This Week in Startups - Revolutionizing podcasting + standards vs. innovation with Anchor Co-Founder Mike Mignano | E1520

Episode Date: July 28, 2022

Today's show is a CLASSIC TWiST founder interview. Anchor Co-Founder Mike Mignano joins to tell Anchor's founding story (1:40), break down what it's like getting acquired by Spotify (15:32), and talk about how RSS standards might be stunting innovation in the podcasting space. (33:17) 0:00 Jason intros today's guest: Anchor Co-Founder Mike Mignano 1:40 Mike explains why he started Anchor, the original inspiration and first versions, finding PMF, building the nuts and bolts of a great podcast publishing experience 14:23 Helpware - Go to https://helpware.com/TWIST to get $1000 off your first invoice 15:32 Why Anchor sold to Spotify, the Series B term sheet they were considering at the time of acquisition, getting courted by Spotify CEO Daniel Ek, Anchor's first check story 24:44 LinkedIn Jobs - Post your first job for free at https://linkedin.com/twist 25:58 Why Apple hasn't innovated in podcasting, paid podcasts vs. advertising 31:59 Babbel - Save up to 60% off your language learning subscription at https://babbel.com/twist  33:17 Why Mike wrote his recent article: “The Standards Innovation Paradox”, evolving standards to increase innovation, the Substack example Read Mike's article: https://mignano.medium.com/the-standards-innovation-paradox-e14cab521391

Okay, everybody, we have a great show for you today. Anchor, the podcasting company's co-founder, Mike McNano, is with us. He joins us for a classic throwback twist founder interview. You know, like I used to do in the old days. Well, you know, Mike, he founded Anchor and sold it to Spotify. He really helped define the entire podcasting space and level it up. And he was on the podcasting team over at Spotify for a couple of years. We had him on because he recently wrote an interesting article about RSS standards

titled The Standards Innovation Paradox. So we had a really deep discussion about podcasting, Spotify, and their role in it, and product market fit, all this great stuff. And Molly and I will be back for the news tomorrow. I'm back for my rafting trip. I had a great three days on the river. I'll share some photos tomorrow. But Friday will be big news energy. Molly and I are back.

Going to be a great interview. Enjoy it, everybody. This week in startups is brought to you by Helpware helps you outsource the tasks that slow your team down. From data entry to world-class customer support, Helpware can help make you bionic. Go to helpware.com slash twist to get $1,000 off your first invoice. LinkedIn jobs. A business is only as strong as its people, and every hire matters.

Post your first job for free at LinkedIn.com slash twist. And Babel. Start your new language learning journey today with Babel. Babel, save up to 60% off your subscription when you go to babble.com slash twist. That's B-A-B-B-B-E-L dot com slash twist. All right, everybody, next up on the program. We have a great guest. Molly, you and I have been doing podcasting since before podcasting existed.

We did streaming shows back in the day. And I'm really excited because I believe our guest reached to me, I'm not sure, but we were DMing for some reason, and I read a medium post that he had written about Open Standards. And many of you know that Anchor is a podcast

hosting company that's done very well and was purchased by Spotify that raised a decent amount of money and had a great exit. So February 2016, they raised $1.6 million in their pre-seed and did some crowdfunding, actually, very innovative for that time period.

2017, a $4 million seed round. at an $11 million valuation by Excel. And then in September of 2017, the $10 million Series A had a $40 million valuation by GV and Excel. And then in February 2019, what a great run. Spotify acquired anchor between $140 and $150 million.

Reportedly, who knows, welcome to the program, Mike McNano. How are you, sir? Good. How are you both doing, Jason and Molly? Good to see you. Good to see you as well. Nice to see you.

I'm assuming you can't tell us what that number was. I am not supposed to talk about that We're not asking We're just assuming And so let's just However congratulations I think I should say It was a great right

Just like Jason just said Thanks Yeah so let's get right into it How come everybody at Spotify Hates Joe Rogan No we're not going to go In that direction of questioning We know that you just left Spotify

But tell us About why you made the decision to start Anchor? What did you originally see? And then why did you make the decision to sell? Some people might say selling in February 2019 was, you know, fantastic, but not maybe peak podcasting, which seems to still be growing massively. So take us through those two inflection points, why you started it and why you sold the bookends.

Yeah, for sure. So why we started it, basically I had become really excited by this notion of the democratization of creativity. I had worked at a company called Aviary. I don't know if you all remember Aviary. It was a photo editing platform back in the day based in New York. I ran product there. The whole premise was, hey, we want to make it really easy for people to take and edit photos and be creative. And so we had a photo editing SDK that you could plug into any product that enabled you to unlock photo editing, basically. That company sold to Adobe, and I was at Adobe. And my co-founder, a friend of mine, who was also at Adobe and Aviary with me, we both got really into podcasts. This was like 2014, kind of when everyone else in the world was getting into podcasts. As cliche as it may sound, like, Serial got me into podcasts, not going to lie. Serial, Grantland Network. I was listening to the startup podcast. And we saw it sort of taking off as a medium. But when we went to go try to create podcasts of our own, we found it to be extremely

difficult. You know, you both have been podcasting for a long time so you know what goes into this. The expensive mic, the, you know, the software, the distribution, all of it. It was hard. And we had just spent a bunch of time, you know, making photo editing on a mobile phone really easy. And we thought to ourselves, well, why isn't it just as easy as taking and editing a photo for podcasting? And that was really the basic premise for anchor at the beginning. It was let's democratize audio. You know, the company took many twists and turns along the way, a couple of pivots along the way, happy to get into any of that. But that was the basic story. It was like, hey, let's democratize audio. That was the inspiration for starting it.

