Crypto Castles

A few days ago, I went to spend some time with the Godfather. I’ve known the Godfather for years now, meeting him at a dinner party in San Francisco over a decade ago. A few years ago, we hung out for a few days in Singapore and he talked about disruptive technologies including Bitcoin, drones, 3D printing and was full of life and energy. He hosted parties at the most exclusive nightclubs and was always surrounded by interesting, brilliant people.

The Godfather gave me a hug, put his hands on my shoulders, and smiled,

“Haven’t seen you in a minute, eh?”

“Let me introduce you to some people…”

He had just gotten the keys to a new house along the Venice canals, and there was a table full of crypto experts sitting around a table with their laptops, churning away, checking out ICOs, discussing blockchain technologies, and buzzing with creative excitement.

On the drive up, I listening to a futurism podcast that was talking about Blockchain:

It is the future.

jurassic-amber


I sat at a table, and a young blonde woman with bright eyes asked me,

“So what do you do besides this? (crypto)”

“Shamanism”, I replied.

She lit up and said, “Yes! They do go hand in hand.”

The Decentralization movement attracts an interesting mix of Hackers, Bankers, Libertarians, Anarchists, and Burners. A collision of the Technocracy and the Conscious Community. Code and Psychedelics.

“Who do you trust more? A third party? Or the fundamental laws of the Universe?”

Evening came, Amazon delivered bags of drinks and snacks, and guy wearing an EOS t-shirt arrives with several large pizzas. I chow down on a couple monster slices of heart attack pizza, covered with Canadian bacon as the futurism conversations continue.


It’s about time to go, so I head into the back room to say goodbye to The Godfather.

He puts his arm around me, looks me in the eyes and says,

“Alcohol. No good.
Weed. Some health benefits. I like it.
Cocaine, Opiates. Terrible. Absolutely terrible.
Psychedelics – uplifting. You know them well.
Now… my favorite drug of all is this.
Dissociative.”

He points at a small mound of white powder. It is a dissociative nootropic stack.

“I used to blast people off, but this is just like a sip of wine.”

He hands me a silver tube, with diamonds embedded into it.

“Silver. Kills bacteria.”

I place it to my nostril and snort the white powder. It begins to hit right away, and feels as though I’m slowly detaching my consciousness from my ego. I’m still looking through my eyes… but, I’m not exactly me. The hacker chemist who formulated the substance that I just took a hit of explains the chemistry behind what is hitting my brain, and it sounds like a foreign language. I look at him, with his messy orange hair and rainbow unicorn t-shirt, and the sheer absurdity and awesomeness of the experience hits me. My life has just been a series of wild adventures that get more surreal, more epic, and more world changing.

Suddenly, some feelings of Miss Rabbit come up. I can feel some connection with her and suddenly feel nauseous. I head into the bathroom and purge… from both ends. The pizza comes back up and out. It feels great. I spend some more time talking to the Godfather in a detached yet connected altered state.

I start feeling nauseuous again and the Godfather walks me upstairs.

“You can stay in the master bedroom. Overnight if you want. I have my other house down the street.”

I lay down on a furry blanket in the bed and hear a mosquito buzzing around. I am too tired and detached to be concerned about it and rest. I can feel myself letting go of everything. It felt as though Miss Rabbit was drifting away on her own raft, and I let her flow into her own stream of reality and whatever cosmic cord that attached me to her in Arrowhead was released. She will return completely in her own power now.

I drifted to sleep to the cacophony of tech chatter downstairs. A few hours later, I awoke to a quiet empty house with a mosquito bite on each of my elbows. It felt like a message that it’s time to focus on the mission, and let go of distractions. I have a rocketship to build.

rocketlaunch

Pointers All the Way Down

in·fi·nite re·gress
noun
LOGIC
a sequence of reasoning or justification that can never come to an end.

