How Apple Upended Digital Advertising — With Orchid Bertelsen and David Herrmann

Orchid Bertelsen and David Herrmann are two senior advertising professionals who’ve watched Apple’s anti-tracking changes upend the digital ad industry from the ground. They join Big Technology Podcast to discuss how what Apple’s “ask not to track” notification actually works, how it’s changed the way advertisers do business, how small businesses have felt the impact, and which platforms it's empowered at Facebook’s expense. Stay tuned for the second half where we discuss how Apple, TikTok, and Amazon’s businesses have changed thanks to this massive, underrated power move. This week's direct-to-consumer article: “A Reckoning.” The Direct To Consumer Craze Is Slamming Into Reality. Learn more about your ad choices. Visit megaphone.fm/adchoices

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Alex Kantrowitz?

  This episode is brought to you by Genesis. What does it actually take to put Agentic AI to work across an entire enterprise? I recently spoke with Genesis chairman and CEO Tony Bates about why orchestration is emerging as a competitive advantage in customer experience and what companies need to get right in the AI era. Then I sat down with Adam Mitchell, head of enterprise business solutions at Voya Financial, to go inside a large-scale Agentic CX transformation, including the business decisions, trade-offs, and lessons along the way. You can watch both conversations now on my YouTube channel today. It's never been more challenging to get frontier compute. How do you know where to look, who to trust, or how much to pay?

• 0:43Alex Kantrowitz?

  Akash is an open cloud that provides easy access, flexibility, and peace of mind. That's how companies like Razer were able to cut their inference cost by 15 times. Visit akash.network/alex for a free consultation. That's akash.network/alex for a free consultation.

• 1:03Speaker 01

  LinkedIn Presents.

• 1:23Alex Kantrowitz?

  Hello and welcome to the Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. So before we get into this week's episode, just two quick housekeeping things. Number one, we would love it if you guys would rate the podcast. There's an opportunity to rate on Apple and there's a new way to rate podcasts on Spotify. So if you're enjoying the podcast and want to give it a rating, that would be amazing. Second thing is that I'm going to introduce a new feature called Office Hours, where I'm going to be hosting an audio event to talk about the week's show. And we'll do it as much as we can. And we're going to do the first event of that nature on Friday.

• 2:04Alex Kantrowitz?

  That's going to be Friday, March 18th at noon Eastern Time, 9:00 AM Pacific. And I'll be taking all your questions and I'm going to try to get Orca and David to come too. We'll see how they're going to feel after this week's podcast, which is a great segue to introduce our guests.

• 2:22Speaker 02

  Our guests today are Orket Bertelsen, CEO of Common Thread Collective, which is an e-commerce growth agency, and David Herman, who's the president of Herman Digital, a social media ad agency. Why are they here? Well, in case you haven't been following the headlines, "Apple has upended the digital advertising industry" by those little pop-up windows you might see if you're an iPhone user that say "Ask App Not to Track." It seems innocuous, it seems like a little thing, but it's totally upended the way that digital advertising works, especially on Facebook. So there's this massive battle going on behind the tech giants. We hear a lot about some of the changes, but we rarely actually speak to the practitioners

• 3:06Speaker 02

  and get a sense as to how this is working on the ground and who's impacted. Well, that ends today because we are going to speak with them, and I am thrilled to have you both on the show. Welcome.

• 3:16Speaker 03

  Happy to be here.

• 3:17Speaker 04

  Thanks, Alex. Yeah, excited to be here. I can't promise this is going to be a cool-headed conversation. I think David and I, maybe we'll battle it out just to keep things spicy.

• 3:27Speaker 02

  All right, we definitely will introduce some debate. So, you know, before I decided to do an episode like this, I did wonder whether anybody was actually going to care. Like, why would people care that Apple is putting this "Ask Not to Track" window out there? What is actually going on? And advertising tends to be, you know, a thing that the broader business, industry, or community, or even the general audiences, tends to fall asleep on. But this seems like, you know, pretty big to me. So, David, can you explain what Apple's done and just how big of an impact that's had?

• 4:04Speaker 03

  Yeah, I'll start with, I'll try to make this as simple as possible. Essentially, the internet is run by, I guess, cookies and tracking. That's how we do most of our advertising across the board. If that's anything from social media to affiliate to news organizations and everything. And what has always happened is essentially when you go on to any website, there is a pixel that tracks your data. And for the longest time, it was sort of this like, okay, if you're visiting the website, you assume that, you know what? This is going to be happening and you're going to get this data. And the big behemoth in the world being Facebook is probably going to track me. Apple essentially came out and said, you know what?

• 4:48Speaker 03

  We are not really happy that this is going on. And we are going to essentially sell a value prop to our customers that, you know what? We're going to actually have it where you have to be, you have to ask for permission to get your targeting. And so that's what they did is they're essentially enabling this, this block that, that allows a website, whether it be Facebook, whether it be TikTok, whether it be Buzzfeed or whatever it may be. If they have a mobile app, they have to basically opt into being targeted versus how we normally were, which was always opt-in. So that's sort of the high level. And what that means is, just to make it as easy as possible,

• 5:30Speaker 03

  is that if I or anyone else is using advertising like Facebook to target a user, if a user has opted out, we can essentially serve them ads after a one day period. Now, that means we can still serve ads to people. It just means that the data that we get back from them and the way that the systems use that data is no longer allowed if they have opted out.

• 5:54Speaker 02

  And isn't that a good thing? Isn't that a good thing, David? Like, people are creeped out by the way that they get tracked. So, you know, they're, why isn't this the best thing that's happened to the internet?

• 6:06Speaker 03

  So I think there's, there's, there's two sides to that. There's number one, yes. In theory, I think that Facebook has been, I guess, probably the biggest element in the room of not the best data practices. It's best with the same.

• 6:24Speaker 02

  You're being very generous.

• 6:26Speaker 03

  Yeah, being very generous. But, you know, a lot of people get confused with this because they assume that, you know, everybody that's using your data actually owns this data, is storing it on their servers and goes, you know what? I know that Alex is in, you know, Austin, Texas right now at this event doing this. I have his email, his IP address and everything. And the reality is, that's not really the case. A user or a small business that's running ads on, say, Facebook, they don't have like these email addresses and all this stuff they can target. It's this itemized, like, random string of numbers that no one can really see for the general user. Yes, there are situations, like, we know of certain companies that have harvested data over the past

• 7:09Speaker 03

  that have done some sketchy things with that data, but that has not necessarily really been the case as of, pretty much since 2017, 2018. A lot of the practices that were done, Facebook put a pretty big kibosh on and made it a lot more difficult for that data. And so, that's, I mean, yeah, it's an elephant in the room of like, "Hey, this is, this is, you know, I don't know. It's against every practice to spy on people." But the reality is, you need to spend money to run a business online because it costs money from like a server issue for news or whatever it may be. And the only way to make this work for brands and for businesses is to at least get in front of the right eyeballs.

