Commentary
Be Very Afraid, Facebook And Google
- by John Motavalli , Columnist, July 6, 2016
On May 18, this column opined that Facebook would soon dump its media partners from their newsfeed, as the value of news diminished, especially in the social media context. Late last month, Facebook announced that news and media content would be greatly diminished in users’ newsfeeds, and soon after, News Corp. CEO Robert Thomson counter-attacked, claiming that publishers would build “a powerful network” themselves.
The sound you just heard was my laughter. That has to be the most absurd statement we have heard all year. Moreover, it shows once again that despite all the water under the bridge since the Internet first reared its ugly head to media, powerful CEOs have learned nothing.
Let’s drill down.
First of all, we don’t blame Thomson for his remarks. What else can he say? In another column, we compared the current situation to the ’90s and media relationships with AOL. Ultimately AOL dumped its media partners also, or forced them to pay huge amounts to stay connected. Then, as now, media companies like The New York Times and Time Inc. simply didn’t know what to do next. A huge part of their current traffic has been coming from Facebook. How do they replace it? How do they explain when future comScore rankings show them plummeting?
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In this current environment, even an Internet-spawned company like Yahoo! is at a distinct disadvantage. Why? Because unlike Google and Facebook, Yahoo! lacks a unique advertising edge, which Google and Facebook get from their huge traffic and targeted advertising opportunities. But Yahoo! is the No. 3 Web property. It still has value and, if Verizon combines it with AOL, it will have a lot more value.
Entertainment, Like News, Is A Commodity
What does news and entertainment bring to the party? Less and less. What the story of Netflix and Amazon’s success
in TV series shows is that entertainment, like news, is a commodity. Companies that had no experience in entertainment as of 10 years ago now have series that top those of Warner Bros. and Fox,
which were both making movies more than 100 years ago. News became a fungible commodity back in the ’90s, when Reuters took advantage of the Associated Press’ conflicts. (Owned by a
consortium of newspapers, AP was loathe to sell its product to potential competitors.)
Cut to 2016. Robert Thomson promises a “powerful network.” A network of what? If you can think of something, let us know in the commentary section below. On May 17, the New York Timespublished a typically clueless piece which stated, “The question of whether Facebook is saving or ruining journalism is not relevant here because, like it or not, Facebook is a media company.”
Another risible observation. Facebook is not a media company, does not want to be one, and is now taking steps to alleviate the confusion. It is a tech platform, and most importantly for its bottom line, an ad tech platform. As such, it can compete with Google by offering a highly targeted advertising environment, which only the two of them could do this well. How can media compete with that?
Does News Corp. have a killer app that will take the Internet by storm? Not likely. Nor is it likely that Time Inc., the New York Times, Hearst, Meredith, Viacom, or any other mainstream media property is likely to combine with News Corp. to build a rival to Facebook. Frankly, media companies have not just a bad record, they have a non-existent record of achieving any tech breakthroughs online. And why should they? How many quality engineers do they employ? Oops, sorry, Google hired them all. Is entrepreneurship encouraged at Viacom? We doubt it.
Where Is The Go Network Now?
Back
in the ’90s, I spent quality time with Michael Eisner, then chairman of Disney, at the launch party for Disney’s online Go Network (remember that?), held at NYC’s Puck Building. In a
rare moment of candor (for him), he blurted to me, “An 18-year-old in a garage in the Valley could build a bigger Web site than we could.” I swear he said this. And he was right. Where is
the Go Network now? We’ll let Wikipedia summarize: “Go.com proved to be an expensive failure for its parent company, as Web users preferred to use search
engines to access content directly, rather than start at a top-level corporate portal.”
And that, succinctly is the entire history of media companies online — expensive failures like Time Inc.’s Pathfinder, which a former top exec termed a “black hole.”
What happens now? Frankly, we fear the future. First, let’s say at the outset that if we were heading Facebook, we would do precisely what they did here. It was smart to use media brands to build theirs, and even smarter to jettison them when they’d outlived their usefulness.
But that doesn't mean this a good thing. Like children who refuse nutritious food and prefer junk, today’s young Facebook users are getting dumb and dumber. They don’t want news in their newsfeed. Even responsible adults often agree. I know I don’t want to hear about massacres in Bangladesh when I’m on Facebook.
Zuckerberg Is Not A
Missionary
If Facebook’s mission is to give its users what they want, then they’re doing that well. If Facebook’s mission is to educate young people, it’s misusing
its power. But Facebook is a corporation; its mission is to maximize shareholder value. Mark Zuckerberg has done a great job of doing that. He is not a missionary, out to save media companies.
He’s not even Jeff Bezos, who saw value in the Washington Post. One thing he has to know — the more Facebook is seen as a news outlet, the more it will be criticized by both
liberals and conservatives for favoring one side or the other, as the recent contretemps over news algorithms proves. Far better to 1. Give users more personal fluff and 2. Avoid news
controversy.
