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Episode 57 March 21, 2017 | 55min

Profitable Online Media

Our co-founders discuss the history of web advertising with entrepreneur John Battelle.

Show Notes

This week Paul Ford and Rich Ziade talk to John Battelle, who’s been, in Paul’s words, “an internet entrepreneur as long as there’s been internet entrepreneurship to happen.” They chronicle his long and varied career, including early days as founding managing editor of Wired, founding Industry Standard during the dot-com boom, the Web 2.0 Summit, successive iterations of online advertising and content marketing, and his current work at NewCo Shift, where he’s working change the way tech leaders think about the industry.

[Intro music]

[0:17]

Paul Ford [Music ramps down] Hi, this is Paul Ford and I’m the co-founder of Postlight, a digital products studio in New York City at 101 5th Avenue, and I’m joined by my co-founder, Richard Ziade.

Rich Ziade Hi, Paul!

PF Rich, what does Postlight do?

RZ We are a digital products studio. We design, architect, and build platforms and the apps that run on those platforms.

PF The things you see on the web, the things you hold in your hand when you are using a mobile device. We build those.

RZ Yes.

PF And we’re an engineering shop but also a very serious design shop.

RZ Yes.

PF So it’s important that people know that we do both things.

RZ Yes. And we’ve got an interesting guest today that’s I thought did, like, two things but as I dug into his background, he’s done, like, 11 things . . . incredibly well.

PF And you’re talking about John Battelle, who, I guess anyone who has looked at the title of this podcast probably knows that that’s who we’re talking to. You know we should also let people know: John Battelle was a client. He came to us very early in the development of Postlight and had us build a website for his company, NewCo.

RZ Correct.

PF And we recently attended his conference. The NewCo Shift Forum out in San Francisco. We talked about the fact that we were going out and hosting a drinks night in California. That’s what that was about. So when we went out and we saw him, we said, “John, you’re an interesting fellow—”

RZ Boy! Is he!

PF “—come on our podcast.” This is a guy who has been an internet entrepreneur as long as there’s been internet entrepreneurship happen. But it’s unusual because he’s not a tech guy, he’s a media guy.

RZ He may hate you for saying that.

[1:53]

PF No! His roots are in journalism! I don’t—I mean—

RZ Roots? Yes.

PF So as he’s built big tech platforms, he has brought a kinda media understanding and he played a pretty critical role in the way that blogging went in 2000 to 2010 and he continues to play a pretty critical role in how people make money from writing and making things on the internet.

RZ Yup.

PF So . . . let’s talk to John.

RZ Great!

PF John Battelle!

John Battelle Hello.

PF John, it’s great to have you here.

JB It’s good to be here. It’s my first visit.

RZ Welcome to New York, your complexion is excellent.

JB [Chuckles] well my complexion reflects the fact that it was ski week in California last week.

RZ Ah!

JB Yup.

RZ There we go.

PF So we should fully disclose at the outset that John is a client of Postlight.

JB Yes.

PF But that’s only one of many, many fascinating, interesting things that he’s gotten up to in his career [JB laughs] uh and actually as a client, you showed up early. It was great.

JB Yeah.

PF We were just a little baby.

[2:50]

RZ We were babies.

PF And uh you’re like, “Hey! Let’s build this thing!”

JB Yeah, yeah.

PF And so we did some web work for you. So—

RZ And the thing, we’re gonna talk about the thing.

JB Yeah.

RZ Is called NewCo.

JB Yeah.

PF That’s right. That is we helped build the website for NewCo. You know we do an exercise sometimes for people who’ve had rich and varied careers, which is kinda go through the years a little bit.

JB Mmm.

PF So let’s say 1991. Let’s start. Where were you in ‘91, ‘92?

JB ‘91 I was in grad school. I had been a reporter covering the tech industry for a few years in the eighties and I realized I was never gonna get anywhere unless I had an advanced degree proving that I could write about more than, you know, hard drive capacities and network speeds. So I went back to graduate school at Berkeley in journalism and uh in ‘91 I was actually drafting my thesis proposal which was about a three page summary of what became Wired.

PF So then onto Wired.

JB ‘92.

PF ‘92 was Wired. What were you on Wired?

JB Uh the founding managing editor.

PF Ok that’s an unusual role.

JB Yeah. Yeah.

PF What did you do as a managing editor at Wired?

RZ Well, before that, what’s the thesis? What was the thesis down to two sentences?

[4:10]

JB Uh the Rolling Stone of technology.

RZ Perfect!

JB Yeah um that’s what I wrote. I said that the world needs a magazine that covers what was happening culturally in technology, the way that Rolling Stone covered what was happening culturally in music in the late sixties—[RZ got it!] late sixties [very cool]. And it was like 30 years later, 25 years later, technology was rock and roll.

RZ Right.

JB Yeah.

RZ Cool.

PF It had that function, early days, too.

JB It did! And it had a group of people who believed that idea [PF right] um and they just hadn’t been united by a brand yet.

RZ So how far into recreational drugs are you at this point?

JB As deep as I ever got.

PF Yeah, that makes sense [all laughing].

RZ Fair, fair, fair.

JB [Laughing] I was, you know, 25 years old, right? [RZ laughs] I tried to not let it affect my ability to edit but that was really what I did, I ran the editorial of Wired and uh—

PF A managing editor can’t be too addicted to drugs.

JB No [RZ chuckles]. As a matter of fact, my job was, you know, not only to make the trains run on time and make sure all the pieces landed and got edited, but also I was a guy at the office when everyone would go to a rave or go to Burning Man [laughs]. So—like it wasn’t—I was just so into the work, I mean, you know, when you’re 25, 26 years old and you get to edit William Gibson, you know, or Neil Stevenson, um [RZ right] you’re like, “Yeah! I’d rather do that than just about anything else.” Right? If you’re into editing, you’re into writing and ideas, uh that was just the coolest place to be.

RZ Sure.

[5:48]

PF So that full dot-com wave. You rode that. When did you leave Wired?

JB Well I got an idea while I was at Wired, I ended up running business development as well and the reason was cuz Louis, the founder and CEO, wanted somebody who was a product person to make decisions about what partnerships we were gonna do. So as biz dev guy I saw a lot of proposals, I wrote a lot of proposals, and one of them that I wrote was for a weekly magazine covering the business of the internet [PF mm hmm] um and uh it just wasn’t sexy enough for Wired [chuckles], to be honest, you know? [PF right] and so I left in ‘97 and started The Industry Standard . . . because I thought it was a good idea [laughs].

