The Information's 411 Xanny Do
Everybody the intermissions Ford. One year weekly podcast brought to you by the reporting team at the information. This is Tom Dotan your regular host. We've got two parts of this episode today. I I'm talking to Jessica two-goal. She had a big feature today about Sander, the addressable advertising division inside AT and T. This is basically AT's gamble to take on the digital advertisers like Facebook and Google in using their data and television inventory to create a massive advertising powerhouse and Shaq. It's not going all that. Well, this is a strategy. That's been attempted several times by other non tech companies and always seems to run into a couple of snags. So Jessica profiled the latest ones happening over AT and T that I'm talking to Kevin McLaughlin about apple and Amazon and cloud storage. Apple has begun to move some of its business away from Amazon in a bid for at least a little self sufficiency. And it speaks a lot to the state of cloud. These days. And how some companies try to go it alone other companies or reliance on the public cloud and some people are somewhere in the middle. Or does the story talking about the Sepah sewed? Let's get on over to Jessica too. Richest one of the long-suffering strategies kind of in the mobile world is trying to use their data in order to be competitive with the digital companies like Facebook, and Google and AT and T is sort of the latest attempt or of this strategy and in the store that you publish today. It looks like it's really really struggling. So I mean before we get into the specifics of Zander and all the stuff that's gone on internally at AT and T and Warner media. Maybe if you could just explain from abroad level, what is the promise of targeted TV advertising. Okay, promise of targeted or addressable advertising, which but AT's ultimately going for is that you, and I could be watching the same show in our homes, but you would see an ad for one kind of car, and I might see at nother kind of car that I looking to buy its individual household. Liberty one on one advertising people have been trying to do this for years AT and T part of their argument for buying time. Warner was we're gonna have this rate premium contents and our eighteen data and the set top box data that we have through our direct TV satellites we're gonna be able to really do this and helped industry compete with Facebook and Google. So I mean as the go down the path to putting this together problem store to crop up almost almost immediately. I mean. Let's talk first about just the attempt to try to get other TV networks on board. I mean what what was the strategy there? And what happened as AT and T tried to do it? So there will they're still trying to do it. Right. They need TV networks onboard because TV networks of the ones that have the ad inventory. Right. So when you see watch show an hour long show. Two minutes of those ads are coming from your cable or satellite operator riots for me. It's spectrum the rest of it. The sixteen to eighteen minutes is owned by whatever channel network. The media company owns that network. Whatever it that comes from them. They are one selling it making money. Right. So most of the ads come from the TV networks, so it's crucial that AT gets deals with the TV networks, but thing is like AT and T doesn't wanna let the TV networks cellar, which is a huge sticking point. Because the TV networks. Have been selling ads since the beginning of TV ads. They don't wanna give up control. They wanna be able to do it. They don't wanna give up the relationship with the advertisers. So that is like a completely like non starter win every TV network. I've spoken to. The other part of it is to eighteen says, okay. You don't wanna do it with? They're trying to do. Now is basically pressure that heating at works to signed deals to give them some of their ads spots through their Parag associations. I'll remember direct as one of the biggest distributors of TV. You know, there's having very aggressive negotiations with the TV networks. Oh, saying if you want us to carry your channels on direct TV, you need to give us some of your Atta, Victoria. But even there they're not really having reut right in. I mean, the like you're saying they have the leverage. But I guess it's just not enough to be able to to push this across the line. So this is what I'll say, yes. I mean, not yet. So they just had to deal with Viacom, right? And that was very closely watched negotiation, the ams news leaks that by Viacom did sign a deal. And but as our store in my story shows, it's not there's no TV Dettori part of that deal right now Joe banner ad the Dory. So. TV networks are just not playing ball right now. Now that could change in aging tease hope is that they're doing some of this targeted advertising not address book targeted advertising with the former Turner. Now Warner media now so with the hope is that people are going to see them be so successful with that. If they are going to wanna play off. I mean, one of the elements of this that I find fascinating is that in following, you know, the rise