Tag Archives: Strategic management

December 17, 2015 · 10:54 am

Charging Facebook

I’m a believer in things repeating themselves in business, even if they take slightly altered forms or use up to date technology.  It’s an offshoot of my mantra about not confusing the business with the tools, I guess.  In any event, I got to thinking about a tidbit I picked up while going through my news feeds the other day.  It turns out according to SimpleReach, a distribution analytics company, referral traffic to the top 30 Facebook publishers  plunged 32 percent from January to October. Among the top 10, the drop was 42.7 percent.  The drop was confirmed by other analytics sources as well.  This, of course, got me thinking about cable operators and television networks.

Facebook logo Español: Logotipo de Facebook Fr...

(Photo credit: Wikipedia)

Like a cable system, a social network is a big, empty pipe.  It creates a method for distribution and little else.  All of the innovation at a social network is focused on improving that distribution and not on the content.  Back when the web started, publishers plugged right into the web and promoted like crazy to get “viewership.”  What Facebook and other social networks (read that as gatekeepers) have done is to take over much of the traffic creation.  This is exactly what happened when the world shifted from over the air broadcasting to cable, but there as a big difference.

In two words: affiliate fees.  This is compensation paid by the operators to the program providers.  It can run from pennies per home to $7+.  That’s per home, per month.  It’s a pretty strong reason why most “TV” content is only available with the blessing of a cable carrier (TV Everywhere).  Why would the publishers (content providers, a.k.a. TV nets) want to disrupt that business model, especially when the can supplement those dollars with ad revenues?

Back to Facebook.  Publishers spent several years building content islands on Facebook, only to have Facebook revamp their algorithm and sent less traffic.  The problem is this:

With social media driving over 30 percent of all traffic to publisher websites and Facebook delivering 75 percent of that social traffic, no publisher, from BuzzFeed to The New York Times Company, can afford to skip using Facebook as a means to promote its content.That gives increasing leverage to Facebook, which is able to greatly influence the prominence and visibility of publishers’ articles in the News Feed of its users.

So here is a prediction, one that might not happen for a couple of years, but one that I think, based on the history of cable TV, will occur eventually.  Content providers are going to charge Facebook.  I’m not talking about sharing ad revenues; I mean the digital equivalent of affiliate fees.  Someone will bite the bullet – a big guy like the Times or HuffPo or maybe BuzzFeed – and tell Facebook to pay up.  Maybe they will take technical measures to prevent their content from being shared there but they won’t publish it themselves.  One publisher gone is not a big deal.  Many publishers gone means an empty pipe, and that means fewer users and fewer ads sold for Facebook.

What do you think?

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December 14, 2015 · 11:42 am

Pro Choice

I never had cable TV until I moved into New York City after college.  You needed the cable there because the big buildings interfered with the over-the-air signal.  Suddenly, a new world opened up, as I had access to several more channels, including HBO.

Cable tv

(Photo credit: Wikipedia)

I had more choice, and I was all for it.  Apparently, I wasn’t the only one either. Cable television contributed to the substantial drop in the broadcast network viewing from 1983 to 1994 when weekly broadcast audience shares dropped from 69 to 52 while basic cable networks’ shares rose from 9 to 26 during the same period according to A. C. Nielsen.  What had been a 6 or 7 channel universe now had almost 40!  100 channels was a dream for down the road and today’s world over several hundred channels seemed impossible.  But of course, as The Boss reminds us, there were 57 channels and nothing on.

Fast forward to today.  Our T/V (television/video) choices are unlimited.  The only real choice we need to make is who is going to do the programming – us or the channel’s programming department.  When we do it, we can watch what we want when we choose to do so.  We can binge on an entire season over a day and we probably won’t have to be interrupted by nearly as much advertising.  Allowing the channel to program our viewing means that those of us who don’t choose to make a decision about programming need not.  We can watch T/V as it traditionally was done – passively.

This changed environment has led to cord-cutters and cord-nevers.  After all, when 75% of people just want a “light” package of channels, paying more for the hundred the cable company chooses to carry seems silly.  As eMarketer predicts:

In 2015, there will be 4.9 million US households that once paid for TV services but no longer do, a jump of 10.9% over last year. And that growth will accelerate in the coming years, with the number of cord-cutting households jumping another 12.5% in 2016. In fact, by the end of next year, the number of US households subscribing to cable and satellite will drop below 100 million…Also noteworthy, the share of viewers who have never subscribed to cable or satellite (“cord-nevers”) is growing as well. This year, the percentage of US adults who have never subscribed to cable or satellite TV will reach 12.9%. That share will grow to 13.8% by 2016.

I have no doubt the cable providers will innovate – allowing you to upgrade your TV, for example, as the wireless carriers do your phone, bundling in streaming music, or changing their business emphasis entirely to being broadband providers (BYO Programming!).  But it’s going to be an interesting transition in the pro-choice video world.  You agree?

 

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December 1, 2015 · 12:22 pm

Unlimited Thinking

I’m not a fan of limited thinking. I much prefer the intellectual exercise of accepting the challenge of a difficult supposition and then figuring out a way to expand the set of answers. I often think of President Kennedy‘s challenge to put a man on the moon in 10 years when manned spaceflight had not really happened yet. Had everyone just said “no way” rather than “ok, so IF we were going to do that, how would we?”, we’d never have made it (nor had great films like Apollo 13!).

The Thinking Man sculpture at Musée Rodin in Paris

(Photo credit: Wikipedia)

I thought of that this morning when I read the quote below. It’s from a piece about the need for advertising to support content and a rant on how ad blockers are killing off content:

And so it really is a simple math problem. If there isn’t any money to pay the people who create content or buy and maintain the servers that host that content, there will not be any content. No one’s really coming at the story from that angle. And those who have lived almost their entire lives consuming content for free might need a good slap upside the head. In fact, everyone could use that slap. Because there are only two choices: ad-supported content or subscription-based content. And we all know most will take free if they can get it.

So there is our difficult challenge.  I disagree that there are only two choices, however.  I’ve also come to realize that it’s really only a problem for a select group of content providers.  First, the “two choice” thinking.  What about a freemium model?  Some very large publishers have successfully adopted it, and if the quality of what you produce is there, people will want more and pay.  What about a donation model?  PBS has used it successfully for years.  So does Wikipedia.  I know of several digital entities – podcasts and otherwise – that use Patreon to fund their content production.  It’s possible to use the appeal of great content to support an affiliate sales model too – buying products from links on a review site, for example.  Frankly, it’s not hard to argue that the ad-supported model is one of the worst options. Besides requiring a large audience to make it work, I think it encourages publishers to grab and abuse consumer data or to inflate page counts (and ad counts) with endless slide shows, etc.  Limited thinking means limited choices.

The realization is this.  Most “publishers” link to a limited set of high-quality content producers.  How many stories that you read, even on big sites, link back to the original work done in the NY Times or Wall St. Journal?  It might be a fun exercise to see how many of the people complaining about no money to support content creation are actually creating content or adding value to someone else’s content. Maybe another business model is a little pass-through of payments to the real content creators from those who are using that work to generate revenue?  There was such thinking back in the early days of the web.  What happened?

As I said upfront, I don’t like limited thinking.  Hopefully today you understand why that is.  Was I clear?

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