Flip the Switch Episode 24: Fraudbook

John Saunders
By John Saunders

SOPHIA: Today on Flip the Switch. Amazon is launching a full-fledged logistics company. And Taco Bell’s CEO is pulling a fast one by joining Chipotle. Space X is not done launching rockets and our main discussion revolves around Facebook’s transparency issue and what it means for advertisers.
 
We finish up with some cool tech talk. Let’s get into it. 
 
00:54 AUSTIN: Welcome to Flip the Switch presented by Power Digital Marketing. This is episode 24 and we are feeling pretty good. 
 
01:01 PAT: Yup. Really excited about the content in today’s episode. I know Austin and I were talking about it earlier today and we were like, “I can’t wait to get in there and record. We have so much cool stuff to talk about…”
 
01:09 AUSTIN: Also, this is our Kobe Bryant episode. Number 24. 
 
01:12 PAT: Yeah, okay. If we’re going to do every single one with an athlete, we’re going to need to forecast for that pretty well. 
 
01:20 AUSTIN: That’s the only one. We want to do Michael Jordan and Kobe. But we’re off that. We’re getting into the brass tacks. Let’s hop into our news before we get into the main segment.
 
First up, we’re talking about Space X and more launching to come. 
 
01:32 PAT: Yeah, so again, Elon Musk’s hot streak continues. Last week we talked a little bit about how he had launched 2 of the most powerful rockets in the history of the world on the same night, incidentally. And that same week he had also started a flamethrower company that sold out of it’s inventory in a matter of days.
 
01:50 AUSTIN: Ironically named, “Boring” company…
 
01:51 PAT: Which it is anything but. News came out this past week on Tech Crunch that said that Space X which of course is Elon Musk’s space project and space company. Aims to make history 3 more times in 2018. So ever since last week, people are kinda like, “What else are you going to be doing?” 
 
And he’s going to be launching 3 more big rockets with different payloads each. 
 
02:15 AUSTIN: I think that also… actually I hope not. That they don’t have another car in there. That was a bit of a marketing ploy. I think these ones… they have specific ideas that they want to go after in specific areas of space… Not just the marketing side of it. 
 
02:28 PAT: Yeah, absolutely…
 
02:30 JOE: So they’re doing things with these launches…
 
02:32 PAT: They’re not just shooting Tesla’s into space anymore. So there’s going to be one in June–and this was the one that I found the most interesting. So this one is going to be basically a new version of a former prototype that was launched called “LightSail.” And so LightSail was a prototype solar sailing spacecraft that launched in 2015. And this is going to be basically a revamped version of that equipped with the rocket power. Oh my God. Did I really just say “rocket power?”
 
02:56 AUSTIN: Yeah.
 
02:57 PAT: I’m gonna keep going with it. With the same rocket power of the two that were launched last week. There have been a lot of celebrity advocation for this. Bill Nye is one of the most outspoken advocates for the project. So it’s a really interesting and fun time to be alive and watching this type of thing happen on a consistent basis.
 
03:14 AUSTIN: What will be cool is they’re going to attempt the first ever water landing, I believe. In about 6 months or so they’re saying. Which is going to be really difficult from my understanding. 
 
And no other rocket’s been able to do that before. It’s physically impossible so to speak. Up until this point. Without a certain amount of technology and of course we don’t know the science side of it. 
 
But we’ve all seen how a rocket lands and then how it lands is it becomes multiple parts. So that’s been the biggest issue. Re-entering the atmosphere it overheats and you have to do something about that. And a lot of that has been losing mass. So they’re really looking to defy barriers and break a lot of stuff. 
 
And of course, the whole thing’s just exciting. We’re entering into privatized space. Privatized research into space where I believe there’s been a lot… Trump came out recently and said that they’re moving that direction. Because there’s people like Elon Musk that are willing to fund it. Which frees up a certain amount of dollars for the economy and our government, of course. To do with other things.
 
04:12 PAT: Yeah, exactly. And another note on that. The next step in the progression is going to be commercial crewed missions. So before, a big reason why I think the tests had gone so well to my understanding was because again the mass was a little bit less, because they didn’t have to account for 4 to 5 astronauts living on the spacecraft for months at a time during space travel.
 
So they had been testing ones that just had different payloads, ones that had different types of cargo. It was 9 different cargo pockets basically. And now that things are going well, the next thing on their radar is commercial crewed missions. So that’s going to be super-interesting to see. And a little bit nerve racking at the same time. There haven’t been a lot of recorded failures with Space X by any means, but there was one back in 2016 when they were testing a new rocket prototype. It was the falcon 9.It exploded on the launch pad during prep.
 
05:02 AUSTIN: I remember seeing that video. It was pretty extravagant in terms of the flare that came from that. So of course we feel that they’ve worked the kinks out, especially if they’re making such a big marketing push behind showcasing the rocket itself. So they must really trust it. I feel pretty confident about it, and Elon Musk is really up to something. 
 
