Introduction

Patrick: [00:01:24] This week's episode covers a new set of topics. The conversation with Niel Robertson covers media, eSports, content distribution, marketing and a lot more. Niel started a software company out of his bedroom when he was 14 years old, and sold his first company in 1999 for $280 million when he was just 24. He has started and sold other companies to Twitter and Cisco. He started another large business that ultimately failed. He's been an investor, venture partner and serial entrepreneur. You can find more about Niel's background in the show notes.

As I often do, I cut the long background section from the interview so that we can get right to the meat of things. But Niel concluded that section saying, "I think it could all be summed up by saying I just like building things and I can't stop doing it." In addition to the overall media landscape, we discussed the role that the biggest media platforms will play and where other opportunities may exist. We cover digital collectible stored on the blockchain and what type of digital assets may be leased out to others. We close with the discussion of leadership, company structure, content creation, and something you should do each year. Please enjoy this unique conversation with Niel Robertson.

Value of Influencer Marketing

So there's in our, when we first met and in our thinking and emailing back and forth about this conversation, there are so many different avenues that we could go down and talk about. So I'll do my best to return to a few common themes. And those might be the state of media content, the role, you already mentioned of influencers, this idea of marketplaces, and technology and content and how these all fit together. We can talk about things like eSports and digital collectibles, and I think all of these threads can be tied back to some core concepts. So maybe you could begin by giving your assessment of the landscape along those major themes as you see it today, maybe specifically with media and content as like the big thing, overarching all of this, and then we'll go down these individual paths.

Niel: [00:03:12] Absolutely. So I got sucked into thinking heavily about this problem, problem space because my business partner and I had jumped into the influencer marketing game. And for those that are not familiar with influencer marketing, they've witnessed it even if they don't understand the underlying industry. Generally speaking, it's finding anybody that has an audience, whether it's this podcast or a model on Instagram, or anything in between, now people on Twitch, for example, playing games, anybody that aggregates an audience and leveraging that aggregation of an audience to help promote something, usually products. That's as complex and simple as it is.

When we started in the industry, it was very much focused on retail. So there had been a number of really insightful people that had built really big businesses out of nowhere by taking advantage of this new channel. So one of the early players, for example, an Australian company called Frank's Body Scrub, was someone who was a barista in a coffee shop, and people kept coming in and asking for the coffee grounds. They said, "Why are you putting them on their plants?" And he said, "No, we actually put them in our face cream. And there's something about the caffeination of the coffee grounds that is really wonderful." So they looked into this and decided it was a great product category, and they built this campaign where essentially, they got, early on Australian models to essentially, rub coffee grounds on their face, post it on Instagram and say, "This is the new new thing."

That company completely leveraged the most intuitive, best parts of influencer marketing, which wasn't even a thing when they started and built something like a $30 or $40 million business over three years. And it has now gone on to develop a whole bunch of other products and it's pretty big. And there was a bunch of other people that really jumped in early on to do that.

So what's happened though, is that influencers have gone from being really a marketing channel of someone that is really just a way to display a targeted ad which happens to be in a picture on their Instagram feed, to be much more respected and looked at as content creators. So as media companies are all jostling around trying to figure out what the future looks like, and as traditional media companies, the Viacom's and AT&Ts of the world are starting to look at what the landscape is looking like the next 10 years, they're realizing platforms like Instagram, and Facebook and YouTube and everything else are actually much more direct competitors than I think perhaps they had realized before. And at the core of all the strategies of this business is actually creator-led content or influencer lead content.

I think, maybe about six or seven years ago, Zuckerberg woke up and said, "This generation is about mobile, everything has to be mobile." And I remember them making that big shift and the first mobile app coming out, and it was really horrible and slow, and they took a while to get it right. All those companies have essentially declared that the future of media is essentially influencer creator-led media. It's the media you start consuming in relation to a person that you admire, as opposed to necessarily a TV show that you just randomly find on Netflix and start binging.

And so the industry has gone from one that's on the hunt for the most effective person to put your product into their feed, to one that really is valuing these influencers and creators as core to the future of media companies and Instagram's launch of Instagram TV, and the commentary they made around it, essentially just validated that that is the strategy that Facebook believes is the future.

And so you've now got a whole bunch of multi-billion dollar platform companies that are really media companies gearing up to try to figure how to build relationships with these influencers and creators. Because creators are not going to have a relationship with six different platforms, they're not going to put content in six different platforms. But someone who's 12 will probably wake up in two or three years, walk into the living room, flip on their Roku TV and see Instagram TV on there and that's the content they'll consume, as opposed to going to HBO or Netflix as their first point of entry.

Patrick: [00:06:42] I'm always interested by how these big changes, and you feel it everywhere, there does seem to be more of an emphasis on individuals versus companies and the people have become the brands is a big trend. Thinking about it as a builder and an investor and business person. What's that angle? So what becomes most attractive, this sounds like you got the most well-financed fast moving companies in the world competing to build the most attractive platform for these people. It seems like a scary space to be as an investor or a business person. So how do you think about that angle?

Niel: [00:07:13] I mean, the thing that I love about what's happening is things that were essentially the purview of large corporation, go back as far as you want to newspapers and conglomerates, and Hearst and Contemporary, NBCs and ABCs, one individual person can build something more valuable than they can from a media perspective. I think that's an incredible disruption on a global scale. I remember, early on in the days of Snapchat, there was a channel on Snapchat called Arsenic TV and it was pretty R rated not safe for work stuff. But they had a lot of attention. And I remember the day that they posted that they had more active viewers than MTV did that day. And that was like six years ago. And that was the moment for me, where I realized there's going to be a lot of people that are going to wake up and have a pretty hard day, in the next five or 10 years.

So where to sit in that landscape? Well, a lot of the players that entered the space and tried to build businesses around this early on, really took the methodology that we tried in my last business, which was to create a two-sided marketplace and essentially, look for the money flowing between both people. Brands are paying influencers to post about their products and look for a way to take advantage of the growth of that money as a general industry. And so they set up a two-sided marketplace, on one side, they recruited brands and the other side they found influencers and creators and essentially executed campaigns in the middle, and they take a percentage of that spend. There was probably 20 or 30 companies that jumped into that space on a global basis, probably 50 or 60, in the first five years.

