SOPHIA: Today on Flip the Switch. Bird scooters becomes the fastest company to reach a billion dollar valuation. And AT&T is merging with Time Warner. Adobe acquires Magento on top of seeing exceptional growth in revenue. Could they be the next ten billion dollar software company?
Our main discussion is about the opportunities and threats surrounding digital advertising, and where you should be allocating your ad spend in 2018.
We finish with “A Minute with Musk.” And we think you’re really going to dig what Elon is up to now. Let’s get into it.
01:07 AUSTIN: Welcome to Flip the Switch presented by Power Digital Marketing. This is episode number 40. Our Bill Laimbeer episode.
01:14 PAT: Bill Laimbeer. You actually had to remind me of who he was before we started this.
01:18 AUSTIN: Bill Laimbeer. The famous enforcer for the Detroit Pistons. The guy threw ‘bow, threw punches .So that’s basically we’re setting the tone for how this episode’s going to go. We’re coming in with the nitty-gritty.
01:29 PAT: We’re coming in hot.
01:30 AUSTIN: Tough information. We’re back also. It’s Patrick and I on the mic. We do not have a guest this week. We had three amazing in a row, but we’re going to try out our own stuff today. I think we’re going to do all right. I think we’re going to do pretty good.
01:41 PAT: Well let’s test it out a little bit. Let’s get into it.
01:44 AUSTIN: All right. Starting with news and trends.
First up, we’re going to be talking about Bird. I know we’ve covered this in the past. No, we’re not talking about the actual birds, we’re talking about the scooters that have taken over pretty much all of California. They have reached the fastest company ever to reach a billion dollar valuation.
02:00 PAT: Yeah, one billion dollar valuation making them what’s known in the Tech or VC world as a “Unicorn.” This was really surprising to see. So they listed out all of the other companies that have reached a billion dollar valuation and how quickly it took them to do so.
Desktop Metal, which is a 3D printing company. Was previously the record holder, and they’d reached it in about 1.7 years is what this chart that we’re looking at on Quartz says.
And Bird was able to do so in less than 1 years’ time. Which is insane. But I think that the craziest part about this in reading the article, is you’re looking at all these other companies that have reached a billion dollar valuation. There’s like one or two brands on this entire list that we even recognize.
02:42 AUSTIN: That we know of. Airbnb is just under 3 years to reach a billion dollars. Which, granted, they deserve it. They have changed the game of how you rent. Where you stay and what that looks like.
But a lot of these companies that we’re looking at–and we could be wrong here–but something like “Open Door” I’ve never heard of. “Let Go Essential Products.” These may be large in their own space, but they’re not household names.
Which I think is worrisome for a product like Bird which grew very fast. But what is the true value that lies with them as a company? That’s yet to be seen. They still need to generate revenue.
03:17 PAT: Yeah. And I think another thing that can stand in their way of generating that revenue is street regulations and laws. And liability. And we talked about this when we talked about ride sharing and Bird and Lime bikes. But Bird in particular, really concerns me. Because essentially it’s a motorized vehicle where most people that are riding it, don’t have experience riding a motorized vehicle at all. They have no sense of the road. They have no etiquette. There have been a lot of… even small communities. I think Santa Monica was even talking about doing this at one point–banning Bird riders.
03:49 AUSTIN: Right. Especially on… I think in some cities, in certain parts of San Francisco they’ve banned riding on the sidewalks.
03:55 PAT: Yeah. Because that’s all people do…
03:56 AUSTIN: They were just running into foot traffic. It’s obviously a massive congestion issue. And then honestly for me, the way I feel about it… this is a class action lawsuit waiting to happen.
04:05 PAT: 100%.
04:06 AUSTIN: I see this as if you’re an ambulance chasing attorney–a tort attorney–you’re just waiting for the right opportunity to find a loophole in their agreement that you supposedly sign up for when you start using Bird. They have that automatic, “I will blank. This release is a liability of blank.”
04:23 PAT: Even though everybody just does what normal people do is just click through it so that they get on the Bird before somebody else comes and takes it.
04:29 AUSTIN: I’m sure it’s airtight, but there’s going to be a point when there’s a certain amount of injury that occurs. There’s an injury that happened… some weird situation with this that is going to put them in a bad situation. And that’s truly going to test who they are as a company.
And then the big one–like you touched upon–is government regulations. We don’t know what the government’s going to do about this. From city to state to federal. They now have to come up with a new set of laws for what this looks like. New types of transportation.
