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Our presenting sponsor for this episode is not a sponsor but another podcast that we love and want to recommend called the founders podcast. We have seen dozens of tweets that say something like my favorite podcast is acquired and founders so we knew there's a natural fit we know the host of founders well david senra hi david. Hey, man, hey, David. Thank you for joining us. Thank you for having me. I like how they group us together and then they say it's like the best curriculum for founders and executives. It really is we use your show for research a lot I listen to your episode of the story of a few more you know before we did our Sony episodes is incredible primer. You know he's actually a good example of why people listen to founders and to acquired because all of his greatest entrepreneurs investors they had deep historical knowledge about the work that came before them so like the founder of Sony who did he influence Steve jobs talked about him over and over again if you do the research and. I think this is one of the reasons why people love both of our shows and there's such good compliments is on acquired we focus on company histories you tell the histories of the individual people you're the people version of acquired and where the company version of founders listeners the other fun thing to note is David will hit a topic from a bunch of different angle so I just listen to. An episode on Edwin land from a biography that David did David it was the third fourth time you've done Polaroid I've read five biographies of Edwin land and I think I've made eight episodes of them because in my opinion the greatest entrepreneur to ever do it my favorite entrepreneur personally is Steve jobs and if you go back and listen to like a 20 year old Steve jobs he's talking about Edwin lands my hero. So the reason I did that is because I want to find out like I have my heroes who were their heroes and the beauty of this is the people may die but the ideas never do and so Edwin land had passed away way before the apex of apple but Steve was still able to use those ideas and now he's gone and we can use this ideas and so I think what acquires doing what founder trying to do as well is find the best ideas in history and pushed them down generations make sure they're not lost history love that well listeners go check out the founders podcast after this episode. You can search for it in any podcast player lots of companies that David covers that we have yet to dive into here on acquired so for more indulgence on companies and founders go check it out. We like to think our one listener that we see in our analytics on zoom and the one listener on stitcher who happens to be my wife. It's a great way to lead into this episode. Who got the truth? Is it you? Is it you? Who got the truth now? Is it you? Is it you? Is it you? Sit me down. Say it straight. Another story on the way. Welcome back to episode 16 of acquired the podcast where we talk about technology acquisitions. I'm Ben Gilbert. I'm David Rosenthul and we are your hosts. Today we have a few notes before we dive into it. I wanted to take a minute and say huge thank you to one of our listeners David Reznik. He's known as the resonator in Slack. David is an entrepreneur with a company called Bester but in a former career he was a recording engineer and music producer. David's been helping us tremendously with audio quality so I wanted to give a shout out to his company. Bester is a platform to share the best things. Curate your best into topics with automated images and links. You can use their widget with your branding embedded on your website. Find out more at bestero.co. That's www.bestr.co Which brings me to my next point. David and I were grabbing an announcement alert. Yeah. If this were a really high production podcast we would have. Sounds a fix. That's right. We wanted to do something a little bit different with this podcast. We're at about the size where we could start doing some advertising and actually we'll get into our analytics a little bit later this episode as part of the topic of the show. Instead we wanted to do something called community showcase. And since so many of our listeners are entrepreneurs that are building things, product people at companies or venture capitalists or finance people, really people that are involved in creating products themselves. We thought it would be really cool to try and just do a community focus every episode. Rather than advertising at least for now we're going to experiment with this. We're not charging anything or making any money on this but we really just wanted to do it as a thank you to our community and listeners. And especially those that are really engaged on the Slack channel and emailing us. So if you have something you're working on and you want us to talk about it on the show either hit us up on in the Slack community or send us an email. And that's a acquired FM at gmail.com also on our website. And we will aim to do start with one and maybe do more of these every show. Let us know what you think. Yeah, that's true. You can hit us up on Twitter to add a choir FM. And we may do a more kind of traditional advertising thing later but if you're working on something we'd love to give you a shout out on the show. So David you're ready to dive in. I think with that all of the preamble here is very appropriate because this episode is a meta episode. Dada. About podcasts. Yes. Today on this episode 16 we will be covering the acquisition by scripts of both mid-roll and stitcher. So I think we'll dive right into it David. You want to do history and facts? Yeah, and I should say before we do this the theme here was topic was first inspired by my wife Jenny. I wanted to make sure I give her a shout out. She was trying to get to our website and she was googling acquired podcast and realized that we weren't in the top hits on SEO. So this is a unabashed SEO play to get to the top of the Google hits on for acquired podcast. This is the first time hearing of this. So EWScripts company for those that aren't familiar is a very old company by technology standards. Not a technology company. They are a broadcast media company and historically it also been a newspaper publisher. But they operate a number of cable networks and television and radio broadcasting stations locally around the country. And in the last two years they've made two acquisitions that have made a huge splash in the business of podcasting space. Something that Ben and I have gotten to know a little bit about over the last year. So the first company that they bought was a bootstrapped startup called mid-roll. And mid-roll has a super interesting history. Some of our listeners might be familiar with parts of the company. It was started in 2010 by two guys, Scott Ackerman and Jeff Ehrlich. And it was started as a company called Ear Wolf. It was actually a comedy podcasting