PF And The Industry Standard, I remember, that was one of a couple publications that really rode the wave of that first dot-com explosion.

JB Yeah. Yeah. All the way over the crest and down onto the rocks.

PF Yeah, exactly [all laugh]. How long did that run?

JB Uh that was five years. Yeah.

PF How big did that team get?

JB Uh over 400.

PF Yeah.

RZ Wow!

JB 120 journalists um, you know, 120 million in revenue in our um penultimate year. Profitable. Um. Very profitable. Uh with, you know, a conference business, a research business, an online business, and the print business, which was 80—70, 80 percent of our revenues was print. But it was—you know, I mean, it was a serious journalistic enterprise with, you know, a lot of ads—like the most—

RZ And it was a hurricane at that time!

JB Yeah, I mean we had the most ads of any publication in the history of publishing and still hold the record cuz no one’s ever gonna—it just—

RZ Unbelievable.

[7:24]

PF The bubble just needed a place to put stuff [RZ laughs].

JB Exactly! I mean I remember a board meeting uh where uh, you know, I was presenting the budget or something and uh and my board which consisted mostly of people from IDG, who owned the majority of the company at the time, saying, “It’s raining money and you don’t have enough buckets. You need to make more buckets.”

PF Right. “Start another magazine!”

JB We started several more magazines. We, you know, we started all these crazy ideas that didn’t pan out but um it was a crazy time and we were emblematic of that time [PF right]. Although, unlike most of the companies that were going public at the time, we had real revenue and real profit.

PF Right.

RZ So 2001—

JB That’s when the—

RZ Spring.

JB Yeah, that’s when the everything fell apart.

RZ Right, so where are you at that point?

JB Ten years from the first question. Um 2001 I was uh chairman of The Standard and the board had brought in a guy to run to after I disagreed with the board about whether we should sell the company and after the bankruptcy of The Standard, I went to Berkeley, I went back to the journalism school and taught there while I was developing a few other businesses. And that was probably the most productive three or four years of my life cuz [RZ hmm] um while I was at Berkeley, I had the Bloomberg Chair there uh so Mayor Bloomberg uh, you know, kinda provided me a safe harbor in a storm at Berkeley. Um but I developed the idea for Federated while I was developing a book that I wrote called The Search about Google and its impact on society [RZ right]. And I also developed two conferences, one of which I did with Steve Rattner, here in New York, called FourSquare, before there was a app called FourSquare. And a second I developed with Tim O’Riley called Web Two [Web 2.0] which, as it’s thesis that the internet was, in fact, not over. That that was sort of a temporary pause that we all had from oh one to oh three but that, in fact, there was a second wave where the web would become a platform for an explosion for new services, and publishing, and, you know, all sorts of, you know, new applications.

[9:39]

RZ Which proved out.

JB It did.

PF I remember going to one, too, in the Javits Center and I’d been a sort of true believer, I was still pretty young, but I’d stuck in, after 2001, everybody else went home [JB right, right], and I was like, “Well, I’m gonna still do web stuff even though I’m making 22 thousand dollars a year.” [JB right] and I, like, snuck in to Web Two Point Oh [Web 2.0]—

JB Oh did you? [Laughs.]

PF And it was gigantic!

JB Yeah well there were two pieces to it. There was the convention kind of expo which [PF right] you went to at Javits and then there was the kinda high-end executive conference in San Francisco [right]. And we also did something in Mosconi, we sorta did it in New York, Mosconi, and then also in Japan and god knows where else. I was mostly focused on the executive conference [ok] where we had 11 hundred people in a palace hotel and I did all the programming and I was the host, and the, you know, kinda the MC, if you will. And that’s where I started doing uh a lot of in-depth, kinda Charlie Rose-like interviews with leaders of the industry.

PF Where you get two comfy chairs: you’re sittin’ in one, they’re sittin’ in the other.

JB Right. Right. And I did that for eight years.

PF Gotcha.

JB Um—

PF You strike me as a master of the executive comfy chair interview. It seems like [RZ laughs]—

JB I really enjoy that! I do because I found that I got to know these people, having been a journalist for most of my life, I’m always asking them questions sorta privately and the answers were so much better than I’ve heard anywhere publicly, right? [PF right] and so my idea was, first of all: let’s create an editorial framework for each of the events, right? Every year there’d be a new framework, a new question, a new sort of central thesis, and then let’s see if we can get these guys to talk about that and in ways that were similar to what I heard offline. Right? [mm hmm] and I think I developed, maybe, a reputation for getting people to say things that otherwise they wouldn’t, but not necessarily controversial, or, you know, trying to attack them, or paint them in a corner, but just to get them to be a bit more honest about [open up a little bit, sure] the impact of what they were doing. I mean if you’re Eric Schmidt and you’re running Google, you need to think a little more broadly than whatever your next product is, or whatever, you know, why Gmail’s so cool.

[11:47]

PF One of the things I’ve learned just working with high-level execs is they start to actually minimize their language down to, like, single words [JB laughs]. They want to do a PowerPoint where the word ‘Powerful’ is there and like a picture with a logo and they’re like, “Any questions?”

JB Yeah right [laughs with RZ].

PF That is a perfect interaction for them because everything else introduces risk.

JB Right, right, yeah, and so—it was a great run. The event did very, very well. I think it came at a time when people wanted to believe again in the web and—

PF Where are we now? This is mid-2000s to end of—

JB Yeah, it’s sort of, right sort of end of the aughts.

PF So this is a magic era. I mean you’re saying it’s productive but The Search was a bestseller. It was a big deal, that book.

JB Yeah, it was in 26 countries and yeah.

PF You called me for that book. You read some blog post and called me—

JB Yeah, I did.

PF Yeah, I thought that was really cool. I guess that was the first index I was ever in. I bought the book and then I checked the index.

JB You checked the index, right?

PF Yeah, you have to do both. And then the—you’re currently engaged in a conference business which we’ll talk about [JB yeah]. So the conference stuff is set. The journalism theme is there. But the new thing you mentioned which people may not know, if they’re listening, is Federated. What was Federated?