There’s all sorts of laws about transportation, of course. Bus lines and other forms of transit vehicles. Cars, planes… everything. So they’re going to have to come up with a set of laws with how Bird does.
And then Bird still needs to compete with their competition. They’ve got 2 or 3 big name players. One out of China that is also with them, competing for that market share. I think Bird right now has the upper hand with the word of mouth. It’s a name that has circulated very quickly in our area. So they do have the best type of marketing, which is word of mouth.
05:25 PAT: Yeah, and it’s turning into… the same way that a bandage is called a “Band-Aid.” People say, “I’m going to Bird over to here.” Even if they’re using Lime or another electric scooter company.
05:37 AUSTIN: And in history the companies that do become a verb typically do stick around. It’s just when you insert that thing into your life, it just flows and it reminds you that this is the product for that type of action. And they have become that.
And I don’t expect that to change. It’s just these roadblocks of regulations that I worry about the most.
05:57 PAT: I think so to. And just like looking at their trajectory, this is a very steep incline. They were valued at 400 million dollars after closing a hundred million dollars in Series B funding. And then in late May they raised an additional 150 Series C, led by Sequoia capital, which was a 1 billion dollar valuation.
And people are saying… people who are pretty familiar with the deal are saying that people have given them cash at 2 billion dollar valuation as well. Which Bird has declined to speak about.
So I do think that there’s a lot of good that’s going for them. And if there’s anything that can help solve some of those potential long-term issues, it’s cash-flow. It’s very low overhead. It’s probably extremely profitable right now, but I do see the opportunity for liability. Which is why they should be using some of this additional capital that has been invested in them through their Series A through C, and probably additional rounds of funding hereafter. They should look at building the right infrastructure to ensure the longevity of the company. Because we don’t want them to turn into another billion dollar valued company that we don’t hear from again.
06:57 AUSTIN: Yup. And lifetime value of the clientele is going to be extremely important in this situation to make sure that people want to come back.
All right, let’s transition out of that one. We’re talking AT&T and Time Warner. We’ve brought this up on a couple of episodes, but it went through. The merger actually went through for 85 billion dollars. That’s with a “B.”
A US judge just said and approved that it does not violate anti-trust law. They’re allowed to consolidate and merge. This was of course, one of the largest mergers in the history of the United States, I believe. I’m not sure what number. A lot of stuff coming out on this. Pat what are you thinking?
07:36 PAT: This is… I have no idea where they can potentially be pulling a rationale that it doesn’t violate anti-trust.
07:42 AUSTIN: It must just be good attorneys…
07:44 PAT: It must be very, very good attorneys. It’s probably Bill Lobel.
07:48 AUSTIN: Yeah, could have been Bill Lobel.
07:50 PAT: Could have been Bill Lobel. Former guest on the show.
But in all seriousness, this is a huge, huge deal. And this can very much affect the way that consumers behave on a day-to-day. 85.4 billion dollar acquisition. That is a testament to the sheer size and magnitude of the 2 companies that are joining forces here.
And it’s not a full-blown merger. It is AT&T acquiring Time Warner cable. So they have until the end of June–June 21st to close out that merger.
We’re seeing some pretty interesting trends as far as the stock prices. But it’s nothing that’s crazy. We’re not seeing a huge soaring spike in AT&T by any means.
08:34 AUSTIN: I want to talk about why this happened and why it was allowed and then what that means for future mergers. And then what this just means for the Tech industry as a whole.
So when you look at companies like Google and Facebook, they own a lot of information. And they’re using that information to create media. Specifically looking at Facebook and what they’ve done with Facebook live. And then jointly, their ad platforms. Both of them.
So they have a lot of information. And what AT&T did to convince the US department of justice that this was okay, is they said they need to have a fighting chance against these Tech giants by acquiring all this information, and merging with Time Warner. So then these two very large tech companies–these informational giants, telecom and tech–are now joining into one as a media company of some kind. So telecom, media company now. And now they have just as much information they say, as Google and or Facebook. So this is why the judge said, “Okay. I see now your competition now is not necessarily Verizon for AT&T and for Time Warner it’s not necessarily 21st Century Fox or Disney.
But it’s all these other companies too. It’s Facebook, it’s Google, it’s Amazon. Along with the entire media industry.
And they changed the game, right? So you have to look at what’s called direct and indirect competition as now what would have been maybe indirect competition with these other companies like Google and Facebook that aren’t directly in telecom or media are now your direct competition. And that’s how they won the argument.