• 7:53Speaker 03

  And so that's really what this does and prevents, on Apple's side, what basically is preventing them from doing.

• 8:01Speaker 02

  Yeah, and I think that this is sort of where people have an uneasiness, where they start to think, they hear people from the ad industry refer to them as eyeballs, not people. And that's where some of the discomfort begins with. Or could you add something to say? I'm curious if you'd like, well, I want to hear what you had to say. And then I also want to throw one at you as well, which is, didn't the advertising industry sort of bring this on itself? Like, it seems like this is, you know, people are opting out en masse to Facebook. Isn't it kind of Facebook's fault?

• 8:30Speaker 04

  Oh, that's a very leading question. See, I'll build on that. I mean, I think as a marketer, right, especially as a digital marketer, there's always been this question of, just because we can, should we? I do think there was a period of time where, you know, especially with digital marketing, everyone's like, all the marketers are like, well, we can measure absolutely everything. We can track everything. We can know all these things about a person. I was like, yeah, but like, do you really need all that information to sell a frozen pizza? To sell a backpack, right? And so we kind of went from this like glut of information where we didn't look at whether or not we should have it or whether or not we could action on it, but just this idea of more. And so I think like, you know, towards the end of my time at Nestle, actually, which was

• 9:13Speaker 04

  where I was before Common Thread, really embraced this idea of data minimalism, right? You kind of eat what you kill. And so when it comes to consumer data and to getting the right message in front of the right person at the right time with the right value proposition, what kind of information do you actually need? How much data do you actually need in order to get that done? So I do think, I think to your point, of course, you got a little spicy with that leading question of did the ad industry bring it on itself? Yeah, I mean, I think the cynical side of me will say, yes, we did, right? In that just because, you know, we could acquire information, we did. We never really stopped to think about, all right, what is this in service of?

• 9:57Speaker 04

  And is this in service of the consumer? So yeah, that's kind of my, my little not so spicy take on it, but certainly my perspective.

• 10:05Speaker 02

  Right. And so let's talk about how practically is changing because people have opted out like crazy when you're asked, asked not, app not to track through Apple. Many, many people say, yeah, why would I want that app to track me? And so they opt out. And so I want to hear how practically this has changed the, the practice of buying ads online.

• 10:35Speaker 02

  Are you able to, to buy ads as effectively as you could? And then a corollary to that, what's going on on Facebook? Because another leading question, David, you told me that, you know, you can now optimize about, about 50% as good as you used to be able to on Facebook. So how has that actually changed the way that ad buying is working?

• 11:01Speaker 03

  Yeah. Um, so in terms of like what has kind of transpired, I think there was a data set that they said like 93%. I could be off a little bit, but it's like 93% of people have opted out.

• 11:14Speaker 03

  And you know what that does is it's just, it's just a, I guess a train work when it, a train wreck when it comes to ad optimizations because suddenly a company that's just use Facebook as, or Meta as we should call them. The elephant in the room, the big one is, is that, you know, suddenly this company that has all these data sets for their ad targeting has suddenly lost essentially all of it overnight. And that does a number on the ad auctions, that does a number on anything from optimizations because suddenly no data is coming in. That goes all the way from the third party stuff, which if people don't know, essentially third party data

• 11:55Speaker 03

  is companies would sell their data to Facebook for, you know, whatever, how much money. And then we would pay for it through the CPM costs, right?

• 12:04Speaker 02

  CPM is cost per thousand, thousand eyeballs.

• 12:08Speaker 03

  Yep. And so that practice essentially was-

• 12:11Speaker 02

  There I go. I just said eyeballs. David, you've converted me. Cost per a thousand people that you reach. Go ahead. Sorry.

• 12:17Speaker 03

  Yeah. Uh, so you know, that third party data was, I think sunset, I believe it was 2018. Was the date that Facebook got rid of that. Um, I could be wrong on that date. But essentially they were already sunsetting some of this data, post all of the Cambridge Analytica stuff. And so, you know, now that we're in sort of, you know, we're almost coming up on the year anniversary of the, the iOS 14 point, it was iOS 14.2, um, sort of drop is the, the data sets that Facebook has are not nearly as good as they used to be, but there's another side of this. It is the attribution side of it.

• 12:59Speaker 03

  So in if a lot of companies, they're using Facebook Ads Manager or TikTok Ads Manager as really their their source of truth, right? They've gotten by for years and years and years where they've just trusted Facebook. Oh, well, there's 12 sales and they all came from Facebook. Therefore, we have a three X on Facebook. Let's scale that ad set, right?

• 13:20Speaker 02

  Right. And I just want to stop you for a second. Yeah. Because just want to talk through the mechanisms of this attribution means. Are my ads leading to sales? And so what they would see was I got, you know, Facebook, when you're at when the app could track off of the app before Apple came in and put this barrier there. People could see that their ads concretely led to sales and they could optimize based on that. But now, all right, now you can pick up.

• 13:45Speaker 03

  Yeah. So so now the data that Facebook has is only limited to within that one day. Um, uh, optimization. So because of the way that the Apple tracking works, Facebook only has 24 hours to essentially track them. Well, most people, this, the the way that the system works is most people are not making that initial purchase. Right? The higher the price of it is, they're not buying them that one day. So what Facebook is doing is Facebook is essentially modeling the data for you within an ad platform. Now, if you know anything about data and modeling data, there is so many uh errors that could happen

• 14:24Speaker 03

  in in that scenario because you're allowing a system that is not really able to see your backend anymore. Um, legally, anyway. Um, they're they're having to make assumptions based off that data. And so where we are essentially a year into this is a Ads Manager, let's just use Facebook. That's essentially broken. Um, in some instances, we'll have weeks where the data within that platform is off by upwards of 60%. Where we'll have ads, we'll see that purchases are coming in, but they're not being attributed to anything in platform. And we just have to assume that they're working because that's just the reality situation.

• 15:06Speaker 03

  And what that creates is a domino effect because you're not able to scale what you think is probably working because you're going to have to make a lot of assumptions. For a brand that's spending, you know, I work with brands that spend anywhere from $10,000 a day up to $70,000 a day. That's a lot of money to make assumptions on. And so, you know, you're needing to basically build essentially first-party data as one aspect of this, which we can get into the nuances of first-party data, but essentially like

• 15:38Speaker 02

  I don't want to.

• 15:38Speaker 03

  Google Analytics.

• 15:39Speaker 02

  Yeah.

• 15:39Speaker 03

  Yeah. And so you're basically making a lot of assumptions here. So that's the reality of a lot of brands are facing right now. And so that's where we're at.

• 15:50Speaker 02

  So Orchid, what does this mean for e-commerce businesses that are relying? You know, because here's the thing, we always hear this line from Facebook, think of the small businesses. And it seems when you hear someone like Sheryl Sandberg say it, it seems like a little bit like you're, you sound like a, you know, mid-rate politician talking about like, you know, mom and pop businesses on mainstream. But it does seem like Apple's changes are actually having impacts on small businesses' ability to run successful businesses online. So what do you, what's, what's actually happening?