network. So Scott had a podcast that was part of, it was in LA in LA. And he had a radio comedy show that I believe was originally called Comedy Death Ray. I think they eventually changed the name of it as a podcast, a comedy bang bang. And he had a bunch of comedians on the show. And it had a pretty loyal following. And so they decided to sort of start a podcasting network around it. So they added a bunch of other comedy shows, added culture shows and music podcasts over time. And I guess it was Comedy Death Ray that it started as. And actually, originally the origins of it were in the upright citizens brigade. Stand-up comedy in Hollywood that's got it started doing there. And then it actually went on separate from what the company that became mid-roll. Comedy bang bang went on to become a television show on IFC, a comedy television show. So interesting routes for what is today the giant among midgets in the podcasting world. So they bootstrap this company for a couple years. They were just purely a content network. And then in 2014, they were doing their own advertising for all the podcasts in the network. They were direct selling ads. And they started getting approached by advertisers who wanted to buy ad space on other podcasts that weren't part of their own network of shows that they were producing. And they kind of thought, well, that's interesting. So they launched a separate product that was an ad network, one of the first, if not the first ad network for the podcasting industry. This was in 2014. They called it mid-roll media. That gives you a sense of how new this whole thing is. I mean, is less than two years ago. Less than two years ago, which is crazy, given that podcasting has been around for over 10 years, going back to the iPod. Yeah, pretty new to an advertising based revenue model. Yeah. A really monetization at all. Yeah. And we'll get into this in tech themes and others. But this industry, the podcasting industry is so fragmented relative to how many people, millions, hundreds of millions of people. And they're going to be able to listen to podcasts. So from the press release, when they launched mid-roll, they said, the new company, mid-roll, offers a 360 degree suite of production, distribution, and monetization services to artists, entertainers, and thought leaders. Advertisers benefit from access to the talented hosts of more than 120 shows, and they're engaged audiences totaling more than 15 million downloads a month using the industry's first user-focused self-service platform. So this is crazy. This is 2014. The first self-service advertising platform for the podcasting industry has 120 shows. I mean, compare that to like ad networks for display ads or other forms of advertising. Adwords has millions and millions of advertisers. Millions like this is... Maybe millions of sites, hundreds of thousands of ad... No, probably millions of advertisers. Yeah, this is like a green of sand compared to like every beach on Earth. Yeah, and we'll get to the dollar amounts too, but again, a green of sand. But they sign up some pretty large podcasts to be part of the network. So WTF with Mark Marin, which is one of the largest podcasts out there. Barack Obama was on it recently. They have Bill Simmons' podcasts and all the ringer podcasts. So about a year after this, and one year ago now, scripts comes in and they buy the company. And it was not announced at the time how much they paid for it, but it has since come out reported $50 million up front and another $10 million dollar, to basically take out like the giant in this industry, which pretty good return for Scott and Jeff considering that this was totally beach strapped. They never raised any money. Yeah. I mean, $50 million is... Well, let's just... We're not going to beat around the bush. We'll get into the numbers now. Podcast advertising, there's not that much money spent right now in podcasting as a medium. According to a Wall Street Journal article from earlier this year, advertisers are only expected to spend about $35 million on podcasts this year, and that's only up about 2% from last year. So the whole industry, $35 million, across the whole industry of which mid-roll represents many of the largest podcasts, but nowhere near the whole industry. I don't know about nowhere near. I think it's not ridiculous to say they're the majority of the advertising spend goes through mid-roll. Of independent podcasts, probably, but the largest podcasts are probably... Good point. Like NPR. This American life. Yeah. Yeah. Good point. There was a quote by the... Someone at mid-roll saying that a handful of their podcasters gross over a million dollars a year, and they have about a 30% take rate. So actually, factoring back, it looks like mid-rolls annual revenue is somewhere in the neighborhood of $2 million a year. Yeah. Wow. So, Scripps acquires this company about a year ago, almost exactly a year ago. They operate it for a year. The team stays intact. The CEO, the mid-roll abroad in an outside CEO, Adam Sachs. I believe he's still the CEO of the company. And then just a couple weeks ago, the other shooter ops. So one of the issues which again we'll get into that's been holding the podcasting industry back, again, relative to how much usage and engagement it has as a media platform with people and users out there, the amount of advertising spend in it is the... All pillars of the platform are basically completely divorced from one another. So you have the way people listen to and consume the user experience, consume podcasts, be a client or streaming over websites. It's completely divorced from where the podcasts are hosted with media hosted and that is also completely divorced from the advertising title. Yeah. Well, as a quick aside, why don't I give kind of what our stack and process looks like. So people get a sense and this is not unusual. I mean, these parts are swapped in and out, but they are rarely consolidated. Just to start the whole process,.fm domain names are expensive. So you're not going out and getting $8.00 go at it. You drop $100 on picking up your.fm domain name because that's the hotness these days. So you need some way to have a consumer facing website. So we have Squarespace for that. So Squarespace generates our RSS feed and gives us a public facing site. Now the way that we deliver podcasts over almost any client is by submitting that RSS feed to the iTunes directory. Now iTunes doesn't host anything. They merely have a URL pointing at your RSS feed, which they scan about once a day, unless you manually force it. And then they update their directory with where your MP3s are hosted. Now we need a place to host MP3s. A lot of people use SoundCloud. A lot of people will use a something like PodTrack for a while. We were actually hosting them on Squarespace, but you don't get a lot of analytics that way. So then you need a hosting service. So we use Libson for that, who's actually