Author Antonio Garcia Martinez Explains How Targeted Ads Work

Basically, long story short, PhD student, drop out of the PhD, go to work at Wall Street, Wall Street blows up, I come back to tech, right? Or back to tech. I never worked in tech, but I got to school in Berkeley and I'd seen kind of the first tech bubble, so I was kind of vaguely aware of it. Join tech, join ad tech, do my own startup, tiny little company, not a big success, get sold to Twitter. I end up at Facebook a year before the IPO as one of the early members of the ads team. So if you go browse for shit on the internet and you see that same pair of shoes inside your Instagram feed or whatever, I created the very first version's initial, not what's there now, versions of that. I was the first product manager for ads targeting. How user data gets turned into a successful ads campaign is what I was responsible for in a very formative period in the company's history. And so I was there, again, not that terribly long, but it was a lot happened. The company grew in size enormously and figured out how to make money. I didn't know how to fucking make money. The ads, as everyone remembers, used to suck. And now everyone's like, ads are either creepy or crappy. There's no in between. So I went from crappy to creepy. It was a big team. A lot of people did stuff to make that happen. So the book is about that. How do you start a company? How do you raise money? The inner workings of Silicon Valley. I went through this famous incubator thing called white combinator. When you say crappy to creepy, do you mean invasive? Yeah, yeah, yeah. In the sense of like, oh, this is totally relevant to like, oh, I was literally just searching for this thing and here's an ad for it. Let me ask you about this because we've talked about this multiple times in the podcast. Sometimes you're having a conversation about something. Oh, God, the microphone thing. Is that real? No. It's not real. No, no. I mean, I don't believe him. Do you believe him? We were just talking about something the other day. I haven't searched for it at all. And I got an ad for it. It's something me and you were talking about. What was it? If I remember right, I couldn't remember, but it was something we were talking about after the show. Six hours later, I'm getting an ad for it. Here's what I bet on. One of you two either searched or went to some website. One of us. So if I do, he gets an ad? Yeah, potentially. Yeah. How? The term of art is called lookalike audiences. What that means is, so some retailer knows that you dump much of money at whatever. REI, Cabela's, pick your favorite retailer, whatever. You two are buds and you interact a lot on whatever social media platform. If I'm Cabela, say, just cited example, I'm like, okay, I know this guy is worth whatever, $2,000 a year. Get me more people like him. When companies like Facebook or other companies can say, aha, well, guess what? He talks to this dude a lot, who, by the way, whose profile kind of looks like yours. So you'll get targeted for something that you did. Yeah, I get that. But we have very different online things. I look to sneakers and stuff. He's looking at hunting and whatnot. The thing that came up, I wish I could ... Normally, I take a screenshot when these things happen because I'll share it with the person. Like look what just popped up on my phone. This was outside of that. This is one of those things I go, all right, we need to talk about this. Again, I know there's defenses to it, but this was ... Let me address the question. It's funny, there was a Planet Money show about this in which they talked to various people who had this experience to try to figure out how it would actually happen. I was a guest on it. But let me address the problem. So imagine ... Let's say Marcus Zuckerberg is listening to your conversations and gets like a live stream of your phone all the time. What fraction of the time do you think you're actually mentioning something commercially interesting? That would be worth targeting against. How often do you say, hey, I'm flying to Boston next week and I need a flight in a hotel on a taxi? And you say it in some structured way. That would be easy. It's pretty rare. Think about it. The amount of data, you'd be on a constant phone call basically to zuck. It would eat up your network like crazy. And then the fraction of the times versus you just going to fucking kayak and entering Boston and using that data. I'm not saying it's technically impossible and in some future world who knows, but it would be difficult. And even if you manage to do it, there isn't ... One of the things ... One of the chapters of my book, I understand you're listening to have a chapter called The Narcissism of Privacy, which comes off maybe more snarky than I mean, but privacy is a right and people have a right to it obviously. But I think one of the misleading things when you think about companies like Facebook is that Facebook wants to know the thing that you least want them to know, which is like your personal conversation with your loved one or whatever. When it comes to commercial data that actually helps target ads, there's very little of what you do or things that you wouldn't think of are what they want, not necessarily what you would like, what you would not want Facebook to know. Right, but what concerns people is the idea that your microphone is picking up keywords that they have accounts with. So whether it's cell phones, tires, whatever it is, then you see an ad for it. It would be more possible in like the smart speaker systems you have at home for example. Right. That probably would be so hard to do. That makes sense. And so how would they target you for an ad with that? Well again, if you said something well structured, that would be easy to tease out. And if that's connected to the same account that's connected to your Gmail or your Google search. Or Amazon. Or Amazon, then they