Egge is the co-founder of Starbackr and an advertising industry veteran who has fallen down the Bitcoin and Lightning rabbit hole.
Egge explained how the world of advertising works, how Lightning could offer improvements for advertisers and consumers, and how the creator economy might evolve on a Bitcoin standard.
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00:00 - Intro
01:55 - Egge Intro
06:38 - The Advertising Industry Today
17:20 - Disrupting The Advertising Middlemen
25:40 - Changing The Relationship People Have With Advertisers
40:42 - Advertising on the Lightning Network
50:26 - Creator Monetization Business Models
54:56 - Enabling Anyone to Earn Online
1:06:15 - The Lightning Round
Egge - 00:00:00:
Today we have that very data driven, very user centric, very intrusive way of doing advertisement. Now the user gets tracked along, the data is inaccurate, no one wins. Maybe the middleman wins, but definitely not the user, not the advertiser. I think the whole approach of having incentivized advertisement or incentivized views is something that is very interesting and advertisers leverage that today, right? It just doesn't happen on a monetary standard. But try to monetize content. If you don't have access to a bank account, try to get a PayPal account. If you are like from Eastern Europe, it gets really difficult already. You need to wait weeks or even months to get approval on PayPal there. And I don't think it is black and white as well. I think we can find methods and monetization models that lie in between. Right, then have a little bit of value for value that have a little bit of like Pay up front, then have a little bit of pay away enjoy. Bitcoin enables that use case of ungated and permissionless monetization straight from the second you start using it.
Kevin Rooke - 00:01:05:
Egge is the cofounder of Starbackr and an ad industry veteran who has fallen down the bitcoin and Lightning rabbit hole. In our discussion, Egge explained how the world of advertising works today, explained how Lightning could offer improvements for both consumers and advertisers and how the creator economy might evolve on a bitcoin standard. I've also added Egge to today's show splits. So if you enjoy this episode and if you learn something new, the best way you can support the show is by sending in sats over the Lightning Network. You can use any Podcasting 2.0 app but my favorite one to use is Fountain. Just a quick shout out. Today's show is sponsored by Voltage. Voltage is the industry standard and next generation provider of Lightning Network infrastructure. We'll have more from Voltage later in the show. Egge, welcome to the show. We've got a really interesting conversation lined up today covering a topic that doesn't get much attention in the bitcoin Lightning space and that is advertising. Before we get into the detailed conversation, how about we start with a little background from yourself, tell listeners what you're doing today for work and how you got into bitcoin.
Egge - 00:02:19:
Yeah, sounds great. First of all, thanks for having me, Kevin. So basically I got into bitcoin, I'd say almost two years ago now and I fell into the rabbit hole really bad. Like I did a free fall, let's say. I actually managed to ship around the whole like altcoin and shitcoin phase. I got really lucky there and I think my entry point was basically Tesla buying into bitcoin. That's what got me really excited about it. But back then everything was very different. I was that typical legacy guy, right? That's like a lot of consuming and everything like that linear economy person. And yeah, I got into bitcoin, the content creator way. I consumed a lot of content on YouTube and there's a very cool German community in the whole space like a very maximalist community as well and that's probably the luck I had that I got into that. Block Trainer is a very famous German YouTube channel that right before I got into the space switched around to bitcoin only content and then I also found a community around Einundzwanzig that is 21 in German which is also a maximalist community. Yeah and I got really interested in the topic I think the technical background was what triggered me the most. That's why I started reading the books Mastering Bitcoin and Mastering the Lightning Network pretty much at the beginning of my journey which really got me into that and yeah. I am a person that's really into like online communities so I spend a lot of my time on Telegram and I think that is one of the reasons why I got into the more deep topics very quickly because I started explaining to people and at least for my part. When you start to explain to people you really do understand that you don't understand or what you don't understand only if you try to explain. That was my entry point. Now the whole thing or the whole bitcoin topic has spread so much in my life that it basically takes up the most part of it and it takes up my career as well now because then last year in August I met Joe in the room which are now my co founders at Starbackr and we founded Starbackr together. Well, we started project in August but then incorporated in December and that's basically how I got here today.
Kevin Rooke - 00:05:02:
Love it. And what were you doing beforehand?
Egge - 00:05:05:
Before I got into bitcoin. So my legacy life. Which still leaks a little bit into my bitcoin life today I spent my time doing advertisement. That's how I earn bread and butter doing digital advertisement like display and bannering actually my family founded an advertisement agency 20 years ago, 21 years ago now and if you think about how long Germany has been having like an active internet usage that's pretty much like since the beginning of the internet right? There was AOL and stuff but then once the internet got a little bit more adopted that was pretty much the beginning. What they do is they are like a monetization. Not a platform but like an agency that does monetization for Web 2.0 websites so you can basically abstract all the difficult things for you you just get one script tag. You implement it on your site and then they will do the monetization. They will try to sell you ad spaces it's basically like AdSense but way better and without like with a better cut and everything that's what I did before in that company I did business development so getting more partners into the portfolio of that company and also ad management and tech development but when I say tech development. Not like coding ourselves. But finding new partners. Finding new technology that might be interesting for the company and for all the partners in the portfolio.
Kevin Rooke - 00:06:38:
Interesting. Now, when having discussions with Bitcoiners, the topic of advertising and the topic of people tracking you wherever you go on a website, it's a very controversial one that a lot of Bitcoiners don't like and privacy advocates are often rail against advertising and so there's a lot of discussion about how advertising is bad today. There's also on the flip side, if you're looking at it from a business perspective, this is how you get new customers and this is how people have been doing this for a very long time. They've been advertising their business and promoting themselves and paying for it. How do you kind of make these two opposing ideas work together? What is the current state of the advertising industry? What's wrong with it today and what do people kind of not understand about it?
