Scott Services: The Wrong People Won

My initial attraction toward SEO and the web was largely that it was like a new and parallel world that bypassed many traditional gatekeepers.

I wrote an ebook which originally had inconsistent formatting and it was riddled with spelling and grammar errors. I learned to write by writing poorly and often while reading great writers daily.

Ultimately it did not matter that my efforts were subpar on some fronts as few people read early copies, and I was receptive to feedback on how to improve it and rapidly did.

The above process … growing while few people see your ugly work … is actually one of the advantages of *NOT* taking venture capital. You get to learn at your own pace while risks are low and only really lean into something when you know it is working. You keep making small bets that won’t kill you and then when something works better than you expect you can *REALLY* lean into it.

I ultimately did that with SEO, blogging, and a couple other areas I can’t mention too much as I had partners on some projects.

This blog never even started as its own site. It was a section on a different site that was spun out to become its own site when it was obvious blogs were being algorithmically over-promoted due to the cross linking from other bloggers and the instant exposure RSS feeds offered.

Instead of begging a book publisher to publish a book I had a higher margin product and the book publishers were begging me. The market was inverted and an outcast won by bypassing traditional gatekeepers.

When SEO was easy it was the same sort of deal. As long as you tried to learn about what the algorithms valued & put effort behind it you could rank for almost anything.

Early on that meant begging, buying, or borrowing links any way you could. If a project was throwing off big money you’d try public relations and to get high quality links to help reinforce the position and increase its longevity. But even junky links worked fantastic back in the day. That’s part of why there was so much blog comment spam, referrer spam, expired domains, cheeseball web directories which actually had pagerank in the URL, article directories, private blog networks, all sorts of other paid links like Text-Link-Ads.com, etc. etc. etc.

New channels provide new opportunities. Small players prove the model, drive adoption, and then over time the affiliate or independent publisher is replaced by some big publisher or a scrape-n-displace offering from the central market operators.

If you take a broad enough view of the world the above sort of water cycle repeatedly happens across all media formats and channels.

New channels emerge
Smaller players and hobbyists are attracted to the new and shiny object
Limited competition & regulation
Channel grows wildly
Channel locked down by regulation or a monopoly

When the channels are new they have the greatest chance of failure, but the biggest potential rewards for early adopters.

As channels are established and competition increases almost all the profit margins get handed over to the central market operator. Everything gets adjust on an “as needed” basis. Anything that hands too much of the profits over to a third party publisher gets cloned by the central network operator, becomes against the terms of service, or is algorithmically or manually neutralized by the central market operators.

affiliates used to be able to sit at the end of the conversion funnel and extract profits from the most valuable keywords, but new algorithmic signals make it hard to stay competitive with limited value add, differentiation, or brand building
commercial keywords are all ads in the search results above the fold & many brands feel the need to bid on their pre-existing brand equity for defensive purposes
Google hid keyword data from organic search & later started to hide some from paid search campaigns as well.
the Chrome browser by default only allows extensions to be downloaded from their official store & while Google got a lot of Chrome distribution through negative option bundling on Flash security updates, they prohibit app bundling in their app store
Apple’s iOS and Google Android allow the central network operators to track third party app usage. The Apple Appstore and Google Play have mandatory 30% rakes and may disallow certain widely used apps after those features have been baked into the operating system or cloned and default bundled on new phones.
YouTube takes a 45% revenue share rake & the ad inventory is sold exclusively through Google tools where Google takes up to another 20% rake off the top
Amazon uses your sales data and product design to create what amounts to an effective clone job of it (going so far as to say there are fake safety issues to demand to see where it was manufactured) and then you are forced to bid on your own brand as Amazon gives itself free ads on your brand for their product clone job
Google and Facebook try to suck content into their networks via Instant Articles and AMP. Google gives AMP priority placement in their search results (just like they did previously with Google+, Google Checkout, Google Base / Google Shopping / YouTube / etc etc etc).
Rather than competing, Google and Facebook partnered to illegally bid rig auctions to destroy header bidding & preserve monopoly profit margins, keeping control over external publishers. Google also pushes “privacy” obfuscation which harms third party publishers and third party ad networks while bypassing those firewalls for its own ad network. They are also looking to use their web browser to do away with cookies, further kneecapping other ad networks.
Early Pinterest Ads sent users offsite and often cost only a couple cents a visit while all the internal cross promotion & viral spread across Pinterest was effectively free. Then over time advertisers start getting charged for pins even being opened and getting a user to actually leave Pinterest and click through can cost $5 or $10 a click. Long after I saw Reddit threads about how I was a washed up hack who could not compete in the modern market I literally used Pinterest to seed the growth of a site which now gets about a million organic search visits a month. I recently tried further promoting that site on Pinterest in some new areas, but the economics no longer works for that particular site on that channel.