been really great. So you pay for a hosting service to host your MP3s, which your RSS feed points. So now we've got just to get this podcast in the ears of you, dear listeners. We have to go through three companies. Yep. Then it's in iTunes. And there's a player that ships with iOS, obviously, or you can use iTunes on the desktop that points at the iTunes directory, but it's made available for others to point to also. So overcast or pocket casts or there is a variety of players that a lot of you are listening to mostly on your iOS devices over 80% on iOS devices. And again, that's completely decoupled from all the other pieces of the ecosystem. So at the end of the day, if you're advertising on a podcast, all you really know is that your name and company was mentioned at an MP3 that got shipped down to potentially an unknown number of people using an unknown number of platforms. And you don't even know if they heard it. Yep. And comparing contrast that to other technology-enabled media platforms like Medium for Blogging or Facebook, which we've talked about a bunch of Twitter or Instagram, all of those, the consumption of the content by users, the hosting of the content for the content producers, the advertising platform are all very tightly coupled into one product. Yep. And in fact, it's the reason that those industries, the incredible measurement and the very tight coupling of all those components are the reason why those became dominant advertising platform. I mean, for direct response ads, especially, but even brand advertising requires an amount of measurement beyond what's available in podcasting right now. Yeah, I mean, if somebody were to come along and like give Ben and me a boatload of money to read their advertisements on our show, we basically could tell them nothing about what happened with that. We actually, is this a good time? Should we show the, sure, what our numbers look like here? Yeah, yeah. Let's do that and then we'll pick the story back up. Cool. So here's what we could tell them. We could tell them, I'm looking at our LinkedIn episode, two episodes ago, that we have about 6400 listeners, which is a unique IPs that have downloaded the URL. We are non-representative. Most of the time, 60 to 70% or higher of listens are going to come through Apple's iOS player. We actually have of that, what I say, 6400, about 4100 come from pocketcats, since they were kind enough to feature us on the homepage. So a lot of you are probably listening through the pocketcats app, about 1,000 from Apple 297 from Mark Armance Overcast, and then trickling on down from there through various browsers of people listening on the website. But we basically could tell them a little bit about geography. You know, we can tell them the IP addresses and cities that people are coming from and the clients. But we have no idea how many people actually got to that point in the episode. Yeah. That's one of the critical pieces. We can't tell them how many of you actually heard what we would be being paid to say. Right. And everybody, you hear those promo codes in a lot of podcasts that give you that nice 10% off. That is literally the only way that the advertiser has to attribute to that channel. So a lot of the times, you might hear an ad for Squarespace and you go to Squarespace and you sign up, but you don't type in the code that never ends up getting attributed to that podcast. The loop doesn't get closed. So you get a little bit of the picture of some of the challenges with the industry. So Squarespace actually, and other people have tried this before, but Squarespace actually is really brilliant here. Like they see there is a huge arbitrage right now between the user listener numbers and engagement on podcasts as a whole medium and the complete cluster that is the state of any kind of advertising or analytics analytics on the platform. And so the way you, the only way you can solve this is to own the full stack and bring it together. You know, one way to own any sort of advertising on the backend would be to be the hosting and to be the analytics, but you couldn't do the measurement unless you have the front end too. So on the web, you could run JavaScript and understand, you know, has an ad been served or people clicking it. How long has it been on site? How long has it been shown? Anyway, in a podcast, you'd need to get a player that had a pretty serious market share in order to actually, you know, understand impressions or do anything fancy around, you know, during this part of the podcast, there's going to be something popping up. And if you want to tap that button, it'll take you directly to the site. So you don't have to remember to type it in later. Or even just passively to know just like on Instagram, like did somebody actually see this picture of this app. So a couple of weeks ago, the other shoe drops and scripts acquires a company called Stitcher. We'd say we'd suspect many of you know about it and might be listening to us on Stitcher, but our analytics tell us there is one of you. Thank you, Jenny. Jenny is my wife. She loves Stitcher. So Stitcher is a podcast client for mobile devices. And it was kind of an interesting story. It was founded in 2008 by three guys, Noah Shank, Peter Diverode and Mike Gaffrey. And just like now, in 2008, podcasts were also experiencing a torrid growth pace. And Stitcher managed to raise quite a bit of venture money to go after this vision of creating the front door, the aggregated user experience client to become the dominant podcast podcasting client. So they raised about $25 million over three rounds first from New Atlantic Ventures and then from Benchmark and then from NEA. And unfortunately, it didn't work. So in 2014, about the same time that mid-roll was getting launched, Stitcher actually ends up getting acquired by the French music streaming company, Dezer, the sort of Spotify competitor. And that didn't work out too great either. It sort of languishes within Dezer. And then last month, Skripps bought Stitcher back from Dezer. We don't know how much Dezer acquired it for, but we do know it was an aquahire, so probably not much. And so Skripps buys Stitcher for the princely sum of $4.5 million in cash. Yeah, that's... So this is a company that had raised $25 million as a venture back startup, failed, been aquahired by another venture back startup. And then now is being bought by Skripps for $4.5 million. Yeah. And so the strategy makes a lot of sense. All of a sudden, you're coupling the ability to really turn on the ad sales funnel with mid-roll with the ability to have a front-end client that you could instrument and do some creative things around to do advertising. At the end of the day, iOS is still the dominant platform that people listen to their podcasts on and it ships with a podcast client. So the challenge ahead is to be able to figure out a way to make Stitcher appealing to people that they would actually go and seek