Let’s face it, News Corp. is not going to build a competitor to Facebook. When it bought MySpace, the social network was much bigger than Facebook, bigger than Google even, the No. 1 Web site. Under News Corp. tutelage, it deteriorated from a value of $12 billion to the point today when its value is negligible. MySpace’s former leader Chris DeWolfe has charged that the Fox Interactive unit forced MySpace to sacrifice usability for cumbersome ads that ruined the site’s functionality. If you’re on the edge of your seat, waiting for the Armageddon of a News Corp. vs. Facebook bakeoff, forget it.
(As a News Corp. and MCI employee in the mid-’90s, I was involved with a joint venture from those companies that sought to compete with the then-powerful AOL. It didn’t end well.)
Ahh, Yes. Pathfinder. I remember all the fanfare at launch.
Thanks for making me feel old ;-)
John you are near-sighted with this statement " which only the two of them could do this well".
The media companies can effectively compete if they partnered correctly and with the most advanced technology Platform. It just won't be today or tomorrow but in 2-3 years if they sign up by year's end.
I largely agree on the outlook for traditional media, but if they change their mind-set, there might be some hope. News Corp is actually an investor in Blendle, which is a network that could becone powerful if it adopted more flexible pricing strategies that made it economical for news junkies or those who just want a good news portal. The key is volume discounts, instead of flat per-article rates (as explained in my blog post at http://bit.ly/1ZwJ0io).
(BTW, I was CTO for the News Corp joint venture that built a pre-Web beta test TV Guide Online in '92-94, which later got sucked into the MCI joint venture.)
John, I certainly don't have answers to your key question of what's next for publishers. But I did write about what they might want to think about at PBS MediaShift last week: http://mediashift.org/2016/06/why-the-news-business-should-stop-publishing-start-pushing/
I will look into Blendle, Richard. I remember you, actually. I ended up reporting to Anthea Disney at the joint venture, what an incredible person she was. I'm more optimistic on this than my old buddy Michael Wolff, who seems to think this Facebook move means the end of the news media. I don't think so yet, but the situation is dire for them. I see the key problem as the very core of what media does--creating media and news that people will pay for. That's what is at stake. If young people don't want to read news, you can't force it down their throats, whether their stuff is available on the right platform or not. Facebook dropped media because it wasn't performing well for them, and that's just about the best platform we have.
Richard, having looked up Blendle on Wikipedia, I have this reminiscence. Back in the early 90s, a friend of mine at the time named Lee DeBoer, a former Cinemax executive, was appointed head of something called the New Century Network. A consortium of newspapers that figured they would do well if they combined into one giant news hub online. It lasted about 2 months, and fell apart for the usual reasons these things fall apart, the companies were competitors, they couldn't work together. Similarly, I worked for BMG and its record labels when Strauss Zelnick was there and the obvious solution online was for labels like RCA (owned by BMG) and Sony to combine. They held talks, but it went nowhere. These companies are aligned to compete with each other, not to work together. I haven't looked up Blendle on comScore, but when it starts to attract Facebook numbers, I will salute. Meanwhile, where is Lee de Boer now?
Leonard, the media companies do not have two years of steadlly plummeting returns to play with. The assumption was always that plunging print ad revenue would be replaced with digital, but that hasn't happened, and it most likely won't now. If there is an ad platform that they can glom onto, let it rear its head now, while they still have a chance. I don't see it.
You can have all of the electronic "platforms" you want but if most people don't desire the content you are trying to get them to access and watch, you still have a big problem.
John, good points on the future market for news and the dismal history of news aggregators. Certainly if too few people care about expensive investigative journalism, high-quality, thoughtful analysis, and wise curation, then the future of news is bleak. But I think that there is a core market for that, and that the new relationship-based pricing models I suggest can help publishers find and cultivate that market on an individualized basis, instead of blindly playing to "the average reader" who does not exist. (I also suggest those models can work best via a shared infrastructure.) The post I linked to above on Blendle touches on some of that, but a broader perspective is in my post "Patron-izing Journalism -- Beyond Paywalls, Meters, and Membership," at http://bit.ly/1KXJLYL. The FairPay strategy it suggests provides an adaptive process for getting closer to customers individually, to learn just what they value, and to deliver it, at a price they accept as fair -- to turn them into willingly sustaining patrons.
Did anyone else see this? The NY Times ran a piece begging their readers to like their content on Facebook. Why? To impress Facebook? This seems so pathetic.
The latest example of the constant tension between the respective values of distribution and content. Do your math and invest accordingly, but remember that both are necessary, because by definition together they define media. As for the article, yet another timestamp in the evolution of our industry, but perhaps not the tectonic shift as portrayed.
Thank you for helping me to understand Facebook's announcement about demoting news in their user feeds. After his run-in with the conservatives, he obviously saw the danger in getting caught in the middle our divisive politics, where some people are always going to suspect some kind of bias, no matter what you do. He's smart to take action on this now, before the conventions and campaigns.
Exactly, Dean. Consider this: Zuckerberg is an outspoken liberal. And he was caught with his bias showing in terms of the news algorithims. One could sense high-level concern at Facebook over that. I am sure high level meetings took place at Facebook, and it was decided that the best way to avoid a fracas like that again was to de-emphasize news and controversy.