And it's not a bad thing. It's very hard to scale that business at the end of the day. Because when you actually run the campaign, it means when you get into the subjectivity trap, people call you and when people call you and debate subjective outcomes, you end up having a lot of stuff, and you end up regressing to being agency.

So my business partner and I looked at the industry and said, "That's not what we want to be." I've got some scars from my last business doing that. And my business partner, Jeff has come from a world of building SEO businesses where you're trying to take advantage of content and searchability of things. And it dawned on us that influencers was an incredibly searchable space. It's all these millennials looking up all their favorite influencers and typing that into Google and typing in different things that they're doing. And that by definition, is a very content-centric space. These influencers are creating content. That's a terrific gift from an SEO perspective, to find a brand new landscape that's expanding geometrically or exponentially that has both searchability and content at its core.

And the business that you build on top of that, historically, has always been a community. And community's a funny word, you have to squint at it a little bit. But LinkedIn at the end of the day is a community. It is a community of business professionals. It just happens to be every business professional. But if you think of my two dimensions searchability, when I met you or when I was introduced to you, the first thing I did was type in your name LinkedIn and look through your history. That's how I get to know you and find commonality. But also, you create a lot of content. And so your resume is content. But you also might publish this podcast to your audience on LinkedIn, or in other places. So that the community around your business professionals is a perfect fit for my example. If you look at other professions, there's almost one major website for every single important profession.

So Stack Overflow is a huge, probably multi-billion dollar valued company, it has about 50 million developers on it. And developers discuss code and ask each other questions. That's the content of developers, Dribbble and Behance are for graphic designers, and they each have about 10 million members in the community. And those members show off all the photography and artwork and design they're doing. We're all very familiar with IMDb, we search on movie stars all the time, and what movies were they in. Oh, where's that shoot taking place with that beautiful building in the background? And they're producing a lot of content as well. IMDb has 350 million page views a month. It's actually owned by Amazon.

Patrick: [00:11:01] Wow.

Niel: [00:11:01] And so House, which is another multi billion-dollar company-

Patrick: [00:11:04] Yeah, I know that one.

Niel: [00:11:04] ... is a community for designers. And guess what? You search on things about your home design, and designers like to show off the designs that they've done. And it's actually a very content centric community. So the actual original inspiration of a community that I thought at first was this company called Model Mayhem, which 10 years ago helped models who have a lot of content, their portfolios, put them online, and disintermediate their agencies. And guess what? A lot of guys and girls are searching on these models to try to find these pictures. It's not always business-related, but it created a massive landscape for SEO. Before Instagram existed, Model Mayhem, had about three or 400 million pages a month as well, and ended up selling that business, I think to Internet Brands.

So Jeff and I said, "That's the model," no pun intended, "is to build a community." And so two years ago, we set off to do that, to build a company called influence.co, really in the shape of LinkedIn, or Stack Overflow, where we studiously avoided being in the middle. We always wanted to just be the matchmaker to acquire information and turn it into something SEO-able, and thus be able to build a very large, scalable business that costs very little to grow because of the SEO value. And that's where we're at now, it's really, really fun to... I'm probably overly obsessed every day by looking at the growth numbers. But it's great.

Changes in Distribution Strategy

Patrick: [00:12:21] The idea of just like... I love talking about just generic business models and helping people think about their own business and ways of improving it. Since you've started, run, invested in, viewed from afar, all sorts of different businesses, this is a neat opportunity to really talk about the present state of the art and future of distribution of products. Obviously, influencers is one way of doing that. But I wonder if there are other large changes that you've seen, maybe just across your own career, as you're trying to sell products yourself in the way that that is done. And something I think a lot about as well, and maybe it's community building, maybe that's the best thing you can do as generic advice for somebody out there, is however small it is just build your own tribe or community. Are there state of the art things that you would encourage people to think about when it comes to, and I know this is probably massively different for like a B2B versus B2C sales. But maybe we could cover both.

Niel: [00:13:15] Yeah. I mean, I think it really does depend categorically. So one of the other businesses that I helped build with another fraternity brother of mine at MIT, is a business called VigLink. And VigLink is the largest, really we call it a meta affiliate. So a lot of people don't actually know much about the affiliate world. But it's fascinating and it's billions of dollars. If you're reading a blog and the blog, say it's a mommy blog and the blog mentions a stroller and that stroller links to Amazon, you might perceive that as just utility, but deeply buried into that URL is a code that allows the blogger to make money, if you click on that link, and then buy something.

What's interesting is you don't have to buy the stroller to make money, you can buy anything. And so embedded in that URL or that cookie is essentially a time window that says, whatever you buy in this time window on Amazon, you get paid 4 to 8% of. But what's interesting is if you then go read another mommy blogger's blog and click on another link that sends you to Amazon, the attribution goes to that person. So there's a whole affiliate attribution last in war that goes on. But this is a huge part of how Amazon built their business early on. They pioneered the concept of taking traditional word of mouth referrals and putting it online.

It is a very, very effective way to grow some types of channels. Blogging has essentially... That really is the birth of influencers at the end of the day, is finding people that have aggregated audience and then talk about products and push people towards those. It's great because it's very traceable. But as things move to being a much more visual medium on Instagram, people just took the simple way of having someone put up a picture of the product and off you go.

I think when it comes to B2B, it's really tricky to find an angle. There's always something new. So SEO was very big for a while, content marketing or inbound marketing was very big for a while. But people tend to flat it out extremely quickly these days. So I think there's interesting things that you can do with like co-registration with partners. So once you've signed up for a free trial with someone, they recommend you to sign up for free trials on other things. There's distribution channels like AppSumo, that let you pre sell bundles of stuff to try to get scale in your marketplace.

I think though, that, to be honest, in the B2B space we're tapped out of anything new and interesting. I think there's a bit of a squeezing blood from the stone happening for those kinds of companies these days. Because B2B stuff doesn't work really well with influencers, it's much more of a commercial product. But there will be a low and then something new will arrive. So I mean, I wish I could give you some divine insight, but I actually think perhaps, one of the insights from an investment perspective is that it's really, really hard to build unit economics in a B2B software company now, which is what completely drives the whole B2B scale and investment side of the house because there aren't new creative things that are emerging. People are actually-

Patrick: [00:16:07] On the product side or on the distribution side?