From Stephen Hawking‘s 1988 book A Brief History of Time

A well-known scientist (some say it was Bertrand Russell) once gave a public lecture on astronomy. He described how the earth orbits around the sun and how the sun, in turn, orbits around the center of a vast collection of stars called our galaxy. At the end of the lecture, a little old lady at the back of the room got up and said: “What you have told us is rubbish. The world is really a flat plate supported on the back of a giant tortoise.” The scientist gave a superior smile before replying, “What is the tortoise standing on?” “You’re very clever, young man, very clever,” said the old lady. “But it’s turtles all the way down!”

NP_jk_turtles-blog480

I spent most of my last post doing a brain dump of the research that I’ve been doing on the Internet and the digital ad industry. I’m attempting to analyze trends and understand where things are headed.

“The Internet” is actually composed of three parts:

  1. Surface Web – this is the part of the web indexed by traditional search engines.
  2. Deep Web – this is the part not indexed by traditional search engines.
  3. Dark Web – part of the Deep Web that exists on darknets, overlay networks which use the public Internet but require specific software, configurations or authorization to access

iceberg-web

It’s pointers/links/objects all the way down.

Decentralization

In Peter Diamandis and Steven Kotler’s book Bold: How to Go Big, Create Wealth and Impact the World, they discuss the Six D’s of Exponential Technology:

  1. Digitalization – the tech becomes bits – ones and zeroes.
  2. Deception – initial hype followed by a period of the tech being dismissed.
  3. Disruption – the tech plays a role in subverting established industries.
  4. Demonetization – the tech makes things free.
  5. Dematerialization – the tech makes things disappear.
  6. Democratization – the tech is available to anyone.

Today, we are at the democratization stage of the Internet. With the rise of mobile phones, and the fuel of the digital ad industry, global Internet penetration, according to Internet Live Stats is over 3.6 billion and climbing, or roughly 40% of the world’s population. Links and clicks (i.e., pointers) are the currency of the Internet, and currently the battle to control these after being waged by the Internet giants.

Decentralization is a parallel step that happens all the way down the 6D process. The Internet protocol, BitTorrent, Bitcoin are all part of the P2P revolution has been happening, but as always in history, there is conflict when power is decentralized.

The AFK We Live In

Since I was a kid, I always felt that there was a subtle oppression against “the smart kids.” It was not cool to be into computers, and nerds were bullied. Things have changed quite a bit, now that computers are ubiquitous and Silicon Valley and the tech industry show the earning potential of nerds. Nerd culture and tech has become cool.

When I watched TPB-AFK, it felt almost like watching an X-Men movie. The government and corporate lawyers were afraid of these young Swedish kids with superpowers that could change the world with their code. The fear and despise that the politicians had for the nerds was palpable. The fact that these nerds were belligerent and immature didn’t help.

When they gave a tour of their underground lair where they housed Pirate Bay, it was just a few few servers in a rack – 4 CPUs with 12 cores,

“an efficient ship.”

With information decentralized and free, the positive, is that we also have an archive. Piracy was part of my childhood in the 80s, and we would use cracking programs like Pirate’s Friend, Locksmith and trade 5.25″ floppy disks that we would hole punch on the left side in order to make them double sided. Today, we have an archive of Apple II games from my childhood that I can look at and play. Nostalgia! and an important preservation of human art and history.

Ed Fries, a former executive at Microsoft has been restoring arcade machines and documenting the process. His blog post is as important as the preservation of the actual hardware. Perhaps more.

Popcorn Time

Popcorn Time is a video torrent streaming site. Will the real Popcorn Time please stand up?

real-slim-shady

The original Popcorn Time split into various forks, and each fork accuses the other of being malware or corrupt, then there’s this Wired article that talks about Popcorn Time being a form of ransomware.

TL;DR – As of this writing (4.20.2017), the version at https://popcorntime.sh/ seems to be the most robust.

popcorntime.png

It has a slick interface and for obvious reasons, much better selection of releases than any of the other “legitimate” video streaming platforms. In other words, it’s arguably a better experience than Netflix, simply because of the library, and that it’s “free.”

The P2P content genie has been out of the bottle since Napster, and it has grown impressively. With decentralization, art, information, and content becomes “free”. More people get to enjoy the content, and the creators have more reach then ever.

