Big Technology Podcast - Disinflation Begins, Snap's Cultural Roadblocks, Meta's 'Year Of Efficiency'

Episode Date: February 3, 2023

Ex-Snap and Instagram executive Meghana Dhar joins Ranjan Roy and Alex Kantrowitz for our weekly news recap show. We cover 1) The implications of the Fed's talk of "deflation." 2) Snap's disappointing earnings and operational challenges with an insider's perspective. 3) Meta's wooing of Wall Street and whether its pivot is real or just talk. 4) What the combination of layoffs and buybacks really mean. 5) Downturn as an excuse to kill ESG? 6) AI Hands! ---- Enjoying Big Technology Podcast? Please rate us five stars ⭐⭐⭐⭐⭐ in your podcast app of choice. For weekly updates on the show, sign up for the pod newsletter on LinkedIn: https://www.linkedin.com/newsletters/6901970121829801984/ Questions? Feedback? Write to: [e-mail]

Welcome to Big Technology Podcast, a show for cool-headed, nuanced conversation of the tech world and beyond. And boy am I glad that we now do this Friday show that breaks down the week's news because we have had a rip-roaring week of news that has seemingly not stopped since the beginning of the week. We've, of course had meta, Snap, Amazon, and Apple, all. report their earnings results. We've had the Fed talk about what their plan is over the next, I don't know, a couple quarters. And we've had this massive surge in big tech stocks that has been up and down and there's a lot to make sense. We're starting to see a little bit about what Facebook and what Snap and what Amazon are looking at as we move into the future. And we're going to break it all down for you today. Again, this is a show we do on Fridays. It's live on

LinkedIn at 11 a.m. Pacific 2 p.m. Eastern. And we also drop it on the feed. So if you're seeing it on the podcast feed, that's why you're seeing it because we dropped the recording there. Of course, if you're here, your questions are welcome. We will take them as we go throughout this conversation. Joining me today. We actually have two guests today for the first time. The Friday show has two guests. Ron John Roy, of course, is here, as always. Ron John, welcome to the show. Hello. And we have another amazing guest, Megan Adar. is here she is former snap former instagram so someone who's been an executive at both companies and when we have questions about what's happening inside them instead of saying well i wonder what's

going on inside there today we can actually ask which is amazing so megana welcome to the show happy to be here alex thanks so let's get started the big news of the week i think the big news of the week despite the fact that we've had these really interesting situations with the earnings results has been that the Fed seems like it's ready to moderate its rate increases instead of doing half a percent or three quarters of a percent raise every quarter now it's going to a quarter of a percent and Jerome Powell Fed chair is saying finally we're hitting this deflationary moment Rodin how did you view the the press conference this week and the Fed's announcements? Yeah, I think you have to look at the press conference on Wednesday, especially

especially in the context of the jobs number today. And I both would want to be Jerome Powell and not want to be Jerome Powell right now. On one hand, Jerome Powell might pull it off. He might pull off the soft landing. The thing that everyone said was impossible, we're seeing moderating inflation and we're seeing a continued strong labor market,

something no one thought was possible. And if he pulls us off, I mean, he's going to be in the Hall of Fame of central bankers. but on the other hand is this actually sustainable again today the jobs number showed one of the strong it showed the lowest unemployment rate since 1969 you have to go back to 1953 to see a lower unemployment rate the the u.s added 517 000 jobs which was far far above what economist expectations were so it blew the expectations out of the water so we're in a situation where

everything looks amazing even underneath the actual like top level jobs number average wage growth was exactly as expected which was moderate at 0.3 so we're seeing a situation where we might not have inflation or it will continue moderating and the Fed actually will be in a very good position so i mean Jerome Powell he might be looking good right now right and everything that happened with the tech giants these giant jumps facebook going up or meta going up 23 percent in one day no coincidence. I don't think that that happened on the day the Fed reported these numbers and held the press conference. We'll get into that in a bit. Rajan, though, I'm kind of curious, and maybe you can help us all make sense of this, because it again seems like we're in this uncanny valley or trying

a very confusing point where we have good, you know, we have good news, but we also have the Fed saying there's continuing to stay the course and they're continuing to raise interest rates into a slowing economy, not a contracting economy, but a slowing economy. And Kelly Evans from CNBC had a great newsletter this week. And the headline was, every landing feels soft at first. Like you initially feel like you're going to kind of ease into it. And then, of course, you look down the line and there is actual contraction and jobs. We're seeing things like wage inflation come down.