Egge - 00:07:34:
That's a very difficult topic, right. I think when you go to a very base level, advertisement is something that is required at some level in some way as well. Actually, I learned marketing and media management, so that's what I studied. And I always like to think about marketing in a way that is actually change management and it's not change management like sustainability and all the things, but what you want to achieve as a marketer is basically change. And what I really do believe is that advertisement and marketing always should add value. Obviously there's the whole topic around like scamming marketing and getting people, getting an obnoxious way to getting people to buy your product even though it doesn't add value to trick them into buying. But I want to put that away because that's not like obviously that's bad, we don't need to talk about that. But in the end, what a marketer should do is to basically find the value that the product will bring to the people and then to point that out and build a campaign around that and actually bring that value to the people. And I think that's a good thing. So advertising isn't bad per se, but can actually add value to the people, to the product and also for the people in the end. Also, I think advertisement is required, or at least currently it is required as a monetization rail for businesses or content creators or whatever. So those are the upside. Those two are the upside to the whole topic. Now, the reason why most people think of advertising as something bad today is probably because how it's developed in the last ten years or something, right? Because if you look at the history of advertisement and I mean, that's a very old topic, right? We have out of home and print advertisement. We had those for decades, right? We had those way before the internet. And most of the time, as I said, it is something that should add value to your life. And today we have that very data driven, very user centric, very intrusive way of doing advertisement, which is called programmatic in the display world at least, which is probably just an approach of advertisers to get or to gain more efficiency when it comes to advertisement. But yeah, that is definitely the thing that people think about when they hear advertisement. That's why it has such a bad stigma, right? People think bad about advertising because they will try to get all your browsing history from your cookies and try to track you online and get more efficiency out of it and try to measure the efficiency and the ad return and everything gets to a level where advertising has to become more cheap, it has to be more efficient and everything. And that's probably why it developed that way. It's a little bit like the whole consuming topic around low quality products that sell for less because people don't want to spend it. That's the whole topic that we have when we talk about circular economies and bitcoin in general. Right. That we have to turn everything down a little bit. That we need to think about how we spend and maybe spend even more to have more quality or have more quality in the end. The whole advertisement definitely has that very legacy economy feel to it. Where everything becomes cheap and everything becomes less quality. Right? So I think what's really bad about that is that it's not about the quality of the advertisement itself anymore, it's just getting really obnoxious and the people trying to get into the home of the receiving end and of the user even a little bit more really lost by track right now. I'm sorry, Kervin.
Kevin Rooke - 00:11:50:
Yeah, that's really interesting though. Is it because we have programmatic ads that this has now become the preferred business model for some of the largest companies in the world? Was that the unlock that made it so appealing for Facebook and Google to use this as a monetization strategy rather than sell something?
Egge - 00:12:21:
There's different effects that took place here, right? I think one is that companies so let's go back a little bit. There's ad agencies and those ad agencies, they have the task of developing campaigns and trying to find methods of advertisement that are more efficient than others. When we started out, as I said, we had out of home, for example, out of home, advertisement has no tracking. There are some ideas around that, how you could measure efficiency, right? But in the end, like it is an ad, you can't tell if a user has seen it or not, if it's just like a paper print, like somewhere in the street. Right. Then companies came about that had more efficient ways of doing advertisement and obviously they sold that product and they also needed investment and funds. So ad agencies started putting a lot of money into those business models. And what happened now what's really interesting is that because those agencies invested so much money into this technology, they had to sell that product to the client as well. The client is now the advertiser, so the brand, so the agency invested that money and now try to I wouldn't say scam, but try to sell that product because they had invested the money and now they have to get some return of it. The ad agency is the adviser of the brand, so what did ad agency sells them should be the right thing, right? A great example of this is IP targeting, for example. And if you spend a little bit time in like the Internet technical world, and you know that IP addresses are not a good way of actually pinpointing your location. I think my ISP is located like 500 kms away from my home. So if someone tried to target an advertisement to me and to my hometown and use my IP address to do that, they would fail horribly because they couldn't reach me. But for almost a decade, that was the preferred way of regional targeting, of location targeting in the Internet. And the reason why is because agencies bought technology. One is IP to location, for example, that was implemented in all the services and ad service and stuff, and now they had to sell it to the client. And that happens with a lot of things that happen so often in programmatic advertising. And that's something very frustrating as well for us as an advertisement agency back then. When customers always asked for these features and you were like. Well. You shouldn't buy that. We can do that. But you shouldn't buy that because there's just no efficiency. But because that money was spent and most of the time the publisher so the site where the advertisement runs or the one that monetizes that size doesn't get to speak with the client. But just with the agency that has that bias now and has to sell the product. So the quality turns back in the end. And that happened so many times and in so many different locations and with the whole programmatic topic as well, right, everything got more centralized. All those companies got bought up and formed together. And in the end, you don't even have a choice anymore. When you come out as a small site, for example, you have AdSense, right, that's your entry to display advertisement for most content creators or for most websites. You don't really have a choice to go to somewhere else because other companies might not take you because you're too small. And now you're stuck with what Google wants, and the client on the other side wants to reach their audience, and now they are stuck as well with what Google wants. And in the end, it's just like Google's thing now. And that happens in so many places, because if you think about very interesting insight might be that Google runs pretty much everything when it comes to Web 2.0 monetization. Even with a company like ours, you have that problem that the most used browser is Google Chrome, right? The most used web engine or search engine is Google Search. You have the most used ad server, which is, as I said, the technology that does all the campaign planning and serves the ad in the end, which is Google Ad Manager. The biggest problematic exchange is Google Ad Exchange. And now you may start to understand why there's no big choice not to the publisher, not to the client, not to the agency in the end. It's just that technology provided now dictates everything, right?
Kevin Rooke - 00:17:20:
So Google's sitting in the middle here, and on the one side we have the advertiser who has this product that want to sell, but in order to get to Google, now they have to pay more because Google is their only kind of option at the stage they're at, maybe. And then on the other side, at the side of the consumer who is going to get more and more ads over time. Now, over the last YouTube, right? Now you go on YouTube and you can't watch a single video without seeing one, sometimes two ads. They used to be like six second ads, now they're like eight or ten or 15 seconds, and the consumer is getting more and more ads and no financial benefit from seeing them, and they don't really know where their data is being used or where it's going to kind of have lost a bit of control of that. So it seems like Google found this position in the middle of these two parties. Is it fair to say that now with Bitcoin and Lightning and the discussion about peer to peer Internet apps, is there a way to eliminate that middle, that center, that is preventing the advertiser from talking directly to the user?
