Facebook’s Surprising Dependency on Premium Content Creators

This article was published as a guest post in AdAge, and is republished here for Digital Quarters readers.

My friends in the expensive business of premium content have an economic bone to pick with a certain social network. The story goes that Facebook gets mundane content from its users for free, and then uses that content to draw its audience of more than a billion people, most of them spending hours on end at the site. And somehow, without spending a dime on content, Facebook rakes in the advertising dollars.

It’s not right, is it? The world’s most creative professionals painstakingly toil to create outstanding – and undeniably expensive – content, all while banal photo snapshots of breakfast make billions for Facebook. Oh, the humanity!

But there’s an insidious catch to the myth that Facebook doesn’t need professionally-produced content. The truth is that Facebook not only benefits from third-party content – the network actually wouldn’t survive without it.

Of course, that’s not a message shouted to us out loud from the tops of the Mountain View campus. In solidarity with Google and Twitter (and more recently Yahoo), Facebook claims that they are not a media company. And the way Facebook slammed the door on the Social Reader last year, leaving previously boosted publishers in a sudden traffic free-fall, you’d have to agree that media is not their top priority. It’s easy to understand why: staring down the barrel of the IPO, Facebook was smart to refocus efforts on advertising on their own site and away from non-revenue-generating avenues like publisher partnerships.

In the long run, however, the Facebook equation will be highly dependent on premium content. As the novelty of status updates wears off and a generation of consumers is born immune to its charms, the utility of Facebook will need to increase. Baby pictures sure seem to garner lots of Likes, but people come to Facebook seeking connections that go beyond a simple thumbs-up. The only way to build true connection is through conversation. And what spurs conversation? Meaningful, relevant content.

You don’t have to tell this to LinkedIn. They launched their own – proprietary!! – content program last fall: a mix of trending business news and opinion pieces written by top CEOs and other influencers. Then traffic and engagement went through the roof. And when did YouTube hit its stride? There’s no denying that elephants are cool, but it wasn’t the user-generated content that attracted hordes of internet viewers – YouTube really took off when people realized they could post and watch clips from Saturday Night Live and other expensive-to-produce shows.

We share and post things we feel strongly about: opinions, news, our favorite TV shows. Without that kind of conversational kindling built into the Facebook feed, the social network will inevitably start to lose our attention. In fact, according to Rupert Murdoch, it’s already happening.

Even if they haven’t publically acknowledged it yet, Facebook is well aware of the gaping content hole in their long term survival strategy. In fact, according to a source at The Wall Street Journal, Facebook has been quietly working on their own news reader for over a year now.

It’s too early to say whether they’ll execute it well. But if they do it right, Facebook could become the one-stop shop for news and premium content – all that stuff we’re currently crawling the rest of the web for. Even better, instead of barraging us with whatever random sponsored inventory they need to move, Facebook knows enough about us to become an ultimate trusted curator – of personal updates, media content, and even products that are truly interesting to me. And the more it works, the more valuable it makes Facebook as a critical distributor for media companies themselves.

It’s not far-fetched … not at all. In fact, LinkedIn’s recent moves in more professional circles validate the opportunity; and Facebook could provide a service for consumers both comparable and complementary to its competitor.

The bottom line is that Facebook does need content from publishers in order to succeed: content is the currency of conversation among users. Without good, thought-provoking, emotion-inducing content, it’s all just duck faces and sponsored messaging.

After all, we’ve seen that before – it was called MySpace.

Where Are the Great New Media Empires?

This article was published in Ben Elowitz’s Media Success newsletter and is republished here for Digital Quarters readers.

I think we all have a clear view of who built the most amazing and enduring media empires over the last several decades.  But even after watching the unfolding of the Upfronts and the NewFronts this spring, I was struck that we don’t yet have an earthly clue as to whose creation will become the next one.  Twenty years into digital media, not one new media company has come even close to establishing a content brand worthy of Disney, Murdoch, Hearst, or Newhouse.

And with digital media’s comparatively fragmented audiences and tiny margins, it’s almost hard to imagine achieving such epic proportions today.  Which makes me all the more curious:  When (and if) the next great media empire finally arrives, what will it look like?

