Flip the Switch Episode 28: Ad Policies
SOPHIA: Today on Flip the Switch. Walmart is expanding its grocery delivery service nationwide to compete with Amazon. And site search optimization is about to get a lot more mainstream. YouTube is trying to combat conspiracy theories by using Wikipedia and it reminds us a lot of our friends over Facebook.
The crypto market is tanking after Google announces that they are banning advertising in the space. Which prompted a conversation around other industries that have restraints on online advertising.
Let’s get into it.
01:03 AUSTIN: Welcome to Flip the Switch presented by Power Digital Marketing. We’ve got a very great episode for you today. And also welcome to episode number 28.
01:10 PAT: Number 28. Our Marshall Faulk episode.
01:13 AUSTIN: I was wondering if you were gonna pull one out. I didn’t have a good…
01:15 PAT: He’s a Hall of Famer so we have to throw him in there.
01:19 AUSTIN: That was a very, very good one. And on the eve of March Madness, very poignant. Because San Diego State is hosting a bunch of games.
01:26 PAT: That’s right. The fact that they made the tournament is absolutely beyond me.
But we’re not here to talk about that. We’re here to talk about some business news and trends. The main topic discussion. And give you a little bit of a crypto update. There’s a lot that’s been happening, so…
01:37 AUSTIN: Yeah, we wanted to do a little precursor with our crypto update because at the end of the month we have a very exciting e=guest. It’s coming in the last week of March, so we wanted to bring that up as a primer. Get everybody back in the spirit of cryptos.
01:48 PAT: Prime it up a little.
01:49 AUSTIN: That’s right. So we’re going to be talking a little bit about that. Burt first, let’s get down to the business news and trends.
01:54 PAT: Perfect. So leading things off here. It came out on Tech Crunch earlier today that Walmart is set to expand its grocery delivery service from 6 test markets to over 100 by the end of this year.
So this is obviously something that we have been tracking closely. The home delivery service industry in general, but also how it correlates with Amazon. And this is clearly something that Walmart is rolling out now that it has been tested in 6 viable markets. That’s basically to combat that Amazon presence. Regain some of that market share that might have been lost.
02:25 AUSTIN: Right. And they’re attempting to go head-to-head with the subscription based model which Amazon, of course, is the king of. And they’re using that Prime for now to sue Whole Foods as an asset to deliver door to door, or for people to pick up. So online.
And we’ve seen what we’ve talked about in the past is Walmart dumping a bunch of cash into the e-commerce business as brick and mortar locations have had a decline in revenue generated.
And who they’re looking to is a competitor who’s the first mover in the space is, of course, Amazon. Which everyone is emulating. And Walmart is actually so our understanding is that they did this in very small markets. Certain markets around the country. To try it out and see if it would work. And they had a lot of success.
03:03 PAT: Right. So the markets that it had originally tested in were Dallas, Denver, Orlando, Phoenix and San Jose, California. Those are 6 of their biggest markets in the entire country, just as far as grocery sales go. So they tested it there first just to see if the demand would still be high.
What they found is that it clearly is. And they’re planning on rolling that out much more. So I think this is interesting too, because it also ties into another thing that we’ve talked about with Amazon.
They acquired Whole Foods way back when. I think it was about 6 months ago, something like that maybe. And what happened was we even talked about this on the show–they always go after market share first, and start to increase their prices. So right now what do you think Amazon is doing with their Whole Foods inventory?
03:45 AUSTIN: They’re just trying to cut that price down as much as possible.
03:49 PAT: Incorrect. They have started raising prices on some of their key SKUs exactly like the pattern has shown. So this could be a very prime opportunity for Walmart.
03:58 AUSTIN: We’ve hit the mark where they started increasing the prices.
04:00 PAT: Yeah, exactly. So we’re to that point now.
04:02 AUSTIN: I think that looking at Walmart that’s what they’re attempting to do. So they’re behind the eight-ball here and realizing what Amazon does and that’s gain the market-share first. So they want to do that.
So what they did, actually, is this isn’t a subscription based model. They actually have eliminated that cost right up-front for paying to have it be e-commerce or delivered to you. I guess, my understanding is that they have an option to either pick it up or they will deliver it to you for a fraction of the cost. So they’re trying to undercut Amazon with a lower price point.