05:19 PAT: Yup. He really is. And the last piece that we’re going to talk about here–he is confident. He has come out in a few different press releases saying that he’s confident that they’re going to be ready for a crewed Dragon orbit. Which is the rocket that’s going to be the crewed prototype. 
 
05:32 AUSTIN: That’s a great name.
 
05:33 PAT: Yeah. Dragon. It’s going to be ready by the end of the year, and a quote by him said, “I think we might also be able to do short hopper flights with the spaceship part of the BFR maybe next year.” By hopper tests I mean go up several miles and come down.
 
05:49 AUSTIN: Wow. When’s it going to be that I can go to New York in 6 minutes from LA? Is that next?
 
05:53 PAT: I think that’s next, yeah. First, it was get rockets into space, shoot car into space. The last part of the progression is send Austin Mahaffy into space without re-entry plan. 
 
06:03 AUSTIN: Well Elon Musk better hope that this works, because Tesla had a pretty terrible quarter–his other company. So this might be a distraction from those numbers. Just put out a bunch of rockets. So I see where he’s doing with this. 
 
06:13 PAT: On the other side of the token, a company that didn’t have a bad 4th quarter that is still on the rise is Amazon. This is a story that we started talking about a few months ago. They started testing local logistics and a lot of their key delivery areas on the west coast to test to see whether a delivery service was going to be a viable source of revenue for them moving forward.
 
And it clearly went well. Because it came out this past week that Amazon is going to launch a delivery service that’s going to compete directly with UPS and FedEx. 
 
06:41 AUSTIN: correct me if I’m wrong, but I believe our very famous Joe Hollerup, Amazon guy himself, was the one that predicted this. So we did have a conversation around kind of where shipping costs are going and what type of industries are on the downturn. 
 
And, of course, Amazon pretty much preys on that. They look for verticals that are struggling and have excess costs that are inflated. 
 
07:01 PAT: High overhead.
 
07:02 AUSTIN: And then they come in as a competitor and just undercut the margin–meaning that they’ll take a slimmer margin on certain things which pushes their competitors to really reel and feel that from a revenue standpoint. 
 
07:12 PAT: Yeah, hindsight being 20-20, this could have been a great opportunity for us to do the “What is Amazon taking over this week?” segment.
 
07:17 AUSTIN: Pretty much. 
 
07:19 PAT: Yeah. So the time frame for this is going to be really, really soon. So it’s going to launch in the LA area within the coming weeks. According to a few reps at Amazon. 
 
Starting with companies that sell stuff from their website. So they’re going to be starting these different types of logistics operations with companies that don’t have a lot of holding costs. Not a lot of overhead. 
 
And just kind of makes sense. Amazon is going to extend its service to its 3rd party merchants as well. 
 
07:41 AUSTIN: Let’s think about this. So Amazon already has their own fleet of cargo jets. They have their own warehouses. They already have contracts with couriers. So isn’t this just the last step? Just cut out everything else and own the supply chain. It makes complete sense of course, and what they can do is test out so many different things from that supply chain and logistical standpoint for them. So they’re going to be able to improve, already, what’s the fastest order to your home time…  in under a day for products…  they’re going to be able to really hone in on what’s costing them the most. What’s costing them the most time. And ultimately turn that into a profitable situation for them. And also a better situation for all consumers.
 
So we’re going to benefit from this because they have a complete understanding of every single part of their supply chain. 
 
08:27 PAT: Yup. Absolutely. And so if you think about it now, let’s backtrack… so they own these stores. They own the warehouse. They own the manufacturing, and now the last part that they need to complete that supply-chain–like you were saying–was the logistics. They have a really long-standing history with USPS and UPS in general. And in the short term, that relationship doesn’t look like it’s going to be hurting too badly. 
 
But in the long-term, that’s where it gets a little bit fuzzier. And I think that UPS is starting to feel that threat. 
 
And the market responded. As soon as the service came to light. As soon as people found out that this was what was going to be happening, and Amazon posted this… or actually released this to the public. The shares for UPS and FedEx started trading much lower by the end of the day last Friday.
 
09:10 AUSTIN: And what I think of right now. I don’t necessarily worry too much about those two companies because they’re privatized. But if you look at the USPS–this is what Joe was talking about–the United States Postal Service… this might be a bit of an issue because they have to have an allocated budget of tax dollars from the government for that service to really run. And then, of course, they generate revenue from us. From the individuals that are paying for their services, and that sort of thing. 
 
So what I start to worry about is if the government sees a big player like this coming in an undercutting their costs, what does that start doing for them? If they’re losing money it means that they might have to lay off individuals. They may have to re-assess how to be more efficient. This is the type of thing where we might see some layoffs from a government run program.
 
09:51 PAT: Yeah, exactly. Which is the scary part about it. And the motivation behind why Amazon did this is really interesting too. We think of Amazon as this powerhouse, profit generating company–never taking losses.
 