Egge - 00:18:40:
I think yes, that would be possible, but I think it's a very long way until we get there. Right? There's so many things that can be fixed with Bitcoin straight away. For example, like with Starbackr, we said, okay, digital content monetization is something that can be fixed quite easily by just pulling out the legacy payment system and putting in Bitcoin, right. That doesn't solve all the problems, but it solves many problems very fast and very quickly. I think advertisement is something that is way more complicated than that because that system is so complex, it has so many different parts to it, and you always have to think about that. So the problem is that happens with Google because you said YouTube and having three ads in a row, right. What happens and what's really important to think about is that there are people that earn a living from advertisement already, and not like me, for example, who did advertisement for someone else. But I'm talking about content creators that actually have to have that monetization rail to earn a living because that's what they do for bread and butter, right? So if you now go ahead and try to change that system completely, you would have to find a way to do it in such a way that the revenue that can be generated off it is the same with the legacy world. And that's really tough, right? Because if you take that content monetization we do on Starbackr, if you have like 100 followers on the legacy world and you know that they understand Bitcoin, for example, and you can port them over or you can partially port them over, you will still gain the same revenue. But if you try to do that same thing with Web 2.0 advertisement, the overall capital that's being deployed in advertisement versus in a legacy advertisement versus the capital that would be deployed in bitcoin advertisement, I think there is a big gap between those two numbers and that is because adoption is not that we haven't gotten that far yet, right? So I think that's very complicated to make that jump. And also I think it's not just the payment part that's the problem, but as I said, it's the whole setup, right? It's the whole system revolving around implementing ads on your site or in your podcast and everything.
Kevin Rooke - 00:21:05:
So when we talk about ads and creator monetization, like direct monetization for creators, audience funded, this brought up an interesting question. I don't know the answer to it, I don't know if there is data on this, but do you have a sense for like what portion of creator revenue today, like on Web Two is advertising revenue versus direct monetization? If it's through like PayPal or Patreon or some other kind of like web to system? And then do you expect that will shift in a transition to a bitcoin standard where now we have a tool for making much faster payments at any amount in the Lightning Network and then we may also have some gains to be had in the advertising world as well. So do you expect there to be a shift in that percentage?
Egge - 00:22:03:
So, coming to your first question, I don't have any numbers on that, but I expect that there's a big gap between those numbers as well. From my feeling, I'd say the revenue that is generated through ads is way bigger than the revenue that's generated through, like, uses directly paying for content. But we definitely see a shift in that in the legacy world as well, even without Bitcoin, because monetization and advertisement gets so much more difficult. And when I say more difficult, I mean like the new way of doing that because people are more aware about privacy issues. In Europe, for example, we have that GDPR now, which is making advertising or programmatic advertising very difficult, right? We have those content bonus everywhere where you need to say I want to have personalized ads. So the whole privacy awareness is making things harder for advertisers and that's why a lot of publishers and mediums and media in general go to the direct pay approach where they say, well, you can now choose whether you want to pay $6, for example, have that site ad free or give us your content and have ads for programmatic ads. I don't think that's a good approach because now you have to choose whether you give up all your data or you pay the pay gate. It's not a good decision to be made, I think. But I think, as I said, the number already shifts without bitcoin and Lightning. Now, what enables Lightning or what Lightning unlocks for us is having more open standards and more open approaches to that. Right. When we think about Albi, for example, having a native Lightning wallet in your browser, that can give concentrated a little bit of money every time you visit your site automatically. Right. And removing that friction of paying and removing the requirement for having accounts, which is I think the most important thing. Right. Because obviously I would be willing to pay every time I visit the site, but if I had to sign up there and put my credit card details and everything, that is a big friction for me. Right, so Lightning removes that and enables very interesting use cases when it comes to when it comes to monetization, that is not through advertisement. So I think definitely it unlocks great opportunities for that. But again, the shift will be very difficult because as someone that tries to monetize themselves only through donations, for example, and just yesterday I had a podcast episode with someone from Germany that had exactly this issue. He said, well, I do open source content on YouTube. I want education to be free, but funding myself just through donations is very difficult for me. But I don't want to go somewhere and have ads. And also I'm very privacy focused. That's not something people usually sponsor and write and it's very hard for me to find someone that wants to advertise on my side as well. So they are currently struggling with funding their own content creation job and they need a sidekick for that, right? Yeah. So I think that shift will be very difficult. But Lightning definitely helps and as implementations progress and everything gets a little bit easier, that shift will become more seamless, I think. But we're not there yet.
Kevin Rooke - 00:25:39:
Yeah, it's interesting the way you talk about the way you framed the web to discussion is like you either lose control over your data and you get bombarded with ads or if the platform decides they can make more money by charging you, they charge you. So you either lose money from paying the service fee or you get hit with ads. It's like, yes, there's obviously a lot of benefits that come with using services like Facebook and Twitter and Google. These things have been great for the internet. I don't want to diminish that. But you're on the losing end on both sides when it comes to either getting hit with ads or paying. And I wonder if Lightning can flip the entire script to the positive side. Meaning like if you had opt in ads privacy first, by default there'd be no ads and only if you wanted to receive ads. You could then use some of these open standards like you talked about albie. You could use some of these standards to then earn from the ads. So if you want to give advertisers access to your own data that I guess you could store in theory on a node or some personal server, you could then give that data up in exchange for money. So by default you either you either have no ads, which is a great experience and improvement over Web Two, or if you want to see ads, you're going to get paid for them. So it's like a total opposite shift there. It feels like that's a very powerful transition that we could go through. What are your thoughts on how we might get to that moment?