So what's your view on that? Is that something that we should be concerned about? I honestly think the most concerning part to me is everything started. to make sense again, as long-time listeners or readers of the margins will know, the world has been pretty stupid and crazy for the past few years. And things started to make a little more sense. And then suddenly this January, we're back to Carvana is up, I think, 85%. We were talking last week, BuzzFeed went up 250% off of a Wall Street Journal article about

using GPT3. Bed Bath and Beyond actually missed an interest payment and is going to have to deferred. fault on their debt potentially, yet the stock went up 35%. So I feel like Jerome Powell was probably just sitting there like, guys, I'm giving you this chance here. We're saying disinflation is around the corner. I'm trying to make this work. And everyone cannot help themselves right now and is right back to stupidity. That's right. And the market keeps, keeps rewarding all the, well, I don't know, big tech companies, tech companies. Kathy Wood is a happy person right now. She called herself, What was it? The new NASDAQ, the new NASDAQ on Bloomberg. I can't take it.

Yeah. So, but look, her portfolio is doing pretty well at the moment. So or one month, for one month. But hey, you know, that counts for something, especially given where she was. So let's break down a little bit about what's happened in tech right now because it was a very uneven type of month or type of week where you had something like a meta do really well. You had Snap do quite poorly. And I know Ron John, you might have. have some perspective on that, that maybe I'm reading it wrong. But then you also had Amazon Go kind of muted, but still not give up its gains on the day, even though it said it's going to have a slow couple quarters. And Apple for the first time in seven years missing earnings expectations. Now, I know Snap is a little bit smaller tech, but I found what they were saying this week to be extremely disappointing. They came in, they said that revenue next quarter is going to be down anywhere from 2 to 10%.

My perspective here is there's something really sick about SNAP. Just the business is not working in the way that it needs to be. Yeah, I'll give you my macro view and then very, very excited to hear Megna's view from the actual inside because to me, I've been wanting to be bullish on SNAP

for a good while where I feel they have all the pieces in place. Again, they have a highly engaged user base And their user base is growing. It was up 17% year on year. They have an attractive user base at 13 to 34 demographic. They are the Metaverse company more than Facebook

is people actually use augmented reality on the platform. But I feel the snap, the thing, I mean, the execution side clearly is I think we're going to get into that topic. But what killed me this week is Snap basically was, they missed on revenue, but they beat on earnings, whereas Facebook beat on revenue missed on earnings. Amazon beat on revenue, missed on earnings,

trying to keep it. Everyone kind of hit one, missed on one. Everyone's guidance was either flat to slightly weak. Amazon guided slightly lower, Facebook guided flat. And everyone celebrated like, this is the greatest day ever. And we can get into why I think that is. But overall, Snap really got destroyed on the day after earnings we're down 11% that day, but are actually up to where they were before.

And I think it's more just this narrative that, again, the big tech companies, all they have to just show is that they'll just be somewhat consistent and everyone's happy, whereas SNAP has to really still show that they can, you know, transform their entire business. And so the question is, can they? And that's, I think, where Megna, I'm sure, has some of your second. Yeah, let's put it to Megina. So I'm going to talk a little bit about what you did inside SNAP and how you view this situation? Yeah, well, first of all, happy to be here and thanks for having me. So most recently,

I was leading the global brand partnerships team at SNAP. And so really this idea of trying to build a business ecosystem on SNAP and kind of got a firsthand view of kind of how the company works and where it was going. I've now left. And so kind of a little bit of an outside in view, kind of piggybacking off of Ranjan is, look, I think there's the obvious stuff, right? Like first, it's really hard to be number three or four fighting for eyeballs in a very niche demographic, right? It's primarily Gen Z. Not to mention the ad tech doesn't really work. Snap is often going to be the first platform to go for marketers' budgets, right? So there's that reality. There's iOS 14, the changes there, impacting the ads algorithms. And then there's COVID, the overhiring and the layoffs,

right? So like that stuff, we all know that's foundational. But kind of my take on it is I think, you know, Snap's a brilliant product. And I think it has so much potential, you know, the stickiness, the engagement, the ephemeral messaging, you know, it broke boundaries. It changed the world in a way. It really changed how teenagers, people interacted with each other, not to mention AR technology and that kind of groundbreaking tech behind it, right? However, something's not working and why isn't it working? And I think everyone's scratching their heads on it. And my point of view really comes down to execution.