• 16:24Speaker 04

  Yeah, I mean, I think, I think that's partially true, right? I mean, growth is hard to find regardless. Obviously, e-commerce has grown quite a bit, especially through COVID. But we're talking about limited budgets, like, you know, impacts like this are felt on smaller budgets and they are in larger budgets. So the big brands can continue to place their big bets. You know, for years, they really haven't had much of an attribution model. They kind of, you know, acquiesce to MMM, which is mixed media modeling, which is a lagging indicator on which channels were effective for you. But they also, those large companies don't also have to, you know, make sure that they have cash in day in and day out in order to pay their staff or make sure that their business is afloat.

• 17:08Speaker 04

  They're really, really looking and focused in on cash flow. Um, uh, for the small businesses. And so, yes, I mean, totally agree with David, right? It's like, hey, the, one of the biggest propositions for digital marketing is the agility, is attribution, is saying, is, is the ability to say, all right, if I have um, another dollar to spend, where should I spend it? And so on a cash flow important business, you know, having lack of insight into where you should spend that next dollar um, is extremely impactful. I think part of it too is that your, your pool that you're fishing in is much smaller as a small business. You're, you have more of a specificity to find the right people who will guarantee product

• 17:50Speaker 04

  market fit, who maybe are similar to the founder who actually created the product because they wanted to solve a problem for themselves. Whereas for the big guys, it's, it's less of a worry because, you know, I used to joke that for the large food and bev manufacturers, their target was anyone with a mouth because they had nationwide distribution, you know, full coverage in every region. And so it almost didn't matter, you know, who they were advertising to because they were advertising to the masses. But when you look at all the new companies, the new e-comm native companies um, cropping up, they solve a very specific problem um, for a very specific type of person. So I, I, I do think that, you know, ultimately um, smaller businesses, um, smaller than the big guys are, are impacted by this in a negative way.

• 18:33Speaker 02

  Right, and let's talk about the-

• 18:34Speaker 04

  But there's also opportunity, which we'll get into. There's also upside.

• 18:38Speaker 02

  I want to talk quickly before we get into the upside about like the, how this is specifically impacting one crop of businesses, so it can bring this concretely a little bit um, you know, into focus, which is the direct to consumer e-commerce business. So, we're talking about companies, I wrote about this in Big Technology last week, but I just want to expand on it. Uh, we're talking about companies like Warby Parker and Allbirds and Hims and Hers, you know, companies who said, we're not going to set up uh, brick and mortar, we're not going to set up physical shops, uh, most of them and ended up, you know, do putting a couple together, they just walked by an Allbirds and a Warby Parker uh, store in A- in Austin this weekend, but they still rely mostly online.

• 19:21Speaker 02

  And because they don't have these big, you know, physical footprints, what they need, they need is, you know, to build these businesses based off of online ads where they can reach people on places like Facebook for cheap. Um, sort of substitute the real estate cost for advertising costs and you can run a new age business. Uh, but so how is something like the Apple changes there that when, when they lose their ability to track well, um, you know, spending on Facebook ads, what's the downstream impact of that? Like what happens to these businesses?

• 19:54Speaker 03

  Yeah. Um, so I think, I think there's a couple of factors. Number one is, you know, you're paying a lot more for the same people that you were a year ago. Um, so the, the, the economics of this just suddenly got way more expensive. Um, you know, I, I think Common Thread has a really good, um, what is it called again? The, uh, the, the reporting tool you have for the CPMs and you're like, Statless? Statless, yeah, this aggregate of like this data. And, uh, it's a really cool stat because it shows you just the increase in CPM costs, uh, year over year as it relates to just the iOS 14, uh, Apple changes.

• 20:31Speaker 03

  And so that's number one, we're, we're not able to, brands are not able to scale quite like they were and get their dollar to go further than they were. Um, but there's a little caveat to that, right? Because we had a unique, uh, year and a half to two years where everybody was stuck at home. And naturally the CPM costs were, were really cheap. 2020 was completely ridiculous and we're trying to now have to go back to 2019 to make any comparison of like, you know, the data you're, you know, in this timeframe. But that's the big, that's the big thing is, you know, before we would get, you know, CPM costs would be, you know, five to six dollars on, uh, some of these campaigns that you're now looking at 14 to $20.

• 21:16Speaker 03

  And it's just, you know, it's a, it's just that. It's like, we're not able to spend as much to get this. Um, you know, like, uh, a good study was, um, like Purple Mattress, right? Like everybody saw the Purple Mattress ads in, you know, 2017, 2018, like they're everywhere. Well, those ads that they were maybe spending a penny a video view suddenly are maybe three cents or four cents. But in the grand scheme, I think that, that adds up pretty, pretty quickly. So I think that's the biggest issue that we're seeing right now.

• 21:47Speaker 02

  Were these businesses actually strong businesses if they had to like rely on Facebook to reach people and like just a a small increase in the price to advertise to people can do such damage? And then the other thing that we're dealing with also is is shipping costs which have gone up from somewhere around $2,000 a container to get it in from China, it's now 20,000. But again, like the fundamentals of these businesses, like it obviously makes sense sell on the internet. But were the fundamentals of these businesses strong if they could get hammered this hard by, you know, a simple tracking change? Parkin, you're up.

• 22:22Speaker 04

  That's a fantastic question. I think I think that's the right question, right? Because like when we talk about the heyday of Warby Parker, of, you know, those early guys of D to C, like that was a very, very different time. So you could, I mean, their digital spending was not as large as it is today. CPMs were lower, like they they kind of got by on a lot, a lot of different things that, you know, kind of rode the tide of their favor. But right now, I mean, what is, what is that saying? It's like, you know, you don't know who's naked until the tide goes out, right? I think this is what we're seeing is that, you know, with cheap, cheap CPMs not no longer being available or cheap, you know, CPAs or cost per acquisition, then you really look at like whether or not the business model

• 23:06Speaker 04

  is sound. Like, do you actually have lifetime value baked into your product or your brand? Or are you a one and done? Right? So an example is if you sell a $300 wallet, where your proposition is that this is the last wallet you will ever buy, then yeah, you have to continue to look for new customers. But if let's say you're a supplement company, right? With like a high return, a high average order value, really excellent product, shipping costs are low because those supplements tend to be pretty lightweight, then your businesses, you know, if you found the right people and you have a really strong retention strategy and customer base, you might be able to ride this out. And so I think what we're seeing is like we are, and this is my cynical view of it, but you know, realist, depending on

• 23:51Speaker 04

  your view. But I think the long tail of e-commerce, right? A lot of these companies that were built on a whim with, you know, really high cogs, no real value proposition.

• 24:01Speaker 02

  Cost of goods sold, right? Yeah.

