Volume 141: World’s Most Expensive Scuba Mask.

1. Don’t Bet Against The World’s Most Expensive Scuba Mask.

tl;dr: Apple Vision Pro demonstrates a very different strategy.

When Mark Zuckerberg bizarrely debuted as a low-rez cartoon avatar with oversized eyes and no legs, it rendered the billions he intended to lavish on the Metaverse moot: The whole thing looking too ridiculous to spark the imagination and lacking any obviously compelling use case.

Fast forward a couple of years and his metaverse ambitions appear dashed upon the shallow rocks of hubris. A rapidly sliding stock price forcing Marky Mark into a swift rethink and shift of attention back to his core business that turned 2023 from a year of pouring cash down a metaverse-shaped drain into a “year of efficiency,” AKA cost cuts and significant staff layoffs.

It’s easy to see why Zuckerberg wanted the metaverse to take off so badly. Right now, his core businesses - Facebook, Instagram, and WhatsApp - depend on others acting as gatekeepers, illustrated most vividly by Apple arbitrarily giving consumers the Facebook revenue-destroying power to de-personalize in-app advertising.

In Zuckerberg’s dreamland, Meta would own not just the apps you use but the hardware you access them through, too, thus giving him unfettered access to whatever user data he may so please and the power to use that data howsoever he may wish.

Having previously tried and failed (a couple of times) to create a compelling Facebook phone, he realized the only way to remove the shackles of the hardware gatekeepers was to wait for the next device opportunity and jump on it in an attempt to build a first-mover advantage and, ideally, a dominant monopolistic position.

This is why he bought Oculus before it even had a commercial product and then lavished some $37bn on the metaverse.

As a result of his strategic desire to control a new hardware and software ecosystem, Oculus/Meta products have been heavily cost-engineered from the get-go. And still, almost certainly sell at an outright loss. Simple math dictating that it’s hard, if not impossible, to scale a new hardware category to millions and billions of units unless it’s cheap enough for millions and billions to afford it.

This is why the upcoming Quest 3 will cost $499, while the existing Quest 2 has dropped to just $299.

However, when you cost engineer a product, you inevitably make compromises. And when you cost engineer a product in a nascent category that hasn’t yet had the chance to benefit from economies of scale, you’re inevitably forced into making big compromises.

So, weirdly, in an attempt to dominate a new market with a product affordable enough to sell millions and perhaps billions of units, he accidentally constrained the potential of that market by releasing hardware that simply wasn’t that great. Not because the technology didn’t exist for the product to be incredible but because the hardware has been cost-engineered to a place where it can’t be.

And then Apple entered the chat.

Apple’s strategy is the opposite of Meta. Where Meta feels existential pressure to lose the shackles of the gatekeepers, Apple faces no such need. Apple is the world’s most powerful gatekeeper, which affords it the luxury of time to build this category in its own image.

Rather than cost-engineering a market entry product in the hope of rapidly scaling, Apple released an aspirational $3,500 product that raises the category price floor, entering from the top rather than the bottom. Along with that higher price comes the ability to create a radically better product that does things existing products can’t. So, rather than the launch response being a resounding “meh,” which consistently happens to Meta, journalists who’ve tested the Vision Pro universally report an experience that feels magical, if not borderline creepy.

Having learned from the iPhone, where the App Store, rather than the phone, fundamentally differentiated it from the competition, Apple likely doesn’t view the Vision Pro as a true consumer device. Instead, this is a luxury product for early adopters and, most importantly, a technology demonstrator designed to spark developers' imaginations so they can use all that hardware goodness to create apps, services, and experiences that we’ll become desperate to experience. Like fart apps did for the iPhone back in the day.

While I can relate to commentators like Scott Galloway’s assertion that nobody will want to be seen dead walking around with Scuba/Ski goggles on (mind you, if you want to see something truly daft, take a look at what Dyson has been up to), a part of that might be because we’re yet to see what’s possible from this class of device, and while the incoherence of the metaverse never made much sense to me, Apple seems to be much smarter in rooting the vision for Vision very much in the real world.