Niel: [00:16:09] On the distribution side. People are actually going back to things like hiring 150 23-year old's and sticking in an office and having them call people. I mean, I did that 10 years ago, when I built my business. And I thought everybody had gotten away from that. And that's pretty much what people are doing now. It's really amazing, or doing huge amounts of scraping on LinkedIn. There's just rooms full of people in the Philippines that for $4 an hour, just go through and scrape information off of LinkedIn and try to compile lists for you. And those lists are primarily for phone lists.

It gets really interesting, too, depending on how aggressive the authorities are about GDPR. Because those traditional... You scrape and put stuff into marketing drips break a lot of the GDPR regulations. I think it's going to get harder before it gets easier, probably in the next five years for those kinds of companies to scale really quickly out of the gates.

eSports Industry

Patrick: [00:17:00] The next topic I'd like to cover is back to media, I want to talk about some of the very recent events that we've been emailing back and forth about, but before we do that, I would love to spend some time on eSports. So this is something that I've been asked to discuss on the podcast quite a bit, and we never have. So an overview of that ecosystem would be interesting, from your perspective, both in terms of just what's happening, but also maybe the potential investment opportunities that exist in that world. Because it's a great example of new content, audience building, all of these things.

Niel: [00:17:32] Yeah, I mean, I think the challenging thing about giving an overview of eSports is that its becoming everything at once. It's changing how people think about building facilities and where they think about building facilities. It's changing... My friends in Australia are very tied to a casino that's in Melbourne, and they have a huge amount of eSports events in the casino that drive a lot of business there. And that's not something... I mean, I guess you can say eSports is related to sports betting and that makes sense for a casino. But that's not what it's about. It's really about what the event space the casino's being used for. Merchandise, ticketing, I mean, of course, with all the sports betting changes the United States. And then now not to make everything about influencers and creators, but the audience builders on Twitch are unbelievable. Pop Culture is essentially moving into games, which is fascinating.

Patrick: [00:18:18] Can you say a little bit more about that, just because I'm just using myself as an example, I'm 33. And I've totally missed this. I've never watched a game. I don't even know what the games are. I don't know if it's Madden, or if it's some other game. So even some of the very basics about what's happening would be interesting.

Niel: [00:18:35] The game industry is shifting around a lot as well, because I think people are trying to build games that are as interesting for viewers as they are for players, which is a-

Patrick: [00:18:43] Interesting, yeah.

Niel: [00:18:43] ... really interesting thing. I mean, you and I probably maybe grew up with an Xbox or-

Patrick: [00:18:48] Exactly.

Niel: [00:18:49] ... a PlayStation or whatever and played Grand Theft Auto until our fingers bled. But someone maybe came in for a minute, watched and left. So creating games that are as interesting to view as they are to play is a whole new category. I think the most, the one everybody's talking about now is Fortnite, which came out on YouTube and Twitch and just dominated everything. And that was the one that Drake was playing with Ninja, one of the Twitch stars and end up getting something like 608,000 concurrent views, which is more than a lot of professional sports will get for a single game. But that game is actually like a Battle Royale game. I don't know if you ever saw the movie Battle Royale.

Patrick: [00:19:22] Yeah, sure.

Niel: [00:19:22] So I mean, you're basically are dropped onto an island that has diminishing amounts of space to run around, and you basically pick up weapons and you build structures to essentially knock everybody off.

Patrick: [00:19:32] Try and kill everyone else.

Niel: [00:19:32] Yeah.

Patrick: [00:19:33] It's exciting.

Niel: [00:19:34] There was like a million people that watched that happen. So that's like all of a sudden, in the middle of a football game, they decide to take all the laces out of the football, and cut the football into pieces and create a new game of Pogs out of the football leather and just play that for an hour. It's like nothing to do with the game. But that just doesn't happen in traditional structured sports games. And so I think that complete and utter experimentation of what the actual game is inside of the game itself, is just going to lend itself to a different type of engagement. So I don't know, I thought it was fascinating.

Patrick: [00:20:06] In this world, I've heard that name, Ninja, before, so he must be the number one guy or something. Clearly an example of an influencer. Do you think that the value in this kind of value chain will indeed accrue more to these people themselves versus the companies that are just really good, like a Facebook? You sent me this article about Facebook creating basically tools, all these companies creating tools for content creators, trying to extract back to your first message, the best stuff onto their platform and take it away from the traditional media companies. I'm always skeptical that the future is going to be much different than the past. And so I'm curious how much you think it's appealing to be an influencer versus to be a platform?

Niel: [00:20:46] Yeah. Which one to be. I mean, my friend Ryan, who I work with technically, on all of our projects, we always have this phrase, just everything is hard. Nothing's a layup. So a bunch of different comments. One is, I think, the battle that's happening between the platforms right now is really around who can create a relationship with an influencer creator by giving them the most ways to monetize themselves? Anytime you're an individual, building a business and monetizing is hard. No matter what you're doing. If you're a musician, or you're a digital marketer that's doing consulting or you're someone that's creating content to an audience.

And so they're trying to win over these friendships by looking at all the different ways you can make money. And what's happening is that there's actually a lot of different ways that you can make money now as an influencer, this is another big change that happened. So in the early days, you could basically go onto YouTube, try to build a big audience on YouTube and monetize your YouTube shows with ads. The CPM rates dropped dramatically on YouTube, which sent everybody into refer. And that was right around the time that sponsored content was actually rising. So people started to be able to charge a lot of money to do sponsored content and maybe create a video about how to use a piece of software, whatever the case may be, and those numbers went up. Because there was a lot of supply now in that space, because everybody flooded in and said, they were an influencer, those numbers are flattening up as well.

So what people are really starting to do, and this was led by a company called Patreon is start to do direct monetization with their audiences. That means I'm going to hold back some of my content for my audience that wants to spend $4 a month with me. And Patreon is a company that was funded, it has about 100 million dollars that led the charge in helping influencers and creators essentially just collect money from their audiences. And a lot of it are podcasters, a lot of it are YouTubers, but it's spilling into other things like traditional players.

What's been really interesting about what Facebook has done recently is that they have essentially said, "We're going to try to help you with every part of your wallet. So you can make ads because of the videos you're producing through Facebook Watch, we're going to try to find brand deals for you to help you make money as a creator. And we're also," they announced that they're providing direct monetization tools in direct competition with Patreon as well. YouTube has come back and said, "Okay, we need to help you monetize better." They actually had paid subscriptions about two years ago, they took them off, except for gaming, so that they could compete with Twitch, and now they've reintroduced them again. So all these people are scrambling to try to help people make as much money as possible.