• 24:04Speaker 04

  Yes, exactly, exactly. Sorry. Sorry, all the acronyms, death by acronym.

• 24:09Speaker 02

  Yeah, DBA, DBA.

• 24:10Speaker 04

  Yeah.

• 24:12Speaker 02

  Sorry, go ahead.

• 24:12Speaker 04

  But I think, I think they're gonna go by, I think they're gonna go by the wayside. And so, right now, though, I think the strategy in order to find growth and to win is that you're going to outsmart, you're not going to outspend like you used to.

• 24:27Speaker 02

  Right. So I, I just wanna share a quick story because it's pertinent. So after my story about the, what we're just talking about, about how these direct to consumers companies have struggled because of these rising ad prices, because of the inability to opt optimize, uh, because their, their, uh, their tracking is broken and therefore they can't attribute their sales to their ads effectively. And because of the rising shipping costs, I heard from one of the stories, that's sorry, one of the companies in the story, and they're, they were like, look, like, uh, our revenue's going up and our subscriber base is going up and you're, you know, you're, you're, you're, um, citing about our margin contraction is misleading and here's why. And I was like, well, I'd been

• 25:09Speaker 02

  tracking all the, all the data. And so I was like, all, all their earnings reports. And they're like, and here's a link to our earnings reports. And I went in and I looked back at every single quarter since they went public and the data beforehand. And I was like, first of all, your losses have gone up five X between twenty, you haven't, yeah, between twenty twenty and twenty twenty-one, the losses are up five X. So congratulations, you're growing your revenue, your losses are going, you know, by multiples. And then second of all, you haven't turned a profit since you've turned public. So it seems like a matter of interpretation that you're doing well as a company, uh, because right now, the numbers don't really seem to back that up.

• 25:53Speaker 04

  Yeah.

• 25:54Speaker 02

  So like, that's a long way of me.

• 25:55Speaker 04

  Details, Alex, details.

• 25:55Speaker 02

  I know. It's a long way of me, exactly. It's a long way of me saying that some of these businesses just, uh, are fundamentally weak. So I just wanna like, uh, while we end, you know, before we end this half, I wanna talk, um, you know, just go concretely about, about two things. Um, is this actually hurting small businesses and, and what's the impact been, uh, on Facebook? So, so it's just like, you know, we, we kind of have danced around it a little bit in the beginning of this conversation, but let's go concretely. Like, uh, is this, is this actually a big problem for small businesses in, in the US right now? Um, you know, what Apple's doing and, and I guess like a corollary to that is like, do the, do the privacy benefits outweigh the damage that might be done to, to those companies?

• 26:38Speaker 02

  David, you you work with them all the time, so go ahead.

• 26:41Speaker 03

  Yeah, yeah. So to answer your question, number one, yes, it's hurting small businesses. It is. We see it every day. I'm hit up constantly by businesses that are drowning, that have fired three different agencies and they're just like, you know, we're just like, hey, you're, you know, you're a small, you're a small team. Can you come in to help us because all these agencies can't? And, you know, the reality is, you know, you built a business off Facebook's algorithm. You didn't build a business off really a need. And, you know, I don't want to be the bad guy in the room, but sometimes I need to say it. And it's uncomfortable to say it, right? So, yes, it is hurting those businesses. And what was the second part of that?

• 27:23Speaker 02

  Well, I was gonna ask if the, if the, I did ask, if the prob, if the damage, we know that small businesses are the lifeblood of the economy. Is the damage to the small business is worth it for the privacy protection that Apple's customers gain?

• 27:39Speaker 03

  This is a really, really good conversation that I think could be a podcast in and of itself. Because the reality is, is, you know, the the data that we have been given is, again, it's not like we're given this data that we can actually go and target these people outside these things. And the economy of the internet will have to fundamentally change over the next ten to fifteen years. If we're literally just gonna go, we're gonna block all of this stuff. Because right now, Google's solution has already proven to be backfiring with how they're doing things. And Facebook's trying to figure this out in the middle of millions or billions of dollars advertising.

• 28:20Speaker 03

  They're essentially trying to build this, rebuild their ad platform that was built off data. And the only one, well, I would say the only two that are really benefiting right now is TikTok and Amazon. And, you know, what you're seeing now is a lot of these small businesses have just abandoned Facebook altogether. And they're like, let's go to TikTok now. And you're like, well, you're really not solving your problem. You're just jumping from platform to platform, but not really solving the fundamental issue, which is you don't really have a product outside of niche. And maybe you're better just to, you know, try something else or go back to email lists or whatever. But the the that's really, I think, the fundamental element of this is like, we as an advertising agent, like the industry as a, the industry as and of itself.

• 29:05Speaker 03

  Did not have any say in what Apple was doing. Apple decided this in and by themselves, they just said, we're going with this without consulting anybody. Now, Google, on the other hand, which basically is their retired business is advertising, is consulting advertising, the industry and saying like, what is the best solution to this? And I do think that's the proper way to go about this because there is so many hands in this business, not only just from suppliers to, you know, all the way down the rabbit hole of of small businesses that essentially, for lack of, uh, way of to say it, like, we kind of held the economy together in 2020, right? Like, everyone's shut inside. It's D to C brands that are just like, hey, I want to create another toilet paper company.

• 29:50Speaker 03

  I have a supplier, let's do this, right? Like, they kind of kept things together for a few months there. And there is that element of like, I'm not, I'm not trying to be, um, not trying to say like, oh, we're the greatest thing ever. But like, it, it, there is an element of, there is a vital importance to this. And I would hate to see our industry fall way back to the old days because there's going to be a lot of damage and it's going to be reflected in the economy pretty quickly. Because a lot of these businesses, look at a firm, right? A firm is a big, took a big, uh, element of this, right? So all these companies that have been based off of D to C, Shopify, if they, if this continues to go the way it's going,

• 30:33Speaker 03

  you're going to see a lot of revenue falling out of, out of Wall Street, which is going to affect kind of everybody. So I think that's really what we're looking at here.

• 30:39Speaker 02

  Right, Orchid, you said something that I want to pick up on, which is that you, it's not about spending more, it's about being smarter. And I want to put another question to you, um, as we piggyback off of that. Maybe this is good for the advertising industry. I have not really been inspired by any of the ads I see in my Facebook newsfeed. And advertisers at their best, when you speak to people who work in the creative side of the business, tell a story and they make people feel emotion and that connects them to a brand. I'm sure you did a lot of this at Nestle. And when you rely, and this is, you know, my, early in my career, I did buy ads. So it's just sort of talking a little bit about, you know, maybe some of the scars I have from back in the day.

• 31:19Speaker 02

  But when you buy based off of data, you can lose some of that storytelling aspect of it. And perhaps this takes us back to the heyday of advertising where it, it goes back to connecting with people on, you know, this emotional level, creating feelings as opposed to doing behavioral advertising. That's like, hey, you just walked out of a Kmart, you could go back in there and get this couch. I'm just spitballing. What do you think, Orbi?