10:01 PAT: That’s a really interesting train of though and one that I actually tend to agree with. My only concern about that is how often that should be applied. So I mean, it’s applied in this scenario because it’s potentially advantageous for these two titans that are trying to make the deal.
In what scenario should that not be an airtight rationale? Because in my opinion–I understand the rationale behind it–but I disagree that they are competitors with Google and Facebook completely.
10:29 AUSTIN: They just have different use cases.
10:30 PAT: They have different use cases completely. I think that it’s probably coming down to some of the data. The consumer level data that they’re able to obtain, and because they know that they’re going to be in some capacity either coordinating with other companies or selling that information to other companies for advertising use. Just like Google and Facebook do within their own proprietary networks and platforms.
So I understand that side of it, and I think that they’re going to be under more scrutiny because of that, and more hyper-sensitive to that. They don’t want any one company to have a controlling share of consumer information. Especially with all the new regulations that recently rolled out.
But at the same time, to say that Google and Facebook are competitors with AT&T and Time Warner, I don’t find to be factually accurate. Because of the fact that they’re in different industries entirely. If that makes sense.
11:12 AUSTIN: No, it does. I agree with you to that point. I think what we’re looking at is just data on a linear level. It’s across the board, we’re seeing data as the one component that makes all these companies compete with one another. And it all comes down to how their advertising. And they are all advertising companies at their core in one way or another. I guess AT&T not as much, but they work with advertisers. They know that mobile devices are going to be–and we’re going to talk about this a little bit later–is the number one way to consume ads as it’s trending.
So that could be it. You know, a lot of speculation here. We of course, weren’t in on the deal. But this is how we feel about it. And yeah, it’s a little bit worrisome. And also this pretty much solidifies that the other big merger–Disney and 21st Century Fox is going to happen. Because how is this any different?
12:05 PAT: Exactly. Now this… and that was what I was worried about from the beginning, is the precedent that it sets for other massive market mergers. And we even had a full in-depth conversation about whether or not that’s good for consumer choice. I was almost playing Devil’s Advocate in a sense, and saying, “Hey, it can be good for consumer choice in the sense that they’re offering premier services. And they’re each big company is going to be forced to offer premier services because the big competitors in the market will be able to offer them, due to additional cash flow.
But at the same time, I think that anybody just thinking about it rationally knows that if there’s less options, there’s probably less likelihood that they’re going to be able to fit your needs exactly, the way that you want it, because they don’t have to anymore.
And I think that that’s something that we’re going to see, especially in the media, telecom industry.
The Disney and 21st Century Fox deal that Comcast is trying to rival right now, is probably still going to happen. And when that does, Disney is going to own something like 45 different media entities. If that’s not the same thing as controlling the media, I’m really not sure what is.
And the fact that a deal like AT&T-Time Warner is able to go through based on some rationale that I think a lot of the American populace would probably disagree with, I think sets a bad tonality for how the rest of these market mergers are going to go.
13:26 AUSTIN: Yeah. I don’t disagree with that at all. I’m definitely a little bit worried about these mergers and what it means for consumers. And then what they’re going to be doing with our data, most importantly. I think that that’s very worrisome. And we’re entering into uncharted territories as a country with how data sharing is happening and then how we consume media.
So definitely have a lot more talk about that as that comes through. We’ll keep you all updated on the Disney situation as well.
All right, transitioning into our last piece of news for today. Adobe could be the next 10 billion dollar company.
14:00 PAT: Yeah, so news came out on Tech Crunch actually yesterday that Adobe reported huge quarter 2 earnings for fiscal year ’18 yesterday. So the company announced 2.2 billion dollars in revenue for the quarter. Which is up 24% year-over-year. Which means that they’re going to be on an 8.8 billion dollar run rate. Which is within reach of becoming a 10 billion dollar software company.
That is crazy.
14:27 AUSTIN: Absolutely.
14:28 PAT: 24% growth year-over-year growth in a saturated market when you’re already firing at a high capacity and generating a lot of revenue. That is one of the most impressive growth metrics I’ve ever been able to wrap my head around.
14:41 AUSTIN: And what they’ve done is they are a software company. So they haven’t limited themselves to what type of software they’re going to get into. And of course, they started with Creative Cloud. That’s their bread and butter. To quote Tech Crunch, it’s how they said it.
And Creative Cloud of course has Photoshop, InDesign and Dreamweaver which are huge for designers and anyone creating ads. It’s huge across the board for graphic designers and all that stuff.
But they haven’t stopped there. They said, “We’re really good at these core competencies, but we can apply everything we’ve learned from those, and start coming up with new ideas.”