It's so I'm overwhelmed by the realization that, you know, like Jason, you know, we were all doing some version of live streaming. We really officially started podcasting. I did at least at net in 2005, and it was not until 2014 that someone came along and was like, this should be a lot easier. How, which, who, no kidding, man. The first 10 years were rough. Yep. But what it makes me wonder is how hard was it to make it easier?

Yeah. So what's funny is when we first started it, we were like, oh, podcasts are heavy. They're complicated. They come with baggage. They're 50 minutes long. They need to be lighter weight. They need to be interactive. They need to be more shareable.

And so the first few versions of Anchor were actually a social network. We weren't even using the word podcasts. Podcasts were our inspiration. But we, you know, we were inspired by, you know, Snapchat stories at the time was everything. You know, Instagram was obviously everything. And so the first few versions of Anchor looked almost more like Instagram and Snapchat than they did podcasting, which was cool because, first of all, it was cool to be in, to kind of innovate on the format.

ad and let people do things with audio that they couldn't necessarily do over RSS. And, you know, if I think back about the success of Anchor, in many ways, we needed to do all that stuff to go out and be able to fundraise, which ultimately led to the pivot to do podcasting, which we did because we found it was impossible to get people to download Anchor to listen to audio content. People were already listening in Apple. They were already listening in Spotify. Once we made it easy for people to make audio, it was impossible for those creators to get an audience on our platform. And they said, hey, let us distribute to Apple. Let us distribute to Spotify. And once we did that, that really unlocked a lot of growth. But that was, you know, that was to your question, Molly, like, that was,

that was a three-year journey. You know, that was three years of, you know, being in the woods and iterating and finding some things that worked and some things that didn't. So it was hard to sum it all out. It was hard. And Mike, a lot of times founders will look at the interface. They'll look at the user experience, which is a great place to start and say, hey, let's innovate here. Wow, there's so many ideas, right? And it's very rewarding to do those ideas. But when the infrastructure hasn't been built and all of a sudden, you're like, wait a second, people can't, we don't even have a foundation here. People can't even get their podcast up and running. So at some point, you had to then say, oh, all the sexy fun stuff, you had to say your team, we're not going to do

that, but we're going to become plumbers and we're going to really put in a great plumbing system here. What was the business model? And then how did you get your team to navigate, hey, I know I told you we're going to like change the world. It's going to be like super cool features and all your mockups. Like just put all those on hold and everybody go under the house into the crawl space with the dirt and the rats and the snakes. And let's work on that boring stuff. Yeah. I mean, so what I can say is, you know, when I talk to a lot of startups, so I invest in a bunch of startups now is an angel. And one of the things I always look for is I really always want to make sure that the founders, obviously, maybe obviously in the team are very, very mission

driven because to pull off a pivot like the one you just talk about, hey, let's not work on the fun stuff. Let's work on the boring stuff. You have to really believe in the mission to be willing to sign up for that. Like, it's not about the exit. It's about, you know, changing the world in the way we promised from the beginning. And so fortunately, we had a small and really mission-oriented team. And when we said to everyone, hey, you know, we think what people really want is to make podcast. They don't want to make this anchor format. But the good news is we think we know how to actually do that for them. Let's do this instead. We were really fortunate to have an excited and supportive team that was more concerned with the long-term mission than I were. I think some of the,

some of the fun near-term interface stuff. But the, you know, the sort of like breakthrough that that made us realize that this is what we had to do was we were doing our own format inside of Anchor. We were letting people make audio. We were letting people interact. It was really creative. It was really fun. And like I said, a bunch of people were saying, hey, I need to be able to put this on Spotify and Apple Podcasts because that's where my listeners are. So we basically said, hey, most of our users don't know anything about RSS. They don't know anything about distributing to Apple. What if we just did that all for them? What if we let them just tap a button? and with the tap of a button, they would appear on Apple Podcasts.

And when we did that, that was sort of the light bulb moment for not only the users and finding product market fit, but for the company. And that was when we realized, oh, wait a second, if you take this process that's super opaque and complicated and technical and you make it magical, that can unlock a tremendous amount of product market fit and product delight for, again, a type of creator that we saw that was growing very, very quickly. And that was sort of the turning point in the company. I don't know if that answers your question. It's a great answer. Actually, really good answer about, you know, the mission can keep people engaged when things aren't fun. Right. Yeah. Or, and when you're still,

when there's uncertainty, which, you know, which sometimes employees have a hard time with. Yeah. How, what was the monetization strategy? Like, who were your customers and who paid you? Yeah, sure. So, I mean, you've both been a podcasting for a while. So you've probably, so you probably know this, but maybe for the listeners that don't know, I'll set some context. So before podcasting became easy, it was really hard. And you had a lot of different providers of podcast hosting in the space. So the market was very fragmented because it was actually, this ties into probably what we'll talk about later with the piece that I wrote around standards. Basically, there was a lot of fragmentation in market, a lot of different players

powering podcast hosting. As a result, Between that and the poor analytics that podcasters can get through our assess feeds, there had never been a great way to advertise on podcasts at scale. There was no platform, there was no solution for sort of rounding them all up and selling them to advertisers. Well, when Anchor really reached scale, and it happened very, very quickly once we did this distribution thing I mentioned, we quickly became the biggest podcasting platform. We all of a sudden had, you know, the vast majority of all the world's podcasts,

on our platform. And we realized, wow, this could be a way to launch a marketplace to connect advertisers with an ocean of podcasters that otherwise normally would never be able to attract advertising because they're too small. And podcast advertising is too manual because of the limited data that I mentioned. So the business model was we launched a, actually, we launched this only right before we sold to Spotify. We launched a business called Anchor Sponsorships, which was that exact marketplace that I mentioned.