04:34 PAT: Yeah, exactly. And I think also… it’s the price-point on some of the products, but it’s also the price-point for the overall cost of goods. So you have like with Amazon Prime, it makes more sense to have that subscription model based. Just because there’s so many people with a Prime subscription.
I don’t know a ton of people that would get a Walmart subscription for groceries. I don’t associate it with groceries anyway.
So this is a great play for them. This is going to be something that rolls out a lot more over the next few months that we’re going to be following very closely. But it’s a very exciting piece of news to kick off our day.
05:00 AUSTIN: Absolutely.
05:01 PAT: Cool.
Moving into our next piece here, it also came out on Tech Crunch earlier today that Algolia, which is a company based I believe, out of Silicon Valley–they added a search analytics tool to their on-site search. So basically what Algolia does, they optimize your on-site search. So you ever go to a website, you go to the “search” bar to find something. It helps you find the products or the services that you’re looking for more quickly by individually cookie-ing you and figuring out exactly what it is you’re most inclined to be searching for to serve that to you faster.
What that does is it helps with online conversion rates, revenue transaction generated. And typically actually helps increase your average order value. There are a lot of competitors in the space especially in Silicon Valley for this, cause it is a SASS company. You have companies like Nextopia, and Decca who was acquired by Oracle so they have a ton of money backing them.
But Algolia made a very smart play here. They acquired a company called Sea Urchin.io. The team of 2 who are behind this product will not be joining the Algolia team. These are 2 people that launched this product called Sea Urchin. And what it does , is just a few extra lines of code that are in an API that allow you to get search query specific revenue tracking.
So you can see exactly what somebody typed into your search bar. Not what product they were served as a result of the enhanced site-search, which is what Algolia will help with. But somebody even types in an incorrect spelling for something, and it’s starting to generate revenue. They can see that.
06:27 AUSTIN: So our understanding is that this is going to revolutionize site-search for individual websites which this may not come to the top of your mind, just as a regular mom and pop shop, but there is a lot of e-comm businesses that are in that enterprise level just now reaching that mid-tier to maybe upper-tier of e-commerce. That’s a big part of their business. Where this can be a big missing component. Because what’s unique about site-search is you can really, really understand your customer, better than utilizing maybe Google Analytics. Because you’re going to get more data, and you’re really going to get to dive into what people are searching for, down to the very keyword.
Which we know with Google Analytics does not give you that keyword level data. This tool will.
07:14 PAT: right. Exactly. So this also measures that on-site intent as well. So it also lets people know–and this is something that we’ve seen companies even going back to Amazon leverage a lot. Amazon can leverage search term data to see what products to create, which ones there might be a demand for.
Any company that uses Algolia will now be able to do that too. It’s typically the bigger companies, because that’s where that investment makes the most sense for them. So Algolia works with clients like Under Armor, Twitch, Periscope, Medium, Stripe. Big companies that have a huge online presence.
But I think the applications for this are much more widespread than that. And really as a business owner, the reason that this is important to me is because this is the same thing as getting consumer level data at a retail store or something, right?
You’re getting it all the way down to the last point. And this really helps fill in all the extra pieces of the puzzle and can really establish your online marketplace.
08:08 AUSTIN: And this is going to make huge… this is going to be huge for companies in understanding of what they should even be putting on their websites to sell. So they can now really understand what people are constantly searching in and then divide that into the different markets. And then what they should prioritize to make sure they keep in stock and in inventory.
And then, of course, there’s going to be the way they search where it will autofill the query for you. So that’s going to be really big for them, because based on other site search data, they can decide what should be auto filled. And when someone is maybe hesitating to figure out what they want to search for.
08:40 PAT: And I think the cool part about it too, is it’s not even like you’re deceiving anybody. You’re actually implementing something here that is going to guide them to what they want to find the most quickly. And as we’ve seen with everything that we’ve covered on this show so far is that User Experience is king. It’s the thing that matters the most. You need to get personal with your users. I don’t wanna… we’re like envious of one another almost. I don’t wanna have the same things show up when I search as when you search, because then I’ll know that it’s just a blanket thing.
09:06 AUSITN: Right. I want it to be personalized.
09:09 PAT: Exactly. I want it to be for me. And this helps achieve that. So what they’re going to see is higher conversion rates, like we talked about. And again, this is just going to help educate people on the user journey.
So a ton of great that’s going to come from this. Really excited to also be reporting on this as time goes on. But huge acquisition today by Algolia. And interested to see how it all turns out.