JB So the idea there came from when I sold the book and had to write it, I was terrified. I had to find my voice, and decide how I was gonna tell the story, and it was a very big story. I wanted to symphonic. I didn’t want it just to be another story about another startup. And so I wanted to tell the larger story of what was happening in culture when we had access to knowledge [PF mm hmm] um at the level that Google brought. And in order to do that I thought, well, probably the best thing to do was to start a blog. And that was two thousand—well, I had stared one in ‘01 but uh which made me a latecomer for early bloggers, but a very early, you know, to the idea otherwise. In ‘03 I started a site where I could write kind of sketches of things I was working on as I was reporting the book.

[13:38]

PF It was very early days for a journalist.

JB Yeah.

PF For like non-journalists, made up the entirety of the internet [JB right]. For someone who could get paid writing, that was like a shocking thing that you would drop your words out of it.

JB And the funny thing is, you know, I had underestimated the fact that, you know, at The Standard and, I guess, at Wired, I had built an audience, people who knew my work [PF mm hmm], and by about nine months to a year into doing Search Blog, the name of the site, I had an audience of three of four hundred thousand people coming every month and, you know, having been a publisher, that was bigger than the audience at The Industry Standard and—

PF But this is the thing: publishers didn’t believe it, right? [JB right] like you could see it and you were like, “This doesn’t line up with what anyone’s expectations were.”

JB The economics of publishing were such that this was very clearly—you know, I looked around and I saw Om doing it and I saw, you know, Pete Cashmore doing it, you know, which became Mashable. I saw Arrington do it which became TechCrunch. I saw the guys at Boing Boing, all friends of mine, doing it, you know, and they had over a million people coming to their site every month. And we all had the same problem which was we didn’t understand our audience and we had no way of making money from them. Um the presumption uh which I think is being questioned now but back then was that there’s no way that you could ask them to pay for it . . . the audience. So uh—

PF People thought maybe a tip jar could work.

JB Maybe a tip jar but that didn’t work and the technology was a little janky back then. So the really—the only thing you could do was ads and I understood that business pretty well having, you know, done The Standard for a period of time and sold a lot of ads. So I thought, “Well, wouldn’t it be cool if we Federated these audiences. So that if I’m an ad buyer I can get a three, four, five, six million technology people, if I bought ads that ran across Search Blog, TechCrunch, Mashable, Boing Boing, and so on [PF mm hmm]. Uh and that was the idea for Federated and it became, you know, at the height of Federated we had 35 hundred different sites, all of them hand picked, all of them high quality, in categories from women’s interest to sports to tech to business and so on. And that became a very big business [PF right] and uh it kind of ushered in the social media era because in order to sell ads into that space, you needed to convince marketers that this was a different kind of a medium. This was a medium that was really intimate, where the authors and the writers on those sites had a real interactive engagement with their audience: comments and, you know, trackbacks, and all that openweb stuff mattered and so if you were gonna bring your advertising into that space, you couldn’t just push an ad in front of someone, you had to actually understand the space you were in and be responsive to it. And so we developed, at Federated, in ‘05 or ‘06 that we called Conversational Marketing or CM which over three or four years evolved into Content Marketing and products that we created where there were actually pieces of content from the brands in the streams of the blogs. If that sounds familiar, that’s the Facebook Newsfeed. The problem was we didn’t, as a federation, have the resources to build what Facebook built. And by 2010 or 2011 it became very evident that Facebook was gonna win and that small and medium-sized publishers were basically screwed. Um and large publishers were too but they had huge cash flow and could probably figure out what to do about this problem more than like someone who had 500,000 readers and was writing about, you know, mountain bikes, right? [PF mm hmm] so Federated while I think we pioneered a lot of things, started a glide path towards obscurity by about 2011, 2012, it was clear, all of us who were running it knew it was going that way. So what do you do? Sell it! [Laughs] you know? Get out! But we had acquired, we acquired five or six companies but one of the ones—the jewel that we acquired was called Legit. Uh and it was a programmatic advertising business and we bought that company because we saw where advertising was going, at least traditional, internet advertising. And it was clear that we did not need a lot of sales people and we did not need a lot of ad ops people, both of which we had, because the computers were gonna do all of that.

[17:59]

PF Define for the people listening to this, define programmatic and define ad-ops. Those are gonna be new terms.

JB Right. So programmatic advertising is essentially advertising that is slotted based on parameterization, based on data.

PF It’s robots buying ads.

JB Robots buying ads and it turns out at least in the first half of the ad tech revolution, the programmatic revolution, it’s robots looking at ads. [Chuckles] fraud!

PF Yeah, that’s the problem too.

JB Uh and, you know, wherever there’s economic incentive and open systems, you know, fraud will flourish until the industry decides to address it and the incentives were so misaligned that for four, or five, or six years, no one cared, as long as the KPI, the Key Performance Indicators, that the agencies bought ads on were being checked.

PF So just people are seeing like enough clicks came through.

JB Enough clicks and enough views of the video, enough whatever, it turns out the robots were actually clicking or looking at the videos.

PF But the ad agency is reporting back to the big brand, you know, [JB right!] the toilet paper company like—

JB Yeah, they’re like, “Hey, man. It’s working!” Right?

PF Yeah hundreds of thousands of people are clicking on this toilet paper ad and [JB right, exactly, so, yeah] watching the cool video.

JB And then everybody looks at the Charmin sales and they’re up by a point. Well that’s just cuz they were up by a point, not because of the ads, right? But we bought this company, you know, when it was doing 11 million in sales and—

PF This is Legit?

JB Yeah and, and, and it just kept growing.

PF So Legit had like a platform. There was a database, there was an interface, you can go there with an ad and say, “I wanna put this ad on the internet.”

JB Right well what Legit was was an exchange.

PF Ok.

JB So a supply-driven exchange. Supply being inventory by publishers. And it focused on the guys that I care most about: small and medium-sized publishers.

PF Ok so I’m Boing Boing and I can say, I can say to you like, “I have these rectangles.”

JB Right.

PF “There’s nothing in ‘em.” And Legit will go out and automatically put stuff in—

JB Automatically fill those with ads. Now, in the beginning those were lower—

RZ Was there anything like this at the time?

JB There were several. As a matter of fact, we bought Legit probably months after Google had bought AdMeld which was a very similar uh platform uh and—

PF DoubleClick was around too, right?

JB Right, well and then they combined it with DoubleClick. So we had a piece of what was the overall programmatic ecosystem and our piece was known as the supply side platform. But also an exchange which is the place where the deal is done and this just kept growing and growing and growing as more and more, you know, demand side buyers, usually agencies on behalf of marketers—demand side buyers found the efficiencies of using programmatic as opposed to going out and getting your nails done and, you know, all the costs of sales started—

[20:34]

RZ Sure.