You know, having worked there, you know, having a great time learning a lot and having really a ton of respect, I'd say, for the product and designers in the company, things didn't really work. And I think that's kind of a conundrum that you might see across tech, right? There's this focus on product visionaries. The Valley has always rewarded product visionaries companies. You know, groundbreaking technology has been built around. product visionaries, but then who are they going to hire around them to actually build a

business? And I think that gap has not been filled at SNAP. Yeah, so you wrote on a post on LinkedIn this week. It's well known that SNAP has never had a strong or long-lasting COO. This fact in and of itself is demonstrative of a palpable operational gap in the org. And then you have what I have up on screen here, which is you say that product strategies are disappearing on Snapchat, like a Snapchat. I thought that was a good one. I like that one. I like that one. Acquisitions occurring randomly and without proper integration, staying separate and stagnant, groundbreaking technology unable to break ground

because of a lack of a go-to-market support, and ad tech remaining mediocre, and returns on ad spend diminishing, which is all, all seems to track with what we're seeing in property. So can you talk a little bit about what it was like inside the company? I mean, bring us in as someone who was trying to get stuff done inside the, company what were you running into and how has that held snap back especially from a business standpoint i think you come into this problem at snap and you know arguably it's kind of the framework under which tech companies are born and raised which is product first product first that's not a bad thing right like product inherently can be groundbreaking revolutionary

change the world but then product and design alone it's like let's put it this way if a tree falls in the forest, right? So if the product and design is really breaking boundaries, that's great. But then how is it getting to market? How is it reaching your audience? And like, what are the business infrastructures around that product to actually make it a business, right? And this is kind of what I saw. Great ideas, smart people, truly creative design, but a fundamental gap in operations. Now, I kind of highlighted on LinkedIn, that's operationally built into the company from an org's, you know, org standpoint. But additionally, it, it sees itself in kind of strategies coming into existence, really good strategies coming into existence and not being able to see the light of day because of

that organizational gap. Why is that? What is going on inside Snapchat that's causing such a problem? I would imagine, I'm just going to take a leap here. I would imagine that you have this product, Focus visionary. Evan Spiegel, but he hasn't installed a Cheryl Sandberg's type operational person to get that operationally working. How far off am I? And what is actually happening inside that company? I love the Cheryl analogy because, look, I really think Mark and Evan both are true product visionaries. They changed. You know, the internet broke the internet in the way they built and the products they designed. It kind of goes back to Lincoln's team of rivals, right? You have this pure product vision and like who are the people you're going to hire around you to actually get that

product to market. And so, you know, Mark hired Cheryl, hired people to make Facebook and take it from a product into a business. And one thing I'll say, and the reason I bring up the team of rivals is a true product visionary never wants that product division to become impure, right? And inherently, any business person is going to have to make it impure to monetize it, right? So it's a little bit of like that balance where it's like you have to sacrifice a little bit of that purity to actually run a business. And I think that's the gap we're seeing at Snap candidly. And what happened with the ad tech?

I mean, you know, obviously the impurity is always something that like, well, that comes with advertising and advertising is the business. So yeah, I'd love to hear. your perspective on why they can't get their act together on advertising technology, why they have ad reps leaving? I mean, listen, I don't think I have a great answer for you, but I think it's a combination of things. I think the first thing is, again, that operational gap, you can have all the great ideas, the greatest engineers in the room building, but how is that being taken to market? Second, when you inherently have a smaller pool of advertisers, right, it's just a very

small pool of advertisers and quickly diminishing again because snap's demographics are small and you know it's a niche demographic people are going to drop it first so then your inputs are smaller right so it's kind of like a little bit of a vicious cycle and that's what i heard i spoke to one advertiser uh this week and was like what do you think about snap as we were heading into earnings and they were like still for teens and it was like okay well if you have facebook better ad tech that you have facebook that has much broader segment of the population, Facebook's going to do better. What do you think on the product side has prevented it from expanding outside of that demographic? Because again, out of my friend group, no one really uses it. But when I do use

it, I mean, and everyone I know who's younger does use it as their primary means of social communication, what stopped it from actually breaking out of that age range? So, well, first of all, you're absolutely right. Ranjan, like even the data will show looking back that I think it was something like a 12 to 21 demographic people. And I remember I mentor groups an undergrad and all of them would raise their hand. We use Snap. We use Snap. We use Snap. Senior year comes, they graduate. We no longer use Snap. So it was clearly like they were aging out of the app. And we saw that over and over again. And why? I think Snap is kind of built inherently to be. be a little weird, right? Like, it's fun. It's created. The UX is a little hard for people like us to use, right? It's a little different. And that's kind of the joy of using Snap, right? It's kind of a niche app that teenagers think is their own little world. And my point of view is they should be doubling down on Gen Z versus pushing it, pushing it up to millennials, because that's a hard sell unless you do real core product changes. And the core product is the one thing that's working

right now i just want to ask one one more question about operationally what it was like i just want to hear your perspective what it was like when you were inside that company and you saw product strategies disappear what happened did they just not get approval did they get approval but not budget whereas their middle management there look i i really don't think there's like one clear thing, right? I know this isn't what you want to hear, Alex, sorry, but like, I'm being honest, right? There's not one clear answer for it, but what I can say is people were smart. Ideas were happening, right? Like good ideas, good product roadmaps were built, but there was a gap in operations. And I feel like I get frustrated with the narrative here right now saying

