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Marketecture: Get Smart. Fast.
Episode 133: Casey Saran on the intersection between paid and earned media
00:50:05
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- [00:01]
Ari Paparo
This podcast is brought to you by Incremental. You ever run a holdout test, wait between two and five weeks for the results, and then realize you just wasted a big chunk of budget? By the time the data comes in, the campaign's over, the money's gone, and the insight's basically a post mortem. That's why I like what Incrementl is doing. They give you always on incrementality measurement. No experiments, no holdouts, no delays. You get answers while the campaign is live and so you can actually make changes, not just analyze the wreckage. With Incremental, you don't just learn what worked, you do something about it. Check them out at the Future of Measurement.
- [00:40]
Eric Franchi
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- [01:29]
Ari Paparo
Welcome to Market Podcast. This is Ari Paparo. I'm here with Eric Franchi and Casey Sarin from Spaceback. We're going to talk everything about creative social influencers and how all that gets put together. Eric, are you an investor in Space Back?
- [01:44]
Casey Sarin
Yes, my fund, Eperium is an investor, a proud investor in Spaceback and I have a particular fondness for creative tech. So it's been fun to be on the ride with Kasey and their business has evolved in such an interesting direction over the course of the past few years that this is going to be a fun conversation.
- [02:01]
Ari Paparo
Yeah, I love creative, but I also love pointing out that I don't love creative business models. So there's two sides of that same coin. But Kasey's doing something pretty interesting and I like how it's the overlap with social. So we have a lot of announcements. So this week we announced the second ever marketecture Live. So for those of you living under a rock, we did Market Live this last March in New York. It was a big Success. Sold out 450 people. We're rerunning the same game plan. October 27th. That's a Monday in New York City. We have a full day conference. We've announced the speakers or many of the speakers and it's really jam packed. I'll be there. Obviously Eric will be there doing the Startup Showcase. Again we have Antonio Garcia Martinez who Probably everyone know as the author of Chaos Monkeys, which is soon to be known as the second best book about ad tech ever published. And he is at Coinbase. So we're going to hear what is Coinbase's strategy around advertising. We have Dr. Mark Grether, who's been on the show, talking about PayPal. We have Jenny Wall, who's also been on the show. One of our most popular episodes from videoamp. And the whole theme of the day is around outcomes. So we have a lot of really exciting stuff. And if you go to marketlive.com, you can register now with a pretty significant early bird discount until labor. And then we also have, I think it's a 40% discount for people who are paid Marketexture subscribers. So I'd really recommend, since we sold out last time, if you plan on going, get the early bird, don't wait for last minute. And we also have an offer for qualified brands and agencies to get free tickets so that we can bring in a lot of diverse viewpoints from different parts of the business. I've been talking a lot, Eric, what are you excited about? How are you going to do this Startup Showcase thing again?
- [03:47]
Sonia Partalo
Yeah, I can't wait.
- [03:48]
Casey Sarin
So it's going to be me and Sonia Partalo, who many people are familiar with. She is general partner at S4S Ventures. Prior to that, she had a long career at wpp. Stanja is awesome. And we learned a lot from the first Startup Showcase. And I think we're going to bring, like, new ideas. And there's such a crop of companies already that are inundating you with pitches to speak. This is going to be super fun. And just looking at the speakers, it's marketecture come to life. Like some of the best guests. I mean, AGM was one of the best conversations we've had. And, like, I could have, you know, talked to him for another hour. We're going to be able to. So this is going to be so much fun. I can't wait.
- [04:26]
Ari Paparo
Yep, I'm really looking forward to it. Once again, marketlive.com to get the early bird tickets. All right, with that, let's jump in. We have Casey Sarin from Spaceback. All right, Casey Sarin, the CEO of Spaceback. Thanks for being here, Casey.
- [04:43]
Sonia Partalo
Thanks for having me, Ari.
- [04:44]
Ari Paparo
All right, let's talk about the most important issue. How's the baby? It's like that Seinfeld episode. How about the baby?
- [04:51]
Sonia Partalo
Baby is great. And, yeah, so she's four months old now. I just went on My first work trip went to the MMA CEO CMO event down at the Bacara in Santa Barbara. It was fantastic. And I was away for three nights and it was actually I slept better than I've slept in a while, but it was tough being away.
- [05:12]
Ari Paparo
Yeah, you go to the conference to decompress and get some sleep. That makes a lot of sense. We could just turn this whole, whole podcast into a dad podcast if we'd like.
- [05:20]
Sonia Partalo
I'm down, man. I got a lot to talk about.
- [05:22]
Ari Paparo
Yeah, a lot to talk about.
- [05:24]
Casey Sarin
Yeah, with our humor. It already is, Ari.
- [05:27]
Ari Paparo
All right. Yeah, the dad humor. We'll try to keep it under control. Okay, so probably everyone's heard of space back, but it's kind of zigged and zagged through the years. What is space back nowadays?
- [05:37]
Sonia Partalo
Sure, yeah. Spaceback is a creative automation platform. We are, I believe, the first creative automation platform really built on top of a brand social presence. So we really think of a brand social presence as an asset library for creative automation. So we help brands turn social media posts and social experiences into production ready creative that can be executed via programmatic and we're totally inventory agnostic. So let's brands really decouple creative and a media plan.
- [06:05]
Ari Paparo
Right. So you're is this organic social? Like you have a really cool post and then you say let's turn this post into an ad.