09:28 AUSTIN: Absolutely. All right, thank you Patrick.
Okay, final piece of news today that we’re talking about is YouTube. Owned by Google of course. And what they’re doing to combat conspiracy theories….
09:35 PAT: Oooh…
09:37 AUSTIN: Yes. I know, right? So this plays in line with the fake news statement. And that’s why in the intro, introduced Facebook as what reminded us of this. And what YouTube is going to be doing is using Wikipedia to combat their conspiracy theory video problem.
09:54 PAT: so they’re using Wikipedia to stop conspiracy theorizing?
09:59 AUSITN: Doesn’t that seem backwards. Because as we all know, Wikipedia is user generated content. So anyone can edit that.
But this is what’s really funny to me. Is YouTube has an epidemic of conspiracy theory videos. And I say “epidemic” because it is so easy for the common person to reach a conspiracy theory video on just a simple one or two related search videos that pop up after typing something in. So on very common issues, let’s say for instance someone wants to understand something about 9/11 let’s say. And then all of a sudden Loose Change will pop up very, very quickly. That’s a big conspiracy video that’s not very accurate and not factually based.
10:36 PAT: Yeah, but it has 40 million views on YouTube, because it populates so high in the results.
10:43 AUSTIN: YouTube knows that they can’t cut down on these videos because so many people have viewed them already that they’re going to come up as the related search. So what they are going to do is they’re going to start putting in automated text right underneath all these conspiracy videos. Videos that are combatted with the actual fact. So they’re going to pull… I think they’re using Wikipedia’s API to pull in strings of copy that are the “facts” so they claim. About the said conspiracy.
11:07 PAT: That’s interesting. The next time I go on Alex Jones’ channel I’ll be sure to take a look at that for you…
11:12 AUSTIN: I immediately thought of “Info Wars” right away. If any of you don’t know who we’re talking about, Alex Jones…
11:17 PAT: Completely insane person. Don’t go find him.
11:20 AUSTIN: He actually is huge on YouTube though. And Infowars.tv. And so he’s a big conspiracy proponent. So his type of videos would now have factual basis content directly under his video to combat whatever craziness he’s saying…
11:35 PAT: Yeah, like he’ll say we never landed on the moon, and then Wikipedia will say first moon landing…
11:38 AUASTIN: That’s actually in the Tech Crunch article, the example they give is the moon landing.
11:42 PAT: That is hilarious. And I think the biggest tie in that this has with what we’ve talked about before too is that every single platform that users are on nowadays are making strides to try to be more factually accurate. We see that Google did the same thing. Facebook was put under heavy, heavy scrutiny for their manipulation of trending news and the accuracy therein. And also their repression of several news outlets. Because it was deemed “fake news” at one time, right?
So I think that this is just a step in the right direction for YouTube because again there is so much user generated content, they’re going to be open to scrutiny.
Probably to a higher degree than Facebook even was, because so many more people use YouTube. It’s the second largest search engine in the entire world. Right behind Google.
12:24 AUSTIN: Right behind itself.
12:25 PAT: Right. Exactly. It’s Google at 1 and 2 there.
12:27 AUSTIN: So this… I mean, it’s funny that every single social media and search engine platform has the same problem. And that’s just information that isn’t factual is becoming very popular because individuals have understood how to manipulate humans. Really, they do understand that humans will grasp any type of information that may seem poignant or relevant to them at that very moment.
12:50 PAT: Or fits their biases. Or aligns with something that they already think.
12:52 AUSTIN: And also we think about maybe how many times a video is viewed. How many likes? How many comments? Those give authority to pieces of content, right?
So you might be a person that doesn’t know a lot of information about a subject, and you go on and the first thing you see is maybe a conspiracy theory video. And it has a ton of searches, right? It has a ton of views.
Now you immediately are going, “Oh, this must be authoritative. Look 30 million people have viewed this video. So that’s the big problem that these engines are having.
13:18 PAT: Yeah, exactly. And I think that the most interesting thing, which is what we’re also tracking with Facebook, Google, etc. is to what extent this is going to be covered. So they’re very vague intentionally about the amount of conspiracy theories that are going to be suppressed and I think it’s going to be one of those very open to interpretation type of things.
13:39 AUSTIN: Doesn’t look like Wikipedia knew that they were going to be used for this.