We basically enabled advertisers to buy big campaigns that spread across, in some cases, thousands of podcasters for advertising. You think podcasting works best when the hosts read the ads or when it's just dynamically insert? So I can tell you it definitely works. It's more effective as an ad unit when the host reads the ads, but there's so much friction in that process. I don't just mean the friction of recording the ad.

There's so much friction with the tracking, the recording, the brand safety, et cetera, it's way harder to scale. And so I think for podcast monetization to ultimately reach scale, you probably have to do some form of programmatic or maybe some combination of the two. We'll let Spotify, my former employer and YouTube figure that all out. But yeah, I mean, I think like on a per unit basis, I think the host red is more effective.

I just don't know how realistic it is for that to scale to everyone. Well, it won't scale to every podcaster, but advertisers, can skim the cream of the top 25 or 100. I mean, it's funny to hear everybody read. There are some ads that they want read verbatim. I read 10 to 15 podcast ads a week for the last couple of years. And it's very interesting when I hear other podcasters read a specific ad read that no

words are allowed to change. And it's just interesting. Or like me and Bill Simmons both have done, you know, some of the fantasy sports ones. And then you have a huge disclaimer. at the bottom. And I, I hear Bellfinons doing every state where you can get help for your, you know, gambling issues if you, if you happen to have them. And I thought it just, it's pretty comical, Molly. That's funny. But I'm sure you also have advertisers that don't want you to follow the script at all. Right. They want you to freestyle. Just go nuts. Yeah, yeah, yeah. Which are great

ones. Yeah. That's the best ones if you do that. Yeah. You hear me say this all the time, but it is so true. Time is money. And money helps you keep your startup alive. So, That's why you need to check out helpware. Helpware calls itself people as a service. Basically, they're going to help you outsource all the tasks that are slowing your company down from mundane things like data entry or to more complex tasks like world-class customer support or AI operations. Here's an example.

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H-E-L-W-A-R-E.com slash Twist. for $1,000 off. I do want to, so you had, I mean, again, we're talking Holy Grail stuff, right? For 10 years, Jason, me, every producer on Earth, Jason Howell, who's now, who was at CNET and is now this weekend, I think, who, but it's like forgotten more about podcast publishing, right, than anyone will ever know. We're all waiting for these two things. One button publish and dynamic ad insertion, Google ads for audio.

And then this is the moment that you sell to Spotify. When you have finally cracked a nut, you've blown this sucker wide open. How come? Why then? Why then? Why did we sell? And did that make them want you more? But really more, why did you sell?

I'm not going to put two questions in there. I only have one question. I mean, I wish there was like some crazy story here. But the truth is we had spent a lot of time with Spotify. We had also spent a lot of time with a lot of the other players in the space, let's say. I won't name them. I'm sure you could figure out who they are. And we really believed that there was probably no better company to acquire Anchor ever,

like not just at that moment, but in the future than Spotify. Spotify believed in podcasting in the same way we did. And it was clear they were investing in podcasting very, very aggressively as they put their money where their mouth is. Obviously, after that, you know, with all the acquisitions and the investments they made. And the other thing I'll say without saying too much is like, if you think about our business and what I just told you, we did this thing where we distributed to all these other places like Apple and Spotify, that is like the textbook definition of a business

that has platform risk, right? You're building a product and a solution in someone else's backyard, and those businesses can be disrupted. So I think between the potential we saw to deliver on the mission with us and Spotify, because we had the same mission, the potential to eventually be disrupted. And the unknown of the future, the other thing actually, which I realized coming into this, I've never revealed before, but I'll just say it now. We also had a term sheet for our series B on the table at the same time from a great investor. We were comparing the two. We were like, should we go raise and go big? Or should we team up with Spotify?

And I don't know. Maybe it's because we were slightly older founders at the time. We had kids. We were like, we weren't young and crazy. We said the Spotify thing seems to make the most sense. We're going to do it. It was great for us. It was great for investors.

It was great for Spotify. I would argue it was great for podcasting. But yeah, we didn't, you know, we'll never know what was behind door number two. Did you run a just, you know, for the founders listening who wonder how these things go down? Did you run a process? Did you hire a banker? And how does M&A work? Were you like in contact with Google, Apple, all the major players over the years, Microsoft,

whoever was bouncing around? you had to do work with them, right? Google's got a podcast, but I was got a pocketer. You have to basically work with them so you meet people and were they like kicking the tires and you're having lunch with them? Or did you run a proper process and hire a banker?

We did not hire a banker. You know, people proposed that to us, but I had always run all of our different transactions and I just kind of felt, I don't know, I just felt most comfortable doing that. Sure. But I know that there are some founders that don't feel comfortable doing that.

You know, a friend of mine just sold his business a few months ago and they hired a banker and it was great. So I think it depends. I also, I had a great relationship with Spotify. I had a great relationship with Daniel that we built over the course of several years. You know, it wasn't, I think a lot of founders think that big company just knocks on their door and says, hi, we'd like to buy you. And, you know, as you both, I'm sure know, that's not how these things work.