Amazon’s biggest losses have always been on shipping. Last year, the company spent 20 billion dollars ensuring that its products were made to customers on time. So by taking that in-house, they can better control those costs, and they can utilize other aspects of emerging technologies. Like drone delivery.
 
10:19 AUSTIN: Did you say 20 billion dollars?
 
10:21 PAT: That was with a “B.”
 
That was 20 billion dollars they spent just on shipping. And again, that’s because Amazon cares so much about the user experience…
 
10:29 AULSTIN: I know I love getting a package in a day or two with Prime. That’s just a wonderful thing that they do that no one else does, of course. And what they seem to be doing is introduce a product line that’s never been done before. And then they just back that up with sufficient research to make that most economical for them. And this is an incredible step in that direction. To increase that supply chain’s economics.
 
10:51 PAT: Yup. So really looking forward to seeing how this all turns out. And how that’s going to affect not just FedEx but UPS and USPS as well. 
 
Moving into one more piece of business news here, before we wrap up this segment. A lot of you guys might have seen this already, but Chipotle chose Taco Bell’s CEO as its new leader this last week….
 
11:10 AUSTIN: Living La Vida Loca. 
 
11:12 PAT: Sure. So this is super-interesting and the market responded really well to this. Chipotle’s stocks rose by 12%. And I think the thing that people are most excited about is there’s a lot of innovation that’s going to come with new leadership. 
 
It’s no secret that Chipotle’s been on… not necessarily the chopping block… but under a lot of scrutiny because of some of the public health issues. The E. coli outbreak.
 
11:37 AUSTIN: Yeah, I can’t think of another chain of restaurants that had a worse past couple of years than Chipotle. Which in the early 2000s leading into 2010, they had quite the soar in their stock price. So they’ve done a phenomenal job of cornering the market for being the first type of company that does this personalized fast-food meal. So it’s out quick, but you’re able to choose and customize your meal. And you believe it to be high quality. 
 
Now that concept’s been adopted by a lot of different companies. And that’s been utilized in a much better fashion. So that’s been one side of the piece is that Chipotle’s feeling that from a competitive standpoint. 
 
But where they’ve really shot themselves in the foot is just by having a bad product. people being sick from your food is clearly the last thing you want as a chain of restaurants that prides itself on being fresh and it’s ingredients being better than a fast-food chain. So this is the complete issue that wants to be solved by this new CEO.
 
12:33 PAT: and the other side of it too. They have tried to pivot and make innovations and none of them have worked. Chorizo and Queso both have been flops. This has been general feedback from the customers. This is on CNN Money saying an analysis about how Chorizo and Queso offerings at Chipotle have been flops. 
 
And I think that it’s a very pivotal time for Chipotle for the reasons that you mention. There’s a lot of associated and related offerings in the space now. There’s Baja Fresh, there’s a lot of places that allow you to do the same thing that Chipotle had done before. It used to be the Gold standard for fast casual dining, because it had higher quality meats, veggies and ingredients. 
 
But now that things have come out since 2015’s E Coli. Outbreak, they’re going to have to pivot. They’re going to need to find another differentiating factor. And the person that they’re bringing in–this Taco Bell CEO–this guy, he used to be… he was actually the one that came up with the concept of the Doritos locos taco. He’s known for innovation in the fast food and casual dining spaces. And I think that Wall Street’s excited at the opportunity here. Because…
 
And as a consumer, I’m excited. Because I’m thinking about it and I’m like… Chipotle has essentially been the same thing, and I’ve gotten the same thing from there always, since like, junior high school. A really, really long time. 
 
13:51 AUSTIN: And I think, this happens with a lot of companies. When you’re a first mover into a space and you do quite well right away–you just set an example for individuals on how to replicate that and make it better. So from a competitor standpoint that’s really what we’ve seen. Is a lot of these other companies moving into the space. Just know how to do it better, and probably have a better supply chain, by utilizing other tactics. 
 
And so to put this in a perspective here, they had a 40%–talking about Chipotle–had a 40% drop in their share prices year over year. And then just with this new hire–up 12% right off the bat. Just when the hire occurred. 
 
So people are really banking on this guy who’s been very innovative over at Taco Bell and had great marketing campaigns. And put together actually a good product that people want. They’re expecting him to do the same thing with Chipotle.
 
14:39 PAT: Mm-hmm. So Brian Nichol is the name of the person who’s going to be the new CEO of Chipotle. And when he came in to Taco Bell, he was seeing the exact same issue. There were a lot of lawsuits alleging that they weren’t using real beef in their tacos. Basically that their product was not high quality. 
 
And pretty much what he did is he launched a marketing campaign to help with their reputation. And then also launched a subsequent marketing campaign to start to appeal to that younger demographic and get more lifetime users.
 
15:06 AUSTIN: And I think what we can expect here from Chipotle, there’s going to be a big shake-up. So there’s going to be something very new. What he did at Taco Bell was really look outside and think about what else could we do that you wouldn’t expect us to do. 
 