If you play by the rules suggested by private market participants you are betting that they won’t dramatically change their ecosystem at the drop of a hat and they won’t compete against you.

And that bet is a REALLY bad bet.

Networks do not stay on top & in control by stagnating. They change with society & if they are influential enough they also change the structure of society.

The Texas AG lawsuit of Google for manipulating the online display ad market lays bare how power works:

Google employees agreed that, in the future, they should not directly lie to publishers, but instead find ways to convince publishers to act against their interest and remove header bidding on their own.

I could easily write a 100 page blog post on that lawsuit while feeling guilty for leaving many things out.

For example, did you know Google stole AdSense earnings from publishers in the AdTrader ad network and lied about refunding that money to advertisers as AdTrader also managed some of the advertiser accounts which got a $0.00 rebate:

We confirmed through multiple sources, both within and outside of Google, through our Google invoices, and data collected from Google APIs that Google never actually refunded any of the confiscated publisher earnings to the advertisers. In fact, Google’s own support team admitted that they never had a system in place for such refunds.

Google is the network I have studied most and know the most about, though others certainly know Facebook equally well. All the large networks growth the predacious exploits.

Even with limited Facebook usage I know they have at various points in time promoted: games, hype headline fake news, lists and viral quiz junk from Buzzfeed, real actual news sites, the Instant Articles version of real actual news, live video, friend content, etc. Facebook also bought Onavo, a VPN network to track the growth of competing apps. That data was used to inform their WhatsApp purchase. And they could see which features from what external networks they should clone, like when Instagram copied much of SnapChat’s offering.

You can follow the Facebook terms of service in everything you do, but the odds of that delivering you real and sustainable profit streams is low.

“You can be unethical and still be legal that’s the way I live my life” – Mark Zuckerberg

Few publishers will be experts at both optimizing for the flaw or overpromotion in the current algorithm or network set up AND being good at reinventing themselves to appeal to the algorithms of tomorrow. You ultimately want to use some of any excess profits to build a destination people seek out so you are less dependent on the central network operators.

At the same time, if you ignore the algorithms and just hope for the best you are probably going to lose to a competitor who clones most of your strategy AND manipulates the result set.

You sort of have to figure out what is being over-promoted today AND then try to figure out what will matter tomorrow, while reinvesting profits to the point you are no longer really faking it until you make it.

Realizing that all success is temporary is vital to encourage yourself to take advantage of the opportunities in front of you, while also ensuring you have a plan B in place that acts as a bridge to tomorrow in case your primary channel bombs.

Almost all profit margins (particularly for newer players lacking access to connections, massive cashflows, strong legacy brands, etc.) come from operating somewhere in the gray area. Behave in a manner that is legal, but push the boundaries of terms from other players.

Google funded eHow. Demand Media was ultimately a pump and dump operation. Those who followed it late got their asses handed to them, but those who got in early had plenty of profits they could reinvest in other lower risk ventures. At one point Mahalo publicly listed their page-level earnings data. One of my buddies went through and put that keyword list through TextBroker and uploaded a few hundred articles to an old blog. After about a year that led to a free house for one of their family members.

Now Google has far more data to use so it is hard to be anywhere near as exploitative or lowbrow as an eHow or a Mahalo was and expect that stuff to back out.