out another way to listen to podcasts rather than use the built-in Apple one. And again, Skripps gets this. This is the play that you would run if you want to actually unlock the value in the podcast ecosystem. So Adam Sisman, who's the Chief Digital Officer at Skripps, who led the acquisition, he was quoted in the press release as basically saying just what Ben said. We certainly have the ad sales force and the connections that make us a leader in the space. But today, we depend almost exclusively on distribution into other channels. This puts in place with a very strong brand, arguably with Stitcher, a very strong brand, another piece of the puzzle in the ecosystem play. Yeah, I'm just going to throw it out. I don't know if it's a bias or if it's, well, whatever. I think Stitcher's garbage. Like every time I open the thing, it is. Yeah, so let's get into why Stitcher is garbage. So the tech industry and especially the corner of the tech industry that is concerned with podcasts or have podcasts of their own basically erupted in an outcry when this happens. John Gruber, who hosts the talk show, which might be the largest and most influential technology podcast, he wrote a blog post saying, middle owning Stitcher is not good for the podcast ecosystem. Stitcher is popular, but my show is not on Stitcher because Stitcher re-hosts the audio, compresses it to hell, and unless you opt out and search their own ads, that's not how podcasting is supposed to work. I firmly believe podcasting should be open like the web. Yeah, so Gruber is a grumpy old man on this one. I mean, I think that there's a lot of things where I don't believe that the user experience delivered by Stitcher is very good and I don't think the fact that they're compressing the audio is great. You want to let podcasters have creative freedom on that. I think the way they currently deliver ads is garbage. The list goes on. However, is publishing worse than it was when you had to purchase your own rack mounted web server and install your own blogging software? Are we in a place where if somebody creates the blogger or media or the worst case scenario on everyone's mind is the Facebook of podcasting is the world worse. I think there's a very valuable business to be made there and I think you can provide potentially podcasting to more people than here today because you can come up with a real sustainable business around it. There's definitely some sacrifices that would have to be made there because I think that ultimately would be a programmatic ad network with a full bidding system the way that adwords is or the way that Facebook ads are. Maybe that upsets a lot of people and changes the way that it works a little bit but I think it makes podcasting. I totally agree. I completely agree. Groupers being a grumpy old man here. The problem isn't what Stitcher is doing. It's that they're doing a really crappy job of it and like the parallels here and I actually I completely agree. I think the opportunity is huge to create as terrified as Gruber and Ben Thompson, you know, another one of our folks we talked about on the show are a lot. He has a blog post about this on St. Techery and talks about it on his podcast which is excellent exponent that he does with James Allworth. They're terrified of the Facebookization of podcasts but the difference between Facebook and Stitcher is like we talked about in the Instant Articles episode. Facebook cares a lot about the user experience and about making things beautiful and the analogy is is exact between Instant Articles where they're taking content that publishers have created. They're re-hosting it within Facebook and then they are serving ads that they are inserting into it and then sharing that ad revenue with the publishers. That's the exact same dynamics. The difference is Facebook acquired Push Pop Press to do this very, very beautifully and Stitcher is a piece of crap. Yeah and here you know Stitcher is under an Eumage management now so I'm very curious if mid-roll strikes me as a very tasteful company and you know mid-roll might do really good things with Stitcher. I worry about it in its current day but the question is there are a bunch of questions that we'll dive into. The first question is what can Stitcher become as part of mid-roll and as part of scripts? And that's interesting talking about in the context of our show. We've never really seen something like this, at least on our show, go successfully before. We are requiring a product that again we're hating on Stitcher here. Apologies to all of the one Stitcher fans. What's next to us? But we've never really seen a product be acquired that isn't fundamentally a good product. And so they're sort of betting on hope here. LinkedIn. Okay, well that was a little different. But you know that isn't like a technology company with great team behind it and the capability within the company to at least deliver the minimum viable product. After they're a small sub-scale technology company that's part of an old school media company acquiring another vastly sub-scale technology company. And what they need to do is build an incredible technology enabled user interface. Yeah, and have we seen an example, I don't think we've done an example on the show yet where a company does actually take that back, we sort of saw it with office. But that where I was going is a company does multiple acquisitions and sort of combines them in a kind of a classic conglomerate way to build a new product from combining existing ones. And the example I'm thinking of there is with the Accompli acquisition building sunrise calendar into a company. But we have yet to see if that is a product success or market success yet. Yep, yep. Well and the difference there too is like the parent company acquiring them all was Microsoft and you could say whatever you want about Microsoft. But there are a lot more, there are technology chops are a lot better than scripts. Yeah, for sure. So we're obviously biased by being part of the startup ecosystem. But I'm very excited to see what entrepreneurs come up with with new Denova businesses to tackle this problem. Yeah. And so we're talking about all the weird forces at play in podcasting right now and kind of the weirdness of the ecosystem. There's sort of secret meetings going on with Apple and some of the bigger, bigger publishers and existing podcasters to understand, you know, should we make this something where it's actually a monetizable platform and they own the ecosystem top to bottom. And one of the things that's sort of playing into that why the reason everyone's making a big deal is because the cost per thousand impressions or the CPMs that podcasting commands at least right now and maybe attributable to the audience that it has and being a very high value audience. But they have a hundred dollar CPMs and for anyone in sort of advertising or who is done online advertising, that's pretty unreal. Yeah. The