PF You don’t have to buy anybody a steak.

JB No, no, you just set the parameters and all the inventory’s out there and you can buy audiences, as opposed to buying a site, right? [PF mm hmm] or a publication.

PF Well that’s really what changed, right? [JB mm hmm] you—Federated sold a bundle of—

JB Publications.

PF And you saw the logos on the Federated website [yeah yeah]. It’s like here’s Boing Boing, here’s, you know, all these various sites um like Deuce and so on [right] were out there and so that what’s you were buying.

JB We sold voice, we sold point of view, we sold traditional magazine values.

PF But it wasn’t—it was about these cool brands.

JB But we bought this other platform as a hedge, knowing that audience buying was the way of the future, knowing that automated audience buying, based on data, was the way of the future.

PF But this has been the struggle in publishing ever since [it has been] because suddenly places that had built these extraordinary brands where you could buy someone a steak dinner and say, “Give me a hundred thousand dollars and I’ll give you space in my thing.” [JB exactly] suddenly everybody was coming to them and saying, “I need 18 to 35-year-olds. What do you got? And prove it!”

JB Right. “And prove it. And, by the way, instead of paying you ten dollars CPM, I’m gonna pay you 80 cents.”

PF That’s right.

JB “And the reason I’m paying you 80 cents is cuz I can find 18 to 34-year-olds across the entire internet for 80 cents so you have to be an 80 cent bid or I’m not gonna take it,” and we’ve been fighting that ever since and, to me, the way you fight that is with data [PF mm hmm]. You say, “I can prove that I’ve got better 18 to 34-year-olds than you and the way I can prove that is the conversion and the engagement and the this, that, and the other,” but you need data parameters to prove that and that means you need a more sophisticated programmatic ecosystem and as we’ve been building that in the industry, in the programmatic industry, Facebook, Snapchat, Twitter, you know, all the platforms . . . Google, have kind of consolidated what’s known as people-based marketing. Real people-based marketing. And four years ago I joined the board of a company called Acxiom which is in that—

[22:24]

PF Spell that for the audience.

JB A-C-X-I-O-M. It’s not an easy one um but I think still we’re in a process of getting back to where brands reflect true audiences and true engagement.

PF And when you say people-based marketing, are you talking then about an individual?

JB Yeah.

PF Like ok so when Google is doing people-based marketing, it’s saying, “Oh hey, Batel just did a search!”

JB Right.

PF Ok.

JB And Batel falls into this, you know, double-hashed anonymous category [sure!]. So I can sell you a hundred thousand Batels [right], you know, who are all auto-intenders or who are this, that, or the other thing that a marketer might want—

PF And Toyota’s on the other side going, “Boy, I need some Batels.”

JB Yeah and well the reason Facebook took off and it’s revenues have been sort of the most extraordinary stories in media in the last 20 years is that they had real people and they could prove it, right?

PF Sure.

JB And, and, and that was—

PF In fact that’s the product.

JB Yeah. That we are the product, of course [yeah]. But the problem with Facebook is that it is a wild garden. It’s a closed system and marketers like to reach people everywhere and they wanna know, “Well if I got Paul Ford on Facebook, I also wanna re-engage Paul Ford on that little mountain biking blog that he’s visiting.”

[23:37]

PF “Yeah I gotta hit that guy seven times!”

JB “I gotta get him seven times in four different environments and—”

PF Right, otherwise—

RZ They try to do that. You see some of that.

JB You see some of that but it’s just moving along and so the two companies that I’m involved with that are very deep in that space. One of them is what we spun out of Federated, we sold the assets of Federated but kept the capital structure and what was Legit but had become a unit of Federated and we spun that out and called it Sovrn and I’m chairman of that company.

PF Spell that one!

JB S-O-V-R-N and that is [ok] one of those, you know—Sovrn—the idea was that if you’re a publisher, you have Sovrn territory, your own domain, um and it’s your data, and your customers, your readers, and you have a right to understand them as well as advertisers do.

PF It is funny how URL spelling can kind of do carbon dating on when a company was founded.

JB Yup. Exactly [laughs with RZ].

PF A lot of vowels went to vowel heaven in the late 2000s.

JB Well you just couldn’t get the do—you couldn’t get the uh domain if it had an ‘i’ and an ‘e’ in it. Or even a ‘g’. So [chuckling] we just did S-O-V-R-N. But the idea was to level the playing field for small to mid-sized publishers by acting like we were advertisers [PF hmm]. But in fact what we do is take the data from the publishers and use it to create higher value for those publishers.

RZ And that’s still around today?

JB Oh it’s growing like crazy! It’s uh you know I don’t know if I’m allowed to say this but what the hell? It’s well over a hundred million in revenues now.

RZ That’s great.

JB And it’s been profitable for ten straight quarters at both cash flow and [?] profitable and it’s growing at 50 to 60 percent a year.

[25:14]

RZ Wow!

PF Ooh.

JB And then now on big numbers and I think the reason is because human beings love stories. And great storytellers love the internet and they create sites where they tell their stories and for a period of the last, really, five to ten years it’s not been particularly profitable to do that, to start a site and just try to be a small publisher. Um but I think that the tides are starting to turn because I think advertisers are realizing that they can’t only live in Facebook and publishers are getting more sophisticated about, “How do I represent the audience that I’ve got in that massive, you know, computer-driven, sort of Nasdaq Stock Market of advertising that is now dominated by programmatic and our mission at Sovrn is to help publishers succeed. It’s really just simple. Our only customer are publishers. Um and so by focusing on that it’s really helped us succeed.

RZ So to hear that we—we talk to other thought leaders and there’s a sentiment out there by some pretty influential people, very successful people, that believe that the centralization of what is the internet is inevitable. There are going to be—

PF Five or six platforms.

RZ Three or four or five silos and everything will emanate from those places.

JB Yeah kind of the network television view of the internet.

PF That’s right.

RZ Yeah.

JB Um I disagree. Um I don’t want to live in that world. I think the beauty of the internet is that anyone can put out a shingle. If I’m like, you know, a freshman at Harvard and I have an idea for uh for a Facebook and I can put out a shingle and everyone can find me um with equal access. That is an innovative, you know, ecosystem. Uh if, instead, I have to fight for shelf space on one or three or five platforms. That’s not an innovative ecosystem [RZ sure]. And so while I think the internet will trend towards oligarchy for a period of time, I think it’s also inevitable that will fall apart.