Snap isn't innovative. I actually think they're very innovative. I think there's a very clear operational muscle lacking in the organization and like I hate to be the MBA talking about business processes but like business processes matter you know and I think it's really that fundamental before we start talking about iOS 14 revenue all of that stuff it's like a fundamental issue right and sometimes you just need that champion at the top to say okay whatever it takes we get this done and if that leadership isn't there then stuff doesn't get done doesn't get pushed through doesn't get the resources And next thing you know, you try and explain to Wall Street while your, why your revenue is going down because your product team couldn't build fast enough to bring in ads in a new world brought about by Apple. That's exactly right, Alex.

Ron, do you have any other questions? No, I think, I mean, it's to me, the thing I like to hear there is it's, it's not that it's not an innovative company. Because, again, it's, it still blows my mind that they basically, I mean, they did invent the stories format. They invented the lens. They basically owned augmented reality for a while, but that was years ago. And they really haven't developed beyond that. And on the ad tech side, you know, and we're going to be getting into meta.

Meta supposedly is showing that they're actually combating iOS 14 and the lack of the tracking changes and are using AI machine learning modeling to build new systems to actually. be able to combat that and snap nowhere in their earnings call did they they talked about their conversion API and how which everyone has right now but they didn't actually get into what their big grand strategy is to change their performance ad marketing yeah you know when I was at meta we were talking about iOS 14 before iOS 14 was there right like we were preparing there was Kathy. There were things we were thinking about. I mean, in a way, Instagram shopping was a hedge against iOS 14. And I'm happy to go more into that if that's interesting. But so I think that

there is a level of operational prep work and like cushion built into the company to actually be having these conversations. Whereas if you don't have those structures in place and Snap, you become a reactive business, right? You're just taking things as they come and maybe thinking about the future, but not actually being able to prepare for it. So we'll definitely get into the meta stuff, but I have one more question for you about SNAP, which is, what do you think the future is here? I mean, you're really correct in pointing out that it's coming to advertisers after Facebook, after Google, in some cases after Amazon, maybe even after Twitter. I mean, Twitter makes more money per user than SNAP does. Sure. So where exactly

is this company going to go? Because on one hand, the money, the money is bad, right? The money situation sucks for Snapchat. On the other hand, this thing is growing about as well as any consumer app we have out there outside of Facebook, right? It went from 363 million users to 375 million. I think this is daily active where you look at, you look at Twitter. Twitter is like pushing 100. So what do you think is the future? I'm off. I'm cautiously optimistic. I think that Snap is a beloved. Is that like the most cop out? That was such a good hedge. Yeah, exactly. What do you really think, I can go like yes or no, whichever way I feel. Listen, I think that the product is beloved, truly beloved. The stickiness, the engagement that you see with Gen Z is truly unrivaled, right?

Perhaps only by TikTok. So I think there's that. But the cautious part comes in because if you're not able to do anything with it and innovate on top of it or grow that revenue in some meaningful way, like it doesn't really matter. It goes back to like the tree falling in a forest. analogy like you can have the stickiest you know product ever but if it's limited to that demographic it's not really growing that demographic is not becoming more monetizable because of your ad tech issues you run into a tree falling in the forest and it doesn't really matter right i want to end this segment with a quote from michael nathanson who's an analyst at moffat nathanson and i realize in the newsletter this week i'd even finish my description of this quote but it's the quote of the week

and he says meta ate snaps lunch because meta is a shark and snap is a minnow now the bullcase for the app depends on snap doing to tic-tok what meta did to it and personally i just don't see that happening anytime soon we're here on big technology podcast we have two great guests with us ron john roy of margins is here with us as always on fridays and megan adar who you're hearing from is the former global head of partnerships at snap and the former head of partnerships at Instagram shopping. So as we talk through this is definitely someone. She's definitely someone who knows what she's talking about in this world. Again, if you're watching with us live and we know there's a bunch of you here, your questions are definitely welcome. So feel free to drop them in and we will get to them when we see them. We'll be back right after this talking about Facebook or as they call it meta. And then we're going to talk a little bit about AI hands and maybe I can get some Mr. Beast content in here. It'd be good for TikTok. All right, back after this.