They, they, they, it takes years sometimes to lay the foundation. So we had laid the foundation and, and talked to Spotify over the course of several years. We were, as you mentioned, also talking to all the other players. Again, I won't name them. and we just felt that Spotify was going to be the best home. How does it go down? Daniel just calls you at some point. You're having lunch with Daniel and he just says,

hey, listen, do you guys want to sell yes or no? Does he just put it out there? Or like some BD mid-B-D person says, hey, do you guys want to open a dialogue about that? How is that subtle? Like, we want to propose to you, but, you know, we don't want to be super crude about it. That's like the moment everybody wonders about it.

Does that go down? Where were you when you got the kind of overture, let's say? Yeah. So, um, this is funny. It's a good story. I know it's a good story for every founder. It's a great story. It's a great story. Come on. I'm trying to figure out what I can say. Yeah, you can just give us broad strokes. One thing I will say, and I have no problem saying this, is the first time I met Daniel Eck, he just called emailed me. Um, and that was right after the first version of Anchor launched. And he just, the earliest, when it, It wasn't even a podcast thing. And he said, hey, I like your product.

I'm going to be in New York. Let's hang. And I just went to go talk to Daniel. And the funny thing, you know, we had just launched. Anchor, I had never launched or started a company before. So I was, you know, I was definitely a bit like starstruck by the fact that Daniel Leck, the CEO was reaching out to me. I said, yeah, I'm in New York.

Let's hang out. What I didn't tell him and only told him later after they acquired us like three years later was that I was actually on a family trip in the Virgin Islands from my mother-in-law's 70th birthday. And I said to my mother-in-law and my wife, I'm like, I have to go back to New York. And they're like, what are you crazy? You're leaving? And I'm like, I'm going to go hang with Daniel Leck.

What do you want me to do? Nice. That's amazing. That's a legit entrepreneur move. It really is. Oh, you're here? Oh, yeah, sure. I'll just, and you just do the 24-hour turnaround because that meeting, that is like, could be a

seminal moment and it turned out it did. Yeah. Yeah. And so then to answer your other question, you know, I don't want to go, I don't want to get too specific into the why or the what, but like there were over the years other conversations that happened. Not just between me and Daniel, but other, let's call them sponsors within the company, people that wanted to achieve certain things, product leaders. Hey, Mike, you know, we know we've talked in the past. Maybe we could work together on this. Maybe we could work together on that. And then when we ultimately did choose to sell the business. It was, so my boss, who I reported to at Spotify for a couple of years, Gustav Soderstrom,

chief product officer, chief R&D officer, had reached out and came to visit us at our office, and we spent a bunch of time together. And basically out of that time spent together, I think the, like, both of us had the light bulb moment where we were like, oh, we should put these two companies together. This is just going to make so much. This is the key that people don't know about M&A. So there's top-down M&A. Oh, Daniel X, you know, just.

meeting people and, you know, being the elder statesman, as it were. But then, as somebody told me when I saw Weblogs Inc., like, who's your rabbi in Time Warner? And I was like, I'm sorry, I don't know what you mean. Who's your champion? Who's the person who's going to own this after the sale happens? And it turned out there was a guy named John Borthwick, who turned out to be my rabbi at Time Warner, who, when people were deciding to buy and gadget auto blog and all that stuff, there it is, Bado Works.

You know, John said, yeah, Jason's the real deal. You should totally buy that company. and you had people like that who were the ones who needed your software who would get the benefit so then they can convince the CEO, the board or whatever and say, hey, this is a viable transaction. Here's why this is better than us, building it ourselves, right? Because that's what you're up against. It's somebody building by.

It's always builder buy. That's basically what it comes down to and with these things. By the way, quick shout out since you mentioned Betowworks. BetoWorks was actually the very first check into Anchor. No shit. Really? Wow. Yeah, so I was at Adobe, I mentioned, and we were building Anchor nights and weekends,

having a lot of fun. And my co-founder and I had never built a company before. But, you know, I'd heard from all my friends that had, they said, look, fundraising is a full-time job. They're like, you sort of have to decide up front if you're going to go fundraise and start your company or if you're not. And I was fortunate enough to get invited to go demo at Betawarks. They used to do this Thursday demo night thing.

People would come and drink or whatever. and I demoed Anchor and I had never met John Borthwick, but he came up to me and he said, hey, we've been trying to fund something in the audio space. This is really interesting. Let's talk. And a few days later, John was like, look, if you're looking to leave your job, I can write you a check, 100 grand right now, friendly terms. You can quit your job.

And then in a few months, you can go out and raise your proper round. So that's what we did. We took that check, quit our jobs. Was that when Peter Rojas was there from Engadget and he was doing the audio? like focus stuff. He was so early on audio. Did you meet Peter? He had just joined. Yeah, Peter had just joined right around that time. He joined John and another partner there, Matt Hartman. John and Matt had just done the, John and Matt did the investment in Anchor and then around the same time they did the investment in Gimlet. So they did both a

content company, Gimlet, and they did a technology company with Anchor, both in audio. I actually think they've made other bets in the audio space around that time. Okay, listen, take it from me. The summer is a great time to grow your small business. Why? Lots of people are taking vacation, summer Fridays, things like that. And you can out-hustle them with your team. And LinkedIn Jobs is going to help you find the right candidates faster.

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LinkedIn.com slash TWIST, and you're going to get your first job post for free. Terms and Condition Supply, because they're giving you something for free. How come the other major players, Google and Apple, haven't just created a hosting company to host podcasts? This is kind of strange, right? Yeah, I think Amazon recently bought one. I think they bought maybe Art 19, I could be wrong.