Egge - 00:27:35:
I think the whole approach of having incentivized advertisement or incentivized views is something that is very interesting and advertisers leverage that today, right? It just doesn't happen on a monetary standard. When you look at Web 2.0 currently or like legacy advertising. Let's say there is incentivized views when it comes to mobile games for example. It's like you want another life for your mobile game, then watch this ad. This is basically incentivized right now. I think it would be a lot more efficient if we would say, hey, by the way, if you view this ad we earn $5 CPM for example, and we're going to give you 50 cent CPM of that because actually your attention is what we are buying. Exactly right. That is what's happening, right?. The advertisement is a trade for attention. That's what the whole thing is about. And that's why ten years ago ads were so flashy as well because they tried to steal the attention from the user from that site. Now if we have that transparency about monetization and we say to the user, hey, by the way, if you give us more data, if we are able to target more accurately, you would earn even more, I think that would be something that would work very great. Now the question is, how do you prevent fraud in that situation? For example, how do you make sure that data that the user provides actually is accurate and that the syllable attacks for example, that they don't create like 1000 accounts to earn even more and stuff. But there's definitely ways I could imagine that would work. Like probably tying the return to a conversion for example, to say, hey, if we see that your account doesn't convert or you don't click or whatever. And also there's like great algorithms that try to detect ad fraud nowadays. So I think there's definitely like models that could work with that. And also regarding the whole GDPR topic, there are also already today there are companies that try to do advertising more privately, right, that try to preserve the user's privacy a little bit better, not because it's in the best interest of the company, but because European laws require that today. So people start to think about ways how could we do programmatic advertisement without doxing the user completely and without tracking and stuff. One way of implementing that would be to have like a private data store in your browser and instead of actually giving the data out, you would receive a call to your browser that be like, hey, this is an ad for phishing. I don't want to know your profile, but please dear algorithm that runs locally, tell me if the user you're currently running or if the machine you're currently running on is interested in phishing, for example. Right. So I mean, the problem with that, again, with a lot of calls and a lot of data, advertisers could again try to build a profile, but still it's a little bit better than just openly having everything in your local storage or like cookie storage. The cool thing now is that as I said, it's an incentive. Could now happen without any accounts, right? It could happen in your bitcoin wallet. That bitcoin wallet could be the identity. Like we could use private and public keepers to have that whole browsing identity. And I definitely think the way of opting into advertisement and putting your interest out actively would increase the efficiency for the advertisers as well, because now we only talked about the user side now. But to be honest, the advertisement experience today for the advertiser, for the brand is not a good one as well because if you use Google services, everyone should go to their I think it's like Google, I have to look that up. But there is a site where you can see your personalized ad profile with Google.
Kevin Rooke - 00:32:02:
Yeah, like see what Google has collected about you, right?
Egge - 00:32:06:
Yeah. Depends on how long you use that service. But it gives you like 50 to 200 categories you might fit into. And it's very funny how inaccurate that it is, even if you use YouTube and if you use Google services a lot, that is very inaccurate. That obviously is a big problem for the advertiser as well because now they get sold. As I said, it gets sold a product that promises to deliver a good targeted ad experience, but the data is off now. The user gets tracked a lot, the data is inaccurate, no one wins. Maybe the middleman wins, but definitely not the user and not the advertiser. And if we switch to a model where the user actively provides information about themselves and about the interest, I think it would be a big win for the user as well, regardless of incentivisation because you would actually receive ads that you might be interested in. Which isn't the bad thing, I believe. As long as it doesn't get taken advantage of. Right?
Kevin Rooke - 00:33:06:
Yeah. And as long as you get off.
Egge - 00:33:08:
Yes, as long as it's your choice. Right, as it's your choice and it's actually, like, as I said, added value, then it's a win win for everyone. Right? I think the most frustrating part for me is if I go to a website, let's say I use a normal privacy, like a non privacy cookie browser, I go to a website and buy a pair of shoes. I will get shoe ads for like a week and I'm like, well, I bought shoes. That doesn't make any sense. Why do I get advertising for more shoes? I just bought them. You should know that I'm not interested in that anymore. So I think the question implementation wise is definitely how could we build a system that is not very hard to use from a user's perspective because that information, like, I just bought shoes is something that would be required for the advertiser again. But I don't want to go ahead and update my interest profile every time I buy something, right? So I think that is something to be solved, but I definitely see the possibilities of having that account list and wallet based. For example, Alba Extension could do that, right? Alba extension could have a place where you put interests and then album communicates with the server and you get advertising for that and you get a little bit paid every time because album can give that server an invoice, be like, hey, you just served an ad here and the invoice pay that and only then I will display it to the user. I think that's a very good approach, but again, is the revenue there? Is the potential of actually doing a switch without hurting all the people that currently rely on monetization for ads? How will that switch look like? I think that are the big topics that need to be solved.
Kevin Rooke - 00:34:42:
I hope you're enjoying the show so far. I just want to give a quick shout out to our sponsor, Voltage. Voltage is the industry standard for Lightning Network infrastructure, creating layer two applications and services on top of bitcoin starts with Voltage, where you can spin up nodes, get access to liquidity, optimize your node and much more. Voltage is leading the way as the next generation provider of Lightning Network infrastructure. And if you want to get a free trial and start using Voltage today, you can do so at Voltage.club. Right? I mean, it makes a time of sense to have the users be able to tell there's no algorithm that's ever going to be able to detect or figure out. It's going to have a hard time guessing what I want and it's always going to have some kind of lag or latency or some kind of error in judgment. And when I get a light bulb idea in my head, like I want a new pair of sneakers, I know that before a computer knows that typically. Some may argue it's the other way around, but I think that there's still I have a better sense for what I want, then the algorithms that can't even figure out where I live. So it does make sense that a user should be able to display that information. And I hear you on the challenge of getting something like this off the ground. As a hypothetical here. If you were tasked with building an emerging peer to peer advertising ecosystem, how would you go about doing that today? Where would you start?