And I think one of the big ones that they did… I believe they run CRM type of services with the Creative Cloud outside of that. But there’s the marketing cloud they have now too. So they have a whole, entire division that’s rivaling Sales Force, which is a huge… just compiles all your data and lets you do checks in on leads. It’s for sales. I’s for marketing. And it lets you have that temp check on your potential customers and current customers.
15:40 PAT: Yeah, and it’s really cool to see somebody going kind of head-to-head with Sales Force. We know that they’re a household name. They’re building the tallest skyscraper in the San Francisco skyline right now. They’re doing very well.
15:52 AUSTIN: Adobe is?
15:53 PAT: No. Sales Force is. Adobe could be on its way though from what we’re seeing. And something they’ve done that’s really intelligent in helping leverage or increase some of that revenue growth. So they were a creative tools company until a few years ago, but then they started moving into marketing analytics and advertising.
Leveraging the fact that they know that designers that are using their Creative Cloud services are either working directly with or in some capacity/partnership with marketing, analytics and advertising companies. So they move directly into those verticals because it’s a space that they know and that their consumers are likely already in.
And it also purchased Magento recently for over 1 and a half billion dollars. Which means that it’s going to have a commerce piece that’s going to go with those marketing analytics and advertising pieces as well.
16:37 AUSTIN: Yeah. And Magento’s CMS. It’s a content management system. Which is what WordPress is. So it’s just a rival to WordPress. Typically Magento is linked with e-commerce, so it’s good for if you have a ton of SKUs. If you’re a company that sells a million different types of products, Magento’s the way to go.
But Magento has a lot of issues in the backend. So as an SEO and working with the development department, it’s not our favorite to work in for a lot of ways. So it’s very functional, in that it does what it needs to for your e-commerce platform.
But working in it isn’t that good. So you can expect that Adobe is going to take that core competency of Magento with e-commerce and they’re going to clean it up. They’re going to make it probably as user friendly as their Creative Cloud. They’re going to make it as user friendly as their sales and marketing platform which we just talked about. That rivals Sales Force. So taking down Sales Force and then coming after WordPress. I expect big things from Adobe.
17:33 PAT: Oh completely. And one more piece that I wanted to touch on really quickly too with that. So there’s all of that that’s going on. And the way that they are pricing it. The way that they are accruing their revenue changed.
So it used to be a non-subscription model. It was like a retainer based model. Like utilization.
Now it is a subscription model that’s recurring revenue. And that has grown steadily ever since they implemented it in 2013, which has compounded the growth. So what we’re seeing is a mix of a few things. I think, they leaned into what they good at with Creative Cloud. They used that as a bridge into related industries and potential opportunities with marketing analytics and advertising. And they have the right pricing structure and the right competitive mindset to go head-to-head with a big player in the space and actually make some waves. Which is super-exciting to see. Especially going off of the last conversation we had, where too much market control is not good for consumers. This is an example of a company being innovative and seeing good success with that in also giving consumers more choice.
18:38 AUSTIN: And they’re not… to rephrase what I said earlier… taking down Sales Force. They’re just rivaling them in competition. I believe Sales Force…
18:46 PAT: Be hard to take down Sales Force…
18:48 AUSTIN: They reached about 3 billion in revenue for the first time last quarter. And Adobe did 2 billion for the first time. So they’re neck and neck but it’s just impressive, with not being that CRM service company which they were in the past. They’ve become that and adapted to that. Along with still offering their Creative Cloud. And then now moving into CMS. So very impressive, Adobe. I know we’ve got a couple buddies working up there.
19:11 PAT: Yeah, good job up there Nick. I see you working.
19:14 AUSTIN: Yeah, Nick Herrera. Shout out to you.
19:16 PAT: Shout out to Nick.
19:22 AUSTIN: Main segment today. We’re talking about digital advertising opportunities and threats. Mary Meekers internet trends report just came out. We found this on marketing land. It’s a very in-depth piece of information on where people are spending their time consuming media and then how companies are allocating their ad-spend to those people that are on those certain types of media.
So realistically what we want to look at here is what the opportunity is for marketers to get in front of their audience. And maybe the most economical and most efficient way based on media trends. And time spent in media.
So I think what we want to dive into first is, of course, mobile.
