LinkedIn was poised to become a major player in the business news sector. Instead, the professional social network is stuck with dull editorial content. Let’s see why it let the train pass, preferring to bet on quantity above everything else.
A new generation of photographers reinvents the way stories are told. For their images, the weapons of choice are social networks and applications, video and mobile phones.
No one should be happy with the sale of French video streaming Dailymotion to Vivendi. Not buyers, nor the the startup’s management team –and certainly not the venture capital community. (First of two articles)
Update on May 13 : 9 publishers joining Facebook Instant Articles program.
[Our April 6 article:]
Several major news organizations are said to be in negotiations with Facebook for a hosting deal. This throws the media sphere into an intense debate: Is this a path to prosperity or a dangerous surrender?
by Frédéric Filloux
Some legacy media assets are vastly underestimated. A few clues in four charts.
Recent annual reports and estimates for the calendar year 2014 suggest interesting comparisons between the financial performance of media (either legacy or digital) and Internet giants.
In the charts below, I look at seven companies, each in a class by itself:
For two companies, in order to make comparisons relevant, I broke down “digital revenues” as they appear in financial statements: $351m for the New York Times ($182m in digital advertising + $169m for digital subscriptions) and, for The Guardian, $106m (the equivalent of the £69.5m in the Guardian Media Group annual report (PDF here).
Audience numbers above come from ComScore (Dec 2014 report) for a common reference. We’ll note traffic data do vary when looking at other sources – which shows the urgent need for an industry-wide measurement standard.
The “Members” column seemed necessary because traffic as measured by monthly uniques does differ from actual membership. Such difference doesn’t apply to news media (NYT, Guardian, BuzzFeed).
For valuations, stock data provide precise market cap figures, but I didn’t venture putting a number the Guardian’s value. For BuzzFeed, the $850m figure is based on its latest round of investment. I selected BuzzFeed because it might be one of the most interesting properties to watch this year: It built a huge audience of 77m UVs (some say the number could be over 100m), mostly by milking endless stacks of listicles, with clever marketing and an abundance of native ads. And, at the same time, BuzzFeed is poaching a number first class editors and writers, including, recently, from the Guardian and ProPublica; it will be interesting to see how Buzzfeed uses this talent pool. (For the record: If founder Jonah Peretti and editor-in-chief Ben Smith pull this off, I will gladly revise my harsh opinion of BuzzFeed).
The New York Times is an obvious choice: It belongs to the tiny guild of legacy media that did almost everything right for their conversion to digital. The $169m revenue coming from its 910,000 digital subscribers didn’t exist at all seven years ago, and digital advertising is now picking up thanks to a decisive shift to native formats. Amazingly enough, the New York Times sales team is said to now feature a ratio of one to one between hardcore sales persons and creative people who engineer bespoke operations for advertisers. Altogether, last year’s $351m in digital revenue far surpasses newsroom costs (about $200m).
A “normal” board of directors would certainly ask management why it does not consider a drastic downsizing of newspaper operations and only keep the fat weekend edition. (I believe the Times will eventually go there.)
The Guardian also deserves to be in this group: It became a global and digital powerhouse that never yielded to the click-bait temptation. From its journalistic breadth and depth to the design of its web site and applications, it is the gold standard of the profession – but regrettably not for its financial performances, read Henry Mance’s piece in the FT.
Coming back to our analysis, Google unsurprisingly crushes all competitors when it comes its financial performance against its audience (counted in monthly unique visitors):
When measured in terms of membership — which doesn’t apply to digital media — the gap is even greater between the search engine and the rest of the pack :
The valuation approach reveals an apparent break in financial logic. While being a giant in every aspects (revenue, profit, market share, R&D spending, staffing, etc), Google appears strangely undervalued. When you divide its market capitalization by its actual revenue, the multiple is not even 6 times the revenue. By comparison, BuzzFeed has a multiple of 8.5 times its presumed revenue (the multiple could fall below 6 if its audience remains the same and its projected revenue increases by 50% this year as management suggests.) Conversely, when using this market cap/revenue metric, the top three (Twitter, Facebook, and even LinkedIn) show strong signs of overvaluation:
Through this lens, if Wall Street could assign to The New York Times the ratio Silicon Valley grants BuzzFeed (8.5 instead of a paltry 1.4), the Times would be worth about $19bn instead of the current $2.2bn.