“But what about compensation?”

Human nature has a tendency to rank everything from best to worst. It is fundamental to our evolutionary survival. The prefrontal cortex

has been implicated in planning complex cognitive behavior, personality expression, decision making, and moderating social behaviour.[3] The basic activity of this brain region is considered to be orchestration of thoughts and actions in accordance with internal goals.[4]

The most typical psychological term for functions carried out by the prefrontal cortex area is executive function. Executive function relates to abilities to differentiate among conflicting thoughts, determine good and bad, better and best, same and different, future consequences of current activities, working toward a defined goal, prediction of outcomes, expectation based on actions, and social “control” (the ability to suppress urges that, if not suppressed, could lead to socially unacceptable outcomes).

In other words our brains are functioning like a quantum computer, constantly ranking and making choices to decide which direction to go. At some point, for most humans, through that process called life, this computer starts getting specialized programming that gets complex, and in a way corrupted by the traumas we suffer along the way. Much of society has evolved in a zero-sum game model where humanity is competing in a giant poker game to see who can get the most chips and sit at the final table. It’s gotten to the point that the richest 8 people (all men) in the world own as much wealth as half of the world’s population. Income inequality doesn’t even fully capture the disparity here.

Part of this inequality comes from the well known fact that “the rich get richer.” The Internet accelerates this phenomenon. Given that the Internet is driven by Google’s Pagerank algorithms, and social networking behaviors, the people and companies who are focused on maximizing their exposure and mindshare drown out the rest. Launching a new IP or movie requires millions of dollars in marketing to push signal through all the noise. Occasionally, there are those rare viral content hits that spread, but there’s so much competition to capture eyeballs, as was discussed in my last blog post.

Kevin Kelly’s classic essay 1,000 True Fans says that an artist only needs 1,000 true fans to make a living. With the decentralized and free distribution of content, it will be interesting to see how the Long Tail of information evolves.

The key players and pieces in this game in the West:

  • Google – indexing the world and controlling the flow of information.
  • Facebook – connecting the world and controlling the flow of information. Getting users to voluntarily share.
  • Amazon – connecting the products and consumers of the world.
  • Wikipedia – indexing the information of the world.
  • Wall Street – indexing and trading the financial energy of the world.
  • The Pirate Bay – indexing the digital content of the world.
  • Wikileaks – indexing and releasing the secret information of the world.
  • The Blockchain – a ledger containing decentralized transactions of the world.

Everything is a pointer, and there’s a tense battle between control and decentralization. I’m thinking a lot these days about how this will play out.

It’s pointers all the way down!

Unbreaking the Internet

For the past few years, I’ve been thinking about the Internet as reflection of humanity and the collective consciousness. It has become ubiquitous, and in some ways, it has a life of its own; algorithms that symbiotically evolve with our collective browsing and clicking habits.


Quick and Dirty Market Survey

eMarketer has great public charts and data, and I did some quick research.

  • US paid media ad spending will grow steadily in 2017 to $206 billion.
  • US digital ad spending will grow from $73 billion in 2016 to $83 billion in 2017 with a growth forecast to $129.23 billion in 2021.
  • Digital ad spending is growing in market share and mobile the main driver of growth.

us-digital-ad-spending-2016-2017.png

  • Native display ads are expected to account for more than half of all US digital display media ad spending in 2017.
  • Advertisers will spend $22.09 billion on native display ads in 2017 alone.
  • Social advertising (Facebook, Twitter, Snap, etc.) will account for 84.2% of total US native display ad dollars in 2017. However, this share is slowly declining, as non-social applications introduce native advertising.
  • Google and Facebook dominate US mobile ads, capturing 54% in 2016, and a projected 57% market share in 2017.

emarketer-mobile-ad-revenues-by-company-2019

  • Globally, Google and Facebook are projected to capture $72.69 billion and $33.76 billion, respectively, bringing the two ad techs’ share of the digital ad market to 46.4% worldwide in 2017.
  • Snapchat is poised for “explosive growth”, projected by eMarketer to grow 157.8% to $770 million in the US in 2017.