- [06:11]
Sonia Partalo
Yeah, really organic social. It can be from brand's own handle. It can be from content posted by creators that they're working with. Really anything on social and all post types as well, from carousel posts, shoppable posts, video posts, reels, et cetera.
- [06:28]
Ari Paparo
This is right in line with the Gary Vee dick where he says you should just be doing tons of social and see what works and then turn that into an ad. He literally says that, right?
- [06:38]
Sonia Partalo
Yeah. And I can't disagree with Gary Vee on this one. I think brands are doing their very best work in social. The days of brands best content being created in a boardroom with 90 day production times is done. Brands have very, very fast machines, turnaround cycles for how they're creating social content, investing their social presence. So we believe that we can take that what brands are doing in social and have that lead their storytelling. It's much more engaging and creative. People are liking and following and comment and doing all these engagements with brand content on social that they don't really do with ads. So when we pull the social content into other channels, it's not only taking the social content, it's also bringing that kind of two way relationship access with that creative. So it still feels social even outside of the walled gardens, just for the.
- [07:31]
Ari Paparo
Sake of a trip down memory lane. Because we love to do that. What was the very, very first idea for space Pack? Because I remember it being really kind of funny. Something about like putting a valentine's card in a banner ad or something. Like, what was that idea?
- [07:46]
Sonia Partalo
So we put a lot of stuff in banner ads. But yeah, it actually started at a Thanksgiving dinner probably over a decade ago where my aunt was kind of getting mad at me for being the pop up guy. Or that's the. You know, I work in ad tech. And she's like, you're ruining the Internet. And, you know, the more she drinks, the more she's just like kind of berating me. And people, other people at the table start chiming in. I'm like, dang, how did this family dinner turn into gang up on Casey for ruining the Internet time?
- [08:16]
Ari Paparo
And that's exactly why Eric specialized in the pop unders, so his family wouldn't notice.
- [08:20]
Casey Sarin
Exactly.
- [08:23]
Ari Paparo
All right, sorry. So then what happened?
- [08:25]
Sonia Partalo
Yeah, so I decided I wanted to show my aunt that actually ad tech could be cool. I didn't sleep that night. Kind of scheming up a way to. My aunt rescued greyhound dogs. So we got a lot of pictures of her dogs from her Instagram account, put them in an ad server. It's targeted a audience campaign just to my aunt. I got her to click on a link to a document, so created an audience of one.
- [08:52]
Ari Paparo
You did a fishing campaign to get her to cookie herself?
- [08:55]
Sonia Partalo
I did. I fished my. Fished my aunt to create an audience of one that I could then bid $50 CPMs on. And everywhere my aunt would go on the Internet, she would see pictures of her greyhounds. Terry. Actually, Terry Kawaja mentioned something about no one has ever cried from seeing a banner ad at an event the other day. And I talked to him afterwards, I'm like, I actually made my aunt cry tears of joy seeing her dogs all over the Internet. And she was taking selfies with her screen and sending them to the family thread. And that was really the aha moment of what if we take this space back and kind of rethink what can be in ad space? The level of personalization that's possible. I did that 10 years ago with true personalization in ad tech. And that was really the inspiration of what is the potential impact of if we replace ad experiences with content experiences, how can we change the relationship that people have with ad space and obviously with the Explosion of Gen AI and creative tech. The opportunity is becoming more and more exciting. But yeah, the very original concept was let's replace ads with content that people want to see and see what that does to the relationship with ad space.
- [10:07]
Ari Paparo
Yeah, all right, so that's where the name comes from. It makes sense. So let's zoom out, let's get off the greyhounds and whatnot and let's just talk about creative in general.
- [10:15]
Sonia Partalo
I'm fire today, Harry.
- [10:18]
Ari Paparo
So what's your big picture view of creative? Is it moving away from agencies and storyboards and big budgets because of AI? Because it doesn't work as well because of other technologies? You know, give us the big picture.
- [10:33]
Sonia Partalo
Well, I'll answer less in terms of what it's moving away from and more what it's moving towards. And I don't think it's a completely linear spectrum. I think storytelling and creative are still going to be very important and agencies will still play a very important role in that. But with Genai, we are going to see brands just have a lot more options for building a lot more high quality creative. A lot of that is going to be around versioning and how we get different variations of creative messages. But it's also about how do we help brands operationalize having lots more creative. Brands are going to go from maybe having four creative in a campaign to 4,000 creative in a campaign. It means the way that we plan and optimize and measure and control control for creative is going to change a lot. So it's not just that we have Genai and more creative is here. The entire infrastructure for how we think about this creative is going to be changing. And I think the real promise of DCO, of the right creative at the right time, right message, is I'd say finally coming to fruition when we move to television where the creative impact is so much greater. We have Gen AI so we can do so much more creative variation. And now we're going to see this next phase where DCO isn't really about making the CTA red or green if it's raining for someone and calling that personalized creative. It's going to be a lot more about actually determining the right creative message. Having a lot of tools to have precise creative messaging and then tools to measure how that works.
- [12:10]
Ari Paparo
Walk us through your vision. How do you think the advertiser gets 4000 creatives? Are they prompting it? Are they meta prompting it? Is someone else doing it? How does that relate to your business, where you're talking about social, where you don't have 4,000 organic posts.
