Updated: Dec 15, 2020
The First Amendment is a metaphorical representation of a new era and an evolution in governance and ownership architectures.
Freedom of Ads refers to a strategic move to liberate value creation from the grips of the centralized value chains to a collaborative network chain. It is a new pathway for economic migration to a Pull-based Ad Platform, liberating our economic graph.
The logic behind the Freedom of Ads is simple; if you sell oranges, then your revenue must come from oranges (you may sell orange juice, yet, the revenue will be squeezed from oranges). As such:
If your core value proposition is search, isn’t it logical that your revenue must come from search?
If your core value proposition is social connectivity, isn’t it logical that your revenue must come from social connectivity?
Yet, such simple logic gets challenged once you look at the financial statements of some of today’s platforms (e.g., Google and Facebook), where their core revenue streams do not correlate with their core value propositions.
To dig deeper into this logic, we need to condense our daily online routines into three primary groups: communicating, doing, and consuming. Next, let us envision those routines being part of denser classifications.
Communicating, being part of our Social Graph
Doing, being part of our Functional Graph
Consuming, being part of our Economic Graph
Now, allow me to ask you three simple questions.
1- Who is consolidating and organizing our social graph? With almost 2.5 billion MAU, I bet you will say Facebook.
2- Who is endorsing our functional graph? With a quick glimpse below, you cannot guess it wrong; it must be Google.
3- Who is safeguarding our economic graph? This is the $1 million question; take your time.
Unfortunately, no one. But do you know why? Isn’t it (our economic graph) a valuable graph? To fathom this absurd situation, we first need to understand:
Why is Facebook organizing our social graph?
Why is Google endorsing our functional graph?
Facebook and Google figured that by serving our social and functional graphs, they could neutralize everyone else (including us) from optimizing and benefiting from such a valuable graph, that is, creating justifiable propositions to monetize our economic graph.
But, isn’t it a win-win-win situation? After all, the;
Users (customers) are happy for getting great free services;
Businesses are glad to receive a slice of our attention;
Platforms/aggregators are delighted to make lucrative revenue.
Narrowly, it is. Holistically, it isn’t a win-win-win situation. Let us explore this paradox.
Over two decades, Google’s search core concept remained simple, (search improved in terms of accuracy, speed, comprehensiveness, and efficiency) but didn’t evolve conceptually (e.g., into discovery, co-creation). I refer you to John Hagel’s The Big Shift in Business Models, if you wish to dig deeper into how businesses should evolve.
Every time you use Google, it feels like you are using it for the first time: a simple user interface that allows you to describe what you want (basically, you tell Google what you want), and Google search will do the rest.
So, isn’t it a great thing to have a service that effortlessly gives us what we want? I will dare to say no. It was an excellent service a decade ago, but the issue is deeper than merely providing a great frictionless experience.
The first iPhone was a great product during its launch year and the following year, but that same old iPhone is a mediocre product if compared with today’s iPhone 11 Pro Max. In other words, Apple needed to evolve the iPhone because the customers that are directly paying for the iPhone expect more value for their money year after year.
Two decades ago, Google search (being a disruptor) was a good service, and then a decade ago, almost the same Google search became a great service; however, today, that same Google search is a good enough service.
As long as users are not paying for searches, Google’s metrics will never correlate search with profitability and growth (search is associated with attention). As such, Google has no incentive to improve search beyond the efficiency and effectiveness frontier.
Google’s Ads service, on the other hand, was very good two decades ago, great one decade ago, and still great today, because it is directly correlated to Google’s revenue stream. As such, Google’s metrics justify improving ad services to Google’s paying customers (businesses). Another must-read post by John Hagel, The Big Shift in Platform Business Models, if you want to look beneath the surface to understand platforms’ business models evolution.
It seems that Google correctly understood Clayton Christensen’s disruptive innovation theory; in fact, Google succeeded in neutralizing some of the theory’s underlying logic.
On the left side is Clayton Christensen’s original disruptive innovation diagram (click here to watch Professor Christensen explaining it).
As per Christensen, in every market, there are two trajectories of improvement:
1- The dotted red line — is the trajectory of improvement in customers’ ability to utilize a product.
2- The blue line — is the trajectory of improvement of the product itself.
The diagram indicates that businesses always improve products (in pursuit of profitability) beyond customers’ immediate needs/abilities (opening the gate for potential disruptors).
