Sharp Tech with Ben Thompson - Meta’s Murky Future and the Transformed New York Times

Episode Date: August 11, 2022

The future of Facebook and Instagram in the TikTok era, Instagram's shifting priorities, and stated preference vs. revealed preference. Then, the new era of the New York Times.

Hello and welcome back to Sharp Tech. I'm your host, Andrew Sharp, and on the other line, Ben Thompson. Ben, how we doing? We're doing well, Andrew. How are you doing? I'm doing fairly well. Earlier today, I finalized my trip to the Dutch Grand Prix later this month. Oh, excellent.

It will be great content for our F1 podcast that we will probably talk about forever and never actually watch. I might make you do it next season, I think, until. then it's just more of a running joke. But it is, it's the project that you and I have the most passion for right now. So hopefully one day it will see the light of day. I'm excited. This is just a practice run for what we actually, what actually matters. You know, one for them, one for us. The F1 podcast will be one for us. And today, Ben, we're here to not talk about Formula One, although we'll do that at some point. I want to talk to you about Instagram and TikTok. And then I want to talk to you about the New York Times.

And for part one and Instagram, I thought a good way to ground us for anyone not familiar with the ebb and flow of the past six months, most of which I've experienced as your friend talking about Instagram as they introduced these changes. But just to summarize, so earlier this year, Instagram began introducing changes to its app that prioritized video and used an algorithm to show you content from outside your social graph,

which is another way of saying people you follow and friends you have. And then that was followed more recently by some very public backlash, including from Kendall Jenner, who is like unbelievably powerful on social media. I didn't really realize the scope of her influence until this whole thing,

She destroyed Snapchat like a couple of years ago when they were like they did like that redesign. And it was like a 17% drop in the stock price or something crazy like that. So yes, beware the generous Kardashian. I mean, it's basically the same advice you'd give an NBA player. Beware the Kardashians. Exactly. Yeah. I didn't know that the younger generation had that kind of juice, but they certainly do.

And in the same week that the Jenners and the Kardashians were voicing their objections, there was a video from Adam Masseri that basically said, I know this is hard for some of you and no one likes change, but this is what's happening. And eventually all of you will adjust and we're pivoting to video because it's the right thing for the long-term outlook of the company. Do I have the broad strokes right so far? Is there anything you want to add?

I think that last bit is sort of interesting because Maseri's argument and, you know, for the record, he said this was coming last summer. Like he did another video. I wrote about it at the time. And it's one of those things where, I mean, you see this again and again where you can predict stuff all you want or in this case, you can explicitly say that something is coming, but no one actually takes it seriously until it actually arrives. I mean, imagine, you know, I'm sure one can think of.

relevant examples over the last couple of years of things like that. I think the argument that Masseri would make is not that we're pivoting to video because it's good for the company. It's that our users prefer video and we are following them down that path. Now, I think the answer is probably a little bit of call may, a little bit of column B. It's definitely good for the company to move in this direction given the threat from TikTok and things along those lines. But it's also the case.

that this isn't unique to Instagram. It's sort of the history of technology. You know, people like video. People like pictures more than text, which Facebook started as text and then it had pictures. They like video more than pictures. And if you want to sort of zoom way out, a sort of argument for the sort of metaverse sort of vision is people prefer 3D over

2D and they prefer more immersive over less immersive. And so I think there is an aspect where, yes, this is something they need to do strategically. But it is true that like people like it. And, you know, the revealed preference, you know, Instagram has access to data. They know what people are doing. They know what people are reacting to. And I find it hard to believe.

And I'm very skeptical about this idea that, no, people just really want to look at photos on Instagram. They don't want this other stuff. You know, people may tell themselves that, but what they actually look at what they actually spend time on, I suspect, is video. Yeah. Well, it's interesting because I disagree with you. And that's a dangerous place to be with tech.

And so I think you're probably right. But at the same time, I think it matters that people don't think they like video. And they open the app and are bombarded with videos from people that they don't even follow. And suddenly what was once, like, people's favorite app. Like Instagram was the one app that hadn't really like gone to hell over the last five to seven years.

And now it feels like it's polluted and is like an assault on the senses. And I wonder how that will affect like its long term health and success. I mean, it really is sort of the big sort of open question here. I mean, I think the, you know, there is that article that study that came out this week about, you know,

young people in their use of Facebook and it basically confirmed what we all know, which is that they don't use it. And you know, to the extent, and you've seen Facebook really evolve over the last several years. Did you really just be a utility app? I mean, they have things like marketplace,

it has things like all the groups and stuff on those lines, events. It's not somewhere you go to sort of like do social networking. But that kind of raises a similar question. Is it that people have moved on and done their social networking elsewhere? or is the fundamental nature of social networking changing? I would argue it's the second one. I mean, there's an article I wrote a few years ago that sort of predicted this.

I started out talking about my Bucks group chat. And, you know, there's a group of us on Twitter that uses Twitter's truly horrific direct message feature, which is just a total mess. It doesn't keep your spot. It's hard to, you can't search. It's a total disaster. And yet we use it all the time, particularly during the season, a bunch of people that who met via Twitter,

and we talk about the bucks and things on those lines. And it's not just that. Like the group chat phenomena, I think, has exploded. And there's lots of factors going into this. Like, you know, there was that, that idyllic era of social media where people just shared stuff like crazy. And then is like the whole scare thing, oh, people aren't getting jobs because of the stuff they posted on social media and

like all that sort of bit. And then it just kind of became like, you know, who really cares? I mean, like, there's this famous Paul Krugman quote in the 90s where he predicted the internet would not amount to anything because people don't have that much interesting stuff to say. And I made the case actually, I think a while ago that he gets made fun of for that comment a lot, but he was not completely wrong. I would say he was certainly wrong the internet wouldn't amount to anything. That's very clear.

