Ep 38: FTC: mobile ISPs abuse privacy, Snap blames Apple for shortfall, Performance ads in analytics scam?

Part 1 Video Starts 0:13 - FTC details mobile ISPs privacy abuse practices amongst major carriers

Part 2 Video- Starts 5:06 - Snap blamed Apple for their shorfall this quarter but the real question is whether that is reality or just part of the “privacy theater”?

Part 3 Video- Starts 11:59 - Rand Fishkin asks: what if performance ads an analytics scam?

Related Articles:

1. FTC Staff Report Finds Many Internet Service Providers Collect Troves of Personal Data, Users Have Few Options to Restrict Use
2. Text of the FTC Staff Report (4.86 MB)
3. Snap plummets 22% after missing on revenue expectations - blames Apple
4. Research Shows Apple's New Do Not Track App Button Is Privacy TheaterWhat if Performance Advertising is Just an Analytics Scam?
5. What if performance advertising is just an Analytics Scam?

Transcript: EP 38

Greg: Alright, here we go. What episode? 38. All right. We're back once again for Episode 38 of the near memo. I'm Greg with David and Mike as always. And we're excited to be talking about the intersection of search, social and commerce. I do it a little bit different every single time.  Tons of news as always, and we struggled a little bit to pick three items, but you have three stories to talk about today. And, first is Mike highlighting an FTC report that focused on ISP, mobile ISPs in particular and their data collection practices.

Mike: So the staff at the FTC put together a report that examined ATT and Verizon, Charter, Comcast, T-Mobile and Google Fi, which represents 99% of mobile internet providers. And they noted that the consolidation of internet, cable, voice content, distribution, smart devices, advertising web traffic knowledge, you know, put these companies in its unique position to invade our privacy. And they note several conditions. One of the most interesting to me in the report, which is 70 pages long.

We'll provide the link.

Greg: Did you, did you read the whole thing?

Mike: I'm about halfway through, but you know,  about halfway through. So I was working on it today.  but one of the interesting ones I liked was, or that I found intriguing several MSPs in their study gathering news data. Consumers do not expect and could cause them harm in particular browsing data, television, viewing history, contents of email, and search data from connected devices, location, information, and race and ethnicity data.

And more concerning as data is used in ways that's harmful to consumers, including by property managers, bail, bondsmen, bounty hunters,  and for those that use it for discriminating purposes and they note that these companies claimed offer. But are illusory. They're not real, but you go to try to get out and either it's totally confusing or not at all visible.

And they note that these guys,  they, they're not as large as big advertising platforms, but the amount of data they have makes them a significant threat to most people's privacy. And they're largely unregulated by the current rules because they fall under the.  note of,  information service providers, as opposed to telephone companies.

So there's very loose or no regulation of them. And so the FTC is trying to carve out a way to regulate some of it on with the FCC

Greg: and in California, they're subject to,  do not track right CCPA and do not track rules.  Or do not sell, sorry, not do not track do not sell my, my information, but the challenge there is that all of those opt out processes are very convoluted and,  buried typically.

And so consumers don't go through the steps. You know, they make it, they, they play hide the ball and they make it hard for people. But, you know, to, to, to.

Mike: And they note that they don't always sell it. They sometimes give it away, which is not, you know, or they share it.

Greg: Well, that would be included. That's included any, any, any transfer of information, whether it's for money or not is included.

But the, but the, but the concern, the consumer's under a burden to, to, to, to trigger that. So if they, if the consumer does nothing, then they're off the hook.

Mike: Although in a first party, That's all those rules are off the table. Right. So it could go from the television and watching to the advertising group within that same company.

Yes, that's true. That's very, they could be targeting you by race or, you know, whatever. I mean, so there's still a huge privacy issues involved in this. And I think in some ways more dangerous than Facebook. I mean, I look at face. You know, a rookies compared to AT & T and Verizon,

David: right? I would say the other thing is,  Mike,  you indicated that they try to sort of hide.

The, or stay out of the visibility of, of sort of oversight,  you know, for these kinds of practices. And I would also say, I would bet that they're lobbying expenses rival Google's and Facebook's help for sure. There's probably more Congress people in the pockets and you know, other potentially other government officials in the pockets of these,  ISP than, than any big tech,  lobbyists would dream of.