20:02 PAT: Yes. Okay, cool. So the reason why this is… so just to be clear this is opportunity. Not talking threats yet. So the reason that this is a huge opportunity is because if you think about the way the advertising works, especially on Google. We’ve talked about this before, but cost per click is assessed on an auction basis. So what that means is you need to be able to willing to spend 1 cent more for the first position than the competitor. And the second where you hit a threshold where you’re not comfortable spending 1 cent more, the competitor–if they are–will jump ahead of you.
The reason that that is significant is that’s the amount that you pay for a click, right? And the reason that it’s even more significant with what we’re talking about is because if there’s more competition in a given vertical, placement, auction… you’re going to be spending more for your click.
20:52 AUSTIN: Right. And so what we’re trying to discuss here is that when you’re looking at maybe desktop… to place an ad on a desktop version, there’s much more competition because up until the last couple of years, the majority of Internet traffic has been on desktop.
And now we’re looking at a little bit of a transition. Thanks to mobile devices, smart devices, we’ve switched. To give you a look at just this past year, 18% of people spent time on desktop. 29% of people spent time on mobile devices. And that is where they’re spending a majority of their time.
Adults last year averaged 6 hours per day on their mobile device. That is a large amount of time to be spending in front of that little screen.
21:35 PAT: Yeah, but here’s the craziest part. More people are on mobile devices but less advertisers are advertising there. So going back to what I was saying before, that means that you’re going to be spending less dollars for a click on mobile, which is where the majority of your audience likely is… depending on your industry… than you would on desktop. Which means that you’re going to be acquiring cold traffic for a lower acquisition cost than you are on desktop.
21:58 AUSTIN: So if you’re a company with a marketing budget and you market on every single medium. Print, radio, TV, desktop and mobile. And you’re looking at where’s my audience? Where should I allocate my ad spend? I want to allocate my ad spend based on where people are spending their time. So if 36% of the time my customers are spending time in front of the TV, I want to allocate 36% of my ad spend to television. Because I want to make sure I reach them every day of the week.
Looking at mobile, this is what we’re looking at from a metrics perspective. 29% of people–as we talked about–in front of mobile devices, consuming media. Only 26% on average of an ad budget is allocated towards mobile devices.
22:43 PAT: Right. And it should be at the least 29% because…
22:45 AUSTIN: So we’re looking at a 3% gap in allocation of ad spend versus people spending time in front of that.
And that then creates is a cheaper cost-per-click…
22:53 PAT: An opportunity. What it creates is an opportunity to get in front of more people for less money. Which at the end of the day, is the name of the game with advertising.
And that was something… looking at every other device they’re what are called “Over-indexed.” It means that people are… let’s say they’re allocating 13% of their ad spend to radio. Only 9% of their audience is there though.
They’re putting 36% of their ad spend into TV. 36% of their consumers may be watching TV, but we know there’s a lot of issues with trackability. And seeing where your dollars are going and what their returning for you.
Desktop was similar. So really what the gist of this is is think critically about your offering. Think critically about where you’re showing up and whether or not you could benefit from leaning into mobile more. Because I’m telling you that the opportunity here is one that is not going to exist for very long.
23:44 AUSTIN: You seriously need to think about mobile as THE way to reach your audience now. It is no longer an option, it is THE way to reach your audience. You need to have that presence with them in front of what’s their most important type of device to get information and to consume media.
Google has forced our hand as marketers and as businesses to go that route. What they’ve done is rolled-out mobile first indexing. And what that does is instead of taking the desktop version of your website they now take and prioritize the mobile version of your website for indexing purposes.
So what that means is if your website is not compatible with mobile devices, you’re going to have issues with Google. You’re not going to get those rankings that you want. You’re not going to get in front of your audience.
And this is just no longer a choice. It’s just what you have to do to be present, in front of your audience.
24:33 PAT: Yeah. I completely agree. And I think that just reading through the trends here, there are things that we already know. As advertisers, we’re in the weeds with these. And we already know a lot of the trends that are coming down the line.
But it’s nice to be able to substantiate for you guys, and paint that picture with data. Because I think a lot of times it gets lost in the noise. Gets lost in the shuffle. People think advertisers are just advocating for whatever they can to get additional ad spend, because oftentimes, it means that we get paid more. But that’s not the case. Our job is to help you scale your business. Our job is to help you grow it.
And a huge component of that is being at the right place, at the right time, with the right message. And the right action.
And mobile–opting into that is a crucial, crucial, crucial component.
25:16 AUSTIN: All right. Let’s look at threats. What could be the downfall if we’re going into mobile digital advertising? What’s the biggest threat in that market?