On the right side is what I humbly think Google is doing to make themselves immune to disruption: when you talk about platform-based businesses, you must multiply the above two trajectories by two. So, in Google’s case, you will see four trajectories of improvement.
1- The upper dotted red line — is the trajectory of improvement of businesses’ (advertisers’) ability to use Google’s Ad Services.
2- The upper blue line — is the trajectory of improvement of Google’s Ad Services.
3- The lower dotted red line — is the trajectory of improvement in users’ ability to use Google search.
4- The lower blue line — is the trajectory of improvement of Google search.
Trajectories 1 and 2 are identical to Christensen’s original diagram on the left side: Google Ad Services have ridden the sustaining innovation curve since their inception. However, to make itself immune to potential disruption, Google altered the blue line (trajectory 4). Google search started with sustaining innovation ideology and then deliberately shifted to efficiency innovation over time.
In other words, Google is aggressively grabbing the search chokepoint: from the lower-end market, no one can disrupt a good enough search service (simply because users will not tolerate something less than good enough). And from the higher-end market, margins are not in favor of any incumbent to wrestle with Google’s financial strength.
The tight integration between search and ads via the push-based system is yielding a lucrative revenue stream, which is the main building block in strengthening Google’s position from both ends (lower- and higher-end markets). As a result:
The customers (users) have no choice but to accept what Google is offering. Even if customers want to pay for a better search service, they cannot: economically, no business can afford to undertake such a proposition (at scale) in Google’s presence.
The businesses (advertisers) will always be at Google’s mercy, obeying Google’s commands to (hopefully) get a slice of customers’ attention.
What Google search did over the past two decades is genius, but it is not sustainable: we must depict the above scenario (illustratively) from an ecosystem perspective to understand why such a model cannot be a sustainable one.
The ecosystem is designed to suck the vast values to Google’s benefit (lucrative revenue and rich data), leaving users with a simple search service and businesses with push-based attention, most of which is an evaporated attention.
When the coreholders’ trajectories within an ecosystem are detached from each other, the cost becomes very high.
Users don’t care about businesses. When I am searching the weather in Rome, I don’t need an umbrella ad to be squeezed in my feeds; therefore, we use ad blockers.
Businesses don’t care about the content that I am searching for. They depend on the algorithm to squeeze themselves into a relevant theme, hoping to get our attention.
Google doesn’t care about the reason behind our search. It wants us to be present all the time.
How can such an ecosystem thrive if its key players (coreholders) don’t trust each other?
Now, you may remove Google and replace it with Facebook, and you will reach the same result; however, in the Facebook case, the overall cost becomes unbearable.
Therefore, in First Amendment — Freedom of Ads, I suggested that it is time to create a new reality by targeting the tight integration between ads and push-based attention.
Targeting technically means venturing from push-based attention to pull-based attention, which is the first building block in liberating our economic graph. The Power of Pull by John Hagel must be your blueprint whenever you wish to depart from push to pull.
The access point of this envisioned trajectory must radically challenge our business thinking: the access point must not be viewed as a classic market-creation innovation since we are not targeting non-consumption (non-customers). The access point must be based on a market-correction innovation: realigning the trajectories of existing businesses and existing customers (of course, new businesses and customers will be pulled as well).
What can be more radical than the “freedom of ads” for businesses (allowing businesses to access the demand side of the economy freely), and what is fairer than giving (back) customers full control over their economic graph?
If you recall, two decades ago, our scattered data (digital footprints) were of no use to anyone. Our data became valuable once the new operating systems (Facebook for social connectivity and Google for searching) refined them, packaged them, and monetized them.
The same applies to our scattered commercial behavior (economic graph); it can be valuable, too, if an operating system refines it, packages it, and empowers us to monetize it.
In its purest form, such an operating system (the pull-based ad platform) may be viewed as Twitter (the latest news about our economic graph). What can be better than ads at performing such a job?
To the Customers: the shift from push-based attention to pull-based attention means moving promoted ads from our functional and social graphs and redeploying them into our economic graph, allowing us to follow the businesses we like, likewise when we follow our idols on Twitter. No one can hijack our economic graph; only we can grant access to our economic graph.
To the Businesses: The shift from push-based attention to pull-based attention starts by commoditizing time and space. That means no more renting spaces for placing ads and no more time-limitation. The quality of the ads’ content will no longer be hindered by the allotted seconds. Businesses will be able to upload their ads like you upload your videos to YouTube.
