This Week in Tech 535

Leo Laporte: It's time for TWiT: This Week in Tech! Oh my goodness. Get your dunce caps on. I'm sorry, I'll wear the dunce cap, you wear the thinking cap, because this is the smartest panel we've had in a long time. Joining us, Steve Kovach from Techinsider.io, Om Malik, from om.co, and from Stratechery, the brilliant Ben Thompson. We're going to talk about Facebook, we're going to talk about Twitter, we're going to talk about the Amazon Brick and mortar store, Om gets a prize for getting that one right two years ago, and a lot more. It's all coming up next, on TWiT. 

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Leo: This is TWiT, This Week in Tech, episode 535, recorded Sunday, November 8, 2015.

VR? PR!

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It's time for TWiT, This Week in Tech, the show where we cover the latest tech news of the week. We have the smartest panel ever. I'm going to have to pick topics that are going to challenge the big brains that are in the room today. Starting on my left, from Business Insider and more recently techinsider.io, Steve Kovach is here. It's great to have you, Steven! Welcome back. 

Steve Kovach: Thanks for having me again. 

Leo: techinsider.io is a tech focused spin off of Business Insider. You are the... what is your title? Big shot.

Steve: Deputy editor. 

Leo: I really like this. It's very personable, which is fun. Science says parents of successful kids have these seven things in common. Twitter just showed some new footage from the Star Wars movie. People upset with Starbucks red cups. I cannot not click on that. Come up with a bizarre way not to fight back. I'm going to hold off, because I still have to introduce the rest of the panel. To my right, Om Malik of om.co, founder of Gigaom. He's an investor and the sweetest guy in tech. Everybody loves Om. Om Sweet Om they call him.

Om Malik: Hi Leo. 

Leo: Hi Om.

Om: How are you doing?

Leo: Great! And finally from Stratechery, I've been meaning to talk to you, Mr. Ben Thompson from Taiwan.

Ben Thompson: Morning!

Leo: The president of Taiwan and the President of China met.

Ben: Yes, they did. 

Leo: That's exciting. I thought that would never happen. I'm surprised. That's good. Why are people upset with the red cups? I have to ask that now.

Steve: Because it doesn't have any Christmas stuff on it, it's just plain red.

Leo: Oh.

Steve: Some Christian Starbucks customers are going in and saying their name is Merry Christmas so they have to write Merry Christmas on the cup and some guy made a video of it and it went crazy viral on Facebook and the next thing you know is it's a trending topic on Twitter and Facebook. It was a big deal this weekend.

Leo: This actually is confirmation of something I've been thinking about a lot lately which is the total trivialization of everything we care about in the world. We've become a nation of... what do you think about this, Om? Aren't there more serious things going on the world? Somebody is worried that the Christmas decorations aren't on Starbucks red cups. It's not even the fact that somebody is worried about that. One person might be worried about that, but it becomes a thing thanks to Twitter and now it's everywhere. 

Om: There's more of everything. There is more of cable TV, more publications, more social networks, and everybody needs to fill the air time. So they'll talk about anything. 

Leo: That's what it is. You're right! There's not enough to talk about. There's not enough material to fill all the empty airwaves, so you've got to come up with this crap. 

Om: Versus talking about the Refugee crisis. Guess which one people want to read. It doesn't take a lot of thinking. 

Leo: That's true. That's a good point. So that's why the New York Times is sending this out, with each and every Sunday times today. This being the cardboard, it even says Google on it, which is their virtual reality viewer. On the Times magazine, it says Virtual reality, the storyteller's newest tool. Did anybody watch the video?

Steve: I watched it yesterday. I checked it out a little bit. Pretty neat. 

Leo: I'm a little mystified to be honest with you. By the way, there's ads. There's an ad for Cooper and a GM ad among the other videos you can watch, but the story is about the displaced, which is their cover story in the New York Times Magazine on the displaced children of war. 30 million children displaced in their homes and these are the stories of three of them. 

Om: Can I ask one question? I haven't seen this. How much did Google pay them to put this all out. 

Leo: I figured that GE which is branded on there has an ad in there and the mini coopers, first there's a URl here which brings you to the minis ads, and I thought that was the content and that brings an ad to the minis. These guys are paying for a lot. This is an incredible revenue opportunity, clearly for the New York Times. 

Om: It would be interesting to ask them the question, especially the media, I would like to ask this question, do they think of this VR device and content for free had it not been sponsored or advertised? 

Leo: Cardboard can't cost that much. It's a couple of bucks worth of paper. It's literally cardboard. But you make a good point. This is somewhat of an upgraded cardboard because it has a metal clip here. I think what's interesting to me, you're right. I think it's a revenue opportunity. Is it the storyteller's newest tool? I don't know. My biggest concern is that for a lot of people this will be their first experience of VR--it's not VR, it's immersive video, it's kind of depressing, frankly. I'll be honest with you. It immerses you in a very sad story. I feel like VR is more about entertainment than it is about news. How important is it that we be in the middle of this video if it's news? Ben, what do you think about this? You write about this kind of stuff all the time, I know. 

Ben: I think it's maybe selling the New York Times a little short to say they're just doing it because they got paid to do it. Frankly, the New York Times has impressed me greatly over the last six months to a year with a pretty active shift to experimentation. We sit here and praise company, like Google or any other cloud service company for doing lots of experiments and tests and seeing what works and what doesn't, and frankly that's how the New York Times has been behaving lately. Everything from missing articles, whether it be the Google open source fast article thing, whether it be different aspects of their business model, and so I would actually, I agree it's a good question to ask, but I would be inclined to presume they were not paid, but rather they were trying to give it a shot, because they've been first in quite a few things over the last few months.

Leo: They certainly understand that digital is the future and not print. If they're going to succeed they have to succeed in a digital world. I think it's interesting. I'm glad they did it. 

Om: I'm going to take a contrary position on this. I'm going to say this: Yes, they're trying out a lot of new things, but this is the same company which can't bring performance to its own act. They can't bring rationalization to its pricing, it can't bring rationalization to its login schemes, so instead of trying to do VR, I think fixing their current products and make them more comfortable to use for existing customers would be a good use of their technology. My question is Google and Facebook and Twitter and every other company in tech tries new experiments without anyone or any clarity on what the business model is going to be I am asking the question of New York Times is would they have done this on their own dime or did they do this because they had advertising? I think if it's just because of advertising they get less credit, than if they were just going to do it on their own dime. That's more experimental. This is just a revenue generation scheme.

Steve: I don't see it as a scheme. Revenue generation is part of the challenge of innovating in journalism right now is figuring out these new revenue streams, right? They can't sell enough ads in print any more. The pay only does so much, so this new revenue stream itself is experimentation. I think it's really interesting. They said hey we have the resources to do this, by the way, GE and Google, two brands that want to be tied with innovation and story telling will be happy to give us money to help support this project. That in itself is a really interesting way to experiment with new advertising models. I'm all for this. I think it's great. I agree with Ben, too. They probably would have done it without GE helping them out. 

Om: Steve, I'm going to say this. You're very young. You haven't seen this movie play out before. They used to do the same thing with CD ROMs and they had a lot of talk about that. Other people would underwrite those. I could probably still find 50 of those music magazine CD ROMs which are hanging around my place, but essentially what I'm saying is that experimentation, innovation I'm absolutely in favor of, I just think sometimes, because Google is also trying to get some retention for our efforts. They are getting pushed aside by the Oculus, VR onslaught, so this is a good way for Google to get attention too. 

Leo: To be fair, you couldn't bundle an Oculus with the Sunday Times. This is cheap; this is the only company, the only VR that could actually be distributed with the Sunday Times. I don't see a lot of Google branding on it, there's Google on the bottom. It's mostly GE. GE has got a much bigger brand, and then Cooper on the Magazine is all about the mini or whatever it's called. 

Ben: I certainly agree. Skepticism is always warranted. 

Leo: Couldn't it be both? This is a great opportunity to make money and a great opportunity to tell news stories in a more immersive and engaging way? Couldn't it be both? 

Ben: When it comes to the business model, actually, the New York Times has gotten a lot of clarity about it. They recently passed a million digital subscribers, which is regardless of your opinion of their apps or their payment options, which I agree are very frustrating, particularly the way they obscure it, but it's still very impressive. And they had a new strategy memo that came out about a month ago basically saying that they are going to double down on that strategy. I think that's actually a really encouraging sign in that it's very dangerous for any business to be stuck in the middle and for them to be clear of that, our focus is going to be on subscriptions. They want to double their revenue there and new subscribers and also increasing revenue from our current subscribers. I like the clarity of their thinking around that. Like I said, it's in line with the other stuff they're doing. At the same time, the trouble with subscription business, and I know this very well, is getting new subscribers is getting new people. It's figuring out why people should care. The fact that, this actually, again. I think it's very clearly an experiment, but it does fit with that. One, it's a benefit for subscribers only, so you're getting something for being a subscriber. Two, it certainly gets attention as an opportunity to attract a new audience that's interested in a new form of media and yes. I certainly agree that the company has opportunities to improve, but I think that it's tempting to lump all journalism institutions in the same boat. Again, as someone who has been a critic of the times that they've done, the last few months, they have really shown an impressive clarity in purpose when it comes to this strategy. I don't think that this is, in some respects, this is a better fit than it might seem at first glance. 

Leo: History is not on their side. The hardest thing in the world is to take an incumbent business like printing a newspaper and move it into the digital environment. 

Ben: It helps that they have no choice.

Leo: They have to. At the same time, I cannot think of any examples. I can think of so many counter examples, like Kodak where even if you saw it coming down the road at you, it's hard to make that change without cannibalizing your existing business. That's the excuse I would give them for their Byzantine subscription model at Wall Street Journal. It's cheaper to get the paper and digital version of the Wall Street Journal than just the digital version, for instance.

Steve: Same with the Times.

Leo: It's so bizarre, but I understand why. They have to somehow make this transition without killing the cash cow. It feels like the times of all the Journals seem to be doing that the best. 

Om: I think experimentation is good. I think you should look at the New York Times labs as doing interesting stuff, and that's experimentation that nobody talks about. This one looks like a way for them to capitalize on a hard earning thing and make some money on it. I would want to know what the data says about the results of this. How many people actually saw these? How many people actually opened? 

Leo: They'll never tell you because it's got to be a low number. You didn't. You get the Sunday Times.

Om: I don't get the Sunday Times. I am a subscriber, but I don't think I'd be able. 

Leo: You leave it outside the door for somebody else to get. 

Om: Then I have to get rid of it. 

Leo: I have to admit that there's more than a few times that I've left that blue wrapper of the New York Sunday times on the driveway until Tuesday. Actually, interestingly, I don't know if it's a coincidence, normally the guy throws it on the driveway and it gets run over or it gets rained on. Today's Sunday times were nicely placed on our porch. I think they might have sent out a word to the delivery guys saying you might want to be a little extra careful with this because there's cardboard inside. 

Ben: Delivery guys don't read that. As a former paperboy. 

Leo: The memo? Why was it so carefully placed on my porch? He's never done that. He did that when he first started and hasn't done it since. 

Ben: Might be a new guy. 

Om: Maybe it's his last day on the job. 

Leo: My only concern I thought was that this was going to be people's first exposure to VR and I'm afraid they're going to have an indelible impression of sadness because it's a very sad story. It's about 3 kids who are living in war zones basically, whose lives have been devastated by war. I get this weird, there's a strange sensation, in one of the scenes, you can see the shadow of it, there's a 360-degree camera. There's no reporters in this story. It's all narration over these kids living their life. But you know that there's this thing in the middle of there recording this. This 5000-dollar camera or more in the middle recording this. I always get this feeling with documentaries. I always think about the guys out in the wilderness living on worms. What about the 20-person camera crew who is following him around? I got the strange sensation that maybe if you gave them some money it would be better than putting an expensive camera there and shooting their life. It's almost voyeuristic. Those are just a couple of concerns. I think it's good that the New York Times is trying something. It's going to be for most people their first experience of VR. Right? 

Om: Some people. Not most. 

Leo: Aside from the people like us who are obsessed with new technologies, how many people have really had a chance to play with this? 

Steve: I think this is going to be the first exposure for a lot of people, whether it's true VR or immersive video or whatever. Also, it wasn't just that one story that one depressing story. There's a really cool tour of New York City street art. There's a story on that. 

Leo: There's a story on a cover that they made, but they're really pushing the display, so. 

Steve: It's its own app; they might do some more in the future. It's some great story telling and it's great exposure to this new technology that many believe is the next big thing. 

Leo: You said the digital subscriptions are over a million. Do we know how many people subscribed to the Newspaper? 

Ben: It's 1.1 total combined. It's a fraction of the amount. 

Leo: Interesting. IDG just closed its last paper magazine, CIO. IDG and Ziff Davis were monsters in technology publishing, and neither of them have paper publishing’s anymore. We're in a tough time if you're in a printer. 

Ben: This is one of the interesting things. There was a really good podcast; I'm going to name a competitor to all of us. The Recode mobile one of their... Code media. That's what it was.

Leo: I'm glad to promote their stuff. Anybody who does a great podcast, we can plug it. 

