TMW #061 | Facebook's metamorphosis, the advantage of digitally native brands, and what's going to replace the cookie?

Oct 31, 2021

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It’s been another big, busy week in Martech. Before we get into it, I have two things to share with you:

  1. Another podcast episode is out. I talk with international editor and media entrepreneur Brittany Jezouit on how marketers are influenced by media and the incentives of our content ecosystem. Listen.
  2. I’m sending out the first email on Wednesday to 37 people who are part of the TMW builders group, these brave souls will be guiding what the premium version of the newsletter, called TMW Plus will look like next year. Join the list.

Here’s the week in Martech:

  • Facebook’s metamorphosis: The company’s brand change signals a major shift in how they see the future of how people use the internet. Is any of it based in (virtual) reality?
  • The advantage of digital-native brands: Companies that start online have significant advantages compared to their non-native competitors, so why is that 90% of them are not making more than $1 million in revenue per year?
  • What’s going to replace the cookie? Perion is one of many adtech companies launching cookie replacements. This one thinks their solution could be more effective than cookies.
  • Everything else: ClickUp’s $400 M raise, Stripe is re-entering crypto, reactions from Apple’s move into advertising, ensuring online anonymity, the rush to acquire email companies, Burger King and ad effectiveness, blocking internet addictions, the Martech team maturity curve, NFTs and loyalty programs, $2 Billion dollars worth of lipstick and what can Squid Games teach us about UX design.

✍ Commentary

The metamorphosis of Facebook. Facebook has changed its name to Meta. You already knew that. But what is interesting about the somewhat sudden change of direction and the breathless memes and articles following it is that the company is trying to get ahead of something. Something they’ve been planning towards for years.

The name change signals a decided shift from a social media company to a reality augmentation company. Sure, there’s the cascading antitrust cases, the Facebook files, the enablement of coordinated genocide, teen depression, and the unending firehose of misinformation. Despite all of this, it’s clear that Mark Zuckerburg sees most of this as a distraction and impediment against the company’s quest to stay ahead of innovation and to harvest even more of our attention. Perhaps it’s even a quest to escape reality itself.

The shift from a social media company to a metaverse company is rife with contradictions. The cringe-fest 1-hour presentation, showing Mark and his colleagues in the metaverse playing games, slapping AR art on walls, buying NFTs, and presenting some very strange use cases seems misaligned from how people actually use the internet. And all of this is strange and unusual because most of what was pitched hasn’t been built yet - this name change is all about how the company wishes to stay relevant. In the face of declining engagement from the next generation and the rise of TikTok and the resurgence of Snap, Mark has to do something to show a forward-looking company that won’t spend the rest of its days investing into “platform safety” and turning up to antitrust cases. This is what Meta represents.

The company is making a big bet on the intersection of three trends - VR and AR hardware, gaming, and crypto. Investment into metaverse technologies will be running into the billions and the company is hiring more than 10,000 engineers to build it. This is a serious effort and one we should be both tracking with concern and curiosity. Yet Facebook’s vision of the metaverse faces significant challenges across these three areas, challenges that I would suggest are insurmountable.

Let’s begin with the hardware. The name change to Meta reminds me of the company’s 2011 pivot to mobile. This was a rapid change in consumer behavior they almost missed. Back then, Facebook had to transition from being a desktop website to a mobile app, triggering a fundamental shift in how the business operates. It was this pivot that drove the company to where it is today. As the shift to internet mobility happened it increased attention on devices significantly. Every boring moment in life could be replaced by a glance at the newsfeed, it was this that created a whole new economy for advertising. The pivot to Meta, however, will be a very different story altogether.

In Mark’s vision for what the metaverse looks like, there’s a heavy reliance on virtual reality hardware (Occulus). This is intentional. The company needs to find hardware that will free them from their reliance on Apple, Microsoft, and Google. There’s also a focus on AR technology as it intersects with VR, but this is the domain where Apple has been clearly investing, and that path leads to nowhere for Meta. And even though global smartphone shipments are declining and VR headset use is growing, the gap between them is still vast, and unlikely to change.

The problem with VR is that the form factor does not lend itself to the kinds of behavior patterns Facebook would want for its business model. They are the experts in monetizing attention, and the more passive attention is harvested, the greater their value proposition. With a VR headset like Occulus Quest 2, you can only use the thing for 45 minutes until you need a break. And besides, you can’t really don a headset while you’re on the train, or when you’re watching TV. This is why VR is the domain of the gamers - the use case for it is about enhancing existing modes of entertainment - not solving the problem of everyday boredom.