• 31:48Speaker 04

  Um, well, I mean, you definitely can do that. I remember back in 2013, there was a lot of conversation around beacons, right? And getting push notifications on your phone while you're wandering around Walmart, which I would not recommend. Uh, but I think to answer your question, you know, these changes, these changes are going to actually spur a lot of innovation in this space. Um, Alex, I know you are in, uh, at South by right now, um, and so you are being inundated in web three conversations. Uh, but I think, you know, this, this Facebook, this iOS change and Facebook change, I mean, this was bound to happen, right? The conversation around consumer data privacy was already happening.

• 32:28Speaker 04

  A big value proposition for web three is this idea of being anonymous or pseudonym, pseudonymous, um, you know, online. And, you know, allowing people to have access to your identity and being able to monetize off of that, right? Personally, not from a corporate perspective. So I do think like this conversation was going to happen regardless. Maybe the timing just got sped up through COVID, right? Similar to the adoption of e-commerce, the rise of e-commerce was accelerated through COVID. Um, but I agree with you, right? It, it is this return to storytelling. It is a return to value propositions, to brand propositions and a reason to believe. And so, you know, we also at Common Thread service a lot of, um, you know, smaller clients.

• 33:12Speaker 04

  Um, and a lot of them, as they're maturing from being D to C only and trying to go up market, right? To a mass audience, like that's actually what they have to figure out is that they found out product market fit pretty early on in terms of like a very, um, You know, very small audience. Sometimes it's it's a commodity wrapped in branding that actually looks pretty good. But a lot of them now have to figure out like what they stand for in the world. Like, why is their hat, right? Even though it's well made, how is that differentiated from the rest of the market? Why are people going to come back time and again to come buy their product? What is the differentiator? So I do think you're going to see a return to that. Now, that's not going to be right for every single

• 33:54Speaker 04

  brand. But you certainly see that as part of the brand story and the brand journey as they mature beyond D to C into broader e-commerce. And then finally, to take on their final Pokemon form as a omni-channel company.

• 34:07Speaker 02

  Orkin Bertelson and David Herman are with us, two terrific ad practitioners. It's great to be online with them, talking about the impact of Apple's changes. I want to talk on the second half about how how this impacts Facebook. We try to get to that in the first half. We touched on it a little bit. Let's go deeper into that. And then also, who wins? What's going to happen at TikTok, Amazon, and Apple? So we will cover that on the second half of the podcast. Hang around and we'll be back right after this.

• 34:35Alex Kantrowitz?

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• 36:21Alex Kantrowitz?

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• 36:37Speaker 02

  And we're back here on Big Technology Podcast with Orkin Bertelson, COO of Common Threat Collective and e-commerce growth agency, and David Herman, president of Herman Digital Social Media Ad Agency. You can see both of their comments in my story about direct-to-consumer stuff in Big Technology last week. So I'll drop that in the show notes in case you're interested. But now we have some other stuff to talk about. We have to talk about how Apple's changes are going to shift the competitive balance in the big tech world when it comes to ad dollars. You know, it's so interesting advertising is looked at, you know, kind of like people in tech tend to scorn it. That's just what I've seen in the past. But if you look at the business models, right?

• 37:20Speaker 02

  You've got Facebook is ad-supported, Google is ad-supported, TikTok is ad-supported, Apple might be getting into that game again. And then Amazon, $31 billion in advertising revenue in 2021. So newsflash, the advertising industry is a dominant part of the Silicon Valley narrative. It's important to focus on it. And I'm kind of... Glad we're getting into the nitty gritty on the show. It's about time. So let's talk a little bit about Facebook because you know, the first thing that I want to know is how badly this has hurt Facebook. They say that there is going to be a $10 billion hit, at least in the near term of revenue that they will not make because of Apple's changes.

• 38:04Speaker 02

  Does that sound right? And actually, David Anorkin, have you heard from Facebook representatives about this stuff? How panicked are they about what's happening right now?

• 38:14Speaker 03

  So I wouldn't say, you know, for one, I would say they're probably right, and I might actually think it might be higher than that.

• 38:22Speaker 03

  In terms of 10 billion, that seems like a lot, but I think it's probably, if not right, right around there, but it might be a little more. Regarding our representation from Facebook, you know, they're not going to come out and say they're going to toe the company line, right? They're not going to come out and say they're panicked. But I will say, I've had more conversations with Facebook reps who have been a little bit more transparent about what's going on there. For lack of a better way of saying it. And we've had calls where they've essentially told us they have no clue what's going on.

• 39:00Speaker 03

  And yeah, it's a little bit of a, okay, this is, it seems like the wind has kind of come away from their sails. And they're, for the first time, essentially in the company's history, they're being essentially beaten in a few different places. And they don't have any ways to combat that. And secondly, the way that they have, I guess, handled a lot of the situation with attribution and with just being forthright about kind of the changes have been a little bit less than transparent. They were very good leading up to the changes, but since then, the platform has been broken so many times where it's really hard to.

• 39:46Speaker 03

  As a, as someone that manages media, I mean, you know, I'm, I'm spending anywhere from eight to 12 million dollars a month on, on Facebook ads. That's not a small number for a lot of people, right? I mean, that's a lot of money. And to not have a clue from your, from your reps, um, really this, this what's going on. We, we've had situation after situation where Facebook's double counted numbers on us. And, you know, without having a strong backend and understanding the true numbers, you know, we would have scaled that all day. And that's a, that's a, that's a huge problem to be doing that, right? And so I think that's kind of where we are.

• 40:24Speaker 02

  So, so I don't mean to interrupt you. So you said without, they had, they had been double counting and you would have scaled it all day. So what I'm hearing from you is a small error in, in Facebook metrics can actually cause you to pump money into that platform. And when that stuff goes off and it's starting to happen now, without clear communication, that could really cause, you know, large spend to go.

• 40:48Speaker 03

  I'll give you a quick example, um, about a month ago, uh, Facebook's deduplication, which is essentially the way that they are. It's gonna get really nerdy for a second, but we have two different ways that Facebook is able to look at the data. We have a thing called aggravated events manager, which is essentially the, it's the, um, uh, people who opted out of targeting. Facebook is able to see that data and, and, and essentially point it to the pixel data and make sure that the same people aren't being counted twice. Okay. It's because they're, they're now having to be lumped in two different places because of Apple. Well, that system essentially broke and for about two weeks, there was no deep duplicating happening.

• 41:29Speaker 03

  Um, and Facebook wasn't acknowledged it, but suddenly our CPAs, our cost per purchase or cost per acquisition was suddenly looking like it was in 2020. And we're like, This isn't right, right? When our MRR, our media efficiency ratio and our return on ad spend, looking at our blended numbers across our revenue to our spend are not getting better, you know what the problem is. And Facebook, after about three weeks, two to three weeks, finally acknowledged the problem. But that's a, that's a long time for a system to essentially be broken for. So that's the issues. And you know, when you have a, a brand that is coming

• 42:10Speaker 03

  to us as the experts and saying, where should we put our money? It's hard to say, let's put it in Facebook. Because it's just these issues that are happening. So that's kind of where we're at right now in all this.