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Sources:


The Lumascape

To get an idea of what the digital ad ecosystem looks like, here are two sample LUMAscapes

display-lumascape

mobile-lumascape

This LinkedIn post by Mike Goldberg does a great job covering the basics of the different components in the programmatic ecosystem.

programmatic-media

The digital ad ecosystem is complex, with lots of different different companies, often serving multiple roles in the ecosystem, making things complex and often opaque.

  • Advertiser/Marketer – has a product to sell. May work with agencies for media planning, buying, and possibly creative.
  • Ad Networks – online ad service provider with various sources of inventory. (such as Google, Yahoo.)
  • Ad Servers – deliver digital ads to websites/apps.
  • Trading Desks – trading service that utilizes real-time-bidding (RTB), enhanced with data.
  • DSPs – Demand-Side Platforms – Tools to purchase millions of targeted ad impressions.
  • DMPs – Data Management Platforms –  Tools to manage and analyze vast amounts of data generated by the ecosystem.
  • Ad Exchanges – online auction marketplaces for buying and selling of inventory across multiple ad networks.
  • SSPs – Supply-Side Platforms – Tools to maximize ad revenues selling inventory on ad exchanges and ad networks.
  • Publishers – Owners of inventory. (Large media companies, blogs, apps, etc.)

Eric Picard put together a great chart that shows the Advertising Ecosystem Impression/Dollar Flow in an older 2012 article.ecosystem-flow


The Fraud Elephant

corruption-elephant

Now that we have a sense of the complex ecosystem, it’s time to discuss the elephant in the room. The digital advertising ecosystem is infested with fraud. Dr. Augustine Fou’s presentation summarizes the problem well.
ad-fraud.png

From this Harvard Business Review article, Dr. Augustine Fou states:

“It’s very difficult to get anyone to pay attention to this problem. Everyone has something to gain from the fake traffic.”

This is such a well known problem, it makes an appearance in HBO’s Silicon Valley.

There was an October 2015 Distil Networks report that estimated ad fraud to cost the industry about $18.5 billion annually, and that for every $3 spent in digital advertising, $1 is going to ad fraud.

According to WhiteOps, an anti-ad fraud security firm: In late 2016, a group of Russian hackers created a botnet called “Methbot” that siphons $3 million to $5 million in fraudulent revenue per day. Now, Dr. Fou is a ad fraud consultant, and both Distil and WhiteOps are anti-ad fraud security firms, so it is in their interest to estimate high levels of ad fraud.

Regardless, the ecosystem is broken and the problem is real.

Pirate and porn sites infested with malware are ready to capture your computer and turn it into a slave on a massive botnet that is the then used to click fraudulent ads some of which are also served on those same sites along with other fake sites. These fraudulent clicks feed into programmatic real-time bidding ad exchanges, trading desks, DSPs, and SSPs. The botnets are so powerful that they are slowly driving third world country click farms out of business by committing fraud more efficiently and effectively than those armies of slave wage workers.

Meanwhile the DMPs are dedicating massive brainpower and resources to sell services to fight the fraud and also optimize links to maximize click-through and revenue. There are companies such as Taboola, Outbrain, Revcontent, and Zergnet serving viral ads all over the web. There’s a simple reason.

Depending on the size of the outlet and the amount of traffic they can generate, a contract with Outbrain or Taboola—the two largest providers of such links—can mean millions of dollars in guaranteed annual income. And if your print advertising is declining 30% in a single quarter, that sounds great.


A Closer Look

outbrain

I decided to take a look at some Outbrain ads.

Outbrain served me the following Sponsored Content as I was browsing Business Insider while researching this post, shown on the right. The content has clearly been tuned to appeal to our human psychology by showing us attractive women and curiosity inducing link titles. Clickbait.