would show you the ads. So like a lot of what happens that's actual targeting is like data joining. So like getting back to the Cabelus example, like I understand you're into hunting, so maybe you shop at the local Cabelus or the Bass Pro Shop. They'll have your phone number and email for all the shit you buy online. What they want to do is like find you online and sell you because it's the fucking deer hunting season sale or whatever. And so what they'll do is they'll upload that list of emails to Facebook and say, oh this is the deer hunting group. And then they'll show you ads based on your actual buying history. So that sort of thing absolutely does happen. Yes. That makes sense. What is it like being in those companies? Like whether it's Facebook or any sort of tech company. For someone on the outside, we look at it and we say, like how are those fucking places run? Because it's like I've had a good friend who was a big executive at Google and now she works at another large tech company. And the way she described it to me, she's like it is utter madness. It's utter madness. And the lunatics are running the asylum to a certain extent because there's a lot of people, the company that she works for now, there's a lot of people that are inside the company that legitimately are mentally ill and they consider themselves activists and they have to placate them because it's a certain percentage of the population of the people that work for the company. And they're the loudest and they oftentimes don't get work done. And when confronted, they talk about their activism. And she's like, listen, you are here for X amount of hours a day. This is your fucking job. You're not an activist. And don't think that if you're complaining about other things that this company does that you doing that is a part of your job because it is not. Yeah, I mean, I think the companies are somewhat to blame because they've done the whole like bring the real self to work thing. And again, what is that? There's this philosophy among like the HR there that like, and if you're being cynical about it, it's engineered to get the most productivity out of you. Like the real self to like if you work at some of these companies, particularly again, to answer your question, I think it depends what stage of the company you join. But if you're talking about big companies like Apple, Google, Facebook, now, it's a campus. It's a lifestyle. They do your laundry for you. They feed you. They do your laundry. They can't. Yeah, yeah. There's like Apple does your laundry. I'm not sure about Apple because we were never in office because it was under COVID. But Facebook had had laundry. I'm sure Google does. Yeah. Whoa. Yeah, it's it's weird. It's you join. I mean, it's a strange analogy, but it's kind of like a cult. And there's like a massive amount of corporate culture. Like I described a slot in Chaos Monkeys. Who said that? Who said that quote that every successful startup is a cult? I think it was Keith R. Boy, I think from Founders Fund. And the thing is, he's right. He's right. Like Facebook was a cult and I joined it and that was a happy member of it. It was very powerful. Everyone sacrificed themselves for the sake of the Facebook empire and its emperor. Did it change your own personal thinking while you were there in the cult? Oh, yeah. Did you subscribe to Cool Age? Oh, yeah. I totally bled blue. I still do. Absolutely. Because again, it's a formative experience. Like some of the most impactful professional work I did was there like it or not. Making taking Facebook ads from like the shitty, stupid little iPad offer ads on the right to like literally the thing you just looked at or bought, which I know sounds cringy, whatever that changed everything. I was one of many to be clear. It wasn't just me, but that changed everything about that company and was super impactful inside the industry. Like how much of an impact did it have when Apple came along and introduced these restrictions? Oh, huge. You're talking about ATT, which is like the ads transparency thing for those who don't know. If you've got an iPhone, like you download an app and suddenly there's like this opt-in that Apple is showing you saying, hey, do you want to share your data with these people? That's hugely impactful. What that does is, so why does that matter? So Apple controls this. They create the hardware and the software and all of it. At the end of the day, seeing from Apple's point of view, Facebook, as powerful as it seems is just another app in the app store, which was always Zuck's fear, which is why he wanted to build the phone. Apple can say, look, Facebook, you don't get to track users as well as you used to. You can't track Joe Rogan down or like anonymously your device ID. You can't do that anymore. You only get a certain level of granularity. How much tracking were they able to do before that? Well, I mean, an infinite amount. They would track you individually. I mean, whether it's worth doing or not, it's another matter, but they would get the individual device ID from your phone. And so they would know who you are in terms of that phone. What does that entail? Like again, if you go to Cabela's and buy a thing, then you go to some ... You were playing a casual game and they show you an ad. You playing that game and you buying that thing in Cabela's can be individually joined in a very precise way. And if you remove that and say, oh, you can't track Joe Rogan's phone, you're tracking 100,000 people at a throw, then they bucketize you. They put you in a bucket that isn't quite as precise as before. What that translates into is fewer clicks, fewer sales, like the effective amount of money that either the advertiser makes or the publisher that's showing the ad makes goes down. Now, is this for the end user, for the person who has the phone? Is it beneficial that they've instituted these policies? Good question. If you get a warm fuzzy feeling