of digital companies in the fall of TV networks and their ad rates. Intern is that they really see I think the United in their belief that Facebook and Google and all these kind of big digital media companies or an enemy of theirs. They really are pulling money from TV ad budgets to extent at least or they worry that it's going to happen. So you would think there would be a United front or they would need to be some sort of United front and there've been attempts in the past to do this. I mean, it sounds like your story touches on this. You know within the con-. Next of AT and T, but why isn't there better collaboration across other TV networks and TV companies to pull their inventory together use their data and try to say in a United front combat digital media companies. Is going on. So you have the cable companies Comcast is majority owner of MCC, which is with charter Cox. And that's like something like it believe it's forty five million households. So they're doing something. Then you have the TV programmers that are doing things with what's called open AP. The problem is any the TV programmers interests and the cable operators interests are not alive. You are things apply. Ration-? But this is only gonna work if everyone comes together, right, right? May just hasn't happened yet in the way that it probably needs to. All right. Let's go inside AT and T for a moment as they're trying to put this together. So the person that is the spear point or the tip of the spear for AT and T and trying to pull this off is this is this executive Brian lesser. What can you tell us about Brian? So Brian is he's a seasoned digital advertising executive. He was with that a team is on the board of open AP. He was wig group am, and you know, he understands digital advertising I think he understands buying advertising. He's not a TV guy. So when he was first tapped as to head up this Andhra business ramble Stevenson, hire them he reports. Randal Stevenson, some folks at Turner were like, that's interesting. He's not a TV guy. Then the first thing that they do after the deal closes the deal being after eighteen by Time Warner is they bought app nexus, which is a exchange to buy and sell ads, but it's primarily digital banner ads. Which is fine. But everyone was like, well, if you you're talking about creating this targeted addressable advertising machine, why is this the first thing you're buying? By the way, that they thought at nexus as technology and ability to crunch data was going to be transferable to television jenness, g things. One is banshee. She the engineering resources that they bought a team. I believe it's four hundred engineers that would comment build up the video and be able to, you know, do that rather than just starting from scratch and sure there's something definitely to be said for that. But it's you know, it's not an easy process. This is going to be it's really hard. The second thing is I think Brian let me my understanding stores Brian lesser had hoped that he was going to be able to do tack on after this happens after at nexus to help build up the video capabilities and given eighteen debt levels that was not the case notes with the story. Also in parts resembles the sort of frequent mean, we have in the tech world where you know, a old line company buys a digital company. And the integration process doesn't go. Very well. I mean within app nexus is that what you sort of happening too is just a clashing of of cultures and executives. After they bought up nexus bright o'kelly's the CEO about next. Brian was the job Ryan loss on the board up next those? You know, an AT plants is huge. Conference in Santa Barbara, the Ritz Carlton, we're gonna unveil Andrew at those and like within days before the conference brought in Brian Kelly. I think he was supposed to speak or it was on the agenda often is off the agenda was kind of wondering what happened to have. Apparently, he'd left kind of sort of bitter falling out with Brian lesser over things. Like retention bonus. Getting retention for him in for his staff severance, and then all the way to you know, disagreement about the name of Zander, which is named after Alexander Graham Bell who I guess has some ties he's evolved in some studies having to the affiliate him with xenophobia. So goes deep deficit, right? Exactly. So he left right away. They bought his banner ad. You know, the people are like what's going on no-one consulted? Anyone Shurmur before they bought app next? Says so you know, that caused a lot of you know, lot of tension. Sure. A as you mentioned in the story, the president of Turner, David Levy who very kind of old timey been around the TV ad world for a long time. Not a huge fan of that deal. Now, he was not a fan of app. Nexus trauma had actually decided to cut ties without nexus. Just a couple months before eighteen Tepa, but Apmac says because it wasn't it wasn't performing at the standard that wanted see perform. So Tara folks, including David Levy, I heard was most local about those were very surprised and dismayed at the position. No, it sounds like, you know, with the integration process. A