  1. Truthfinder – This led to a fake “The Beacon” magazine article with the title: I Typed in My Name and the Results Had Me Speechless. The website itself is a public records search business, and as I looked around for reviews, I found this review site with 143 reviews – two positive and 141 negative, with many complaints of fraudulent credit card charges and selling of their email address to spammers.
  2. The Modern Man Today – This led to another fake article titled The Skin Tightener Every Man Should Know About, telling a story of discovering this miracle product, and web design that implies magazine coverage from GQ, Variety, subtly implying that Matt Damon and Robert Downey Jr. use the product. In reality, almost every single link, from the menus to the magazine covers leads to a landing page for a product called LifeCell. There are what appears to be fake Facebook reviews (some of the users seem fake, and others … were they hacked?) and are even disclaimers at the bottom of the page that essentially confess to the page being an advertisement and fake article and the “celebrity endorsements” are justified because the celebrities attended an event where they accepted a goodie bag with the product.
  3. Business Insider – This was interesting. Business Insider bought an ad that was served through Outbrain on their own page? Curious. The article is a glowing review of an $89 sweatshirt made by American Giant with the title This hoodie is so insanely popular you have to wait months to get it. At the end of the article there is also a link to another article titled We tested what might be one of the best hoodies out there. Hey, I love hoodies too, so sure why not… At the top of their article:The Insider Picks team writes about stuff we think you’ll like. Business Insider has affiliate partnerships so we may get a share of the revenue from your purchase.Ok, I don’t have too much of a problem with this – they like hoodies, I like hoodies, if I buy a hoodie, and they get an affiliate referral fee, sure.So, what’s up with the American Giant article? Where’s the affiliate fee? I dig a little further, and find that this Business Insider article is actually part of a marketing campaign done by Launch Squad. It was a placed article to promote the brand, with traffic spread by Outbrain onto sites such as Business Insider to generate “Thought Leadership.”

We partnered with American Giant prior to their launch in February 2012. We set out to develop a cult following of the brand through creative campaigns and social marketing. In December, 2012, American Giant was cited as creating the “best hoodie in the world” by Slate, which led to unchartered success for the young company.

We focused on the value of American manufacturing from the CEO’s perspective, and placed contributed articles in Forbes, Fast Company, Business Insider, and others.

These three case studies in current day digital marketing give a pretty good survey of a few different types of digital advertising. Fraudulent? Maybe, they aren’t technically “illegal fraud”, but the practices definitely feel deceptive and purely profit driven.

Much of the ad tech industry finds themselves in a parasitic relationship with ad fraud, either making a living fighting it, or accepting the “necessary evil” of having fraudulent inventory trading across their platforms as they profit off of it. It reflects a kind of desperation, scraping the monetization scraps left behind by the bigger players in the industry.


The Two Giants

The reality is, the digital ad fraud issue, on some level, doesn’t matter. It’s just noise. It will always be there, but the bottom line is that the digital ad market is currently dominated by a two giants.

frost-giants

The two giants consume over $100 billion and 46.4% of the market, and they are ravenously chomping away at market share.

Based on the IAB’s numbers and public financial numbers from Google and Facebook, the two digital giants accounted for about 99% of the $2.9 billion in advertising growth in the third quarter—with Google making up about 54% of the total and Facebook about 45%, leaving just 1% for everyone else.



The Cool Kids

A few weeks ago, I was talking to my 13 year old daughter and asking her about her generation’s mobile online behavior.

snapchat-wallpaper

What apps do you use?

“Mostly Snapchat and Instagram.”

How about Facebook?

“Sometimes we just use it to login to apps. Besides that, we don’t really use it.”

Do you mostly watch Youtube or do you use Vimeo too?

“Vimeo? Eww.”

Why Eww?

“I dunno, we just like Youtube. They force us to use Vimeo at school sometimes.”

What websites do you visit?

“Websites? I don’t visit websites. We get our news from Snapchat. It could all be fake, and we wouldn’t know.”

Gary Vaynerchuk has a good writeup, The Snap Generation: A guide to Snapchat’s history. The Snap Generation (beyond Millennials?) has been raised not just on the Internet, but on smartphones as well. Many of them have spent their conscious lives constantly connected online to their friends.