And for them that was breakfasts was one of the big things they did. Was they went to a meal that may not be associated with Mexican food–especially fast-food–and then put out a good product that people enjoy with a great marketing tactic, and then, of course, with actually a good product. As we’ve been talking about.
 
So definitely expect Chipotle to do something similar where you may not expect it. And then hopefully it works for them. I think… I’ve always enjoyed Chipotle and I know there’s a lot of people that really do. So it’d be good to see them get back on that horse.
 
But, of course, the most important thing is they need to fix getting people sick. And that’s the last thing and the first thing that they need to do right now. 
 
15:57 PAT: Yup. That’s the end-all, be-all. They need to fix their product to make sure people don’t get sick, and then they need to fix the operations within the stores. Because that is the second biggest source of complaints from consumers. Long lines, messy eating and cleaning… it’s just not an enjoyable place to have a meal anymore. 
 
So the market seems to think that Brian Nichol is the man to come in and fix all that. But we will see, and we will report all that back to you when we do. 
 
All right, everybody, our main topic discussion for today. news came out over the course of the last 2 weeks that Facebook has been manually altering the trending now news section that appears in users upper right-hand corner of the UI. Here to shed a little bit of light on that is Austin. Austin, what can you tell us?
 
16:38 AUSTIN: Thanks Pat. So I think what we want to do here is pose a couple of questions. And then on the backside we want to talk about what this means for advertisers and should you be continuing to allocate budget to Facebook. 
 
So starting this up, I wanna give you guys a quote from Keith Weed, who is the head marketing executive over at Unilever, who has big brands such as Dove. Here we go, “2018 is either going to be the year of tech-lash, where the world turns on the tech giants. And we have seen this already. Or the year of trust. The year where we collectively rebuild trust back in our systems, in our society, or where we go the opposite way.”
 
What he’s talking about here is what Facebook has been up to, and that is altering manually what you see and what news you get as a consumer. So we’ve some of these issues come out in Google recently. That’s been in the news of them doing similar things. We’ve even talked about it on this podcast.
 
17:35 PAT: Yeah, repressing quote-unquote “fake” news outlets. And then the question becomes how do you determine what is real versus fake news, right?
 
17:40 AUSTIN: Of course. Right. So the fake news… we’re back on this. And we do want to talk about this importantly because it does affect advertising budget.
 
And what Keith was saying and for Unilever is they’re going to scale back their budgets for a company such as Facebook because they don’t believe they’re being transparent with their consumers. So the people that Unilever’s trying to reach. They feel that those people are being wronged by what Facebook’s doing. 
 
And then could possibly put a comparison between Unilever’s products and Facebook because it’s on the same platform. So when you have a platform that claims to be unbiased…  it’s a platform for everyone and anything possible. When that turns out not to be true, you can start gathering your own thoughts and `information about how you feel about that platform. And anything associated with that platform could spiral into a poor feeling or a wrong feeling about that company. 
 
So this is the big fear with these large companies, where they spent 2 billion dollars a year on digital platforms like this…
 
18:42 PAT: Yeah, Facebook and Google mainly…
 
18:43 AUSTIN: Unilever does, yeah. So this is becoming a much larger issue for big companies, where they want to trust these platforms because they get so much interest for their brands here. But if they feel that they’re being wronged by the advertising platform, they don’t see the point of continuing to advertise with them.
 
18:59 PAT: As an advertiser, I think that you’re faced with kind of two sides of this issue. So first, you can either opt into advertising on a platform like Facebook because it has extremely stringent targeting capabilities based on interest, gender, page likes–basically the intangibles that a lot of people only divulge on their personal profiles.
 
On the other side of that… and the reason that advertisers find that appealing is because they feel that it gives them the best chance to resonate positively with the right people. And that’s something I think a lot of people forget. They’re not just trying to target these people based on interests for the sake of a data-point. It’s user experience driven. The reason that they’re doing that is to enhance the user experience and enhance their perception of that brands relevancy and importance to them. 
 
And then when something like this happens, where more news comes out about an already heavily scrutinized advertising platform that could bode poorly on your brand. As an advertiser you have to be a little bit worried about how that’s going to reflect with your core audience. 
 
20:04 AUSITN: And let’s back up here and explain a little bit more of why company like Unilever are upset with Facebook. And this goes back to the trending now section. So the far right side of when you’re on Facebook. On the desktop specifically. You’ll see certain news topics that they feel are important to you. So these are relevant and of course curated by an algorithm. an algorithm that supposedly is supposed to look at all news from an unbiased standpoint and then decide… or not decide… but just see which one is talked about the most. 
 