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So, search for The Hustle Daily Show and your favorite podcast, up like the one you're using right now. And we're back here on big technology podcast Friday edition. We're breaking down the news. Of course, big week of earnings. Every company in the big tech world reporting, well, except for Microsoft, but Facebook, Snapchat, Apple, Alphabet. They're all, they're all telling us how they're doing. We've got the Fed chiming in. And the darling of the week really was meta. Meta reported not unbelievable earnings, right? They had, you know, they narrowly beat on revenue and guided flat on earnings missed on earnings guided flat for next year yet they they were the absolute most beloved stock on the market this week and almost single-handedly changed

the narrative around their company in one earnings call i mean i think jim kramer was calling it like a generational earnings call or something like that which is pretty impressive given that the numbers weren't impressive so let's talk a little bit about meta Ron John, you had a perspective on it this week. I mean, what has made meta standout in the way that it has that others haven't been able to do? I hate to agree with Jim Kramer, but I will agree that this was a generational earnings call. So for me, the numbers were meh. Like, I mean, they were fine.

I don't think they were, they were actually very similar to snaps for the most part other than the guidance. However, I've been waiting for this moment for a while for Mark Zuckerberg to quietly but definitively deprioritize the Metaverse. And I think he did it. And I think he did it in an amazing way. First of all, in the actual earnings release, in the intro, he doesn't even mention Metaverse. He talks about AI, Reels, Content Discovery. I did a search 29 times he says AI, seven times he says Metaverse.

He before even mentioning the Metaverse says, we want to be the the leader in generative AI and AI recommendations. And then my favorite part, when talking about successes about the Metaverse, he bragged about having 161 million people use WhatsApp digital avatars. That is the Metaverse he's talking about right now. But he made a good point. I mean, and again, this is like a snap bit moji or just a everyone has these.

This is not some fancy Metaverse wearing a helmet type thing. And he's using that as an example of success. So I think he's saying it right now. He's like, we're getting back to the core business. And AI obviously is the hot topic of the day and Facebook is well positioned for it, as you and Jan Lukun discussed the other week. So, I mean, that conversation feels even more relevant right now. They are saying, we have been working on this.

We're a leader on this. This is core to our business and that's what we care about in our, quote unquote, year of efficiency, which is what they titled their manager. titled their management philosophy for the year. So I will. Sounds like some expensive consultants. Yes. I read that and I was like there's a lot of workshopping and testing on that one.

Okay, but I want to push back on this, Ron, Jenna. And I totally hear you. But I also think that, yes, in the top of the earnings release, you have Zuckerberg saying, okay, it's a year of efficiency. We're going to work on generative AI. No meta in the beginning. However, if you look at the actual numbers on the quarter, the company lost another 4.28 billion on the Metaverse last quarter, and that's 13.72 billion

in 2022. Nearly $14 billion on the Metaverse, and it accelerated in the fourth quarter. That to me doesn't seem like a slowdown. The company is still called Meta, and the expectation is that they're going to lose even more money this year. So, yes, he did a good job talking to Wall Street, But my understanding is Wall Street actually reads the numbers as well as the words. And so how do you square that with this hypothesis that you have? Yep. So meta reality labs, which is the big money loser, also includes all their work around artificial intelligence research.

They don't break out what is going to the future Metaverse platforms in us all not having legs in a virtual office room from the good generative AI stuff. So the research that is in there that's been pushing all of these. product changes around content recommendation that lives in there as well so i think to me my the bull case is more and more they're diverting that spend where they're comfortable losing money towards generative AI and other AI and quietly you know going head to head with Microsoft who's the cool kid at of the moment right now in the space um but also i think it's more just hearing the words for mark Zuckerberg's mouth year of efficiency and again those consultants probably paid

off because all he had to do was just say it. For so long, everyone's just been waiting for him to say refocus, efficiency, cost cutting, and he finally did it. So I think that's what everyone's paying attention to. You think Wall Street is that easily persuadable? I mean, how does saying year of efficiency like 20 times lead to the generational call of earnings call of your life? Did you see the Tesla earnings?

I think, yes, I think Wall Street is easily that persuaded by narrative. Okay. Interesting. I mean, I'm going to throw in two different variables and see how much you think that because I think these might have also played a big role. I think the fact that this came out on the day that the Fed kept saying, you know, the same name Mark Zuckerberg is saying your efficiency. The Fed is saying disinflation, right? I think that plays a major role. The other thing is there is a fundamental difference between and maybe you're going to push back on me here. But there's a fundamental difference between what Facebook. did, which is it beat the, it beat revenue or revenue expectations in the call and SNAP basically matched them. And then also, META's guidance might have been a little bit, little bit down,

but it's got, no, meta's guidance was flat. Flats was down. And Snaps was down. And this, if this is all about momentum and expectations, then meta has a story now and a narrative that's accompanied by facts with a moderating Fed and revenue that it can continue to hold in the face of iOS 14 changes that don't allow