Mike: So in fact, in 2015, They, they, it was agreed that they would, then they would be under telecommunication rules, but they lobbied against it, lobbied against it, lobby against it. And Congress finally overturned that in 2018. So they were once again fell under the  information.rules and thus were largely unrounded relative regulated due to lobbying.

Greg: I mean, it's lobbying is very, very effective in most cases. I mean, we can

David: even higher ROI than ad words.

Greg: That's right. Exactly.

Mike: Now the lobby. Thank you for you.

Greg: Yeah. All right. There we go. So, so moving on to our second item, which is mine,  snap,  released it's Q3.

earnings. I dunno. What was it? Yes. Was it yesterday that they came out in the last depends

David: on when you're listening to

Greg: within the, within the, within the past recent period ambiguously stated,  snap came out and said, you know, it's guidance was lower than expected and it also sort of blamed,  apple for the, the, the, the MIS,  in the, in the,  app tracking tense, transparency itself.

Privacy rules impacted snap more than expected even though,  snap CEO has been supportive generally of the, of the rules unlike,  you know, in Facebook's case. So what's interesting to me there is that on the one hand, and then on the other hand, there was a report that appeared originally in the Washington post,   in September.

Where a company called I'm looking for the name of the company, a company called lockdown, which is a privacy software company.  was, did an investigation of a number of games, mobile games,  on the iPhone,  where people had not opted in to be tracked. And they found that the fingerprinting was still going on.

People were still collecting tons of data and that data was. Transmitted. And so the, the, the sort of high level,  messages that,  companies are ignoring consumer wishes that are being communicated through this opt-in process and, and, and almost nothing,  conceivably has changed there and Tector called it privacy theater,  implying that it was.

Style than substance, but that seems to be contradicted by snaps earnings, you know, and I mean, Facebook will also give us an indication of how real this is. So I find that kind of juxtaposition. Interesting. If there's a fingerprinting going on where lots of data are being taken from a lot of sources,  and still sort of circulated in this ecosystem, then why is it that snap is suffering, you know, and blaming.

and does this then portend, you know, this is part of the larger measurement sort of conundrum that's going on in, in advertising right now is it's getting difficult with the disappearance of cookies and with mobile privacy to kind of track people. And how is that going to impact,  ad spending in the future?

You know, there's a lot of discussion about that right now. So I just found the two things kind of interesting snap suffering, a hit, and then. A study saying, well, nothing has really changed. Yeah. I

David: wonder how much of the snap hit is truly due to apple and how much is, is an easy scapegoat for the wall street story?

would be, would be one thing.  I think that at least in the. I am a full disclosure. I am not an active Snapchat user.  but in the sort of in the cultural arc, it feels that Snapchat to me anyway, has been sort of one-upped by tick-tock as the cool hip new network.  and that, you know, some of the, the, the other sort of mainstays are.

You know, still as powerful in terms of, you know, Twitter, I feel like Instagram, there's still very active usage on both of those platforms.  we saw a rumor, I thought,  this week that PayPal was going to buy Pinterest. So there must be a fairly active user base on, on Pinterest. You just don't, to me, it feels like snap has sort of lost some of its its newness.

you know, potentially partly pandemic induced. An apple may be a convenient scapegoat. I. Frankly, I doubt that Facebook's earnings are going to be hit to nearly the same extent that I would agree

Greg: with that I would agree with that. I think that, I think that you're right, that, that some of it probably is apple.

And, and right now it's an easy thing to point to apple and say, see, look at them. And,  you know, we're not responsible. There's no structural problem here.  the,  investment from Piper Sandler did a teen survey. They do this teen survey every year. It's 10,000 to. 16 years old, they've been doing it for awhile.

And I wrote it up in one of the previous,  newsletters. It may have even been on,  on Monday this week.  but,  what was interesting about it is I, I tend to agree with you. The Tik TOK has sort of taken over as the, as the, as the cool network for people under, you know, 25 or 20, whatever snap snap chat was still the favorite network, according to the survey of, of teams.

And Instagram was the network that had the most time spent. I believe, even though it wasn't the preferred network, a Tik TOK was certainly up there. But I think in terms of the moment tick-tock certainly has the momentum and tick-tock occupies the same place that snap did for people. You know, even though snap has some different features.

I think that just sort of emotionally, psychologically. Tik TOK and snap are more directly competitive than maybe some of the others.

David: Right. And I'd be interested to see that study run with a demographic that's at least 10 years older than 16 year olds, because I don't think there's that many advertisers going after people with no disposable income.