But he wasn't that wrong that people don't have that much interesting stuff to say. And the reality is, is that Facebook and Instagram in particular, and Instagram, you know, there's one bit where Facebook carries all this cruft that lets Instagram just be sort of Instagram. At the same time, Facebook's sort of locked into what it is. Like, like it's locked into the people you know in real life, like, and for better or worse. And it has your mom on it either for better or worse, right? And Instagram has always been something that's been more nimble, not just in terms of not having to bear all that burden, but also Instagram's changed dramatically over 15 years.

I mean, again, I'm doing the, I wrote about this, but this is something that I've been tracking for a long time, where Instagram started, it was basically you apply filters to a photo, and then you push that photo to Twitter. That was basically the main Instagram use case when it started. Now, there's a very famous Chris Dixon article that's something like,

you build the tool and then the network will follow. Instagram layered on the network after that, and it became this sort of photo sharing app. But for a long time, the photos and stuff that you posted was all in chronological order. And then Instagram added sort of the algorithmic feed, that rated stuff you did. And that was a great example of the exact thing we're talking about now. People lost their minds. They hated the fact they were putting an algorithmic feed.

But the reality is, is post algorithmic feed, people use Instagram way more. Because it turns out a lot of the stuff, like we as humans are not very good at parsing and picking out all the different things of this is actually what I want to see. and organizing by time is actually a terrible mechanic when it comes to stuff we might be interested in. It's like it's kind of arbitrary. Like we use it because it's easy. And it turned out that actually showing people's stuff that they preferred to see that was shown by stuff they looked at previously, met they use Instagram more. Fast forward a couple of years. And you have things like all the direct messaging on Instagram.

Like people, again, people like, oh, another button, another area in the interface. Now direct messaging on Instagram is massive. It's basically another social network that is almost independent of the core Instagram mechanic. And, you know, I was, my daughter, like, not to dip in the pure old man anecdote thing,

but she, like, we had to get a hold of one of her friends who were picking her up to go to some activity. I'm like, oh, what's her phone number? And she's like, I don't know. I only talked to her on Instagram messaging. Oh, my God. So it's funny you say that because that's, that's my reaction when you talk about Instagram

direct messaging in the same way that I wasn't aware just how massive Kylie Jenner's reach was. Like, I'm now too old to understand that Instagram DMs is like a bustling marketplace of ideas among the youth. And like, so maybe I'm just sort of out of it. And Instagram has its finger on the pulse more than I realize. Yeah, well, I mean, there's more, too. I think the biggest example is, Instagram added stories.

And everyone again, outrage, terrible. You're ripping off Snapchat. This is so lame, et cetera, et cetera. What happened post stories? People stop using the Instagram feed. Like what you do when you open Instagram

is you go through the stories and then if you're bored, then you'll start scrolling down the feed. The reality is that the fundamental nature of what Instagram is is so, is completely and utterly different from where it started. And that, that, that, that shift.

has been associated by ever-increasing use and ever-increasing engagement. So I think there's this bit where people are painting this nostalgic picture of, oh, Instagram is this peaceful place, this place that I like, when the reality is that Instagram has been changing dramatically over the years. At every step, people have complained about it, and at every step they've used it more. And so you can understand Facebook sort of like giving lip-serge to, yeah, we hear you, you know, big pain.

And then just plowing on ahead anyways. Yeah, it's fair. And that was the final update was that Instagram then started to roll back some of its more dramatic changes following widespread complaints. And Adam Masseri said, I'm glad we took a risk. If we're not failing every once in a while, we're not thinking big enough or bold enough. But we definitely need to take a big step back and regroup. We've learned a lot.

We'll come back with some sort of new idea or iteration. So we're going to work through that. So now they're sort of in limbo for the time being. But I think that the trajectory is still pretty clearly defined. And meta is going to be prioritizing video going forward. Right. There's two important changes that are happening. So two and a half.

So half of it was they also released this new version of the app that was basically TikTok. and like from look and feel. And there's only a small percentage of the user base. This is what they do. They just roll out to a few people tested. See like they see how much engagement changes, things on those lines. I never get to be one of those test users on any social media network. Every time Twitter rolls out.

Yeah, that's true. That's true. I could be group A or something. But yes, okay. So it was a small percentage of users. And I think that was the big mistake in this, honestly. I think without that stark dramatic. change and people posting about it.

A lot of the stuff people don't even notice. They might complain. Like, man, there's lots of videos or whatever. But I think that sort of like shown a light on what was going on and triggered the necessity for this sort of response. But so I don't think that's necessarily a really important factor here. I think there's two things that are going on with the shift. Number one is obviously the increase in video.

And again, it's hard to parse apart how much is this what users want versus how much is a response to TikTok. You know, clearly the response to TikTok is super essential, super important. We can talk more about that either and why it's a threat. But that's sort of number one. Number two is this algorithmic bit, the part where they're going to start surfacing things that you didn't necessarily, you know, you don't follow those people. And that, more than anything, that's the TikTok threat. And it was squarely in Facebook's blind spot. And I think that's the most important thing to understand about this sort of overall dynamic, which is TikTok came up in this world in China where you obviously had the censorship regime and where peer to peer sharing is inherently risky and dangerous. And actually, ByteDance's original product was called Totiou.

It was a news app. And news is particularly risky in that sort of environment. And so what TOTI did is TOTO did is TOTO developed this algorithmic way to serve news. And one of the things with an algorithmic way is it's inherently centralized. Like it's going through the central computers deciding what goes where, et cetera, et cetera. If you're going through that process, you can devalue certain things. You can censor certain things. It's because at the end of the day, you're serving the users.

They're not getting the content from other people. They're getting it from the centralized place. And so, you know, there's this, you know, I think this Peter Thiel saying that AI is like fundamentally left wing, crypto's right wing. And the idea is this, this centralizing force of AI lens itself to sort of centralized control.