13:41 PAT: Yeah, so…
13:42 AUSTIN: That’s what they said. Someone from Wikipedia was… they said, “We were not aware that we were involved in this project.” The quote was a little different than that, but it seems…
13:51 PAT: We’re not here to be journalists, we’re here to tell you about the news.
13:52 AUSTIN: And YouTube announced at South-by-Southwest onstage–so this was an official announcement without Wikipedia validating it’s occurring.
14:00 PAT: No going back.
14:01 AUSITN: No going back.
14:02 PAT: I like that. Well, hey, we’ll definitely be sure to keep everybody up-to-date on this. But for now, another very interesting development in user generated content and the platforms that help provide that.
14:14 AUSTIN: All righty, everybody. Our main discussion today is we’re talking about Google and Facebook ad policies. The reason why we’re doing this is because just recently–actually today–Google blocked… said they’re going to block crypto-currency ads starting June 1st. So yeah, that’s a pretty big loss for the crypto-currency industry. This got Pat and I kind of thinking about other industries that are affected by Google ad policies. Because this can really affect the way you market yourself. And the hoops that you have to jump through to make sure that people see you online.
So I think really, we want to have a conversation around their different policies. Facebook and Google I mean.
And then just certain industries that we’ve had an understanding of and dealt with personally.
14:55 PAT: Right, exactly. And I think that this is a super-timely thing to speak about. Just because we have seen so many changes in the user experience and content landscape over the last 3 months.
There’s specific guidelines for Google onsite content. There’s specific guidelines for what types of industries you can run ads for. And then we have all this other stuff going on on these other platforms.
Kind of bodes the question to me of what’s the rationale behind it?
So the goal today is to talk through what’s prohibited, what’s restricted. Talk about potential work-arounds. And kind of discuss the reasoning as to why. So just kicking things off, like Austin mentioned–this was provoked because Google AdWords, which is the ad platform obviously associated with Google–that runs search ads and display ads and things like that. Shopping ads. Came out today saying that they’re going to prohibit entirely crypto-currency related ads.
There’s a difference here. You can have restricted content. And that’s content that you can advertise for, but it’s going to have limitations on it.
This went straight into the prohibited content category. And oftentimes what we see in prohibited content with Google is counterfeit goods, dangerous products or services, anything that enable dishonest behavior. And also inappropriate content. So I think the one that this falls under the most closely is probably enabling of dishonest behavior.
And I think that this ties back to a few of the things that we’ve covered on the show. You have ICO fraud. You have people pumping and dumping. A lot of questions around the accuracy and the validity and the honesty within the market.
I think that this is just a way to protect those users from having to be exposed to anything like that.
16:31 AUSITN: Major companies with a very wide net to be cast over. With a lot of influence such as Facebook and Google need to protect themselves from situations like what crypto-currency currently is. It is an unregulated opportunity for people to lose money. At the end of the day, right?
People are associating themselves getting scammed or losing all their money from an ad they saw on Google or Facebook. That is a very detrimental feeling toward these major companies.
And just after they just went through a lot of this with the Russian scam. Where the election was rigged via… allegedly…
17:12 PAT: right. Air quotes around that one.
17:13 AUSTIN: By the Russians. So this is all falling in line. This is a trend we’re seeing where these large companies they know they need to protect themselves on all fronts, and advertising where they do make money has actually been something that they need to protect the most. Their revenue stream
17:27 PAT: And that makes the most sense to me too, because if you think about it, they need to protect the validity and the accuracy with which people associate the ads that are served on their network. So if I am a user and I click through, let’s say, a potential ICO advertisement. Before June of course. It ends up being a fraudulent scam where I lose a ton of money.
Not only am I probably not going to be super-inclined to do anything ICO or crypto-related anyway, I’m probably not going to be super-inclined to click on ads anymore. Because I’m like, “Dude, that took me to the completely wrong page. I wasn’t looking for that, and I got scammed as a result of it.”
So I think, like you said before, associating bad feelings with the platform is one thing. But this is Google protecting its revenue stream. It only makes money when people click on their ads. If less people click on the ads cause it’s not trustworthy they don’t make money.
18:12 AUSTIN: To be a viable long-term company. And Google has shown for 2 decades now that they are that. They need to protect their revenue stream long-term. They can’t see that quick cash. And an industry like crypto-currency is a quick cash way to maybe grow your business. They may see that.
