In the previous essay, I talked about that Facebook’s primary revenue source is from online ads.
Well, there is no easy way to say that, but 98% of Facebook revenue is coming from online ads. So it’s not a big surprise that they are one of the most affected companies by both surges of usage as people are using Facebook, Instagram, Whatsapp more heavily, and decrease of marketing spend on ads on its platform. So ads for Facebook are basically a matter of existence.
So It is smart – or a strategic necessity as I will explain in a minute – that they are trying to find different revenue streams.
It seems like after the first quarter of 2020. We had discussions about strategies and the future of businesses that didn’t happen for years. That is understandable because of the COVID-19 pandemic, lockdown, and the expected economic effects. Many people started to look with more focus than usual into what big companies had to present in the first quarter earning calls.
What I want to explore here is the discussions around online ads, what does big companies earnings are telling us about the current online ads situation. And what does it mean for the future of online ads?
Let’s start with this bold statement:
Morgan Stanley analysts project that online advertising will suffer more this year than during the 2008 financial crisis.
Are we in an online ads bubble that about to burst?
Let’s investigate first the big companies earning reports.
Google’s revenue has risen in every quarter of its history.
Alphabet reported total revenue of $41.2 billion for the first quarter, up 13% compared with a year earlier. […] this was a particularly well-timed reveal for a company that has been a model of growth during its 22 years of existence.
I was wondering how many companies can claim this fantastic continuous growth for such a long period of time. Man, we are talking about 22 years! But let’s postpone our remonetize talk about google history into another essay. And let’s focus on the main topic of today.
In his essay, Fred Wilson wrote in AVC blog about technical innovation, business model innovation, and the last two big waves we had in the tech industry:
A good example of this was moving from web apps to mobile apps, which was largely a technical innovation. While the move to mobile certainly created some new companies, it largely strengthened the market position of the big Internet companies because there was little to no business model innovation.
Compare that to the move from desktop computing to the web. We saw massive disruption as we went from a licensed software business model to an advertising supported business model, which has evolved into an advertising/subscription freemium business model.
I am excited about the move to crypto based business models supporting decentralized apps for this very reason. I think it opens up the possibility that some very large new companies will be created that innovate largely on entirely new business models.
That’s very true. It’s exciting to see how crypto & decentralized computing evolve. We are standing in front of a solution for multiple problems, and we have only discovered the technical side of it. But we don’t see – yet – a similar successful business model that can accelerate the technology and make it accessible to the public.
It’s a relatively small chance to have technical innovation plus business models innovation by one person or one company. But when it happens, the results are remarkable.
A few years ago, I just joined a company. And during the all-hands meeting, the CEO of the company was talking about the conversion rate for our product. Our conversion rate is X. We need it to be Y. He said.
The only little problem was… I had no idea what the heck he is talking about. And what is the conversion rate in the first place? So I asked my product managers colleagues and did a little research to get a rough idea about what it is.
Conversion Rate Is
“The conversion rate is the proportion of visitors to a website who take action to go beyond a casual content views or website visit, as a result of subtle or direct requests from marketers, advertisers, and content creators.” Wikipedia
In other words. It’s about measuring how many users decide to take action towards a specific goal, for example, buy a product or subscribe to a newsletter.
The other problem is ‘How’ to get better in conversion rate is much harder and less clear than the definition. Every product manager has his own ideas on how to do it. So It’s a mix of art and science. And If you are developing a website/app you actually are tackling the topic one way or another.
So here I will list some ideas on how to improve the conversion rate for your product from what I observed at the products I worked on.
Recently I watched the first week talks of Startup School 2019 from Y Combinator. It’s not just interesting if you are a founder but also useful if you are working in a company to understand how to build better products.
So here a few points from the talks:-
Even if you have a product idea in mind. Reach out for people maybe at bigger companies to discuss problems they have in similar products before you implement your idea. What are the features they like? What are the pain points? If you can improve or fix any of these points, try to sell your solution.
You don’t have to build a solution first to be able to sell it. you can sell an idea by a simple landing page.
At the early stages of a company, Talking directly to users is so much cheaper and more effective than ads. Products can get so much worse when you don’t communicate with actual user for max 6 weeks.