Again, we don't have to peel that apart, but I think just the broader sort of, a view on that is interesting. And so they sort of leaned into this algorithmic recommendation sort of bit, and that's the same sort of model that TikTok works on. Now, why it's so particularly compelling in the terms of TikTok

or it's sort of Chinese equivalent is the, the more difficult the format, the harder it is to do it well. So if you go back to text, a lot of people can write a funny joke on Twitter, right? Like, like, and so there's an aspect where you can find good stuff just in the people that you follow. Photos, it's a little trickier to take a good photo than, right? Maybe not. Maybe photos are even easier, to be honest, especially with the arises smartphones, right? And you have something compelling there.

But you start getting into video and it's hard to sort of make a compelling video. And I think one of the reasons, you know, even if you're on TikTok or you're on Instagram, on Reels and they will surface ones. And you just look over, you like, how many likes are on that? It's like, oh, this is a 10 like one. It looks like, this is a piece of crap, right? And like, people are trying to make it cool and compelling. It's just not really cool and compelling. It's hard to make

something interesting. And so you have this bit where Facebook was fundamentally limited in the amount of content they could serve you. Now, the reason they had an algorithmic timeline is because if you take, if you follow 500 people on Facebook, that's a lot of of stuff. They need to sort it and give you the best stuff. But 500 is infinitesimally small relative to the entire Facebook network. And so TikTok comes with this advantage of we don't really care who you follow. You can follow people on TikTok. You might have some sort of

input of algorithm, but it doesn't actually decide what you see. And instead, we're going to figure out the stuff you like and pulling the best stuff across the entire network and serve it to you. And it's like it's internet economics taken to its extreme where, you know, there's tons and tons and tons of videos produced on TikTok. 99.99% of them are absolute garbage that no one's interested in seeing. But 0.1% of a massively large number is a huge number of videos that are actually super compelling and people enjoy seeing. And so TikTok comes in and says, look, yeah, Facebook, you have the social network. you leverage the social network to smush Snapchat, right? Because the Snapchat, like, was also a social network.

And so they're doing this story format from people you know. Well, I know way more people on Instagram. Why don't even want to try Snapchat when I can get the same sort of, you know, idea with people that I already follow? And so Facebook had one with the social network, but TikTok comes in. And they're providing, look, we're not actually a social network at all. TikTok is a user-generated content network. It's much more analogous to YouTube than it is.

is to a Facebook. And they're like, look, we're going to find the best stuff and the pool that we're choosing that stuff on Facebook. You like, oh, you have 500 people. We have millions, hundreds of millions of people. And we're going to find the best stuff and serve it to you. And it was so much more compelling than anything Facebook could serve up. And so this bit about, that's why the shift to we're going to start serving you stuff from people you don't follow is such a critical one. That's the key response to TikTok. It's instead of, being limited, like our social graph, for a long

time it was our advantage. But this always happens with advantages. At some point it also becomes your weak spot and your blind spot and a mill around your neck. And that is what happened to Facebook. And so that is a really fundamental shift. And to go back

to that Krugman quote, it's like, yeah, most people don't have that much interesting to say. But the reason why the internet is fundamentally different is the scale. There's so many people in the world that if you can algorithmically pick out the best stuff, pick out all those needles in this huge haystack, you're going to be able to, you know, knit something beautiful or whatever your deal metaphor is.

Well, no, I mean, that makes sense. And you were on this very early. You wrote about this back in 2015, saying that Facebook needed to evolve its product beyond just content from your social network. and I hadn't really thought about it that way that like, anecdotally, a lot of people that I am friends with and who use social media on a regular basis post less often than they did 10 years ago.

And so, like, there's sort of a diminishing base to draw from even within the 500 people that you're friends with on Facebook because people just don't really, like, maintain the same daily habits that they did when they were in college. And so the idea that this is sort of a hedge against less content there and eventually you're surfacing more compelling content. That's where I'm not sure I can get there because I look at the reels and I'm just like, I don't know, this is kind of shitty. And I don't really want any of this. I didn't ask for any of this.

Whereas Instagram stories, it's interesting because that actually tracked better with the way people. want to use social media these days. Like Snapchat really hit on something that like I think people didn't realize at the outset is that, you know, you don't necessarily want to post something that's going to be there forever. And if it can be sort of transitory, oftentimes that's preferable. And it also helped me avoid ever having to sign up for Snapchat when Instagram added stories. That's what that's what Instagram did. They didn't kill Snapchat. They just cut off their growth. and like Snapchat was just going up, and completely flatlined.

And yeah, which is to your point, because it was a network base, if you already have your network somewhere else, why would you want that? Exactly. And you can have more fun when it's not like a permanent record that you're creating. So I appreciate that shift.

And just generally speaking, though, the one aspect of this that is taken as sort of a built-in premise for a lot of these conversations, TikTok's long-term threat to Facebook. How real do you think that is? How imminent is it that there's enough damage to really change the long-term outlook for Facebook? Like, what's your read on all of it?

Oh, it's real and it's very present. I mean, it is by far the biggest existential threat to Facebook of anything. I mean, far more than like the Apple and the ATT stuff, which I'm sure we will, you know, have plenty of opportunities to talk about. That's a big problem for Facebook's revenue and their bottom line. But at the end of the day, like the, that's not an existential threat. Like that might lower your stock price, but it, you know, you can overcome that. You can build around it.

You can figure out new ways to monetize, et cetera, et cetera. At the end of the day, though, an advertising business is fundamentally predicated on user attention. And the whole thing with tech is so many things about. tech is it's infinite. You have infinite amount of ability to distribute. You can serve an infinite number of users. Like all this stuff just scales sort of perfectly. The one constraint, the one scarce resource is time. We only have 24 hours in the day. We only have so much time to devote to these apps to sort of look at the sort of stuff. And that is a critical function of advertising. You have to be like you need more time. You need more longer with your eyes sort of looking at the sort of thing.

And TikTok and so the number one, the existential threat to Facebook is losing its grip on time, on the time that people spend. And every minute that's spent on TikTok is a minute not spent on Facebook, number one. So there's a very zero-sum aspect to this. Number two, it's not just that TikTok sort of peels away the few seconds you were spending on stories. People get on TikTok and they look up three hours later and they're like, oh my God, where did the day go, right?