As illustrated in Part I (Freedom of Ads), the above liberating propositions are just the starting point; ads are the anchors that stabilize our economic graph and pull the coreholders — customers and businesses — toward each other at scale like never before. There will be no more intermediaries — assuring zero-friction.
Customers will engage with businesses via centralized access to three tightly integrated business stacks (inspired by Hagel);
1- A customized interdependent interface that gives them full control over their economic graph: complete autonomy over when and with whom to engage. On the other side, businesses will merely plug-and-play to place their ads at the Product (Ads) Innovation Business stack.
2- The modular interface at the Infrastructure Management Business stack to select the best (logistics/administrative) services providers based on speed, quality, or price. On the other side, the businesses will shoulder the heavy lifting integrating their value chains with services providers via the infrastructure stack.
3- Centralize modular interface for communicating with all brands. Complaints can be sent to the relevant brand effortlessly, likewise tweeting.
However, for such an economical migration to succeed in its endeavor, we must remove one more obstacle from customers’ and businesses’ pathway. Do you think that businesses will embark on such a journey if you ask them to depart from one centralized value chain to another centralized value chain? I don’t think so.
As such, we need a new ownership architecture: a shift from the shareholding model to the coreholding model.
Under the shareholding architecture, the value is created in the platform’s ecosystem, and then, most of it is transferred to the owners of the platform (shareholders).
Under the coreholding architecture, the platform becomes the ecosystem; as such, the created value stays within the ecosystem for the benefit of the coreholders. At the same time, the platform (ecosystem) pulls other players in to join the value-creation process and share the pie with the coreholders.
The coreholding model becomes a reality once the customers reclaim the right to their economic graph and once the businesses reclaim their place in the value-creation equation: being “coreparties” rather than third parties.
I am reusing the above picture from part I to reinforce that we are only One percent away from such a reality. All it will take is a consortium of geographically distributed businesses (e.g., A20 conglomerates) to step up as the founding members of such an envisioned pull-based ad platform.
Libra’s underlying concept might be a good inspiration for the shift from the shareholding to the coreholding model (if global currency is not possible, a global ownership might be).
Now that we can (theoretically) imagine our economic graph being liberated from the grips of the centralized value chains, let us explore what can change.
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Once our economic graph is safeguarded by an operating system (pull-based ad platform), all our other graphs can simply plug-and-play within it.
Ben Thompson made a fundamental distinction between platforms and aggregators
I want to suggest that such a pull-based ad platform can merge both functions (facilitating and intermediating). As such, it may be viewed as digital (blackhole) economic architecture governing the gravitation process of the elements of value creations (enabling & unlocking new values). Let us briefly explore how this can be a game-changer on a fundamental level.
On the left is how Uber (UberEats) controls a sizable portion of food delivery service. Uber, to an extent, is commoditizing the restaurants (via a modular interface) and, in return, granting them access to a broader population of hungry customers via the transportation’s chokepoint.
With the pull-based ad platform (on the right), the story will differ a bit. Uber and other delivery services (themselves) will become commoditized (via a modular interface) within the ecosystem. In other words, the operational graph will be at the service of the economic graph. As such, both the businesses and customers will benefit (lower prices and improved services) from the intensifying competition within the ridesharing industry.
The same can happen with the social graph (i.e., social graph serving the economic graph). In other words, if Facebook is commoditizing content creations today, Facebook itself may get commoditized tomorrow, along with other social media, to serve our commercial behavior.
Now, let us imagine how the pull-based ad platform can open the gate for more profound collaboration with other ecosystems, platforms, as well as individuals: providing differentiated experiences to the coreholders.
Example: A makeup artist working at a beauty brand stand at Selfridges.
Employees’ loyalties are bound to serve employers (sometimes even if it is at the expense of the customers). And the work environment (limited space and time), play a significant role in underutilizing the expertise of the makeup artist when serving the customers.
With the envisioned pull-based ad platform, the makeup artist will be able to engage with customers directly, serving customers’ economic graph, rather than serving a single brand (a radical transformation in the underlying loyalty behavior in favor of the demand side rather than the supply side.)
S/he may still be a full-time employee, but the rest of the day, S/he can become an “Infomediary” (John Hagel’s concept), serving the customers as their trusted advisors. In other words, the customers will become her/his employers, and the brands will become the customers.
As you can see, the bandwidth of possible collaborations is enormous (from an employee, all the way to Amazon). I trust your ingenuity in envisioning more scenarios: Unleash it.