25:23 PAT: Robots. AI. So in this… I kind of said that as a joke… but seriously…
25:29 AUSTIN: Not the Terminator, right?
25:30 PAT: Not the Terminator. This is like… so there’s a couple of different threats. So from an advertiser’s perspective, we have always been operating under the assumption that AI is eventually going to figure out how to automate our job. To an extent, there’s already conversion optimizing. There’s optimizations for ad rotation, just based on the data that’s coming in.
It’ll always need the human element. It’ll always need the human touch. AI is not sophisticated enough, nor will it be within our lifetime to craft that sentient side of it as closely as a human can.
But we had always thought a lot of the analytical work is eventually going to be replaced. What we’re finding out though, and what was really interesting about this is that that might not be the case.
So reading through this, we all know about the GDPR…
26:20 AUSTIN: European Union…
26:23 PAT: Yeah. The data protection regulations that rolled out. What that means is there’s going to be less data on the personal, consumer level readily available for AI to be able to interpret and iterate off of.
26:34 AUSTIN: Yeah. So when we’re looking at AI and what these companies that would you like you to sell you this software as a service. This AI, this marketing platform, is that they want to automate the way that you advertise. You no longer have to spend time bidding. You no longer have to spend time constantly optimizing. They’re going to do it for you.
And how they’re going to do that, and how an AI service would work is they have to have so much information readily available at the touch of a button for you, for that to make sense. So that you are efficiently spending and optimizing for your ad spend. You’re getting a return on your ad spend based on their automated services.
But what we’re talking about now is these bots might not have as much information as they first thought they would. Because of honestly what Facebook did. And how they’ve really screwed up.
And how people access your data is now… governments are saying, “All right. We seriously need to limit what these large companies have in front of them.”
And so what that means, is we’re going to have to rely on humans a lot more as we don’t go into this universe where AI had as much information as they thought to still run ads. To still do your marketing. To still have that pulse on what your customer’s doing.
27:38 PAT: Yeah. And I think there’s 2 pieces to it. One is the data analytics side. So even just at foundational level, it’s not going to have enough information to operate off of successfully.
The second piece is the qualitative level. So nowadays there’s a higher amount of scrutiny from society in general about how you’re portraying the brand. Whether or not the things you’re saying are factually accurate. Fake user generated content. These are all issues that Facebook has dealt with directly. And it has become prominent in the news because of Facebook’s botching of these issues.
And AI is NOT the solution for those things. Because it’s still learning. It still needs to get caught up basically. It’s still figuring out what to do. And it doesn’t know your brand regulations. It doesn’t know your brand guidelines. All it can do is interpret the data that it’s given and spit out what it thinks is the correct answer based on what has been given to it.
28:29 AUSTIN: And where I think this could really be an issue is with creative. So how ads are created and what they look like and what they say.
So if you’re going with an automated service, you’re expecting that automated service to build these ads. They’re supposed to be in charge of the creative. It will analyze its data in front of it, and then make decisions on what the target audience should see based on that.
But what you run the risk of is them not having the most accurate data. So they’re starting to spit out creative that doesn’t necessarily hit the mark. And then on the flip side of that is us as humans, we can kind of QA that a little bit better. We can see, “Hey, that doesn’t sound right.” or “Oh, that doesn’t look right.”
29:09 PAT: “As a human, that makes me feel uncomfortable. It makes me feel this way, or this way, or this way. When it should make me feel this way.”
29:16 AUSTIN: Sure. And that’s what you run the risk of. Is that you don’t have that person at all times saying, “Yes. This ad can go.” “No, this ad can’t.” And you run the risk of not having that pulse on your target audience.
29:27 PAT: Exactly. And so that’s why we consider it to be a threat. Obviously AI is something that is an emerging technology, still. It’s getting better. It’s getting smarter, more sophisticated. I do see it being a major player in conjunction with humans. In the ad space especially where a lot of it is data analytics. But at the end of the day, just the way this society is moving, and the type of scrutiny and new corporate responsibilities that companies and brands are put under. You need to be prioritizing how you’re positioning the brand, and humans can do that more effectively right now than AI can.
29:58 AUSTIN: Yeah, I don’t think we’re there yet. But I think the biggest takeaway from this one is just that opportunity. Companies like Google, Amazon and Facebook are already ahead of us in how they’re generating new revenue based on how their allocating their ad spend. So their very aware of this, and their scaling at an astronomical rate. And their advertising budget is going into their own platforms, truly.
So Amazon’s advertising on Amazon. Google their advertising on Google and Facebook on Facebook.