It's so scary how good their algorithm is. It even sucks me in and I then look up 30 or 40 minutes later and I'm like, why did I just waste my time that way? And so my, my association with TikTok as a product is not necessarily positive, but I can't deny that they're good at what they do. Yeah, absolutely. I mean, and that's,

and so once Facebook loses user attention, it's over. It's game over. Like, like, it doesn't matter how good their advertising is, doesn't matter

if they're better at solving the ATT challenges than anybody else. The thing that I've written about is a thing called the aggregation theory, this idea that power on the internet in a world of zero marginal cost

where you can scale infinitely, your power comes from owning demand. And in the case, this means eyeballs, engagement. If you have the most eyeballs, the most engagement, it doesn't matter what your suppliers do.

Like, they will come to you on your terms. And this is a big change from the analog, world. In the analog world, power came from controlling supply. If you, or you control distribution, if you had the way to actually get something to people, you could charge higher prices, you could do all sorts of things. Like you think about where advertisers used to be on newspapers, right? Why? Because that was just the only way to get it in front of people. And so newspapers were

fabulously profitable for years and years and years. On the internet, there's an infinite amount of advertising. You can advertise on a newspaper. You can advertise on a website. You can advertise on Facebook, you advertise on TikTok, where are you going to go? Who is going to achieve the highest prices? It's going to be the companies that, number one, have the most users and number two can help you find the specific users that you want to serve. Facebook, even with Apple's changes, is still going to be the best option for finding the best users. I'm pretty confident in that, but it doesn't matter if they don't actually have the inventory and have a way to get in front of people who are there. And so all, like, everything pales in comparison to.

this threat. And it's hilarious that the FTC is in the middle of suing Facebook for being a monopoly when Facebook is facing by far the biggest threat to their their position that they ever have. I mean, the original FTC lawsuit against Facebook didn't even mention TikTok. The word was not even in there. And it's like they have this crazy narrow definition. And it's funny, their definition is all about like defining what a social network is and Facebook has a monopoly on this. It's like actually Facebook's entire problem is that they have. have been constrained to being a social network. And if you want to make an argument, are you about monopoly, you have to talk about something

that's scarce. What is the scarce resource that is being monopolized? The only scarce resource on the internet, particularly in terms of an advertising based on this model, is time. And TikTok is cleaning Facebook's clock in that regard. And it's a massive threat. It's cleaning Facebook's clock now or it might long term? Like I, I know it has been. TikTok's the most use.

happened like as far as time shared in like I don't want I'm speaking off the cuff a little bit but depending how you define it but no it is massive particularly amongst young people and again it sucks up so much time that even if the relative user numbers which are still huge I think it's well

over a billion users the the minutes spent is astronomical it's a huge threat it's a threat to Facebook it's a threat to Google and YouTube it's a threat to everyone now it's not hasn't shown up in necessarily the revenue figures yet because there's an entire like building out that infrastructure on how to

serve ads effectively, how to monetize that. Facebook's way ahead. And they still have sufficient, you know, audience that if you're, you know, if you're an advertiser, it's an ROI equation, it's return on investment, which means making it easy to use and making it measurable, that I part super important. You're still going to spend on Facebook instead of TikTok. But that's a function of Facebook, of TikTok actually. building up those tools and capabilities.

And that's something that's under TikTok's control. They can do that. They can execute on that. So, no, like, it's an existential threat. It's an existential threat now and today. Wow. You know, and I think this, you know, to go back to 2015 piece, I mean, not to pat myself on the back and I'm going to reach around here.

But I think it was remarkably prescient on my part about Facebook needing to shift. The part I got wrong is in that piece, I'm like, they need to, the alternative is going to be professional content, right? And so they, like, and my argument is they need to be more like being almost a portal type experience. They need to like push like the bus feeds of the world and things on those lines. Like those are actually really good for Facebook. What I got wrong was the fact that no, the alternative is more user-generated content,

just pulling it from sort of all over network. That was the sort of piece that was missing in that piece. But part of this was a function of that really wasn't possible back then. Like, you know, Facebook and the way it is, Snapchat, like they're all functions of the technological environment in which they came up. And just the sheer capability to parse all these videos to understand what they're about, to link that to different users. Like it's a, it's like this multivariate like calculus linear algebra sort of problem.

That's that takes massive amounts of horsepower, like computing power, takes massive amounts of content to already be there. And that just wasn't possible. necessarily back then. I mean, we're getting there. I mean, Totiao existed when I wrote that. But, you know, there's a bit where when a new network comes along, it just makes these new sorts of things.

It comes up in a different technological environment than even five years previous or a decade previously. And so, like, Facebook was late to adjust to this. But I'm actually, although I was right in 2015, I don't know Facebook could have necessarily pivoted in the right direction then, but certainly they should have pivoted a, few years before they actually did. Like, they are behind. They are very much behind.

Well, it seems like they recognize that as well. And there's been a lot of urgency on Zuckerberg's part and even Adam Maseri. And so they're at least pivoting quickly now and throwing the full weight of meta behind these new priorities. But I have a couple more questions before we move to part two. and the first one is a possibly stupid question that I just thought of as you were talking about the existential threat to Facebook. To the extent that diminishing engagement presents an existential threat, wasn't it always inevitable that Facebook would fail in the long term? And the reason I was wondering about the TikTok threat is because so many people have been predicting Facebook doom for like 10 years. for one reason or another.