RZ That’s uh it’s reassuring to hear that. I think we share that sentiment. I mean you’re talking about the web [right] and the open web and—

JB And, by the way, we also had the whole Apple App, you know—

RZ Well there’s that.

JB Mass hallucination.

[27:37]

PF Well that was supposed to kill the web. All these things were supposed to kill the web [yeah yeah yeah] and the web just sorta gets more difficult to build big things upon but also faster and weirder and stranger everyday.

JB Yeah, yeah.

RZ It’s sorta that top layer of bacteria [JB and PF laugh] like if you keep taking the antibiotics, eventually there’s that strain that you can’t kill [laughs].

JB That’s my hope. That’s my optimism. Um and—

RZ Is—is—you’re optimistic. That’s a sentiment but what do you, I mean, let’s park the optimism for a second and just looking at the hard realities . . . of how things have become very centralized, you know, you do have young people who don’t—that the browser isn’t that sort of generic sort of non-commercial tool that you use as a window [right] to all these other places, but rather, you start inside that commercial experience, right?

JB Right. Right. Well I mean I think they start inside the mobile phone screen.

RZ Yeah.

JB That’s kind of the browser now, right?

RZ Yeah.

JB And so browsers commoditize. I mean they’re tools to get to information and experiences and services and so we had the sort of app revolution and I think—one of the things that makes me optimistic is the rise of what’s called deep linking. And I spend a lot of time staring at that in sort of 2010 and 2011. And deep linking is now a fact of life. When you hit a link it used to bring up a mobile browser. Now it brings up an app for the most part.

RZ And it’ll sniff out that—

JB Right, right. And so that idea that you can jump around from service to service, that the fact that you jump from one service to another, the refer, is uh trackable and knowable so people can build businesses understanding the flows of people from one place to another [RZ mm hmm] um I think augers a new open web. If you think of those terms in a more sort of Catholic representation, as opposed to, you know, sort of structural or fundamentalist. Like, “Well it has to be a browser! It has to be a URL!” No it doesn’t. It just has to work like the web works which is you jump around from place to place, value goes where attention goes and data follows it so that you can understand the business case. Um I think that’s happening with apps. And I think the opportunity to create breakout services, breakout media uh still exists and will continue to exist. Um but it requires a certain fluidity that, you know, the first version of the web did not. In other words, if you want to be successful as a publisher, you have to understand, you know, those platforms. You have to know how do I exist, in the case of NewCo, as a business related publication. How do I look and exist in LinkedIn? How do I look and exist in Facebook and in Twitter and I haven’t done Snapchat yet for NewCo cuz I’m not sure that really is a channel for us [RZ laughs not the audience] but, yeah, not the audience yet but um uh, you know, there are several platforms that we just have to think about how do we live there natively and one of the things Sovrn’s doing, because it’s a paying point of publishers, is we’re making it possible to take a piece of content and write it once, and publish it across every platform, whether it’s GoogleAmp or Facebook instant articles or LinkedIn or wherever, um and that’s just something if you’re a two-person shop doing a mountain biking site, you don’t have the bandwidth to do all of those things [sure]. But that’s why companies like Sovrn exist, right? To say, “You write that great thing, you know, great piece about the new Klein mountain bike and we can make it shine in SnapChat, we can make it shine in Google, we can make it shine, you know, wherever you want it.”

[31:26]

RZ You don’t care about where the origination point is?

JB No! The key and I think this is something that the platforms are starting to come to terms with, the key is what are the economic terms upon which uh the trade occurs? So if that post, for whatever reason, you know, gets 40 thousand views in Facebook and Facebook makes, you know, 40 bucks from that [RZ mm hmm] how much does the publisher get? [Right] and that piece has not been worked out yet. Um I think that the large companies: the Hearsts and the Time Incs and The New York Times are, you know, pulling their hair out trying to figure out [oh yeah], “Can I model what I’m getting from my Facebook distribution channel?” And, you know, I”ve been arguing with people at Facebook that these need to become economic certainties. And the value needs to accrue more to the creator of content who is the person who draws and engages the audience than the past ten years have seen, right? I mean it used to be that the trade was, “Well Facebook will drive a shit ton of traffic to you and you can monetize it on your site!” That turned out that, you know, you would make pennies on that [sure] [PF sure] and Facebook traffic was not particularly good traffic.

RZ No, they don’t—they, I mean to this day the hyperlink out of Facebook is a second-class citizen, right?

JB Mm hmm.

RZ It’s—and—

JB And it’s a third-class citizen inside Facebook, right?! Yeah, you know.

PF Sure.

RZ Oh, it’s a disaster, right?

[32:48]

JB But I think that they’re gonna realize that in fact over time the—Facebook’s not in the business of creating engaging content.

PF They’re not great at it.

JB No. And and and so I think the trade has to be more fair [RZ well they’re piggybacking] and I think they’re working on that.

RZ They are?! That’s interesting to hear. That is a sentiment inside of Facebook?

JB Yeah, I really believe that it is. Yeah.

RZ Interesting. That’s promising to hear.

JB And it’s also being driven by marketers who are saying, “I’m finding that the engagement with the publisher is of higher value than the engagement [RZ sure] on Facebook except for certain types of transactions which are generally understood to be direct response.”

PF Mm hmm.

RZ Interesting.

JB So if I need to build a brand. I need to build a brand where hearts and souls and minds are changed and that’s at the point of engagement with publishing content.

PF Not necessarily on top of your Grandma’s lasagna.

JB Yeah, I feel like when we all decided magazines were over . . . cuz I’m kind of, at my core, a magazine guy. We threw out like the entire baby, you know? [RZ chuckles] uh and we forget that what magazines are is a lens on human experience that people trust [PF sure], you know? That they say, “Oh I ascribe to that point of view about that experience,” right? And that point of view about that experience—it’s interesting cuz it fractured into, for awhile, influencer marketing. So you know, “Hey, I’m a hotshot, you know, young, you know, millennial uh female who has a huge Instagram follower,” and so you saw a bunch of Federated-like models spring up in the last five years that federated not websites but people who had large Instagram followings or large Vine followings or large YouTube followings and would sell marketers into those channels [right] and I still think that’s an important part of the ecosystem but—and the content that those people create is similar to, you know, bloggers in 2000 to 2010 but overall, long-term, brands outlive human beings, you know, as the face of the brand, right? So the idea that you know someone who’s a 22 Instagram star is going to turn 32 and no longer be an [laughing] Instagram star [RZ right], she’s gonna get married and settle down and have a different point of view. So brands outlive the face, right? And become a trusted source. So I think there’s an opportunity for these brands to reemerge.