This should be the biggest red flag in Meta’s understanding of the next shift in technology. Despite the investment into new hardware and software, the underlying human behaviors driving it will need to shift to be able to leverage the technology. Between you and me, I’d rather use technology to enrich what’s happening in the real world, than escape it completely. But there could be other monetization opportunities for Meta in this new direction.

The word creator was used many times during the name change announcement, which brings me to my second point. Mark has realized that the attention economy is in entropy - people want more control over the data they share and creators want to earn real money instead of likes and comments. And because of this, the idea of clipping the ticket of what creators can earn looms large in this new vision.

Like every other approach Facebook takes to technology, they’ll want to build the platform to drive consumer adoption and then charge the companies that run inside it every time a transaction occurs. I’m sure that some pundits will start calling it the metaverse tax. Yet even this change of approach runs in the complete opposite direction to the community that is bringing the idea of the metaverse to the mainstream.

Crypto, NFTs, and decentralized finance communities are the driving forces behind the idea of the metaverse, especially as it intersects with large gaming platforms like Roblox and Axie Infinity. At a foundational level, the reason why there’s so much energy in this space is because of the problem of large monopolistic platforms centralizing the attention of the mass consumer. Decentralization, for all its own problems, is an attempt to help online creators and communities to build on top of something else other than major platforms like Facebook, Instagram, TikTok, Twitter, and Google.

Here's one hint: The full company name is Meta Platforms, which is a major contradiction given that the metaverse is about interoperability and integration between various apps. Mark has already said that they want to build into the metaverse, and not become it, but that doesn’t necessarily mean they don’t want to dominate it. 10,000 engineers and an entire rebrand to the literal name of the concept seems to validate this.

After all, just like the pivot to mobile, Facebook is already behind on the concept. Roblox is capturing the attention (and more importantly, the imaginations) of more than half of all US teenagers. Axie Infinity is driving more than $1 billion in annual revenue, the first major game that has created an annex between cryptocurrencies, NFTs, and gaming. Meta clearly wants in on this rapid scale, but they are not a gaming company, they are an advertising company that is struggling to keep their platforms safe from abuse and misinformation.

While the problems persist on Meta’s core apps, moving towards the metaverse will continue to be the subject of regulator scrutiny and consumer hesitation. A case in point is the next iteration of Occulus which will include face and eye tracking, and begs the question - do we want more of our lives tracked and measured?

I’d argue that most consumers don’t really care all that much. But for the people who are working for companies who are funding the attention economy through this ad model, we need to be asking if this is the kind of future that we want Facebook and other major platforms to build for us? I have no doubt that in whichever iteration of the metaverse we find ourselves in, it will be one where our behaviors and interests will be surveilled.

Outside of the memes, the vitriol, and the condemnation Meta is receiving at the change of their corporate branding, one thing is clear. If the big tech companies are willing to invest billions into this idea, they will be creating tools for brands to participate in it too.

The role of the marketing technologist is often to take whatever tools Silicone Valley creates and turn it into a market advantage for the companies they serve in. The metaverse will be no exception, and I suspect that in the near future, every brand will have someone thinking about this in the same way these tech companies created the social media manager, the SEO consultant, and the programmatic ad buyer.

Right now, Meta is mostly a dream, which is hard up against significant hardware, software, culture, and human behavior challenges (not to mention anti-trust and regulatory issues), but tomorrow much of this could be solved, so maybe now’s the time to hire a metaverse manager? Links: Mark Zuckerberg Interview. The vision for Meta in 2018. The arrogance of Meta. After the Facebook Papers. Web 3.0 and the attention economy. NYTs. A deep dive into metaverse marketing. The branding decision. Is Facebook giving us something we haven’t asked for? Vanity Fair on how the Metaverse will change everything. Axie Infinity.

📈Chart Of The Week  

The advantage of digital-native brands. McKinsey claims that digitally native brands (DNBs) are bottom-heavy in the economy, with 90% of them realizing revenues of less than $1 million per year. DNBs are brands that start online and offer primarily digital goods or services, which makes them primed to compete outside of the digital realm. Notable examples are D2C companies that end up landing up on grocery store shelves or online influencers who start their own fast-food chains. The advantages of digital natives are their control over the customer file, and consequently, their understanding of their customer’s needs. Link

📰 Latest Developments

Perion launches a cookieless identity solution. There seem to be dozens of new cookie replacement technologies coming out recently, ensuring duplicity and inefficiency in the tracking marketing for years to come. One of them, Perion’s SORT (Smart Optimization of Responsive Traits) is interesting in that it runs outside of Google’s ecosystem and uses machine learning to identify and places users in groups based on a variety of contextual signals rather than content consumption. Perion claims that the network is showing better performance than cookie-based targeting. Link