And then you've got Amazon over here, that owns Twitch, which is one of the greatest secrets of Amazon's portfolio, who has been helping people like Ninja have subscription channels, and do in game monetization. So whatever, when you kill the big boss, someone sends you, they're called Cheers on Twitch, someone sends you $5 worth of Cheers and you can end up making a ton of that money. And a lot of that stuff comes from a lot of the live video platforms. I mean, both the very safe for work live video platforms and the not safe for work live video platforms, like a lot of the Webcam girl stuff is all about in game gifting and things like that, as well as companies like YouNow and YY out of China that are you can sit there and talk to people and give them money. So the platform companies are scrambling to try to create these relationships and try to create these monetization strategies for them.

Is it better to be an influencer or a platform? I think the challenge of an influencer is, how do you scale yourself? How do you not have to be streaming for 80 hours a week on Twitch to make ends meet? Because I think what people are very wary of is that early, early YouTube people started to make money but the CPM rates dropped so much that you could be essentially making videos with millions of views and making two or $3,000 a month. Barely enough to survive as a YouTuber.

So I think it's going to take a major shift for people to be able to directly monetize with their audiences and for those audiences to learn what kind of content they want to consume in a way that they'd be willing to pay for it. And then I think whoever wants that formula is figured out and it's happening, it'll probably take another few years. I think whoever has the best distribution to audiences that are willing to pay, back to distribution again. Because I am not so sure that your audience on Instagram, if you're whatever, an Instagram model your audience on Instagram is the one that's going to pay you $2.99 a month.

It's more likely that if you've created a Facebook group and you have a highly engaged audience there, they're going to be able to turn into money. Or maybe it works really well on Twitch because people are just sitting there watching you all the time. One of the most monetizable categories is actually podcasting. Because as a friend of mine who's in the space said, "You're getting something to listen to you for 30 minutes or an hour, they're already pretty heavily engaged, they're probably likely going to end up paying you $2.99 or $4.99 for specialized content."

I think the thing that is the long-term strategy here is both for platforms to be able to win the future of eyeballs by having creators on their platform that are essentially creating content. But also one of the biggest problems for brands is they can't spend enough money with influencers and creators. This is actually one of the biggest issues of the industry right now. You can spend $5,000, you can spend $100,000, but it's very hard to spend a million dollars on an influencer marketing campaign right now. This is exactly the same problem that happened in the SEO industry when it started. It was really hard to spend more than $5,000 a month in SEO. Now the industry is $80 billion a year and people have multi million dollar budgets. But it's very hard for a lot of the early companies to get scale and to get off the ground because there just wasn't enough money flowing around. This is a prediction, I think that what people are trying to do is trying to become the platform where people essentially monetize all those eyeballs so that they can then go back to the brands and say, "Look, there is 100,000 people paying on this channel. This is a million dollar sponsorship opportunity."

Patrick: [00:26:20] Well, that's good. Yeah.

Niel: [00:26:22] Yeah, exactly. And what will happen is we'll go from, here's $1,000 to put up picture of my product on your Instagram feed to just like Google sponsors your Wi-Fi at Starbucks, Maybelline will sponsor fashion influencers' channel and every single person paying 299 a month, 50,000 people that's $150,000 a month, they're just going to pay for that for everybody. The influencer gets the money, the brand gets a native advertising sponsor at scale, the participants are happy because they don't have to pay that money anymore. And you're going to start seeing more and more of these opportunities for brands to come in and have a way to spend a lot of money in a non invasive way. It's nothing different than the Yahoo homepage takeover of old.

So that's a jumble of things. But what I think really matters is distribution. And I think the absolute sleeper in this game is Amazon. I think they are actually going to be the player that wins. Because they're sitting there with Twitch, and they have an incredible business and they're learning. I think Bezos is like the internet crocodile. He just watches, they get really good at their own thing, and then they figure out how to give their own thing to everybody and build a multi billion dollar business out of it. So they're getting really good at Twitch and streaming and communities and monetization. And then they go, "Well, cool, you don't have to do live, you can just put up videos here too." And then all of a sudden, they've got a billion people watching Twitch videos every single day, it's very easy to then scale.

Patrick: [00:27:46] Is that the number?

Niel: [00:27:47] No. I'm saying at some point in time they'll be. I mean-

Patrick: [00:27:47] Jesus Christ.

Niel: [00:27:47] I mean, it's in the hundreds of millions already. It's massive. People will look back, just like people look back at the one billion purchase of Instagram and thought, "Wow, that was cheap as hell." Or the $1.6 billion for YouTube, which seems like a steal, people are going to look back at the $900m that was paid for Twitch and think it was the cheapest thing they ever did.

So they're just going to sit there, lurk in the water, and all of a sudden, look at everything else in the Amazon ecosystem. You've got 100 million Prime members that have access to Prime channels. So you have a long form content distribution network that is already sitting in people's homes, you have an Amazon influencers program, which we work on with Amazon, where they actually allow influencers to build storefronts of all the products they talk about on their various channels.

Patrick: [00:28:31] Wow.

Niel: [00:28:31] Because it's actually, if you go on someone's Instagram, and you see like, "Here's a dress, I really love." You can't buy it off of Instagram. You have to go hunting for it and find it on Amazon. So now they just say, "Hey, here's the product you talk about, and you can drop that in the bottom of a YouTube video, or you can put that in your Instagram link, whatever the case may be." So they have thousands of those things. And so they have native commerce integration, which no other platform has. And if you sew all these bits and pieces together, if they add one piece which is a place to aggregate your community and manage them, which is a little bit of what's happening around their Twitch experimentation. But they also have one thing that no one else has, which is they have a neutral to positive opinion by most influencers and creators.

A lot of the other platforms have done things with demonetization or they're viewed as platforms for older people, not younger people or have come and gone. And Amazon pretty much everybody's like, "Yeah, I like Amazon." That's actually one of their greatest strengths. And so I think they're going to just slowly put all these pieces together, let the rest of the world battle it out right now, and then introduce a way for influencers and creators to essentially monetize three or four different ways.