inside knowing you're not being individually tracked, yes. Other than that, not particularly. But it also doesn't give up the access to your data that's this very valuable commodity for Facebook. Right? So here's the tricky thing about data. One of the many misconceptions that I try to address in the book about how Facebook works is it's often not Facebook data that's being used to target you. Because if you think about Facebook, it's like you're posting random photos, you're engaging with content, but a lot of your commercial activity like booking airplane flights, shopping for shit doesn't happen on Facebook. Facebook doesn't know about that, strictly speaking. So how do they solve that problem that like, we got to show them fucking shoe ads and Facebook doesn't know shit about what shoes you look like? So part of this is what I described in the book and what I helped build in the early stages. There's a way of joining YouJoeRogue and FacebookU to Cabela's U in some relatively data safe way that lets Cabela show you an ad for those shoes. Facebook doesn't necessarily know all the Cabela shit because Cabela doesn't want to let Facebook know that shit because they don't trust Facebook. And so a lot of the stuff that's going on isn't like, oh, Facebook knows everything about you. It's like, no, Facebook knows who you are on every device because you tend to use Facebook everywhere. Maybe not you, but other people. And so that means that they can join you very well to all the other commercial activity you do. And you use Facebook a lot. So they have lots of opportunities to maybe show you an ad. That's really Facebook's strength. But getting back to your original question, how does Apple fuck that up? Well, it fucks it up because it doesn't know who you are on that device at the individual granular level anymore. And so it can't talk to Cabela's and say, oh, that guy who's looked for these weird things like show them this ad, that can't happen anymore. Is it in any way negative for the person who's the end user? Good question. Because maybe you would want to see those ads because this is something that you're actually interested in purchasing. I mean, in the happy case, but let's face it. In the happy case. If you're a person who's, you know, you have full control over your urges. You're not a person who's just like, you know, you can't afford something, but you buy it anyway because you're fucking crazy and you saw the ad and you can't help yourself because we know that there are people like that out there, right? So in the best case scenario, is it better? I would think so. But isn't that like what you do as a business? I think the status quo is a lot better than the like stupid punch the monkey ads. I used to remember those ads in like display ban. I probably don't remember them, but like in Yahoo.com back in the day, there'd be like a little moving target and then like punch the monkey. Like you can either see that bullshit or you can actually see an ad that maybe has a chance of being relevant in Instagram feed. So yeah. Do you give anything up to have those relative ads? No, in fact, I mean, you gain things, right? Like a lot of services wouldn't exist if they weren't paid for via ads. So like the reality is if Facebook's ads start sucking more, i.e. the amount of money they make per ads goes down, they're just going to show you more ads. So do you think that Android phones handle it better because Android phones allow more of those things in? Yeah, it's a super wonky question. I wasn't expecting this. It's wonky? Yeah, no, no, no, it's good. I think I love talking about it. The model that Google and Apple have are somewhat different. Apple is a fully vertically integrated thing. They create literally the chips and the software you're looking at. Google's a little bit different. You can buy Android phones made by all sorts of manufacturers. Their model in general tends to be a little bit more open to third parties. And so there's a whole ads ecosystem in Google where I could fill this wall or whiteboard with all the little boxes, all the little companies that get together to show you a single ad. And so Google is a little bit better about being more open to the outside. Mind you, they still use monopoly power in various ways, like they're not saints. But Apple has a more closed-mode approach to it. That's why they're building an ad system because they want to make money in ads, but they're not going to go the Google route. They're going to build more than likely. I mean, not that I have deep insight into it anymore, but more than likely they're going to build it themselves because they have a more closed vision of it. How they think about data privacy, here's another thing. We really want to geek out. One direction Apple's going that's kind of interesting is that a lot of the data for your iPhone is going to live on device. In other words, for the past 20-plus years of internet, we've had this model where you do shit on a phone, data goes into the cloud, weird shit happens, and you get shown a page or an experience. A lot of that's changing. Most of what you do on a phone is through an app. It's not a browser anymore. It's like the code is running on your phone. You're producing data on that phone. Why shouldn't the computation and all the shit that happened happen on the phone? These phones are actually pretty powerful. A lot of things are moving in that direction for a bunch of reasons. One of the reasons actually is privacy. Apple and other companies have made public statements about this. It's like, whoa, it's more private. What's the ultimate opt-out? My data's on this phone. You know what I do? I take it and I throw it into the fucking lake. There, data's gone. Right. But if you opt-out on deletion when the data's in the cloud and a bunch of third parties have it, you never really know. Right? Right. But if you keep the data on the phone, it is better in many ways.