Ben: This is a conference talk. It was really good about quite a few things including the albums on story. One of the points that was interesting to your point, Leo, was the print thing. For example it talked about how the Amazon story, why did it run on a Saturday, which was not a traditional news cycle.

Leo: The New York Times story about how horrible it was to work at Amazon. 

Ben: Right. The reason was so that it would still be fresh when they printed it on the front pages of the Sunday paper. He was very honest about it. It's kind of a silly thing, but the fact of the matter is, the Sunday paper is by far the biggest, it drives a ton of revenue. 

Leo: Steve saw this video yesterday. They were promoting this for a week, and you didn't have to have the paper and the cardboard to see it. 

Ben: I think they've calculated that. They put it on Saturday, and it'll be fresh enough for their Sunday subscribers. Apparently what happened with the Salon story, they ran it during the week as a series on the web and planned to print it on the Sunday paper, but it got more pick up than they anticipated so it ended up being they felt they had a very stale story for their most profitable customers. That went into the timing of the Amazon story, which I thought was very, really gets at the trouble they have in this transition, that any incumbent company has. At the same time, the benefit they have is that they're the New York Times. You don't get a million subscribers by having a hard to pronounce website name. I can tell you that much.

Leo: Om, is one of your problems the Times, these particular stories and the controversy around the Amazon story, the Nail story and I'll add the Hillary Clinton email server story? All three of those, according to some, were mis-reported by the Times. 

Om: Not at all. I have no problems with what they do on a day-to-day basis. I think the last one and a half months we have seen the return of the classic big publication. Both the times and the Wall Street Journal went on Investigative story track and came up with some really solid strong stories. Everything they do from an editorial perspective is not perfect. Most of the things they do are actually pretty good. If the Times went away, there would be a hole in the Universe. Don't get me wrong on that. I'm only making a point about the specific VR related move of theirs. I think this is less reflective of their innovation and more opportunistic. 

Leo: So you'd say, VR? PR. 

Om: I think the key for me is I think the Amazon story is nowhere the New York Times misreporting a story of that magnitude. The Nail salon story. They may not be talking about things, which it would seem perfect or realistic at times, but as a publication. I'm sorry indeed. I quite enjoy, I can't emphasize how my day wouldn't be complete if the Times weren't there. Whether I wake up to read their tech coverage... probably not. Do I wake up to read John Markov? 100%. Do I wake up to read their foreign reports? Absolutely Features? Absolutely. I was saying was, as a publication, they and Wall Street Journal have been doing some really strong stories, I think the story are not acceptable to a certain part of Silicon Valley there's no story exposed, flaws and how we value and companies, and how we write about them and how we talk about them. A fetisizeation of start ups. It kind of was jarring for all of us in the entire eco system whether you're a commenter an investor, a blogger, or whatever. It sounds like woah. Where did this come from? That's what big publications can do. Take 8, 9, 10 months to investigate the stories which actually need a closer look. I think Amazon was one of those things. 

Leo: You don't think it has anything to do with the fact that Bezos spot the Washington Post. 

Om: Come on. That is an insane argument. It's got nothing to do with it. 

Ben: I was going to apologize for jumping in. I already jumped in. 

Leo: I know it's hard. I should apologize to the listeners at home, because everyone is on Skype. The latency makes it difficult. Go ahead, Ben. 

Ben: I wanted to jump in. I 100% agree with Om. That's what made the thing so tragic. The reality is as much as this pains people and I've heard from people saying we're trying to do good things, we're trying to change the world, the more you want to change the world, and the more you have the capacity to change the world, the more oversight is necessary. All the people who really screw things up are trying to change the world, and given the amount of power that tech is accruing thanks to Internet economics and Networks and the way it makes the big get bigger, I completely agree that this focus of the Times and the Journal recently is very much appreciated and another thing from that Interview is saying that we're going to focus less on day to day stuff, there's no market for that anymore. We could get that easily. Spend more time on these sorts of things. I think that's a great thing. 

Leo: That's by the way what we do too. I'm not going to be able to compete against a blog that can publish every five minutes. 

Steve: Five minutes? That's slow. 

Leo: That's really, that's an excellent point. 

Ben: I'm sorry for interrupting. You had me so eager to agree with you. 

Leo: We all agree with Om. We would be fools to disagree. We were talking before the show started. The trivialization of the stories, thanks to the drive to create links in social media, the vast amount of trivial stuff that hits the front pages, I think it's nice to have some people doing what Stephen Levy calls slow news. The times to this story, controversial though it was about a guy who died alone, it was an immensely researched a year in the making story that only a big organization like the Times could do, I think.

Om: That was another example of a big publication doing a big story, which is why their value doesn't go away.

Leo: That's what they need to focus on, in my opinion. 

Om: They can't be able to meddle, in my opinion. I think they're right by focusing on the big story. I think that's what gets people talking and then they cover America pretty well. A lot of people disagree with their politics, but they still cover the day to day of America pretty well. They have some good coverage of a lot of...

Leo: The Times is the only news organization that has a large widget on the front page of my phone, or one of the pages of my phone. 

Ben: If you actually sit down and go through, I'm turning to the upper end of the New York Times, if you go through and just consider that the incredible volume of high quality content that comes out every day, it's pretty phenomenal. It makes me so encouraged. Again, I'm being a bit of a contrarian. I tend to agree with Om that this thing is more of a publicity stunt than anything, but that said, my points about them having much more clarity in their strategy and being focused on being differentiated and doing stuff that only they can do and charging people for that, I think it's encouraging. It's encouraging because we need institutions like the Times. Again, do they get everything right? No. They don't, but the reality is no Newspaper has ever gotten anything right. It just so happened that they were the only source before so everybody presumed it was right. That's an adjustment for them as well, to know that they're not the only source of truth. To go back to the Amazon thing, I think that's why it's so great that it responded on Medium to the Amazon PR guy. That's the whole point. What was so hard for the Times for a very long time to adjust to, was appreciating that News can happen that isn't in the New York Times and it might never be in the New York Times. It doesn't mean it's a small story. That whole phrase, all the news that's fit to print was so limiting in a way. I think they've moved past that in a very real way and in a way that makes sense in an environment where you don't have a geographic monopoly, you don't have a moat built on distribution. Competing with everyone on the Internet. That means you do have to be focused and you have to do what you do best. It's good for them. It's good for tech. Be prepared. I'm pretty sure there's going to be more of these stories coming. Frankly, we're all big boys and big girls. We can deal with it. As an Industry, collectively should welcome it. 

Leo: Certainly done more to expose immersive video and VR than anybody has done to this date. Om, you have to acknowledge that they should be looking at innovative ways to monetize as well because if they don't monetize, they can't do long form reporting either. They go hand-in-hand. 

Ben: I think you can spin an angle here. Frankly, I'd have to agree with them. 

Leo: I don't want to make this a journalism panel, but later in the show I want to talk to you about your gray land piece, because, Ben I thought that was really awesome. I agree with you 100%. 

Ben: I can give my defense about why I do write about particularly print media. The reason I find writing about print media so fascinating is not because I compete in the Industry, although as any human, I'm sure that plays a role, but it's that text perfectly translated from analog to digital. 

Leo: No bits were lost.

Ben: Exactly. Text is the fundamental structure of code and all that sort of thing. It's more than zeros. You get what I'm saying. What's interesting about that is that meant the effects of the Internet, the effects of there being zero distribution of your ability to have basically zero transaction cost and to manage a huge customer base in a way that wasn't possible before, that manifested itself in print way faster than in any other industry. So immediately, you had this very jarring disruption going on, so one if you can understand what happened in newspapers, what happened when distribution-limiting function goes away? How do things fall apart in interesting ways? That's actually something you can start thinking about when it comes to other industries, whether it be the transportation industry, the hotel industry, the video industry. Then on the flip side, if you can start to think about what business models might emerge from this; how can you actually build a business? Then again, that might be a clue for how you can build a business in other industries once they've been all messed up. It's the purity of the fact that text was so perfectly translated, which means it experienced all these issues before anyone else that I find it fascinating to think about and write about from a business perspective because I think the lessons will ultimately be broader than the New York Times.

Leo: I think it's a crucible. It's a test tube for everything that's about to come. 

Om: The way to think about this is remember back in the mid 90's, we had the brokerages where you had to call a broker and put your trades through and then the discount brokers came, and then the Internet brokers came and the game changed. And then there were a couple of homes, like banks like JP Morgan which were all about quality and services and stuff like that, and they scaled up with a lot of help from the government, and then there was a whole bunch of online discount stock brokerages. I think media is going through the same cycle, in fact, all Industries will go through the same cycle. You are either going to end up in the low-cost, high volume business, or you're going to end up in the premium business here in the middle, you're going to get kicked. There will be no room. Remember all those forms, like Mary Lynch. I can't even remember half their names, they're just gone.

Leo: The street corner brokerages. 

Om: All those, Prudential, everything is just gone. What's left is the E trade of the world and Schwabs of the world on one end, and then you have guys like JP Morgan and Goldman Sachs. What's happened is what is going to happen in every single Industry. In Media, it's being played out right in front of us. Right now. You can see. The scale guys are just winning, right? They're going away with all the revenue is going to those guys. On the other hand, some people are bulking up. BuzzFeed is a good example, why should another example of video and Premium... building their businesses on top of it. I think it's an interesting time in media landscape too. I think Ben is right, when he says that this is going to have a knock on effect of every other Industry. I'm actually interested in knowing what Industry he thinks will be impacted next. 

Leo: The other thing that's great about media is we can see it happen visibly. What's going on to the real estate brokers of the world I don't know, but I can tell what's going on in the New York Times and other newspapers. We've got to take a break. What a great panel. I'm thrilled to have you all. Steve Kovach from techinsider.io, from Stratechery, Ben Thompson, Om Malik, who is just from Om. That's it. He's the guy. Right there. We're glad to have you along for the ride. Our show to you brought to you by audible.com. I've got two free books for you. The real challenge with Audible is which books. A hundred and 80 thousand titles, bestsellers, science fiction. Of course great tech titles as well. I just published a blog post with every Audible book I own. Highlighted the ones I like a lot and I realized there's a lot of tech titles that I read and listen to on Audible. If this is the kind of conversation you like to have, the innovators, Walter Isaacson, and of course his previous book, Steve Jobs. Elon Musk. But then classics. You go back in time and hackers, some of those great Stephen Levie books. There's also a lot of wonderful fiction and history and science fiction. I want you to visit audible.com. Let me give you the URL, you can get two books free. You'll be signing up for the platinum account, that's two books a month, plus the daily digest of the New York Times or the Wall Street Journal and all of that is available to you for free for the first 30 days. That means you get two books or two credit books. 99 percent are single credit. Most likely you're going to get two books, and then cancel in the first 30 days, you'll pay nothing. Those books are going to be yours to keep,. I've got to tell you, this is one of those things.... You're going to get hooked. The new Stephen King Story collection is amazing. Each story has a different narrator, so it's a great way to hear the variety and range of narrators. Unlike reading a book, listening to a book is a lot about the narrator and having a great narrator can really bring a book alive. So it's a good idea to think about that. One of the nice things with Audible is you can always listen to a preview of any book so I recommend you do that when you're picking your books. These are the high-performing narrators. I have to agree. 11-22-63 was an amazing book. I am Malala. The Gold Finch. Great Narrators bring a book alive. This is a wonderful one. The Help, which is dramatized by several women, including Octavia Spencer. What a great novel. If you saw the movie, don't judge it by the movie, which is a great movie, but you've got to read the novel. Here's the deal. Go to audible.com/twit2, get signed up for the platinum account, your first month is free, get two books. I know it's not easy to pick. I'm listening to an amazing book. It's called "The Righteous Mind." It's a little deceiving. My Dad got it and I didn't listen to it for a long time. I thought it was about why good people are divided about politics and religion. It's not about that at all. It's about moral psychology and how we gain a moral compass. What it is, when it is that we learn our ethics. Is it by our parents teaching us? Is it in our genes? How do we come to moral conclusions and how do they differ across cultures? It's fascinating. Jonathon Haidt, the author is a professor at UVA where he's done a lot of work on this. One of the best known moral psychologists. I'll just give him a little plug for that. That's what I'm listening to right now. Audible.com/twit2. Your first two books are free. Good luck picking. But here's the good news, the following month you get two more books and forever. When I look at twitter.com/moments, the Twitter moments feed, that's when I say thank God there's the New York Times. It's just terrible. You guys agree? This is Twitter's newest product. The first thing that happened under Jack Dorsey's leadership. 

Steve: To be fair, I think it was Steve Costolo's project for...

Leo: It had been around for a while. I think Jack was the one who said hey can you get that out of the labs. 

Steve: It's annoying in that stupid blue dot. I'm so anal about my notifications. I just, I've had to train myself to ignore it. It's basically useless. I never find myself looking at that moment. I get my news from my Twitter feed. I have lists, I follow great people. That's the best way to get your news on Twitter, not from these. 

Ben: Someone saying I have a great curetted Twitter feed, I get my news from Lists, all these sorts of things...

Leo: So much work though. That's years of work.

Ben: Decrying moments is arguably in favor of moments. 

Steve: Of course. Then it's not done well. It's just BuzzFeed.

Ben: I would argue anyone that has done that much work with Twitter is not in a position to judge whether it's...