average YouTube CPM in 2014 was $14. Web display ads can get anywhere from $10, $5. Podcasting is like total breakout and you know that's the ceiling with hundred dollar CPMs and I think for this show we'd be somewhere between $25 and $50. But the people that are making their living as sort of independent podcasters right now are doing great. Doing great. If you have an audience and you're an independent podcaster, you can do great. Yep. And actually Ben Thompson makes a good case a while ago before the ringer started about how Bill Simmons could move to solely podcasting, how it's much more economical actually if you're a writer but you're also someone who can do a show to write for free and publish that as your lead gen and then monetize your podcast audience. All right. Let's maybe jump into acquisition category. Yeah. So I mean, I think it's pretty clear here this is a product acquisition that is getting rolled into this suite of products. Yep. Yep. Got to be. If they can daisy chain these things together correctly, there's a bunch of money to be made. I think it involves having exclusive content. It's hard for me to imagine a reason to go download a podcast player to play. Well, it's hard for me to imagine going and downloading Stitcher to listen to content that I could get otherwise. But if it became sort of a Netflix type thing where they're producing original content and signing exclusive artists and maybe it doesn't quite use that model where I'm paying a subscription fee, but it does use the model where I have to be listening to the very place where I can be advertised to, then they might be able to create a real business there. Yeah. And this is very explicitly they've said so this is their plan. And so midroll was already had two pieces of the ecosystem together with the content network and the advertising network. In a news article in an interview after the acquisition of Stitcher, you know, this kind of came that midroll has just come out with a new premium service called Howl, which offers original shows and ad free archives of popular podcasts. So they're clearly moving into this kind of Netflix type category and they interviewed the president of the VP of business development at midroll, Eric Dynan, and they say, and he says clearly at some point the two will intersect. Yeah. Yeah. Okay. Moving on to do what would have happened otherwise? Yeah. I think in this case, like, this is sort of the first real splash that's been made of somebody trying to do the obvious and bring the three pillars of this medium together. So I think I think otherwise, like we would just continue to drift. Yeah. Stitcher continues to languish. Midroll continues to grow incrementally and is able to sell to, you know, the sell ads to some of the big, but not network big podcasts and we continue to see a lack of consolidation and no money go to podcasting. Yeah. And what's interesting in the, this is almost the like not what would have happened otherwise, but what will happen now. I do wonder if this is like the shot across the bow that wakes up some folks in the entrepreneurial and startup community to realize, man, there's a big opportunity here and build a, or attempt to build, you know, what stitcher tried to in the beginning. Yeah. David, it feels like you're, you're teaming me up a little bit. We, um, we actually gave this a go at Pioneer Square Labs and we were really interested in podcasting just based on the growth trajectory of the amount of people that have started listening to, to podcasts in the last couple of years. It's still not a huge number of people, but the growth rates really good. And one of the reasons, I mean, for all the reasons on this show that we've already talked about it, we shied away from it where, you know, it's, there's only, you know, $30 to $40 million spent a year on it. You can't really stick your toe out with an MVP. You have to be the hosting the analytics. You really have to have a client out there and your client has to have some reason to be better than Apple's client because, you know, shipping with the platform is a huge advantage. There was one thing that we really wanted to do. And that was dynamic ad insertion so that we could sell ads programmatically. And one thing that we felt was super important was for the host to be able to read the ads because that's been one of the things that commands the really high CPMs in the world today. And one way that we were going to do that is have the host go through and record ahead of time the ad reads. And then we could insert in the host's own voice anywhere throughout the audio. That's cool. That's cool. So we started, you know, looking at this and we started figuring out, okay, cool. We can make like pretend MP3 URL is in dynamically generate those episodes with the appropriate ad for that person at the moment that it gets downloaded by their podcast clients. And then it's specifically to them. We started looking around. There really are some people tackling this right now. There's a company called ACAST that's doing dynamic ad insertion and actually just recently Pinoply launched a company called Megafone or I guess a product called megafone.fm and they also are doing the dynamic ad insertion. They've got this cool UI where if you're an advertiser or a host, you can go in and select the spots where you want to insert the ad. So you know, some people are making runs at this. I continue to think that you need to be able to show real measurement from the client side, but who knows maybe maybe something crazy will change and Apple have an API to plug into for that. You know, they're suddenly not averse to services revenue. Well, yeah, and an advertising model as we're seeing with changes in the app store. And if they can find a way that continues to ensure user privacy, but makes podcasting more valuable, maybe we'll see you away for Apple to open up reporting of podcast advertisers. Yeah. I don't know. Two things I want to mention. One just mentioned real quick. I feel like we haven't quite sharply pointed out yet. The other dynamic that's really interesting in this industry is Apple. I mean, Apple like created this medium or it was created around Apple. Yeah. They're still the dominant player, but they don't care about it at all. It's funny. They just, they sort of inherited it too. People were creating podcasts and sending them around ad hoc. And they were people were putting them on their iPods. And then finally, Apple put a podcast section of the iTunes music store, which was just a directory and not a hosting service for people to do this. And it's so funny that it's still, you know, even called podcasting, right? Like nobody has an iPod anymore. And the Apple has just like accidentally had this nascent, huge opportunity unfold that they're really not taking advantage of because it's really not an Apple type business. You know, it's there Apple classically sells hardware and makes a profit