with Instagram. The ads are out of control.”
You know, with a lot of these updates there’s always pushback and a lot of times we just kind of let it go and get used to it. So it’s hard to say if Instagram’s going to adjust and listen to users. Like kind of, Facebook has recently with their updates.
But hopefully they’ll find a middle ground. Because right now it is a little bit overgrown with ads.
But I think also people are going to be more selective about who they follow. Who they’re connecting with. And there’s going to be a lot more of that influencer content that’s an ad, but it’s an organic ad. And that’s another route that making it look natural in the feed…
27:29 AUSTIN: And what’s the influencer content you’re discussing? Just for an understanding…
27:32 SOPHIA: So in terms of influencer marketing, that’s when a brand partners with an influencer and they’ll post something that’s on their own feed. It’s technically an organic post, but it is an advertisement.
27:42 AUSTIN: So it’s like someone you follow who has a lot of followers. So maybe an Instagram…
27:47 PAT: A lot of clout in their local community.
27:49 AUSTIN: A lot of clout. A lot of Instagram modelly posts. Those are the people you’re discussing.
27:53 SOPHIA: Exactly. So it is kind of interesting because even without the sponsored tag underneath, there’s still ads in your feed. And you might not even realize you’re getting an ad, because you think it’s just someone that you follow.
I think leveraging this content for advertising is really effective, because it looks natural. It feels a little bit less “salesy.” It’s more lifestyle oriented, and I think that’s one of the keys to creative on Instagram. Is no matter what, even if it’s a paid ad or you’re working with an influencer, is keeping it really lifestyle oriented.
28:23 PAT: So what I’m kind of hearing too if people are going to be following and being a little bit more selective about who they follow. It’s more imperative now than ever that even if you do see that extra reach and you’re putting out more ads, if I’m an advertiser, the content needs to resonate with my target at a much higher rate than it has before. And if that’s the case then perhaps Instagram anticipated this being the trend. Maybe it’s their way to try to push out more relevant content to the users.
Because they’ve gotten that kind of feedback before like you just described where it’s like nothing that I care about. “Why am I getting this ad?” That’s the least ideal scenario for an advertiser. So it could be very beneficial for them. But it’s going to be some extra leg-work.
29:03 AUSTIN: Right, it might as well be a billboard at that point. I think what really focusing on this right now is the relevant side is they’re saying and making it not look like an ad. So what Sophia was saying with the influencers is they’re so good at disguising it. So it’s just another post that you’re seeing. Maybe you really like that person.
You don’t realize that they’re selling you something. That’s knowing your audience. The individuals that are creating these ads, that are hiring these influencers… they know their audience. And they’re able to disguise their product not as an ad, but as someone enjoying that product.
And that’s the best way to reach your audience. Through these various channels. And as we were saying… we discussed with Facebook… the hyper-relevance is the best way to engage. Because on Facebook they are cutting down on the ads.
And on Instagram, you just can’t have your be like an ad if it’s going to increase. So it’s the same situation. You need to be hyper-focused.
29:48 PAT: Yeah. And it’s kind of reminiscent of Google’s quality score with advertisements too. Every single big online platform where there’s a massive marketplace of people that they can reach, they’re trying to make the content as useful to you as possible. Not just because it’s going to enhance the user experience, which I think is a factor… but more so because if it does resonate with you well, you have a much higher likelihood of converting than you would have before. And Google even rewards you with lower Cost per Click if you have a higher quality score.
We see Facebook organic rolling out something similar. Trying to push people more to the advertising side. And because of that, a lot of people, if they’re not getting news from the outlets that they follow, they’re probably going to stop following a lot of them, right?
So they’re going to need ads to keep them up to date. And we’re seeing that with Instagram and this was just a really, really insightful conversation.
30:35 AUSTIN: Awesome stuff. Sophia, thank you for joining us. I hope you throw me a few likes on Instagram. Instagram’s straight flexin. That’s what the kids are saying?
30:44 SOPHIA: Um, yeah. I’m not so sure about that one. But… Thanks guys
30:48 PAT: Thanks for coming on.
30:53 PAT: Moving into our final segment here. If you really thought that we were going to go a whole episode without talking about crypto-currencies you’ve got another thing coming.
31:02 AUSTIN: Au contraire.
31:05 PAT: So we’re going to get into a little bit of a crypto update here. We’ve seen the market start to tank a little bit recently. Resident crypto expert Austin Mahaffy has a few thoughts around this. So Austin, what’s been going on and why is it occurring?
31:18 AUSTIN: So I know a few of us have probably been a little bit worried about the dip that has occurred. But have no fear, I do have a few answers for you guys on why this is happening and why you shouldn’t be scared of the dip.
31:29 PAT: Lay it on me.
31:31 AUSTIN: So every year around this time, we do have enough data to back this up. There is a very similar dip in the crypto-currency market. Though this is a very new market, we have about 3 years of data for Bitcoin. And just around the turn of the New Year, there is a large dip in the price. A lot of this is dictated by the Asian market.
So individuals over there are the ones that trade cryptos majority. They were introduced to it first. They’re first movers into this. And it is a majority done by them.
There’s a lot going on in the Asian community at this time. For one, Chinese New Year. That’s a really big holiday for them. So we just had our holidays, they’re having their holidays. That means people are spending money. They’re taking their profits from the year. They’re exercising their ability to enjoy the money that they just made.
So it’s very common for that to occur at this time of year.
32:15 PAT: Yeah, and like, what better way to reward yourself after a full year of earnings than to sink it into possibly the most volatile market that we’ve seen to date?