Leo: It's for the newbies is what you're saying. 

Ben: The reality is we know exactly how far the Twitter experience will get you. It will get you reportedly 300 monthly active users. I'm curious how big that number actually is for people looking at Twitter and accidentally logging on. The other problem with Twitter, Twitter works well as an advertising platform. 300 million isn't large enough, frankly, which is amazing. 300 million is definitely plenty big to do a direct response platform, but the actual format of a feed where it's flowing by quickly is a direct response, but there's a real mismatch when it comes to their business models and canvas. Again, I generally think Moments is nice. It's nicer if you're a sports fan, because those moments are the most compelling. I certainly agree that there's lots of problems. The fact that it's not at all like the Twitter experience in the absence of other evidence is a plus in my mind. 

Leo: I have to confess, the only time I see it is during these shows when we talk about it. I try to avoid it otherwise. 

Ben: I have written relatively in favor of it, and I'm kind of annoyed by it, because I'm one of the longest running Twitter bearers. This company has a massive problem on their hands and it's not looking good at all. 

Leo: Do you think they've turned Twitter around? Has Jack done a good job of...

Ben: I don't think they turned it around at all. That's why I'm annoyed. 

Leo: It's always darkest before the dawn. This is Twitter's moment. 

Ben: I know. The reason why I'm encouraged is what I see in Moments and what I see in other things that happen on Twitter is the recognition that they have a problem and frankly... 

Leo: I think the market forced them to recognize that. Don't you think?

Ben: Leo, that homepage of Twitter, the rotating three clip art images, that was the home page of Twitter for 3 years! When I talk about this advertising problem, there being a mismatch between advertising products they can offer, this is all intertwined. A stagnating product isn't a problem from the user perspective, it's a problem from the business model perspective. Frankly, it boggles the mind how little the product evolved over years. Frankly, recognizing you have a problem is 50% of the problem. At least they recognize they have a problem. They have massive issues in overcoming that problem, one the brain drain issue is a huge problem, why would you want to go work there? Why would you want to stay? Two, there's a real mismatch. You see this with Moments. Not to pick on Steve, but there's this on one hand they have people who love Twitter and never want it to change, and that's their biggest strength is they have this built in user base that's fanatical about the product and on the other hand they have 4 times the number of people who have tried the product and decided that it's not for them. To give these people back is massively independent of the fact that anything you do to get them back is going to annoy the other group. They're in a really tough spot. 

Leo: The American presidential election, which is in full gear and has another year to run is an opportunity for Twitter to shine? 

Ben: Maybe. I think Facebook is going to dominate. For a few reasons, one that's where people are. Particularly the part of the electorate that needs to be reached by a political campaign. Two, the infrastructure Facebook has in place to support politics is very impressive. They have a team that is non-partisan that is available to any candidate that will teach you how to use Facebook, what to do and how to do it. It's worldwide. They fly all over the world helping candidates in elections all over the world. They're gearing up and staffing up for the US election. Three, they have an advertising product that works that fits well with the platform. I think it's one of the best advertising products in tech. It takes over the screen of the device that you're looking at. No advertising in tech has done that before. I think that they're going to have a huge election season. 

Leo: I don't see much political content on Twitter. I see it posted by my friends who are the left and right fighting with one another, but I don't see any Ben Carson stuff here, I don't see any Hillary Clinton here. I see it on Twitter. Hillary owns Twitter. 

Ben: Twitter tends to be the coasts and liberal, but Ben Carson is dominating Facebook. 

Leo: But if I don't follow him, I'm not going to see it, right? 

Ben: Would it be worthwhile for Ben Carson to target you? That's the power of Facebook in these sort of platforms. The thing to keep in mind...

Leo: My understanding of American politics is the way you become president is by winning over these swing voters, not the ones who are going to vote for you no matter what. 

Steve: He's going after the Republicans. It makes sense. He's attributed to Facebook a lot of his success.

Leo: Really? His success is attributed to Facebook? I got to follow him. If I like Dr. Ben Carson, what's going to happen to my Facebook feed? First of all, this is interesting. You can have a sign up button. Look at this. Sign up. That's different from... what happens if I sign up? That takes me out to his site. 

Steve: You just gave him money. 

Leo: Donate, Twitter, and more. This is Facebook reaching out. I'm sure if I go to Hillary Clinton, I'll see something similar, right?

Ben: Facebook is very non-objective about it. They will care about the impact it will have on other...

Leo: Hillary has sign up, but she hasn't figured out how to put a donate there. Interesting. What do you think, Om? Where do you come down? Twitter, Facebook? Do you have an opinion on what we're talking about here? Just give me a chance to say something. 

Om: I think Ben has strong opinions about Twitter. He's right. I think my piece on Twitter which is about all the challenges it faces is like many. Not only Facebook is very strong, it also has competition for attention from Instagram and Snapchat and a whole bunch of other things, so the task is much more difficult for them than most people realize. The good news side, you actually have a CEO who comes from the product background who was a co-founder. He has the moral authority to make decisions inside the company, I'm actually more hopeful about Twitter making some kind of comeback than most people, purely based on the fact that we finally have somebody who cares about the product, who cares about the users, who cares about the experience. It's not something which can happen in three months or five months or 12 months. There's a lot of articles people write about... It's decaying, it's dying. Whatever. That company knows how to make a comeback. They just keep coming back. I don't know how they have the ability to re-invent themselves right now. I think with Jack in charge, they will figure out a game plan. 

Leo: Meanwhile, Jack's other company is going down. 

Ben: I'm glad Om said that. I think that's exactly right. The whole thing about Twitter, as a company it's ridiculous from the get go, and they've overcome so many obstacles, most of them self-generated. But there's something meaningful to that. I know Dorsey has invited Steve Jobs comparisons. There's a reason all these ridiculous things, there's some grain of reality in them. I hope it ends up being a repeat. The only thing I would add, though, is we in tech undervalue the impact of Twitter. Facebook is responsible for 79% of social referrals. Number two is Pinterest with 16%, and Twitter has 3%. Even though we all live on Twitter and we act like it's equivalent to Facebook, when it comes to a political campaign and an advertisor, it's not in the conversation. That's a big part where all our discussions tend to warp the reality of the challenge they face. 

Om: That's exactly what makes it interesting. All the influencers are on Twitter. They're talking to each other and that gets amplified. A radio, a television or other social platforms. I think what Twitter has is the media and the celebrities. I think it's the best vanity platform.

Leo: Vanity is a good word for it. 

Ben: That's where the value really is. When you think about it, the dispersion of information, Twitter is much closer to the top than Facebook. Stories that blow up. Like the BuzzFeed dress story for example. They did a breakdown of how the traffic flowed, and it always starts on Twitter. Figuring out how to capture that and get value from that, there's something there. There is something there in Twitter. That's the biggest reason to be encouraged, more than anything. There's something. I'm glad Jack is back, I'm glad to have the authority there. I think... I'm not going to add any more. 

Leo: Meanwhile, Snapchat in terms of videos is closing the gap with Facebook. Trippling its video traffic. The growth has been stunning. Facebook has 8 billion daily video views. What is a view according to Facebook? Is it one second? Two seconds? Snapchat is saying 6 billion video views. That's 3 times more than it had in May. If I were a candidate running for president, I would look at the Snapchat folk. 

Steve: Hillary has a great social media team. 

Leo: What do you do on SnapChat if you're a candidate? Do you make policy statements?

Steve: Make stories. I'm a really bad SnapChat user. Age 30, I'm probably too old for SnapChat. From what I've seen, she does a great job with events and stuff, and their stories are a great platform for them to share these videos with people, just to broad blast them out to people at once.

Leo: Does SnapChat have a way... I would have to search for Hillary Clinton if I wanted to do that. 

Steve: You follow her like you follow her on Twitter. 

Leo: I have just followed Donald Trump, Ben Carson, Hillary Clinton, Bernie Sanders... Not on my SnapChat. Just followed them on Facebook to see what happens. 

Steve: Your newsfeed is going to look like garbage. 

Ben: You should follow Marco Rubio. 

Leo: To get a full experience?

Ben: He's probably going to be the nominee. 

Leo: I think you're right. Not Ted. Ted is too far to the right. Marco Rubio. 

Ben: I'm not sure who was saying this, but the two finalists are probably Cruz and Rubio. 

Leo: I'm liking Marco Rubio. I'm going to have one hell of a feed. I'll try to follow them all on SnapChat. SnapChat doesn't do any of that you might like... because it's supposed to be personal. 

Steve: You have to seek them out. That's why you see so many people to Om's point, using Twitter as the starting point and making a little Avatar to follow them on Snapchat. A lot of media renovations. 

Leo: How about the discover thing? 

Steve: It doesn't really drive traffic though. These are the stories that are native. 

Ben: Snapchat is a behemoth. These videos are no accident. There's a reason why Facebook tried to buy them and why they feel threatened by them. Snapchat is going for a scale. They're going for the almost TV replacement brand advertising sort of angle because it's valuable in a way. They'll get a better discover functionality at some point, but for now, there's some sort of value that you have sought out what you are going for. What you have available to view is selective, it's not just filled with a bunch of junk. Then you add the whole you've got to keep your finger on the screen and keep watching it. You're ensuring... the liklihood that someone is viewing what they're looking at is pretty high. 

Leo: You don't have to hold it anymore. You're so last week. Actually, I was really pleased, because I got tired of holding it. I could swipe right to chat with Hillary Clinton. I could see if she responds. I'm afraid she's going to send me a naked picture. I don't know. This is not what I wanted to have happen. I tried to follow her stories, but I didn't get anything. Not personal messaging to me. These are the stories like Baratunde still thinks people are following him. He's really slowed down though, quite a bit. All right. Interesting. Hillary is, by the way, just Hillary on SnapChat. You search for Hillary Clinton, but her Handle is just HIllary, so it's very intimate. Interesting. I can't find it anymore. I've lost my SnapChat. I wiped this phone off. Now nothing works. All right, moving right along, I can tell—

Ben: Let’s talk about the Square thing. I think it’s interesting.

Leo: Let’s talk about Square. So Square is a unicorn, right? Valued at $6 billion dollars except maybe not. The IPO terms are going to put the valuation actually lower than the last funding round, more like $3.9 billion dollars. That’s not because Jack is doing double duty as CEO, right? Most likely that’s the bad news from Starbucks for instance, that Starbucks deal which was highly touted was a big flop.

Ben: Well Square’s pivoted from being a, the vision was to be a consumer focused payments company to being basically a small to medium size business infrastructure provider by merging their payments into you know, management systems and things like that. Which in the long run is a more viable market I think but a smaller one. So, I think that’s reasonable.

Steve: And then look what happens when they try to partner with the big businesses, the Starbucks deal which you saw on the S1 was just a disaster.

Leo: Right. They lost money on that. After a year they pulled the plug on it.

Om: Well I think the way to think about Square or any other service like Square is you know you’ve got companies which are built for today’s market demands. For instance payments today are not the way payments used to be in a 9-5 world where the stores would open at a certain time and close at a certain time. The demand and you know, the commerce is a very, it’s an unpredictable, a very unpredictable surety so—

Leo: It seems like such a, it felt like it was such a powerful, empowering technology that any artist with a Square thing—

Ben: It is.

Leo: But why hasn’t it exploded as a rule?

Ben: It’s a $4 billion dollar company. That’s not bad.

Leo: Oh, ok. Never mind.

Om: I mean like when did that become a bad thing that it’s a $4 billion dollar company?

Leo: No, you’re right. Ok. Never mind (laughing).

Om: Only remember like you know there’s people—I recently went to Seattle and visited a company called Filson which has been in business close to 120 years. And they had like a $50 million dollar business. You know, a billion is still a billion in the real world.

Leo: It’s good money.

Om: I think maybe not in Silicon Valley but in the real world a billion is a lot of money. I think even a million is a lot of money in the real world. I think we have a very skewed perspective of you know what it is. It also doesn’t help that we have this you know, for about three years we had this hype cycle around unicorns. It’s like nobody stood there and asked the question. Like a unicorn is a mythical thing. It doesn’t exist. Like why would you put your unicorn against your company’s name? It’s like it’s a myth.

Leo: So a unicorn is a company valued at a billion or more.

Om: Yea. But it’s like why would you use a phrase like that to describe which is essentially a pretty big deal. A billion dollar company or a two billion dollar company. It’s like, you know I look at that as one and I see there is promise of growth, there is promise of opportunity and you know I see again like a company built for a shifting economy. You know are they perfect? Absolutely not. We’re they valued perfectly? Not really. Who’s to blame for that? Investors. Not the company, right? They will take the best valuation they can get at any given time. And when the media talks about valuation as your only yardstick of success, well a lot of people start thinking that is the value, that is the yardstick of success, right? I mean I wrote a post about this recently. You have to build value not valuation. Valuations come and are the outcome of value not the other way around. I think this is why I feel that the whole conversation around Square IPO or whatever is kind of, you know, upside down. I think we should be looking at, this is a pretty solid company targeting an audience which has been unsold for a very long time. And they are building the equal of AWS for financial services for small and medium businesses at scale. I think that’s a pretty good, reasonable idea. What the markets values it at? That is a different story. I think the company’s value is spot on.

