Growth of online video is staggering:
According to Move Networks, a company based in Utah that provides online video technologies, more than 100,000 new viewers jump online every 24 hours to watch its clients’ long-form or episodic video. During the first two weeks of November alone, more than twice the number of Americans were watching TV online than in the entire month of August.
The repercussions are clear:
And as they shift their focus away from TV to grab us on one of the many other screens in our lives — our computers, cellphones and iPods — the command-and-control economic model of traditional television is being quickly superseded by the market chaos of a freewheeling and open digital network.
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WatchMojo NewsletterWHY IS BEACON AND SOCIAL MEDIA ADVERTISING DOOMED TO FAIL?
Part of the problem facing Facebook is that tech companies that rely on advertising have gotten lazy about content and don’t understand the media business. This is why many VCs have bad track records in web consumer media investing, because so many of them are not media, advertising or publishing professionals, but rather, technology guys who are smitten with Google’s success (the most successful ad-supported tech company).
When Mark Zuckerberg announced, somewhat sheepishly, that media changes every 100 years, it was ironic, and wrong.
It was ironic because the next day, William McGeveran, a professor at the University of Minnesota Law School, argued that Facebook’s new ad platform, dubbed Beacon, violated a 100 year law in the state of New York that “protects people from having their names and likenesses used for advertisements without permission”.
It was wrong because media and advertising have not changed for over 100 years, if not more.
Yes, technology has consistently changed the details: print, radio, TV, and now the web have created new environments where the details have changed, but the fundamental premise of advertising - what made Google a $200B and what Facebook relies on to justify a $15B value - has not.
Advertising is based on matching marketers with an audience given the demographics of the audience (be it readers, listeners or viewers).
But, the audience’s demographics are largely driven by the content.
However, the content has historically been created, edited and presented by the publisher.
That is key, but as Google did before it, and Facebook plans on doing, is to bypass a lot of the content creation, editing and presentation, and instead leverage content from others. In Google’s case, the content comes from public organizations; in Facebook’s case, it comes from private individuals.
That last underlined part is a major nuance and even more important on the monetization ability of search vs. social network.
If the geniuses involved with Facebook’s business model don’t realize the inherent challenge, limitations and complaints when they try to monetize that content, they are doomed to fail.
This is why Coca Cola - one of the world’s largest advertisers - balked at the idea.
WHAT FACEBOOK SHOULD DO
Oddly enough, earlier this year, when everything Facebook touched turned to gold, Zuckerberg announced proudly at Tech Crunch 40 that Facebook was neutral and did not editorialize, in other words, it was not a media company. That’s where Facebook erred in its platform. What Bebo did last month - open up and allow content creators to plug content and ads - and what MySpace is doing more and more of, is a much better marketing platform.
What Facebook has done as a tech platform works fine with software and what not, but last time we checked the score, software platforms were not doing too well in online advertising. Incidentally, maybe that is why Facebook and Microsoft were a match made in heaven…
But what Facebook can do going forward is to adopt its platform from one used to currently create vapid applications to one that allows content owners to really import and target users.
I know what you’re thinking: as a content owner, there is nothing stopping you from creating apps around your content, but it’s not the same. MySpace is a far better media platform, even though the demographic data on Facebook users are far more accurate, thus valuable.
I doubt users would mind if they were greeted with content… which in turn had advertising embedded in it… that is after all how media, publishing and advertising has worked for at least 100 years.
Mark Zuckerberg is all of 23 years old, but for someone who claims to being into history, he might want to freshen up on his history of media companies…
I probably need to dust off my microeconomics books to better understand the nuance between edgeconomy and massconomy (I guess those are seats between First Class and Economy?), but interesting nonetheless:
The point is: in the edgeconomy, business models happen. The days of business model fascism are over.
Business models can no longer be planned in an ivory-tower boardrooms, announced by grand decree, pushed through the value chain by inert market power, shoved down helpless, hapless consumers’ throats, and left inert for the next century.
That approach to commerce is as obsolete as a mainframe or a Model T Ford. And the venture guys, CEOs, etc who don’t get it are great at killing their companies dead.
That’s why I keep making the fundamental point - Facebook’s DNA was built for the massconomy. Unfortunately, Facebook is at the forefront of the edgeconomy. This fundamental strategic mismatch is why Facebook’s problems are growing - and will continue to accelerate.
I agree with the boldfaced part… I’m not sure I’d give Facebook and its backers that much credit re: their gameplan for advertising. The fact is Mark Zuckerberg is a programmer who borrowed his main idea from many before him and a wide array of factors including luck, simplicity and timing propelled him and Facebook under the limelight…
Mind you, beyond those factors, comes Zuckerberg’s ambition and drive, according to a controversial article in a Harvard magazine:
What can [explain Facebook’s success], in large part, is Zuckerberg. Tales of Zuckerberg forgoing food to program through the night are near legendary. He coded facemash in a two-day, half-drunk frenzy, according to his online journal. “I haven’t really eaten all day,” he wrote. “My diet and sleeping patterns really go to shit when I have a coding project … or when I don’t.”
But, with ambition and drive, sometimes comes hubris, too.
This is probably the fourth big mistake - or mishandling of an opportunity - he’s made in the past 12 months alone.
Mistake #1 was the way the news feeds was announced. Yes, today it is a great add-on but it had to be scaled back and modified after users cried foul.
Mistake #2 was the FB apps and FB fund. Yes, the concept of a platform is great, but devoid of utility (ironically) the apps are largely useless and only create noise. It’s why I spend far less time on Facebook than I did a few months ago (and I was never a heavy user). The point is: it killed my user experience. That was the FB apps, the FB fund was a f-up from the get-go. It showed a lack of experience and common sense.
Mistake #3 was Beacon, from beginning to end. This isn’t the end, because Coke balking at the program is really just the beginning of the bad news from mainstreet, and Madison Avenue.
Mistake #4 was the MSFT investment: $240M for a 1.6% stake is great, but at a paper value of $15B, Facebook is going to have a hard time yielding an actual exit. An IPO is impossible at given revenue, profit levels and lack of business plan; and M&A is off the table too as MSFT will you-know-what block any deal by Google, Yahoo!, News Corp. etc. and not have any reason to pull the trigger itself…
The backdrop of all of this, is that (at least when VCs Accel, Meritech and Greylock came on board), Mark Zuckerberg put in a clause that the board could not replace Mark Zuckerberg as CEO. Problem is, even Yahoo! made room for Tim Koogle and Google made room for Eric Schmidt. I’m not sure who really gets the credit for YHOO and GOOG’s success, but at present rate, unless Zuckerberg gets an injection of humility and common sense, I know who will be blamed for Facebook’s Friendsterization.
Monthly growth since June 2007: Now streaming millions of videos each month. Technical analysts will note the uptick in growth.
Monthly growth rates are:
August to September: 25%
September to October: 36%
October to November: 40%
November to December: 51%
Daily growth since June 2007: Now serving hundreds of thousands of streams per day.
We still only have - at most - 30% of our clips on our network… these graphs are from part of our total network, but the trendlines are representative of the growth in our total reach (our WatchMojo.com property + the 50 or so places we distribute content to)…
And, we shall be announcing a few major announcements soon, we shall… we so shall.