• 42:23Speaker 02

  Yeah, that, that did get nerdy, but I appreciate you going into that amount of detail. It is, it is important. So I'm going to get to your

• 42:29Speaker 04

  I'll add something to Alex, just really quickly.

• 42:32Speaker 02

  Okay, go for it, yeah.

• 42:32Speaker 04

  I mean, this is the hardest that Facebook reps have had to work, probably in their 17 year history, right? Because I think historically, they would kind of lean back and like, you know, a lot of the guidance, especially in big companies, was that if you have a, a dollar to spend in social, your first dollar is going to go to Facebook. So now they kind of have to work for it. But I, I think it's also like inaccurate for them to, and I know they're not, but like to blame this entirely on iOS. The reality is that they've had a lack of product innovation within their app for a long time. I mean, they reported the first like negative user growth in 17 years. And although TikTok, in terms of a user base, is still about a third of what Facebook is and about half of what Instagram is, it's

• 43:14Speaker 04

  still the fastest growing app. And like, the time spent on it is going up because they actually have compelling content from creators who are bought into the product. So, you know, I'm hoping that they're not hiding behind this. But the reality is that Facebook has had a lot of issues as a platform for a very long time.

• 43:30Speaker 02

  Right. And so let's get into the, the money side of things. David, what, what's the spend looking like in terms of your agency? Are you moving money away from Facebook? And if so, where, where is it going? And then, and then same question to you, Orchid.

• 43:46Speaker 03

  Yeah, so I would say right now, um, well, if you asked me this question a year ago, I'd say about seventy percent of our budgets would be on Facebook slash Instagram. Now, we're probably down to about fifty-five percent on Facebook, Instagram, and that extra fifteen percent has gone to TikTok. TikTok has, uh, put it this way, TikTok has quickly transformed into one of the best discovery channels out there.

• 44:20Speaker 03

  But YouTube has also really, really gotten good. And so some brands where they have a lot better video content, um, that's more storytelling, we're putting ads on YouTube, and the ones that have embraced creators and really embraced that, that, um, you know, nine by sixteen vertical videos are on TikTok. And we have, we now look at things, we look at everything, and again, to get a little nerdy here, we look at everything on a one-day-click database. Um, I have our system set up where it says, one day, this is the type of return we get per channel.

• 44:54Speaker 03

  Right now, um, Facebook is basically on par with what we're seeing on TikTok and YouTube in terms of one-day performance. And up until probably maybe this year, we didn't, it was always Facebook would be number one by a long shot. And so it seems like the quality of the traffic mixed with the, uh, the conversion data is just not nearly as strong, but TikTok on YouTube, on the other hand, seem to have gotten stronger. And so I think that's really where things are. Um, so yeah, that's kind of where I'm at. Worked good.

• 45:30Speaker 04

  Yeah, and for us, I mean, it really is more about the conversation that we're having as we're renewing a lot of contracts with our clients, right? Is, which is last year, everybody was all too happy to continue to focus on Facebook, Instagram, a little bit of Google search, and that was kind of the conversation, right? Maybe some retention, depending on the maturity of the business. Now, every single conversation is how do we diversify our media channels, especially TikTok? Right? So now, in addition to the core social platforms, now we're also talking about Amazon Marketplace. YouTube has also entered back into the chat, right? And so for us, a lot of the conversation isn't about Facebook or TikTok. It's Facebook and TikTok. Because again, right? It's like you fish where the fish are.

• 46:15Speaker 04

  Facebook still has the lion's share of audiences. So the last information that I pulled, um, Facebook is at what? About three billion monthly active users. TikTok is about 1.1. But what you're not accounting for is a US audience or like including China or not including China. But the reality is that there's a lot of momentum and force and time spent on TikTok. And like 92% of TikTok users actually doing like complete an action. So if you'll remember, two years ago, TikTok announced Shopify integration. And they had largely done not a lot since then. And now they have in beta that you can actually have a very native shopping experience in app. So TikTok is growing in space. They're continue continuing to innovate.

• 46:59Speaker 04

  I think attribution is not as accurate as Facebook historically. But for us, it's definitely much more channel diversification so that you can kind of spread your risk out a little bit. And I think it makes teams more creative and having more levers that they can pull.

• 47:13Speaker 02

  So we've talked about TikTok a bunch. It seems very clear that it's becoming a a preferred alternative to Facebook. So two questions about TikTok. One, does the ad platform in terms of the data you can target with on TikTok look anything close to Facebook? Because Facebook has people raising their hand and telling them who they are. TikTok is largely, you know, it's well, it's we raise our hand and tell TikTok who we are in a different way, which is that the algorithm starts to know our personality and our interests probably better than we do in some cases. So how does it look like from a data targeting standpoint there? Um, and it's kind of interesting, actually. Maybe Apple by cutting off Facebook's data is actually now driving us to TikTok, uh, which might do even more data collection. So I'm curious what you think about that.

• 47:57Speaker 02

  And then two, when it comes to the creative, right? Is Is the creative, uh, it's very different on TikTok. On Facebook, you could have like an image and a headline on TikTok. You know, you have to, it's much better to have a person. You can't like have a Lucky Charms box talking to people, although maybe that would be interesting like it's.

• 48:13Speaker 04

  You could. TikTok creative needs to be unhinged.

• 48:16Speaker 02

  Yeah.

• 48:17Speaker 04

  If it's unhinged, it will succeed on TikTok.

• 48:20Speaker 02

  Right. Okay. So actually, I, I, I won't put my opinion on it. So, so let's go A, the, the, um, targeting. Uh, B, the creative, how does that change? And how is TikTok holding up next to Facebook? Or can you, you started so, so you can, you can pick this one up.

• 48:39Speaker 04

  I'll start with the creative. I'll, I'll, I'll pass it over to David for, for the, for the data. But like, yeah, I mean, you know, I am, I am someone who is far too old to be spending the time that I am on TikTok. We'll put it that way.

• 48:50Speaker 02

  So addicting.

• 48:51Speaker 04

  But what is interesting, it's so addicting, the algorithm so right. And so, I mean, I guess I will speak to targeting a bit. I mean, targeting is really interesting because it's like, you know, there's human behavior and then there's what humans tell you, right? And so like the running joke was always that, you know, for me, so I turned forty in July. So Facebook, um, launched my sophomore year of college. I'm pretty sure a lot of the interests that I put in there are still from my sophomore year of college. So you see like a lot of bands like, um, live, I was super into live. I don't know why. I was also into fish, like, please don't judge me. And so, you know, I would say the targeting for TikTok feels like more, like they're going to give you more relevant information

• 49:33Speaker 04

  because they know what, um, content actually resonates with you. And so the content that we've seen, you know, of course, is also wildly different because, you know, those glossy, very finished ads, you know, don't really work on TikTok. What works well on TikTok is, you know, everyday creators, everyday people giving a testimonial or introducing a product. Because if you tap into human behavior, people like to be, they'll feel like they're the first to discover a product that they will then tell their friends about, right? There's always like this i- idea of discovery. And so, you know, what's interesting about TikTok is that you can't always hop on trends as an advertiser, right? Like, I'm pretty sure we couldn't get the rights to like the Yasified Shrek in a like, you know, latex catsuit dancing in the background.

