onsdag 3. februar 2010

Facebook helps the news industry, but it’s no white knight

Facebook is assuming its rightful place in the Internet ecosystem as a significant distribution channel for media properties.
Hitwise reported today that the social network now drives the fourth largest amount of traffic to media properties behind Google, Yahoo and msn. Facebook’s public relations team also has started encouraging users to set up ‘News’ channels. (Facebook’s Malorie Lucich explains how to do it here).
So this inevitably begs the question: will Facebook be the savior that the traditional news media has been waiting all along for?
Nope. But it will probably help a little.
Facebook has a few advantages over other aggregators like Google:
1) Facebook’s Pages encourage loyalty to specific media brands and publications. Users choose to ‘Fan’ a number of content sources and follow them persistently, which encourages them to return again and again to a single place.
This is contrast to Google’s search model, in which users look for content around a specific topic and are presented with millions of possible choices. (Yes, there’s Google Reader but it’s not as mainstream as Facebook and most of the traffic Google drives is through search.) Search is a model that makes the commoditization of news more apparent. It’s also the basis of The Wall Street Journal editor Robert Thomson’s infamous criticism that Google encourages “promiscuity” and Mark Cuban’s complaint that the search giant is a vampire.
2) Facebook will offer publishers new kinds of analytics that Google can’t. The company recently started giving Page owners feedback statistics, showing the total number of impressions, “likes” and comments for an update.
These are much richer analytics for engagement than pageviews or even unique visitors. Pageviews can measure anything from a split-second visit to a 10-minute stay. It’s much better to go to advertisers and say definitively, “Here’s how many real people are genuinely interacting with our content.”
Over time, these analytics will probably become more sophisticated. Wouldn’t it be nice to know as a publisher, that women ages 24 to 35 are more likely to follow you or share your content? You can almost imagine Facebook building an ad network outside of its main site and on all of the Connect properties, enabling them to offer hyper-targeted advertising across millions of sites. Imagine visiting a Facebook Connect-integrated Wall Street Journal and seeing advertising that’s perfectly fit for you, rather than generic ones for Dutch investment banks. (Note: The company hasn’t said they’re doing this. It’s just a possibility that I think would be interesting.)
3) Engagement analytics may attract better-produced content. The CPM (cost-per-1000-impressions) or CPC (cost-per-click) model of advertising incentivizes cheaply produced, thinly-reported content and loads of linkbait. If you’re a free media property relying solely on advertising, you want to get as many hits as possible as fast as possible. So you want to write short pieces with provocative headlines or go the Demand Media route, by studying search trends and producing 5,000 items a day in response to changes in search volume.
But if you’re optimizing for likes and comments, a three-paragraph story produced in 15 minutes is not going to get a lot of interaction, unless it’s shocking news or thought-provoking.
4) News is compelling in a social context. There are stories out there that I probably wouldn’t give a second glance to if it weren’t for a couple of friends discussing and sharing them. Facebook will probably be the best place online for mainstream audiences to replicate the experience of reading and sharing The Sunday New York Times (outside of the newspaper’s own web site.)
The Huffington Post-Facebook Connect integration is the best example of the network’s potential for making news socially relevant. The integration created a virtuous cycle of traffic for both companies. People follow what their friends have read on the Huffington Post, click through on interesting links and then find more stories to share with other friends. Within the first month of the integration, Facebook referrals to The Huffington Post nearly tripled to 3.5 million visits.
5) Facebook may help balance Google’s power over publishers. If it becomes as significant as Google in terms of driving traffic, it will provide a counterweight against the search giant, and possibly give publishers — a teeny, tiny bit — of leverage.
Google commands the search market with 65.7% percent market share and said it paid $5 billion to publishers last year through AdSense. The arrival of Bing raised some hope that media companies like News Corp. could wrangle concessions out of both search engines by playing them off each other. As Facebook grows more powerful in directing traffic around the web, similar arguments will probably come up.
But with Facebook’s ARPU (average revenue per user) relatively low between an estimated $1 and 5, it’s highly unlikely that the company would share advertising revenue appearing on Fan pages or on its domain, just as it would be unlikely for Google to offer a share of its search ad revenues to the properties it indexes. Plus there are collective action problems in organizing millions of publishers to stand up against monolithic corporations. However the mere existence of another competitive player should push Google to be even more conscientious about its relationship with publishers.
Despite all this, Facebook doesn’t solve the news industry’s core problem.
Here’s how it used to be. There used to be a limited number of channels to reach consumers. You had to advertise in mass media like newspapers or TV stations to be in front of your potential customers. There was weak accountability for whether that advertising actually translated into real purchases, and instead mostly metrics on overall audience size and some demographic breakdown.
Now there are billions upon billions of sources of content competing for attention. And with that, the advertising model that once subsidized public interest and in-depth reporting has fallen apart. Plus, Google’s search ad model is more effective at capturing user intent and people when they’re close to the point of purchase.
As Clay Shirky so elegantly put it – from a business perspective, the best newspaper journalism of the 20th century was merely a fortuitous, economic “accident”:
“The expense of printing [newspapers] created an environment where Wal-Mart was willing to subsidize the Baghdad bureau. This wasn’t because of any deep link between advertising and reporting, nor was it about any real desire on the part of Wal-Mart to have their marketing budget go to international correspondents. It was just an accident. Advertisers had little choice other than to have their money used that way, since they didn’t really have any other vehicle for display ads.”
Facebook and Google are now the vehicles for display advertising and they now own these audiences in all their fragmented glory. It’s a tad ironic, considering that when Facebook initially conceived of the news feed, vice president of product Chris Cox said that the company started with the newspaper as their design paradigm on-stage at a real-time meetup last November.
While Facebook is a must-have distribution channel for news properties, it doesn’t change the fundamental economics facing news publishers. Audiences have splintered and taken traditional media’s pricing power over advertising with them. First movers like The Huffington Post that understand the power of social distribution will gain a tremendous advantage over other outlets that are late to the game. But as Facebook becomes more saturated and crowded with news content, we’ll be back to where we started with lots of sites screaming for our attention.

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