Leo: So I shouldn’t pay attention to the headlines that say, like this Issie Lapowsky headline on Wired, “Square’s Low IPO Price Could Signal Hard Times for Unicorns.”

Ben: No well, one I think that Om is right. I think that actually Square is an almost a better IPO investment than some other companies, in part because they pivoted relatively recently to purely focusing on SMBs. So I think a lot of their growth is actually in front of them. Unlike some companies that there growth is entirely private.

Leo: Yea.

Ben: But two, I mean the narrative around this Square IPO I think is and the pricing is totally backwards. This is strong evidence that there is absolutely not a bubble. Because the whole idea of, and I wrote this 6 months ago saying it’s not 1999. Like a big part of a bubble is euphoria and the presumption that there’s always a bigger fool down the road and that prices are going up for prices’ sake. I mean if there was a bubble we should expect that this valuation would be even higher and there would be wild speculation about it. And there’s not. People are being quite rational about it. And you can argue that within a narrow band of financing the growth level that there are some valuations that are perhaps warranted, but that’s very different than this sort of prevailing narrative that the entire, there’s structural issues that are going to go up in smoke. And I agree. Like there is a business here. I think it’s probably being valued correctly. And oh by the way, Om talks about value versus valuation. You look at the terms and like the fact, the valuation was always a myth. And it wasn’t a myth just because all valuations are myths. They are. But it was a myth because the people buying into that $6 billion valuation were not really paying $6 billion dollars. They included lots of caveats like if it’s priced, if it’s priced lower we get a bigger share of stocks that guarantees the returns. There’s all these sorts of things in the agreements that if you were to actually price the value of that optionality, the reality would be that the valuation is probably about where it ended up being. And the top—and this is a reminder I think for people paying attention to this that whatever’s reported as a valuation, if you don’t understand the underlying terms that go into that valuation, it is, it is not just a meaningless number. It is an actively disingenuous number. And that’s the case almost certainly for nearly every single unicorn that the number is not, in a proper accounting, is not what it is. And frankly, I mean I don’t know. I just, the whole narrative, the whole bubble narrative in general is very frustrating to me. I think there is issues. There are things going on. But it’s nothing like 1999. Anyone that even suggests that it is, I’m going to say, I’m going to pull an Om’s side, I think you’re a little young. You can’t compare to what was, what was going on back then.

Om: Except for the really real estate. I think that real estate is pretty 1999 right now. And salaries too. So things are a little the same from the salary stand point and also from a real estate standpoint. 

Ben: Right, exactly. I think that’s exactly right. There is something going on. But it’s totally different from what was happening then. And that my bigger concern, and I think this is, I tend to write about this once a week. My bigger concern is the, this is a different kind of, I don’t want to use the word bubble. It’s a different kind of economic problem where the other problem with a lot of these companies raising huge amounts of money is they can be in business for a long time without having a viable model. It’s all zombie companies in a way. And that has its own problems. And they’re significant problems. They’re more about opportunity costs and things like that and the sort of companies that aren’t being built, and aren’t scaling the way they ought to because talent is so dispersed. Because real estate costs are out of control. And those are very real issues. But they’re almost 180 degree different issues from an underlying perspective than what was happening in 1999.

Om: The one thing that people keep forgetting, whether it’s Square or any other delivery service or any consumer product service online, any company that is building value to whatever valuation, there is a factor of human friction. Like people can only you know consume things so much. Remember Groupon? That didn’t, that wasn’t a bad idea. It was an idea which ran into human friction. We couldn’t really consume all those deals all the time, right? Like we only have so much money we can spend on things. You know there is so many times in a day that you can order from Postmates or from Munchery or Sprig. Or like you can’t order two lunches. I mean you can, but you can only eat one lunch, right? Unless you have like other problems. 

Leo: (Laughing) sometimes I have three or four, Om.

Ben: It reminds me of the pay to play market for gaming.

Leo: First lunch is freemium?

Om: So at some point I think we have this like, like that we as an industry always forget that there’s a human friction. There’s people in the real world that have to pay for these services and goods. And all those take a little bit longer than what you project on a spreadsheet. I think people just—you know, let’s say if Uber went away today, there’s a lot of people who would be unhappy. Like guaranteed, right? That’s a valuable long-term company which is being built in my opinion. Like there is a lot of value there because the universe would miss it. The same as when, you know, if Postmates went away I would be kind of upset. Like you know—

Leo: What does Postmates do? I don’t even know.

Om: It just gets me food. That’s what it does.

Steve: It gets you anything you want, whenever you want it.

Leo: Oh, it’s a lunch logistics company.

Om: It’s like a myth, right? It’s food, it’s pretty good.

Leo: See, only people who live in cities know about that because of course they don’t deliver here.

Steve: It’s not in Petaluma?

Leo: No, I don’t think so. I think, I think Petaluma’s too small.

Om: Isn’t that like the farmland and everything?

Leo: Yea, well, we don’t need to.

Om: You grow your own food, right?

Leo: We actually grow and cook our own food. Did you, I’m sure you did. In fact it feels like you’re referring to it a little bit, The Atlantic article by Robin Sloan, “Why I Quit Ordering from Sprig” specifically, from “Uber-for-Food Start-Ups.” And she talks about, it’s an interesting article. Is it—I hope she’s a she. I maybe made an incorrect assumption. But she talks about the contrast, something called Josephine which is a neighborhood thing where you order food from somebody in your neighborhood who just has to cook some extra. And you go over to their house and you take it. And you eat it. And you have to plan ahead. And Sprig where she says it’s all about, you know, “I want this food now.” And she says, “I feel like there’s a whole underclass of people that I’m seeing that I feel bad, that I actually feel bad for.” She likes Josephine because it’s somebody who’s cooking and you kind of have this experience with them versus the stranger who’s delivering you with Sprig. Did you read this article, Om?

Om: I did.

Leo: What did you think?

Om: You know, interesting article.

Leo: As a Sprig user.

Om: I don’t use Sprig I use Munchery.

Leo: Ok. Similar?

Om: Sprig’s quality is pretty dicey.

Leo: Ah.

Om: All over the map.

Leo: She mentions that. She had a bad chicken sandwich from Sprig (laughing) which may be the real reason she quit ordering from them.

Ben: I think that Om’s point is a really good one. This concept of because the lower, the cost of getting started are so much lower than they used to be, that there’s way more companies than there are today. But the ability of the market to digest companies and to, I mean develop new habits around these sorts of things is fundamentally limited and that means that we should expect there to be more attrition than ever before. Just because there’s more people, there’s more companies getting born. But you know, not that many more and we should expect there to be that many more, you know coming out the other side. And that’s ok. That’s normal. That’s a good thing. It’s great that it’s easier to get companies started than ever before. You know primarily thanks to AWS and similar types of services. Again I worry about the opportunity costs of all, especially engineering in particular being spread out more thinly than ever before. But yea. The human capacity point is a really powerful one.

Om: You know I think when you were talking about that article by in The Atlantic, right?

Leo: Yea.

Om: And I read that article. My thinking was well when we had the industrial revolution and in the 21st century, the 20th century the idea of food and how people consume food changed and fast food chains came around. Now we are once again changing the idea of time, work, you know, live. All those things are being redefined because we are infinitely more connected all the time. So the restaurants will have to look somewhat different. So like so to me Sprig looks like a fast food chain. Not a restaurant, right? Except it doesn’t have a physical space where you go and get the food. The food comes to you. So is it the same? I think the old underclass has been replaced by the new underclass and that’s what she’s talking about. Except you know, it’s the reality of how the world is changing, right? I’m not, I’m not saying she’s right or wrong but I do feel that we have to recognize the fact that as a society we are changing. Because, because of how the on-demand behavior has become pervasive at least in our area. And you look at cities like Shanghai or even San Francisco there’s much less retail space being built, right? So if you want to open a restaurant you have to pay a premium on rent which means the food is priced at a premium. So only a certain kind of people can go to the restaurant. So there is like a demographic you know, barrier being created around, around what is the food experience. I think a lot of it we just don’t, we just look at it from a very narrow perspective without trying to understand how the society is changing. I think how the iPhone and the smartphone itself has changed the society’s behaviors is like spread out. It’s like on food. It’s on how we communicate. It’s on how we find relationships. Everything is being redefined because we have a much more real time existence now because of the phone in our pocket. I think it is easy to dismiss that I don’t like this. Well, this may be the model of the future. Not that I would like to eat from Sprig because their food does suck. But.

Leo: (Laughing).

Steve: (Laughing) I like Sprig.

Leo: I can’t get Sprig, so. I can’t get Postmates either. I checked. They’re not in Petaluma.

Ben: There is something profound about thinking about valuing the impact of a product based on sort of its knock-on effects on other parts. I mean Om just mentioned Rents. I think one of the most fascinating things about AWS is there’s been this shift in start-up plan from the valley up to the city. And there’s lots of reasons for that. Shift to consumer, you know, preferences. But you know part of it is you don’t need to have server space in your office. You can, you can start a company in a WeWork office and then bump up to you know a 1,000 square foot space or whatever and grow from there. Whereas before you had to start out with space. And not to mention the whole cost of servers and Oracle databases and all that sort of stuff. Like there’s very real—I met someone, a decorator that works in construction. I’ve told this story a couple of times so sorry if I’m repeating myself for people who listen. But he works in construction and he works in retro-fitting old offices. And the biggest part of all their jobs is retro-fitting old server space. Like there’s all this infrastructure, all this air conditioning, all this sort of stuff and it’s because of AWS. And that is, that gets that in a sort of very profound way. The impact of AWS. The same thing that Om said with the smartphone. And frankly that’s why I noted I think, that’s why Uber is such a big deal. It’s not just because it’s replacing the taxi industry, it’s the potential to replace the car broadly. And when you replace the car, suddenly you need less parking spaces. You need less parking spaces, you can build different kinds of buildings. You have different kinds of buildings, you get a different sort of foot traffic. You might get people even closer. You might get different density, different real estate patterns. Like that is, you want to talk about changing the world, like that is how the world is actually changed by some of these products and yea, not that many make the cut. But the ones that do, I mean the impact really can’t be overstated. 

Leo: We’re going to take a break. Amazon has opened a brick and mortar store (laughing) in the weirdest story of the week. We’ll talk about that and a lot more. Om Malik is here from Om.co, his blog. Do you have money invested in Twitter? I suppose I should ask.

Om: No.

Leo: No. I’m sorry.

Om: I have no, I have no public market stocks. I’ve never owned any.

Leo: Really?

Om: And, yep. And I don’t intend to.

Leo: You figure by the time they go public it’s a bad deal.

Om: Pretty much.

Leo: Get in early. Sell it when they go public.

Om: Hmm mmm. That’s when you’re in the venture business.

Leo: Yea. And it’s an ad-venture. 

Om: It’s definitely.

Ben: That was a terrible joke (laughing).

Om: That’s a pretty good one.

Steve: I liked it.

Leo: (Laughing).

Steve: Bad joke.

Leo: Bad jokes are us. That’s Steven Kovach, techinsider.io. Ben Thompson’s also here from Stratechery. We’re talking about mobile. I’ve got to talk about mobile payments. And the best way to set up mobile payments for your app or website for that matter, Braintree. Braintree is code for easy mobile payments. 10 lines of code on almost any platform. And all of a sudden, your customers, your users get access to all the payment systems they want. Apple Pay, Android Pay, PayPal, Venmo, credit cards, even Bitcoin. And you know when something else comes along, Braintree supports that too. The example of what happened when Android Pay came out last month. It was amazing. You know if you were a Braintree user, you open your control panel, boom, you check the box. Now you’ve got Android Pay. That easy. And the best really recommendation from Braintree is their customers. Of course GitHub uses Braintree which means you’ve probably used Braintree too. Ever take an Uber ride or a Lyft ride? That’s Braintree. Airbnb, Hotels Tonight, that’s Braintree. Braintree is everywhere. Those new buyable pins from Pinterest. Braintree. And that’s the beauty. Braintree makes it easy to make payments for your customers, eliminating the problem of abandoned carts, getting you more sales with Braintree’s best in class mobile checkout experience. In some cases there’s no check out at all. LV.0 STK. That’s Uber. Then you just get out of the car. That’s the checkout. Braintree’s amazing. I want you to try it. You can get a little sandbox experience if you go to Braintreepayments.com/TWIT. Check out the integration. It’s easy across all platforms. Superior fraud protection. Customer service. Very fast payouts to you and your first $50,000 in transactions are fee free. Braintreepayments.com/TWIT. If you’ve been looking for the right solution your search is over. Braintreepayments.com/TWIT. 

Leo: Love the review in The New Republic of the new brick and mortar store, it’s in Seattle I think, for Amazon.com. The review was by, you know obviously somebody who loves small, independent bookstores and he was just mocking, the word he used was the banality of Amazon’s Book Store. Why does Amazon—by the way, I’m glad you’re here, Om, because it was I think at least 2 maybe 3 years ago that you said the next step for Amazon is to open a store. You said that. Oh, he’s muted. Are you there? There we go.

Om: You want to say something to me?

Leo: Congratulations. You are right.

Om: It starts with an s ends with a y.

Leo: (Laughing) starts with an s? This is like a tough crossword puzzle. Ends with a y.