• 50:17Speaker 04

  And if you don't know what I'm talking about, please go look up.

• 50:21Speaker 04

  So for trending music, right? You can't necessarily pay like, you know, the exorbitant amount that comes with licensing that music. So you do have to be a little more creative. Now, a lot of clients are also asking like, hey, what about organic TikTok? And then, you know, some of them will reference the Duolingo owl. And so like, that takes a lot of time and effort too, right? But again, like when you have like, just a really diverse and wild set of creative on the platform, what you ultimately end up testing isn't necessarily like minor iterations, but it's actually like large categories of like different creative, right? Do you have someone in the background with a big block of text that you have to read through? Is that a format? Is another format like actually a creator like doing an unboxing experience? What does that look like?

• 51:06Speaker 04

  Is another one where you try to hop on a trend without actually like, you know, breaking any legal rules around it? Um, so we're seeing like, we're having a lot of fun on the creative side, um, but not like, there's no one thing right now that works for every single brand across every single category.

• 51:22Speaker 02

  Do marketers have the capacity? I just want to throw one more follow-up to Orchid. Do marketers have the capacity to scale up the creative needed to be effective on TikTok? And I'm asking this with a particular eye on whether TikTok can actually be competitive with Facebook. I mean, Lord forgive me for saying this, but it doesn't take a lot of, you know, creativity to put up a banner image and a headline on Facebook. It takes a ton of creativity for, to put up a video on TikTok that people respond to. So I'm just trying to think about TikTok's ability to, um, to ramp up its revenue. You know, and, and that will obviously take marketers being up to the challenge, are they?

• 52:01Speaker 04

  Um, it depends. I know that's like the answer that most people hate from marketers, but it truly depends. So I agree with you. I think a lot of like direct response or e-commerce ads that just feature a promo of like 30% off is not wildly creative, but you can run through a lot of those. And I would still argue there's still a place and time for creative like that, right? Um, now with TikTok, you know, we have a large UGC department. And so we're seeing a lot of our brands are coming to us. Yes, sorry, user-generated content. Um, so where we reach out to creators and we, you know, we source them, we give them a brief, you know, they actually like send back creative to us. Um, so we have a lot of brands who are at that stage where they do have an internal production arm,

• 52:44Speaker 04

  but they need to augment it through other services. So we do help them scale up that way. Now, the thing that I think that we're feeling now, and I am, I think I'm either a millennial or a geriatric millennial, is that when I started in advertising, right, I was like the young kid who they would like invite to all the rooms, they're like, tell me more about people like you. And I was like, this is so easy. I just talk about myself. And now, you know, for a lot of us in leadership, now we're talking about Gen Z, which is an entirely different, um, you know, sentiment around a generation. They want different things. They think humor is, you know, different types of humor are funny than like the millennials, right? And so now, all of a sudden, you have these marketers who like just don't have a grasp, right,

• 53:28Speaker 04

  of what this generation wants and what resonates with them. And so that's kind of the bridge that we have to build is to say, all right, of all of these things that we are testing, right, um, for CTC, Common Thread, it is a, what are we seeing in the broad category? What are we seeing for brands similar to you? And then how do we apply it so that we at least shorten the learning curve? Rather than start from net new and starting from like thirty different ad types, right? We just kind of narrow it down to ten. So it is difficult, um, it is a new challenge, but you know, the rewards are there.

• 54:01Speaker 02

  Yeah, I'm gonna take what I'm hearing and say it's gonna, I think creative is gonna be the hardest part. Ad creative will be the hardest part, um, for, for advertisers to, um, handle on TikTok. And I think that will be the biggest impediment for TikTok's ability to grow and compete with Facebook in a real way. David, your thoughts on the targeting?

• 54:19Speaker 03

  Yeah. Yeah, so, um, the way that TikTok's targeting potentially works in the ad plat- platform is in a variety of ways. Number one, they do have select interests, um, it's, it's growing every day. Um, and the way that they compile those interests is based off the algorithm. So the algorithm is feeding those interests. So, you know, you can find things such as like as basic as, you know, iPhone, but you can get really detailed on it, actually. Um, and while Facebook has reduced their amount of interests, uh, TikTok has increased. Um, outside that, though, they have things such as creator content. Uh, you can target creators based on their, their content. You can target with hashtags. Um, hashtag targeting is very, very, very.

• 55:06Speaker 03

  Very deep. In fact, oftentimes, we will use hashtag targeting for a lot of the niches, and it will get very down into the nitty gritty. You know, and so, you know, I'm, as someone that I've been on TikTok's platform since their beta in 2018, in terms of like flying around the ads and everything like that, and night and day difference between where they were even two months ago to where they are now in building something. And, you know, but to kind of echo what we were talking about earlier with the content, is that it is a behemoth, and most brands are not mentally prepared for the amount of creative is needed on the platform.

• 55:47Speaker 03

  Just to give you an example, I work with one brand that we are spending anywhere from fifteen to twenty thousand dollars an ad TikTok ads.

• 55:57Speaker 02

  What type of company?

• 55:57Speaker 03

  We, uh, it's D to C, uh, D to C skincare brand. And we cycle through anywhere from, I would say, eighteen to twenty pieces of creative a week. And we have four full-time creators, two full-time editors, or one full-time editor, and then we're trying to get more and more and more because we're trying to scale more. And then we are also executing with landing pages and all these things, right? It's really becoming a, it's a content game at this point. It's not necessarily, you know, who can make the best offer, because offer isn't really the issue here. It's who can get on the for you page, who can make these ads go viral, and kind of go from there. And that's

• 56:42Speaker 03

  really where I think TikTok shines the best, between, say, Facebook and TikTok. TikTok, it's, it, even on the organic front, so TikTok is rolling out business audiences, which is essentially, now we're able to target followers, we're able to target organic video views, which Facebook doesn't have. I can't target Instagram followers. I can't target Instagram organic video views. So TikTok has really basically taken what Facebook has been kind of sitting on the sidelines with and gone like, Oh, well, we're just gonna go do everything that marketers have been asking for. Uh, but we're also gonna do it in a privacy kind of way. And that also comes down to some of the people that TikTok has recruited from Facebook to come work for them.

• 57:27Speaker 03

  Uh, and so that's, I think where I'd end this is, is that is that the product itself is night and day difference. And it's fun, like TikTok is fun. And I, I, it's, and people are gonna play with it, right? It's fun. So, yeah.