[35:10]

RZ Is it safe to say that the state of affairs today haven’t created an environment for them to flourish? We’re not there. It’s a tough place right now.

JB Yeah it is a tough place except, I mean, I have to say uh you know I’ve been chairman of Sovrn since we spun it out three or four years ago and I was the guy the boardroom saying, “We’re screwed!”

RZ Yeah.

JB “You know, like, look at the trendlines here!” Everyone’s spending in Facebook and Google is basically chasing that spend as well.

PF Throw out the baby, throw out the bathtub! [RZ laughs.]

JB I’m like, “I know we have 25,000 publishers but they all have their own individual sites and yee, you know, we gotta come up with strategy to, you know, we can ride this programmatic wave for awhile but everyone’s gonna wake up and say, ‘Ahh I’m just gonna move all my budget to Facebook,’ right?” [RZ sure] and it just has not happened. And I think that the reason it has not happened is because these individual sites have a lot of value and we’ve seen our average CPMs go up by three to four times over the last three years. Now we started a small base [chuckling], ok we started at 60 cents, 70 cents but it’s going up to two or three dollars.

PF So marketers wanna talk to people outside of Facebook. That is the reality that you experienced—

JB Absolutely.

RZ I think it’s about the relationship.

PF Sure.

JB Yeah.

RZ The relationship between those individuals and—

JB I wrote a piece awhile ago that got some pickup but I still believe it. We lost context. And by ‘we’ I mean the advertising marketing community lost context. You know, what is the context of Facebook? It’s not a place where people are changing their hearts and minds, it’s a place where people engaging with their friends and—

[36:49]

PF But they’re not obsessively figuring out which camera to buy.

JB No. And—

RZ It’s—you also kill time on the toilet. That’s a big part of it. I think it’s a time killer [JB yeah yeah]. It’s just a thing, you’re waiting at the doctor’s office [yeah], you just open the thing up [right] and just blindly—

JB Right.

PF But you’re not creating a community with an extreme sense of intent. Like the—when you think about camera websites on the internet where people talk about lense obsessively [RZ oh!] [JB exactly] and then you’re obviously going to advertise your lens there [right]. That’s it. You get much better bang for your buck [right right] than trying to find people who may buy a camera—

JB So the question is is there a way to get that ad for that camera lens on the right site without having to have a supply chain of ad sales people and advertising operations people who slot the ad and make sure that the right number of impressions that were purchased actually happen [PF mm hmm], can we automate all of that so the efficiencies go to the point where, once again, the majority of the economic value accrues to the publisher and not to the people in the middle.

PF So the people listening, I mean if you—

JB And by the way, the largest person in the middle for a long period of time was Facebook or Google.

PF When you look at this ecosystem the number of middlemen is ridiculous [JB yes]. Like someone taking a half penny off of everything, all the way through. There’s a chart by uh Luma Partners [right] which they’re downstairs from us [RZ laughs] and it’s a famous chart where you just see, it’s like a hundred companies [JB right] that your ad might go through. So a little bit earlier you mentioned NewCo [yeah] and we should talk about NewCo [yeah]. What is NewCo?

JB NewCo started sort of as a side project, a crazy idea that I had.

RZ By the way, your life is effectively is about 11 side projects [laughs with JB].

JB [Laughing] it kinda is! Everything’s a side project that like you know sort of like a kid who keeps tugging on my pant leg [RZ chuckles]. Um and that’s what NewCo was. I was in the midst trying to figure out Federated in 2012, 2013 and a friend of mine came up to me, I had stopped doing Web Two [Web 2.0] cuz I sort of thought that brand had played out and I wanted to sort of go out while it was still doing well. So I just ceased operations and decided not to do it and the event drew a lot of people to one place at one time. And a friend of mine came up to me and said, “We—you gotta keep doing events!” [RZ something chuckles] you know and I’m like, “No, I don’t. I wanna stop.” And he said, “Well wouldn’t it be cool if instead of bringing people into a ballroom like you know there was an event where you could go out and check out the companies where their headquarters are and meet the founders and meet the founders in their native space?”

[39:18]

PF So, “Let’s get out of the Sheraton!”

JB Get out of the Sheraton and get into like instead of seeing some CEO of some hot shit startup, you know, pitching it from the stage [RZ go there!] where you learn nothing and if you are one of the guys that elbows your way to the front to meet the person after the talk, they don’t wanna talk to you cuz you’re like one of those guys with the sharp elbows, so they think you’re crazy. But wouldn’t it be cool [RZ chuckles] if instead you could go inside and this came from the fact that I had kind of a privileged position if I could call—if a company like, you know, Facebook in 2007 was doing well, I could literally email Mark and say, “Can I come check you out?” [PF Yeah] and then I’d go inside and see what was on the walls and meet the people there [RZ sure] and that’s such a richer experience than hearing Mark for 20 minutes on stage somewhere. And he’s like, “Wouldn’t that be cool? Kinda like an artist’s open studio but for like cool companies?” And I thought, “That’s a crazy, dumb idea that will never work,” because the logistics alone, you know, a hundred companies open their doors in one city in one day. Right? I mean how do you do a hundred events at the same time? But I couldn’t stop thinking about it and so I figured the logistics out and I found some software that could make it possible, I used music festival software [RZ interesting] cuz during a music festival there’s ten bands playing [PF sure] at any given time. And so I thought, “Hah! Well if ten companies open their doors in any given time people have to [PF do you remember the—] pick a schedule.”

PF Do you remember the name of the music festival software?

JB Yeah, yeah. It was Do Stuff.

PF Do Stuff. Ok. That’s—now we know, now everybody knows that—ok.

JB Yeah but then Do Stuff stopped doing that so then now we work with a great company called Sked which does the same thing [PF ok sure] and so in any case just as a side project for no business purpose whatsoever cuz I couldn’t figure out how to turn it into a business um and, quite honestly, not sure entirely I can even now [RZ laughs] but anyways we did it in San Francisco just as a lark. And people loved it.

