Chaos Monkeys: Obscene Fortune and Random Failure in Silicon Valley

by Antonio García Martínez

The negotiations were way, way, way above my pay grade, so I have no idea how David Ebersman, Facebook’s then CFO, managed to coerce or cajole the bankers into offering a high and fair price, essentially screwing themselves in the process. But he and whoever else on the Facebook side deserve the Nobel Prize in economics for doing so. They even squeezed the bankers on fees. Oh, yes: in addition to fleecing you with overt price manipulation, bankers are paid a flat fee for their exertions. Facebook’s syndicate accepted a modest fee of just over 1 percent, rather than a more typical fee that sometimes runs as high as 7 percent. While the press jeered about the “disastrous IPO,” the feeling inside the company was one of utter triumph. Facebook had gone public without getting skinned alive, and it now had a mountain of money to recruit the best engineers, acquire budding competitors, and outspend rivals on product development, all with minimal dilution of the shareholders (i.e., of us, the employees). Here is your lesson from the Facebook IPO: whenever you see the headline “Stock X Pops on First Day of Trading and Declared a Success,” instead think “Founders and employees just got completely screwed, and the bankers and their wealthy clients made fortunes.” Because that’s what happened, and didn’t happen, in the case of Facebook.

120 milliseconds is about one-third of the time it takes a human to blink an eye. That’s what we had to play with. That’s how much time an FBX partner had to return a bid and an ad when requested to by the exchange, an auction process that would take place fifty billion times a day, or about half a million times per second.

Michael Lewis’s Flash Boys,

So what happens to those globe-spanning bid requests, assuming they don’t drown in their trans-Atlantic undersea cable? The people listening for your presence in billions of such requests per day are known as “demand-side platforms” (DSPs), and they’re the stockbrokers of this real-time media world, working in the employ of the advertiser or agency who wants to sell you something.* The DSP quickly unpacks the bid request, and queries its data for anything it knows about you: sites you’ve browsed, shopping carts you’ve abandoned, that airfare quote you got and never acted upon. They’re all there and returned within milliseconds via state-of-the-art databases hyperoptimized for the purpose. Much of that data isn’t even directly observed by the advertisers in question. Companies have done deals for the right to rent a little piece of the webpage on sites of commercial interest, just enough to touch your browser and see who you are. These data brokers put you in some targeting segment—for example, “travel intenders” (i.e., people about to spend money on hotels)—and then resell you as “third-party data.” Since everyone has a pseudonym for you via your Web browser, and that browser is known to Facebook, Google, and everyone else, that data can be used to target you. This is all anonymous (in the sense of Facebook data never leaking out), but it’s everything you do online. All of it is more spice in the targeting sausage going through the advertising meat grinder, and is traffick...

Below a good article of how Facebook Exchange works https://techcrunch.com/2012/06/13/facebook-exchange/ Below good wiki article on how DSPs work https://en.wikipedia.org/wiki/Demand-side_platform

Svengali

Vic Gundotra

ossifying

Why do ad servers matter? At first glance, they seem inconsequential. To continue my (now perhaps stretched) nautical analogy, they’re merely the container cranes that shuffle boxes around. But in fact they play a much more important role. Look: the advertiser doesn’t trust its agency, the agency doesn’t trust its trading desk, the trading desk doesn’t trust the ads-buying software it’s using, and the ads-buying technology company doesn’t trust the exchanges. The only thing that keeps this dishonest world honest is the existence of an agreed-upon source of truth. That oracle is the ad server. If a marketer wants to reach a million people in the eastern United States, showing each person no more than four ad impressions between the hours of four and ten p.m. on Thursday (a common buy for movies, incidentally, which always launch on a Friday), then that marketer will be satisfied only if the ad server report says that’s what he got. The ad server isn’t merely a data server spewing forth pixels on demand; it’s also the accounting system that decides what gets delivered when, to whom, how often, and where on the Internet. And that’s just for fairly brainless brand marketing buys that want to make a big, broad splash. For marketers who track their performance (such as online retailers), the tyranny of the ad server yardstick is even greater, since it defines the units, in addition to the accounting, of marketing dollars.

Nice slide deck on how adservers work https://www.slideshare.net/gnehapk/online-ad-serving A more comprehensive explanation of “first part ad servers” and “third party ad servers” - Also a brief history of how they came into being https://clearcode.cc/blog/what-is-an-ad-server/ DOUBLECLICK by Google and ATLAS by Facebook - Are platforms that allow advertisers/agencies to create 3rd party ad servers AND also allow publishers to create 1st party ad servers

Pause and think for a moment. What’s it like to be a Gokul or a Boland or a Fischer? You’ve seen excellent engineers and product people come and go, as your recruiters land the best new grads from every leading school. Your privileged position inside a powerful and market-leading organization exposes you to every industry trend and player, and pads your network with a roster of power and influence. Your ability to make any company’s senior management appear and deliver fawning and revealing product demos means you know everything that’s going on in your industry, down to the color of the clickable buttons in the products. And yet there you are, lips bolted like pipe flanges onto some bigwig’s ass, plodding along like an ox yoked to a grain mill, grinding the grist the big-company machine requires. Why is that? I’ll tell you why. It’s because you are without a doubt the least daring and least innovative person at your organization, because in the opportunity-rich environment in which you live, the ambitious and capable have left to pursue it. There’s a negative selection in which the cream (or whatever it is that initially rises) gets constantly skimmed off, and you are what’s left after years of continual skimming. Changing from big company A to big company B is cosmetic, as it’s of course at least a lateral move if not a step up. You learn that what matters in a big company is to avoid falling victim to firing or layoffs, and to appear important and critical to the compan...

That’s the nature of Valley success, however: you try ten things, based mostly on random hunches, a few key product insights, and whatever internal mythologies your culture reveres. Seven of them fail miserably, are discontinued, and are soon quietly swept under the rug of “forever today” forgetfulness. Two do OK, for more or less the reasons you thought, but they don’t blow the doors off your success metric. And one, for reasons you discover only after the fact, becomes a huge, transformational success. The amnesiac tech press weaves the narrative fallacy around the proceedings, fabricating a make-believe dramatic arc from steely-eyed product ideation to flawless and unhesitating technical execution. What was an improbable bonanza at the hands of the flailing half-blind becomes the inevitable coup of the assured visionary. The world crowns you a genius, and you start acting like one. When the next usage or revenue crisis hits, you repeat the experiment, rolling your set of product dice on the big Valley table. At some point, you don’t find the crisis-solving winner, the dealer sweeps up your remaining chips, and you’re busted. The company fails and your logo is recycled as a reminder of corporate mortality. Then everyone wonders how such a confirmed genius could have possibly failed, and ruminates on the transience of talent. That day will arrive for Facebook too. It some ways, it already has; Facebook just bought its way out of it.