Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley by Antonio Garcia Martinez is mostly about his crusade to bring Facebook into the modern world of Internet advertising. He explains why the fight that got him fired wasn’t relevant in the long run:
The Great Facebook Ads Debate of 2013 ended up being moot, or at least, a debate whose import would be more strategic and long-term than tactical and immediate. For all the Sturm and Drang, Facebook’s quarter-saving gold mine, the thing that catalyzed the stock out of the post-IPO doldrums, wasn’t Custom Audiences or FBX. A third product, the only other novel ads product Facebook launched during its harried IPO period, code-named “Neko,” was that savior. The product itself, like so many, was simply the combination of two otherwise disparate domains: Facebook’s ever-addictive News Feed and ads inventory on the Facebook mobile app, instead of the desktop site. That’s it: ads in News Feed, while the user was on his or her mobile device—that’s what saved Facebook.
In retrospect, it’s clear to see why Facebook succeeded on mobile. For starters, data. On desktop, the browser and its cookie pool (that even third parties like data brokers and even Facebook can read from and write to) mean there’s a lot of data sloshing around for every Web browser. The fact you’re pricing your car on the Kelley Blue Book site, or searching movie times on Fandango, is something that’s known not just to Fandango or Kelley, but to an entire world of data brokers and targeters. In mobile, Web browsers generally don’t accept third-party cookies, which means that someone other than the New York Times can’t read or write data about you when you’re on nytimes.com on your mobile browser. Contrast that to the data mayhem that reigns on a desktop browser. Also, that mobile browser typically does not have access to your unique device ID, which, as we’ll see, is the real identifier that matters in the mobile advertising world.
Second, the triumph of apps as the core mobile experience. Think of it this way: from the data perspective (if not the technical one), an app is like a unique browser for a specific company, which that company has built so you can experience its very particular website. You effectively have hundreds of unique browsers on your phone, with which you read content and buy goods or services.
If you’ve gotten to level 47 in Candy Crush Saga, searched for a house on the Redfin real estate app, or bought something on Amazon’s mobile commerce app, that data lives and dies inside those apps, and never leaves. This means that on mobile, at least datawise, you have a first-party relationship with a few apps, and that’s it—there are no data middlemen.
This was confirmed in a big way when Facebook Ads launched the only truly novel thing it’s launched since the IPO: the Facebook Audience Network. AN, as it’s known, is easy to understand: it’s simply Facebook Ads, powered by Facebook data, running on apps other than Facebook. As such, it’s the cleanest test of the value of Facebook’s data. The performance of those campaigns, in terms of both clickthrough rates for advertisers and actual monetized CPM for publishers, was very good, indicating that in the land of the mobile data blind, the one-eyed Facebook man was indeed king.
All this meant that while on desktop high-quality publishers with engaging formats competed with Facebook, on mobile the pickings were very slim indeed. Nonintrusive but stylish ads, which paired well with organic content from your friends, on an app experience like Facebook, which featured supremely focused attention and a crazy-high engagement rate (clickthrough rates on Facebook’s News Feed reached easily into the single-digit percentages), were very competitive with the mobile alternatives. This meant Facebook had the mobile advantage from the get-go. Those two things, data and high-quality formats and placements, meant that Facebook dominated mobile like few other incumbents had managed to, and would dominate for the foreseeable future.
One of the pleasures of Martinez’s book is that it reminds us how unpredictable financial success can be:
None of this, of course, was even remotely apparent in early 2013 (despite whatever Facebook claims now), when the ego pissing matches in Sheryl’s conference room depicted in this book were raging. That’s the nature of Valley success, however: you try ten things, based mostly on random hunches, a few key product insights, and whatever internal mythologies your culture reveres. Seven of them fail miserably, are discontinued, and are soon quietly swept under the rug of “forever today” forgetfulness. Two do OK, for more or less the reasons you thought, but they don’t blow the doors off your success metric. And one, for reasons you discover only after the fact, becomes a huge, transformational success. The amnesiac tech press weaves the narrative fallacy around the proceedings, fabricating a make-believe dramatic arc from steely-eyed product ideation to flawless and unhesitating technical execution. What was an improbable bonanza at the hands of the flailing half-blind becomes the inevitable coup of the assured visionary. The world crowns you a genius, and you start acting like one. When the next usage or revenue crisis hits, you repeat the experiment, rolling your set of product dice on the big Valley table. At some point, you don’t find the crisis-solving winner, the dealer sweeps up your remaining chips, and you’re busted. The company fails and your logo is recycled as a reminder of corporate mortality. Then everyone wonders how such a confirmed genius could have possibly failed, and ruminates on the transience of talent.
[Note that Martinez’s own creation would have been successful when compared to any yardstick other than the rest of Facebook’s revenue:
What about FBX, our baby in this drama? FBX’s revenue, which was just starting to show signs of explosive growth toward the end of my Facebook tenure, hit its stride in the months after I departed, reaching about a half billion in revenue by early 2014, all of that absolutely new. That means FBX was one of the fastest-growing new-revenue products in Facebook history, second only to the billion-dollar News Feed bonanza described above. And it was built with a handful of people at peak development, while News Feed ads required a small army to create and maintain. … Despite that everlasting antagonism, FBX stubbornly holds on, too profitable and too strategic to shut down (for now at least), much to the chagrin of the Bolands and the Bozes of Ads.
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More: read Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley
Oh, such sweet nostalgia!!
It’s a decent explanation of why no-one makes web apps for the phone’s browser anymore. They don’t want our browser history shared with their competitors, so the cost of using their app is a few gigabytes of flash for their own custom instantiation of the UIWebView widget. Apple & Samsung benefit by being able to charge $200 for a paltry increase in flash allowing you to use 1 app or 2.
I think the idea that out of 10 ideas, 7 are flops, 2 are moderate hits and 1 is a home run is overly optimistic. At Yahoo, the “genius” Sandberg scored zero out of hundreds of at bats. Really transformational ideas that lead to big $ are black swan events. In 20/20 hindsight, Facebook seems unstoppable but it could have easily turned out that there was NO way that they could have monetized their audience to the extent that they have. Of course with half the people on earth looking at Facebook, even collecting pennies per member would have added up to a lot of $, but not what they are making now.
One of the paradoxes of the web is that you can get millions of people to use your site but if you try too hard to monetize those eyeballs they will disappear. The simplest example is a paywall – if you want to get rid of 90% of your audience, just put up a paywall and they’ll be gone in a flash.
Since Antonio seems to be reading this, I have a question for him. Wouldn’t he (and especially his partners) have been much better off selling to Twitter, closing the sale and then quitting for Facebook after a decent short interval? After a month or 2 or 6, he could have said “this isn’t working out guys – it’s just not clicking for me” and quit with plausible deniability. I realize things move quickly in SV, but if Facebook was really hot for him, they surely would have held their offer open for a little while.
Re: jack crossfire’s remark – I see it as a step backward. On the desktop, all you needed was a browser and the whole world was yours but on your phone you need a different “app” for every destination. Sometimes the “app” has functionality that is not achievable inside a mobile browser but most of the time you could achieve the same goal (and the proof is that in fact they do, but on the desktop). Maybe the big boys (FB, etc. ) can justify an app but do you really need/want the “Payless shoe store” app? You gotta be kiddin’ me.