Oh, longer than that. And so, and so, and I've won, I, I, part of my brain assumed that this was another case of, of those false prophecies. Um, but to the extent that TikTok is a real threat, wasn't it always a given that something like this would emerge and unseat Facebook? Yeah, well, I think the ideal Facebook strategy would have been what they do with Instagram, where you sort of have a cash cow. And it's really hard to catch lightning in a bottle when it comes to like social. networking. And so you just buy what's next. And so I think ideally they tried to buy Snapchat and then I think in an ideal world they would have tried to buy TikTok. And you know, it's pretty interesting. On one hand, there's obviously problems there as far as like, you know,

one company sort of dominating the space. I was going to say this is the FTC suit. You're laying out for them. Right. Well, on the other hand, like if TikTok actually was owned by Facebook and had Facebook's monetization attached to it, like it would be a phenomenal resource for like advertising and for creators, like there'd be way more money in the ecosystem because they wouldn't have to be built from scratch. There would be an aspect where Instagram could stay Instagram because the next thing is sort of down the road. I mean, it's sort of intriguing to consider that this sort of de facto ban on Facebook

acquisitions is going to result in, at least from an Instagram traditionalist perspective, a worst user experience because the only route for Facebook here is to basically take Instagram and change it. That also is why Facebook is such a fascinating company to watch because Mark Zuckerberg is, you know, the, you know, Sisyphius, whatever, or who is the one that's like pushing the Sisyphus pushing the rock of the mountain? You're right. He's in fundamentally in this area where there's a shelf life on your product.

And he doesn't care. He's pushing forward. And, you know, this is a. And it's interesting because there's an article I've been working on. I couldn't quite get it out this week. I might do it next week. But there actually is a through line to the metaverse here, which is there's, you know, if you think about this shift, you start out with friends and family.

And that's super compelling or classmates, whatever it might be. Then this is another shift that Instagram is undergone. Instagram is really about celebrities. And the celebrities might be ones you and I know about. like the Kardashians, it's by and large all these influencers that we have no idea

who they are. But if you, you know, but they're just like, they have like millions of followers and there's a huge advertising ecosystem which isn't Instagram ads. It's like them pitching stuff

within their feed and like the whole influencer sort of thing. I will just interject there just to say that that's what Instagram is currently servicing to me. As they draw from my interests and generate extra content. I'm getting a lot of F1 WAG content, wives and girlfriends, who are all influencers. And so I don't actually mind that.

I'm familiar with the world and it's fun to follow along as everyone's on summer break in Majorca. But it is definitely true that like the most compelling content comes from like a fraction of the actual user base. Right. And so you're already seeing this shift. Like this idyllic idea that Instagram is about my friends posting their photos, that has not been true for the vast majority of people for years. And you see this sort of shift going on. Now, now we're undergoing, just step back the broader ecosystem.

We went from friends and family to professional influencers. The next step beyond professional influencers is the entire network, right? That's what TikTok is-hangers. That's, yeah. And just like, and this is a function of, this is like sort of YouTube versus Netflix, right? It's like professional content, all of which is going to reach a certain quality bar, although you may quit with Netflix, but, you know, bear with me here. Versus YouTube where there's literally like hundreds of millions of content uploaded every day or billions of hours or whatever it might be, most of which is crap, but you don't see the crap. Like this is such a key difference.

You only see what the algorithm surfaces for you or what you search for explicitly. And this world of abundance, if you can just pick out the good stuff, you end up with a far more compelling product than any professional organization could ever put together. Do you remember Quibi? I do. I never actually used Quibi. So I know everybody else never used Quibi. What was Quibi? Quibi was basically, we're going to make this mobile first.

experience is going to be professionally produced. And they win this big thing like, oh, all the stuff out there is crap. We know how to make good content. We're going to make this compelling product. Complete and utter failure. And it's striking is that that failure happened at the same time as TikTok's rise. Because on the internet, there is more power, more compelling content in volume combined with algorithmic recommendations than there is some sort of taste maker choosing what you can or cannot see.

YouTube is doing the same thing to video. And you see this, like, Twitter did this to text. Like, if you just have more stuff and you have the capability, which Twitter doesn't really, but to pick out the good stuff and serve it to people, you're going to have a more compelling product than professionals can ever produce. And you see this pattern again and again and again. And so you're moving from friends and family, which was more compelling than like buying a newspaper, right? So let's back up.

So you had the Sears, like the New York Times, whatever, like serving up the gospel. And that's what everybody reads. Then social media came along where you could read stuff from your friends and family. People like that better than like one centralized source. Then you came along where we had this professional influencer. But again, the professional influencers were attuned to your interest. We're not all following the same professional influencers. It's like custom to you.

People like that better because turns out professionals are better at making content than my friends and family. but it's a different layer of professional than like sort of like the newspaper that went on your doorstep every day. The next step is the entire network. So it's not just like these people that I choose to follow. It's like we can understand you better

than you understand yourself. And we're going to give you this sort of compelling stuff. If you fast forward a few years, it's not just AI choosing the best content to make for you. It's going to be AI making the content. And when Dolly can, out. I wrote about this. No, I wrote about this in the context. Like, the Dolly is one of the most critical products to come out to understand the future of the metaverse. Because

one of the challenges of like a metaverse in a 3D environment is creating these assets is very expensive. And say, how can you ever create enough stuff? And you end up with these constrained experiences that are the same for everyone. It's the only way to sort of get scale. And it's not really compelling. But when you start imagining a future where you can explore an environment, you can be in this 3D immersive experience, and it's created on the fly custom for you. And it's the same sort of idea where it's serving you F1,

you know, hot wives sort of stories, but it's doing it with like, it's creating an F1 experience for you. Like there's all sorts of crazy stuff that you can imagine. And suddenly, like, it's this takeover of AI. AI is moving up the stack. Right now it's just recommendations. but you can see 10 years down the road, 20 years down the road,

we're all living in this perfectly customized attuned to us sort of experience that's so compelling. Yeah, we might say, man, I can't be just wasted all the time doing it, but the key thing is you wasted that time and it was ours. And that's the through line here. And this is sort of the big thing, the big sort of bull take for Facebook in the very long run, is they got sufficient scale and money and power

and capabilities in the social network era that they have the resources to create this next era in a way that the hot new startup would never have. Just can't do. And the hot new start is like, well, we have a new social network with all the teens on it and people don't care because social networking isn't very interesting anymore.