PF Fun to be nosy. It’s fun to go see the—what’s on the walls [JB yeah, right, it is] and what kind of floors they have.

JB And other people came from other cities to the San Francisco one and then they came up to me afterwards and said, “Can we do it in our city?” [RZ Sure] and I’m like, “Sure, just don’t expect me to pay you, right? You know I mean you guys figure out the economics but here’s how we did it.”

[41:26]

PF So you have this very light franchise-y model.

JB We have a very light franchise-y model and it just keeps growing and it just won’t die. So, you know, Shanghai and Toronto and, and, and Chicago, and Miami, and you know Boston, and just all these new cities in the last, you know, year or so.

PF So NewCo is basically an idea and you’re providing some coordination.

JB Right. Well what happened was last year I realized that the festivals as awesome as they are as an experience are not incredibly great businesses at scale. Like I couldn’t get GE to give me a lot of money as a sponsor to sponsor eight cities in the United States and five cities internationally because it’s a distributed event. So there’s not a thousand [RZ nobody’s staring at the same poster] people in one place where they can put the banner up [yeah] and, you know, and give the commercial, you know, to those thousand people where the sponsor comes up and talks about how awesome GE is.

PF So even though—I mean there is a way to make value for GE out of all of these experiences.

JB But they had to work too hard, to be honest.

PF Yeah, that’s the thing ok.

JB And so, and so, we, you know, given that I don’t know how to do anything else, I’m like, “Well what’s the big narrative? Like why are all these new kinds of companies emerging in cities around the world? What’s happening in a larger sense to our ecosystem?—”

PF Define ‘new’ here. What’s a new kind of company?

JB It’s a new approach to running a business. And so the new approach, I think at its core is that a company is driven not by the pursuit of profit or the extraction of capital but, rather, by the pursuit of a larger mission that makes the world a tiny, little, better place. In some cases, like a new co like Tesla it makes the world a lot better place. And I thought about all the companies that I really kind of vibed with that I loved with. And they all had that at their core: some purpose, some mission. Right? And the tech industry really started that way, I mean, you know, Steve Jobs and the bicycle for the mind [PF sure] and—

PF And even before that Homebrew Computer Club was just people putting wires into other wires and saying, “Let’s see what happens.”

[43:22]

JB Right. And I think that the tech industry was the first explosion of a new approach to doing business and it turns out it’s not just about the mission, though that was paramount, it was also about the way the company was run, how it was managed, they idea that the people were the core asset of the business, not the access to markets, or the distribution, or the commodities that had been cornered so that you could, you know, “I cornered the rubber markets so now I can make Goodyear tires.” Right? It was, “No, my mission—the people are drawn to that mission. And the people are the core assets. So a new approach to talent, a new approach to management, and a new approach to partnership which was more tilted towards the open, as opposed to the closed.” And so I kind of wrote a manifesto about that and I thought, “There’s gotta be a media brand around that,” and so last year that’s what we started uh I called the brand Shift. So NewCo Shift. And it’s the shift in capitalism from one approach to capitalism where the true north is maximize shareholder value to a new approach to capitalism where the true north is make the world a little better, right? And so it’s—I call it the Maslow’s hierarchy like, you know, “Ok we made the profit bar. That can’t be the only thing.” [PF sure] you have to have profits so that you can be a business but . . . what next?

PF So I mean a canonical example of new co then is like an Etsy [JB mm hmm] which is incorporated as a B Corporation [right], it’s not—it’s explicitly said—

JB Almost all B Corps are new cos.

PF Right.

JB Yeah.

PF There’s an explicit statement that you are not motivated by profit first [JB right] and that the company isn’t obligated to maximize profits.

JB And that is actually a structural governance in the shareholder agreement [PF yeah], so shareholders can’t sue a company for not maximizing profits, right?

PF So that’s a different DNA for a corporation.

JB That is a different DNA and I think that DNA whether or not they become an actual B Corp, that DNA is starting to spread throughout all sorts of big companies. And that’s why I did the Shift Forum a few weeks ago was to sort of bring together companies that are getting the sense that maybe there is a new way of, of prosecuting capitalism. And you see this at Unilever. You see it at Walmart. You see it at GE. You see it at very large companies that are realizing, “I can’t hire the hotshot 24-year-olds out of business school anymore cuz they all wanna go work at new cos. They wanna work at a place that has more than profit at the center [PF mm hmm], where they can wake up in the morning and go, ‘You know what I’m doing at Etsy, or the Honest Company, or whatever, feels like I’m adding value to the world. I’m not just trying to sell more soap or trying to, you know, um, you know, move more cars. I’m actually trying to you know fix some things that are systemically broken in the way our economy works.’” [PF Sure] and I think that’s a very good thing and it’s worth celebrating. So now NewCo is really about telling those stories and convening those conversations.

[46:11]

PF And well tell me about the media wing of this.

JB So I mean we’re small but we’re growing. You know, I mean, a few months ago our average readership was about 300,000 um and this month it’s over a million. Um and you know we’re curating stories that are very similar to what I did at Wired. You know we didn’t write many of our own stories at Wired. We went out and found people who had things to say. And to that end, Medium has been a great place to be because Medium’s sort of a place where people who have something to say tend to go and just say it. They don’t what the overhead of, “I gotta start a blog and run a blog and feed the blog.” But you know, “I’m the CEO of Ford and I wanna announce my autonomous vehicle, you know [PF mm hmm], initiative. So I’m gonna go to Medium and announce it there.” [sure] and then I pounce on that and say, “Hey, dude. Let’s run that in our publication.” Right? Or, “I’m the CTO of the US government and I wanna talk about digital initiatives and how we need to change the idea of service in the government.” I’m like, “Hey, Meghan, run that with us!” Right? Or, “I’m a shareholder of Uber and I wanna talk about how that company is failing the core values of what it should be paying attention to in terms of its constituents, its drivers, its employees, and so on. I’m gonna write an open open letter to the board of Uber as a shareholder,” and I’m like, “Hey! Run that with us!” Cuz all those stories are part of this shift in capitalism, so NewCo Shift has become a place to find those stories, you know, and understand a particular point of view about business.

PF What’s next for NewCo?