Yeah, no, Amazon is buzzing around. I can tell you that first-hand experience. But it's really Apple. I mean, I think we're going to get here in a minute when we start talking about your standards piece that you wrote a medium just recently, right, July 12. So post-departure. But I do want to go, as long as we're sort of diving into the past, I do want to go into this Apple question because there is a strong argument to me made that the reason

it took from, you know, when we were podcasting in 2005 until Anchor in 2014 to make some progress in this medium is that Apple kind of just kept this baby in a cage for a really long time. Look, I don't know why Apple does what they do, obviously. I mean, from the outside looking in, if I look at all different Apple's different business lines, podcast seems quite small, even if they were to get it to scale, right? I mean, I'm just speculating here. Maybe it's just as simple as that. I don't really know. What, I mean, what do you both think? Apple's slow with software. I mean, Apple takes their time.

And so their pace is not going to be the same pace as, you know, Overcast, you know, or Spotify. So like Overcast will go fastest because they're the smallest nimblest. They'll have better features than Spotify's player. That Spotify will see what Overcast is doing and come with their own innovations. They'll go faster. And then Apple, their, you know, design, they really want to get everything perfect. And they're going to go slower.

and like you said, how big of a priority is it when AirPods are making tens of billions of dollars in profit and it's hard to make a profit from podcasting, I think. And so for them, it was like a nice thing to do.

And then they know if anybody wants to be avant-garde and do really interesting stuff, that's overcast business. You know, okay, or Spotify can, you know, be somewhere in between the absurd power user and the average, you know,

Apple iPhone user, and then Spotify may want to be somewhere between those two, right, in terms of their interface and what they provide. Yeah, I mean, I think that would be my guess, right, Molly? Yes, I think being 20 years slow with software is different. You know, I mean, it's like, I think podcasting is not a business that Apple cares that much about. And it became this catch 22 for the industry that's less about Apple and more about what you were saying, Mike, just now about distribution, right? Apple was the biggest distribution gorilla by far for this whole time.

But it's not a business they care to be. And they're not going to be the ones who. you know, take this open standard and turn it into a publishing platform or a proprietary platform for, you know, making great podcasts. They're just kind of like dinking along with it. But the distribution power prevented anybody else from getting into it in a real way, I think, for a really long time and innovating. Funnily enough, they are starting to do more here now. I'm sure you both know they have, they have, I don't know what they call it, you know, they have subscription podcasts,

which are, as far as I can tell, proprietary format to Apple. So maybe they are starting to do stuff now. Let's talk about that one. Yeah. Competition. So yeah. Well, the paid thing, because we, we looked at that. We had done a Patreon.

But, you know, advertising is just doing so well for us. Yeah. That why bother charging our customers and our customers don't seem to mind the ads because we read them and they're 75 seconds. So it's not a big problem. But do you think that's going to work? Do you think people want to pay for podcasts? I think it's possible.

I think it probably depends. on the format, on the creative format. I agree. Something like what you both do, to me, advertising makes all the sense in the world. You publish almost every day, high volume of content, high, high listenership. That's a perfect opportunity for scale and for advertising. I think subscription podcasts probably lend themselves something that's maybe a smaller, more niche audience that is willing to pay, maybe something that's multi-format where you're subscribing in one place and you're getting access to a bunch of different content, a bunch of different mediums.

I think we'll see. But I do think, and what I've seen, you know, based on my own work is that creators want monetization flexibility. They want to, you know, they want to have a choice between advertising or subscription or patronage or whatever it might be. So I think we'll see. It's still super early. But I do believe that if you give creators the tools,

there will be some that will find really compelling ways to use them. Yeah. My theory on it is there is a group of podcasts that, that are so risque that they're, that's true. The advertisers don't want to deal with it. So my friend Sam Harris, who I got into podcasting when I lived in L.A., and I encouraged him to start the podcast and helped him do it. You know, he was talking about, you know, atheism.

Can you imagine what some religious group that is offended by that? Or he's talking about, you know, radical Islamic terrorism. Like, all of a sudden, you're going to get a lot of phone calls if you're like some mattress company and Sam Harris is reading your ad, which I think he did do some. then the Red Scare the ladies at Redscare way too controversial they're using you know very colorful language

and then Brady Sinellis was advertising based and then he did Patreon and then some some Tim Dillon somebody told me makes a bunch of money so you know it's completely possible for those folks if they have a really it's interesting it's like

you're sort of describing like cable versus HBO right it's like once you get on HBO you can say whatever you want and show all the boobs but if you're cable, you got to keep it tight and it's ad-supported. I mean, only fans, what I've heard is that, you know, vast, vast majority of their revenue comes from content that couldn't exist on Instagram for similar reasons.

Yeah, Instagram does not, I mean, I can take my shirt off on Instagram, no problem. Exactly. Don't get me started. For most of us, learning a second language in school, it was a joke, right? I was supposed to learn French. I didn't learn anything. But here's the thing. Now you can learn.

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B-A-B-B-B-B-B-B-Bel.com slash twist. BABEL. Language for life. This is a good tie-in to the article, I think. It is. Yeah, it's a good perfect pivot. So let's talk about standards. So you've got this piece, and I want to talk to you about timing a little bit. You've got this piece out just a few days ago, the standards innovation paradox,

sort of explaining, I think, for people who aren't that familiar. I mean, we've abstracted away so many of the guts of podcasting. that I think a lot of people don't really even understand that we're just talking about RSS. Still, real simple syndication. Like, you have this piece breaking down how open standards can enable something to exist in a lot of different ways, but then also prevent it from innovating. So walk us through a little bit what you're saying here and why. Sure. Well, maybe I'll start with a why.