Thoughts on Different Platforms

Patrick: [00:29:37] Given how much a smallest of these stocks, the names we've mentioned, all have already dominate this course on investing and have really led market returns, it would be fun to just to do a quick overrated, underrated on some of the other platforms just to hear your thoughts because the thoughts on Amazon are so interesting. So maybe we'll start with something like Snapchat.

Niel: [00:29:54] In my view, Snapchat is in a moment where they could make a couple of moves and leapfrog some of the other people that have just legacy stuff that they've got to deal with. I think that window's relatively short, I think there's probably six months for them to make a few moves, before they start to just Twitter themselves into a steady state platform that never gets any bigger, probably never any smaller.

They did launch something recently, which is called Snap Kit, which was the ability to actually authenticate using Snapchat. And that doesn't seem like a big thing, but it really is because it gets a lot of developers to build apps on their platform. And it was one of the hardest things before, is that you could never pull statistics from Snap, you can never really integrate it into your app. On our platform, influence.co, people come in and they authenticate all their platforms and you can't authenticate Snapchat. So if someone could tell us they have 100 million followers or zero followers, we just don't know that. So they're putting some basic infrastructure in place. And I think they're really thinking about this. But I think that window is small for them to make some pretty serious moves.

Patrick: [00:30:54] How about Twitter?

Niel: [00:30:55] Oh, Twitter. As much as I love Twitter, because they bought one of-

Patrick: [00:30:57] A personal favorite. Yeah.

Niel: [00:30:58] ... my companies, I was talking to a friend of mine who runs strategy at Edelman, and he made a really, really smart comment about Facebook, which was also a comment about Twitter in the process. He said, "Facebook's genius is they basically haven't changed anything for six years." That's actually pretty true. If you think of it, the news feed is basically the same. They built a lot of stuff, a lot of neighborhoods around the city for Marketplaces, and facebook.gg, and all this stuff, but they just haven't screwed with the base. Because people don't like relearning new stuff. And I think Snapchat is suffering from this problem of trying to get people to relearn. And Twitter I think is in this really tricky thing where they're trying to get a whole bunch of people to relearn because the core is really hard for a very broad audience.

So I'm not huge on Twitter's future. I think they place a big bet on live. And I think out of a few categories, like gaming, I personally think that live has never produced significant returns. I mean, I think that Instagram is backing off of live, I think Facebook is backing off of live and going more into just traditional long form content, eat it when you want. So no, not a huge Twitter fan.

Patrick: [00:32:06] So we've talked about Facebook, Twitter, Amazon, any other major interesting platform that you think is important in this landscape? And I want to talk about how all of this that we've talked about impacts the incumbent media companies too.

Niel: [00:32:18] Anybody that we care about.

Patrick: [00:32:19] Twitch is fascinating.

Niel: [00:32:20] Twitch is, I mean, really, Amazon is fascinating. I have to stop myself all the time remind myself that Amazon is Twitch and Twitch is Amazon and Amazon they're just smart. And because I think what's happening with Twitch, is they're getting incredible scale so they can back into things that other people can't do. I am really interested to see what Pinterest does. They're this funny little comp, funny little company. They have this funny in the broad scheme of things, but they have $450 million of revenue. They're, I think, almost profitable. They're about to go public, I think. And they have 250 million users that's growing. They just keep chugging along. And I don't view them as in any trouble at all. I think the opportunity is all upside for them.

And I think they could make a couple of moves and do things like much more native commerce integration, OLA Amazon, they could do a lot more stuff with video content. The creators that are on that platform, or that like that platform, they're very content centric. It's in their nature. They're a funny beast that if you look at all the check boxes of what the future of media is, they check a lot of those boxes. They just haven't organized them into an assault on anything yet. Yeah, I think if Pinterest goes public, I'd buy some of that stock.

Patrick: [00:33:38] So we're almost an hour in and we haven't gotten to-

Niel: [00:33:40] Sorry.

Patrick: [00:33:40] ... blockchain yet.

Niel: [00:33:41] Sorry.

Digital Collectibles and Blockchain

Patrick: [00:33:41] No, no, no, this is awesome. I'd love to go to blockchain and talk about your, I think relatively nascent interest in that world. We talked quite a bit when we first met about digital collectibles, which is the first concept in crypto that has me really interested and excited frankly, probably since just Bitcoin. So tell us a little bit about your interest there, what you're doing, maybe discuss a little bit why digital collectibles are interesting and where that might be headed.

Niel: [00:34:10] I was one of those people that watched crypto and just let it do its thing. More fascinated by the headlines and actually more fascinated by the incredible amount of ingenuity that's gone into some of the hacks that have happened. And then I stumbled across the digital collectible side of the world. And I got into it because of all the fervor over CryptoKitties. And for those that don't know, essentially, well, Bitcoin is a distributed ledger that keeps track of how much Bitcoin everybody has. The fact that you have one Bitcoin versus another Bitcoin is irrelevant, just like you having a physical dollar bill versus another physical dollar bill, they're completely exchangeable.

But digital collectibles is essentially a standard on top of Ethereum, the ERC-721 Standard that allows for a distributed knowledge of ownership of a unique item. And that doesn't mean that you can't have the same unique item. In the same way that you might have a seven prints of an Ansel Adams photograph, there's not only one of them, but you know that you have one of seven, that's fine. But it tries to translate the concept of uniqueness and authenticity onto the blockchain.

I think that's a really interesting side of the world. Because I think, to me, it translates into a lot more things that a lot more just generalist human beings feel comfortable with. I think the biggest problem with blockchain is the early entrants are really wed to a lot of the philosophical underpinnings, anonymity, complete and utter decentralization. So these the extremist parts of the landscape, and which I think is partially why it's been successful, but in general, that's not how most people work. They want to know about things, they want to not have anonymity. I mean, I think Twitter's biggest problem is that it's highly anonymous. And so it just encourages a huge amount of bad behavior.

And so the collectible side of things is a step towards that where you're starting to associate ownership with individuals. I think, if you abstract the concept of unique ownership from things like a digital collectible, like owning a CryptoKitty, or owning a digital piece of artwork, or something like that, into things like owning a movie ticket, or owning something that allows you to play Fortnite with Ninja, and that's the thing that you own, and it can be tradable and movable and it's completely digital, that gets really fascinating to me, it becomes highly disruptive to a lot of traditional industries that have digital equivalents, but have central authorities that essentially are in control of this digital equivalent.