So I think that what we’re kind of seeing too is these 3 companies shift into their own. Like, Amazon was using Google for a lot of product advertising, right? At the very top. And they just recently stripped a lot of their budget away from that.
30:38 PAT: Yeah. And it’s kind of unclear what direction that decision was made in. I don’t know if it was Amazon saying “we’re gonna just advertise on Amazon.”
It might have just been Google saying, “You can’t advertise here.” We don’t really know that for certain. It’s come out on the news that it was more like “we’re dedicating our own money to our own platform.”
I don’t buy that at all. Google is still the world’s biggest search engine. Amazon’s number 2. Amazon’s the second biggest in the world, and their trying to scale. But at the same time, Google is still where the vast majority of your consumers are going to be.
31:13 AUSTIN: I don’t ever see Amazon being number 1. And the biggest reason why is cause the majority of search queries are questions, right? I mean, every search query is technically a question, but what I mean by that is informational versus transactional. And Google has both.
You can’t have informational queries on Amazon. Because you’re trying to buy something. So if you type in “What’s my favorite color?” Or “When did somebody, somebody was born?”
31:40 PAT: What team did Bill Laimbeer play for?
31:43 AUSTIN: Perfect.
31:44 PAT: You can’t find that on Amazon. And that’s why I agree with you completely. I hear what you’re saying.
The difference though, is that you can measure the intent on Amazon much more closely than you can on Google. So there’s two different types of intent I think on Amazon. It’s either, “I wanna buy this product,” or ” I wanna see how much this product costs.” And they kind of are one and the same, but one is for showrooming and one is for buying.
And the fact that they’re…
32:08 AUSTIN: Thinking about the funnel. “I know what I want to buy” is at the bottom. And then which price is the best is one above.
32:14 PAT: Exactly. So I see Amazon being… they focus on the middle and the bottom of the funnel. Highest intent. It’s either, “I’m looking at price and I’m deciding.” Or, “I’m ready to buy.”
Google is the top and the middle. So it’s discovering who the brand is. Discovering what information they need to make the decision.
32:30 AUSTIN: Could say Google’s the whole funnel.
32:31 PAT: Well, yeah. It’s the whole funnel too. But I would say that they’re really… you do see a heavy emphasis on the informational side. Because that’s what it has to offer.
But yeah, to your point. I mean, Amazon is leaning into their platform much more because I think that they have an understanding of the intent that the users are searching with. And they think that they can capitalize on it for a better return there, than they do on Google.
At the same time, there’s a lot of opportunity even within Amazon that advertisers should be leveraging as a whole. Amazon advertising has started to get a lot more robust in the last 2 years. It used to not give you a ton of data. Used to not be able to optimize off of it as effectively. The backend was kind of a mess. It just looked like a product feed with a ton of numbers and SKUs.
And now it’s starting to give the advertisers back some of that feedback loop, so they can iterate and keep spending more money. And justifying their Amazon costs.
And then you also see voice… voice advertising. So Amazon Echo… people who have installed the Amazon Echo skyrocketed at the end of 2017. I bet money that is going to be the next big emerging subvertical within digital marketing
33:39 AUSTIN: I agree. And just to close this down, I don’t think that in the 21st century there’s a better time to be a marketer, specifically an internet marketer, than right now in 2018. Consumer confidence? All-time high in the last 6 years. We’re looking at strong lifetime value across the board.
We’re looking at one of the lowest unemployment rates we’ve had in an extremely long time. Just around 3.8%. So people are buying. People have more money than they did 10 years ago. Which is equating to if you’re marketing and you’re marketing on mobile, you’re probably going to have a pretty good return on your ad spend. If it’s fully optimized, if you’re hitting that target market. You can expect it to do pretty decent.
So I’d say give Patrick a call if you wanna really make some money.
34:23 PAT: Yup.
34:25 AUSTIN: We’re closing the show down with our favorite segment. We’re talking about our very good friend…
34:31 PAT: Long-time listener.
34:33 AUSTIN: Long-time listener Elon Musk. The Boring Company. What are they up to Patrick?
34:35 PAT: All right. So there’s something new with them every single week. It came out this week that they are going to be… so this is going to sound weird… So they’re basically building a set of underground tunnels in Chicago to help avoid traffic. That go directly from O’Hare International Airport to the business district downtown.
So the whole reason that this became a venture in the first place is because Elon Musk describes traffic as “soul-crushing.”
35:07 AUSTIN: Yes he does. And he’s not wrong.