When Matt Cutts was on TWIG in 2013 he stated:

If you want to stop spam, the most straight forward way to do it is to deny people money because they care about the money and that should be their end goal. But if you really want to stop spam, it is a little bit mean, but what you want to do, is break their spirits. There are parts of Google algorithms specifically designed to frustrate spammers. Some of the things we do is give people a hint their site will drop and then a week or two later, their site actually does drop. So they get a little bit more frustrated. So hopefully, and we’ve seen this happen, people step away from the dark side and say, you know what, that was so much pain and anguish and frustration, let’s just stay on the high road from now on.
…
Some of the stuff I like best is when people say “you know what, this SEO stuff is too unpredictable, I am just going to write some apps.”

This past year is the year when “writing some apps” was revealed to have the same core problems that SEO has. Central market operators grabbing their tithings (fight between Apple and entities like Spotify and Epic Games, Google Play pushing through similar 30% rake requirements) and then outright banning apps like Parler from their app stores.

The COVID-19 pandemic moved everyone and everything online.

The ad money follows the attention stream. If the central network operators pay creators nothing then those creators who have a following will find other ways to monetize. Cygnus was early to SEO and he was early to influencer marketing.

Selling a sliver of attention and then using that funds flow to improve website usability, website design, content quality, brand awareness, reach, etc. … is usually going to work out better for most people than trying to raise venture capital. Many small bets and incremental improvements yields much higher odds of success than a few really big bets.

Speaking of bets, I follow the stock market a bit because it teaches a lot about human psychology, markets and marketing.

Well before the COVID-19 crisis happened the repo market froze. In fact, the Federal Reserve was discussing alternative ways to fund the market’s liquidity without looking like they were directly subsidizing and bailing out hedge funds:

the new approach could also create political problems for policy makers, analysts said. The problem centers on the central bank lending directly to hedge funds, the little-regulated investment vehicles that tend to serve wealthy or institutional investors. … Though hedge funds are key participants in the market—where they both borrow and lend cash—lending to them directly through the FICC would raise questions about whether the government was backstopping their bets, analysts said.

When the COVID-19 crisis happened optics no longer mattered. Bailouts ensued. Without them levered hedge funds were screwed as many instruments became illiquid and spreads blew out even in bedrock stable markets:

Of particular concern: The hedge funds were using trading strategies similar to those employed by Long-Term Capital Management, a fund that collapsed in 1998 and nearly caused a financial meltdown. The bet that hedge funds were making earlier this year was simple enough. Called a basis trade, it involved exploiting a price difference in the Treasury market, generally by selling Treasury futures contracts — promises to deliver a bond or note at a set price on a set date — and buying the comparatively cheap underlying securities.

Toward the end of last year and early this year Bitcoin was a rocket ship on the thesis of mass money printing leading to currency debasement and revaluing finite alternatives to fiat cash upward.

And then regulators began dropping hints while banks started to put the breaks on it. And XRP got kicked hard by the SEC, leading to delisting.

Tether may be an absolute scam (it’s hard to short Patio11’s knowledge), but in spite of that there are a lot of retail traders bored at home chasing anything that moves. There are ETFs like GBTC sucking up a huge share of the Bitcoin float with no intent of ever liquidating any of the position.

If sports and society shut down and people are stuck in their homes gambling is an unsurprising source of entertainment. Barstool Sports founder David Portnoy got this and quickly became a day trader when he didn’t have any sports to talk about.

Above I mentioned a bit how the Federal Reserve was ultimately bailing out hedge funds. In an easy money market where central banks are printing tons of money what a lot of hedge funds do is buy higher beta growth names while shorting lower beta value stocks, particularly if they feel those companies are destined to go under.

In some cases the short bets believe ideas from a category apply to a specific company in a way they do not. And that can lead to a massive short squeeze, especially if the company announces a buyback and/or insiders buy.

In other cases, the shorts are so confident in their position, they go HOG WILD with low interest leverage and literally short the entire float of a company, trying to drive it into bankruptcy.

Recently Melvin Capital and some other well-connected hedge funds went short GameStop’s stock and a Subreddit named WallStreetBets took the other side of that position.

