Stealing Signs - Issue 49
Quantifying the Adpocalypse, Tales From The Father of the Xbox, Can You Lend Against A Creative’s Subscription Revenue?, The Evolution of Adobe, & Analytics v. Intuition
Worth Reading
Quantifying the Adpocalypse
there are massive negative marginal return rates on ads in your feed. Being bombarded by more ads does not mean you will make more purchases, and even with higher usage, there is a world where we have more impressions but less spending.
I like this succinct quote from former AOL CEO which sums it up nicely:
“For the first time in history, you’re probably going to have the highest point of media usage in the history of the United States and the lowest point of advertising in the U.S.”
We appear to be fast approaching the “highest point of media usage with the lowest point of advertising in the U.S..” In other words, more impressions than ever with lower ad spend than ever.
If true, this dynamic begs for more creative ad units. With impressions increasing but effectiveness and overall volume decreasing due to negative marginal returns, more creative ad units could help boost click-through and conversion. This is in part driven by the ad networks, but is also the responsibility of the brands/advertisers to create new ad content suited for new ad units. Examples include interactive content like ads that allow users to transact or demo a product in the ad unit itself. Two big hurdles here are the technology constraints of ad units and the ability (and willingness) for brands to create high-quality ad units at scale. I believe we'll see more creative ad units over time and that the technical constraints are a lesser concern than brands ability to create new advertisements at scale — this likely requires new enterprise creative tools.
Interview with Seamus Blackley, The Father of the Xbox
Kane & Seamus Blackley, Father of the Xbox
It was a controversial project, and there were only a few of us. We had to get buy in, so we started out by saying internally that we were trying to bring Windows to the family room—because that’s what worked. Microsoft was an OS company, and we needed to convince a lot of people this would help Microsoft software. It was a little bit of a headfake. We weren’t saying it to be manipulative, it was more of an analogy—Xbox games would be developed on PCs and run on Microsoft Xboxes.
The creation story of the Xbox is a masterclass in the Innovator’s Dilemma. A few of my favorite excerpts below:
The initial Xbox team was a small group of relatively junior employees that positioned the console as a new, effective way to “bring Windows to the family room.” This was the best way to garner support internally
The senior management team often clashed with the more junior Xbox team and pushed through projects that hurt Xbox’s performance and the end-user experience because they misunderstood both the nuances of the Xbox infrastructure and what consumers wanted:
Some thought consumers would be ok with a long bootup because the Xbox was so powerful. Are you kidding me? It’s a consumer device. We needed shit to happen on the TV the moment you touched the button.
Xbox went to market with a controller so large that the Japanese Microsoft employees though it was a joke:
They thought it was a sick joke insult, like an American, Texas, look-how-big-everything-is joke.
Shifting gears, one of the most important story lines of the Xbox project is the way in which they served the developer community. Seamus notes that the team worked hard to support and create documentation so third party developers, specifically Sony developers, could easily create games for the Xbox. Since Seamus notes Sony hadn't previously done this with the Playstation, it’s likely Microsoft’s intentional openness created a new dynamic in the video game world, one where both large and independent game developers could build for the console. Did Microsoft seed the creator economy in gaming?
A Creative’s Subscription Revenue: Can You Lend Against It?
Connor Hale, MBA Student at HBS
Ideally, the lending product would create: (1) A tech-enabled window into the creator’s business and (2) a repayment flow from the platform to the lender that mirrors the cash flows of the business. By building predictability into the unprecedented and de-risking the payback, a tech-enabled subscription platform may allow lenders to provide competitive financing to previously unfinanceable borrowers.
So, can you lend to creators? The answer is seemingly yes, but banks have yet to incorporate the creator business model into underwriting practices.
The obvious issue with the Substack example Connor offers is the market size. Banks would only want to lend to a very small number of Substack writers because only a small percentage have large user bases, produce consistent content, and would see meaningful return on promotional efforts, especially paid user acquisition
Connor also suggests this model would work well with creed-based spaces like sports and religion because the content is more predictable and niche dynamics more established. This seems plausible, but if we focus on media specifically, a more effective focus is likely on individuals — the content creators themselves. If a lender is concerned about churn, user growth, and upselling existing subscribers, the individual is far more predictable than a niche as whole because the most successful models in the creator economy, at least in media, are tied to the creator, not the content.