So if a certain political matter is really important on the internet and people are chatting about it, that’s something that Facebook would want to return to you. Because they feel it’s important. The algorithm feels like it’s important, because a lot of people are discussing it. And that sort of thing…
 
So the problem arose where individuals in an office that work for Facebook started manually choosing what you see. So they took the unbiased aspect out of that, so that the algorithm was no longer working, and chose as a human what they think another human should be paying attention to. 
 
And a lot of this was based on their own political beliefs. So whatever that is, whatever they felt was most important. 
 
That’s completely wrong. That’s a lie to the person consuming Facebook where they think that what they’re seeing on the right-hand side is articles that Facebook is seeing as having the most conversation. So they now think that that’s the most important topic. They believe that that is what’s being discussed. When, in fact, it’s just a human in an office that decided that for themselves. 
 
21:34 PAT: Yeah, exactly. And it takes that unbiased piece out of it like you mention, but it also takes away some of the… I guess… validity of the platform to a lot of people. And I think that’s what advertisers are worried about. As we go on here, I personally think that people are going to continue advertising on Facebook for a long time and that they will be better for it. Whole-heartedly. 
 
And the reason why is because there’s too much at stake for Facebook to not fix this right now, and do well for their advertisers to maintain that stream of revenue. But they have not had a good track record since about 2016. 
 
So looking really quickly at a timeline. March of 2016 – Facebook suspended Benjamin Fearnow, a journalist curator for the platform’s trending now topics feed after he leaked information to Gizmodo.
 
May 2016 – Gizmodo reported that trending topics were routinely supressed by… they routinely supressed conservative news. Which send Facebook scrambling
 
July – Rupert Murdoch tells Zuckerberg that Facebook is wreaking havoc on the news industry and threatens to cause trouble. 
 
August 2016 – Facebook cuts all ties with trending topics journalists, ceding authority over the feed to engineers in Seattle. 
 
November – Donald Trump wins election. Zuckerberg says it’s pretty crazy to think fake news on Facebook helped tip the election. 
 
December 2016 – Facebook declares war on fake news. Hires a CNN alum, Campbell Brown to shepherd relations with the publishing industry. 
 
Let’s pause right there for a quick second. In that amount of time, there have been 3 or 4 things that have happened that have indicated basically user manipulation to dictate the feed. To dictate the information that you see. And that’s got to be a huge worry from… not just an investor standpoint, but from a user standpoint. It’s like, “What am I consuming? Is this because some guy name Chad who lives up in Seattle thinks this is important? Or is this actually important?”
 
23:27 AUSTIN: That’s exactly what’s happening. The name may not be correct, but this guy Fearnow that we’re talking about, he was one of the people that would have been in charge of this type of thing. And he actually thought it was a very bad idea. They’re like, “Hey, wait a second, you’re pulling that news story because you don’t agree with it.” that’s not good. You just changed the way that someone is expecting to get unbiased news from us as a source. 
 
And then tying that all the way back into advertising, how do you know that the data that you’re receiving is correct?
 
23:56 PAT: How is it unbiased data if the person that’s helping reach… helping with that reach is inherently biased as well?
 
24:03 AUSTIN: If I’m one of those outlets that expect to be on the trending now feed and you’ve allocated a lot of money to Facebook and you’re expecting to get traffic. And then you’re not seeing that come through, or you’re confused about why a certain amount of people aren’t showing up. 
 
It turns out that they decided to just do whatever they wanted. This is a biased situation where you can’t believe the metrics that you’re seeing because you don’t know who decided gets to see what. 
 
24:29 PAT: Yeah, and so just to clarify too. The advertising metrics as a stand-alone are accurate. The problem is that a lot of advertisers are basing their strategy around interest, strategy and what people have engaged with previously. Which is the aspect of it that has been proven to be manipulated. 
 
Let’s go back to September 2017, now. Because this timeline is far from over. 
 
Facebook announced that a Russian group paid $100,000 for 300 ads that were aimed at US voters.
 
October 2017 – Jonathon Albright revealed that posts from 6 Russian propaganda accounts were shared 340 million times. 
 
November 2017 – Facebook general council Colin Stretch got pummeled during a Congressional intelligence Committee hearing. 
 
And then January of 2018, bringing us right up until the newest news, Facebook begins announcing major changes aimed to ensure that time on the platform will be time well spent. So we’re seeing everything from the formation of the problem, to the crux of it, to the proposed resolution. And my question is… where does Facebook go from here?
 
25:28 AUSTIN: And Facebook has a pretty big issue because they say they lost 50 million hours a day from users in the past quarter. So clearly something’s turned them off. 
 
And I think a lot of people on Facebook are starting to see more and more news come out about Facebook. Of them hiding things. Or maybe the Russians were using their platform to skew the political election that we just had. Or they’re hiding news from other things. 
 
And you really gotta ask yourself do you want to be associated with that? As a user. Do you really want to be on a website that’s… you don’t know what you’re going to get, and you can’t trust them. 
 
And the answer’s no. And that’s clearly being reflected in their numbers going down and having a bad quarter. 
 