Given a choice of sitting courtside at an NBA game or floating legless in a cartoon environment, I’m pretty sure I know which experience wins.

It also shows that Apple has a much more acute understanding of the power of its brand than Meta does, as it launches the Vision Pro months before it’ll be available and is advertising it heavily. Why advertise a product that doesn’t yet exist? Three reasons: First, Apple is using its media dollars to sow the seeds for future dominance of the category (and to make any potential purchasers of an upcoming Quest 3 think twice). Second, Apple is using the Vision Pro as the carrier of its brand. The bet is that an ad for Vision Pro is effectively a brand ad that will lift the salience and sale of Apple products more broadly. (When we consider that for most consumers, Apple is innovation, that’s likely to be exactly what happens). And third, this product inoculates the Apple brand against generative AI criticism. Fewer questions will now be asked about its lack of LLM vision while it’s screaming, “Don’t look over there; look over here instead.”

At some point in the future, perhaps fast following the Vision Pro launch next year, Apple will figure out what’s working and what isn’t, it’ll have a portfolio of partners and killer apps to draw from, and it’ll have built up latent aspirational desire among consumers more broadly for its product. And then it’ll release a Vision SE or similar product. Only it won’t be $500. Instead, it’ll offer 95% of what the Vision Pro can do for about $1,000-$1,500.

And as soon as it does, it’ll be game over for Meta unless it can figure out a way to offer similar functionality at a fraction of the price. But even then, Apple is aspirational and trusted, while Meta is anything but. Not to mention the Apple ecosystem is unparalleled, and its hardware chops are unmatched by anyone. And if iPhone vs. Android has taught us anything, it’s that given a choice, developers would rather bet on the purchasing power of the Apple consumer.

It’s too early yet to bet on whether the goggles-as-computer category will or won’t take off. But, unlike my deep skepticism around the incoherence of the metaverse, the complete lack of brand trust surrounding Meta, and the less-than-great Quest hardware, what Apple is doing suggests that if anyone can get this category right, it will.  

2. When Taking No Risk is The Biggest Risk of All.

tl;dr: What is risky work anyway?

I was reading a post on LinkedIn the other day about whether we should or should not present “risky” work to our clients, and it made me think of two client experiences I had a few years ago.

The first was for a foreign bank operating in Asia. It had recently launched a savings product focused on retirees, and the executives in charge were stunned that they hadn’t achieved “our fair share” of the market. In fact, they hadn’t attracted a single customer. Without diving too deeply into the details, the diagnosis was that they’d launched a derivative me-too product into a market it wasn’t favored to succeed within for various reasons, but mostly because its branch network favored urban downtown locations close to where people work rather than where they live. And retired people, by definition, won’t be commuting to work.

The second was working with a well-known global corporation that found itself a bit down on its luck. It had a long-tenured advertising agency, so I arranged lunch with the agency team to get the lowdown. I remember walking away afterward, shaking my head and feeling utterly stunned at their lack of ambition for their client. As far as they were concerned, this was a dead company walking; they didn’t believe it had anything even remotely approaching an appetite for interesting work, and it didn’t matter anyway because it didn’t have a future. Suffice it to say, there were zero amazing advertising ideas, or any ideas, if I’m honest, being prepared to help move this brand out of its funk. (In the years since it has significantly turned itself around, so not so dead after all. And I think the agency was fired along the way, so, yeah).

In both cases, these were examples where not taking any risk was the biggest risk of all.

Which, of course, begs the question. What is risky work? And what if we tend to fundamentally mistake what is or is not risky? What if the formulaic, expected, small c-conservative work is, in fact, the riskiest? What if fitting in with what’s expected and copying what everyone else is doing, far from de-risking, actually adds risk?