GME has a 52-week low of $2.57. After being pumped by the Subreddit the stock closed today at $347.51, leading to billions in losses for hedge funds which shorted over 100% of the stock.

According to @S3Partners, short sellers lost $14.3 billion on $GME stock today… just today.— Riley de León (@RileyCNBC) January 27, 2021

The hedge funds that shorted over 100% of a stock … were market manipulators aiming to manipulate a market.

When they win, that is capitalism.

When they lose, they get bailed out, contact regulators and have pressure applied to prevent THE WRONG PEOPLE from winning.

There are over 2.6 million Wall Street Bet users and only 10,000 hedge funds. The power of the proletariat is now!— Reddit Investors (@redditinvestors) January 27, 2021

The SEC published a statement on market volatility, the Biden administration mentioned it was watching GameStop, Nasdaq’s CEO suggested halting trading to allow hedge funds to steamroll Reddit users, and Reddit (at least temporarily) banned the WallStreetBets subreddit for hate speech.

That WallStreetBets was temporarily nuked will likely make the degenerate gamblers even more aggressive.

Emergency Press Conference – The Suits Shut Down @wallstreetbets @WSBChairman My prediction is tomorrow will be intergalactic for $amc $gme $nok

(Im not a financial adviser. Don’t listen to me) pic.twitter.com/oYrsPOz8Vx— Dave Portnoy (@stoolpresidente) January 28, 2021

You can see a lot of moves coming if you understand internet culture.

does one throw one, two, three, four, or five hundy at $TR on open? :)— uoɹɐɐ (@aaronwall) January 26, 2021

But in many ways we are now where the outcomes will be pre-determined in order to ensure THE RIGHT PEOPLE win.

Politicians will determine outcomes after the fact.

The more THE WRONG PEOPLE win, the more intervention there will be to correct the natural order.

Risk is much higher than most perceive because outcomes matter more than process & some multi-generational politically-connected wealth is losing badly to THE WRONG PEOPLE.

Gamestop:
Perhaps they got lucky.
Maybe just a flash in pan.
So dismiss them if u want.
But if read their messages u see its not just about money.
They’re discovering their voice.
& that they’re powerful.
IMO this is partly why wont be so easy for Fed to bailout Eurodollar Mkt…— Santiago Capital (@SantiagoAuFund) January 28, 2021

We are now at the point that the internet is no longer a spot for weirdo outcasts & instead it is reshaping the rest of society.

Part of a person as awful as Trump getting elected as president was micro-targeted South Park inspired videos sent to minorities reminding them of Hillary Clinton’s super predators speech.

And who could forget her laughing about having the head of Libya murdered, a former nation which fell apart to such an extreme degree they had open air slave auctions.

Another part of Trump getting elected was Obama promising “Hope and Change” but then standing between banks and pitchforks for the intentional and malicious fraud that led to the 2008 economic blowup.

As it turns out, a Citigroup insider had the Obama cabinet picked out before he was even elected.

Citigroup was the biggest TARP recipient.

Citicorp is the same company which illegally merged with Travelers, had that merger made legal after the fact by getting the Great Depression era Glass-Steagall Act regulation repealed:

”I think we will look back in 10 years’ time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930’s is true in 2010,” said Senator Byron L. Dorgan, Democrat of North Dakota. ”I wasn’t around during the 1930’s or the debate over Glass-Steagall. But I was here in the early 1980’s when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness.”

After the internet stock bubble popped the Federal Reserve lowered rates dramatically and left them there far too long, creating a massive hunt for yield. This led to a housing bubble and deteriorating loan standards with fog-a-mirror NINJA loans and similar dominating the market due to the insatiable demand for “risk free” yield. Entities like Citigroup created a ton of bogus mortgage paper they knew was garbage. Their entire board of advisors was repeatedly emailed by Richard M. Bowden about the fraud:

I started issuing warnings in June of 2006 and attempted to get management to address these critical risk issues. These warnings continued through 2007 and went to all levels of the Consumer Lending Group. We continued to purchase and sell to investors even larger volumes of mortgages through 2007. And defective mortgages increased during 2007 to over 80% of production.