The Evolution of Adobe and Future of Creative Software
Meha Patel & Nnamdi Okike, 645 Ventures
Adobe’s $1.8 billion acquisition of Omniture in 2009 was seemingly off strategy and non-complementary. Why was a creative/design software company making such a large bet to acquire the leading player in enterprise analytics? Adobe understood that the future of marketing was uniting content creation with marketing analytics. Disciplines that were historically the purview of different enterprise departments would merge, and the rise of web/mobile analytics would enable a much tighter feedback loop within content creation and design.
This post is an extremely insightful analysis of Adobe’s growth over the last 4 decades, out of which Meha and Nnamdi identify three growth drivers:
Successful partnerships: Apple and their LaserWire printer
The ability to bundle products: One integrated software solution instead of a point solution
Successful Acquisitions: Omniture’s enterprise analytics, Behance’s creative social platform, Marketo’s marketing automation software
Meha and Nnamdi identify three evolutions in Adobe’s core markets, one of which they call the “Democratization of Design.” This evolution includes startups like Canva that are making it easier for non-designers to create high-quality creative content. An interesting consideration when this evolution is viewed as an opportunity area for new startups is social media platforms like TikTok and Snapchat — we’ve seen both companies focus on tools for their creators in addition to building a large social network. While it’s a long, steep hill to climb for social networks to gain prominence, the bundle of creative tools and distribution is compelling. I think a focus on creative tools will become more common for established and emerging social networks that can leverage their existing distribution in a bundle — this aligns with Adobe’s logic in acquiring Behance, the social platform to discover creative work and connect with creators. The distribution plus creative tool bundle is especially likely as social networks become more established as creative platforms and as professionals begin their creative process on the social platforms themselves. This logic also maps to Meha and Nnamdi’s “Video workflow” opportunity area for startups to build on Adobe’s legacy.
The social network might also allow creative tools to implement new business models. A company like Behance opens the door for creatives to connect and transact with one another within Adobe’s ecosystem, meaning a marketplace model could become an additional revenue stream.
<stuff> Weekly
LOL Weekly: Hard-Hitting Political Analysis!
lololol
Funding Weekly: Wise
Wise isn’t a classic bank-as-a-service company, as it doesn’t want to power neobanks and help them get started. Instead, the startup targets other companies that touch on financial services but can’t offer those services because it’s such a big investment.
Integrating Wise in your product doesn’t require significant development or regulation efforts. You don’t have to develop an entire banking user interface, as you can just redirect your customers to Wise. The fintech startup also handles know-your-customer and know-your-business (KYC and KYB) processes.
Wise raised a $12M Series A from e.ventures, Grishin Robotics, Base10 Partners, and Techstars.
Embedded banking is a hot segment of the embedded finance trend and the broad capabilities Wise offers customers like banking, payments, and payroll is an interesting integrated solution where point solutions typically live.
The description of Wise’s customers in this article strikes me as odd: companies that touch on financial services but can’t offer those services because it’s a big investment. Isn’t this nearly every company? Payroll and payments apply to just about every company I can think of, unless I’m misunderstanding. The banking features are really what’s new for their customers — the banking-as-a-service model bundled with core functions like payroll and payments could be quite compelling.
Baseball Weekly: Analytics vs. Intuition
Eric Kaufmann, Product GTM Operations @ Google
It’s unfortunate that A-Rod continues to criticize analytics and ridicule teams for relying on useful data. I’d like to think this is performance art for ratings and buzz, but I fear he actually believes this. On what planet is more (and better) data bad for the game? Well, we might actually be on that planet now — one where decision makers have the data but can’t properly apply it.
At EOD, to Eric’s point, analytics and advanced statistics provide are information to help inform better decision making. It boils down to the decision makers. The decision makers need to have an understanding of analytics such that they can factor it into their decision making process, as opposed to the seeming binary process used now: analytics or intuition. For example, managers and coaches need to understand analytics enough to know that they’re in a situation that is 2 standard deviations from the mean, an extreme outlier situation, where intuition should play a more significant role in decision making. And vice versa. We need more managers and coaches who believe in the power of analytics enough to understand them deeply, or folks who understand analytics deeply to have more influence over decision making. A-Rod’s criticism is overly-emotional and misses the point. Analytics aren’t the issue. The decision makers are.
Art Weekly: Basic Trajectories, 2020
Nate Lowman
Basic Trajectories belongs to a series of “Map” paintings that reflect Nate Lowman’s fascination with the representation of America. “My goal is to dislodge the illusion that the country we live in is a fixed thing,” he explains. “The country is not fixed. Borders are in flux. The way it is now is not even how it should be.”