32:21 AUSTIN: Of course. Right. So that’s something to think about too. There’s a human side of this. Even though crypto is digital and decentralized and confusing, there are still just humans behind this. It is just you and I all over the world, trading these and getting excited and making money.
So the way that they celebrate is by pulling it out.
Also, another thing to think about bringing it back to the US, is remember that we did have futures happen. So the futures market did open in December, and the maturity date for the first contracts just ended. So right around the same time that all these people are pulling their money out for Chinese New Year, also the same maturity date.
So people wanted to make money on this. And the way that they did that is by shorting the market. The way that works is you say that the price is going to be X, when it’s already at Y. And you need that price to go down. So the people that hold a lot of Bitcoin, the way they do this, is they start selling it off. They start selling it off to the point where the price drops. It creates panic in the market. And individuals like you and I start selling. Because we see the price dropping and we don’t want to lose money.
33:22 PAT: Big Short. Where have I heard that before?
33:24 AUSTIN: Very famous movie. Ryan Gosling. Great actor. Steve Carrell.
So keeping in that same realm, this is a very volatile market. It’s still very manipulated by individuals who have a lot more money than you and I. They saw this as an opportunity to capitalize on the amount of money that people made by just creating fear.
And the way they create fear is by making the price drop really low. So they did that. So not only did they make money by hitting the strike price for their futures, but they also made a lot of money because they sold at the top. They knew when they were going to do this that they would be selling high and then buying low. So they collected their dollars on the short. And then they reinvested and made money when there was a little bit of a spike this past week.
34:06 PAT: And I think the thing to keep in mind here… and we’ve discussed this before too, but want to reiterate. There was a study that came out… I think Bloomberg might have published this saying that there’s 1000 individuals in the world that own the vast majority of Bitcoins in the world. Right? And when all those people decide to sell off massive chunks at a time… I’m talking like 2, 3, 4 coins at a time, it causes the market to dip. You take a look at the market like this, where the technology is definitely air-tight, but the concept behind why the market trends behave the way they do is a little bit unbeknownst to the common person.
If they see the price start to drop, they get scared and they sell off. Which is exactly what we saw looking back at comparable trends from the dot-com boom and bust. And the real estate market as well.
34:48 AUSTIN: Yup. Patrick just nailed that one. So what I want to say to you guys is if you feel good about what you’re investing in technology-wise. If it’s a sound business that has a plan to be successful, don’t fear about this price going up and down. A lot of the times if you’re in ICOs… if you’re in a company like Ripple that we’ve discussed on other ones… it is still traded against Bitcoin. So instead of it being traded against the dollar like normal stocks, it’s traded against Bitcoin. So when the value of the Bitcoin drops, it looks like you lost money, right? It looks like that maybe Ripple is also having a crash.
That’s not true. It’s just what backs it. What the value that backing that ICO is dipping to that time. So don’t fear the company you invested in is necessarily bad or losing value… it’s just that Bitcoin is volatile and this is the market we’re choosing to be in. Sop definitely keep up to date with news, so that you can know when things are happening. And be aware of Bitcoin is still the dominant currency here, and they do dictate the price.
35:46 PAT: So nothing to be concerned about if I’m an investor as long as I’m making sound investment decisions.
35:51 AUSTIN: Absolutely. Thinking about this–this is still a market cap of I believe 5 to 8 hundred billion dollars. And why that may seem like a lot to you guys, we’re not even remotely close to where we were with the dot-com boom and bust. Which was 8 to 10 trillion dollars. With a T. So
36:06 PAT: with a “T”?
36:07 AUSTIN: With a T. so we’re talking B to T here in the difference in the size of the market cap. We’re nowhere near the top. This is simply just the beginning. So if you’re trying to day-trade… if you don’t have 24/7 to devote to this market–don’t do it. Invest in a company you really like, that has a business model that is going to be successful long-term and just let it sit there. Wake up a year from now and you’ll thank yourself.
36:27 PAT: It’s the same way that you think about novice investors getting into conventional stock trading. It’s a format of trading and a methodology that’s Warren Buffet is a huge proponent of called “value-investing.” So it’s not so much the stock that you’re investing in, and banking on whether that stock is going to increase or decrease. The way to make an advocate for the most sound investment decisions is to do your research into a company that you truly believe in. And then invest your money there and hold onto it, because you can rest easy knowing that you think and you’ve used your best judgement to understand that that company is going to be okay in the long run.
You take that same principle and you apply it to the crypto market. You look at some of the ICOs that have come out. You need to look at the technology behind these coins. You need to see what they’re offering that other competitors aren’t. Because it is an increasingly more saturated market every day, with every new ICO. And for every good ICO, there’s 2 fraudulent ones, where people are just trying to pump and dump and make some money.
So the thing to keep in mind, always value-invest and make sure you’re making the investment decisions as you would in the stock market, or else you are going to have a bad time with this market because of its daily peaks and valleys.
37:35 AUSTIN: Killed it, Patrick. That is spot on.
So I think that about wraps it up for our crypto conversation. Just takeaways here–don’t fear. It’s going to go up and down. That’s Bitcoin. This market is on the rise. We talked about the differences of market cap. We’re not even close to where we were at with the dot-com boom and bust. So just keep your dollars where they’re at. Don’t freak out. Find a company you love and stand with them.
37:54 PAT: Well said, Austin. And that just about wraps things up on episode 21 of the Flip the Switch podcast presented by Power Digital Marketing. Thank you guys again so much for joining us today. We’ll be back next week with a brand new episode. But until that time, this is Pat Kriedler, Austin Mahaffy, John Saunders signing off. Always feel free to hit us up on our socials @flipswitchcast for both Instagram and Twitter. We’ll see you next time.