So if you’re Facebook the first thing that you need to do right now is restore trust. And that’s what the guy over at Unilever was saying. Mr. Weed. Is that you need to restore trust with the advertisers and the users.
 
26:19 PAT: First the users. 
 
26:20 AUSTIN: And Of course, first the users.
 
26:24 PAT: Because those are the people who advertisers are trying to reach. You can make advertisers as happy as you want but fi the users are unhappy, the advertisers don’t have anybody to advertise to. So it’s gotta be priority number one. 
 
Priority number 2 needs to be restoring relationships with advertisers. And the conversation there needs to be around how many new users you have regained since you started to regain public trust.
 
And I have faith in Zuckerberg and the whole Facebook team. I think they’re going to do it very well. There’s too much at stake, like I said before. They make something like 60 to 70 percent of their company revenue from advertising. Just like Google does. 
 
They’re a massive publicly traded company that’s extremely valuable and who has one of the most intuitive targeting capabilities on the planet aside from Google.
 
27:04 AUSITN: And currently 85% of all social media marketing is done through Facebook. So they have a massive control on the market. They’re pulling in insane amount… billions of dollars in revenue from advertising on their platform. So clearly they don’t want that to go away. Or slip at all. 
 
So the big thing here, which is really interesting to me, that we’ve talked about. They recently changed their algorithm to actually show less ads.
 
27:27 PAT: Yup. Show more user news.
 
27:29 AUSTIN: Right. So this is clearly what they want to do. Restore the trust of the users. They’re starting to do that. 
 
But now they might have affected their relationships with advertisers by saying, “Hey, we’re not going to give you as much ad space. You’re still expected to spend the same amount.”
 
Don’t we think that that’s going to have a little bit of a bad effect with those relationships?
 
27:49 PAT: Well, here’s the thing that a lot of people are failing to mention when it comes to that conversation. Is that, they are also making adjustments with advertisers to help them promote more locally. And as an advertiser, would make the argument that the more local you can be with your advertisements, the more effective you are. 
 
So I think that they’re actually finding a nice medium ground where users aren’t pummeled with national broadcast ads all the time. And their user experience is enhanced. And they’re also helping advertisers regain that reach and potentially be even more effective in their core markets than they were before. 
 
But it’s going to be a process. And advertisers are going to need to be patient. But the good piece about it is for every advertiser that thinks that this is going to not work… that bales from the platform… that’s just going to mitigate how much you have to spend to reach the same audience. Potentially get the same amount of results. 
 
So I don’t see the real intelligent and savvy advertisers going anywhere. If anything they see this as an opportunity a little bit.
 
28:40 AUSTIN: Right. That’s a great point Patrick. And also, when we’re talking about Facebook, we also need to include Instagram. Which this is the same budget that we’re talking about, so a Facebook budget includes Instagram. You can actually manage both in the same platform. It’s very easy and seamless since they’re owned by the same company and the audiences are the same.
 
So you can have the same audience you want to target on Facebook as Instagram. So you don’t have to make any changes unless you’re drastically have different audiences on the different platforms. But that doesn’t happen very often. 
 
So what they did on Instagram, as we discussed. Is they actually are increasing the amount of impressions you get as an advertiser. So it seems like they’re trying to possibly shift advertisers to a platform that more people like. They’re going, “hey, Facebook is getting less time, less numbers. And maybe your advertising dollars aren’t as valuable. But good news is, we have a product that’s actually doing the opposite. It’s gaining users daily. It’s gaining hours daily. More and more people are focusing on this platform, so we’re going to bump impressions up on that one. Lower impressions on this one. But at the end of the day, you win. Because you know that your audience is increasingly growing regardless of which platform you’re going to advertise on. 
 
29:50 PAT: And I think that’s a savvy move by Facebook. And it should be indicative to advertisers, investors and users that they’re going to be here to stay in the long haul. They go back to that age-old business question. Do I focus on getting better at what I’m bad at? Or do I lean into what I’m good at? 
 
And almost every successful business in history has leaned into what they’re good at. And Facebook knows Instagram is consistently rolling out better advertising capabilities. Their reach is increasing. It’s a highly visual and content oriented platform. And that’s the type of content that users in the typical demographic for advertisers that choose social media find appealing. That’s what they want. 
 
30:24 AUSTIN: And with Facebook too it’s increasingly coming out informationally… it’s 25 years or older is the primary individual that spends a lot of time on Facebook. And as an advertiser, you really want to hone in on kids, of course. Younger generation. Cause they can get their parents to buy the things that you are selling. So you do, of course, want to hit the parents for certain products. But it’s really important to get your product in front of where the kids are at. And they’re all shifting over to Instagram because Facebook is just generationally not as cool. So Instagram came out a little bit later. It’s that more visual, faster notion. You can share pictures and messages quicker. So that’s why there’s been that big shift there.
 