I'll go backwards. Yeah. The Y is actually, it's pretty simple. This is basically something I've been thinking about for the past eight years because I built Anchor, which, as we just talked about was based on a standard. Then I sold it to Spotify and I got to see how it works to build products based on standards. I got to see it in a startup and I got to see it a big company. I've been a creator myself, right?

So I've seen this from all sides and I'm really fascinated by this paradox, which I've observed. And I'm off for the summer and I've been writing and doing things I haven't been able to do for a long time. And I was like, I'm going to write about this. So that was the why. But the what is basically this. Standards are awesome. As you mentioned, they enable products to basically find an audience. For people that don't know, maybe the listeners that don't know exactly what a standard is,

the way to think of it is it's just a common language. It's a common language for systems on the internet to talk to each other, whether it be software or hardware. And because this language already exists, it's been standardized, basically dramatically reduces the barrier to entry for new products or services. So if I want to build a new product. podcast player or a new email client, I don't have to come up with this language to interact with all the different stakeholders and services inside of this type of product environment. I just adopt the standard.

And so, like I said, this leads to more products, which leads to more choice for customers, oftentimes data portability, lots of other benefits. And really, like most of the great innovations of the internet wouldn't exist without standards. The other thing I think is worth pointing out is Standards are technically extensible and changeable. However, and this is where the paradox comes in, when a standard achieves scale, right? When many, many stakeholders adopt the standard, what you end up with is lots and lots of fragmentation, lots of players in an ecosystem. And so when a change gets proposed, you basically have too many people that have to come

to an agreement for the change to be adopted, and you basically end up in stagnation where no one can agree on anything and the standard effectively becomes fixed. And that's why there's a paradox, right? Standards are great. They help products achieve product market fit. But over time, the standard stagnates and all of the benefits that you wanted to get out of it in the first place become effectively impossible. So it's a very interesting dynamic that has taken place in podcasts and I argue in the piece that this is why there has been mostly stagnation to the format of podcasting over the past 20 years. but this has happened lots of times.

Like messaging is another great example, right? And here's a chart, yeah. Here's a chart that you drew, which I thought was clever, which is, you know, when you're building with standards, you know, you get this great rush in the beginning, but then it kind of becomes hard because everybody's got to get consensus around this. And this is something that's going to happen in crypto

with all these open projects where you have a voting mechanism as well. And then you have building with your proprietary tax. And the perfect example here would be, you know, RSS for blogs versus versus Twitter. So, you know, and then it happened with podcasting. And for people who don't understand, anybody can put it up an RSS feed, then anybody with a player can grab that RSS feed

or they can make a database of RSS feeds and nobody owns it. So the person who wants to compete with Spotify or Apple podcasting or overcast or with, you know, anchor can just grab all the RSS feeds and start over. Now, the challenge comes in, like you're saying, you want to add some feature, which Anchor did recently, or Spotify did recently, video. So maybe you could explain, you guys wanted to take audio and video

and sync it perfectly so that if a person was listening on Spotify in the new beta, which we're part of for The Speaking Startups and All In, you turn your phone, the video just starts playing at the exact same point. But the standard didn't allow you to do that, or it was a little challenge?

Maybe you could use that as an example. Yeah, I'll, I'll, I'll, I'll touch on that briefly, again, not being an employee anymore. I don't want to be confused as being a spokesperson for spot-up. But just quickly, what I'll say is, yeah, video podcasts and RSS have existed for many years, but they don't support the seamless transition between video and audio. And so if you go into a standard podcast player and you download a video podcast, or you go to listen to a video podcast, your phone is effectively downloading the entire audio file

up front or video file up front, which might, by the way, might be 500 megabytes. That might use up like, yeah, gigantic. So although there is support for it, there is poor support for it. And so to change the way that that operates, you have two options. One, you could go and change the standard of podcasts. But as we talked about, given how many players there are, that becomes extremely hard. Or you just do something new. Now, a startup will have a really hard time doing something new because they don't have an existing

audience they can plug themselves into. But bigger companies that already have distributed. channels can effectively leverage those distribution channels to launch new products. And I think IMessage is a great example of this, right? So history of messaging, text messaging, SMS was the standard. It launched, it was invented sometime in the 80s. It didn't even get to scale, though, until late in the 90s. Because, again, you needed all these handset manufacturers and carriers to agree on messaging, right?

then somebody said, hey, let's add pictures to text messaging. Wouldn't that be great? But because of the stagnation of the standard, you couldn't do it. And so a whole new standard had to be invented that was MMS, took about another 10 years. Then Apple says, hey, we have this product called the iPhone. It's got millions and millions and millions of users. We're just going to do our own thing because we already have a distribution channel to tens or hundreds of millions of people. We're going to call that iMessage.

And that's not beholden to the SMS standard. And so we can do anything we want. We put in full resolution images. We put in group features. We put in, you know, voice memos, all this amazing stuff. And because they were big enough, that meant that they didn't necessarily have to rely on the standard to get distribution for new features. But obviously, startups in that example are at a complete opposite advantage to that. They need the standard.

So it's just a really, really interesting dynamic. Now, I will say, since we're on messaging, I think, you know, again, we said up top the benefits of standards is that they give consumers choice, they give consumers data portability. Consumers like open standards. And so the other thing I think is really important when a company innovates on top of a standard instead of changing it is to offer backwards compatibility, which I message does. And we all know this for those of us that have an iPhone. You message somebody on Android. What happens? Turns green, falls back to the standard.