Patrick: [00:36:34] Are there a couple of other examples that this area will thrive with examples? The one of the scarceability to play with Ninja is a perfect example. What are some other things that might be threatening or disruptive to existing players?

Niel: [00:36:45] Well, I mean, I think there's lot of people that are experimenting with games on this. Relate to the gaming industry, I think it's really fascinating. So for example, a lot of games, Fortnite games have the concept of finding and owning things, finding coins, finding weapons, things like that. Well, if those are now exportable and tradable back to distribution, it creates a lot more value in those things. So I think if you take the concept of digital collectibles, and you add one more thing, which is the ability to lease a digital collectible to someone, the amount of space that you can cover with ideas gets very big very fast. So to use a gaming example again, and there's a lot of other real world examples, imagine if I've worked really hard in World of Warcraft to gain some item in the game, which is really-

Patrick: [00:37:26] Some hammer.

Niel: [00:37:27] ... some hammer, right? Yeah. Smooting or something like that, that helps you get through some challenging part of the game, I don't necessarily want to go and sell it because I earned that thing, I want that thing. But I might lease it to you for three months. So you can go on your own adventure and try to get through whatever part of the game you want to get through with that. And have a decentralized authority that handle a lot of stuff is really interesting. So I think it's the ability to have authentic ownership of something that leads to things like the leasing of that authentic ownership that gets super fascinating.

Patrick: [00:37:54] Why do you think it matters for it to be decentralized or to be on a blockchain versus just World of Warcraft has its own market and you can buy and lease and whatever?

Niel: [00:38:02] I think a lot of this comes back to the underlying infrastructure of blockchain being transparent. I mean, I think the thing that's such a funny dichotomy in crypto to me is anonymity plus complete transparency. It seems like you couldn't put together a coherent sentence that way. And I think that what happens is, because there's complete transparency, you essentially have a built in information API to anything that gets built on it. So to my knowledge, I can't go and pull information on every World of Warcraft object and who bought it and who sold it, and for how much and when it was last bought and sold, and if something just got found. But I can go look into blockchain and see that in Ethereum.

And so what I think is really fascinating in the digital collectibles world, like CryptoKitties is, a lot of the players are not front end players, they're back end players. They're people that are literally looking through the blockchain for opportunities, like a trader would look through stocks or write things algorithmically, and are actually executing things directly at the blockchain level, kind of a headless player, if you will. And that's where a lot of the money's being made, it's a lot of where the transactions are happening.

And so I just think you can basically build something new on that, and you instantly inherit all of the people that are already playing. It's like saying, "I don't need the NASDAQ." I mean, getting around securities regulations, if I wanted to find a way to issue ownership in a company, I could do it. But you want all of the participants in the market there and the set of rules and regulations and the set of technology they built around it to be able to apply to whatever new thing you put onto the market. And so I just think there's a lot of value in that.

Patrick: [00:39:49] Talk a bit about beyond just digital collectibles, just the tokenization of other stuff and maybe the relationship between tokens, cryptocurrencies, whatever and the real world. For example, I've heard this example a lot, which is, let's say Apple's shares were somehow tokenized on the blockchain, and there were things that were unlocked. If you held the shares for a year you could buy next iPhone for 5% off or 10% off or something. Just more space in which to do interesting new things. How do you think about that, the tokenization of other things, as a useful idea?

Niel: [00:40:24] We talk a lot about the idea of security tokens in a business like influence.co. Any kind of a business that's a community. I think it's sad that the first million people that joined LinkedIn and probably created critical mass in that business, that was sold for about $24 billion, something like that, didn't get anything. They maybe didn't even get a job. They got to say that, I was LinkedIn number 372, or something. And that might be enough for most people. But those are a lot of people that are essentially creating value for you. It's way too impossible to deal with traditional stocks options for that level of people. But tokenization, security tokenization is a really interesting way to solve that problem.

So for example, you could take 10% of the common shares of a business that was a community and essentially issue securitized tokens to the first 500,000 people in that community, and we would make those tokens tradable, but also, at sale time, there would be enough distribution to those people. And it's a really simple mechanism for doing that. What's interesting about it is, can you dig into it?

And one of the biggest problems is essentially giving people compensatory income. So in the startup world, we give people options. So you can actually build though, into the token, the concept of activity, in the same way that you could give someone advisor shares in a business and as long as they keep doing something for the business, they can keep their options, they never have to essentially pay for them until they have a liquidity event and they can just pay the difference, you can do the exact same thing from a technical perspective and a community. So as long as you show up to the community once a month, you essentially retain your token that you earned and you don't have to pay tax on it until there's actually a liquidity event. And so that's really interesting to be able to do that at scale. And to tie just like basic participation in things into ongoing ownership of something that's tied to a real class of stock.

Patrick: [00:42:11] We've talked about a lot of exciting stuff. I want to spend a minute on maybe the downside of this by asking which company or companies out there that people will be familiar with, have the hardest road ahead. So maybe a fun way to ask the question is, let's say you had to build a five year short portfolio, and you don't have to worry about the volatility between now and then or something like this, based on all of these observations, and what the changes that you're perceiving in, in the media world, who's in the most trouble?

Niel: [00:42:37] So this is a roundabout way of answering it. But maybe it'll lead people that understand the players better than I do to some conclusions. When I was in Melbourne last, so I spent about three months of the year in Australia, and I'd go between Melbourne and Sydney. I realized that about 90% of the services or some of the things that I need were provided to me by American companies and not by anything in Australia. So I stayed in an Airbnb, I plugged in my Netflix onto the television, so I've got entertainment, we ordered Uber Eats, we get all of our transportation from Uber, all of my phone was Travel Pass by Verizon. So I don't have a local SIM card anymore. And there's a few other examples. And I'm calling this like the government operating system. In the 1970s, everything that I just said would have been gotten in part from some government. The government was involved in utilities, the government was involved in housing and taxes and things like that. All the stuff has been abstracted completely away. And all of those companies are now actually big US companies operating on a global level.