Egge - 00:36:26:
That's a tough question. When you say peer to peer, I think the first, the first question that needs to be answered first is how will the web I don't like that wording because it's so stigmatized by all the different weird project around that. But how would the web of the future look like? And are we actually going to have something like a peer to peer internet? Right? Because if you have a peer to peer Internet that has direct connections between the two servers and not like that whole weird interweb that we have today, how would advertisement actually work? Right? Because today it's very interesting. If you go to a website, a normal legacy website, and open the source code and look at where all the assets come from, that's not a peer to peer connection. You're not connecting to the website you open, but you could connecting to hundreds of servers that provide fonts, that might provide advertisements, that provide images and stuff. So all of that would be gone in a peer to peer world because you would need to it would be peer to peer. Right. So how would an advertiser actually go in there without, again, invading your privacy? I think approach to that would be actually to have, as I said, maybe browsers or browsers extensions that could inject content into your browsing experience on a secure level. Because now the ad wouldn't come from the site you requested or from the peer you requested or whatever it would be. Your browser extension would reach out to ad server and get that out from there. And the cool thing would be if you could control that connection, if you could verify that it's a secure connection. And then again, instead of using cookies and like all that tracking history and all your browsing history, as you said, maybe have like a profile where you say, well, I want to opt in into personalized ads. Here's the tracking profile I want to have. And now I think when you ask about how would I build the business the advertiser site would need to become first, I think, I think you would need to pitch that idea to advertisers and make them understand why it's so important. Now, tying back to the beginning of the conversation, that is really hard because you need to get around the agencies because those agencies are not interested in your tech. They have more tech, like for the last five years, let's say. They need to sell that tech for the next five years to actually break even. Right. So you would need to find companies and advertisers that are actually interested in products like these. And I think that's where Bitcoin would become very very helpful, right? Because what I noticed is that there is bitcoin industry is growing very fast and most founders and most companies in this industry understand this whole issue. They are very close to that topic and also they do have funding. It's not like that. This is a small industry without any funding. There's tons of Bitcoin companies that spend tons of dollars on marketing budget every year. And I think if you would go to them and be like, hey, let's not take over the whole internet, let's not fix everything now, but let's start with us as like a minimal viable audience or like minimal viable market. And when I say us, I mean bitcoin us. Right? Let's build our own little internet here. And I think that's what a lot of companies do already, right? I think that's what impervious plans like everything is their own little space and we don't need to take over the whole world now, but we can have like a small project where we say like, okay, let's take Bitcoin content creators, let's take bitcoin advertisers and let's take Bitcoin tech providers and put everything into our own space. And that's what's happening already. Like take Fountain for example, right?
Kevin Rooke - 00:40:26:
Egge - 00:40:28:
Like any Bitcoin content creator, all the ads you find is bitcoin advertisers. Right. Because that makes sense as well, because it's the audience, it's the advertiser is a perfect fit.
Kevin Rooke - 00:40:38:
Egge - 00:40:40:
Sorry. Yeah, go ahead.
Kevin Rooke - 00:40:43:
We're starting to see that emerge, I think on Fountain and on Stacker News we're seeing advertisers in different forms. So advertisers in the form of like an audio clip on Fountain and then advertisers in the form of job poster on Stacker News and they're effectively funneling revenue, so they're paying for placement and that revenue then flows to the users of the product. So you're right, it is kind of picking up already. There's a bit of steam behind that idea of users being paid for participating on a platform and being targeted. Right?
Egge - 00:41:24:
Yeah. And I think what's missing currently is the provider that does this as a business, right. Because right now all those companies and all those platforms do it by themselves, they do it in the closed system and it's like there is no place where I could go. Maybe there is an agency I don't know of, but there's no place that I can go to set up a campaign, for example. And that would then run on Fountain as an audio clip or in second use now has those job postings, right? But I think you understand what I mean. There is no place where I can go to get my ads to all the platforms. The middle man is currently missing and if there is someone out there listening to this podcast that wants to found a company. I think that's currently missing. That's the missing piece to have like a technology or a standard that actually plugs in with all those endpoints and that could be that central platform to like where an advertiser could just put in a campaign and it would run on different places. As an advertiser, I don't want to go to all the platforms and build different assets for all platforms and have to adjust everything. I want to just put in a line item in a system and then click on a button and maybe connect it with my node of fund a wallet that will automatically pay invoices that come from other systems. I think that is exactly what I meant when I said Lightning enables open standards because now I don't even need to know the person that I'm selling my ad to, right, that I'm buying ad space from, sorry, because I can just have that system that connects to different platforms, fund the wallet and click Go, right? And now all the payment will be done while serving the ad, not having to build afterwards or not having to do stuff, right? Obviously there's still the tax thing that we need to worry about but let's not talk about that because it just makes things too complicated and we don't know where we are in like two decades with that. But I think that is currently the missing piece. Having one place where you can insert your ad and then it would spread out to all those bitcoin platforms that are currently out there that support advertisement and obviously they would have to implement that as well. Right. To have that end point to actually receive the ad and pay for the ad as well or get paid for the ad space.
Kevin Rooke - 00:43:59:
Big idea for the bitcoin entrepreneurs listening to this.
Egge - 00:44:03:
Kevin Rooke - 00:44:04:
In the short term though, if we think about the creator space in Lightning, how do you think Monetization is going to work in the next couple of years? Like not thinking out in the next couple of decades but just right now and into the next couple of years we have a few different models emerging, right? We've talked about advertising, we have value for value and then we have Pay as you enjoy or set pricing. Things like Mash offer like a spin on value for value. They have some similarities and some differences and then there's just direct like pay $10 for this branded coffee mug or something. How do you think if you can break those different segments down, which one do you think will dominate in the next couple of years for the bitcoin creators and the Lightning kind of community.
Egge - 00:45:02:
I definitely think value for value is something very valid that we'll see a lot of use in the future as well and we do with Podcasting 2.0, right? You have that very cool and user friendly integration where it actually works, right? What I think currently is missing is like that little bump to the user that says hey by the way, you enjoyed this show for an hour now it is time to maybe give something back. I think that's a big problem, right? I think there is even a study about that if you have an event and you don't put a price on it but you say everyone that attends has to donate, you will actually make more money than if you would have priced the event before. Right? I'm pretty sure I read a study about that. I need citation needed on that point. But I can definitely imagine us humans that we work like that, right? Or having that feeling in your heart that you want to give back is something that can be leveraged by content creators. Not in a bad way. When I say leverage it sounds a little bit like scam but that's not what I meant. But I think the implementations that we currently have lack that little bump or reminder that says hey, give something back as soon as we have that and it's not really hard to do. I would love to see that more on value for value platforms. I think that is a very valid model to monetize but again, it is a very risky model as well because you can't really calculate your monthly return from that, right? It's very hard if you have to pay bills to be like okay, well hopefully I get enough donations in the next month to actually pay my bills. It's very hard to calculate and that's something that we see with open source development as well. So I think it will definitely be used a lot, especially once like as I said, implementation gets to the next level and it gets more adopted as well because right now there's talking about Podcasting 2.0, there's Breez and Fountain that I know of, but those applications don't have enough use yet and there's a lot of people that just listen to podcast on Spotify or somewhere else. So that's one issue. I definitely think that idea of paying for content while you enjoy is something that will develop that might be even more valid case for creators to monetize the platform. I'm very biased on that, right? Because at Starbackr we do have pay gates, for example, we do have monthly subscriptions for creators and I think the reason why that works so good is because it doesn't require the user to rethink everything because they are used to those models from legacy platforms and I don't think it is black and white as well, I think we can find methods and monetization models that lie in between right? then have a little bit of value for value, that have a little bit of pay up front. That have a little bit of payway. Enjoy. But I definitely see the whole use case around Monetization through Lightning of content creators. But what I'm always worried a little bit about, and I might get a lot of boost for that, but I'm always a little bit worried about is also like the whole bookkeeping and text thing. And that's not very important if you have a small YouTube channel and you earn a couple of bucks each week. But if you want to actually earn a living and have to pay bills and everything, that might get very difficult if you don't have you get into a weird position. Definitely depends on your jurisdictions. Well, and where you live. But that's definitely one thing that is way easier to solve with pay up front. Here's a bill, here's an invoice, like not a Lightning invoice, but a real invoice. This is your bat. You're done now, right? Again, very difficult to answer.