The Snap Generation values their privacy and consumes social media like little digital snacks, creating a real-time mental multidimensional map of their social and virtual connections instantly in their heads. They are accustomed to instant gratification from Google, Wikipedia, music streaming, and Amazon Prime. They learn how do do anything from Youtube. They play video games, and like to watch others play video games on streaming channels and Youtube. They leave an ephemeral digital exhaust trail that is characteristically different from the previous generations. It’ll be interesting to see how this generation evolves as the reach adulthood.


Break the Internet

kim-breaking-the-internet

So, is the Internet broken? Not really, it is just a reflection of human behaviors with machine learning algorithms optimized to maximize monetization of ad traffic on the Internet. The links that work are links that our human collective are responsive to, and computers are really good at figuring it out. Every time Kim Kardasian releases a naked selfie, it spreads all over the Internet, because we are addicted to controversy, and her ego is addicted to attention. A woman with almost 100 million followers on Instagram needed to do an attention seeking photo shoot because she needed it to feel empowered and confident? What an interesting reflection of the human ego.

kim-instagram

Data scientists and machine learning algorithms are extremely powerful at figuring out what makes us click. This is not good or evil – it is a tool that can be used to subconsciously change our behavior. It turns out that as humans, we all have an inherent need to connect and share stories. Technology has evolved in order to enhance this ability, just at a scale that we could have never imagined.


Mind Control

mind-control

Elon Musk considers artificial intelligence the greatest existential threat to humanity.

“With artificial intelligence, we are summoning the demon. You know all those stories where there’s the guy with the pentagram and the holy water and … he’s sure he can control the demon. It doesn’t work out.”

A.I. is already here, and is subtly modifying the collective psyche of our species, tailoring our experiences online through the forces of ad monetization, psychographics, and digital exhaust trail analysis applied to a human connection, validation, and impact loop. The human race is a race of storytellers, and on a meta level, the Internet is simply an accelerated real-time digital micro-story exchange.

Cambridge Analytica, a data science firm is in the news these days for getting paid millions of dollars by President Trump’s campaign to use psychographics micro-targeting to affect the behavior of voters. Psychographics use the Big Five Model, also known as the OCEAN Model, to psychologically profile people in order to target them better.

  • Openness to experience describes a dimension of personality that distinguishes imaginative, creative people from down-to-earth, conventional people.
  • Conscientiousness concerns the way in which we control, regulate, and direct our impulses.
  • Extraversion is marked by pronounced engagement with the external world, versus being comfortable with your own company.
  • Agreeableness reflects individual differences in concern with cooperation and social harmony.
  • Neuroticism refers to the tendency to experience negative emotions.

Michal Konsinski is a psychologist and data scientist that developed a method to assess a person’s OCEAN personality profile based on their Facebook likes. You can try it here.

 

traitpredictionengine

 

Cambridge Analytica is using these (and other) personality profiles to create micro-targeted messages for marketing campaigns.

At Cambridge Analytica we understand that every customer, every cause, and every campaign is unique. That’s why we help you connect with every member of your audience on an individual level in ways that engage, inform and drive them to action.

We bring together 25 years’ experience in behavioral change, pioneering data science, and cutting-edge technology to offer unparalleled audience insight and engagement services and products.

Their CEO, Alexander Nix is seen here describing the process pretty clearly.

Cambridge Analytica is reportedly ramping up its U.S. government business. The U.S. government is hiring a “psychographic, behavioral modification” firm to help with its messaging. Our dystopian future has fully arrived.

In all seriousness, the reality is that computers and the Internet are a modern miracle. The digital age is catapulting humanity forward at an unimaginable rate. We have more access to learning, products, travel, experiences, everything than ever before. In all of the chaos, there is incredible opportunity.

Digital ads have been the fuel of the Internet since the dotcom boom, and aren’t going away anywhere soon. The experience of digital ads is improving, and opportunities to participate in the evolution of human communication and consciousness are more accessible than ever.

What’s next?