I’m a huge proponent of being ambitious on behalf of your clients. To seek out what it will take for them to win and to be unafraid of bringing novel, different, challenging, and…gasp…“risky” ideas to the table if you believe it has the real potential to move the needle, even if it might be hard to back that up with precise data. After all, it’s a hypothesis, and there are many ways to prove or disprove a hypothesis.

This is why I tell clients that if they work with me, the work will not be data-driven. It’ll be hypothesis-driven and data-informed. Why? because all too often, we use the term “data-driven” to mean “do exactly what everyone else is doing.” After all, doing what everyone else is doing represents a singularly definitive source of data to base our own decisions on, even if it might prove utterly wrong in practice.

Now, don’t get me wrong. This doesn’t mean we hold our clients to ransom. This isn’t about walking into a room with a completely uninformed, “bold” opinion the client is more likely to view as “insane” and then stating, “Buy this or else.” That’s unlikely to get you anywhere but fired.

Instead, this is about showing options and ranges. To express what a middle-of-the-road approach would be, which lowers the pulse, before explaining why you think it probably isn’t right, and then sharing “riskier” approaches that you believe to be more appropriate backed up with a clear rationale for why.

I’ll tell you right now that even if they don’t buy it, clients always appreciate it when you don’t pigeonhole them and place artificial limits on what’s possible for them before they’ve even had a chance to tell you what their limits are.

3. Don’t Let The Door Hit Your Ass On The Way Out.

tl;dr: Chris Licht out at CNN. Employees rejoice.

I don’t have any comparison data handy, but if I had to estimate, I’d guess that CNN is one of the world’s best-known media brands and probably a top 3 news media brand globally.

And it’s been going through a torrid time lately, as illustrated by this profile article that almost certainly precipitated the demise of now-former CEO and Chairman Chris Licht.

To understand why, we need to look at two business dynamics. The first is that TV News is a tough business to be in right now. The second is that parent company Warner Bros. Discovery has the unenviable task of getting out from under the huge debt load it inherited as a part of the deal it signed to acquire CNN parent, WarnerMedia from AT&T.

In practical terms, this places a considerable squeeze on the business since changing industry dynamics are crimping revenues at exactly the same time the parent company needs to find enough free cash to pay back its debt.

If you’re a cable news network, you make money predominantly from two sources. First, from the advertising revenues you command based on your audience size and viewer demographics. Second, from the carriage fees cable TV providers negotiate to pay in return for carrying your network. As more consumers cut the cord and quit cable entirely, both revenue sources are in decline, and the commodity rates paid by digital advertising online and via streaming aren’t enough to make up the difference. And if the web is any guide, it may never be.

As a practical matter, the highest carriage fee paid to any news network is paid to Fox News. This makes sense, as it’s also the most viewed news network and has the distinct advantage in the cord-cutting stakes of appealing to the least likely cohort to cut the cord, namely old people. The median Fox News viewer being somewhere around 69 years old.

Below this in viewer terms, CNN has been duking it out for 2nd place with MSNBC for years, yet has more recently found itself floundering around in 3rd as MSNBC positions itself more aggressively as the progressive alternative to Fox News conservatism.

Following the acquisition by Discovery, Christ Licht was tapped to run CNN, get the viewership numbers up, and get CNN to a place where it could contribute free cash to pay down that parent company debt.

But he failed.

It appears this was a trifecta failure of strategy, leadership, and execution. Let’s take each in turn.

First, on strategy, his stated goal was to turn CNN back to its roots as a “neutral arbiter of truth.” And while some view this as an impossible task in the polarized and fractured political landscape we live in, I’m not sure I entirely agree. While the two dominant political parties in the US are far apart ideologically, philosophically, and in policy terms, that doesn’t wholly reflect the views of the populace as a whole. As the Economist is fond of pointing out, Americans are significantly closer together on the issues than party alone would suggest, which is one reason the fastest-growing political affiliation in the country is no affiliation. So, while I get the “untapped market” reasoning for this strategic choice, and I’m not going to say neutrality is impossible based on the data, I will say that, at a minimum, it’s a complicated strategy to pull off in our current political landscape, especially considering that CNN had previously spent four years as the liberal “fake news” punching bag for the Trump administration.