on that hardware and then has software and services to differentiate that experience. And that doesn't sound like what this is at all. But in this new kind of shifting Apple, maybe we'll see this, but my that would still be on Apple letting it. Delta and also, you know, I want to bring up one thing that we thought about, I've thought about, you know, it's before and in preparing for this show is like, I bet a lot of listeners are saying, well, hey, I mean, like what you guys are talking about already exists. It's called SoundCloud. Sound like that's true to a certain extent, but I think, I think SoundCloud and Apple both, like, they're very focused on music. Actually, just right before we started recording the show, went through the, for some reason, my old SoundCloud account got deleted or something and I went through the onboarding process. It's Twitter's investment. Twitter's investment. And, and, and through the onboarding process, like, it's super clear that SoundCloud is about music and that they're pushing people to music not to podcasting and, and same with Apple, you know, they're invested, they bought beats. Maybe we'll cover that in a future show, you know, and read it Apple music. They're investing a lot in that. But nobody is really doing this, you know, I think you, if you're going to build a really great client and consumer experience, like it has to be about podcasts. Yeah. I agreed. Second thing I wanted to mention real quick, you know, bend, this is a great example since you were talking about PSL, like I'm curious. I bet a lot of our listeners are curious. Like, what's your process at PSL? Like, how did you guys, when you were diving into podcasts, like, what did you do to validate the market? Like, how did you look at this? Yeah. So, a lot of the times we start with a space that we think is interesting. And that's what we did here. And I really, you know, I'm kind of the guy that buys all of our, our ads on social and search and in sort of knowing exactly how that world works, it was kind of like blindly obvious to me, like, wait a minute. If I want to buy ads on a podcast, I have to do what? Like manually getting touch with someone at admittable and, you know, there's a minute of the spend. Or in the podcast directly. Yeah. It's, you know, it's a completely immature market. And so we started pushing on that opportunity and trying to figure out, okay, what would it look like if we actually pursued this? So we do two things. We do kind of a top down and a bottom up. And from a top down, you know, we look at what is the market today and what market forces do we think will make, you know, what, what, what does it look like in five or ten years? And obviously that's a guess. But we try and make that an educated guess. And we look at things like, you know, in this, Apple could be either a big risk or potentially make this a lot easier. And then it would be all about timing. So we look at sort of that top down of, okay, how much, how much money could this business really make? What's a tam there? And then we do a bottom up. And I think that if we were a VC firm, we would, we would kind of just do the top down. And if I was an entrepreneur, we would just do the bottom up. But since we're sort of both, you know, that the kind of startup studio is responsible for both sides of the house and the early stages, deciding whether to go after the opportunity and actually doing some of the building, once it kind of passes that sniff test of this could be a big business, which this one didn't. Then we start really validating, can we acquire customers for significantly less than the lifetime customer value, you know, building as lightweight of stuff as we could? And we really couldn't think of a good way to lightweight test this because again, you would have to be the host, the analytics provider, ship the client, get client adoption. It's a years, years long process. And it could be an interesting business, just not one that we could do in sort of a short early validation timeframe. Which again, kind of brings us back to this dilemma. And we know we'll see what happens with this set of acquisitions from scripts, but this dilemma that the industry's in where like, it's kind of hard to just start a company to fix this, like to just start Facebook, you know, or just start Instagram. You have to do a lot more heavy lifting than they did a front and you have to contend with these players like Apple that are hugely dominant in the industry, but a really complex set of motivations. Right. Right. You would have to have a lot of confidence there to make a big investment in this that Apple wasn't going to flip some switch because it seems like while it's not in their wheelhouse, huge risk to your business. Yeah. At the same time, like there is, like, let's be clear. Like as a VC, I believe, and you probably believe to Ben, like the numbers don't lie. Like there's a massive opportunity here. Yeah. Something will happen in podcasting. It's not totally clear how it'll shake out. And our big question in grading this one is, do we think it's going to be these guys? Yeah. Let's move on to tech themes and cover that. So I feel like we were dancing around this a little bit in talking about how the kind of the distribution of the audience and listeners is across the industry and different podcasts. My tech theme is the power law. And we see this in so many areas of tech, whether it's the app store and at the top, you know, 10 apps are responsible for whatever, you know, X 70% or whatever of downloads. You know, and it's the same thing here in the podcasting industry. So Ben, you had some stats on this. I think was it that the top 10 podcasts are responsible for 40% of listeners in the entire industry? Yeah. The top 10 publishers because those top 10 publishers, NPR, this American life, those sorts of WKYC, I believe, or WNYC. I think WKYC is Cleveland. WNYC, they have a big portfolio of podcasts and they're sort of just the parent publisher. But yeah, the top 10 are responsible for 40%. So, you know, again, and here's another puzzle you have to unlock to win this industry is you need those top 10 publishers to be on your platform because they represent, you know, by far or, you know, the top 100 publishers, they represent by far the majority of the market. Yeah. Yeah. My, my theme is it's really hard to compete with the platform defaults. And, you know, Apple ships, podcast app, even before that, they, they bundled podcasts into, I believe, is iTunes on the phone. And, you know, there's, that gets someone 90% of the way there. And are they actually going to go that extra mile and go look for a different podcast app? And are they going to look for yours? And is yours differentiated enough? And, you know, I think premium content might be the way to do it. But, you know, businesses have won sometimes even illegally over the years because they were able to bundle with the platform and