Ben: Sorry, I believe.

Leo: Sorry? Did we mock you at the time?

Om: Oh yea. You and Scobel and—yea.

Leo: Why? Why would you open a store? Is this the store that you were hoping they would open?

Om: Well, it’s not bad. I think that the review made it sound like it was terrible.

Leo: Yea.

Ben: There was a lot of snark.

Steve: It’s a snarky piece. I mean I didn’t take it too seriously.

Leo: Consider the source, too, The New Republic. I mean these are people who want to preserve independent book stores and loathe Amazon.

Om: Yea, I went there last week just to check it out.

Leo: Oh, did you? What did you think? What’s your review?

Om: My review is on a scale of 1 to 10 I would give them 6. 

Leo: Ok.

Om: I mean it’s not like, it was clear why they set it up. It’s all essentially showcase their products not just the books.

Leo: It’s the Kindle showroom in effect.

Om: It’s just an Amazon showroom. It makes it more attractive to people because it’s a book store, right? Most people want to walk into a book store versus—

Leo: It’s kind of cozier.

Om: You know, walking into like a—not many people walk into the Kindle Store or the Microsoft Stores which are in the mall. But the books is something people want to kind of get a closer look at. So it’s kind of, you know, interesting. I don’t make whichever way you want to see it. I don’t, I wasn’t that, it’s not an Apple Store. Like just to be clear.

Leo: No, no.

Om: It’s not selling like any design standards or anthing.

Leo: But as I remember, the reason you thought Amazon should open a store was really that the future of retail—

Ben: Don’t cry, Leo. You can say sorry,

Leo: I’m sorry, Om. The future of retail was online and that the experience of gathering with others and you know, having a coffee, that it was all about experiential stuff. That is what a brick and mortar store should be. This doesn’t sound like that.

Om: No. But you know, they will tweak and get it right in my opinion. I think it’s not, it’s not a terrible store. Let’s be clear.

Leo: It’s probably a money losing store though for Amazon, right? It’s not a—judging from this article, the rent’s, they’re in an old sushi restaurant. But the Barnes and Noble that used to be there was kind of run out by high rents. It’d be difficult, this fella thinks, as does the manager of the University Book Store up the hill, that it would be difficult for them to make money at the store.

Ben: Well if I can get 2 gripes in. I mean one, to make categorical statements about anything is problematic. Like all retail will be e-commerce and that obviously won’t be the case. And two—

Leo: Why would you buy a book at a bookstore?

Ben: Well, two this insistence on judging the financial viability of long term success of any sort of new initiative based on a version 1 what is clearly an experiment is a waste of time and space. I mean, of course it better be losing money. If they’re making profit on it from day one, it’s like why don’t they have the entire fleet of stores open now?

Leo: Everywhere. Yea.

Ben: But I mean, and the other thing too is as long as it is as good as a standard book store, which by even this guy had to admit it was, well given the backend infrastructure Amazon brings to bear, it actually might be profitable. I mean the reality is you can innovate in a business model without changing the consumer facing part of the product at all. And you can build a bog standard book store that has a superior back end and be far more profitable.

Leo: Right.

Ben: But sorry, that’s my rant. I actually want to hear the rest of Om’s impressions.

Leo: No, you make excellent points, Ben, and I stand corrected. Go ahead, Om.

Om: Well I didn’t buy anything from there if that’s what you wanted.

Leo: But were you tempted to buy the new Paperwhite or anything?

Om: Well no.

Ben: Well that’s the thing, sorry. You have to look at this systematically, right? It’s building Amazon customers. There was a story—

Leo: Is it? How? I don’t understand how this builds Amazon customers. This isn’t even Amazon’s business. Their business is not having you go into a store and look at books and buying them. Their business is you decide you want to buy a book, you go online, you press a button.

Ben: So they should probably cancel AWS because it doesn’t fit their business.

Leo: Well, no, ok. That’s obviously not the case. AWS is maybe their best business.

Ben: But that’s the thing. You have to look at it systematically. I think that’s what makes Amazon a harder company to appreciate than other companies where it’s all—you know, Apple, it’s all out there.

Leo: Well do you buy Om’s contention this is really about a showroom for Amazon’s physical products like the Kindle and the Fire?

Ben: I think it’s about getting you into the Amazon eco-system. We already know a Prime customer spends about $1,600 a year versus a normal customer who spends about $400. Like the value of being a part of it and this is just another entry point. And again, it’s version one. It’s an experiment. I’m sure they’re trying, they’re trying to figure it out. And it might fail. The great thing about Amazon is they do lots of stuff that fails and they close it down. They closed down another business this past week. I can’t remember which one it was. So maybe they’ll close it. And that’s fine. They’re cool with that. And if it succeeds, well, that’s—I saw another story, I’m trying to find out where it is but it talked about, it was kind of a mocking story, too. And they mentioned in the story about someone walked out with a Prime membership.

Leo: Oh.

Ben: Like I’m pretty sure that that’s a pretty successful transaction.

Leo: Don’t mock that. That’s a win. Om, how was the Wi-Fi in there? Was it good?

Om: No, I didn’t try it. I used AT&T wherever I go. I think Wi-Fi is—

Leo: It disappoints.

Om: So I think the way to think about these stores is, let’s say they have a book reading, you know.

Leo: Right.

Om: Book reading is part of the book ecosystem.

Leo: No, and that’s what you said 2 years ago. Right. Exactly.

Om: They need- so if all the bookstores go away, there’s very few left, where do all the authors go for doing the book readings and having one on one interaction with their fans?

Leo: You almost don’t even need books in this bookstore, frankly.

Om: And I bet you most of the books where stocked to move, not stocked to stay there.

Leo: Right.

Om: They have much more intelligence about what sells in what part of Seattle, right? And so they’re going to stock books which are kind of you know, of interest to people in that region. However, like when you look at this, like it was interesting that I would go in, there’s a book author, you know I listened to the author, buy the book probably, order it or do something, and I also check out the new Kindle or the new Kindle Fire or the new Fire TV. And who knows? I might end up with one more product. Like I walk out with one more product. Or prime membership. Or something. And I think that ties you into the ecosystem more tightly, more—ecosystem is probably not the right word. The Amazon experience. You are experiencing Amazon at a much more real, physical level so it actually means you can go and trust them and when you buy stuff from them online. Which is probably what they are going for. I mean why would Microsoft open a Microsoft store? They don’t need to. But they have because it’s all about—

Leo: Well, it’s different selling computers. I think Apple and Microsoft both realized that the experience of buying computers in a computer store does not benefit them. You know you go to, I don’t even know, a Best Buy I guess is the last place you can still go. And that’s not going to be a good buying experience for anybody.

Om: So where are you experiencing Kindle? Kindle Fire?

Leo: Well, you can’t. That’s right. That’s right.

Om: Exactly. So—

Leo: Although, we know now from Pew that only 18% of adults have e-book readers anymore anyway.

Ben: Only.

Leo: Well that may be a dying business. It’s down quite a bit.

Ben: But Om thinks it’s super—

Leo: Although I did buy the new Paperwhite and I looked at it and thought I’m in the 50s, so.

Ben: Om said something super-duper important though that gets at why the vast majority of talk about this has been kind of facile. It’s that Amazon evaluates, Amazon is thinking according to long term value of a customer. Like it’s almost like a CPG company. Like why do, why do you see ads for deodorant or for dishwasher soap? It’s because once you get in a habit of buying something, you’re going to buy it for the rest of your life. And actually that small purchase magnified by buying it every month for the rest of your life is tremendously valuable. That’s why you have you know, P&G final ordered themselves to get on different platforms where they can reach young people. It’s the same sort of thing with Amazon. They don’t, just getting a new customer, in particular getting a new Prime customer, pays off over decades. 

Leo: Yea.

Ben: And so you can’t properly evaluate this store or any other initiative Amazon does unless you have visibility into what the lifetime value of a customer is, what the turn rate is. All these sorts of things that go into calculating that and frankly, anecdotally speaking anyway, I live in Taiwan. I don’t even have access to Amazon and I still own an Amazon Prime membership. Because that’s how phenomenal the experience is for when I’m just back or whatever. And I think lots of people who are Prime members are, know that’s the case. And the way you stop thinking. You just buy stuff when you need it. And man, the value, if this gets people. If this gets like that guy buying the Prime membership, or it gets them buying a device and getting locked into this. And the whole Amazon video thing tied to Prime and all these sorts of things. I mean again, I wouldn’t be surprised if the store was, I would bet it’s losing money today. I won’t be surprised if it loses money forever. If you only look at the store. But to only look at the store is to, is to not understand Amazon as a company.

Om: I think the analogy is when you get a credit card from American Express in college. It’s not about the college credit card, it’s more like how long are you going to be an American Express customer? Perhaps for most of your life.

Leo: Since 1980.

Om: Yea. And that’s where the long-term value for Amazon is. And I think that’s where, that’s how they’re, like now they have to get a lot more people into the Amazon ecosystem.

Leo: Did Google make a mistake then deciding not to go ahead with its New York City store? They renovated it for $6 million dollars and now they pulled out.

Ben: Well it’s a different business. I mean Amazon—

Leo: Google has nothing to sell.

Ben: Amazon as a consumer business is about yea, that elective value of selling you things. Google is not.

Leo: Right. Ok. Not everybody needs a retail store. So I shouldn’t open a TWiT retail store in downtown San Francisco probably.

Steve: Probably not.

Leo: I do like though what Om’s vision for this store was. Which was really a place to congregate, to hear authors speak. Not so much to buy books but it is still the same idea which is a goodwill venture for Amazon. And then you can sign up as you go out the door for Prime.

Steve: It’s great that it goes to the core of what Amazon started as which was a virtual, online bookstore and you know, they didn’t build a Walmart clone. You don’t go there and buy toilet paper which you can do at Amazon.com. They went there and you know, it’s a nice bookstore. And that kind of builds that familiarity with the brand again and again I totally agree with what Ben in saying it’s just locking you, any way they can to lock you in. And whether you walk in and walk out with a Kindle or walk in, walk out with a Prime membership or just like a good feeling about Amazon, it’s a win for them.

Leo: How much of Amazon’s business is selling books I wonder?

Ben: It’s shrinking. The portion of media which is books and software and packaged music and stuff like that, I think is 19% and falling.

Leo: Wow.

Ben: Although it’s still very profitable. I think what’s interesting is they did start with books the first time and they’re starting with books now. But I think the reasons are actually very different. When they started with books the first time is because books had a huge amount of margin to play with frankly. And they had, and it fit the whole Amazon vision. You could offer every book in the world when a regular book store couldn’t. And books were just a perfect fit for getting a company like Amazon off the ground. And I think Bezos has said he doesn’t have any particular attraction to books per se, just they were, it was the perfect thing to start with. Whereas here what I think Om said is a really great point. Like no one likes to walk into an Amazon store. I mean yea, we all care about Amazon because we’re geeks and we’re you know, some tiny minority that uses Twitter. But the—people like going into bookstores. They like browsing. They like looking around. And that makes if you’re going to into retail to Steve’s point, to deliver an experience that builds affinity for your company and your brand and leads to other products and all that sorts of things, books are a pretty compelling place to start. And it’s just a happy coincidence that it really fits the Amazon branding and origin story as it is.

Leo: Let’s talk about Comcast in a moment. Data caps are coming. And Comcast—I love this leaked memo, whether it’s real or not. It’s telling the customer sales reps how to position this. It’s not about the data cap, it’s not about congestion. It’s about giving you a better experience. But first (laughing), a word from FreshBooks. If you’re a freelancer you know the key to making a living is billing (laughing). You can do the work but if you forget to invoice, eh, you’re not going to get paid. So if you are a freelancer, can I make a suggestion? Make it easy on yourself to do the most important part of your business. Send out those invoices with FreshBooks. It’s the super simple cloud accounting software that’s giving thousands, more like millions of freelancers like you, the tools to save time billing and get paid faster. You’ll be creating and sending invoices in minutes. Even if you’re not a numbers person. Especially if you’re not. If you’re a creative you’re going to love this. Get paid upfront. You can actually request a deposit in FreshBooks. No more covering costs out of pocket or waiting until the end of a project to get paid. Isn’t that a cool idea? Hey there’s going to be, there’s going to be some expenses associated with this. Would you like to put in a deposit ahead of time? You can organize your expenses easily. The FreshBooks app lets you take pictures of receipts and get them right into the invoice. Of course you can track time and hours on that FreshBooks app almost instantly. Again, goes right into the invoice. And with FreshBooks automated customer reviews report, you can see all your reviews in one place and easily post them on your website. They’re really expanding the offerings they’re giving the freelancer to make it a better experience for everybody. You’ll wonder why you didn’t start sooner. If you’ve got questions of course the FreshBooks support rock stars are there. Help is free forever. They’ll go above and beyond whenever you need a hand. And I’ll tell you, I started using this in 2004. I’m no longer a freelancer but I have to say it was such a lifesaver. It was the only way really I got paid. You’ve got to send out those invoices. You can’t put them off. FreshBooks.com/twit you can try it free for 30 days. Do me a favor, mention This Week in Tech when they ask how did you hear about us? Your 30 day free trial awaits. All the fun stuff. You get to do all the fun stuff in your business and let FreshBooks handle the paperwork. This Week in Tech. That’s all you have to say when they say how’d you hear about us. FreshBooks.com/twit 30 days free.