to track, whereas Snap is in a boat in the middle of the sea without an oar, and that narrative is falling apart for that company. What do you think about that hypothesis? Yeah, no, no, hold on. I actually would agree with you here. I think I would say, no, I would say that was the most powerful part of the narrative is that Facebook, by beating on revenue showing we can still grow even in this very bad environment. Because again, all they have to do is just turn off that money spigot that's going to the metaverse. and suddenly those earnings look a lot better so they have pure control over their financial future whereas snap as we've talked about on the core part of their business the performance advertising

side again it was up plus 4% on the direct response side but overall no one has any confidence in their core business so i think i agree i think that's the difference there and as you said and let's just note snap is right back to where it was before their big disastrous horrible earnings call It's right back there after this Fed meeting. Meta happened to report on the day of the Fed. So yes, I think the animal spirits might have played a role here too. But I'm very curious for Megna's side, what your perception of is meta, have they figured out the iOS 14 problem?

The IG shopping you brought up is one potential head, which it sounds at least publicly that they've been deprecating a little bit. You had written on this. like have they figured out their way out of this this hiccup in their trajectory i mean if you really think about it they're probably the most ahead of the game versus the other platforms but then is that still an enviable position to be in given ios 14 not really right and like i mean this is foundational everyone knows this but like why is mark investing in the metaverse right it's the rails of his own universe he can't control the universe the rails here he wants to focus on the metaverse it all

kind of adds up, right? You know, with the, with the losses in reality labs, what, like $4.2 billion, consistent draining of the money. Like, it kind of, it kind of makes sense that he's walking it back. But do I think that that's actually going to be deprecated? No way. I think that that's a long-term investment. He's just learning that he has to position a little, position it a little better because it's not, it's not plausible for the rest of the market. Now, in terms of Iowa, sorry, terms of Instagram shopping, I think Instagram shopping was a brilliant little strategy, right? If you think about it, there is so much opportunity with e-commerce and Asia cracked social commerce. And I think Instagram was best positioned in America to crack social commerce as well.

So there was that angle to it. Added revenue, GMV, changing the business, right, becoming the super app. But then there was also the checkout angle to iOS 14, right? And the checkout angle is really important because it gives them the audience data that they lose with iOS 14 and that was the real strategy yeah yeah so just explain that because yeah that's a good that's a good point if let me take a hack at it if if someone clicks through an ad on Facebook and lands on another page and buys now because of those iOS 14 changes meta has no idea if they bought or not so they're not able to optimize the ads so this is the push just to bring shopping within the app right and if you you you you you Yeah, you got it, exactly, right?

So you are consistently on Instagram losing traffic, right? Because people are driving to their websites. They can no longer track that traffic, if you will, right? So now they lose an audience to which they can retarget ads, right? So that's kind of the foundation. Now, with Instagram checkout, you win a lot of things, right? You got to take of revenue, you get some GMV going. What's GMV?

Most important. So it's how much you sell on a platform. Okay. So you get kind of these new revenue sources on platform. And on top of it, you now have like PII data, right? End to end PII data that you lost through iOS, but also data that you never had before, like processing payments. So now you have not just that data, but a new audience and a new way to retarget that audience that shopped on Instagram. Instagram. I'll pause there. Does that make sense? It does. I'm going to ask a question here. Yeah. I spent a long time as a beat reporter covering the ins and outs of Facebook. And I remember going into the Menlo Park headquarters as, you know, as long as eight years ago and hearing from them about the social buy button and how that was the future. And okay, that was a time where they weren't pressed to do this because they could still track checkouts. Sure. Because it was before the Apple changes. But it just never worked. And Twitter also had a same thing.

They had a, they tried to push social commerce. That didn't work. I'm curious if you saw anything inside the company that would give you faith that this will work this time. Maybe it's desperation. I don't know. But what did you see inside Facebook to make you think that it's possible that people will actually decide they're going to see a product and then buy it within Facebook or

buy it with an Instagram? Two answers for you. One is there was organic user behavior that, birthed this product, right? People were interacting with brands. I think like 80% of people on Instagram follow a business, right? People are commenting on businesses, hey, like, tell me more about this product. Can you DM me a link? And then you lose that traffic. So there was this behavior on platform already that made a product like this enticing to Instagram and Facebook, right? So that's like number one. And then number two is the theory I kind of wrote up on LinkedIn about,

which is, listen, they're trying to do a lot, you know? And the Kevin's, you know, back in the day, the founders of Instagram, and they were still there when I first joined, they used to talk a lot about focus, right? Like being disciplined about how you grow the app and what features you build. And I think that was their legacy, right? After they left, it kind of like catapulted into a super app, right? Like, let's throw on reels, let's throw on dual-facing camera like B-reels. let's throw on IG shopping.

