Facebook and the Media Have an Increasingly Landlord-Tenant Style Relationship
fortune.com
fortune.com
Imagine you create a craft beer. You can't build a relationship with all of the bars, restaurants, nightclubs, gas stations, convenience stores, and grocery stores that sell beer. So you sell through a distributor, who has all of those relationships. The amount of product you sell is now at the whim of that distributor.
You own the product. The distributor owns the means of getting it to the audience. You can sell some direct, but not as much as the distributor can. So you go to them for volume.
You can increase sales by creating a better product, so consumers demand it (i.e. high quality content). You can provide incentives to the distributor (i.e. paid ads on FB). You can do some of your own marketing to make it appear more valuable. But ultimately, you have to sell to the distributor as much as the end customer.
And if you're in a popular category (content/craft beer), the more people that enter, and the more product they have, the less share of shelf-space (which is like the facebook feed) any one product is going to get.
(1) There are multiple competing distributors who compete for your business. On the other hand, Facebook holds a monopoly on the time spent on its page and is incredibly dominant.
(2) Distributors don't typically compete with producers, but Facebook does. It also has "owned" content (friend's updates, videos, etc.) which it can serve without giving any traffic to media producers. This gives it a much stronger negotiating advantage.
FWIW, I thereby will argue that Facebook is acting more like a "retailer" than either a landlord or a distributor ;P. You are trying to get space on their shelves so people "browsing" see the things you are selling. You technically can create your own store somewhere, but people don't randomly browse there.
One of my favorite stories of the relationship between a retailer and a supplier is that of Wal-Mart dealing with record labels in the mid-2000s. Wal-Mart, Target, and Best Buy represented over half of all music sales, but from the perspective of those stores music was, at best, a loss-leader for stereo systems.
http://www.rollingstone.com/music/news/wal-mart-wants-10-cds...
> "This wasn't framed as a gentle negotiation," says one label rep. "It's a line in the sand -- you don't do this, then the threat is this." (Wal-Mart denies these claims.) ... "We're in such a competitive world, and you can't reach consumers if you're not in Wal-Mart," admits another label executive.
> While Wal-Mart represents nearly twenty percent of major-label music sales, music represents only about two percent of Wal-Mart's total sales. "If they got out of selling music, it would mean nothing to them," says another label executive. "This keeps me awake at night."
> For the music industry, having such a dominant retailer is like being stuck in a bad marriage. Whereas traditional music retailers took advertising money from the labels to push new releases in Sunday newspaper circulars, Wal-Mart barely advertises locally. It relies on national campaigns, where it promotes its own low-price policy. "Wal-Mart has no long-term care for an individual artist or marketing plan, unlike the specialty stores, which were a real business partner," says one former distribution executive. "At Wal-Mart, we're a commodity and have to fight for shelf space like Colgate fights for shelf space."
Facebook owns the audience (land), but they don't yet have the ability to fully satisfy (farm) that audience. So they direct traffic out to publishers who provide content to fulfill that demand. Like sharecropping, they split the revenue.
Of course, there's a reason that sharecropping has a bad name: all the power is held by the owner (Facebook). They can, and probably will, shift to a model of owning the content directly.
In 10 years, I wouldn't be surprised if most publishers were dead, replaced by Facebook directly paying creators. (We can already see this in television, with Netflix directly producing their own content.)
More compellingly, content generation could be owned by facebook if there was a limited set of content to generate. Farms produce some limited subset of crops (e.g. corn, rice). Netflix produces a limited set of tv shows. Netflix with only the shows that netflix creates wouldn't be as compelling without access to the other large corpus of shows. The same would be for FB. While it could be argued that FB could generate its own content, like Apple/Google apps on the app stores + other apps, I doubt that the cost/benefit of FB becoming their own content producing shop will ever be compelling enough to kick out the existing media companies.
It'll probably follow the Netflix model more closely: building specific pieces of content which it thinks are desirable for the platform and as a competitive edge against others.
One example: I envision Facebook expanding its "trending stories" feature to include a full-length in-house article about trending news.
This has always been one of Microsoft and Apple's biggest strengths (though executed with varying degrees of competency at various times for both of them).
Facebook isn't going to replace all existing publishers, but it very well might become a publisher for a few very profitable sub-niches / types of content.
Or more likely (again, a la Microsoft and Apple) simply buy quality publishers in those niches. Because quality, but under-supported publisher + first-party FB analytics, advertising ability, & platform control = a pretty winning play.
Yes, just as much as I believe other outlets. All those same criticisms apply equally to other news sources.
In fact, at least Facebook would use data to drive their stories.
Yes. This is the metaphor I use for describing building applications within a walled garden (like iOS): You don't have users, Apple has users, you have a portion of Apple's "real estate" that you can monetize while turning over 30%, and if Apple thinks somebody else can do a better job of monetizing that real estate (including themselves), then (effectively) out you go.
This is exactly what the publishers are doing: They are creating content for Facebook's users, not for their own users. They are not building an audience that happens to use Facebook to connect to their content, it's that Facebook has an audience that happens to read the publisher's content.
It's Facebook's land, and the publishers till Facebook's fields at Facebook's pleasure.
> In 10 years, I wouldn't be surprised if most publishers were dead, replaced by Facebook directly paying creators.
This works for YouTube. If you can generate millions of views, you can get a share of the advertising revenue.
Like the scorpion, it is in its nature.
I highly, highly doubt it.
-Marshall McLuhan
While Vihart is talking about youtube in this video, her discussion of Edmond Snow Carpenter's "They Became What They Beheld" is very relevant to this situation as well. (note: Marshall McLuhan may have written an early version the book)
Too much medium, not enough message.
Maybe they need to create a 'Google Reader' :)
[edit: fixed typo]
The problem which Google Reader solves is "show me some stories from a variety of sites which interest me." Facebook also solves this, admittedly in a rather different way, but it's still the same job to be done.
> Can you put in rss feeds to your front page on FB?
No. But that didn't keep me from replacing Google Reader with increase Facebook use.
But it seems to work, at least for the bigger part of the population.
Actually, Facebook does have a "save post" feature.
> But it seems to work, at least for the bigger part of the population.
Yup, it's a pretty suitable news/reader replacement.