But they have to look at their entire business and protect themselves on all fronts because that was what’s most important to their shareholders long-term. So that is where we’re getting to.
I’m kinda curious Pat, looking in this about how ads get posted, the review process and how that all works. So typically when you want to post an ad, what do you typically have to go through to make sure that people see that ad?
18:50 PAT: Tremendous question. So what you have to do first is you basically… you upload everything often through Google Editor just so you can do it in bulk. That’s a technical piece, just for any marketers listening. But once it’s up, all your ads for a short period of time… or maybe an extended period of time depending on your industry and vertical and its I guess volatility of trustworthiness. It’s under review for a period of time. So it could be a long time. It could be a short time.
After which point it’s either approved fully, to where it can be served with no eligibility limits. This is something… the approval process will be really quick for these kinds of ads. You can expect a turnaround time between 3, 4 hours at the most usually. A lot of times it’s less than that. And then you’re ready to start accruing impressions.
It can be approved but limited. So these are for companies that have that restricted content that we were just talking about. So this is a restricted content company is somebody that mentions anything that’s copyrighted. In their ad. Because there’s a whole ‘nother copyright review process that needs to happen.
Healthcare and medicines. That’s a big one. Because they don’t want people again, getting scammed. They have to really check to make sure that people…. and that they’re representing how their using… medicine in particular. They want to make sure that the ad is accurately explaining and portraying what it can help with.
Political content–no brainer. Financial services. Again, people put a lot of trust should they go through that ad.
20:15 AUSTIN: And we have arrived at financial services with crypto-currencies.
20:20 PAT: Exactly. But again, crypto-currencies got bucketed under prohibited. And the things that fall under prohibited are often much, much worse. I’m kind of almost wondering why they associate it with that type of fraud. Realistically, if you’re looking at financial fraud on a big scale wouldn’t you stop Wells Fargo US Bank, Bank of America from also running ads on Google?
20:43 AUSTIN: Multi-level marketing?
20:44 PAT: Yeah, exactly. Anything like that. So it’s kind of an interesting call.
20:48 AUSTIN: And I wonder, is a company like Verve–which is a multi-level marketing–can they advertise on Google?
20:53 PAT: Before they got shut down by the FTC they probably could. Well, and again, it’s stuff like that. Because that was such a massive deal that prompted this whole thing. And we’ve even seen in the time that I’ve been at this company, no less. I’ve seen multiple industries get effected.
You have… take something that’s sensitive like rehabilitation. Right? Like the rehab and detox industry. It used to be that you could really rarely run ads for that on Google. And again, all of this applies to Facebook as well. So when I say Google, that’s my vernacular tor saying ad networks in general.
21:28 AUSTIN: Yeah, Facebook and Google are very similar in their policies. You can be looking at this too when we talk about Google, think of it also as Facebook.
21:35 PAT: Yeah, for all intents and purposes we’re talking about advertising online in general on these two platforms
Rehabs, that’s something that’s very, very sensitive to people. And it’s something that’s again, we’ve seen a lot of people get scammed because of that. And so it used to be that it was really limited eligibility. You couldn’t retarget. Because think about it, let’s say that you have a loved one that had struggled with drug or alcohol use. And you go to the website and then you don’t convert. Next time you’re at the computer with somebody that you might not have searched with initially.
22:07 AUSTIN: It might pop up.
22:08 PAT: It might pop up and follow you around. They don’t need to be thinking you’re an alcoholic or a drug addict, right? So they nixed that right from the beginning. They used to have limited eligibility with the actual search ads.
What we’ve seen in the last 5 to 6 months is that that has been shut down almost entirely. And I know Austin, you’ve been working a little bit on this as well. We’ve worked on clients together actually that are in verticals that are similar to this. And we have a couple work arounds for it, but again, it’s coming to that… kind of just protecting that user experience and stopping people from being susceptible to fraud when looking up sensitive information.
22:45 AUSTIN: Yeah, and if you’re a good internet marketer… if you understand the space from an entire perspective and not just your channel that you’re working on. So paid may be what you do, but there’s other channels to work with too. So a work-around, right?
A work-around to make sure you still get in front of you clients, because it’s not illegal to have a detox, right? It’s an important industry that it needs to help people. It is there to help people.
23:11 PAT: But you gotta get your name out there.