The battle to define the next generation is on, and to date we’ve seen three forms of contestants:  the platforms (Facebook, Twitter), the portals (AOL, Yahoo), and the independents (Vox, Say Media).  Where would you place your bets for the next 20 years?

 

Biggest Winner to Date:  The Platforms

While the last decade has brought challenges (to say the least) to traditional media companies, it has been a golden age for the technology platforms that reach audiences online.  Facebook, Twitter, Netflix, Hulu, iTunes, YouTube, and Amazon have won the lion’s share of our content-surfing attention, and they’ve been rewarded with an influx of ad dollars and subscription revenues to match.

Of course, none of these platforms are media companies – at least in the sense that not one of them built a business on their own original content.  The definitive stance of Twitter’s Dick Costolo – “I don’t need or want to be in the content business” – has been echoed repeatedly by the leadership at Facebook and Google.  Hulu, Netflix, iTunes, and Amazon may claim more of a kinship with media, but at the end of the day they are still (with occasional exceptions) merely conduits for someone else’s content.

True media brands win over the hearts and minds of audiences with a unique point of view.  Platforms, on the other hand, are mostly dumb but useful pipes.  They get the people the content they want, and they’ve won hundreds of millions of users that way.  But they sure aren’t content brands.  Technology can aggregate an audience, but it takes personality, a point of view, and original content to build an empire.

 

The Original Digital Promise:  The Portals

Back in the v1, the portals were platforms.  They combined three must-haves – a dial-up connection, an email account, and a start page.  They drew a massive audience with these killer apps, and along the way they built content and advertising revenue streams and considered themselves in the media business.

But despite their enviable combined reach of 460 million users monthly, the portals today have an audience problem:  they are no longer genuinely earning their audience.  It’s what Alex Berg calls “the Mazda syndrome”:  you don’t choose a Mazda; you end up with a Mazda.  (Thanks for the 2001 626, mom, I promise to drive it until I can afford something else!)

By and large, users aren’t coming to portals for the content; they are coming to log into the legacy email account that is more cost than benefit to change.  While they’re there, they click on a story.  According to comScore data, almost 70 percent of the visitors to Yahoo’s media properties came from Yahoo Mail.

The portals have both content and audience, but most of their audience isn’t there for the content.  And since portal email use has declined 30 percent in the past four years, that missing link is becoming more and more of a problem.  You can’t build an empire on an unstable foundation.

 

Honorable Mention for Brand Purity:  The Independents

Portals, platforms, and legacy media companies maintain their extensive reach –their single greatest advantage with advertisers – by providing mass content to mass audiences.  But this broad-not-deep approach left an important gap for new entrants to fill:  independent publishers like Buzzfeed, Mashable, and Vox’s The Verge saw the opportunity and brought tailor-made content to niche audiences on the Internet.  In turn they were rewarded with fierce brand loyalty, viral sharing, and exploding visitor growth.

While the top independents have been huge successes with their audiences, they now occupy a tweener role in digital media:  big enough to be meaningful, but small enough to be of “questionable scale,” as the technology folks would say.  Relative to the portals and the platforms that see hundreds of millions of visitors monthly, the independents are tiny fish in a huge sea of entertainment options.

In fact, it’s impossible to build empire-caliber scale on a single media property.  What a media brand needs is a portfolio of properties – it’s the only way to earn premium pricing from advertisers and to leverage your brand into new revenue streams.

The independents are off to a good (albeit small) start with strong brands and loyal audiences.  After all, before there was the Disney empire, there was a mouse on a sketchpad.  We all start from somewhere.

 

Combine Ingredients, Mix Well

Chances are that the ultimate next-generation media company won’t be one of the independents we know today.  But it won’t be a portal, either, nor will it be a platform.  The next media empire will almost certainly have attributes of all three.

Advice for aspiring emperors:  Take a cue from the platforms and become masters of distribution.  From the portals, learn to build massive audiences in order to serve advertisers and build a true network effect.  Like the independents, value and exemplify brand purity – the kind of purity and spunk that also, ironically, built the greatest media empires of yesteryear.

Ultimately, a media company’s strength lies in the brands that it builds.  Those great, big, beautiful brands that draw their own audiences at scale are the prize of the industry.  But the road to get there?  It will take amazing content with great distribution and killer technology.  Now that’s a foundation for a new empire.