lot of the stuff is historical. And it's really only been the last month or two that we've seen the integration process of Warner media happening inside AT and T they put some new executives in charge of the as business. I mean, how are things shaping up in in the most recent you know, couple of weeks. So I had you know, they have their up fronts in mid-may. So I do get the sense that things are going smooth are. I mean the way. It's going to be there. The to have these to the issues to add sales, forces rights Turner, hasn't ads sales floors still worm you had stores and Zander has an ad sales force both wanna market, and so that's complicated. Right. Because the they're they've different PNL's, and it's not clear as to how long that structures in Alaska. My guess is that they're doing that? Because quite frankly, the turnaround sales for a snake plus money and Zander doesn't yet. So that's an issue. I also have to say I'm not clear how the top dogs are all getting along. Like, obviously David lease that down. But I'm not sure how one or media head jumps danke and Brian lesser with that relationships like ROY. And like you said Bryan doesn't report to him. He reports into a different executive at at AT and T, you know, I remember talking to people about Zander a couple of months ago, this is people in the ad buying world. And there was a lot of folk behind it, or at least they saw them as a real threat to Facebook and Google as someone that could consolidate a lot of inventory, how the targeting technology can really make go at it. No like, I said, this is a couple of months ago. I mean, as you reporting the story and talking to people in the media buying world. I mean, what's the senses are still a belief that there's real potential for this or people kind of wary and release stepping back and saying let's see if they can get their shit together. That's a good point advertisers are goalless. They're bullish Zander. They love. Love I mean, because what the promises compared to what other promises of the made to them. It does seem like it's the most compelling, right? It's not a consortium which has prevent from the old days of the canoe, Sean, which was the first to try to dress the ball like, so they think okay. Will they won't have that kind of messy mess, and they have the mobile data on top of the TV data. So yeah, that's really interesting to us. It's just a matter of execution if they can get the TV networks onboard wrote wrote in a lot of that stuff is still up in the air. What are you looking for next, by the way? I mean, what do you think for people paying attention to this will we'll give a clear signal as to what direction this process is heading. You know? So they're having are up front mid may. I think it'll be really interesting to see what they announced what that announcement actually me. And I think people have to like kinda dig in. If they say the head deals with TV networks, what kind of inventory does that really include? I also interested to see what happens with some of these consortium like open, a P off launched a competing product competing marketplace yesterday, they announced it it's supposed to come out. I think in the fall, but Okinawa Ps members are all going to allow consolidation themselves. So interested to see what happens with that as well. You're for sure we'll lots of pay attention to Jessica thank you for taking the time and digging in the trenches of Zanny, and we will we'll be watching. We talk about the clash of giant tech companies one of the things that I myself really think about is kind of the clash between cloud services, especially when it comes to apple which we all know is huge consumer product and consumer facing brand, but has clearly a ton of needs in terms of cloud storage. And the story that you wrote with a mere Friday talked about the interplay between apple and Amazon and how much reliance apple has had historically on AWS and where that's going. So we can just get to the heart of the story here. So what did you an Amir find as you were looking at the kind of business that apple gives AWS every year? The key. Takeaway is that last year apple after many years of development and political battles internal turf wars was able to finally make some real progress in becoming self sufficient in the cloud. And what I mean by that is apple flip the switch on an internal storage system. That. Powers? I cloud and possibly other services. As a result. Apple was able to spend five hundred million dollars less on storage in two thousand eighteen then they spent on AWS storage in two thousand seventeen. Yeah. Yeah. And so this like you say was a years in the process project and something that apple had a mean assumingly wanted to do for awhile, right? Beat less be less reliant on the public cloud. Yes. And also more self sufficient in terms of you know, in some cases being able to use its own service to provide the best performance. That's the key thing with apple is that they want to have it served their services perform, well, no matter where users are in the world. Right. And so, but there's you know, there's another