35:09 PAT: He’s not wrong about that. It’s just funny because he’s the first one to try to really do something about it.
35:14 AUSTIN: So, okay. He wanted to do this in LA. This was like his solve for traffic in LA. He was crusading around trying to get LA to do this, and they’re just not buying it. LA is built on top of itself, pretty much. The way that LA’s built, it was never supposed to be this thriving metropolis. It was just these little sections of towns that were built very early on when California became a state. And then all of a sudden, it just turns into this just conglomerate of absolute power. Sheer commerce.
And it’s built in such a weird way that it just probably wouldn’t work. But Chicago is similar in a way, but is actually built–I would say–a little bit better. And it’s also smaller.
35:55 PAT: It’s a better test.
35:56 AUSTIN: They have a better test ground. So they said why not? “Why the hell not, Elon Musk? Come on down.” Because Elon Musk is paying for the whole thing.
36:03 PAT: Yeah, exactly. The Boring Company is going to be footing the bill for this. They said they can do it under a billion dollars. It’s probably going to cost up to 800 something million.
36:11 AUSTIN: Yeah, right.
36:13 PAT: That’s gotta be wrong. We’ve seen how good Elon is at his estimates, right? Yeah, take…
36:20 AUSTIN: Not to talk badly about Tesla, but My God.
36:22 PAT: If you’re listening Elon… “We’re going to school Toyota on lean manufacturing.” No you aren’t. You missed your quota by several thousand cars, you know?
So I doubt that it’s going to cost under a billion dollars. But this is really, really cool stuff. It’s going to be 17 miles of underground tunneling that has no traffic. ON these little cars that are autonomous electric vehicles that are on an electric track. So they can’t crash. And these things are going to fly, Austin. These things are going to go anywhere from 125 to 150 miles-an-hour.
36:53 AUSTIN: I just let an “Oh Dude,” slip because I was looking at the picture of the car. I got really excited. What Elon’s up to… this is futuristic. We have reached the future.
37:02 PAT: This is like right out of the Jetsons.
37:05 AUSTIN: I love it. It’s just this gravitational vehicle. It’s probably going to be set up like the bullet trains in Japan, where those things just book. And they’re just levitating basically. With magnets that aren’t attracted to each other. So positive-positive makes it float.
And these things are going to go so fast. Frictionless tracks, skates… I mean, these things are going to fly. You’re going to be able to use it if you’re going into the airport.
I honestly really, really hope this works. I am so pulling for Elon. Because he’s just a dreamer, man. This guy’s optimistic about our future, when people are so dark and bleak about where we’re at as a country. This guy is like, “No. We’re doing amazing things. I’m putting electricity in every home. I’m changing the way cars are. We’re going to have these bullet-trains underground. We’re going to Mars.” I love this guy.
37:50 PAT: We’re going to Mars for fun. We’re going to beat NASA there. We are going to build a fleet of electric, underground skates that can travel at light speed. Just to save you from the inconvenience of traffic. This guy is the man, and I think that’s probably been such a long-time listener.
But at the same time, I do worry about him setting himself up for failure here. Because it would be by far… far and away the cheapest undertaking of this scale in the history of the world.
38:22 AUSTIN: Let’s do a little metrics here on what a subway cost. 2nd Avenue subway, New York City, guess how much it cost per mile? 2.5 billion. Per mile. That’s per mile.
38:33 PAT: That’s not what I was going to guess.
38:35 AUSTIN: I’m not sure what he’s estimating how long this track’s going be. But I guarantee it’s more than a mile.
38:42 PAT: Does he get a discount for digging underground? Do the work yourself. Make the road, you don’t have to pay as much to build on it.
38:50 AUSTIN: I honestly am not sure what he’s thinking in terms of costs. But we here are pulling for our good friend Elon Musk at the Boring Company and Tesla. Keep making flamethrowers and keep thinking about underground railroads.
39:00 PAT: And if you need any digital marketing help, you give us a shout.
39:05 AUSTIN: Oh yeah.
39:05 PAT: All right, you guys. That just about wraps up episode 40 of Flip the Switch presented by Power Digital Marketing. Join our forum. We have a private forum page on Facebook called “flip the switch podcast forum.” Love to talk to you. We are sitting right by the computer, waiting to approve you. We always put in articles, quizzes. We understand what you guys want to hear, and then we bring it to you on the show.
So do that. We’ll be waiting for you guys. But until that time, we’ll see you next week. This has been Pat Kriedler, Austin Mahaffy, Joe Hollerup and John Saunders signing off.