Leo: This Comcast memo went out on Reddit which of course makes it instantly suspect. Although when you read it, it sounds pretty realistic. Comcast has started to expand its trial of data caps. They were doing 250. Hey, don’t worry, it’s 300GB a month now. And apparently this memo that was leaked was to customer service representatives telling them how to discuss these new data caps. For instance, “Do say, ‘Fairness in providing a new flexible policy to our customers.’ Don’t say, ‘The program is about congestion management.’ It’s not.” Under the new plans you may or may not be subject to this. One of the things Comcast says is “Well everybody has the 250GB data cap. We just don’t enforce it everywhere.” Implying that they’re planning on doing this everywhere. The number one ISP in the country. Under the new plans customers can opt to pay an extra $30 - $35 dollars a month to unlock unlimited internet access, but if you don’t you’ll be charged $10 bucks for each additional 50GB. And they max out by the way at 600. Then you’re on the extreme tier. And after that, all bets are off. What do you think?

Steve: I’d be so, I’d be so hosed.

Leo: (Laughing) I know.

Steve: There’s no way that—

Leo: You know most people say, “300GB, I’m not going to hit that.” 

Steve: With all the video I stream, all to my big screen TV, yea.

Leo: That’s the problem.

Steve: I’d be done in half a day.

Leo: 6 hours of Netflix a day and you’re going to do it.

Om: You know I don’t move from my building because I have Webpass.

Leo: You can’t move.

Om: I don’t move because I have Webpass.

Leo: Right.

Om: Not Comcast.

Leo: Right. It’s kind of a community internet from the building?

Om: No.

Leo: No?

Om: No it’s not community internet.

Leo: Oh, I thought it was.

Om: They are an independent ISP.

Leo: Urban, urban internet.

Om: Urban internet. I’m getting close to 300MB per second right now.

Leo: Oh my God. That’s amazing.

Ben: This is, this is exactly what we should have expected to happen once net neutrality was banned.

Leo: Wait a minute I thought we had net neutrality.

Ben: Sorry once it was enforced, sorry I used the wrong word. This is entirely 100% predictable I unfortunately wrote at the time when net neutrality was going down. And if you back up and look down from a view on to incentivize, if you want to incentivize faster and faster broadband speeds, well this is a great way to do it. Comcast now has a great incentive to get you even faster internet because the faster internet you have the more you use.

Leo: The more you use.

Ben: The more they can earn. So setting aside the other issues like from a, from a certain perspective this is a good development because now they have good incentives to improve internet. And once you removed the opportunity for them to charge for discriminating data, then it was inevitable that this was going to happen for one. That said there’s certainly lots of issues here. For one, Comcast does violate net neutrality blatantly as does every other provider because Comcast owned data does not count against the cap. 

Leo: They have apps, for instance, like the Xfinity App for Xbox which does not get counted.

Ben: Right. And that’s, and just in general just cable television uses a tremendous amount of data. They’re going over the same wires and uses a tremendous amount of data and that doesn’t count either. So there’s certainly problems there. But the reality is as long as you’re going to have a regulated environment, which again has its own problems. It’s not a panacea by any means. And its own problems particularly around incentives. That this was inevitable. And frankly I’m a little, I’m a little tired of in this entire debate there’s a lot of people want to have their cake and eat it too. Like they want, they want private companies to do things that aren’t, they want them to give, to infinitely invest in new capacity and not discriminate data, and not charge for it. And I’m sorry, like if you want to have a debate, you should have a debate about whether this should be a regulated industry, whether the underlying infrastructure should be government provided and then there’d be competition on top of it. The best markets in the world work that way where the wires themselves are a public good and then ISPs compete on top of that.

Leo: Is that how it works in Taipei? Is that your situation?

Ben: Yea. I have like 10 select choices for internet access, and like right now I’m--

Leo: But it’s all the same wires but government owned.

Ben: It’s a privatized company but yea, the access is regulated. So yea, no I have 100, I don’t have 300 down, I have 100 down and I’m paying $30 dollars a month for it. So it just like, this is an inevitable sort of thing. And I think that maybe this will wake people up to being a little more serious about it. The problem in the US obviously is the, per our earlier discussion, the political system, particularly when it comes to anything government related or regulation or that sort of thing is so, so extreme in a sort of anti-government sort of attitude that this is, this is an inevitable outcome. And again, all things considered, all things considered I think that it’s a good thing actually because I want there to be more and faster data. I’m concerned about the people that can’t afford it. And that’s something that we need to have more of a conversation about.

Steve: But don’t you think it’s also kind of reaction to just the growing cord cutters? I mean doesn’t Comcast now have more internet only subscribers than they do internet and TV?

Ben: Totally and its super smart.

Steve: This is a way to protect themselves against that.

Ben: Totally and they get the cap in now when most people aren’t violating it. And by the time people start violating it, well it’s part of the landscape. No, I mean from a pure business perspective it’s a smart move by Comcast. And from, frankly from a systematic perspective, I think you can make the case, given the realities of the US political system, it’s the best of bad alternatives. I’m glad we have net neutrality but this is the tradeoff that comes with net neutrality. 

Leo: How about this? Go ahead, Om.

Om: So a little heavy thing. It got a little heavy there for a minute. I think there is another way to think about it and this is what I’ve always argued for is that if you can charge more money for higher tiers. So if you want 100 MB connection, Comcast should absolutely charge more money for it. And that’s how they pay for their network, by paying, by making more money off people to want the latest and the greatest speeds, right? Just like you would in TeleWood make the most money from people who wanted the latest and greatest Pentium chips or whatever, right? These days it’s i7. So similarly higher speeds should be going after that ready model whether than saying, “Yes we’re going for that model but we also limit how much bandwidth you can consume. And then we will charge, you know, companies like Facebook and Google and Netflix more money on top of that,” to bring the data which you and I have actually paid for access, you know, to access that data. So they want to like eat their cake, you know, have it and eat it and just it’s insane. Like I think—

Ben: A lava minute?

Om: Yea. It just is like there is, and they save so much money when they offer a network bandwidth. They don’t have to deal with, you know their frequencies on their cable are much more efficiently utilized which much fewer overheads and much less cost to them. And so from that standpoint, I think you know, they’re not being fully honest about things, like how much is their cost? They never talk about their costs. They never talk what’s the real economic model. It is all shrouded in ambiguous, you know, stuff which is what this memo was all about. You know, I think—look, nobody’s saying that you know, that we shouldn’t pay for higher speed tiers. I think absolutely. If my ISP said, “$200 or $500 for a 1GB connection.” Yep, you can have it. You know I want the 1GB connection and I will pay for it. And so that is how I think they should be pricing. And then not double dipping on the other side too. I think that’s the problem I have with the cable companies and the phone companies.

Leo: I think that for--for the caps to make sense to it would have to be tied to increased costs on their end. It seems much more likely to be—

Ben: No, that’s not how pricing works. Pricing works not based on you cost of inputs, it’s based on what price the market will bear. And that’s part of the problem here. And that’s why—

Leo: Well, or using this as the heavy hammer to discourage cord cutters. I mean the only people who are going to use more than 300GB are people who are using services that compete directly with Comcast Television business. Right?

Ben: The fundamental issue here is that Comcast effectively has a monopoly in most of the markets it competes in.

Leo: Absolutely.

Ben: I mean the other choice is not there.

Steve: That’s what we need to get at. There we go.

Ben: So I mean I guess just broadly I just have a—yes you can say what they should do and what they ought to do. I just don’t have much room for their telling businesses what they should do because like some blogger on the internet really wants them to do it. And I put myself in that category. The issue in the US is the lack of competition, and usually you do lack competition by regulation but again, for various political reasons that’s not really the case in the US. So given that, we’re in bad situation. And so my argument is, given the crappy situation we find ourselves in, all things considered, this is a better outcome than favoring some sorts of data over others.

Leo: But they’re doing both.

Ben: No, no I mean the actual stuff coming over the internet is treated non-discriminatory.

Leo: That’s not true.

Ben: It is true. The issue when it comes to coming in the back in is Netflix is always been able to go over the general internet stream. Is that for quality of service reasons, Netflix wants to—

Leo: I understand. But Comcast does not charge against its data caps for its own apps.

Ben: No, yes, exactly, which I noted. No, that’s true. And I think that is why the regulations are still problematic. Which also gets to the problems with regulations in general. You can never regulate perfectly which I think is something people tend to forget. But no, let’s not use site of the big picture. The big picture is a warped market and so my statements about this being a relatively speaking good thing were in the context of a warped market. I’d rather—

Leo: So, so it seems like, ok. So it’s either they’re, either they’re price gouging or they’re anti-competitive. But that’s the way it is because of the market.

Ben: Well it’s a monopoly.

Steve: They’re already anti-competitive.

Leo: Come on, there’s got to be something better than that. That’s what you’re saying? We’ve got ourselves into this.

Ben: It’s that the US gets its crap together when it comes to regulating monopolies.

Leo: Well they’re trying to but the monopolies don’t seem to want to cooperate.

Ben: We just had a political discussion. There is at least 50% of this country that finds any sort of government intervention at anything completely anathema and worth going to the battle parks over. That’s the reality we exist in and there’s an aspect of making—

Leo: So you’re saying, given that environment then you shouldn’t be shocked if a corporate entity is rapacious and makes as much money as it can.

Ben: Given the environment that is exactly what should have been expected.

Leo: Right.

Ben: And like I said, it’s still better than—

Leo: And with a monopoly you have no recourse. Yea it’s probably a little better than it could have been I guess.

Steve: It’s great when fiber comes to your town and you know the cable companies. I mean we’ve already seen that happen in Kansas City.

Leo: I would just argue that there is a strong, as we have said, a strong societal interest in not letting the internet service providers become these kinds of rapacious gate keepers.

Ben: It would be wonderful if they made laws based on interest on that idea.

Leo: Yea, yea. 

Ben: I agree.

Leo: You’re just a cynic.

Ben: (Laughing) about this?

Steve: He’s not being cynical at all.

Leo: He’s being a realist. That’s what cynics always say. I’m not cynical, I’m a realist.

Steve: He is.

Leo: Ben you must be excited. The iPad Pro is just a few days away. You won’t have to draw your napkin graphs on a little mini iPad anymore.

Ben: Oh, that’s a particularly bad drawing. I hate that.

Steve: Do another one.

Ben: I have a better one.

Leo: (Laughing) let’s see, let’s find some more. I’m a subscriber so I can scroll through all of this content.

Steve: Are you ready for the Apple Pencil, Ben?

Ben: I am. I’m very excited about it.

Leo: Yea, he literally this is how he does those.

Ben: It goes both ways. I mean I do all those on paper. And that’s a really old one especially and I was really lazy that day. It was actually a few years ago. I reused it.

Leo: (Laughing) oh, all right.

Ben: But there’s a—no and Paper’s amazing, especially the latest one has these really cool updates. And I’m excited about the iPad Pro because of—if you go on the Twitter article there’s a pretty good one I think. The Moment’s one.

Leo: Ok.

Ben: Just scroll down the page. I’m excited about it from a product perspective but every release of the iPad I’m like FiftyThree is making an app for the iPad Pro. And I’m sure it’s going to be awesome. And I have zero idea of how they’re going to make money for it beyond the fact that they haven’t seen money and they kind of have to push forward and figure something out.

Leo: Yea, this is nice.

Ben: They make money by selling a stylus.

Leo: Right.

Ben: And—

Leo: And a few extra colors and shapes and things.

Ben: No, that’s also free.

Leo: That’s all free? It’s all the stylus.

Ben: They make their money from the stylus. Their biggest source of income is the stylus sold in Apple Stores. Is Apple going to pull their stylus?

Leo: Why would you buy it? Why wouldn’t you just buy the Pencil and be done with it?

Ben: Well for now the pencil only works with the iPad Pro not the smaller ones.

Leo: So Apple will still sell the other one.

Ben: Well the big issue is Apple continues to be a terrible ecosystem supporter. I mean there’s—the issue with the iPad, the use case for a phone and for a computer is pretty clear. It’s not clear—what makes an iPad both intriguing and challenging from the beginning is it needs to generate new use cases that haven’t come before. And for Om’s point before those just don’t—I’m almost talking from a financial perspective but also from just a general ability of people to absorb new capacity perspective that’s really, really hard to do. And Apple needs apps to do that. But apps are only going to be developed if there’s a viable business model around building them. And they’re just isn’t one. But we talked about this last time so I’m repeating myself.