I think that the advertising world is probably more interested in the, you know, Instagram stand in demographic of, you know, sort of 24.

Greg: 50 or so, yeah. And that's why Facebook, I think, remains so successful even though it's sort of a middle-aged audience. That's where the disposable income is. That's where the discretionary spending is.

Okay.

Mike: Although there were reports this week of Facebook feeling like it was an existential crisis, that they were not bringing young children and teenagers into their platform and that they needed to develop a product to do so there was that report. So they clearly see this audience as the future audience and, you know, Snapchat and.

Audiences mature. So,  to select,

David: which makes the $1 billion acquisition of Instagram and even better value, right. It's like they bought, they bought themselves a 10 year runway on demographics. So that's exactly

Greg: right. I mean, they, they were talking about pipeline. That was the language that was, we have to, we have to.

You know, the, the, the

Mike: biggest puzzle, as opposed to whatever this has got mainlining or whatever.

Greg: I mean, the big, the big tobacco analogy, it gets more and more accurate. It seems every day, you know, we've got to get our kids hooked on, on,  on us.  so kind of shifting back to advertising,  Rand Fishkin had a really fascinating post that is not a new critique of.

They fill in the blank, PPC media,  questioning whether or not it's really delivering the value that people think it is. It's, it's, it's kind of.  I mean, there's sort of two arguments. One is that was raised in the early days of the internet, is that, is that,  ads are not internet online. Advertising is not getting enough credit for the value it's actually delivering display in particular was always the subject of that discussion.

But Rand's argument is quite the opposite that analytics are making us think that paid ads, performance advertising,  is, is doing more than it actually is. And he gave a bunch of examples.  companies that have cut their ad spending down to

zero,

David: or he highlighted Airbnb's,  CEO's statement saying that they took their ads to zero during the pandemic, and they basically didn't see an impact.

So,

Greg: and gamble has done those kinds of experiments in the past. And so it's, it's, it's an interesting, so take it away. I don't want to steal your thunder here.

David:  so I would say that there's a caveat for me anyway, that a lot of the companies that, that are typically. Used as examples of companies that can do this and not see an impact are very large brands already.

And I think that there's, there's sort of a need to get to a stage where your brand actually is sort of top of mind for consumers before this story is as effective as, as the one that, that ran tells. But generally speaking, I think, you know, the point is that because,  performance ads are so trackable that CMOs and CXOs.

Loves them because they can, they can tell a really tight story that, okay, we spent X dollars on these ads and they brought us Y revenue. And even though Rand's point, is that in most cases, people probably would have bought the thing that they were going to buy without actually clicking on that last per performance ad.

Particularly if it's a retargeting ad,  that they're sort of,  he used the analogy of a market.  you know, standing outside of a pizza parlor with a discount code and then taking credit for all the discount codes that got redeemed at the, at the pizza parlor.  so that you're just sort of you're you're cherry picking your, your customers who would have bought anyway, because another channel was working.

then, then you're you're retargeting ads really are. So I think it's just an interesting thing to,  to sort of keep in mind. I don't want to throw all performance advertising in this bucket. I think it still is hugely valuable to, you know, to even try to build an audience and to, to build a customer base,  for smaller businesses that said, you know, th the thing that struck me, there are a couple of things that true.

There's been a historic,  historically there has been a, a huge underinvestment in SEO and other organic forms of marketing because they are not very trackable.  and I think that. No, this that's partly where Ronda's coming from with this. Now it should be said he probably has a little bit of bias because he now runs an influencer marketing product, which is a little bit less trackable.

But,  but I think that that was one of the things that stood out to me. The other thing is, as it relates to local is this is where the, the specific ad unit of a local service ad really is so brilliant because it's very hard to imagine. You have seen an ad for Joe the plumber or been to Joe the plumber's website before and then, oh, it's actually, you know, the last click on the, the LSA is what brought you to Joe?

I don't think that that's a very realistic consumer journey. I think that the LSA is really are catching people who are in. You know, Hey, I need this thing now. And this is, this is the ad unit that is bringing me to this business. So,  I think it's,  it's just, it's

Mike: just particularly true with Google, including the LSA in the pack,

David: in the pack.