look at how IE achieved dominance on Windows or, or, yeah, being shipped with the platform is a very clear way to win. And actually, that's in the, the mobile world pre-iPhone, you know, it was a really difficult to install those Java apps on your flip phone. And the way that those companies used to actually get their, their games and apps distributed was bundling because if it's on the platform, it's going to get used. And, you know, it's interesting like that I'm thinking about the blogging space and, you know, Google acquired Blogger. And you could argue that that's an example of the platform, Google owning, Blogger owning the, owning, having an unfair distribution of the distribution channel owning the platform. But Blogger never had the kind of market share that iTunes does that Apple does with podcasting. Yeah, that's true. All right. You want to grade it? Should we bring this one home? Yeah. So I think we should grade them separately and look at, look at Mid-Roll and then Stitcher, at least that's how I want to break mine down. I like that. Mid-Roll, while, while it is a better company is really, they're really taking a flyer on spending 50 million on that thing. Their revenues right now are, I think like one and a half to two million a year. And you, you really got to believe that there's going to be like a, a big change in the way that you can stick these businesses together to make that change meaningfully. And where I am betting, man, I bet against them. So I'm going to. On the other hand, though, you know, in defense of Mid-Roll, they do have, you know, they are the advertising network for some of the biggest podcast, which as we were saying was, was one of the keys to unlocking this. Sure. Sure. I still don't know if it's 50 million. Like, I don't know. This is to me, a old media company that has money lying around, sees their cash pile shrinking and is concerned about the future and. And sees the opportunity in podcast. Seize the opportunity, but 50 million dollars for something that makes, you know, two million a year. How much did Facebook acquire, pushpots press for? We don't know, but a lot less than that. Yeah. Yeah, yeah. Mid-Roll is a D for me. I love the two companies. Mid-Roll is definitely my favorite, but God, that's a high price tag. Stitcher. Could they have bought anything else? I mean, like, if there's another podcast client out there, I guess Stitcher already has this ad pipeline built in that they wouldn't have to sort of do themselves. But to me, you know, just pointing Mid-Roll's ad sales at Stitcher, I have more faith in that as sort of a small business than I do of them executing the large opportunity of creating the top to bottom ecosystem successfully. So I'd say, you know, I'd go a B on the Stitcher acquisition just because they've already got Mid-Roll and they can, you know, point those ads into Stitcher and I'm sure make some money out of it and get there for 1.5 million out. But I don't think they're going to pull this big shabang off. Yeah, the whole rodeo. Yeah, I think I'm with you looking at them separately. You know, I mean, one of the things with Mid-Roll, I'm not going to be as harsh as you really, even though the company was founded in 2010, like Mid-Roll only started two years ago. So, you know, yes, like, that was a very healthy multiple, whatever their revenue was, like, it was a healthy multiple that they paid for it. And I'm sure it's growing very quickly and if they can get, start to get some of the big, big publishers and represent them, maybe there's more to it, you know, I'm not incredibly bullish, but I'd give it maybe C plus B minus now. You know, again, the real issue is Tam, right? Like the whole key to this is you have to unlock the Tam, the total addressable market and you have to do that through an integrated platform, which brings us to Stitcher, right? And we have been hating on Stitcher in this with probably with good cause in this episode. But again, like, you know, what you were just saying, Ben, I think is interesting. Like, who else were they going to buy? Like, what were they going to do? They knew they had to have a client. And, you know, this is scripts that we're talking about. And Mid-Roll, while, you know, great company and a podcast and company, it's not a tech company, it's an ad network. And it's like a low tech ad network, like spoken word, you know, just to be honest, this is a people business, not a tech business. So they didn't have anybody that they could build this internally. And then who were they going to buy? Like, they're not going to buy overcast, which I use and love, you know, that's great. It's great. Mark, it's great. He's not, no way he's going to sell this to anybody, let alone a script. How many, I wonder how many users, well, this is what a podcast has. Oh, pocket cast. Oh, I don't know. Pocket cast could have been a potential one. But Stitcher, for all of its problems, and we don't know how engaged these users are, but they had eight million registered users. Now I bet a lot of those were last users. But if you do the math, they paid four and a half million dollars for eight million registered users. So they paid just over 50 cents per registered user. Yeah. You know, if big if here, they can magically hire some great people to come in and actually build a really good user experience here. Like that's fairly cheap for like a pretty big head start. Again, I don't think they're going to pull this off. So I'd give that a B. It's not terrible. They didn't spend much money on Stitcher. But I'm handicapping the odds of this success at low. But again, if they pull it off, they're going to look brilliant, right? Like if they can pull it off, I don't think they will. They will spend, you know, $54.5 million to win this category. I don't think they're going to pull it off. Yeah. Hey, I also just figured out in looking at CrunchBased to see if Shifty Jelly, the awesomely named Parent Company behind pocketcats, if they'd raise any money and according to CrunchBased they haven't. But they are an Australian based company. So that explains our Australian listeners. Ah, very cool. Shout out down under. Yeah. If you know anything about pocketcats, hit us up in this like community or by email. We'd love to chat about it. Okay. Should we move on to follow ups? I think it's time. Time. We, uh, quick but super interesting follow ups this week. First, Twitch going way back to one of our earlier episodes. We talked a lot in the episode about the massive volume of transactions that are going through the Twitch platform and in tipping, which for those that are unfamiliar with tipping or did not listen to the episode, go back and listen to it. I think it was one of our really, one of our best early episodes. It's raw, but, um, but it was good. So tipping is very raw. It's this amazing phenomenon on Twitch where people will just give other people money. So like if you're streaming on Twitch