Who Profits When Everyone Is Recording? (ft. Kyla Scanlon)

[upbeat music] Last week, I made a bold claim by stating I like targeted ads.

One listener called me, quote, "a clown with a microphone." That's fair, but I stand by it.

If I'm gonna see ads, I would rather see ads for things that I actually want.

But there's a difference between me giving a company my data and somebody else giving my data away for me, and that's the focus of today's show, how always-on devices are eroding our consumer privacy.

Essentially, when anyone can record you at any time, what does privacy consent actually look like, and when does the convenience of the surveillance economy stop being worth the privacy we give up? Later, Kyla Scanlon joins me to talk about where we draw the line.

I'm Jack Raines, an investor at early-stage venture capital fund Slow Ventures, writer of the Substack newsletter Young Money.

In this show, we discuss how the biggest themes in Silicon Valley and Wall Street are impacting your life and your wallet.

[upbeat music] Like I mentioned, I took a lot of heat last week for my apparently flaming take that I love advertising, and I'm a massive proponent of giving away all my data to big tech companies so they can serve me better ads.

The best benefit of targeted ads isn't just seeing better recommendations.

It's that all of us benefit from a lot of free stuff or cheaper stuff that would otherwise cost a lot more money.

Let's take Uber, for example.

Yes, Ubers do seem to be a little bit overpriced now.

I've also seen the price go up.

Uber's ad business probably keeps the prices lower than they otherwise would be.

Uber does two billion dollars a year in advertising revenue versus in twenty twenty-five, they did twenty-five billion dollars total in mobility revenue, which is the revenue from you and me riding Ubers.

So close to ten percent of that rideshare revenue comes from ads.

Ad revenue is much higher margin to serve than other mobility revenue because you don't have the labor cost of the driver.

It's, the marginal cost of serving another ad through the app is basically zero.

But because Uber can be more profitable with ads, you, they can afford to charge you less money to take your Uber.

I, I like that my Uber is probably fifteen dollars cheaper to go to the airport because it's expensive enough to Uber to JFK.

Amazon's the same way.

Marketplace Pulse had a great piece back in twenty twenty-two about how advertising was masking the fact that Amazon's retail business isn't really profitable.

In twenty twenty-one, Amazon's retail operations made six point three billion dollars in operating income.

But if you backed out advertising revenue, they would have had a twenty-five billion dollar loss for their retail operations.

Again, ads have zero or close to zero marginal cost, and most of that ad revenue is pure profit.