Well, okay, so that's the bull case. I will present the bear case before we move on because my take, It may be naive and maybe idealistic, but I think that some of the strategy here underestimates the intelligence of humans. Because you look at why Facebook succeeded in the first place, and there was a genuine service there in connecting people who lived across the country. You got to see their photos. And there was real value in being able to remain. close to a network that was distributed all over the place. In the same way that like Netflix,

they gained market share by providing consumers with a useful, intuitive, and enjoyable service. But there is so much pressure to grow that then they start chasing like the lowest common denominator content. Facebook was sort of the same thing. Like they start pivoting to video. And one day you look up and Facebook is just like an assault on the census. Like, people want to complain about all sorts of different bad things that Facebook

has done and its corrosive impact on society. First and foremost, if you log on to Facebook.com today, like, it's actually difficult to use because it's loaded up with all this different junk. And I wonder whether that's the direction that Instagram is going to go. And I just think long term, it's a risk if you're emphasizing pure engagement over like the way. way people think about your product and the associations they have with it. Like even if the Instagram stuff is pure nostalgia for an era that never really existed, I do wonder whether there's a business case to be made for prioritizing the user's ideas about what the product is and like what the service provides relative to like just throw

a bunch of stuff up that you think will keep them locked in for an extra five minutes or whatever the number might be. And I don't know the answer there, but that's that's sort of the other side of it where I just look at all this pressure to keep growing and locking people in. And ultimately, it just turns all these products to crap. I mean, that, I think that's a very reasonable bear case. I think that that's exactly right. I think the, the only pushback I would have is not that you're wrong about these apps becoming crappy. I think that's exactly, that's true. And it has happened to Facebook.

I will note as an aside that it's very interesting that Facebook is the favorite thing to blame by people who don't use Facebook. It's very convenient. It's like, it's definitely like not me. But like that's right. That's exactly the fear. I think the pushback on you, though. And this isn't, this isn't an affirmation of. of the bull case.

It's just a sort of pushback on you is what's the alternative in that view? You can have this idea that it doesn't evolve. It just stays the same. And it's like, and then what happens? Does it like is your argument that it actually keeps up engagement? No, I think we know what happens. It dies. Like that's, and so there is a bit here where you can definitely argue that Instagram's

going in the wrong direction that all. all these changes are actually going to kill it. But the reason why I am sympathetic to it is, in my view, the alternative is also death. And so better to go in a direction where you least have the chance than the one where, like, death is certain. But you get all the sort of blog boys online applauding you saying, you know, Instagram's really peaceful. I don't actually want peace in my life. I don't spend any time there. but if I wanted peace of my life, I know exactly where I would go.

Yeah. Well, and I think the real answer is probably that there's a balance between stories and reels. If you just look from a bigger picture, like the stories change was hated by everyone initially and ultimately made the product 10 times better. This is a pure anecdote, to be clear. I've found myself using reels a lot and like really enjoying it looking forward to it. Like I said, like aerobytes. I get a lot of F1 stuff. I get, you know, unfortunately motorcycles, which I definitely do on motorcycles.

Not interested. And, yeah, I just like stuff that goes fast. It's not good. And so I find myself finding stories very boring. It's like, yeah, actually Realz is way more interesting. My usage of Instagram is way up. Again, this is one person's data point. I do kind of like feel less guilty about using reels because when I use TikTok,

I'm like, you know, the whole Chinese angle. I'm like, I'm not sure this is actually good. And so, um, so again, I don't want to over index on one data point. But to your point, you said that, you know, who knows? Well, the one company that does know is Facebook. Like they know what you're doing in their apps every second that they're using them. It's being tracked. It's being measured.

and, you know, maybe, you know, the strongest argument to your point is they did do this rollback. Maybe there really is data that shows people were encountering reels and closing the app because they're annoyed. Like that, that, like, and so that would be a reason to roll back. On the other hand, if it comes back and I suspect it will, it's because the evidence shows that it is actually driving more engagement. Interesting. Well, we'll continue to monitor it.

Hopefully we'll get another Adam Masary video in Fortified. months. My favorite take on that video was from one of our mutual friends who said, Adam Messary looks way too good to be a CEO of a major company. He looks way too healthy. He's tan. You want your CEO to look a little bit more frazzled and burnt out, but he just looks great. So good for him. Living well. Part two. Yeah, exactly. He's doing great, regardless of the Instagram backlash. Part two, I want to talk about the New York Times. You had a terrific interview with Meredith Kopit Levian, president and CEO of the Times. And I want to talk about a couple different themes you guys touched on. But first and foremost, just as a general comment, I really

appreciated the interview because it feels to me like, I think there are millions of people who are online every day. And they experience the New York Times as something, of a daily punching bag. And you've got people complaining about it from all places on the political spectrum. Everybody seems to hate the New York Times if you sign on to Twitter. But the big picture reality, when you zoom out over the last 10 years or so, like, the Times has responded to all sorts of people who were predicting the death of traditional journalism by absolutely dominating all of the new media that was supposed to replace the Times and

every other newspaper and ultimately becoming more successful and more powerful than ever. I like that you highlighted that side of the story because honestly, like, it's a pretty incredible story that doesn't get highlighted enough as a bunch of weirdos on Twitter spend all day, like accusing Maggie Haberman of treason or something. The big story of the Times is pretty amazing. Yeah, I mean, it was a hilariously mismanaged company for like the first 20 years of the internet. I mean, they didn't know what they were doing. Their stuff was available.

Then they had a paywall. They had all sorts of stuff. They had no sort of like idea where they were going, making bad acquisitions, not making good acquisitions. They built this huge building, you know, downtown New York that they had to sell. It was just, it was a total mess. And it's interesting because, you know, there's an aspect and Coppilevian did acknowledge. this where a big part of the time's growth over the last decade

was Donald Trump. Like, like, people like Donald Trump was the greatest news story of, in like the history of news stories. Just constant material every day. People, you know, still is. Out of office, two and a half years. Here we are again. When I went to business school, we, we, uh, we

had to do this week. I can't remember what, I can't remember what it's called now. We had to do like skits and do performances and like pressure hunts and crap like this. And we were all, you know, organized into different teams. And there was like 10% of people that were just way too into it. And they like did everything.