- [12:25]
Sonia Partalo
Yeah, well you'd be surprised. Some brands do have thousands and thousands of organic posts and even more in their ad manager or as dark post which are also very compatible with Spaceback. So I'd say there's no lack of content in social for creative automation even as it stands today and brands are just continuing to invest. We see obviously the creator space only accelerating and more and more social content is video. When we first started space back a decade ago or less than 10 years ago, but even then it was predominantly still image post. And then with the emergence of TikTok and then Instagram Reels, TikTok being video only, we've just seen a massive shift towards video content and social and that I think is very convenient timing. With CTV and the living room going programmatic, it means we have a lot more video content to kind of repurpose into creative for the living room.
- [13:24]
Casey Sarin
That makes a ton of sense. I would argue that it's not like 4000 creative, it's probably infinite creative if we really think about the capabilities of Gen AI. I was with someone yesterday and we were kind of going through Google's VO3 model and the ability to go from text to image and then from image to video and make realistic videos. It's here. So how are you both retooling, you know what you're doing. But then again to Ari's point, like counseling brands on how to take advantage of some of these capabilities that again it's not a future thing, it's a. We'll talk about this later on in the refresh. It's like a today thing.
- [14:04]
Sonia Partalo
Yeah, totally. I mean from space bats perspective and I couldn't agree with you more. It's not 4000 creative. More more kind of illustrating that we're going to see many X multiples increase in the type of number of creative that brands are using. And I think the systems that we create need to think of it as Infinity Creative, not 4 to 4000 as I said. But how do we operationalize potentially having individual creative for every single placement that's being delivered? From Spaceback's perspective, we are helping brands do that based on existing assets in social, video assets, image assets. We also train our model on things like the brand's website, the brand's catalog. So we're pulling a lot of a lot of other kind of brand assets. But you know our approach is how do we have a kind of pre populated asset library using using AI so brands can really quickly build high creative like non designers In a few clicks that's already leveraging high quality creative content that was created by the brand. So we're not solving that zero to one problem. If a brand doesn't have any assets, then there are exciting companies in the, in the creative tech space that are doing that, that are helping brands turn their website into a video that they can run on ctv. So I think there is a place for that. That's not what Spaceback does specifically. We help brands convert assets that are already on brand that they already know are performing well, resonating with their audience and bring those into paid media. And we do see on the performance side that social content outperforms standard creative. Pretty much every test in every environment we've ever done. It's amazing. People prefer social content. I mean, it sounds obvious when you say it, but we see that time and time again through measurement. So I think that's kind of a blessing and a curse for us a lot of times because the bar that we're up against is existing creative and we're I think phase two of space. Back when we were first getting off the ground, it was convincing people that this is better creative and having countless case studies and just banging our drum as loud as we could as to hey, this works. Now it's, I think less about proving that it works and really helping our partners get the most out of it. And just because we can perform better than an existing creative. That shouldn't necessarily be the bar. It's like be the bar. It should be how much creative lift, how much performance lift can we see in brand lift and all the things that brands are measuring through having a much more dynamic approach to bringing all really helping creative move at the speed of culture. And we see tons of activations around things like Mother's Day is huge for Spaceback, where a lot of brands will have social posts around these holidays or tentpole events where they won't necessarily have programmatic creative for it. We allow them to turn that stuff into creative that they might run for a weekend, a couple days. Really their most current, most engaging social posts can be powering paid media in real time.
- [17:06]
Ari Paparo
You mentioned earlier just a phrase, quick question. You said dark social. What is the definition of dark social?
- [17:11]
Sonia Partalo
Sorry, A dark post on Instagram is just a post that's not discoverable on a brand's feed, but still has a public URL that they can use to run paid budget behind.
- [17:22]
Ari Paparo
Why do they do that? Is that just an option in the cms?
- [17:26]
Sonia Partalo
So say a brand wants to put paid spend behind a post, but they don't want it to be discoverable on their just organic feed or they want to run a bunch of different variations of a post. They might not want to have 10 different things. So it's a way for brands to kind of manage their paid presence and organic presence together.
- [17:46]
Ari Paparo
All right, I learned something today. I'm interested in what you're seeing on the brand side as it relates to creating social. So the old model was like you had 120 something person who is your social media manager and maybe every once in a while they did something kooky around the office and made. Made something in an attempt to go viral. Is that still the model or is it changing? Is it getting more diverse through the organization and more professionalized?
- [18:16]
Sonia Partalo
I'd say it's definitely changing. And every organization kind of has a unique approach to social. So I wouldn't say there's one kind of one answer that's going to cover what we're seeing across the board. I will say that I know one question that you often ask your guests, so I don't want to preempt you on this, but around what's your greatest business challenge? For us, it often is just how social and paid media historically have been so different. So when we're bringing a solution to market that helps teams bridge that gap, sometimes those teams traditionally haven't been working together. So I'd say the trend is definitely for brands to think more holistically about their social presence and their paid presence. And that's happening whether or not spaceback exists. But definitely a good trend for us. But if I could snap my fingers and accelerate that, that would be one of the fastest things to accelerate our business.
- [19:09]
Ari Paparo
Right. So coordinating between paid and social is really important. But what about the quality of social? There are some brands that have invested heavily and are really resonating with the audience and others who maybe aren't as much. What are you seeing in the marketplace?
- [19:23]
Sonia Partalo
Yeah, I mean, that's another thing where whether or not spaceback exists, different brands are going to approach social differently. We do see some brands are really excited to use us just because they invest so much in social media and they don't really have a plan for how they're going to capture the most out of that investment. Some brands are just excited about running their influencer content on television because they are so proud of it. They created it and it's trapped in the walled gardens in a way. We've seen very large brands do that where they have infinite creative budget. And this isn't just about cost savings for creative. It's about having a really social first approach. On television, we see brands do that. We also see brands who sometimes are not proud of their social presence and think, hey, we want to use space back. We love this idea, but we want to wait a few months until we invest more in social. We encourage brands to test it out. It's so easy to get up and running. It's a CPM fee, so it doesn't require reallocation of budget. People can just rotate spaceback creative into existing campaigns and have a really quick, easy way to stick. You know, test something new and innovative and see the performance impact.