Leo: Let’s take a break. We’ll talk about OneDrive next. Prepare for OneDrive. Get in gear. First though a word from Squarespace, my blog host. It’s a really lot of fun. In fact I’ve been blogging a lot more because I like the platform so much. Squarespace is beautiful, it’s a state of the art technology and somebody was telling me, I think it was Jason Calacanis who said, “You know you’d be nuts to go out and hire a designer and build the technology and get a web engineer and all that stuff nowadays because Squarespace has all of these state of the art templates.” They do all the things you need to do. They’re mobile responsive. They look great on any size screen. They offer you e-commerce on every site. It’s a super reliable hosting. I mean you just can’t bring it down. And it’s $8 dollars a month. So this is just, it’s crazy to do anything else. And I finally, I finally listened to my friend Jason and said, “All right, all right.” And I couldn’t be more happy. I was easily able to import all my content over. In fact the great thing about Squarespace, is you go to Squarespace.com, click the get started button and then you could try it for 2 weeks without a credit card, absolutely free. You can even import some of your existing content. So you really have a chance to play with it. Get a sense of what it would be like. They’ve got great apps on iOS and Android. They make it easy to post. I wrote an entire blog post on my iPhone the other day and it was so much fun. It was so easy. You can post via e-mail as well. They’re now offering $100 dollars in AdWords credit if you opt for the business or commerce plan. But I think the best place to do is start at Squarespace.com, click the get started button, choose your template. I’m still playing with the templates. I like my template and I customized it a lot, but the nice thing is your content is completely independent of your template. So you can change back and forth. Decide, “Oh, today I feel like, you know, a little different.” If you’re a restaurant they have special templates for them, for bands, for photographers. Really great for photographers. So anybody who wants to express their unique aesthetic and vision and do it in a way that they have state of the art web technology, this is the best way to go. Squarespace.com. Use our promo code TWIT when you buy. Again it’s free to try. You don’t need to give them a credit card. But when you buy use TWIT as the promo code you get 10% off and show your support for the show. And it’s a good reason to try it today. A good reason to subscribe for a longer period of time. You know I forgot when I set it up, I forgot to use my offer code (laughing). Don’t forget to use the offer code TWIT. If you missed anything this week you missed some great stuff. Let’s take a look at what happened this week on TWiT.

Narrator: Previously on TWiT:

Leo: We have a group of 7th graders in the studio today. This is a podcasting class.

Paul Thurrott: So these are the kids that are going to stick a dagger in all of our backs.

Leo: (Laughing) They’re coming for us.

Narrator: iOS Today.

Leo: Is the new Apple TV an iOS device?

Megan Morrone: The audience said yes.

Leo: Yes.

Megan: Buy Megan an Apple TV.

Leo: So we’re watching a clip from Santa Barbara. By the way, look at how good that looks. What did she say? Backed up.

Narrator: All about Android.

Ron Richards: Google’s got a new app called Who’s Down. Always know who’s free to hang out so you never miss out on the fun.

Florence Ion: Come on, millennials, let’s hang out with our Android phones.

Don Esposito: Who’s Down.

Florence: Now we’re going to need to have people go to school just to like give therapy and how to be ok on missing out on stuff. It’s just getting really bad.

Narrator: Know How.

Father Robert Ballecer: This is something that is available to anybody who has a Google account. And this shows you the bits of data that Google has been storing on you. So these are some of the voice searchers that I've done. We have gained the trust of Bryan Burnett and tomorrow we shall strike. Wait, what? 

Narrator: TWiT. Say hello to the NSA. They’re listening.

Fr. Robert: I probably should have scrubbed this before but oh well.

Leo: Ah, I love that Know How show. And coming up a great week ahead. Let’s see what Mike Elgan’s planning.

Mike Elgan: Coming up this week, Apple’s giant iPad Pro tablet and the optional Apple Pencil ship on Wednesday, November 11th. Microsoft releases Windows 10 mobile on Thursday, November 12. Also on Thursday Microsoft rolls out its new Xbox One experience update which resigns the dashboard and provides backward compatibility with more than 100 major Xbox 360 games. For all this and the rest of the news this week, subscribe to Tech News Today at twit.tv/tnt. Back to you, Leo Laporte.

Leo: Thank you. Mr. Mike Elgan. TNT Monday through Friday, 10:00 AM Pacific, 1:00 PM Eastern time, 1800 UTC. I know Microsoft’s rolling out a big Xbox update because I got my new Beatles One Plus Blu-Ray DVDs, remixed Beatles music in 5.1 surround and I’m ready to play it and my Xbox One is my DVD player. And it said, “No, sorry, you can’t do that until you download 3.8GB of update data.” We are talking with Steve Kovach from techinsider.io. Great to have you, Steve. Om Malik from om.com and of course Ben Thompson of Stratechery. You should subscribe. Is that going well for you, Ben?

Ben: It’s going very well.

Leo: You making a living?

Ben: Yea, you should just read. I mean there’s one free article a week so, but then yea, if you want more every day, daily update.

Leo: I subscribe. I subscribe. You’ve got just really great, insightful stuff. What about, by the way I know you wrote about this on Tuesday. Blizzard, Activision Blizzard buying the makers of Candy Crush, what is it, $5.9 billion dollars? Are they nuts?

Steve: They’re the biggest video game company in the world, right?

Leo: Yea but they don’t have a sequel. They don’t have a sequel. 

Steve: It’s kind of weird that they’re, you know, just kind of hoping that another Candy Crush is in the works and they would have another big cash cow. 

Leo: Remember--

Steve: And it’s kind of rounding out their portfolio. But yea these companies, you know, there’s Zinga, there’s Rovio.

Leo: Yea, remember Draw Something? OMG Pop?

Steve: Draw Something got bought by Zinga.

Leo: How much did they pay for that? Just shows you. Two years ago they paid $200 million dollars for it, right? Four years ago.

Steve: Yea it’s like 200.

Ben: Was it?

Leo: It wasn’t that much. It seems like it was a lot of money at the time, doesn’t it?

Ben: But I’ve written for a long time that investing in mobile games is very difficult because of this problem. But that said, to be fair, Candy Crush Saga is like 30 some percent of King’s digital. Which is a lot, but they’re not just Candy Crush on your computer.

Leo: But what else is there?

Ben: Well there’s Candy Crush Soda for one. Which is also in the top 5 of games.

Leo: (Laughing) so it’s in the Candy Crush Sphere, right. Yea, yea.

Ben: Well and they have, they have like 20, 30 some odd games ranging from top 50 to top 500.

Leo: If you include Soda and Crush together, is that—I mean it’s only 30%. That’s interesting. Must be more than that.

Ben: I think those 2 together is probably more than 50%. I don’t have, I’d have to go back and look at the exact numbers. But no, I mean the general precept that these are difficult, challenging—

Leo: The problem is you tend to buy at the absolute peak. You buy when the thing is making the most possible money.

Steve: It’s still making money. Look at the App Store rankings now. Yea, top grossing, Candy Crush number 4, Candy Crush Soda number 6.

Leo: But how long is it going to last and can they—

Steve: A while.

Leo: I mean look at Rovio. Look, nothing was stronger than Angry Birds and they’ve done every possible derivative of it but it’s hard to find another hit.

Om: Because they got busy making—they want to make movies.

Leo: Movies, yea.

Om: And Toyland and stuff like that.

Leo: That was a mistake. They should have focused on games.

Om: Totally distracted from—and then there was some other dysfunctional stuff with the company which will probably never get reported on Rovio. I think Candy Crush is one of the few games or companies with 100 million+ monthly active users.

Leo: 330 million average monthly active, monthly unique users.

Om: Right. That’s just massive. Like I think we don’t quite understand like how powerful that is. I think there’s very few companies of that scale right now. I mean this company, I remember writing about King way back when. And I can’t believe like how big they have become since then. I didn’t really think of them like a company which would be this massive, right? And they started out, they were doing some kind of PC game or some kind of mobile games. But they were not really positioned to be a $6 billion dollar exit.

Leo: It feels like a successful mobile game is much like a viral video. It’s lightning strikes and while it’s clear now that companies like BuzzFeed have figured out how to make viral videos, has King figured out how to make viral mobile games.

Ben: You’re thinking about the business model wrong because that’s true for something like Angry Birds where it’s a paid up front purchase.

Leo: Ah. But this is an annuity. This is money every month.

Ben: Right, exactly. So it’s a very, it’s a very different type of business from that perspective. And yes, it is declining. It is slowly declining. And that’s very different than something that has a huge up front hit and then declines drastically. And I think there’s, I think the price does seem a little crazy to me but I do think there is logic to this on both sides. From a, from a King perspective, the hardest thing, there’s a reason why Candy Crush Soda Saga is their number 2 hit. Because the hardest thing is discovery. Is getting people even aware and trying your new product. And you bring a company like Activision with you know, Call of Duty and World of Warcraft and all these, Guitar Hero and all these sort of titles that they have and they help you get over that discovery and awareness hurdle to a much more powerful extent than almost anything else particularly among a particular audience. And that’s why you saw in the quotes coming out of this, the King CEO was practically giddy at like—

Leo: Oh, I would have been giddy too.

Ben: Well, no, particularly around the IP angle.

Leo: Right.

Ben: On the flip side though from an Activision standpoint, they’ve launched lots of games, most of them have been relative duds and they’ve all mostly been paid up front. And they’ve been experimenting a little with paid, with paid to play lately but the problem is that it’s just a very fundamental different business model and different skills set to create games that monetize well on mobile. 

Leo: What’s the secret of Candy Crush? Because it’s really just Bejeweled which was a big hit many years ago. So they didn’t even invent new game play or a new game at all.

Ben: Well, I mean, I am not a frequent player. I’ve tried it. So I’m not any expert on this. But there’s 2 aspects.

Leo: It’s addictive that’s for sure.

Ben: There’s 2 aspects to it. One is it has to be a good game. Like at the end of the day, it has to be something that people find compelling going back to. And then 2, the way in which you earn money has to be a way that at least some segment of the users doesn’t find it a turn-off and a push away. Which Angry Birds all the follow ups were just all terribly done. And frankly Activision games, and again I haven’t played them but you see this from a lot of traditional game publishers. They just, the pay to play aspect is like hitting you over the head with a hammer. And it’s a big turn off, right? 

Leo: Right.

Ben: And I think that there is absolutely a skill that comes with making people feel good about buying stuff. Buying things is not necessarily a bad experience. Amazon’s so great at it. You buy stuff and you feel great about it, right?

Leo: But buying virtual goods? It’s hard to feel great about buying virtual goods (laughing). As somebody who’s spent $300 dollars in doughnuts—

Ben: All evidence to the billions of dollars suggest that for some segment of people it actually does feel pretty good. And that’s the marriage here. Is on one hand you have the IP and the ability to break through all the noise, to get a title off the ground. And on the other hand you have the skills set to make a compelling game from that and a compelling game that makes money in a way that users don’t get turned off by. And it’s those 2 together, and not to use the dreaded corporate word synergy, but I think there is a synergy here where they’re both bringing 2 very different skills to the table and potentially to the benefit of both of them.

Steve: I hear music.

Leo: Oh, never mind. Nothing. I’m just going to play a little Candy Crush Soda. Find the bears.

Steve: I don’t even know what I’m looking at.

Leo: Yea, I know. That’s the funny thing. To me it’s like, huh? And obviously to most people. I don’t know, I don’t know. It doesn’t match—oh see, it gives me rules now. Match 3 candies of the same color in a row. Oh, ok.

Ben: You have to remember Leo your experience right now is the exact opposite of the typical Candy Crush experience.

Leo: Why is that?

Ben: Because you’re playing it with intent. Like you’re like, “I’m going to go play Candy Crush and figure out what it is.”

Leo: It’s really kind of brainless, isn’t it? I’m thinking too much.

Ben: But that’s the case with all of Activision’s games. You don’t, you don’t accidentally play Call of Duty, right?

Leo: Right.

Ben: You sit down and you--

Leo: It’s intentional. 

Ben: Install 3GB of updates and you put a headset on and you sit there for 3 hours and you play it. And all of Activision’s skills and their business model, everything is geared around an intentional activity. Mobile gaming’s very different. It’s stuff you do on the bus. It’s stuff you do standing in line. The sort of respective of the person, playing’s very different and it takes a very different skill set. And I think it’s that skill set along with a nice annuity that Activision’s acquiring.

Leo: Is it a skill set? Oh, to make the games. Not to play them. For sure (laughing). Oh look, I got a gummy bear.

Steve: You got a bear.

Leo: I think that Candy has something to do with it as well. All right. It’s a casual game. It’s a very different kind of game. Doesn’t Activision have anything in that category? I guess not. They have, Blizzard has, Blizzard has that great card game.

Ben: Yea, they have that one card game. I’m trying to remember what the name is. 

Leo: Hearthstone.

Ben: Yes. But relatively speaking that’s like a top 30 game. It’s not even in the same—

Leo: Interesting. And you know who loves Hearthstone? Gamers. It’s really more of a gaming game than a mobile success. This, I find this revolting. I just—(laughing). And Om, you can’t even look at this. Your doctor won’t even let you look at this game. I don’t think it’s approved for you.

Om: I’m just looking at how old you are.

Leo: (Laughing) is it an age thing? I think of this as being played by a lot of middle aged housewives more than anything. Am I wrong?

Steve: My mom plays it. I mean my mom’s almost 60 and she’s addicted to the pet one. I forget what’s called. Pet Saga or something. Yea, that’s all she does. She sits on her iPad while watching TV and—

Leo: Wow.

Steve: Yea.

Leo: Microsoft backed down on their unlimited OneDrive offer because people started using unlimited amounts of space. And they said, “You know, we’re not going to do that anymore.” How damaging is this to Microsoft? Is it bad or does it not make any difference at all? Silence. Dead silence. Nobody cares. Nobody cares about this.