Let's just throw on a bunch of things and see what sticks, spaghetti on the wall kind of thing. And I think when you lose focus, you have to kind of decide how much revenue you can actually attain for that lost focus. And I think like those two are competing interests that Instagram is running into now. Oh my God. I'm just remembering how many topics we want to cover today. So but the word focus brings me back to one of them that we want to. So Andrew Bosworth, who is the head of.

reality labs wrote this kind of unbelievable post. I mean, it actually makes sense, but just the way it's written is like, what are you talking about? Man, it's called focus. And in it, he's talking about how when Facebook was a younger company, the beautiful thing about it was that it focused. And then as it got bigger and more successful, it would start saying yes to things. The example that he gave is charity and which they would never do because they were like, we'll make the world better with our product and he said he's talking about how the company needs to return to focus i'll read like a quick selection from it he says each individual digression from our core competency like this can probably be positively be measured positively on ROI but considered locally but i believe they

collectively add up negatively there are hundreds of them each individually individually reasonable but they take people and money and altogether they start to outweigh the core and create drag. I pick charitable giving not to suggest we should change anything about that program necessarily, but rather because it is an example of what seems like an unalloyed good, which nonetheless has a hidden cost at scale. What he's saying is the company needs to focus. I think that, and Ranjan, you brought this up in a text message to me, so I want you to riff on it. I think that conceptually this makes sense. But Facebook and Megan, you hinted at this is like one of the most unfocused companies that you can ever.

come across in the tech world and it's potentially this kind of like weird unself-aware statement that boss is making because potentially his division the reality labs is is the unfocused part of the company I mean that's your thesis is me jumping at the microphone that's your thesis Ron John so why don't you expect okay two things on this one as you said the lack of self-awareness when it's your division that is the poster child for the lack of focus, where instead of owning commerce and focusing on that, again, we're putting on the vision is putting on helmets and that type of metaverse. The other thing I found really interesting in this, and I've been seeing this more and more, actually connected to this,

Axios communicators and their newsletter had a whole piece about how CEOs are going more silent around ESG and DEI initiatives. My hot take here is that In our post-ZERP world, a lot of companies, you're going to start to see the true character, everything that they were talking about a few years ago. And you're seeing it more, especially in tech, that people are saying, you know, rather than blaming their own management decisions, rather than blaming their own lack of focus, charitable giving, the fact that that was the chosen thing, ESG, the BP CEO the other day, said they're going to be cutting back on renewable energy efforts because they're just not

paying off totally moving away from renaming their company beyond petroleum now that times are a little tough and suddenly there's economic pressure so so i think you're going to see a lot more of the technology world the corporate world changed the way they were speaking about a lot of things over the last few years and i think this is the perfect encapsulation of that well there's there's one more point that i want to bring up by the way last call for questions because we've got like five we have like five minutes left and then we're going to go. But I wanted to bring up that there was this other thing that's happening, which is that people are saying maybe this entire move towards layoffs was not entirely Wall Street driven and part of it was a way to recapture power over employees. There was an

article by Brian Merchant in the LA Times that talked about this. And at first I was skeptical because I was like, no, of course Wall Street does need to see these cuts inside these companies. But then when that you you combine that with what a 20 billion dollar share buyback with Facebook 40 and authorized 40 right authorized so they haven't done it yet but you authorized that you've you've cut layout you've cut all these employees to cut costs and now you authorize this massive buyback and it's like well maybe this is a moment where a lot of these social causes that have been baked into the companies are now going to be stripped out with the excuse that okay it's it's tougher times so megan i'm curious what you think about that

I mean, I'm super aligned, Alex. I think they're using it as an excuse to trim fat. Even companies who aren't in financial trouble are doing layoffs now. So it's kind of like the trend of the season, you know, spring 2023, if you will. But, you know, my take on layoffs in general is, you know, it's obviously a very hard time on people and, you know, especially people who need health care or need visas, et cetera, et cetera. But I actually think this is going to be healthy for the market. I think, that, you know, the trend we're seeing are these big platforms not doing too hot, pulling back, over-hired, pulling back now, looking at core product, right? And I think what that really means is they're forsaking some real territory in the innovation field. And there's going to be a lot of innovation coming up with not just the talent that was let go, but, you know, people at these companies who decide to leave and build because there's clearly market value and, like, a value prop to be built.