Second, Mr. Licht seems to have been an abject failure as a leader. Based on the Atlantic piece that precipitated his downfall, he failed across multiple dimensions, but possibly the most critical was that he seemed unhealthily obsessed with his predecessor, Jeff Zucker, and unable to pass up any opportunity to criticize what went on in the past. The problem? He was also criticizing the actions of the people that now worked for him and whom he needed to execute the strategic pivot. Clearly, not realizing that every second you spend criticizing the past is an opportunity missed to inspire people with your vision for the future. I may not know much about corporate leadership, but I can confidently state that those I’ve watched successfully lead a business through considerable change invariably do so with an almost messianic focus on the future and almost zero time wasted re-litigating the past.

Third, execution. And this is almost certainly what really got Chris Licht fired. Warner Bros Discovery would’ve allowed any amount of dodgy strategy and poor leadership to fly as long as the audience was growing and the dollars were flowing. I don’t fundamentally think they care whether those dollars are right-leaning, left-leaning, or neutral as long as they’re there. So when the execution of a complex strategy was so poor that the network now finds itself floundering and the revenue contribution from CNN is under real under pressure, the axe had to fall.

In simple terms, the net result of these failures is that people with more liberal political leanings viewed the obvious and inept clumsiness of the pivot to neutral as not being a pivot to neutral at all but a rightward lurch toward Fox News-lite, while people with more conservative political leanings continued to view CNN as radioactive, meaning Chris Licht’s lasting legacy is the neat trick of turning off, well, everyone as audience numbers slid ever lower.

So, how do you fix this? Well, the idea that somehow viewers of Fox News are ever going to watch CNN is a pipe dream, no matter how enticing that Fox News carriage fee and unlikely-to-cut-the-cord demographic might look. They don’t want neutral; they want something else. When Tucker Carlson was fired from Fox, his audience didn’t turn to CNN; it went to even more politically conservative news networks like Newsmax and One America News Network. So, almost certainly, that avenue is a dead end unless CNN hires Tucker Carlson and fully pivots rightward.

This leaves two options:

The first is to take the neutrality strategy and execute more effectively. If you’re going to be about facts, be about facts. But don’t think that putting conspiracy theorists and election deniers on the air makes you neutral because it doesn’t. You can’t give equal weight to lies and the truth and then refer to that as neutrality. It doesn’t work that way. If you give credence to lies, then by definition, you aren’t neutral.

So, to find a way of making the neutrality strategy work, CNN would need to find a way of presenting facts as facts, lies as lies, and of hard questioning everyone from every side of the political aisle in the process. Having grown up in the UK, I have a picture of a network like CNN becoming more like Newsnight used to be. Love him or hate him (and there’s plenty not to like), Jeremy Paxman never let any politician of any party off lightly. He grilled them all.

If America needs anything from a news network right now, it needs a news network willing to ask the hard questions of its politicians rather than acting as their on-air cheerleaders.

Second, CNN ditches the neutrality strategy entirely, pivots left, and dukes it out with MSNBC to be the preferred network for the politically progressive. But that will be far from easy, too, since you’re effectively duking it out for half the total audience in a declining market against a network that already owns that space, while five minutes ago, CNN was giving free rein for Donald Trump to do as he pleases.

And, of course, all of this will happen against a backdrop of continued business model pressure, as the real 800lb gorilla in the room isn’t whether CNN should position itself as right, left or neutral, but how to get the business out from under the weight of an ever declining cable TV environment.

I’ll be honest I don’t envy whoever gets put in permanent charge. Future success will be a game of needle-threading. Yet it’s hard not to wish for CNN to do well because I think the world is a better place with a functioning CNN in it. And under Licht, it clearly wasn’t.

Ultimately, I’m not sure the financial status of Warner Bros Discovery will afford CNN the time and investment it needs to turn itself around. This is why the most likely outcome is their cutting bait and selling it.