- [20:38]
Casey Sarin
Sure.
- [20:39]
Sonia Partalo
But sometimes, you know, I think if brands aren't confident in their social presence, that can be a little bit of a barrier.
- [20:46]
Ari Paparo
You brought up influencer, and that's one of the hottest areas of social. So if I'm a brand, I'm really dumbing this down. I'm a brand, there's an influencer and I pay that influencer to talk about my brand. And it's disclosed. It's totally kosher. I don't own the copyright that influencers work. Right. The influencer owns. Well, I don't even know. Maybe the platform does. But the point is I don't own it. So can I use that influencer's content in my ads?
- [21:14]
Sonia Partalo
That depends on your relationship with the influencer and your business terms with influencer. Typically, yes. And typically the influencer content, if it's posted on the brand's organic page, it's implied that the brand owns the content. But spaceback ourselves, we don't do rights management. So we can help brands with any content that they have rights to, but we're not helping them negotiate rights management with individual creators.
- [21:41]
Ari Paparo
Sure, but do you find that folks are thinking about this extended network effectively, they're like, we have our social, but we also have this cloud of influencers we're paying and those are all assets we might be able to use in various ways.
- [21:56]
Sonia Partalo
Absolutely. That's, that's a lot of what we see is creator content. And what we're seeing for the most part is, you know, this is, this is great for creators. You know, being, being on the. I mean, talk about being too, too good of content for the walled gardens like that. That's a, you know, we're saying that for brands, but really that's, you know, about creator content is, it is so good and it is. Has limited exposure. So I think this is a really a creator moment to help this great content, get outside the walled gardens, get to larger audiences and have more paid spend behind it.
- [22:28]
Ari Paparo
All right, let's just for fun, go around the horn and each one of us say a brand that we think is killing it on social. Take a second to think about it. Casey, you're probably the most familiar. What's a brand? Not the best. You love all your clients equally. But what's a brand that's killing it on social?
- [22:43]
Sonia Partalo
There's so many different types of killing it on social. Like there's like the Wendy's answer where it's like just the amazing, you know, really clever, you know, comments. There's the, you know, Williams Sonoma where it's, you know, beautiful magazine level content that they're, you know, creating all the time. There's, you know, I think Target's doing really cool stuff with different mommy bloggers, kind of different types of vertical creators. So I know I'm. It's a cop out answer, but there's so many different types of killing it on social. And I think that's what makes it cool too, is like there's not a, there's not an individual playbook. And this means that brands can, you know, find their own identity. And it can be a challenge for, for some brands. And it's not something that spaceback necessarily helps them with, you know, ourselves. But it's just fun to see so many different. Like we've had furniture brands do like, you know, 30 days of, of discounts and every single day run new creative that they're posting on social. And we think, yeah, it's pretty, pretty cool.
- [23:38]
Ari Paparo
All right, Eric, what, what do you think?
- [23:40]
Casey Sarin
Yeah, this is a fun question. I like this. It's native to the platform, right? Like, you know, on X, if you can find somebody, you know, obviously within your organization that can, you know, kind of strike that balance between brand voice and unhinged, like it can be great. A couple of weeks ago, Coinbase had somebody take over the account and you know, was just like posting the most outlandish stuff and it was like some of the best like, like X posts by a brand that I've seen and then completely on the other side. So there's a brand called Origin. Origin Main, I think is the, is the full name. It's very big on Instagram and it's all storytelling. This is a brand that is trying to bring clothing and textile manufacturing back to America and they feature their employees, they feature them refurbishing these looms that they buy that have been sitting for like decades and Just like bringing them back and like actually how like the jeans are made and the founders are really into it. So it's like, I think it's a little bit. You're kind of dependent on the platform. But those are two examples. That's awesome that I've talked.
- [24:49]
Ari Paparo
Yeah, I haven't seen much good on X except for snarkiness, I think on like TikTok Insta. I like uts. Uts potato chips. They have this ongoing series where they debate whether it's pronounced uts or uts and their employees like mispronounce it on purpose and then, you know, upset with each other. I don't know what it is. Social media has confused me so I have no idea what it is. It's one of the two and now we're talking about it, which I guess is half the battle. I'm a big fan of the crab chip, by the way. That's just while we're talking about. You have the crab chip.
- [25:22]
Sonia Partalo
I'm going to check it out.
- [25:23]
Ari Paparo
Yeah, it's probably not available West Coast. It's, it's a flavor. It has no crab in its crab flavoring. It's like the stuff like Old Bay basically. It's really delicious.
- [25:33]
Sonia Partalo
I'll try them out when I come out for. For your book signing next.