It's just that the platforms aren't doing it. That sounds right to me. And having been inside the company, what do you think about this thesis that it's the end of charitable giving and ESG and employee resource groups now under the banner of hard times? Or is that a little bit of an oversimplification? Listen, I think it's a little reductive and you know it. And I think it begs the question on whether you think corporations are inherently evil or good. I think corporations are just driving value for shareholders. So, like, I'm not surprised at all. Okay, great. We have one question here, or really a comment, right, from Jafari Khalid.

He says, just to piggyback on Dar's comments, product strategies are disappearing. It was very evident recently when OpenAI and ChatChapT were reported by the mainstream media that all of a sudden big tech companies jumped on the bandwagon on AI. Never seriously reported on their product strategies. seriously incorporating AI? Are they serious now or is it just a bubble and will it be over soon? My perspective is it's definitely serious and this has been like Jan has been talking about Jan Lecun who was on last week. This has been under development for a very long time inside these companies and the question has always been, did they have the guts to do it? And now open AI has

cleared a path for them to do it in a way that would have been difficult for them otherwise. out of the way and curious what you guys think i mean to build off of that what megna is just saying around how the refocusing the year of efficiency whatever it's being whatever we want to call it will create a whole new you know era of innovation i completely agree because i think a lot of what these companies did was defensive a lot of the markets they went into a lot of the products they launched again when every company is in everything whether it's media music video messaging, commerce, whatever else, it was just to head off some other competitor or because one of the other big tech giants was doing it, they did it as well. And I think that we're not

going to see that anymore. And I think that's going to be incredible for startups, especially kind of mid to late stage startups that never really could, you know, hit that rocket fuel growth path because they were hampered by the big technology companies. So I think that I think from that perspective, kind of the reshuffling of resource. two smaller companies, I think is a very good thing. I mean, plus one, right? Like, I think it's just healthy for the ecosystem. And I think it's about time that the little guy had a shot.

So I'm going to be very interested in leaned in to see the kind of innovations that are built in the next 12 to 24 months. Now, if only these companies can get the AI hands correct. And there's this, just to end on this, there's a great story in BuzzFeed talking about how they have no idea what hands are supposed to look like and they always botch them when they try to draw them because they don't have a perception of the real world and hands are photographed weird oftentimes not in photos oftentimes with digits being hid and these AI systems just can't get the hands right and once if they can't get the hands right you're you wonder how smart they are I mean let's just end AI hands are weird any thoughts about that guys I think it's it is the perfect representation I'm guessing it's

going to be continued as kind of a meme, like way to explain this really difficult thing in a very simple way because it's true. Anyone who has used Dolly, sometimes you get some weird stuff, especially if you use stable diffusion and go to the kind of cheaper, free models, you get even weirder stuff. People's heads kind of turned in different ways or just things that don't make sense. And I think we're going to see more and more of that is everyone rushes towards generative AI and thinking that they're going to get this easy way to do incredibly, incredibly difficult tasks and challenges, they're going to realize that no, a lot of things actually don't work that well. Yes, you can write a poem in the style of Shakespeare about Jerome Powell or whatever else,

but to actually solve really specific problems, there's a lot of stuff that unless the training data is there, it's not going to work. So, yeah, Megan, why don't you take us home? Have the last word. Take us home. Listen, I think we're just in the beginning of generative AI. And everyone's saying it's overhyped, but I'm here to say it's even more overhyped than overhyped. This is just the start. And so there's a real long way to go.

And I'll be curious to see what Microsoft does to actually grow, grow the business and incorporate it into real products to drive real value. Okay, great. Well, thank you, everyone for joining. Thanks for all the folks here in our live audience. thanks megana your first podcast ever i think it was a real success thanks for coming on ron john great to see you as always thanks for joining us thanks to all of you the listeners thanks to lincoln for hosting us here and having me as part of your podcast network uh really appreciate it and um we will again be back on wednesday

with a conversation with joe caproso the president of whistle sports kaya ureyev who is a reporter for the information asking if the creator economy was a far I'll just tell you right now before we sign off. I've turned on monetization on YouTube shorts just to see what type of money I'd be getting paid out. And I got one cent, no, two cents off of 18,000 views. So there will be a lot of walk about it. Exactly. So I'm excited to have that conversation.

And then next week we'll be back on Friday. Again, going over the week's news and taking your questions, 11 a.m. Pacific, 2 p.m. Eastern Time on LinkedIn on YouTube. and then back again on the feed. Hope you're enjoying these new shows. It's been amazing seeing the engagement and the average listen times on them. It's been great to bring them to you every Friday. And we'll keep doing it.

And you stay there and we'll keep coming back. All right, everyone, thanks again. And we'll see you next time on Big Technology Podcast.