Kevin Rooke - 00:49:16:
Yeah, that is the most chaotic part of earning on Lightning right now for me is I've probably earned on like eight or so different apps in the Lightning ecosystem in the last month for various things. And I've now started to do like a monthly consolidation. And so every month at the end of month yesterday. I did this just like figure out how much did you earn from each platform. Consolidate it and make sure you're kind of like. I want to make sure I'm keeping track of books and stuff like that because the numbers are getting to the point where they're hundreds of dollars a month from Lightning. From some value for value. Some pay for messaging and things like that. But it's at hundreds of dollars a month now, so it's too big to ignore. And I think that's for sure an underrated thing that people are not fully appreciating the need for that yet. But as more creators start to earn more money, I think that will become pretty obvious. And yeah, it's a problem that definitely needs to be solved. But I think the idea of being able to operate on all these different creator monetization models, it can be very appealing. If we can fix the issue of consolidating payments and letting people know, here's exactly how much you earned. This is what you owe, this is your income. If we can figure that part out, then I think that the part about having any possible model to fit your content is great. For some people, value for value is going to make a lot of sense. For some people, it's going to be pay as you enjoy. For some people, it's going to be pure subscription. For some people, it's going to be pay once and get lifetime access. And I think the beauty of it is we can do all of that on Lightning. Whereas all the other kind of gated web, two systems or anything built on Fiat Rails, it can only do a subset of those things, right? It can maybe target two or three of them. Maybe you can do subscriptions if they're bigger than $10 a month on Patreon. Maybe you can do big purchases, but good luck doing the 50 cent purchases on a credit card. I think there's definitely value in having a lot of these different models to play with. At least that's my opinion.
Egge - 00:51:48:
I think what is very important, what you just said as well, is the gated part, right? Legacy world is. So permission. And I recently just wrote an article about that, a very short blog post, what the problem of current digital quantum monetization is and what the problem of the whole gated and Permission legacy payment wall is. And most people in western countries might not even notice it. And that's maybe because they are in that financial privilege, that's maybe because the content they provide is not controversial enough to actually be a problem, right? But that is the reason why we founded Starbackr, because we said, well, we do have a problem with gatekeeping and those gatekeepers are not legitimate by the people, they are not voted on. Those are companies that impose their moral standards on everyone. And it's not only Visa and Mastercard they do that. But because we talked about Google before. When you want to use now coming back to the web. To example. If you want to use Google Ad server for your publishing. Right. If you have a website you want to put that at server as like that monetization tool on top. Google will crawl your website and verify it and say yes or no. It's not like you can host that software yourself and just put it on and be like, well it's my site. And as long as an advertiser wants to purchase on that site, they should be allowed to. Google will decide if you're allowed to use Google Ad server or not. And that is a big problem, right? I mean, as I said, most people might not notice it because they just, as I said, privileged in the Western world with the financial system that we have. But try to monetize content. If you don't have access to a bank account, try to get a PayPal account. If you are from Eastern Europe, it gets really difficult already. You need to wait weeks or even months to get approval on PayPal and that is something that Lightning can solve. Like Bitcoin, that's like straight from the minute you host, you deploy your wallet, you are able to receive funds you don't even need. Something like a BTC Pay server, which obviously makes things easier. But as soon as you have a wallet and you have like a static address, you could say hey, here, or like a Lightning address or Alan URL, whatever it is obviously the more sophisticated implementation gets. And Value for Value, for example, is a very sophisticated implementation in my view. But, Bitcoin enables that use case of ungated and permissionless monetization straight from the second you start using it. And that's something that is really strong about that. A lot of people forget that from time to time. Right, and exactly. That's why, as I said, we found it Starbackr because we wanted to enable content monetization for everyone. Not only the people that are permissioned by Visa and Mastercard or by Google or whoever it might be, but actually for everyone.
Kevin Rooke - 00:54:55:
Right. That last part for everyone is really important. And I'm actually just realizing something now as you're saying. This is like if we look at the way stock trading has evolved, we went from this brokerage model where only the people who kind of knew what they were doing had access to people who have to put it in a bit of work. You have to go to your bank, you have to get them to sign off on papers and $10 stock trading fee every time you make a trade to like, Robin Hood and Cash App where it's like you can invest as little as a dollar buying fractional shares, zero fee. Literally anyone can participate. No credentials, no kind of like education required at all. And we can debate the pros and cons of that, but it basically opened the floodgates for everyone to participate. And now I wonder if we imagine a future where Lightning is like the standard. Is this going to open it up so that, everyone can become a paid content creator? Anyone can earn for their content because right now, I think in web two, that was part of the vision, like, oh, anyone can create now. Anyone can make stuff. Yes, it's true. Anyone can create, but very few can get paid from their creations. Right. We did open up. Anyone can make a Tweet, but good luck getting paid for that tweet. It's just like there's still a very small fraction of people that are getting paid for the content they create. Do you think that we open this up to absolutely everyone? And are we going to see any new types of content created as a result?