- [25:35]
Ari Paparo
Definitely. Hey, I appreciate the call the callback. We'll talk about it. All right. That was an awesome conversation about creative. There's so much more there. We're going to take a quick break. We have tons of news, earnings and AI. AI AI Eiio. I guess I would say. All right, let's take a break. This episode is brought to you by you of Digital, the Go to training company in Adtech. They've launched the AI Accelerator, a hands on boot camp that gets teams actually using AI for marketing and advertising use cases. Most people in our industry still aren't confidently using AI even for basics like better email or smarter research, let alone creating content or analyzing data. The AI Accelerator changes that. It's participatory, immersive and it's being used by teams at Diageo, Disney and MediaOcean with tremendous results. And the industry AI leader, Scope 3 is now the exclusive sponsor of the AI Accelerator. This program is legit. Go to you have digital AI and use promo code market for 20% off or email contact at U of Digital for group rates.
- [26:51]
Casey Sarin
All right, welcome back everybody. We are here with the refresh aka the news of the week. So it's Thursday, July 31st. We are in the Doldrums of summer and there's more news that we can ever possibly cover. So I don't know what's going on, people. 80% of it is AI though. Let's talk about some earnings. Let's talk about some, I think like kind of neat announcements or strange announcements out of some walled gardens and then AI stuff. So earnings, we had two big ones drop over the course of the past 24 hours. The first was Meta. Incredible earnings report. So meta 47 billion. 46.6 billion in ad revenue, up 21% year for year. Their overall revenue for context is 47.45. So advertising is meta. Couple of points here from the, from the report and we should talk about it. And specifically Kasey, because I think Meta fuels your business. I love your perspective. So number one, AI is working. They're seeing a 9% increase in average price per ad. And number two, 2 million advertisers are using Gen AI creative tools. So again, to underscore the point that, you know, gen AI is is here in terms of creative, the two other things I thought was neat was, number one, they're CapEx, so they're going to spend $72 billion this year largely on AI. And then number two, we'll drop it in the newsletter. Zuck dropped this manifesto on the race for super intelligence and basically pointed directly at some of the other LLMs in terms of where they want to take superintelligence and the impact that it has on the world. But man, Meta is just firing on all cylinders.
- [28:31]
Ari Paparo
Yeah, I mean, just I guess 18 months ago, the stock was hitting rock bottom and everyone thought the toilet and everyone's like, oh, Zuck's been wasting all this money on the Metaverse. This company's earnings are flat. What's it worth? And some people dove in at that point and made amazing amounts of return and now it's just an AI machine. So yeah, don't try to pick stocks, I guess, is the message here, Kasey.
- [28:57]
Casey Sarin
So as Meta goes, does your business in a weird way?
- [29:03]
Sonia Partalo
Yeah, I mean, I think what this highlights more than anything for me is just there is a real mid tail, long tail of video advertisers and they're on Meta. And as an industry, I think creative is a big part of the unlock. But how do we bring this crazy demand into ctv? They already have these video assets on Meta. I'd be willing to bet a very large percentage of what we're talking about are video creative. So I think our business is really part of the larger industry. Challenge of how do we access that budget and deliver performance that is going to be comparable or going to warrant brands diversifying outside of Meta. And I think that is going to be a long, long battle that starts with creative, and it starts with removing barriers to entry. And really how do we creative from. I think what Meta has done with their AI. What Google's doing is turning creative from a barrier to entry to a lever for optimization. And that is a challenge that we're going to have to be able to do that outside the walled gardens to be able to stay. So I think this highlights the opportunity and also really what we need to achieve to access that kind of budget.
- [30:14]
Ari Paparo
Why doesn't Meta have a living room strategy? They have the advertisers, they have the AI. Why can't you see a Meta ad on your couch? And I'm not. I'm humble enough to realize that, you know, Meta has outperformed anything I've ever done in my career, so my advice is literally worthless to them. I'm just wondering. It seems to me like it's a big missed opportunity.
- [30:35]
Sonia Partalo
Yeah, I mean, I'd argue that Meta is. I mean, this isn't. I'm screwing your question again, but I think you're probably generating a lot of revenue for Meta in your living room, just not on the big screen. But you are engaging with Meta while you're on your couch. Definitely. I think that they're probably just not on your podcast telling you about their living room strategy. I think a lot of smart people at Meta are thinking about it and I think it is going to be an extension of what is already working for. I think we see, obviously Facebook audience network has been something that has existed for a while. I think it'll be interesting to see if Meta expands that more into television.
- [31:21]
Casey Sarin
Well, I think the living room strategy, attempt one, was VR, so a completely different form factor and device. And it's very clear from the comments that Zuck has been making is that glasses are going to be really, really important and he thinks going to ultimately overtake the smartphone. And if glasses are the strategy, you're probably wearing glasses all the time. So again, these could just be new devices, Ari, not necessarily TV and ctv.
- [31:49]
Ari Paparo
That's true. And I think though, when you think about a real leanback experience, you have TikTok and YouTube pretty far ahead of reels. It feels as though it's an area where they have some white space ahead of them and they're obviously working on it, but it's not nearly as evolved as Those two other competitors.
- [32:09]
Casey Sarin
Okay, let's keep going. We got so much here. Microsoft a little bit less square in the advertising story, but. But, I mean, what a beast. It's now a $4 trillion company. There's two $4 trillion companies in the year 2025. Just the scale that these companies are operating at. Insane. $76.4 billion last quarter. Cloud revenue $47 billion, up 27%. Search and advertising revenue up 21%. Azure is a $75 billion business. Just shout out to Microsoft. Operating at a scale that is just, like, unbelievable.
- [32:45]
Ari Paparo
While Headcount continues to decline.
- [32:48]
Casey Sarin
While Headcount continues to decline. What a point.
- [32:51]
Ari Paparo
Yeah, they. I don't have the numbers in front of me, but they've done two rounds of layoffs in the past 24.