If you control the government economic outcomes are determined by politics.

Citigroup was so confident in their control of the political outcomes they continued to dump bad loans on the FHA after Fannie Mae and Freddie Mac were forced into receivership.

THE RIGHT PEOPLE WON.

Any government which intentionally subsidizes and promotes massive fraud ultimately undermines their own legitimacy.

Obama was so rotten he made Trump look like a reasonable choice.

Who were the people hurt worst by Citigroup’s fraud?

Poor minorities.

So it should come as no surprise the Citigroup recently published “research” on how racism is holding back the U.S. economy.

If Obama the president matched Obama the candidate the Citigroup board would have been imprisoned, that bank would have been dismantled, and the above “research” would not have been published.

The reasons I liked Trump were:

he was hated by the media, so they’d cover wrongdoings (even making some up)
until the COVID-19 crisis hit, he was broadening the economy
his administration pushed through an antitrust lawsuit against Google for their monopolistic bundling practices

The above being said, the January 6th siege was absolutely idiotic, and looked like it was something out of South Park.

Google’s Eric Schmidt played a vital role in the Obama elections & administration. Their relationship was so close it was called “The Android Administration.”

When the FTC investigated Google the Obama administration intervened to prevent justice. And now Schmidt’s shadowy “use AI everywhere in weaponry” startup is deeply embedded in the Biden administration.

We are back to an administration loved by the media. The controversy are hence reduced to casual magazine cover shoots.

Mainstream media: please serve your vital roll in society. Cover that casual photoshoot and not the Darth Vader aspects of Eric Schmidt.

Biden pushed against the “racist” attribution of the COVID-19 crisis to its source in China, though few have considered how “free trade” with a country with over a million slaves would impact living standards as it deindustrializes the country and destroys the middle class.

If a country has a live organ harvesting program for its own citizens, do we want to have close ties to it?

If a state-controlled economy dumps fentanyl into your country they deserve nothing but ire and disrespect, at least until that problem goes away.

While we are seeking out a just global society, does LeBron James say “technically the Chinese Uighur slaves who make my shoes are not black, so it is all good? #BLM”

Free capital flows plus structural trade deficits from “free trade” with slave states = declining domestic living standards.

If you have an average to below average IQ, did not come from wealth, have high living costs, and you must compete against literal slaves your life is probably going to suck.

Declining living standards can be masked temporarily through manipulating economic data, but fake data can’t restore hopes and dreams and aspiration for something better.

When I was inside the Fed, it was acknowledged internally that the core PCE was a broken metric that understated & misrepresented true inflation. The decision was made to continue using the broken gauge because Fed models would not work if true inflation was used.

QE is a lie. https://t.co/E3LlQhTPyv— Danielle DiMartino Booth (@DiMartinoBooth) January 4, 2021

That loss of hope will fuel deaths of despair, desperation, and a desire to believe in just about anything.

The race baiting “equality of outcomes” promoters only throw further fuel on the fire by telling people they are victims and pointing their ire in the wrong direction.

Burning down the local nail salon in a riot is not going to change the Federal Reserve bailing out hedge funds who are manipulating the stock market.

Instead of acting like an enraged victim, read Kurt Vonnegut’s Harrison Bergeron and then consider what skills you can lean into to make a positive change in the world.

The process and outcome of that “free trade” & papering it over with increasing debt leverage was well known in advance.

Look no further than this 1994 Charlie Rose video interview of Sir James Goldsmith.

Ultra-wealthy plutocrats were willing to partner with the CCP and sacrifice the US middle class in order to gain more wealth and political power.

THE RIGHT PEOPLE won.

For some people the web was a life raft, but a lot of the easy wins have already been had.

And the central network operators are getting more aggressive with scratch-your-back censorship for those in political power.

As more and more services happen online, more and more of business profit margins are flowing online, and the online networks are having a massive impact on the portions of the economy which remain offline.

The central network operators can choose to ban an outgoing president while ignoring politicians who call for genocide in other markets to curry favor to political leaders. As Zuck would say …