player in this picture here, which is Google and they've also been providing some sort of cloud infrastructure services for for Apple's. Well, right. Yes. For the past several years as well. Yeah. And one of the things that seem to have maybe, you know, spurred apple to become more self sufficient. Was a previous incident with Google and fire in their in their data center. Can you explain a bit about that? Yeah. Well, apple I think they had an agreement with apple sorry apple had an agreement with Google, and they expected their data to be stored in a certain way and later it emerged that Google was not storing data in the way that apple thought. And so that was one issue. And then the other issue was there was a data center. Fire and apple was lost some of its data temporarily for some of its users right was able to recover, but in the end there was some animosity between the two companies and apple kind of put its planned increase in spending on Google cloud on hold for awhile. Yes, sure. I can see why apple would be a bit frustrated by that. So the larger context though, is that there's been a lot of kind of dithering within the tech companies that are not explicitly cloud service companies or cloud storage companies. As to whether or not they wanna build versus lease. I know I write a lot about snap. And there was you know, years ago debate with when it was nap chat to bait about whether they should build up their own storage infrastructure or keep relying on Google cloud. And you know, the result for them was that they were going to stick with Google cloud. And now AWS, but there've been other companies that have taken a different tack. I mean from what you've seen. I mean, what's the kind of state of play right now with companies in terms of building your own infrastructure or or leasing it. Well, it was several years ago that dropbox became the first really high profile AWS customer to say, hey, you know, what we're gonna do it on our own. We're gonna pull our stuff out of AWS or most of it out of AWS and put it on our own cloud infrastructure, and at the time dropbox gained a lot of credibility and wore it sort of as a badge of honor in the industry that they were able to actually build their own cloud at scale, which is not easy to do. And it's also obviously expensive to do. Right. Right. And so. Apple seems like they've taken a middle tack. They're not like snap in which they're leasing their entirely relying on the public cloud. They haven't done the dropbox root of being completely self-sufficient. What's what's the thinking with an apple about their their stance? Well, right now, I it sounds like, you know, there was some camps that might have wanted to do it all themselves and other camps that felt that tapping into services from existing cloud providers would be the best way to go are understanding is right now apple isn't gonna go fully self sufficient. It's going to use cloud providers such as AWS and Google, which are the the ones we know it's using currently on an as needed basis in areas of the world where Apple's own service isn't the best option, and I mentioned this earlier, but it's all about storing the data as close as possible to users because of course, that would impact the speed of the service in your ability to, you know, do things more quickly, right, right? What does this mean for amp? Amazon though, I mean having apple as a less lucrative customer certainly affects the top line a bit. But are they worried at all? I mean is this something that they've you as a long-term concern? I don't think so I mean, it is a fairly sizable chunk of business that they are losing. But you know, this is storage. This is a very sort of undifferentiated part of the cloud infrastructure, stack as they call it. And it's also an area where Microsoft and Google are very able to kind of poach customers because you know, it doesn't take a ton of technical expertise, or or, you know, ability to move data around between clouds, I think this is why Amazon's more focused on things like database services, and of course, Google and Microsoft are as well, the real battle and cloud right now around database services. That's why you're seeing AWS going toe to toe with oracle with trash talking between the camps. So to answer your question. Yeah. I mean, it's not great that Apple's moving stuff out of AWS. But. Certainly, no great concern. I wouldn't think for them. So one of the things you were talking about before we started recording the podcast is that the apple story is in some ways of validation for Amazon in terms of how much of a head start that they had in the space. Could you explain that a bit? Yes, our understanding is that apple did build a lot of its own cloud, infrastructure storage, and sort of gains expertise there. But they also realize that it didn't make sense for them to recreate AWS. And that there were certain things that AWS will always do better than them. Right. Right. And and you know for for that reason alone. Apple will never probably be completely self-sufficient. All right. Kevin fascinating stuff. Thanks for joining. Thanks, tom.