and, um, for a variety of reasons, but your audience will just give you money, uh, called tipping. And when Amazon acquired Twitch a couple years ago, all of this was just happening off the platform through overlays and screen overlays that broadcasters would use, could use Bitcoin or PayPal or stuff to do this. They've now brought this onto the platform and they just launched it with a feature called Cheering on Twitch and, uh, and it uses a virtual currency called Bits and super interesting. This is going to potentially unlock a massive revenue potential for Twitch, the company that was already happening in the ecosystem and, and also want to give a tip of the hat to our Slack community member, James Kay, who, um, brought this to our attention in the, uh, in the Slack group. I had not seen it. So that's one, two follow up to Facebook instant articles, paper, RIP. Oh, man, it was the best iOS app ever, period hands down. That was so good. High praise from Ben. Facebook paper is being shut down, sadly, but the spirit lives on in instant articles within the main, uh, within the main app. So, uh, if you never experienced paper, you have until the end of July to rush out and download it, play with it. Yeah. So poor one out this weekend for, for Facebook paper. Um, and then, and then lastly, super interesting. We posted this in the Slack community, the SEC filing for LinkedIn, uh, detailing all of the ins and outs and blow by blow of the acquisition process came out, uh, and it is super interesting. So we'll link to this in the show notes and it's also in the Slack group, but turns out there were actually five parties involved in bidding for LinkedIn. So Microsoft obviously, and then, you know, everybody assumed, you know, and we speculated on the show that Salesforce, it's now come out. Salesforce was heavily involved in the acquisition, but there were three others to have been identified as Google and Facebook. The Facebook story is pretty interesting. Apparently, um, assuming that Facebook is the party that is referred to in the filing, Reed Hoffman had a meeting with the CEO, you know, of the company of party D or whoever it was, um, Mark Zuckerberg and said, hey, you know, there's actually this acquisition process for LinkedIn going on like would Facebook be interested in and Zuckerberg was like, no. So that was not a, a, a, a involved process with Facebook, but Google apparently went pretty far down the path. And then so did the mysterious party C. Nobody knows who party C is, but they also spent a lot of time looking at LinkedIn. The other interesting thing in this filing is the bidding war. So the first bids, first bid that Microsoft put in for LinkedIn was $160 a share. And if folks might remember the deal got done at $196. And so what happened? And I think that was about $5 billion worth of value that's the difference there. And so it turned out, so Salesforce and Microsoft were bidding against each other, started at $160, deal was on track to happen. Microsoft had won it at 182 per share. The merger agreement was being negotiated, everything was going along. And then Salesforce or party A as it's referred to in the filing just comes in over the top after after having essentially pulled out with a $200 per share bid kind of out of nowhere. But the bid was not all cash. It was mostly stock. And so that kind of through the process, big wrench in the process, the whole deal with Microsoft had to get renegotiated and ended up getting done at $196. All cash. Wow. Great move sales force. Yeah. I hope that the read Hoffman and Jeff Wiener wrote a, a, you know, sent a really nice bottle of wine to Mark Benning off that today. Yeah, no kidding. And we'll now compete against him. Yes. Yeah. Should he, should he the carve out? Let's do it. All right, nice. I have a quickie this week. We've actually, it's funny, we mentioned the ringer or twice already on this podcast. And I've, the ringer itself has been my carve out the, the week that it launched. But my carve out this week is one of my favorite writers of all time announced this week that he will be starting at the ringer. And that is Mark Titus. Mark is a fellow Ohio State alum who was known or still is known. It's his Twitter handle has club trillion. And it's the most awesome name of all time because Mark would ride the bench and would get put in for one minute per game. So his stat line read 1, 0, 0, 0, 0, 0, 0, 0. And so he started this blog called club trillion. Well, he's at a Ohio State with the tagline views from the end of the bench. And he became this phenomenal sports writing personality and just hilarious to follow on Twitter. And he wrote, I think he wrote for Grantland actually when Bill Simmons was there. So I'm really excited to see Mark's writing come back to life at the ringer. That's awesome. I love that. We see there when you were there. He was. Yeah, I'd get to watch his few seconds of game when they throw him in. That's awesome. My carve out for the week is actually a concept, a management tool, self management, or of your teams that probably a lot of you are familiar with called OKRs. So it's very impressive. I've been using OKRs for a couple of years. They're really great. So the idea, there's a cool history behind it. Google uses OKRs. And they were introduced to Google when they were still a tiny startup by John Doer from Kleiner Perkins who was on their board. And so there's a great willing to it in the show notes. Rick Cloud, who's a partner at Google Ventures. And he had been there. And he did a great job of making a lot of good content. A great willing to it in the show notes, Rick Cloud, who's a partner at Google Ventures, and had been at Google and YouTube before that, gives a great hour-long overview about how the objective and goal setting process works at Google. It's really good. I just use it myself, but it also is great for teams and the idea is that you set a small, finite number of objectives for yourself in any period. And an objective is a high level thing. So one of mine is help my portfolio companies. And then you set KRs or key results under each objective. And the key results have to be smart. So specific, measurable, actionable, realistic, and time-bounded. I think that's it. Anyway, but one I have is spend at least 15 hours per quarter face-to-face with each founder of each portfolio company I work with. So it has to be super clear. Did you hit this? Yes or no, at the end of the quarter. Anyway, it's a great system. The concept is you should really stretch yourself and achieve half or less of your key results. Anyway, shout out to KRs. Awesome. Well, that about does it. If you aren't currently subscribed and would like to hear more, you can subscribe from your favorite podcast client. And if you feel so inclined, we'd love a review on iTunes or to tell your friends on Twitter or Facebook too. Thanks so much for joining us. Until next time. Until next time. Who got the truth?