- [32:56]
Casey Sarin
Yeah, the last was 9,000 a few weeks ago. Wow, that's a really good point. On the other side. So Spotify reported earlier this week and they got hit pretty hard. So the stock was down like 11%. Their advertising business, I actually couldn't believe this. Like, with all this great news from the other companies, their ad biz was down 1% year over year. So there's some debate on whether Spotify is like both audio and video. Primarily audio. Is video the future? But the audio market is growing. The audio market is growing 6% CAGR. So they are the de facto leader in audio and they're outperforming the market. I couldn't believe this.
- [33:36]
Ari Paparo
Yeah, I was a little surprised because they've really been moving and shaking. They've doing a lot of stuff. I was at their event, I wrote it up. They have a really nice sort of hedged garden approach where you could buy direct, you could buy through Programmatic. They have creative tools, they have AI, they have services. They're throwing a lot against the wall here. I have to believe it's ultimately two things. One is it's audio, which is, despite growing, very difficult market, not well measured. It's got a lot of problems. And two is the same problem Netflix has, which is all the best customers don't see ads. And in the case of Spotify, all the best customers don't hear ads. So you're going after the free users, which are almost by definition going to be lower value. So that combination is tough.
- [34:21]
Casey Sarin
Yeah, I think that's right. I mean, in the earnings report, Daniel Ek, the CEO, he was very pointed. He said, this is not a strategy problem, this is an execution problem, and we will fix this. But I think you're onto something. And Podcasts is still a relatively small part of the market. Podcasts on Spotify are full of ads. If you have premium like I have premium and I'm listening to ads the whole time, I really think it's a real issue for them.
- [34:47]
Ari Paparo
I'm a customer. So as an operator of marketexture Media, we insert ads, we use their ad server, Megaphone, we use their ad network. It is kind of a mess. It's not a top notch platform by any means. Like it feels like it's an afterthought inside the company. And I know I'm friends with a lot of people there. I tell them that to their face. It's just like Megaphone is not, it's not an ad server you'd want to build your business on.
- [35:12]
Sonia Partalo
How does that make you feel about the, you know, not a strategy problem, but an execution problem. It sounds like, you know, strategically.
- [35:19]
Ari Paparo
Yeah, there's something to here. I'll give you one example which will shock the listeners. You run a podcast, it runs on all different platforms. They introduce the ability to run video. Okay, cool. Video's great. It monetizes better. As soon as you run a single video, they change the way your entire system works. First of all, the video only runs on Spotify. So they don't have the ability to push a video to YouTube or to anywhere else that you might be listening to the exact same podcast. But secondly, they actually stop your ad serving from working properly on video and they make it exclusively a Spotify ad Network product. So if you want to operate a media, you want to be a creator and have maximum monetization, you would never use that feature. So they rolled out video in a way that totally cripples the ability to monetize. And that's just one example of kind of this sort of half assed product development system they've got.
- [36:09]
Casey Sarin
So Mike Shields posted, I think it was this morning that they should buy Vivo and double down on video. I was shocked that Vivo's still out there and I guess like operating, but they do have a, they have a CTV app. It's how I send my dad to, you know, I guess not watch, but listen to listen to the marketexture podcast. So perhaps there's a video element here that they can double down on.
- [36:34]
Ari Paparo
Also, Alex Cantrowicz, friend of the pod, he posted something just this week saying all of his podcast discovery happens on YouTube. He's a significantly bigger podcaster than this. He has probably hundreds of thousands of listens and that's. We can't underestimate the threat that YouTube is to Spotify.
- [36:54]
Casey Sarin
Yeah, for sure. And it can monetize video pods at a far higher rate.
- [36:58]
Sonia Partalo
So.
- [36:59]
Casey Sarin
All right, Spotify, let's figure it out. There's a couple other ones that hit this week we should talk about. So not earnings, but just like big walled gardens. So number one, this we all caught and it was interesting. So TikTok is offering an off site measurement product. So this product is called Engage Sessions and allow advertisers to target users who spend at least 10 seconds on their website after clicking an ad on TikTok. So it's a little bit of like analytics, you know, proving out that TikTok actually drives qualified customers and they're doing it without a pixel. So it's privacy friendly.
- [37:36]
Ari Paparo
Yeah, so that's what they say. You could probably drive a truck through the caveats in, hey, we're not using a pixel, but we use JavaScript. But we control the browser because it's a webkit that we launch from our app, you know. So I had some conversations on Twitter about the mechanism by which they're tracking this. No one really knows, but it's a nice product. I like the idea.
- [37:57]
Casey Sarin
Yeah, it's a good idea.
- [37:59]
Sonia Partalo
Do y' all think this is a prerequisite to some kind of TikTok off platform monetization as well?
- [38:05]
Ari Paparo
It could be. I mean, I don't know if the TikTok format of vertical video really would work off site very well. I mean, you would know better than we would. How does vertical video work in banner ads?
- [38:15]
Sonia Partalo
Yeah, I mean, TikTok has had a successful out of phone program for a while doing out of home. TikTok has a TV app that has a vertical video experience. Actually, I have a friend who has a TV that actually is on a motor that turns to vertical on his wall.
- [38:31]
Ari Paparo
That's crazy.
- [38:32]
Sonia Partalo
It's pretty dope. But I think that there are plenty of ways for good content to live in other context outside of TikTok. So I think it's more of a. How valuable is the TikTok audience? So I think there's something there.