And like the rest of us just like sat around like this is the stupidest. This is I'm paying how much to do this? Like to be treated like a kindergartner. And so then there's this this opening class like this management class. And what on the first day the professor is like, you know, asks a sore. No, that's sore as UW. I get rid of what did you think about, you know, the week that you had?

And like, you know, this would be like, oh, it's great. like, no, it was ridiculous. Like, why are we doing this? And he said, like, well, what we come to understand is the way you create, like, great teams and you create, like, sort of like is you have these shared experiences. And he's like, this, you know, one of the best ways to do that is you accomplish something. You do something together. And so those of you that, you put on these performances, these are things, you created bonds.

And like, now going forward, you're this huge class of people that never knew each other. You now have friends for wife. And then he's like, but the even better way to create a shared experience is shared misery. And the fact that most of you hated it was actually part of the point. What, like, you're, you're there and you're complaining together and you're, you're miserable and you're finding soulless in each other also being annoyed and miserable. And you also created friends for life and actually probably stronger and more durable friendships than the people that were up there trying to perform.

And it's like, it's like, you know, like it's like a ton of friends like, you bastards. It's like, okay, it's the theme of this episode, Ben. State and preference versus revealed preference. That's what we're all about today on Sharp Tech. No, absolutely. Well, I think that applies to the Trump story, right? Like who read the news about Trump the most? The people that hated in the most, and they could not get enough, right?

And if you wanted the best sort of recounting and daily TikTok, you know, in the other sense of the word of what was happening in Trump world, you subscribe the New York Times. And oh, by the way, it's your patriotic duty. You know, like if you're a good liberal, you know, and so, and so that was obviously had a huge impact. But I think that does, that wasn't the only thing. You know, I've been writing a lot about the New York Times from the beginning of tech in part because it's like an avatar for the broader sort of publishing world. And I think the publishing world has always been an avatar for the impact of tech generally.

Because like publishing is just text. It's just bits. And so it experienced the impact of the internet and the transformational effects and the devastating effects on business. models ahead of everyone else, but it's the same effects you're seeing in sort of lots of places, right? You can draw a line from what happened in newspapers to the impact on like taxis with Uber, right? There's similar sort of dynamics going on. And so the New York Times, and this did correlate with when Copeland took over in 2013, they made this conscious shift. And they wrote this, this white paper about what they were doing. And it's actually one of the better business documents I've read over

my time at Chetectory, which really leaned into this idea, look, we need to align. We're going, our focus is going to be subscriptions, and subscriptions are the right play in a world where you have platforms like Facebook. They're going to dominate advertising. They're going to give a lot of little stuff from everyone to you. You will need to get customers that value what you have, build a direct connection with them, and monetize them on an average revenue per user basis, way higher than you're going to get with ads.

That's what I do is chatechery. I get $120 per user per year, which is way higher than I can ever get. per advertising that limits my audience, but that's okay. I don't have a mass market product. You need to have your business model and your content aligned. And what the New York Times did was they really made a shift in their content that also aligned with this subscription business.

There was this story they wrote about Amazon as like workplace conditions. And I remember Dean Becker would refer to that about what an impact that had on the business of the New York Times where they needed to invest in these hard hitting sort of things because that's what people would pay for that was unique. And people would feel not just they needed to expand their news staff, like their newsrooms like close to 2,000 people now. So they could deliver a lot of them. But also it would give people this sort of tie like, this is valuable.

We need to pay for this. And it's been phenomenally successful. Now there's definite downsides. The New York Times, I don't think objectively speaking is this sort of, if it ever, was just articulation of what happened in the world. It has a narrative. It has a point of view. It's, I think, definitely a point of view that is associated with one side of the political

landscape and not necessarily the other. But while you may bemoan that as a news consumer, from a business perspective, it's brilliant because you drive value. You get paid by being differentiated, by being something that stands for something. if you don't have haters, you're not making money. And the New York Times has leaned into that more than anybody else. Interesting. Yeah, I want to come back to that, but just on a basic level,

as someone who's watched the tech space for a long time, is it crazy when we talk about the technological changes that have occurred at the times over the last 10 years or so, is it crazy to think that finding a way to effectively paywall was an important breakthrough for them. Like, not just deciding to use a paywall, but I only started subscribing after I was not able to find a workaround

to get free articles anymore. And I don't know whether that's seen as like a revolutionary sort of benchmark for them. Yeah, I think it might be a commentary on you more than anything. But, no, I do think there's, like, that's one thing Copeland referred to in interviews, just having, like, understanding what's the right amount of free articles, like, what stuff.

should be available, what shouldn't. And you get a situation where you keep hitting that paywall. I'm not going to read that. I'm not going to pay for that. But you know, I'm going to go to another browser. I'm going to go to incognito mode. I'm going to search for it or whatever. And the reality is you're never going to close all those holes.

It's a, you know, it's like putting a lock on your door. Like a dedicated thief is going to get in. The idea is to stop most of the people. Yeah. In the end of the day, it's like, you know, I honestly, I hit this paywall so freaking much. I'll just like, whatever. You know, I'll pay.

And then the beautiful thing about recurring revenue is you forget that you pay it and you're basically paying forever, right? Like, and so you're getting all these different pieces. So I do think they've honed that and figured that out. That's one of the reasons why Coppolaevian was optimistic about the athletic, for example, because the athletic just has like a hard play of payroll, right? There's no, there's no like massaging you down where you sort of keep, you know, you keep getting bugged and bothered. And you're like, fine, I'll do it for convenience. Like, that's the thing.