Jesus, yeah. Text turn green. But that's what makes it work. Not to even complicate it more, but now there's like the RCS standard that's been taking, you know, that's taken just as long to get adopted. And then I messaged to head. Okay, but so there is a version of this. And, you know, yes, you just said you're not an employee of Spotify. But there is a version of this that must have been sparked in some way by the conversations in Spotify.

Because we talked, even on the show, Jason was, you know, somewhat strident in addressing Daniel Eck on this topic because Spotify is effectively starting to creep toward breaking podcast standards in order to do some of this innovation. You know, like I said, uh, I guess really, Mike's like, yeah, let me speak for the PR department. I'm just saying, I could speak for Mike. Here's a thing. Brought it into focus for you.

Here's what happens. This is actually a really good discussion to have. The people who are in podcasting don't want to see Spotify or Apple or Google. do what Apple is doing to iMessage, which is break everything and take too much control. It's better for all of us that there is a fragmented level playing field. And Spotify has some audience, Apple has some audience, Google has some audience, overcast,

and a thousand flowers bloom in players, etc. And we're not beholden to anybody. So when we had the opportunity to be in the video, I said, I don't know if I want to do this. And I CC Daniel on the emails and just said, listen, I don't want you breaking pockets. I don't want you to force me to use Anchor. I should use Anchor if I want to.

I already have an RSS feed. And they guaranteed me, listen, it's going to be backwards compatible. And you'll eventually be able to use your own RSV feed with this. We're just trying to figure it out or whatever. And so I took it on good faith. But if Spotify overplayed their hand or anybody did,

I would just call them out publicly like I'm doing here. And that's what all people who are on the other side of this, podcasters should absolutely give it to any player, any platform that tries to screw the standard. because if they screw the standard, then it's, we're going to go into Zuckerberg land. We're going to go into iMessage land where no more innovation is going to happen.

And so that is the key thing here is, sure, innovate along the margins, but Mike, to your point, and it's very reasonable, but just make it backward compatible. And then people can make a decision, and then people who are in the industry should be very vocal.

So Adam Curry, who is, you know, the podfather has been very vocal about this stuff. And, you know, it's up to the standard committees and for those folks to find consensus, Molly, I think, to keep the ball moving forward so that people just don't give up on it. Because what essentially Twitter did at some point was I think they've removed RSS support. And they were just like, yeah, you can't subscribe to somebody correct me if I'm wrong here, but you used to be able to go to Twitter.com slash Jason slash RSS, I think, where they had some very easy URL structure and you could

actually subscribe to somebody's Twitter in an RSS feed. I don't know if you could still do that or not. I don't think you can. I think they deprecated it. And so it kind of sucks. Exactly. And that's like exactly what you're saying, which is, look, RSS took us this far. And in order for podcasting to, you know, I mean, because another thing we've been saying about podcasting for almost 20 years is it doesn't make any money. So in order for it to make some money, has to evolve. Has to evolve. There's another interesting example of this that's happening right now in real time. And I've seen a few people talking about it, but I don't know if it's been fully acknowledged yet, which is with substack.

Right. So Substack, awesome product enables creators to build subscription newsletter businesses, right? And they distribute those newsletters over email, right? Which is, by the way, a brilliant startup strategy because everyone in the world has email. So you have an infinite pool of consumers to potentially tap into. But what became, I think, pretty clear with Substack, from my perspective, at least, is that they would eventually run into problems of innovating on the format of the newsletter, right? They can't do anything dynamic in an email client.

They can't do personalized discovery. They can't do real-time comments. They can't do anything dynamic. And so thought it was clever, but maybe not surprising that a few months ago, I think it was, they launched an app. And now if you go to any substack page on the web, it says, view this in our app. And I have to imagine that they can do really, really great things in the app. They can probably personalize discovery and ultimately make, you know, make creators more

money by gaining them more exposure. So I wouldn't be surprised if we see them really lean hard into the app. But I think what they will also do is respect the standard going backwards. They will probably never get rid of the ability to figure stuff in the know, right? When they pulled that, a bunch of their writers, I believe Casey Newton, Newton called them out on it. And he is one of the people that they pay to move to the platform. And he called them out on it. It's like, hey, listen, The default is to not get the email. I don't want this. I don't want to beg Substack to get the emails of the people who subscribe through the app.

So this is the obscureification and this is the slow boil that big companies do to screw over content creators. And I'm not saying Subsack intentionally did this, but somebody who is making product decisions said, you know what? If we own the emails and Casey doesn't have the emails of this group of users and we don't go to their email box, we have more control over them. And if, you know, whatever platform now they host your RSS feed and they are 49% of your distribution, now they can exert control of it. They can say, hey, you have to, we have to read your data. And that was the other thing I went to town on Daniel was like, listen, I care about the privacy

of our users. What are you, are you going to resell this weekend startups and all in users? Because I had people do that as well, and they assured me they did not. Because they could just say, take all in and this week in startups, call it tech business finance and then they just sell the general category of tech business finance and the ad that happens before this week in startups you know when i guess the the the platforms don't insert ads dynamically without permission that would be illegal to do and you get sued but they do have ads before or after in between podcasts for what it's worth um you know you mentioned this is how big companies screw

creators i don't know the substack team i've actually never met anyone over there but i i doubt that that they have any malicious intent here. I think what they want to do, and I actually think it's probably pretty noble, is they probably want to help the discovery of smaller newsletter writers that can't find an audience

automatically, that don't have massive Twitter followings. And they probably want to figure out how to do discovery at scale, which they can only do in an app, which I think is probably to the benefit of everyone in an ecosystem. I think it's more in the first. I think they want to create a bundle. I think they want to charge people $24 bucks a month to get

up to five and then split it five bucks each. And then now all of a sudden you are more beholden. So this is where the platform's interests can diverge from the top people in the ecosystem versus the bottom people, right? And so the platform naturally wants to help everybody and make it simple for users and push people to the top. But then the people who are already on the top are like, I didn't sign up for this. And so that's the natural give and take where you have to speak up if you are in these ecosystems. And it's a bit of a negotiation, right? The big fish in the small pond never wants the pond to get bigger.