I don't go to banks, I don't take any currency out anymore. All that stuff is done through Uber and Uber Eats. And so that to me, I think is the very subtle, biggest disruptor of big companies. And the answer might be, it's just smaller versions of those companies in other markets, not the United States. And I'm not waving the American flag here. I just think that the accessibility of US-based services on a global basis that displaces a lot of local companies is highly, highly disruptive. So I don't know. That was an interesting epiphany that I had. I was trying to think of things that I don't get, I mean, healthcare is still a complete and utter mess. I have to get health care locally in Australia. I'm sure if I was doing, well, schooling, I don't know, depending on how I wanted to school my children, I might be able to get that all through something online now. I don't know. So I think that if you're going to look at the companies that are essentially competing with that, with the life stack blob, as independence, I would be scared.

Patrick: [00:44:44] Be scared.

Niel: [00:44:45] Yeah. I'm trying to think of a good example. I mean, I don't know, something like a regional telephone company, I don't know if Southern Bell exists anymore, but something like that. I mean, that would be scary to be one of those companies.

Leadership Lessons

Patrick: [00:44:58] Since you've seen a lot of companies, run companies etc, we were emailing a bit about some members of your family and the very interesting different things they do. And this notion of leadership. We would love to hear your thoughts on different styles of leadership and maybe any lessons that you've gleaned, watching a lot of leaders and being one yourself.

Niel: [00:45:14] So there's four members of my family, my sister and I, my mother and my father. And my father is an opera and symphony conductor. So conducted here in New York City Opera and all over the world. My sister runs an English department in Los Altos High School, and has taught many classes and my mother is a mother. So she's managed the family and everything, and I bought startups. And we just think it's really interesting to compare the fact that we all have been in various management and leadership positions, and what our styles are.

I think there is an interesting dynamic emerging between a generation that has grown up experiencing and hearing a lot about networked organizations, so non hierarchical organizations, because a lot of their experience are in smaller companies. And smaller companies can survive networked organizations. But I think at some point in time, when they grow bigger, they have to become hierarchical to run themselves. It's just the nature of the beast. So I see that as an interesting challenge as a leader to guide a generation of people that have started in a non hierarchical world into necessary hierarchy at scale. Or to work with them. I think one of the most interesting transitions I've had is, I very much viewed people leaving my companies, when they worked for me as like I had a personal failure. I took it very hard when anybody joined the company and left two years later or three years later or four years later.

And there's a great guy named Ben Casnocha, who wrote a book about essentially, with Reid Hoffman, he was Reid's chief of staff at LinkedIn for a long time, he wrote a book about essentially a new generation of people that go through tours of duty. So taking a look at a leader not as trying to retain all their staff as long as possible, but to help them go through a journey for a couple of years to achieve something personal for them, which they then will work really hard to thank you for in return. And at that point in time, either being very comfortable with them leaving and becoming alumni of the business and thinking of things as an extended network, or talking about a new tour of duty and what that could be.

I completely refused that notion five years ago, and now I've completely embraced it. And the last person I hired at influence.co, we set up everything about his involvement that way, about what his title was, what his focus was, his equity compensation, his goal structure, and a very blatant conversation that said in two years I either want you to be negotiating with me again about-

Patrick: [00:47:36] The next thing. The next tour? Yeah.

Niel: [00:47:37] ... a job here, or walking out the door and going on to your next thing having leveled up here. That's a big, big change, I think that's happening in the workforce. That I know that I myself was resistive to, but once you embrace it, it just makes it a heck of a lot easier to build organizations.

What Makes for Good Content?

Patrick: [00:47:52] The notion of content has become so ubiquitous, and we've talked a ton about it today. You've worked in this world and thought a lot about it. Are there any generalizable lessons on what makes for good content? Or maybe asked better, advice that you would give to people who are creating content or hope to acquire like in a platform style, those that create content? What are the markers of the most successful new content strategies that you've seen?

Niel: [00:48:20] I would say the content creators that are the most successful, so one of our good friends is a woman named Lauryn Evarts, who handles The Skinny Confidential, she's a lifestyle blogger. She talks about this a lot with me. And she's very successful at what she does. She has a podcast and a Facebook group and things like that. I think the most successful content creators are those that are thinking about engagement and community behind the content they're creating, and they're thinking about content that facilitates that. I think, because content marketing became a channel that was so utterly adopted by everybody, that just general proliferation of content, that's soulless, and has nothing behind it, it's just there to become searchable to answer a quick question, has devalued content massively.

And so I think the people that are most successful are thinking about content that gets people to lean in and engages and allows to have conversations around it. And that might be, it's anything from a picture on Instagram that shares a bit information that gets people to ask questions, to longer form content that is then backed up by a discussion in a community related to it. I think you're going to see people being a lot less successful with just giant content engines that have good keyword density and the right H1 headers and going and doing a ton of backlinking. And we've even seen this in the influencer space. Yeah, there are 40 different articles about how to write a good campaign brief for influencers.

But what we focus on is actually allowing influencers to put up a piece of content that they created with a brand and then tell the story of how they got that content. What the techniques were, the choices they didn't make, publish all the information around that content. And we call that showcases, and that's been an incredibly successful part of our site. So it's maybe content with soul or content with community is the future, not just raw volume. I think it's not playing anymore.

Patrick: [00:50:08] Just because it's fresh on my mind because the most recent example happened, I think just yesterday. There's a great example in our business in the... Well, not in the asset management business, but in the financial advisory business, a firm called Ritholtz Wealth Management, which has effectively adopted this strategy of influencer roll up. So they have, it's a financial advisory business, as a disclaimer, I'm good friends with the people that run it and think very highly of them. They have one by one, effectively through Twitter identified, built relationships with, and ultimately hired the biggest influencers in different parts of the financial Twitter universe stack. I'm curious what you think about the viability of that strategy, more generally speaking, and maybe any pros and cons, just trying to wrap this all back to this finance world, we've really focused on media and content.

Niel: [00:50:58] I love that strategy. It's like private GLG. I love that strategy because I think what it allows them to do at some point in time is to separate what's publicly available from what's privately available. And I think maybe another way to answer your last question, and this one at the same time is, that's the future of content, it's front of house back of house. You're just going to start to see people not give it all away for free anymore.

And one of the things I think that I see influencers doing and maybe there's companies doing this too, is they are starting to look at different channels as essentially part of the funnel. And there wasn't really anything at the bottom of the funnel before, I'm not trying to be glib about it, I think there really wasn't. What was at the bottom of the funnel was just do more stuff at the top of the funnel. It was like that was the loop. But now the bottom of the funnel, now there's a generation of people that are growing up paying $2.99 a month for the bottom of the funnel. That's important, that's money at the end of that rainbow.