23:14 AUSTIN: You gotta get your name out a certain way. And one of the ways that has worked for that industry is organic search. So SEO. People do search that a lot. And they’re either searching for informational queries–so their trying to find out information about how long it takes to detox from a drug. That’s pretty big one that has a lot of searches. You could name any drug that you want.
23:32 PAT: We don’t have to name any of them on the show, but…
23:35 AUSTIN: Yeah. Fill in the blanks. Or “how long would I typically be in rehab?” So those type of questions, right? You can do SEO related advertising–SEO is advertising–to make sure that your detox center gets in front of your clientele. So what you’d do is you write blog posts around those topics. You make them high quality. You answer all the questions.
Now that person is in your funnel. We talked about funnels just last time when we had Nicole, that great interview. So you get them in your funnel through SEO. It’s a great way to capture a lead. It’s a great way to get in front of your clientele. You’re not breaking any rules. It’s just another way to approach your marketing.
24:09 PAT: Exactly. And I think… I totally agree with that, and I think another reason why that’s the appropriate work-around too is because it also ensures that level of credibility. We know for a fact that Google has really upped the amount of on-site crawls that it does. It makes sure that your site isn’t stuffed with keywords anymore from the organic perspective. It makes sure that you’re writing quality content that actually informs the question.
So these users are not being dragged into anything scammy. If anything, this is a way to make sure that users in this industry in particular are actually finding the most useful information right away. And to you as a business owner, it could even cost less. It just depends on the scope of what you want to do. You could be writing 150 blog posts a month. In which case it might be comparable.
But at the end of the day, it’s going to keep you more visible than ads will as of now.
24:51 AUSTIN: We’ve talked about the Return on Investment or something like organic search, where you may not see that return in the first 4, 5, 6 months, but a year to 2 to 3 years, you’re gaining an incredible amount of return on your investment due to Google finally giving you the authority that you deserve in the space.
25:09 PAT: Exactly. It’s exponential.
25:10 AUSTIN: And it’s the time… it’s a time-play. It’s a long-term play and we’re talking about legitimate authority in the space that you’re gaining. It is a legitimate, legal form of advertising.
25:22 PAT: Exactly. And one other vertical that I thought was kind of interesting. That we wanted to touch on very quickly here towards the end. Especially since it’s an emerging market. CBD and THC related content. Under heavy scrutiny lately especially.
25:33 AUSTIN: Hot topic.
25:34 PAT: Hot topic. So we know that as a result of it being legalized in California, there’s a lot of issues with the state level law versus the federal. There’s banking issues right now. So you can’t cash any checks if your company is associated with that at the federal level. What that’s basically started is that you can’t fund any type of like, advertising. It’s tough for your cards to be cleared. It’s tough for your billing to be verified.
So that’s its whole thing.
For a long time though, already, Google was already wiping the slate. You can’t have any CBD, THC content in your ads.
26:11 AUSTIN: The time has not come yet, for them to be able to. But yet on Instagram, you can post. Let’s say you run a dispensary, you can post… not an ad, but a you can post a post about that. And it’s an organic. So I think that ties into our solution here.
Is the organic advertising if you will. Which is just a regular post on Instagram or Facebook to let people know that you exist. So you cannot go through advertising channels at this time. And you can go through SEO. Yu can go through just regular, organic Instagram posts. But we’re falling into the same bucket here.
26:38 PAT: Yeah, exactly. And I think that it falls into that medical and healthcare category from before. So you don’t want to be advocating for the fact, “Hey, this is going to rid you of any anxiety, insomnia, back-pain.” All the typical ones that you can rattle off.
When in reality there’s no way to prove that that’s the case.
26:55 AUSTIN: And we’re seeing a trend here with what… the way Google and Facebook feel about certain industries. If they’re not federally regulated, they don’t want to be a part of it. Because let’s be honest here, these big companies rely on the federal government and vice-versa for a lot of policy. A lot of funding. There’s a lot of lobbying that occurs for certain laws that help these big companies achieve bigger growth. And they both want that. So stepping on the toes of the federal government to make an extra buck through your revenue streams is not a great business move.
