Discover more from Margins by Ranjan Roy and Can Duruk
Data Breaches are now Growth Hacks: Zappos Edition
Ranjan here, and this week I'm talking about accountability.
Last week I got an email from Zappos about a settlement for a 2012 data breach. For these types of settlement emails (of which there seem to be an increasing amount) I'll usually start by looking at the sender email and searching around to see if it's a scam.
The sender domain appeared legit. I started thinking, rather than a phishing attempt, this had to be Zappos marketing email. It just had to be. I've seen plenty of unconventional, creative attempts at re-engagement, and I hadn't shopped on Zappos in years. There was no way that our legal system would resolve a data breach...with a discount code.
But it's for real. As someone involved in both the worlds of marketing and email, I cannot begin to describe how drool-worthy it would be for a marketing team to be given the opportunity to push a tiny discount code, to millions of consumers, in the format of an email that is almost guaranteed to be opened. If Zappos sent me the subject line "10% off, just for you Ranjan" there is no way it gets clicked.
Amazon-owned Zappos was rewarded for leaking the personal data of 21 million customers. They almost certainly received an injection of revenue from longtime, disengaged customers. And let's be clear, it's a 10% discount. In ecommerce-land that's what you usually get for signing up for an email list. That's a percentage you find on a coupon aggregator website, not something like 50%, where Zappos would lose money on a per-unit basis. This is lead-gen, not punishment, and incredibly effective and original lead-gen at that. This is Zappos laughing at our legal system and the consequences of lax data security.
Note #1: My co-host Can gave me permission to tell you all, he spent $200 on Zappos as a result of the email.
Note #2: The lawyers arguing on behalf of the consumers got $1.62mm in legal fees. That sounded pretty awful, but I'm not really sure how this stuff works so maybe it isn’t? I’d love any knowledgable legal readers to help provide perspective as to whether that is also egregious.
We also learned about Adam Neumann's golden parachute. The WeWork cofounder being allowed to sell $1bn of his stock was perhaps within the bounds of decency (and, maybe if WeWork tanks, that liquidity will have been even more valuable). As for the $500 million SoftBank takeover of his outstanding loans, I imagine there could be some really weird financial structures in place, given those loans bought buildings that were leased to WeWork. Sometimes the self-dealing is so complex that it can only be solved with more self-dealing.
But that consulting fee. That's the big middle finger. That's the part where it feels like more of a statement than just about the dollars. Does he need that extra $185mm? Why is it even exactly 185 (is this another Kabbalah-inspired number)? Was the extra liquid 18.5% increase in his net worth really worth it given the impending layoffs of thousands of employees?
It only makes sense in an environment where there is a complete lack of accountability. Sometimes it feels like it's not even baseline zero accountability. It veers into negative territory. Like negative interest rates have flipped our understanding of the value of money, in the Zappos and WeWork cases, you are now directly rewarded for taking the more egregious and harmful action.
Regular readers will know of my general, longtime WeWork skepticism, but the sheer doublespeak absurdity of 8 years of talking about "We" and naming your company "We" and then pulling the most amazing "Me" move is the stuff of legends. I'll say it again, WeWork captured the essence of the 2010s better than any other company.
Iraq War History Rewrites
Continuing on the word of the week, let us quickly touch on last week's Zuckerberg speech at Georgetown. I have strong feelings on the whole Fifth Estate thing, but the part most relevant to this post was Zuck's recreation of the Facebook origin story.
Most Margins readers are probably familiar with the long-reported origins of Facebook. There was Facemash, the Hot or Not style site. There were the instant messages where he called people who handed over their data "dumb fucks." There were the Winklevii Twins, there was Sean Parker, there was brilliantly growing from Ivy Leagues to other campuses. All this stuff has been documented in detail, for years. And I’m of the school that the “dumb fucks” stuff is not even that bad. When you’re young you say stupid things and hopefully we all mature. I’m sure if you pulled my chat transcripts, bad things would come out.
So why do they have to make things up?
Nowhere in any discussion, at any time, did we hear about Facebook being invented to help him create a vibrant discussion around the invasion of Iraq. In the 16 years since its founding, even Zuckerberg never publicly made this claim. In fact, the story doesn't even quite make sense:
But it fits neatly into the idealized role in society that Facebook is currently promoting. So he just said it. And maybe it'll stick. Maybe it won't. But it's clear that there is absolutely no fear that there will be a cost to making things up. It’s not calculated, it’s confident.
These things all had me thinking about accountability and how it feels like it's completely disappeared. I sat on a trading floor in 2008, and watched as not a single executive went to jail for even the most egregious misdeeds of the financial crisis. It was certainly an early glimpse into what a complete lack of accountability looked like.
It feels like things have escalated since; that we've gotten to a point where many in power can simply laugh these things off. Teams of communications professionals must've reviewed Zuckerberg's speech. Someone must've voiced concern about blatantly lying about the origin story to fit the narrative. Yet, you can easily see the collective calculation dripping in the words.
Who cares? We'll just say it. Maybe it sticks, otherwise, we'll just move on.
With Adam Neumann, you wonder, was there any advisor saying "maybe let's hold off on that consulting fee, given you will already have enough money for the rest of your life and this is uniquely terrible given what's happening to your former employees". Nah. You know he's probably raising money for some new venture, was high-fiving on “beating” SoftBank, and will be invited back to a Time 100 gala in a couple years
And even that email from Amazon's Zappos. That one, being of the marketing world, I know someone at Zappos was laughing. I would have. To watch a huge influx of traffic, filling up carts and converting, all thanks to your "settlement". You might as well start writing up a Medium post on leaking customer data as a growth hack.
What I’m Reading
Goliath: The 100-Year War Between Monopoly Power and Democracy: Maybe I’m writing this frustrated rambling as I’m currently reading Matt Stoller’s new book on monopoly power. It’s fantastic. Matt also writes a Substack newsletter, and if you’re not ready for the book, check out this recent podcast he was on, Do we want democracy or two-day shipping?
The China Connection: How One D.E.A. Agent Cracked a Global Fentanyl Ring: This NY Times piece is so long, and so good, and so detailed, and such a good narrative, that it made me start thinking about the disappearing delineation between an article and a book. It hits on so many important themes (geopolitics, opioid crisis, US-China trade) and is such a good story.
Final Note: My co-host Can made the point while reviewing that my frustration is clear in the piece, but perhaps it would be more constructive to lay out some concrete solutions. Keep an eye out next week :)