And so all of the other channels are now essentially going to be used to drip stuff down in. So I think it's genius to go and get people that are producing probably really great public opinion on finance stuff, and continue to support that, maybe because they're part of a larger infrastructure that can fund that. But inevitably, what will emerge is that some of the information gets some of the good information-

Patrick: [00:52:11] Gets held back.

Niel: [00:52:12] ... gets Held back. And this is like, I mean, everything. Whether it's the journal or whether it's the information or... I mean, every single source that I pay for Stratechery, at the end of the day, that's the future. There are two ways to curate good content. One is have an editor and one is charge for it. I mean, it's like-

Patrick: [00:52:32] That's it.

Niel: [00:52:32] ... Yeah. And so in the same way that we just paid 99 cents for an app or for a song on iTunes for 10 years, we're paying 99 cents... Or a ringtone. I mean, content subscriptions is just the new ringtone business. There is a whole generation of people that paid 60 bucks on their phone bills to have 16 different ringtones and ring backs and things like that. We know that people will pay $1.99 to $3.99 a month ad infinitum for things that they like, as long as they're associated with something that they like. We're just moving that from pithy media and games, sorry, pithy entertainment, and games into content.

And frankly, it's worked for me, because I'd rather give my money to someone that's really spending a lot of time doing the work like a journal or something like that, than spending hours and hours and hours hunting around.

Owning Restaurants

Patrick: [00:53:16] So just a couple of fun closing questions to what's been a fascinating, edifying conversation for me for sure. The first is this idea of restaurants. So I think you've started or owned two restaurants, which are notoriously either the best in very small cases, or in most cases, the absolutely worst businesses in the world. It's so incongruous with everything else you're talking about, so I'd love to hear about that experience.

Niel: [00:53:37] I mentioned I started my first venture back business when I was 22. We sold that when I was 24. So I had success at that age. Anybody that would have that kind of an experience at that age would go find something that sounded very sexy as a contrast to building tech companies. And for me, those are restaurants and bars. The other thing I think that's really been an interesting arc in my life is that when you're young and you have success, you tend not to be honest with yourself about the silos in which that success is repeatable. I see this pattern with a lot of my friends, you have some success, you make some money, and so you start just getting fascinated in a lot of other things. I'd love to be involved in restaurant, I'd love to be involved in fashion house. Maybe I'll go build a gaming business, whatever the case may be.

And you go through this arc where you just think that your success in one industry is translatable into another, it's a very naïve thing to do. But what happens is you anchor yourself in a lot of investments and things. And then they tend to not go as well as you think because either you got lucky or your success didn't translate very well. But you don't have really enough time because you have a lot of projects and they all need you to focus on them. And you continue to tell yourself, "Oh no, if I just focus on that, I would be successful at it. But for the time being, I'm just going to give it more money."

And so you give it more money to buy yourself more time because you still believe that you can actually jump in on that and be successful at it. And so you end up putting a whole bunch of money on the table and then you have the gambler's dilemma of walking away versus continue to double down on it. And this is exactly what happened in the restaurant space. And it was a really important journey for me because it was probably the most humbling experience that I had, which is a necessary part of my overall business experience. Because what it really taught me is nothing new, that the restaurant industry is hard, but what it really taught me is that I might have built my first software company when I was 14 years old. I've been thinking about how to be good at building software companies for 10 years by the time I sold that, and I don't know anything about restaurants.

And it's like an obvious lesson, but I think it's just this very natural path I see where a lot of people become successful, is they just think success is laterally translatable. And I really don't think that's true. I think there are very few people that can just jump from one thing to another and have the same outcomes.

Patrick: [00:55:46] What about motocross?

Niel: [00:55:49] Well, fortunately, I was never trying to be very, very good. I also have this other thing where I really, really believe that's it important every year to find a new physical skill. I mean, it could be knitting, learning how to ride a motorcycle, you name it. Becoming a professional rower, throwing a Frisbee 100 yards, whatever the case may be. I think in our digital age, we consume massive amounts of new information about new topics all the time. And so we think that we are learning and evolving, but we're doing very little learning and evolving tactically.

And so I got on this kick of trying to just do a lot of new physical things that would require mastery. And my friend one day, said, "Hey, I'm bored, let's," in Colorado, there's a bunch of motocross tracks. Said just, "Hey, come out with me one day." And I thought of motocross as a pretty redneck heck thing to do. Got out there, threw me on the bike essentially showed me how to ride it for five minutes, and then just left. And I literally bought the bike from him the next day, and just started this journey of getting deeply into motocross and doing the big jumps and doing the hare scrambles with 150 riders of all levels and battling it out with people on the course and ending up in the hospital a bunch of different times. And it's just an incredible addiction.

But I think what I really love about it is that there's something different, intrinsically different about feeling like I went out to learn how to ride a motorcycle, and now I'm extremely competent at it, that I probably don't get from anything digital. And I can read whatever. I can do Rosetta Stone and learn French for a while, but I don't know, maybe it's just much more caveman visceral thing to be able to physically do something. But I think that's the lost art. I think if everybody tried to learn one new physical thing a year, they would live a much happier life.

Patrick: [00:57:30] So my closing question for everybody, every guest, is to ask what the kindest thing that anyone's ever done for you is.

Niel: [00:57:36] I think probably the kindest and most impactful thing that happened to me was, in the first business we built, Service Metrics, that was the one I moved to Colorado for, the guy that was running the business, his name is Tom Higley, the kindest thing he did was let me be involved. There wasn't a part of the business that he just cordoned off and said, "I don't want you in the board meetings. I don't want you to talk in the marketing, I don't want to do anything." He gave me some room to run. And I put a hell lot of work into that business to try to not make that a bad decision on his part. And I think that was probably the kindest thing he could have done because he changed my opinion about what I wanted to be from someone that just told technology stories to someone that built business stories. And I think that access was everything. So yeah, that's what comes to mind.

Patrick: [00:58:25] Well, thank you so much for all this time. It is conversations like this one that are the reason I keep doing this. So it's been incredibly interesting and fun, and I hope we can do it again.

Niel: [00:58:34] Yeah, thanks, man. I really appreciate it.

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