27:29 PAT: Right. Exactly. So what we would advocate for and what we recommend is if you are a business owner in one of the verticals or an associated one that we’ve mentioned there are work-arounds. You can find a way to get the visibility in front of the right people and still draw in that qualified crowd. But you may just not be able to use traditional advertising methods on Google, Facebook, YouTube anything related to that. Like you might have before. It’s just a different degree of scrutiny, and you need to be very careful with how you navigate it. But if you’re providing good content, you’re providing a quality experience and you’re actually there to provide the right solution to the right user at the right time. Google’s going to reward you for it.
28:05 AUSTIN: Couldn’t have said it better myself.
28:08 PAT: All right. Moving into our last segment here. Again, one of our favorites. We talked about Amazon. We talked about the user experience. Now it’s time to hit on crypto-currencies a little bit…
28:18 AUSTIN: It has been a while though.
28:19 PAT: It has been a little bit of a while. We wanted to make sure we were dispersing our content a little bit.
But a lot has happened in the market. Especially over the last few weeks. So here to give us the recap is our resident crypto expert, Austin Mahaffy.
28:29 AUSTIN: Thank you for the intro, Pat. So just like our conversation we just had about Google cracking down on ads. That directly affected the market. So what we saw just today is a pretty steep decline in the price of everything. Which was already lower than its January high.
So in January we had that all time high. The market was doing tremendous. Everyone was wondering how they just made so much money so quickly. And everyone’s dreams crashed and burned. Waking up in early March and the market has not recovered. So Bitcoin’s been floating around 10,000 until the last couple of weeks when things have gotten a bit more murky. And we need to back up a couple of weeks to really understand why this is happening and what’s going to happen.
So the SEC has been meeting a lot and the federal government has been meeting a lot about what to do with this. Do they classify it as a security? What does this mean for equities? Are you buying a piece of the company or are you buying a currency?
29:20 PAT: Is it real?
29:21 AUSTIN: Is it real? What is this? What’s happening? What we’re arrived at and what’s important to note here is that the crypto-currency companies have basically been split into 2 things that they can offer. One is a security–which is just like a stock. All of us can buy stocks. You can buy on the NASDAQ. And all that good stuff.
And the other side of it is what’s going to be called a utility token. And utility tokens will not be regulated by the SEC. If you have a token of currency that falls as a security, same as the stock, that means it has to follow the same regulations. Same SEC regulations as a company that issues stock.
So the whole, entire crypto-currency market and the basis of these companies was built on deregulation. So if all of these major companies and these big movers in the market are all of a sudden subjected to regulation of a government body, this completely undermines the whole entire philosophy of why they were created to begin with.30:15
30:17 PAT: Yeah, exactly. But my question for you a little bit around that is I understand the reasoning why the user might not like that very much. For these bigger companies that are starting to adopt similar technology–like we’ve mentioned before–that have also played nicely with the federal government. Like, how it this going to affect them at all? Or is this a way for them to consolidate a lot more of what once was murky market into something that they have clarity into and they can generate revenue off of with the technology?
30:43 AUSTIN: You bring up a really great point, Pat. Because this is a big opportunity for companies that are already regulated, right? And tech companies that are already regulated, they’re traded on the stock market. If you’re a big tech company, you go, “We don’t really need to make a token. What’s the point of that? So that we can maybe get a large market share of some volatile market and be manipulated? We already have a viable business. Why don’t we just invest in what is block-chain technology that we’ve talked about. It’s a utility. It’s a public ledger and it moves fast and it’s encrypted. Which means it’s secure. Why don’t we invest in building one of those, and just make it part of our business?”
It’s a subsidiary, right? It’s another revenue stream. Guess what will be affected by that if it goes well? Your stock price. So your stock price will be directly affected by you creating a new revenue stream via new technology.
So a company… perfect example right now, IBM. IBM’s been out of the game in terms of new technology for a while.
31:35 PAT: Ever since Apple.
31:36 AUSTIN: They picked it up and are investing heavily in block-chain technology. And what they want to do it use it for data storage. They are a data storage company. They want to invest in a new technology–block-chain technology–to utilize that as their new form of revenue.
The companies that are already regulated have a big advantage. If you are a company that’s already came out and you’re in the crypto-currency market, disadvantage. Crypto-currency companies that will be created in the future need to follow a new set of rules. Either be a utility token and don’t be regulated by the SEC. Or be a security and be regulated by the SEC.
32:10 PAT: So what’s if I’m a company that is coming out in the future, what is the detriment of being a utility token as opposed to a security? Is there less opportunity for revenue generation there?