- [38:49]
Ari Paparo
Do they monetize outside of their own apps? You said out of home, out of phone, out of phone, out of phone. So basically on the TV, but still a TikTok app.
- [38:57]
Sonia Partalo
Digital, out of home. So digital billboards.
- [39:01]
Ari Paparo
So they're buying ads on other people's content on digital billboards, I believe they.
- [39:06]
Sonia Partalo
Have in the past. So that's interesting. So this might. It will be interesting to see if TikTok expands on that to do more TikTok placement off TikTok.
- [39:15]
Casey Sarin
Sounds like a job for Spaceback.
- [39:17]
Sonia Partalo
We're ready.
- [39:19]
Casey Sarin
Cool. Hit up your boy. All right, I got one. That is a head scratcher. We have to talk about this. And again, Kasey, I'm happy you are here to talk about this. So there's a new ad policy at X. You are. If you're a brand, you're going to get lower rates if you produce aesthetic ads. Ads that are free of emojis, ads that are free of hashtags, and ads that are free of URLs. So ads you can't take an action on. This is a head scratcher. I don't know what to think. What do you guys think?
- [39:55]
Ari Paparo
Well, I mean, X ads. I was thinking about this this week, that the basic format of the X ad is that it's a tweet. That's both like the best and worst thing about it. Because the best thing is that you do read them and the worst thing is you accidentally click on them and then you get upset. I was saying to myself, I was doing a little thought experiment, this is what I do in my free time, thought experiments about X ad monetization. And I was like, I wonder if they would be better off just doing an Instagram style big ass image. And you would notice it was an ad, so you'd have some banner blindness, but it would probably work a lot better. And it's interesting you're bringing this up because I think they're sort of. This is like a half measure. Like make the ads look more like ads, but don't prohibit people from using posts.
- [40:39]
Sonia Partalo
Interesting.
- [40:40]
Ari Paparo
Okay.
- [40:40]
Casey Sarin
I was looking at it from the perspective of like with X. Job number one is to prove the value. So if you remove or penalize URLs, you start to remove the ability to do like some sort of like click based measurement. What you're saying is actually remove it completely and just focus on the fact that you can put good ads out there. Right.
- [41:02]
Ari Paparo
Maybe. I know that the ads currently suck. Could I tell you about my favorite X ad I saw this week? It was an ad promising an astrologer to use astrology to help you pick crypto. It was like, madam, whatever's forecasting of crypto prices. And I just love that ad so much because frankly, that's probably a better way to pick crypto than any other method. Right. And it's like the perfect X ad at the same time. And I just found like, we had product market fit.
- [41:30]
Sonia Partalo
Did you click?
- [41:32]
Ari Paparo
I did not. Click.
- [41:35]
Casey Sarin
Casey, what should X do?
- [41:37]
Sonia Partalo
Look, I think it's actually, I mean if you think about, you know, ultimately what we do, you know, ads got to be good for buyers, sellers and audiences. Users. I think X seen what they can do to influence more than one side of the, you know, that kind of the three legged chair and they're actually trying to influence the advertiser creative that they bring that's going to benefit the whole ecosystem. I don't know if they're doing it the right way. I don't know if it's going to work. But I commend them for trying to look at the tools to kind of how do they influence the value exchange and kind of measure and learn how to ads that should be better user experiences actually impact the entire value exchange for everyone. I don't know if it's going to work. I'm kind of with Ari. I think trying things that are not about moving just one leg of that stool at the same time but actually economic incentives to advertisers for ads that better benefit publishers. I think there is something there. And thinking about that value exchange holistically rather than one pillar at a time.
- [42:38]
Ari Paparo
They really got to do something. The X ads are really bad. The whole X ad system, we covered it when Linda left the company that they're down like 40, 50% over the last 18 months. The ads themselves as a user, they're just bad. Sure they could let it die on the vine as X shifts its business model but if they want to make this billion 2 billion in revenue a year, they really have to do something.
- [43:01]
Casey Sarin
So let's see if this works. All right, let's move on to some AI stuff. So Trey from AdTech explained a marketing dropped this post this week. Cloudflare versus the AI crawlers. A last stand for the open Web. Everybody should read it. It was fantastic and it was one of the most bearish arguments that I have seen about the future of the open web coming from an ad tech person. So it was, you know, a little bit of a head scratcher. What was your guys reaction to this? Like it just, I mean I thought it was just a great piece.
- [43:37]
Ari Paparo
Yeah, Trey's great. We love publishing ad tech explained. I think that it's interesting. Cloudflare's position here is really interesting. They're just a ubiquitous provider of network services for websites and they already do things for publishers. They already do things like robots testing the captchas and so effectively gating and trying to monetize the AI scraping seems like a really Great thing for them to be doing. In addition, there's the data point that came out, I think, this morning that we had reported previously that Amazon was licensing New York Times data for shopping. The price tag came out $20 million. So not a drop in the bucket. That's pretty meaningful, I think Trey, you know, he extrapolates the linear trends and ends up in a bad place. It's possible he's right. It's possible he's not. It's a good point of view.
- [44:26]
Casey Sarin
The big line that I pulled out, we are inexorably marching towards a future where AI relegates any content creator to a mere input mechanism for insatiable AI models.
- [44:36]
Ari Paparo
Hell yeah, man, as long as I get paid.
- [44:40]
Casey Sarin
But it's, you know, the point he also makes is like, you're kind of damned if you do it, you're damned if you don't. As a publisher, you can block the crawlers, but if you block the crawlers, you're not going to be appearing in the LLMs, which is this real existential risk.