But I think we’re now… what we’re wondering is, “is this enough?” Is Facebook what they just did was really wrong? Morally and ethically they’ve been hiding a lot of information. From us, the Americans and really just the world. 
 
So are we just going to forget about that? Is this going to be enough for all of us to move on and be okay with it?
 
31:29 PAT: Yeah. Definitely. Oh, yeah, let’s look at some of the things that have happened with some of the other biggest companies in the world, right? You have issues with advertising regulations consistently changing on Google. You have issues with Google deciding what kind of news is real and fake, which is an entirely subjective opinion most of the time, unless it’s just factually wrong. And a lot of the content on the Internet is opinion based, so how can you even then assess that. 
 
I think that this is going to wash over. I think that people are going to be day-to-day affected by any aspect of this. I think that the savvy advertisers are going to see this as an opportunity and stay on the platform. And they’re going to be more effective and have better cost mitigation as a result of it. 
 
32:08 AUSTIN: Well said, Patrick. I definitely agree to that if things are actually changing. So if Facebook isn’t just blowing hot air here, and they’re going to actually crack down and be resourceful and unbiased. And they’re going to deliver great information to people in a very seamless manner, then I think, yes. I think, of course, this will blow over. 
 
People make mistakes. New companies make mistakes. Let’s remember that Facebook is still a pretty new company in terms of an enterprise level business. So, yeah, I think that they could work this out. And as an individual, you want to trust Zuckerberg and his products, because it’s something that we grew up with and might know to be very relevant to our life. 
 
So of course, you want to trust the guy who invented it, and is in charge of all these things. So I think that there’s a real opportunity for them to reverse it. And I also think that with a companies like Unilever… let’s be realistic here. They’re not going to get away from their audience. Stripping ad dollars from Facebook and Instagram would probably be the biggest mistake they could make as a company right now. 
 
33:07 PAT: Absolutely. I wanna go back to a point that you made before. You said that they’re going to be fine if they make all these changes. If they’re serious about this. And on paper that sounds like a big “if,” because it’s a big undertaking. But I don’t think that that’s that big of an “if.” Doesn’t Zuckerberg–since it’s a publicly traded company–have the fiduciary responsibility to his shareholders and investors to make that change?
 
33:29 AUSTIN: Yeah. 
 
33:30 PAT: You know, like, that’s why I have faith in this. And why I think that it’s going to be fine. Because ethics and morals aside, he’s going to have to make this change if he wants Facebook to be a sustainable and long-term company. Or else they’re going to lose all their usership. And the people who will not allow that to happen–I mean, he invented the product arguably–Winklevoss–but there’s that side of it. He has an entire board of directors and tens of thousands of shareholders to respond to now.
 
33:58 AUSTIN: Yeah, you’re right. That’s a great point, Patrick. I think that we’re definitely going to find out soon, because once this thing gets rolling, of course you’ve got Q1 and Q2 coming up. So if things trended down… keep trending down like they did in Q4 we’ll know that the public is not reflecting well on Facebook. But I do agree with you. I think that we’re going to expect things to turn around. The audience is not going anywhere, of course, so advertisers don’t have a choice but to continue to advertise there. 
 
34:28 PAT: If I’m wrong about this, I’ll pay you $50 cash after the Q1 earning report comes out. Mark my words. I promise. 
 
34:34 AUSTIN: Wow. You pay me in Bitcoin?
 
34:36 PAT: I will pay you in Bitcoin. Absolutely.
 
34:36 AUSTIN: All right, perfect.
 
Final segment for today, we’re doing something a little fun. Talking cool tech and cool technology with Joe. 
 
34:51 PAT: I love that. Get him involved a little bit. Make him talk on the show. 
 
34:54 AUSTIN: I don’t know how much he’s going to talk, but I think he’s got something for us. Let’s hear it Joe.
 
34:57 JOE: Yeah, I got a couple things, and I don’t think you’re going to expect what I have to say as we talk about your reverse microwave. 
 
My favorite idea of cool tech nowadays are called “Ghost Organs.” And essentially scientists have been able to take or harvest organs from cadavers and then completely rinses them of all their cells. So it’s kind of like a host organ. I’m serious.
 
It’s a host organ, and then they’re able to inject it with the cells that match or are compatible with say someone who needs a heart transplant.
 
35:32 AUSTIN: Yeah. 
 
35:33 JOE: And then they’re able to do a heart transplant with these ghost organs. Put them in and people have a brand new healthy heart.
 
35:40 AUSTIN: I actually heard about this. My dad had a really bad knee. And he’s considering doing this. I think it’s still in the beginning stages…
 
35:46 JOE: No, you don’t put the heart in your knee. 
 
35:50 AUSTIN: Okay, not with a heart. Not with a heart…
 
35:53 PAT: We’ll leave that one to the scientists. Austin, you go.
 
35:55 AUSTIN: I swear that that was it. 
 
Okay, I’m talking about… you guys might have seen this… Boston Dynamics robot dog named Spot-mini. Have you guys seen this? 
 