32:18 AUSTIN: I think utility tokens are actually what all crypto-currencies need to be. Moving forward.
32:24 PAT: Yeah, cause just talking about it, and learning about it over the past year–it’s the technology that people are investing in anyway, right?
32:28 AUSTIN: You’re completely right. So what a utility token is, it’s a representation of an actionable item that occurs on a block-chain technology… sorry, on a block-chain just itself. So what I mean by this… let’s bring up an example.
So there’s a company… there’s an exchange called Binance. And they’re one of the largest crypto-currency trading companies in the world. They have a token called BNB. Stands for Binance. And what it’s used for… what its utility is. Is you can use that to pay exchange fees. So if you’re buying and selling crypto-currencies, you can invest in the Binance token to cover the cost of your exchange fee.
33:03 PAT: Right. So it’s free trading.
33:04 AUSTIN: So if the Binance taken goes up in price, your trading fees just got lowered, because now your Binance token is worth more, but the cost to trade is still the same. So that right there is a utility. It has a purpose. It’s still on the market, so it can go up and down. But it actually has a usable purpose which is the utility.
33:23 PAT: Which makes it less volatile.
33:24 AUSTIN: Which makes it not necessarily more volatile, but it gives it tangible ability. It gives it a purpose. Because no longer a security is of course, just a representation of entire company. A utility token can actually be used for something. So this is the direction that crypto-currency companies are headed is find a use for your token either to pay for something–so people on your network can buy something with it. Whether that’s an idea, maybe some advice, maybe trading fees since we’re talking about this.
Find a utility and that way you fall outside the regulation, so you’re still in that philosophical mindset of what a crypto company is. And then you’re also able to have value. You have value as a utility.
34:02 PAT: Okay. And the last thing that I want to wrap up with before we close out the episode here. If I’m an investor. Somebody that has been invested in crypto-currencies before, what is my move right now?
Because we see that the markets… everything is lower. Oftentimes the best practice is to buy low, sell high. Think I remember reading that somewhere.
But then now all these things are coming out. We have the regulations, the SEC stuff, all the markets tanking to the point where we’re not seeing it bounce back as quickly.
Would you be more hesitant as a new investor and conversely if you already have money there, do you hold tight? What’s the move?
34:40 AUSTIN: I’d be worried. Especially if you’re playing in hot fire, small markets. And so what I mean by that is we’ve talked about those ICOs. Yeah, I’m coining that one. That’s a trademark. No one else can say that.
34:51 PAT: That’s for your bio on the show.
34:54 AUSTIN: Hot Fire, small market. So what I’m talking about is a low cap coin. So we’re talking about Tron. Some people may know what I’m talking about. Low cap coin. The price of that crypto-currency is trading at I believe 2 to 3 cents a token right now. It is nothing. Their market cap is tiny. T
That is a very worrisome thing for you to invest in right now, because it’s easily manipulate-able. So it can be easily affected by other people.
35:15 PAT: Yeah, one guy sinks 10,000 dollars in there that’s the majority…
35:19 AUSTIN: Right. People can trade that easily and manipulate it easily. So what I would… if you’re looking to invest in crypto-currencies right now… which you totally should, cause it’s still viable. We talked about the utility tokens, look for those. Also just stick with the Big 3 right now. You can’t go wrong with doing Ethereum, Lightcoin and Bitcoin. Specifically Bitcoin and Ethereum. Because if people want to get into the crypto-currency market, the only way that they can trade crypto-currencies is by buying either Bitcoin or Ethereum. So we know that there’s always going to be demand for those two large coins because if you want to go on an exchange and you want to trade… it’s all based on Bitcoin is the backer. So it’s not USD that’s backing all these coins. It’s Bitcoin. It’s Bitcoin to Tron. It’s Bitcoin to Ripple. It’s Bitcoin anything around those power ledger. Those are just 3 other coins I called out.
So go with the coins that are in demand, the Big 3. And that’s about it.
36:08 PAT: Mm-hmm. Perfect. Well thank you so much Austin. Thank you guys all for joining us today for episode 28 of Flip the Switch presented by Power Digital Marketing. We’ll be back again next week with some more great content. Stay tuned for that interview. At the end of the month we’ll be talking to a crypto expert, and bringing you some more content about that.
But until that time, this has been Pat Kriedler, Austin Mahaffy, John Saunders and Joe Hollerup signing off.