ClickUp raises $400 million. The company is now worth about $4 billion, which is not bad for a company that was late to the productivity software party. The way they are differentiating is through centralizing (docs, process apps, tasks all in one platform). This was the promise of Atlassian, but everyone still uses Google docs with Jira or Trello. Along with Notion and Airtable productivity apps are having their second renaissance. Link

Stripe is re-entering crypto. This will be very important for small businesses, online creators, and tech startups. Cryptocurrencies are becoming a viable way to transact online, and while it does away with frictions like exchange rates and cross-border delays, it also introduces new ones in the form of price volatility, gas fees, and supported currency types. Stripe did for payments what banks couldn’t do - create a flexible, API-first ecosystem that simplifies payments. Could it also do the same for cryptocurrencies? The opportunity is here, but we’ll have to wait and see. Link

📚 Reading

Apple and ad measurement. Online advertising is often an art masquerading as a science. As Apple has blocked Facebook and other apps’ ability to measure effectiveness, Group M is suggesting that despite this, ad budgets won’t change much outside of the performance marketing space. This is because ad attribution has always been flexible. So long as revenue and sales targets are met, there’s no real incentive to stop spending on these platforms. Link

Trusting AI. There’s more talk coming out of the industry on the patterns where AI can create value for marketers within reasonable risk appetites. Two areas are impacted by this stream of innovation: Programmatic ad buying and customer experience. Trusting artificial judgment over an ad budget or the conversation your brand is having with your customers is still highly contentious, and should be. Links: Ad buying. CX. (Also see last week’s commentary on the topic in #060).

Ensuring anonymity. The UK Information Commissioners Office is investigating online anonymity to come up with a better, more defensible position on when tech companies are preserving a person’s right to being online anonymously or pseudonymously. Data sharing in the ad economy is where all the risk and bad acting is occurring, and so government oversight and regulation is needed. Link

🔢 Data & Insights

The rush to email M&A in 2021. Email platforms are consolidating. There’s a significant amount of acquisition and merger activity happening in the technology category, which is being driven by increased web privacy regulations and constraints on paid social and search channels. Email is ancient but keeps riding the waves of internet change, becoming a catalyst for the marketing platform/clouds/suits we see today. Link

Stripe on the creator economy. The company has released a report on the creator economy, which is important because Stripe is a core layer in payments in monetization for small businesses and solo entrepreneurs. Creators that are actively monetizing their work will soon pass $10 billion in earnings and have grown 48% year on year. Link

Burger King and ad effectiveness. The company is losing ground to other fast-food chains despite the company’s often viral and downright strange marketing strategies. They can get everyone talking about moldy whoppers, but it’s not turning into people eating them. Link

💡 Ideas

Blocking internet addictions. An interesting innovation from an Australian bank, Westpac, gives users the ability to block transactions from gambling industry companies. It’s also enforced for people under 18 years old. Sadly there are many people who need a servicelike this as gamification methodologies to hook users become increasingly sophisticated. Link

The Martech team & tech maturity curve. An interesting perspective from Martech Tribe, attempting to track the stages of maturity when teams adopt new technologies. You could overlay a Dunning Kruger, or a Gartner Hype Cycle framework over the top of it and not much changes - there’s always a trough of disillusionment. Link

NFTs and loyalty programs. There’s something most of us are missing between conversations about “NFTs are the future” and “why would you pay for a JPEG, lol.” Tokenisation is a viable pathway for a new form of loyalty program. Going beyond points and cash, Clinique - a makeup brand is experimenting with using NFTs as a way to reward customers. Link

✨ Weird and Wonderful

Can Squid Games make you a better UX designer? Link

Teen girls, TikTok, and tic disorders. Research is saying that teenagers are developing at the Tourettes-like syndrome after almost two years of obsessive use of TikTok compounded by social isolation during lockdowns. Link

$2 Billion in lipstick. A Chinese live-streamer “lipstick brother” managed to sell a record amount of product in just one day on Alibaba. Personality, influence, and distribution are creating situations where legacy brands can’t even get into the game. Link


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Want to share something interesting or be featured in The Martech Weekly? Drop me a line at juan@themartechweekly.com.

Juan Mendoza

Marketing technology strategist at The Lumery, I analyse marketing, data, and technology trends for some of the most well-known Australian and global brands.

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