Steve: I’m not a big OneDrive user so I don’t even know. I mean I guess I kind of—are they grandfathering people in who—

Leo: No. 

Steve: No. So you’re just totally—

Leo: You’re screwed. I mean they won’t delete your data for a while but, yea.

Ben: This was a screw up. Like it was a stupid thing to offer. And they’re taking their medicine and if anything, I think there’s potentially an argument. Again, I’d like to get more specific details around the organizational structure behind OneDrive. But remember Microsoft’s whole like functionally organizing thing where we’re going to have marketing over here and we’re going to have product over here.

Leo: Completely reorganized, yea.

Ben: This sounds like a fundamental communication breakdown. Like marketing, it sounded great from a marketing perspective. Someone from finance or engineering should have actually run the numbers.

Leo: Right.

Ben: Because this is the internet. There’s going to be bad apples that are going to abuse whatever you give them. This was totally, this should have been figured out. And like I’m sure it was just like—the thing you have to remember is that Microsoft for all, you know, I think they’re somewhere in the Twitter universe in that they’ve made a ton of great, further along, they’ve made a ton of great steps and a lot of great moves that are very encouraging. But they still have some real existential questions. One of which is they have no idea how to make money from consumers. You know, I think they’re like way worse spending a lot. And for all the talk about cloud storage going to zero, it’s still very, very expensive. When you look at, you look at Box’s numbers and how much it costs to support freemium users. It’s costing not zero.

Leo: Interesting.

Ben: And so I’m sure they were losing a lot of money on this. And it was a screw up. And hopefully there is accountability for it.

Leo: I love Peter Bright’s headline in Ars Technica, “Microsoft drops unlimited OneDrive storage after people use it for unlimited storage.”

Steve: And that was a weird thing because that was also all their messaging too, right? Remember when—

Leo: Right, they wanted you to do that.

Steve: Yea when they were pitching OneDrive too they were like, “We’re going to zero, it just gets cheaper every year for us to do this so, this is why—“ I mean I spoke to people on the OneDrive team who gave me that exact pitch when they were telling me about these updates and—

Leo: I think Ben nailed it. The marketing team did not speak to finance. I think you’re exactly right (laughing). It costs us what?

Ben: Which is a terrible mistake to make. I mean it’s—

Leo: Because it really is just about marketing. It’s about getting people to sign up for other paid programs so they get the benefit of the unlimited OneDrive. So it really is just a marketing tool. It has no real value to the business.

Ben: Yea, I don’t know. It was big screw up.

Leo: It might, I mean you could make the argument I mean that getting people to use more Microsoft services to move off things like Google Drive and Amazon might help Microsoft holistically. Must have been very expensive.

Om: Yea. I wonder if they were looking to, I’ll probably say that if they use Microsoft products you have unlimited storage. 

Leo: That’s essentially it.

Om: I mean, then they should probably do it, right? Like using Microsoft Office.

Leo: That was the deal. If you paid for Office you got unlimited storage. That was the deal.

Ben: Yea it was Office 365.

Leo: Yea, which I pay for, for 8 bucks a month and I get unlimited. Now, the real problem here is this is a communication error because the truth is you still have a terabyte and for most people, that is unlimited storage. At least unlimited cloud storage. That’s a ton. 

Ben: Yea, one terabyte is totally reasonable. It was a 100% screw up. I mean they got so in love with the unlimited talk that they screwed up. It was a great opportunity. 1 terabyte, giving 1 terabyte, effectively unlimited is a great offer. And yes it doesn’t ring quite as wonderfully in your marketing pitch but this goes, I mean again I question, it really makes me wonder about the organizational structure. I know that sounds super geeky and stuff that people don’t care about what how does this happen that you have, you make what should have been a strength and compelling offering has now become a black eye. I mean it’s pretty terrible. I mean I think it’s not going to be that big a deal in the long run. This stuff blows over. But I don’t understand how this happens in a company—I do understand how that happened. But it doesn’t make it any worse than—

Leo: It could have a lasting impact because, well of course Google’s gotten away with this time and time again. When you close down something people rely on.

Ben: Yea but Google’s not asking people to pay for it. Like it’s a trust issue and the fact of it is, Microsoft is asking people to pay money. And this is, was for a paid service.

Leo: Right.

Ben: You had to be an Office 365 subscriber. And so that makes it much worse because to get someone to pay for something is such a challenge already. And it requires a certain degree of trust and yea, they betrayed that. And that’s—when Google, Google at the end of the day is giving you something for free. And you can’t really complain when they take it away.

Leo: Anything else you guys want to talk about? We can wrap this up. Om, are you satisfied? Have you gotten everything? It’s gone from light, day to night in your apartment.

Om: Yea.

Leo: I think it’s bedtime for Om.

Om: No. It’s just time to you know—

Leo: Do something else.

Om: Actually work (laughing).

Leo: (Laughing) what do you do for, what does that mean when you say actually work. Like what are you going to do? Do you like have a stack of papers on your desk that you’re going to go through?

Om: No. You know it’s the 21st century. You do everything on the computer. 

Leo: I think, I think you’re going to be going through your Lightroom looking for more great Instagram posts. That’s what I think you’re going to be doing. I love, I love the pictures you’re posting lately. Just some great stuff. And is this all Leica stuff or—I love the black and white. Look at that.

Om: No this is all Fuji X-T1.

Leo: Oh, you’re using the X-T1. That is a nice little camera, isn’t it?

Om: Yea, I’ve been enjoying using that. This one is a Leica.

Leo: This is a Leica, yea. 

Om: I do want to sell my Leica. I don’t like it very much.

Leo: It’s too hard.

Om: No, it’s like 20 millimeter is a difficult lens for me to—

Leo: It’s too wide. Yea. What do you have on the XT-1? What are you using on the XT-1?

Om: I’m using 50mm.

Leo: Perfect. The native prime as they say.

Om: And I use 35mm on my Leica Classic.

Leo: Great stuff. I love the black and white.

Ben: Om has an amazing Instagram account so—

Leo: You’ve got to follow him.

Ben: I don’t follow that many on Instagram because I actually do try to look at every picture, but one of my favorites ever.

Om: You see my Instagram is all about no people.

Leo: That’s good because I’m sick of people, as you are.

Steve: No selfies.

Ben: You were doing the portrait series for a little bit though.

Leo: You and Chris Michael do the portrait stuff. There’s Chris himself. He’s going to be on TWiG I think this week.

Om: Nice.

Leo: Yea. He’s an interesting fellow.

Om: Yea, yea.

Leo: Smart guy. We used to get him the new, The Old Screen Savers to talk about military.com. I guess that was his first startup. And no selfies. What the hell’s wrong with you?

Om: I’m not important.

Leo: Man, don’t you have any ego? Thank you, Om, it’s always good to have you.

Om: I do. That’s why I’m on your show.

Leo: Om.co that’s the place to go.

Ben: (Laughing) I appreciated that, Om.

Leo: He’s the Yoda of tech.

Om: I’m looking like that too.

Leo: (Laughing) you’re cuddly. That’s good. That’s cuddly. I want to thank Ben Thompson as always for joining us. It’s really a pleasure. Ben as you can tell has a really sharp intellect and thinks about this stuff more than most of us. Except for Om and Steve so—

Ben: I’m super pumped up about Om. Om was kind of the original when it comes to building--

Leo: Yea, no kidding.

Om: Dude, I’m still here.

Leo: Deep thought. He is the original. And he’s still there.

Ben: I didn’t say he was gone I just said, no, one of my personal sort of—

Om: I love, I love Ben’s stuff.

Leo: I know, I know.

Om: It’s fun.

Leo: Great guys. And Steve, you and I will just sit in the corner here talking about—

Steve: Gadgets.

Leo: Yea gadgets and stuff—

Ben: Speaking of selfies, I believe that Steve Kovach was featured in a how to make a superior selfie for a Tinder article.

Ben: Yes I was.

Leo: Steve. Steve. Is it on—where is that? Is it on Tech Insider?

Steve: It’s on Tech Insider. My colleague was doing, she talked to a Tinder consultant or something and they used my, some photos of mine of what not to do.

Leo: Oh, you’re the before.

Ben: You had some, you had some favorable ones I think.

Leo: Here it is. 10 does and don’ts for your dating profile photos. Same person. You can go both ways. Aww—

Ben: There’s a handsome guy.

Leo: I would swipe, what is it, right? Swipe right?

Steve: Swipe right means yes, yea.

Leo: I would swipe right.

Om: Steve, how is your Tinder game?

Leo: (Laughing)

Steve: I don’t use Tinder. I don’t like Tinder.

Om: Uh huh.

Ben: Tinder is so fascinating as a business because the traditional problem with dating sites which I don’t see any company has figured it out anyway. But the biggest problem with them, kind of related to our Amazon discussion, is they have bad lifetime value because they don’t get repeat customers, right? If you help two people get married, the problem is then they’re no longer your customers. You have to get new customers. Tinder is a—

Leo: Tinder doesn’t worry about that. There’s always another hookup around the corner.

Ben: It’s a modern value proposition.

Leo: (Laughing) We’re not worried about long term relationships here.

Ben: It’s quite interesting actually. And the fact that they’re monetizing through in-app purchases and not advertising is actually—

Leo: How do they monetize? Do you buy stuff?

Ben: They have a $10 a month subscription.

Steve: They have the super like thing and—

Leo: Super like?

Steve: Yea, yea. There’s like some ads.

Ben: Though you’re limited, you’re limited by the number of swipes you can do in a day I think without it. I think there’s an undo function.

Leo: They need an undo function because I think it’s probably a problem that you accidentally swiped left from time to time. I’m just thinking.

Ben: Yea but then it’s a paid upgrade. It’s like a $20 a month subscription.

Leo: Whoa. Wow.

Steve: That is way too much.

Leo: Wow.

Steve: I’ll just stay single forever.

Om: This is a great service where everybody denies they use it. It’s like, wait? How is it so big that if everybody doesn’t use it?

Leo: Nobody uses it, yea. Well, I’m happily married. I don’t need to use it, thank God.

Steve: No I really don’t use it. Look, I can show you my phone.

Leo: Look, it’s nothing, there’s no Tinder on there. Zero Tinder. It’s a Tinder-free phone.

Ben: It’s not on there.

Om: You just have one phone?

Leo: Wait that looks like Grinder. What is that, oh no, never mind.

Steve: No, that’s my gym app.

Leo: Oh, that’s sad. Steve Kovach is at, he is deputy editor at techinsider.io. Do you get a little deputy badge with that?

Steve: I wish.

Leo: You should. You should get a badge.

Steve: I should make one.

Leo: Yea, make a badge. I’m the deputy here.

Om: I think you guys should bring back the newspaper boy hats. Everybody should—

Steve: Yea.

Om: With like your, like a little deputy badge or whatever. I think all like BuzzFeed, Weiss, everybody should be wearing it. Go retro. They should be the new, it could be the skinny jeans of 2016.

Leo: You know I just realized that the big, the big data breach is going to be when Tinder gets breached, right? Because right now you can’t tell, you don’t know if someone’s using Tinder or not, right? There’s no way to know that.

Steve: What do you mean?

Leo: Well I mean I can’t find out if--

Steve: Yea, I guess not. 

Leo: But at some point, like Ashly Madison. In fact I bet you hackers are working on this right now. This thorny problem. The Tinder Data Boost.

Steve: And those chats are going to probably be really interesting.

Leo: Oh.

Steve: Imagine that.

Leo: Oh. Yikes.

Om: You’re worried, Leo. What’s going on?

Leo: No, I’m not worried at all. Although my wife did a, my wife told me—

Ben: I’m not worried either.

Leo: I’m not. Why are you zooming in on me? I am not—

Ben: (Laughing).

Leo: Just swipe that. My wife did tell me that she did check the Ashly Madison database. So maybe I should worry. No I never—if I sign up for Tinder it was merely for—

Steve: Research.

Leo: Research (laughing).

Steve: Market research.

Leo: Market research. Hey it’s been a lot of fun. You guys are great. Thank you so much for being here. I appreciate it. 

Steve: Thank you, Leo.

Leo: We’ll see you next time. And for all of you who joined us live, thank you for being here. We do this show 3:00 PM Pacific, 6:00 PM Eastern, 2300 UTC. If you want to watch live, I’d love it if you do. You can join us in the chatroom. Irc.twit.tv. If you’d like to be in the studio with us, we always have a great time and you’re more than welcome. Just e-mail us ahead of time. We’ll put a chair for you. Tickets@twit.tv. Happy birthday, David. He’s here for his 50th. A reminder that tomorrow the author of Cyberphobia, Edward Lucas will be my guest on Triangulation. If you missed the New Screen Savers yesterday, Jason and, Jason Howell and Scott Wilkinson co-hosted because I was out of town. They did a great job, too.

Jason Howell: Thanks. It was a lot of fun.

Leo: Talked about 8Stem, a new end high loudspeaker and we interviewed the creator of the STEAM Carnival. Actually I did that one. Next Saturday Ian Thompson will be joining us as a co-host on the New Screen Savers. I hope you’ll stop by. Thanks for joining us and we’ll see you next time! Another TWiT is in the can.