You know, they never want, they never want it to get bigger and for smaller fish to be able to take a, oh, go ahead. Or, you know, they just might want to run their business the way they want it. So they don't mind the small fish being there, but they don't want to have their approach compromised. Like I understand cases position. I want to own those emails and I want to be able to move anytime I can. So what's next for you? You leave, you start in angel investing. Tell me any interesting angel investments you've landed so far?

And what's next for you? Yeah. So, well, one quick, I want to say one more thing on Spotify before we wrap up. Just connected to what I said about Substack. You know, I'm sure they want to help the writers and the consumers. One of the reasons I loved working at Spotify and one of the reasons we sold back to an earlier question is because I truly did feel that like us, remember I talked about being a mission-driven startup. They were very, very mission driven as well. Like, you know, people see big company,

big tech company. They think, you know, it's easy to make that company the enemy or the bad guy, but Spotify truly is a company that wants to enable, you know, tens of millions of creators to be able to live off their art and billions of fans to have a great experience. So, you know, it's a great company. I believe that, yeah. I believe that. Yeah. I mean, just, but with great power comes great responsibility. Comes great responsibility. All of a sudden, you're 30, 40, 50% of the distribution, like Susan Wojjecki has to deal with at YouTube.

Now you inherit a bunch of other problems, which is, okay, if you were overcast and you're like, I don't want to have, I don't want people to be able to subscribe to this particularly toxic person. You know, nobody even notices, but now you're Spotify, now you're censoring, you know, and then Spotify's got to say, we're not publishers. And I'm like, really? You're not publishers. okay, you bought all these podcasts,

you sell ads on them, and you distribute them. Give me a break, Daniel. You're a publisher. Like, not my problem. I'll leave that one. I mean, I understand why you want to pretend. I understand why Daniel wants to pretend he's not a publisher,

because then he can say, I don't know what's inside of these, you know, podcasts. It's up to them. But it's like, you're monetizing them, you're publishing them, you're distributing them, and you're promoting them.

Yeah, you're making choices. It would be different if it was, Overcasts. Overcast could say we're not a publisher because they're not, you know, making any editorial decisions. Moving on, tell me about angel messing. What I talked to that. Unless you want to jump into the frown. No, no, no. We'll let that one continue. I'll let you. Here's the third row. Would you, I can hand you the grenade. Would you like this stuff on it? Here's the grenade. It's just right here. I can toss it back and forth until it explodes in somebody's lap. We'll let that one continue in the comment section. Uh, so yeah, angel investing. I started a few years ago. I mean, I, I, I, I,

I loved being a founder. I love the zero to one stuff. I loved, you know, searching for product market fit, positioning, all that, all that fun stuff. And so started doing a few years ago when I was thinking about what I wanted to do next, you know, I had always really been excited. I told you in the beginning of this conversation. I love the idea of helping people create. You know, we did that with photos at Aviary. We did that with podcasts and anchor. I view investing as a way to help founders create businesses. And so I've been really enjoying that. And so in a couple of months, I'm going to be starting up a full-time investing role. Can't say what it is right now, but maybe you can have me back if you're, if you're so

gracious and willing to do so. And I can announce that. And welcome to the launch team. Congratulations on coming to work here. Everybody thinks I'm just hiring everybody. It's like, it's hard Molly. Literally, I'm now getting like tons of people who are like, hey, you hired Molly. How about me?

I'm this free. This is this free. I don't have an unlimited bankroll here to hire everybody. Not yet. I'm working on it. All right. and Molly, can you give us how people can find, I know it'll be in the show notes, but how can people find Mike and find his piece?

Because it's really worth reading and meditating on. Definitely read this. I mean, this is such a great kind of epilogue, you know, coming out of what you've built a great rumination on the way that tech develops and is going to develop. It's just fantastic. It's called the Standards Innovation Paradox magnano. dot medium.com. M-I-G-N-A-N-N-O.

Mike, thanks for coming on. It's great. Thanks, Mike. Thanks for having this is fun. Thanks, Mike, for joining the show. Make sure you follow Molly and I on Twitter. I'm at Jason. She's at Molly Wood.

Follow the show at TWA startups. And if you love the show, why not give us a five-star review on Apple? And, you know, I read those. And once in a while, I reach out to somebody. So make sure you use your full name there in the review. So I can reach out to you and find you on Twitter. Or you can just email me a screenshot of your review.

I always love when somebody does that. Sometimes I even send somebody. a little swag if they do. So you know my email, Jason at calicanus.com for the rest of my life. You can slide into my DMs and say hello. And we're looking for questions for Ask Jason and Ask Molly and as Zach, ask an angel. So if you have any questions, just at mention me on Twitter. You can send it to me on Twitter or you can email producers at this week in startups.com. If you send us a video of yourself asking the question, we'll use it on air and you can get a little promotion for your startup or whatever you're working on your Twitter handle.

All right, everybody. We'll see it tomorrow. Thank you.