It's convenience. sell on the internet is convenience. You, you can get access to any New York Times article you want if you work hard enough. You could probably do something to be honest. But at the end of the day, to close down every single loophole makes the experience so miserable for your paying subscribers, it's not worth it. And so what you want to do is you want to get 90% of the people who are generally good and they're just annoyed at the inconvenience and fine, I'll pay. Yeah. Well, there you go. I mean, I forward the strategy daily update to like thousands of friends every morning. But it's a big funnel. And you'll grow that way long term. Don't even

worry about it. It's about the exposure. Yeah. So you mentioned athletic. I was struck by the difference between the Wordle story and the athletic story. And Copet Levian gave good answers on both. But with Wordle, to me, that's just like a slam dunk, like one of the best investments they've made in a really long time because it was a modest investment up front and it's a genuinely great product that I still use every day. And then when the athletic, you know, they paid 500 million plus for the athletic. And I don't know, you pointed this out in the interview. I don't know that the athletic is that different or superior to a lot of the free alternatives on the market. So what do you make of of either of those moves.

I'll let you take it in either direction and like the long term plan for the athletic. Yeah, I mean, I think you just said a wordal. I mean, it's a daily habit. People go to it every day. They could put other stuff in there.

Like it provides, it's a fun association with the times, right? Like, even if you hate the times, like, well, I do like, exactly. And the crossword puzzle is pretty good. It's like, yeah, they have some, you know, interesting lifestyle stuff, right?

And so, yeah, there's nothing but upside there. It was a great, great acquisition, made total sense. It was all those acquisitions where it happened. And it's like, oh, of course, that's what's going to buy word only. That makes that that's perfect. I like the idea of the athletic acquisition. Like COVID-11 made the point that, look, they're getting scale right away as far as production goes,

like tons of reporters and editors and all those sorts of things. I think there's a mixed bag as far as quality, to say the least. I do feel like they overpaid. And because there's real synergistic revenue synergies here. Number one is like New York Times really focus on building a bundle where you can subscribe to just the newspaper, but you can pay a lot a higher price to access to cooking, wirecutter, games, the athletic, like, you know, all these different pieces. And so having a like, as she noted, sports and news go together naturally. Like what's great about them is there an endless source of new content, right? There's always something sure about.

There's always something going on. And so that makes a lot of sense. The other thing is the New York Times still has a meaningful advertising component. They're actually getting tailwinds because they have all this data about their readers because they subscribe. They know their address. They know their credit card. They know their user. They do all this sort of stuff.

They can serve them ads that are targeted in a way that like Facebook can't anymore because of Apple's changes. Whereas New York Times is all first party. They can do that. And the athletic doesn't have advertising. So they can change it to not just that funnel. to bring people in more, but much more of a freemium product. And there's a big advertising opportunity there. And advertising is a natural fit with sports also.

And so, and then the athletic has a podcast. Like, there's a lot. It's a really natural fit. The problem is who was paying for the athletic? And the athletic was losing gobs and gobs of money. They're like, they, you know, I think that they were locked into this, like, we're never going to be advertising. were this sort of vision.

The problem is they, I felt created a product that to your point was no different than free products. It's like, why should I pay for this? They hadn't had that New York Times come to Jesus moment where we need to get away from day-to-day beat coverage

and lean into in-depth sort of stuff. Well, and that was the idea with the athletic. And when you say the quality varies, it's never bad quality. Like there's a baseline standard that everybody adheres to. Exactly.

I have found myself. myself thinking like, all right, well, this is no different than a story in the Washington Post or anything else. So like what's what's really going on here? Right. And so what I feel like I feel like the New York Times, they, they have the capability of significantly increasing the value of the athletic by one tie into their bundle to applying their knowhow as far as increased subscriptions and three adding advertising. The problem is I feel like that value they gave to the athletic. It's like, look, you could be worth $500 million to us. Here's $500 million.

Instead of like, look, your business today on your own, $200 million, maybe, I guess, and then we can increase it. So I think that that's, it feels like from my perspective, that was, that was the mistake. It was just the price. I like the acquisition. I like the concept. I do think the New York Times can make the athletic, really like the athletic needs with the New York Times did to itself. And so I think there's a real opportunity there. I just think they pay too much.

Interesting. Okay. Well, I want to close with one thought to get your reaction. So you mentioned the times and the potential downsides of relying on a subscription model. What occurs to me is that there really is there's added incentive to sort of pander to your subscriber base. And that can be antithetical to a pure journalism mission. and as you're describing some of what the times could do to succeed with this model, it doesn't sound that different from like a Fox News,

like give people what they want and capitalize on a base. And I don't think that's that healthy, but at the same time, ringing your hands over it isn't worthwhile either for, and it ties together with our first segment, because in the same way that like TikTok presents an existential, threat to Facebook and they can either change or just slowly recede and die. Like, Facebook was soaking up all the ad money.

So, like, that market was going away regardless. And the New York Times had a choice of either, like, slowly withering away or shifting to this model. Is that a correct read on the situation? I couldn't have said it better. I think that's exactly right. Like, I think we're in a worse place, journalistically, today than that we were. in a world where newspapers had tons of advertising,

and they had an incentive to serve the entire market, and the best way to do that was to play it down the middle. The reality is in a world of subscriptions, you're incentivized, you set it yourself. I mean, give people what they want. And I think you've seen this happen in the New York Times. I find their tech coverage to be terrible. And not in that they don't do great, like, extensive work,

but the attempt to find narratives and impose them on the facts. It's one of those things where I read it. I'm like, that's a really unfair characterization of what's going on. You know, the whole, you know, what does this mean for your other coverage in lots of places? Like, I think editorially speaking, New York Times is stronger in some of the investments and the in-depth stuff they do, but the narrative driven nature. Again, people who have been critical at the times for years would say it's always been the case. I'm just looking at from a tech perspective. I think it's much worse than it has been. And I think that's part and parcel of the model.

That's what their readers want. Their readers want them taking on tech. And so they're going to do it, whether the stories there or not. Well, there you go. Adapt or die is the theme of the day here on Sharp Tech. And we'll see what the theme is next week.

But this was fun. And we'll come back next week. Yeah, we've got to have to pre-F-1, but we'll go off to the races as it were.