- [44:54]
Ari Paparo
It is. And we've talked before about how Google is being a little bit aggressive on this front by telling publishers they have to agree to both AI and search in the same robots entry as opposed to potentially negotiating them separately. So there's a lot of moving parts on this.
- [45:11]
Casey Sarin
Yeah. One of the things I thought was neat though is that, you know, he points to these, you know, almost like AI native sites, like recipe sites, and how they're going to be the first one to get killed. And Doubleverify drops a report that says, actually recipe sites are growing because it's so easy to basically produce them with AI slop. And you're provided a, a how to for brands to avoid this stuff because these are just some of the most difficult sites to navigate and shouldn't be monetized at all. So. But it was a. It was an interesting dichotomy.
- [45:43]
Ari Paparo
Is an AI site bad if the recipe actually turns out to make good muffins? I don't know.
- [45:49]
Casey Sarin
I mean, just the UX, right. Like you just ask ChatGPT or your LLM of choice for the recipe and the directions. You get it. It's probably the best recipe versus just navigating these rando sites that are just built basically forever mfa. I do think that they're probably not the best choice.
- [46:09]
Ari Paparo
Yeah, but I mean, it's competing against these effectively MFA recipes created by real creators. I don't know. I'm not sure how much better it is.
- [46:17]
Casey Sarin
Yeah, it's a Great question. I don't know. Debatable. Couple other quick hits before we leave it. ChatGPT is reportedly now at a $12 billion run rate, 700 million users, but also burning $8 billion.
- [46:33]
Ari Paparo
That's a lot of burning.
- [46:34]
Casey Sarin
Yeah, a lot of burning.
- [46:35]
Ari Paparo
I think this ties into the Azure being a $75 billion business from earlier.
- [46:40]
Casey Sarin
Exactly, right, exactly, exactly. And meta having a $72 billion CAPEX. And finally, Mark Cuban made the news. I remember you're a fan of Mark Cuban. I don't know if you are anymore after this. He said that there should be no ads in AI. We should learn from the algorithmic issues that we've encountered with the social platforms.
- [47:03]
Ari Paparo
I don't know. I'm going to take a charitable view of this, which I already did on X, which is there's a really big difference between taking payments to influence the model versus tacking ads on top of the outcomes, right?
- [47:18]
Sonia Partalo
Yes.
- [47:19]
Ari Paparo
And you can make a pretty good argument that a model should not be influenced by effectively paid placement, product promotion, whatever you want to call it. And I probably agree with that. But then once the outcome is being generated for an end user, putting some ads in there seems totally harmless.
- [47:35]
Casey Sarin
Yeah, and he walked it back, actually. He made a subsequent post that basically said, hey, if it's something is identified as an ad and kept independent from entering into your feed as a user, he thinks that it makes sense. But it's like, where's the line here? There's this explosion of companies that are building SEO for LLMs. Right? And you know, if we extrapolate this into, you know, one of our favorite examples of gravel, you know, you just want to like book a ticket and get the best rate. And if you're provided the best rate and an LLM makes a cut, is that an issue?
- [48:11]
Ari Paparo
I don't know. Probably not.
- [48:13]
Casey Sarin
Shouldn't be. Right?
- [48:14]
Ari Paparo
I mean, if I want to plan a vacation and then they are some paid links to actually book it, or affiliate links, I don't see the problem.
- [48:22]
Casey Sarin
Who cares, right?
- [48:23]
Ari Paparo
Yeah, as long as it then shows me a pop under for the vacation location. You know, someone at ChatGPT should be working on their spawning algorithms.
- [48:34]
Casey Sarin
Spawning ads.
- [48:36]
Sonia Partalo
I heard something interesting from Sean Downey at Google about monetizing AI responses with the ad creative actually able to use elements of the prompt. So basically the creative being even more relevant because it's using the exact elements of the prompt in the creative. So it's almost giving users exactly what they're looking for, or at least more of the perception of relevance, but I think it's an interesting plane with relevance that way, where it's less about relevance of the ad and more about relevance of the message.
- [49:11]
Casey Sarin
That's super interesting.
- [49:12]
Ari Paparo
So are you saying if the prompt is find me a low cost hotel in wherever that might be the lowest.
- [49:19]
Sonia Partalo
Cost hotel in wherever?
- [49:20]
Ari Paparo
Yeah. Yeah. They might use the word low cost in the ad or something like that.
- [49:25]
Sonia Partalo
I think that. Yeah, basic example.
- [49:28]
Ari Paparo
Yeah, I think search has had that capability for a long time, just with like keywords and stuff like that.
- [49:33]
Casey Sarin
All right, cool. There's still some more news. We're out of time. Subscribe to the newsletter so you can see it, but this has been an awesome conversation. Kasey, thank you.
- [49:41]
Sonia Partalo
Yeah, thanks for having me.
- [49:42]
Ari Paparo
Casey, thanks for being here. And everyone, thanks for listening.
- [49:46]
Casey Sarin
See you next week. Thank you for subscribing to Market.
- [49:50]
Ari Paparo
New interviews are added every week at marketecture TV and your favorite podcasting app. Thank you for listening to the Market podcast. New episodes come out every Friday and an insightful vendor interview is published each Monday. You can subscribe to our library of hundreds of executive interviews at marketecture tv. You can also sign up for free for our weekly newsletter with my original strategic insights on the week's news at News Market tv. And if you're feeling social, we operate a vibrant Slack community that you can apply to join@adtechgod.com.