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? 

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 Times published 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.)

MediaPost.com: Search Marketing Daily

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