Egge - 00:56:42:
First of all, yes, I do believe that we can open it up to everyone. That is exactly what we try to do. Right. When we found a Starbackr, it was a very tough decision that might just disclose this, that we were like, do we really want to incorporate or would it be better to host an onion, for example, that it could be like the Silk Road of content. But we said, well, and now you can discuss if that would be good or not and if you want to have free markets and stuff. But what we wanted to achieve is to solve a problem for as many people as we can do. And that problem was that gated payment Rails, right? So we decided to not do that. We decided to have a clear web website because then we can actually have that accessible to as many people up to everyone, right? So that was the first decision that we had to make. Now, when it comes to different types of content, I definitely do believe that, especially when it comes to more riskier types of content that are just excluded from the whole monetization today because payment processors don't allow them. And again, that is totally up to you if you want that or not. But that is how we as Starbackr position that we said there is no moral censorship if that content is legal in the state that we are incorporated and it is something that we are required to do, you allow to post it on Starbackr. And that is something that no other platform that is based on legacy payment rails can do. And we've seen that now taking an example from the adult space, we've seen that last year with only fans, which was one of the reasons why we actually found it, Starbackr. What happened there was that only fans announced that they might or that they plan on banning adult content from the platform. And we said virtually we said together and we're like, why would they do that? From a business perspective, that doesn't make any sense. Why is that happening? Because even though they have cooking videos and there's like some sport videos on there and sport content, most of the revenue probably comes from the adult sector. That's no secret, right? Why as a company, why would they do that? If you started investigating that a little bit, you would really quickly find out that it's Visa and Mastercard putting pressure on them and being like, hey, you have to do that, right? Because it's too risky for our business, too risky for a payment network. Stakeholders don't want that.
Kevin Rooke - 00:59:15:
So who's putting pressure on Visa and Mastercard? I want to hear more about how far does this chain go? Because that makes sense to me that, yeah, if your processors are going to be putting pressure on you, you may have to make a decision that is not perfectly in line with your revenue. If you had your own way. But who's then putting pressure on Visa, Mastercard and how far does that chain go back?
Egge - 00:59:41:
I think that's a very difficult question to answer because that's not information that's disclosed or publicly available, right? If you look at the cases that happened in the past, you can definitely find some people that are part of that company that just have very old or outdated moral standards, let's say, or like conventional moral standards depends on your views. And in the end, I think it is also when you grow that big as a central company like Visa, Mastercard or PayPal, did due diligence and risk management get very difficult? And I mean, there is a part of me that can understand them acting that way because they have to ensure that they don't lose that insane monopoly position that they currently have. Right. So they want to protect the network and that might be the reason why they do that. But then again, I think it is also like as I said, stakeholders with very conventional ways of thinking and just not a very libertarian and free way of doing things. Right? Yes. What is the question that I definitely can't answer is how did it get that way? And why is no one wondering about that? Having a centralized company that is in a position of power, there is no comparison to that. If you start to think about what Visa, Mastercard actually can do with a simple click of a button, they can wipe out businesses, they can wipe out business cases with a simple click, they can wipe out existences of content creators in a minute, just because they are able to arbitrarily exclude anyone and actually they are allowed to. Right. Because their terms and conditions well, we don't like what you do. You can't be part of our network anymore. And what is important to understand is if you build a company and you get to a certain size and that's why I can totally understand only fans when they bow to the pressure. When you get to that size and you risk losing that monetization rail and in Web 2.0 it is the only monetization rate they have. There's no alternative. In Web 2.0, if you lose that rail, you can shut down within a week. Right. There's no way you can actually support the company and all the structure you have built as a company and keep your employees if you lose Visa and Mastercard as a monetization rail in the digital world, that's why Bitcoin is so important, because Bitcoin can fix that. Bitcoin is an open standard, there is no gatekeeper and we can actually build a very healthy system that doesn't need that kind of centralized service to dictate its moral standards on everyone.
Kevin Rooke - 01:02:38:
This has been fascinating. I want to finish off with one. I want to get you to steal man the case against Lightning monetization or there's like Lightning creator movement. I think that there's a new creator movement for me here and we've talked about a lot of the advantages that Lightning can offer. What are the disadvantages, what are the downsides right now that you see for Lightning creators today? What needs to be solved? What are some of the things that make it a bad experience today?
Egge - 01:03:13:
Tough question. I think one of the problems that we currently have is usability, especially when we think about Normis, right? That is one of the missions that we have a starbackr today that we want to make things more accessible. Because if you are from this space and if you're from this problem and if you have your own note running at home and set up everything. Lightning is very easy to use and it works great. But if your technical horizon ends at using Instagram, Lightning has a horrible user experience and I might get booze for that now. But we have received so many support tickets of people that own Bitcoin on an Exchange, for example, that is not Lightning enabled yet and that are wondering why they can't pay invoices on Starbackr because they own bitcoin, right? And it says it's bitcoin, why can't they pay? Well, because it's a different protocol. So definitely something that adoption might solve with time. But I think we have a lot of work to do on an implementation side to abstract all those difficult things. A great example is gallows bitcoin beach wallet, right? Bitcoin beach wallet. I mean, it is a custodial wallet and it is behind KYC Gates, but from the usability of that app, it's very cool, it's very easy to use and it abstracts all the difficult things away and we need more of that. The second part is definitely what I mentioned before is the amount of capital that's currently being deployed in the legacy world versus the capital that's being deployed for marketing and advertising. I mean, in the Lightning world, right, if you plug into AdSense and you have a site that has a lot of views, you will get a substantial amount of money right away. It might not be the best CPMs and you might not get the best rates, but you will earn money straight from the point and you don't have to do any work. It's very difficult to start that monetization process in the Lightning world. Trying to get advertisers to do ads on your page or to do ads on your podcast is not easy when starting out, especially if you think about the legacy world risky environment, right? Because it is like the financial things and people don't understand bitcoin, really, especially not legacy companies. It's always very nerdy and people are like, I don't want that. So I think that's a big challenge to overcome as well. I think those are the two reasons why not why I wouldn't suggest it to anyone. To everyone. But thinking about it. I would probably suggest it to everyone because in the end. If you sat down for a whole day and read a little bit about it. And if you most people will be able to set up a Lightning wallet or set up a Bitcoin wallet. But not everyone. That's a little bit issue. I see.
Kevin Rooke - 01:06:02:
Right, well, I want to finish this off with a segment to do at the end of every episode called The Lightning Round. Some rapid fire questions for you. Are you ready for the Lightning round?