JB Well we just did this Shift Forum which to me was a proof point, like can you make that narrative which is complicated cuz it involves large companies, startups, policy, uh you know, all sorts of different ideas brought together. Is there a community that cares about this change in capitalism? If so, we should be able to bring that community together and have a conversation. And if that conversation sucked, then, you know, we don’t really have a brand but it was awesome [chuckles]. So we’ll definitely be doing that again and we may be doing more of them in cities around the world. That model works from a sponsorship standpoint—

PF So the theme was, essentially, a NewCo ethos, as opposed to [JB right] technology changed or—

JB Our kinda tagline was “Capitalism at a crossroads”. You know?

PF Yeah it’s always at a crossroads but [RZ laughs] ok today’s crossroads.

[48:30]

JB Yeah, today’s crossroads which I think is a bigger narrative, right? I think everyone thought that change equals digital, change equals tech [PF right], and, you know, our argument is: no, actually, innovation and change well that is constant but right now we’re in the middle of a really big renegotiation of the social contract with business. Like, what do we expect of business? Before we expected business to deliver shareholder value [mm hmm], now we expect business to solve really big problems that are hard to solve simply with the institutions of government or religious organizations or civic organizations or NGOs. Business is the most nimble engine of change that we have in our society. And so we should expect more of it and, again, the technology roots are key because I think the technology industry has gained so much power . . . and so much data and information but has not yet accepted the mantle of responsibility—

PF Oh it truly has not.

JB And, and, and so that was a major part of the conversation at the Shift Forum. Uh and a big part of my writing over the last couple of years has been on that theme. But what I loved about that forum was the leaders of the tech industry who were there accepted it, right? [PF mm hmm] uh and, and the beauty of it doesn’t hurt to have Donald Trump as president because he had—

PF Well, it does, John. It hurts—

JB Well, it hurts a lot! But it doesn’t hurt [RZ laughs] in terms of pushing this conversation forward because I had all these incredible people coming as speakers but when Trump—he dropped the immigration ban on the Friday before the conference started. And then you had Brad Smith, the president of Microsoft, who filed the amicus brief against it with a hundred and 50 signatories um of the entire industry: Facebook, everybody. So we could talk about, “Wow! You went out on a limb. You said, you basically flew the bird to the president, you know, as an industry. Are you going to continue that? You know, what’s your point of view going to be on net neutrality? What’s your point of view going to be on, you know, taxation and repatriation of capital from, you know uh, offshore havens? And so on.” You could start to talk about talking respons—“What’s your point of view on, on, on privacy? What’s your point of view—” You know? And those conversations, the industry’s been relatively hesitant to take a strong point of view but if business is, indeed, going to become purpose-driven, it means it has to have a point of view. And, and that is what was explicitly on display at the Shift Forum.

PF Alright, so, any other side projects nipping at your heels?

RZ [Laughs with JB] there’s three other businesses we need to walk through!

JB Um . . . none that I wanna attest to at the moment.

PF But the answer is yes.

JB Yeah, yeah.

[51:09]

RZ Small tidbit: uh John plays drums.

JB Oh yeah well I, I, I had my midlife crisis about eight years ago and I decided that I hadn’t learned anything new. Um and I was, you know, relatively um . . . I had a few drinks with a friend at a party and he said, “Hey, I’ve got a music studio.” He’s renting a place nearby and he said, “It has a music studio.” And he played like guitar in a band in college. And I’m like, “I have never played an instrument in my life. I don’t know anything.” He’s like, “It has a drum kit, you could play [laughing] that.”

RZ There you go!

JB And it turns out I had time. I didn’t know it. But I had time. And so I—you know, YouTube taught me how to play [RZ there you go] and now I play, you know, at least two, three times a week and it’s [RZ laughs]—it’s an awesome—it’s an awesome outlet.

RZ [Laughing] he’s terribly well-rounded!

PF Do you perform? Can people come see you play drums?

JB We don’t play—we don’t play out a lot. Um we’ve had some band drama of late.

PF Ugh! Even dad bands have—[RZ laughs].

JB Even dad bands have drama. But we have played out and uh successfully, I would say, um and uh it’s just a lot of fun.

PF What’s the name of the band?

JB After.

PF Ok.

JB And we named it [RZ woah] so you should—- we usually play after putting the kids to bed and, you know, after [RZ laughs] doing the work you need to do. So we usually start at like ten.

RZ [Laughing] tell a different story about the name!

PF No, no, no!

RZ Use that story.

JB Well, the real truth is: you should not listen to us until after you’ve had three drinks [laughs].

PF Right, right.

RZ Fair enough.

[52:29]

PF Alright, so John Battelle: many things, many companies, decades of experience, but also the drummer for After [all laugh]. John, thank you for coming onto our show.

JB Absolutely. Thanks for having me.

RZ Thanks, man. This was great. Thanks . . . I have to tell you, Paul, usually when I talk to people, I sort of hone in on their deficiencies so I can feel better about myself . . . didn’t work today.

PF Battelle is a pretty bluff, handsome, consistent fellow.

RZ He’s handsome—I bet maybe his toes are weird. Who knows? Everybody’s got issues.

PF We’re outside of the bonds of journalistic responsibility: we just interviews a client, we went to his event [RZ laughs], and we’re talking about how handsome he is. So um yeah I guess we’re not—

RZ That was a great discussion.

PF We’re not gonna win the Pulitzer on this one [no] but uh but that really was—that’s somebody who has been around since the beginning and whatever the motivation is still in the game.

RZ Oh and he’s killing it. Continues to kill it.

PF So you know the thing that I got—we should tell people: when John was pitching NewCo Shift Forum, you’d get an email and you’d be like, “Well, I dunno if I wanna go to this,” and then you’d get another one like two days later and you’d be like, “Uh maybe I should go this.”

RZ Well then and the names kept dropping!

PF Ah man! This guy sold the hell outta that thing!

RZ Yeah, yeah yeah yeah.

PF So it’s a good reminder that, like, a little shamelessness and just pushing it, if you believe in it, goes along way cuz he certainly got us to pony up and go out to San Francisco.

RZ It worked.

PF So there you go [music fades in] that’s our big lesson for today. This has been Track Changes, the podcast of Postlight, a digital products studio in New York City. We build apps that you might have on your phone, we build web apps, and we build big platforms, and we design them and we make them beautiful. So you should check us out on the internet at postlight.com. But yeah, even more so, we’d love to hear from you. If you have any questions, send them to—

RZ [email protected]

PF [email protected], a very friendly email address. We’d love to get your questions.

RZ Have a great week, everyone!

PF Everybody work hard! [Music ramps up, then fades out to end.]