• 57:43Speaker 02

  We have just a couple of minutes left, so let's just do a little bit of a lightning round here. Well, it won't be as exciting as a typical lightning round, but I do wanna cover two more companies briefly before we go. There's Apple, and this is another big question that we have to ask. Does Apple's big play to restrict Facebook's ability to sell effective advertising lead up to Apple creating an advertising platform of its own that does a lot of the things that marketers use Facebook for?

• 58:11Speaker 04

  For certain categories, yes. So like apps, yes. For consumer packaged goods, probably not, is my guess as of today.

• 58:20Speaker 03

  Yeah, I, I, I'm still in the fence on it. Um, Apple's search ads are definitely good for mobile apps, but they're not scalable at this time. So there's still a ways away, if this is anything, so.

• 58:32Speaker 02

  Okay. Wow, that's good. We're, we're moving lightning right through. Okay, and then the last one is Amazon. Uh, with a direct to consumer or any e-commerce company, you know, some try to build their own websites and they rely on the Facebook ads to reach people. Um, and it's like kinda nice, cuz there's an illusion, an illusion of independence there. But they don't wanna go through Amazon. Amazon's just another middleman. But Amazon has, uh, logistics, Amazon has an ad platform. Amazon just made thirty-one billion dollars, uh, in advertising last year. Is Amazon the biggest beneficiary of these changes?

• 59:08Speaker 03

  Yeah, well, yeah, I would say they're one of the biggest for sure.

• 59:12Speaker 04

  Yeah, I was gonna say, I was like, I don't know if they're the biggest, but it's really at the top.

• 59:17Speaker 03

  Yeah. Why is that? Yeah. Yeah, let's unpack that a bit. So, so here's what we're seeing is a couple of things. Number one is a lot of brands are still using Facebook, but driving to their Amazon stores. A lot of people are just saying, you know what? Our targeting on Facebook sucks, so let's just drive to the Amazon store and see what happens. Um. Have you done that? And how's it work? Uh, so I, we do it a lot with TikTok, not with Facebook. Um, and it actually works very well. Um, you use an instant, you use an Amazon instant page. So you create an instant page that looks like Amazon. And then when they click, they click right to checkout and drives them right to the checkout on Amazon. Um, it works surprisingly well.

• 1:00:01Speaker 03

  Um, again, you're not going to see that data in platform, but you're seeing on the backend and you're making a bet that that person probably has Amazon Prime. But there's, there's a lot of, you know, Amazon is a, is sort of a, uh, in D to C especially is kind of an ugly place because a lot of people don't want to play there, um, for a variety of reasons. Number one, it's with our, with the expense as it is already of running ads on these platforms, then to have Amazon take their cut as well. Suddenly it's not as profitable than running on Shopify. Number two, there's a lot of people and a lot of brands that are very, especially if they have a brand that isn't patent, uh, patented. Uh, they're running the risk of Amazon just ripping them off, um, which tends to happen.

• 1:00:41Speaker 03

  So there are these things where people just don't want to be on Amazon for, or they take their, their excess inventory and throw it on Amazon, call it a day. Um, and so, yeah, so I think there are those Amazon businesses and then there's those Shopify businesses. I don't see a world in which we are going to have, you know, Allbirds or, you know, some of these brands that are coming up, say like an Allbirds. That are going to put all their inventory on Amazon and just run Amazon ads because they want to conti- control the brand still. And so that's one thing I'd, I'd call out. Orkin, how about, uh, your clients?

• 1:01:16Speaker 04

  Yeah, so Amazon's definitely one of the top beneficiaries, but it's just like it's that age-old argument of like, do you go direct to consumer or do you go retail? Right? You kind of fish where the fish are. So if you think about, you know, if you only have a D to C channel, then all your advertising is probably around like education, right? Because a lot of the new brands are, you know, creating a market, right? They're not like really going into an established one. And so the question then is like, all right, what is your retailer strategy? You know, a lot of the criticisms we have about Amazon about not having access to data or not owning the consumer experience, those are still criticisms of traditional brick and mortar retail. And so even when you look at retail like Target, like Walmart, like Kroger, I mean,

• 1:02:00Speaker 04

  all those guys have massive ad platforms as well. So I think Amazon is going to be, at least for our clients, we're recommending it as an and, not an or. I do think that there's this question about price point, right? At what point is your product so high-end that it actually is like dilutive to the brand by having it on Amazon? So again, I think it only works for certain product categories. But one thing we don't talk about enough either are all the like Zappos, right? All the other platforms that Amazon owns, because if you have, if you're selling your shoe through Zappos, like it's automatically going to be pulled in to Amazon when you search for that brand anyway.

• 1:02:41Speaker 04

  And so I think this is more actually about a D to C versus a retailer strategy than like, hey, like, you know, how, how much of, you know, the e-commerce world does this play? And obviously it's a part of e-commerce, but it is that traditional argument of D to C versus retail.

• 1:02:57Speaker 02

  Amazing. Well, look, I, I love an advertising conversation for many reasons. I'm an old-school ad nerd, so I can't get enough of the industry. And I also think that, and as we've shown probably over the last hour, is that when you start talking about advertising, you really get into the way that the businesses of some of the biggest companies in the world function. I talk about Apple, Amazon, Facebook, Google, TikTok. This is where it comes down to. This is sort of where the business rubber meets the road and it's always good to. Really get in and explore and instead of you know, talking about high level numbers, actually speak to the practitioners and hear about you know, how does these systems work and how the impact is felt on the ground. So, Orkin and David, thank you so much. Can't

• 1:03:42Speaker 02

  uh, really can't thank you enough for being here today and uh, hope you come back sometime soon.

• 1:03:47Speaker 04

  Absolutely. Yeah, sounds great. I'm waiting for your next book, Alex, then we'll host another book club, so.

• 1:03:53Speaker 02

  I know, I have to get to writing. Maybe we'll do one about these, these tech giant wars. Again, if you enjoyed the podcast, want to talk a little bit more about it, we'll be hosting Office Hours on LinkedIn. You can just go to my page, just Alex Kantrowitz on LinkedIn, and I'll have an audio event. It's Clubhouse style, and that is going to be at noon Eastern and nine Pacific and the other times, you know, in the middle on Friday, March 18th. And again, if you enjoy the podcast and want to rate us on Apple or Spotify, that would be amazing. Thank you, Nick Watney, for editing the audio. It was really nice to see you in Austin this past week. That was cool. And I've been working together for a long time and finally got to meet in person, so that was awesome. Thank you, LinkedIn.

• 1:04:38Speaker 02

  It's a pleasure being part of your ad, well, your podcast network, which includes advertising. Let's keep it up. And thanks to all of you, the listeners. Appreciate you coming back every week. And I hope you join us next Wednesday for a new conversation with a tech insider or an outside agitator. Until then, take care.

• 1:05:07Speaker 05

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