Egge - 01:06:13:
Kevin Rooke - 01:06:14:
All right, first question. Among the billion dollar creator apps we have out there today, whether it's Facebook, Twitter, only fans, all the ones that people are familiar with, Instagram, which will be the first to fully integrate Lightning. I should probably actually remove Twitter from that because they kind of have a tip jar thing going among the others, which will be the first to integrate.
Egge - 01:06:39:
Lightning payments within the app only fans, I think.
Kevin Rooke - 01:06:44:
Interesting. And how will they do it? Will it be a subscription thing? Will it be a value for value thing?
Egge - 01:06:52:
I think it will be the same monetization models that they have today, but paid with. I don't think they will implement Lightning itself. I think they will implement crypto probably, but I think it will be the same monetization models that they have today, but just with different paint rails.
Kevin Rooke - 01:07:08:
Interesting. If you were in Mark Zuckerberg's shoes today and your task was to reposition the company and help it adjust in the context of this shift we may be seeing in advertising, what is your first step to reposition Facebook to benefit from this discussion? We talked about this next era of advertising where users are getting paid.
Egge - 01:07:37:
How do you do that as a bitcoin? I'm obviously very biased on that one, but I would definitely change the company's name immediately. Yeah, I think that's a very difficult question to answer.
Kevin Rooke - 01:07:54:
Putting you on the spot.
Egge - 01:07:56:
Yeah, I got to say, obviously, like, plugging in bitcoin as payment method for the current monetization model would be an easy to do first step. But again, getting the education out to all those people that are currently monetizing on that platform is insanely difficult. But I think that will be the first step to actually give the opportunity or to give the possibility to monetize via bitcoin on the current system to not pay with credit card only, but maybe to have like crypto wallets on bitcoin wallets on the platform. To be honest, I'm not a very big fan of how Facebook approaches monetization on that platform. And if I was actually Mark Zuckerberg, I would probably re-architecture everything.
Kevin Rooke - 01:08:48:
Interesting. Okay, I want to get your estimate for how much our data is worth. And I've seen a couple of metrics, I won't share them until I hear your answers. I want to hear your sense for like, a normal user. Imagine someone living in America just because most of our listeners here are Americans, the average American user, how much money are advertisers paying to reach them each year?
Egge - 01:09:20:
That's two different questions. Right. One question is how much is data worth or how much is our data worth? And it definitely depends on is that data accurate? I have no idea how much advertiser would pay or does currently pay to reach a single user. I think if I would say a number, it would probably be below $20 because I've seen CPCs so cost per clicks on social media, for example, which are like nineteen cents per click or conversion, it's like insanely cheap. So I would say probably below $20 per user. But I think accurate data and actually so 100% validator is not indefinitely, but it's worth much more than that. Maybe it depends on the product you're selling, but I'd say like $100. If you know that that will be a conversion, I would pay as much as 75% of the product worth.
Kevin Rooke - 01:10:28:
Right, yeah, 100%. Now, the one data point I have on this is from Facebook's earnings. You can calculate out the average revenue per user in their different subsegments. So they have, like, the Americas, they have Europe, they have Asia. What are the customers worth in those segments? And the average revenue per user is over $100 per year for a user on Facebook.
Egge - 01:11:00:
Kevin Rooke - 01:11:03:
This is only in America. I believe in Africa. It's much lower in Europe, it's a little bit lower in Asia. It's somewhere in the middle between Africa and Europe. But it's kind of staggering. I think it was like $30 per quarter was the average revenue. And this may be a couple of years old, so it may be higher now. But yeah, I think if people understood that and that's just Facebook alone, by the way. That Facebook and Instagram, of course, but that's only one. Then you add in Google, you add in Snapchat, you add in Twitter, and there's a reasonable case here, and then you add in all the out of home stuff and all the there's a reasonable case for making that our data is already worth $500 a year across all these different apps. And then you start to think about, like, what could that mean if half of that went directly to the user and the user gave better data? And then you expand the pie double, and then both get 500, the user and the platform. It's like there's money to be made here. It's a big opportunity, especially for something that users don't even recognize they're doing, like no one would ever if I said, will you pay $500 a year to use Facebook and Google and Twitter? There'd be no way. Yeah. That is worth that much already anyway. Is there any book that has meaningfully changed your view of the world? Any book recommendations?
Egge - 01:12:46:
Oh, wow. In general, you mean? Yeah, that's another tough question. I think the last one I read that really got to me was The Price of Tomorrow from Jeff Booth, I think is his name. Yeah, obviously, like Bitcoin standard, although I have controversial takes on that one, but definitely that one as well. I think it's required for every Bitcoin to read that. But I think The Price of Tomorrow was the last one that really got to me, especially when it comes to the way that our economy and our spending develops. Right about what I said in the beginning, that we as a society have to understand that things of quality will require us to pay more for things and that it can't always get cheaper, cheaper, cheaper, cheaper, cheaper. Obviously, recommending Price of Tomorrow, things should get cheaper with technology advancing or at least have better quality. But that is something that we have to understand our society. So that's something that really got to me recently.
Kevin Rooke - 01:14:02:
I like it if you could only hold one asset for the next decade and it could not be Bitcoin, what asset would you hold?
Egge - 01:14:19:
I mean, I got into Bitcoin two years ago and they don't own anything else anymore. And now thinking about that is really tough. I think it would probably be gold. I definitely see the risk of not having a real cap. Right. But I think you said like two years now, so I think the risk of that cap, like, exploding spontaneously is quite low. So I'd probably go for gold. But yeah, obviously bitcoin.
Kevin Rooke - 01:14:55:
Yeah, it's a tough question. It really gets people thinking. Awesome. I really enjoyed this conversation. Thanks so much for taking the time. Where can people go to learn more about you and the work you're doing?
Egge - 01:15:09:
Well, they can definitely check out my Twitter, which is Egge 21. M currently. I hope it will be in the future as well. Then you could go to Starbackr and see what we are doing there, which is Starbackr.com or app? Starbackr.com for the web app. Yeah. So I think that are the best two places to learn about me or what I'm doing.
Kevin Rooke - 01:15:31:
Awesome. Thanks again for taking the time. Hope we can do it again soon.
Egge - 01:15:35:
Yeah, thank you so much, Kevin.