Build features based on user feedback and get back to them when you implement it. It’s a good way to transfer them into customers and will make them so happy.
Usually, users don’t know what they want in your product. it’s your job to figure it out and they will know it when they see it.
Doing users interviews “before” building a solution is the best way to save you from “I built the best product” bias, without actually solving a user’s problem. This mistake I personally saw many times that companies try to pick a technology and then ask what kind of problems we can solve with it? You have to start from a user need and solve his problem with appropriate technology. Simply like in real life you want to fix something then you pick the right tool to fix it.
First-order thinking is fast and easy. It happens when we look for something that only solves the immediate problem without considering the consequences.
Second-order thinking is more deliberate. It is thinking in terms of interactions and time, understanding that despite our intentions our interventions often cause harm. Second order thinkers ask themselves the question “And then what?”
There are many examples of the first type of incomplete thinking — for example, personal decisions like taking a job or investing your time and money into something. Or as in society like voting in elections.
And I say ‘incomplete’ because even if consequences seems to be positive in the short run, it doesn’t mean that it will stay positive in the long run. And more importantly, that also if it is positive afterward it will be just a matter of coincidence not based on a logical way of thinking.
I enjoy reading about the history of personal computers and the internet. Especially the period of 80th and 90th. As it’s the history of the industry, there is a lot to learn from it. What kind of ideas are working and what aren’t? What makes a software product successful? What makes a software team successful? And what could be the fastest ways to fail? Etc..
And recently I was listening to an interview with the creator of Internet History podcast. And just going throw the list of episodes the topics are quite impressive. Check it out.
“The struggle itself towards the heights is enough to fill a man’s heart. One must imagine Sisyphus happy.” – Albert Camus
The Myth of Sisyphus
Albert Camus on his book The Myth of Sisyphus introduced a thought experiment. Imagine if we are watching Sisyphus pushing a massive rock to the top of the mountain over and over again. Everyday to the end of time. For us, that’s absurd and pointless.
Imagine also that he stopped pushing for a while. To reflect on what he is doing. To ask what is the meaning of what he is doing. Most probably he will get the same result. Then he will have to continue pushing.
And about that, Camus is saying the only solution for Sisyphus is to choose to make this process of pushing the rock his all world. To decrease the desire of making meaning out of it. To make the rock “his thing.” To engage himself entirely in the process and “try” to enjoy the small details.
Of course, Camus meant that as a metaphor. The point is the reflection from time to time is right and essential. But overdoing it is a waste of experience and enjoyment. The solution for Sisyphus is to be engaged enough in the activities that can bring him joy, And if he doesn’t know any. Then his job is to try and try more things until he finds one. To find his rock then make it his thing.
Several months ago I was reading Prof. Taha Hussein biography The Days. And one of the main points of his biography as you might expect was his experience with blindness. How he learned by listening. How he finished his degree. How he mastered new languages like French and even Latin besides Arabic. How he finished his Ph.D. in Paris. How was he able to sit for hours and hours to just listen to someone who was reading for him. How was he remembering all that without even taking notes?!
His life was hard, and his experience was just amazing and motivating.
After I finished the book, I wanted to try that. To try listening instead of reading. So I tried Audiobooks from Audible. I liked the idea so much, and I switched most of my books reading to Audiobooks. The experience is entirely different.
I was listening recently to Masters Of Doom book. The book is so well written that made me feel like I was listening to a movie! Besides a brilliant narrator Wil Wheaton the book experience was even better.
It’s the story of John Carmack and John Romero. Following their creation of Doom, Quake, and other games. They started from almost nothing to a paycheck from shareware royalties one morning of 100 thousand dollars, to a gaming empire that changed the face of the gaming industry.
I liked the curiosity, creativity, and the dedication they put into something they really really cared about. Creating a good gaming experience alone is hard. Combine that with the weak technology at that time to create small details like the infinite scroll as in Mario game when they imported it to PC the first time.
“In the information age, the barriers just aren’t there,” he said. “The barriers are self-imposed. If you want to set off and go develop some grand new thing, you don’t need millions of dollars of capitalization. You need enough pizza and Diet Coke to stick in your refrigerator, a cheap PC to work on, and the dedication to go through with it. We slept on floors. We waded across rivers.” — John Carmack