Exactly. Right. Where it's, where it's even a little less clear.  you know, what's, what's paid and what's not. So I think it's it again, it's just a really interesting,  article. I think it's a very timely article given all the things that Greg, you just mentioned.  and something that I hope people will at least sort of file away at the back of their minds, as they're thinking about their marketing budgets moving forward.

And that sort of thing is I do think organic tends to get the, the short end of the stick and that potentially,  we're spending a lot more money on ads that are, that are preaching to the converted,  as opposed to actually evangelizing our products.

Greg: I think it's, I think it's really,  challenging to tease all this apart.

I think the point you made about brand equity or brand awareness is a really critical point because you know, these well-known brands that people shop for buy from any way are, you know, you're getting a lot of sort of direct navigational searches to those brands. You know, how many times have you just out of laziness, done a search for a particular site or brand, and then clicked on the ad because it was the top link simply because it was an easy way to get.

You know, there's some, there's some percentage of that going on, but, but also people would buy from those brands anyway, where it gets a little murkier is in your local scenario where people don't know local brands, they don't, you know, you want to build a fence or have somebody paint your bathroom, you know, unlike you, Mike, that has like a curated roster of, of home services companies, you know,  most people would just go and do a search and then do some review, you know, investigate.

And most of those searches are unbranded, not navigational category based. And that's where the ads really do seem to matter. And, and, and they matter in part because the platforms like Facebook and Google have made it harder, not withstanding the local pack to, you know, to get those organic,  results in the, in the, in the top, you know, slots.

So I D I definitely think there's value for, for ads, but as you point out David, the, the. The imprecision or the lack of tracking trackability. If I can use that word for organic has, is, is, is,  is a challenge because internally when people are justifying. You know, they want to see KPIs. They want to see metrics that are mapped to ROI.

Very, very directly there's even

Mike: a conflict in the analytics. I mean, Google's interest is in showing last click attribution to the ad in their analytics product. And they do that a lot. So I think.

David: Brandon did highlight the, the series from Avinash Kaushik on that sort of exact problem that, that GA has been historically trying to solve, trying to do a better job of, but yes, you're right.

There is an inherent bias there,

Greg: but it just it's, it's just interesting because in the sort of zooming out to the larger kind of story of advertising and wherever sizing is now, no ads are more expensive than they used to be. They're more competitive. As more people are trying. Mark it online,  even then in the pre COVID period and, and, and you, and you've got uncertainty about their efficacy.

you know, in some it's, it's motivating some people to, to, to try other things to go back into traditional advertising out of home in particular is one of the ones that seeing some benefit, although you can, you can track that with mobile devices. So it's, it's kind of part of a larger, interesting story about.

What do we do now where it's getting harder to track things and it's getting more expensive to buy ads. And yet we're compelled to buy ads because of competition, which is also driving prices up.  and, and the lack of organic visibility in some of these platforms, it's kind of a perfect storm of challenges for many advertisers, especially small.

David: I sorry, I was eating myself. I do think that there's some we're, we're at a very interesting point in the sort of ad organic digital ecosystem. I think it's in some ways at as interesting as the rise of Google in 2004 and five, where I think that there is going to be real opportunity for,  For creativity and for trying new things that hasn't necessarily existed because it was, you know, initially, you know, SEO was so easy.

It just work. You just did it. Facebook ads were so cheap, they just work. You just did it. And I think we're in a space now where everything is a lot. And everything is a lot more expensive and that, that there's there's room here for, you know, it's harder just to run the same playbook over and over and over again and see success.

And so I think that that should excite people who are in marketing because of sort of creative reasons, as opposed to just functional

Greg: reasons. Well, I mean that, you know, connected TV is one area that's growing and where a lot of people are doing exploration. And then also obviously influencer market.  and,  and, and Tik TOK has a sort of an extreme example of that.

And one of the interesting things about influencer marketing not to open another door is that people are saying that the most effective influencers are not the celebrities, but they're sort of,  you know, the tending toward the micro-influencers smaller people who have smaller number of followers, but are perceived to be more credible, not sort of,  necessarily people.

You know, Kim Kardashian and, and others that people have historically thought of as influencers.

David: Okay. All right, Mike, I think that's a very positive way to end the show. Yes. Yes. I

Greg: think your point about creativity is great and,  hopefully people will do that. I mean, it opens the door for a lot of experimentation creativity.

hopefully people will follow up and try things and so on and so forth. All right. So that, so that brings us to the end of the day. Fun-filled fact filled satisfying episode of the near memo and,