It opened the door by itself…
 
36:14 JOE: We’re doomed…
 
36:15 AUSTIN: It’s super scary.
 
36:19 JOHN: It looks like the one that came in that new “Black Mirror” episode. It looks exactly like it.
 
36:21 AUSTIN: That’s what they said. They were saying that in the article. I wonder if “Black Mirror” caught wind of it and just put out the episode around it. 
 
But anyways, it’s really scary. It’s very self-aware. And it’s aware of its other counterparts as well. And there’s a video out and it’s walking on 4 legs, and then it had a retractable arm as a face. And then it opens the door with it, and holds the door open for its friend. And then its friend walks through. And then it goes too.
 
I just imagine those things just running after me and killing me. 
 
36:50 PAT: I was going to say, that sounds like one of the scariest revolutions in the history of science. 
 
36:54 AUSTIN: I don’t know if this is a good thing. 
 
36:56 PAT: But it is cool.
 
36:57 JOHN: They look really weird when they’re moving…
 
36:59 JOE: Like, the one that did the backflip? 
 
37:00 JOHN: The one that did the backflip really freaked me out, but when this one moves its arm, it’s really… I don’t know… It’s really…
 
37:07 PAT: It looks unnatural. It’s kind of like herky-jerky, but… yeah… That’s interesting. That’s really cool. I’m kinda scared about that. But…
 
37:12 JOE: So my cool tech is saving lives, your cool tech is ruining lives.
 
37:18 JOHN: This has all been, like, terrifying tech which is segment that we’ve done before. 
 
37:21 PAT: Yeah, terrifying tech with all of us. 
 
37:24 AUSTIN: Well, Joe’s saves lives, so that’s not too terrifying. 
 
37:26 PAT: All right, my turn. So this is one is the Red Smart Phone. It provides a holographic screen that lets you view videos from multiple different angles. So consumers are pretty unsure about what that even meant…
 
37:39 AUSTIN: So is that 360 video?
 
37:40 PAT: Yeah, it’s like 360 video…
 
37:42 JOE: Like Princess Leia in Star Wars?
 
37:46 PAT: That’s exactly what I was going to say. Yeah, Princess Leia in Star Wars is exactly what I’m thinking right now. It’s… basically a user can take a virtual tour of buildings, landscapes or anything like that. In an interactive map. 
 
So I see this actually being a really good tool for not just people in the construction space, or maybe commercial real estate space, that they can use. But you can just send somebody interactive map. They can project it, and take a virtual tour. 
 
Or I think businesses could just use this for recruiting purposes. “Hey, take a look at our office. I know that you live in New York and we’re in San Diego. But this is what we’re all about. Take a tour through the office and see what it’s like.”
 
38:21 AUSTIN: They should let us do their marketing. What if we attached it to a drone and then flew it in the sky and it could get…
 
38:28 PAT: Now we’re really talking…
 
38:29 AUSTIN: All the city. And then it’s like you’re walking amongst the city. 
 
38:33 PAT: Whole bunch of ideas right now. We’ll talk about it off the air. 
 
John, do you have any cool tech? 
 
38:44 JOHN: No. 
 
38:45 PAT: Okay. Nothing.
 
38:46 JOHN: I came under-prepared today.
 
38:48 JOE: He wants a board that automates the levels.
 
38:50 AUSTIN: Okay, I get to talk about the reverse microwave then.
 
38:51 PAT: Okay. Do it. 
 
38:53 AUSITIN: All right. For John. We’re talking about the reverse microwave. And what do you think of when you think of a reverse microwave? Quick freeze food and drink.
 
So let’s say you got something that you want cold, and boom, you can flash freeze it in a second.
 
39:05 PAT: Is that what you refrigerate usually? Something you want cold?
 
39:06 AUSTIN: Yeah. I swear…
 
39:09 JOHN: What happens when you put metal in it?
 
39:11 PAT: Is it the same thing as a regular microwave? Or is it, like…?
 
39:15 AUSTIN: Guys, I don’t know. I didn’t make it. I just read this. We’re going to have to get the whole manual if we want to know that. 
 
But, hey, imagine how cool that’s going to be? You could just flash freeze something right away. Would you guys get this?
 
39:26 PAT: I would potentially. I mean, I’d like if you came to the table with a little bit more information on it. 
 
39:31 JOE: We’ll just edit this part out. 
 
39:32 PAT: yeah, we’ll just edit that out. 
 
All right you guys. Thank you so much for joining us today on episode 24 of Flip the Switch presented by Power Digital Marketing. Again, we’ll be back next week with some great content for you all. But until that time, you have Pat Kreidler, Austin Mahaffy, John Saunders and Joe Hollerup signing off.

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John is the Director of Web Development at Power Digital and thrives on the balance between creative and strategy. Using his experience in CRO, John approaches website builds with the user in mind, combining psychological and technical aspects of design.