Again, there is no doubt that Wall Street would respond enthusiastically to a major shrinkage of NYTCo’s print operations; but regardless of the drag caused by the newspaper itself, the valuation gap is absurdly wide when considering that 75% of BuzzFeed traffic is actually controlled by Facebook, certainly not the most reliably unselfish partner.
As if the above wasn’t enough, a final look confirms the oddity of market valuations. Riding the unabated trust of its investors, BuzzFeed brings three times less money per employee than The New York Times does (all sources of revenue included this time):
The news media sector has become heavily dependent on traffic from Facebook and Google. A reliance now dangerously close to addiction. Maybe it’s time to refocus on direct access.
Digital publishers pride themselves on their ability to funnel traffic from search and social, namely Google and Facebook (we’ll see that Twitter, contrary to its large public image, is in fact a minuscule traffic source.) In ly business, we hunt for the best Search Engine Optimization specialists, social strategists, community managers to expand the reach of our precious journalistic material; we train and retrain newsroom staff; we equip them with the best tools for analytics and A/B testing to see what headlines best fit the web’s volatile mood… And yet, when a competing story gets a better Google News score, the digital marketing staff gets a stern remark from the news floor. We also compare ourselves with the super giants of the internet whose traffic numbers coming from social reach double digit percentages. In short, we do our best to tap into the social and search reservoir of readers.
Illustration by Rafiq ElMansy DeviantArt
Consequences vary. Many great news brands today see their direct traffic — that is readers accessing deliberately the URL of the site — fall well below 50%. And the younger the media company (pure players, high-performing click machines such as BuzzFeed), the lower the proportion of direct access is – to the benefit of Facebook and Google for the most part. (As I write this, another window on my screen shows the internal report of a pure player news site: In August it only collected 11% in direct access, vs. 19% from Google and 24% from Facebook — and I’m told it wants to beef up it’s Facebook pipeline.)
Fact is, the two internet giants now control most of the news traffic. Even better, they collect on both ends of the system.
Consider BuzzFeed. In this story from Marketing Land, BuzzFeed CEO Jonah Peretti claims to get 75% of its traffic from social and to not paying much attention to Google anymore. According to last Summer ComScore data, a typical BuzzFeed viewer reads on average 2.3 articles and spends slightly more than 3 minutes per visit. And when she leaves BuzzFeed, she goes back to the social nest (or to Google-controlled sites) roughly in the same proportion. As for direct access, it amounts to only 6% and Twitter’s traffic is almost no existent (less than 1%). It clearly appears that Twitter’s position as a significant traffic contributor is vastly overstated: In real terms, it’s a tiny dot in the readers’ pool. None of this is accidental. BF has built a tremendous social/traffic machine that is at the core of its business.
Whether it is 75% of traffic coming from social for BuzzFeed or 30% to 40% for Mashable or others of the same kind, the growing reliance to social and search raises several questions.
The first concerns the intrinsic valuation of a media so dependent on a single distribution provider. After all, Google has a proven record of altering its search algorithm without warning. (In due fairness, most modifications are aimed at content farms and others who try to game Google’s search mechanism.) As for Facebook, Mark Zuckerberg is unpredictable, he’s also known to do what he wants with his company, thanks to an absolute control on its Board of Directors (read this Quartz story).
None of the above is especially encouraging. Which company in the world wouldn’t be seen as fragile when depending so much on a small set of uncontrollable distributors?
The second question lies in the value of the incoming traffic. Roughly speaking, for a news, value-added type media, the number of page views by source goes like this:
Direct Access : 5 to 6 page views
Google Search: 2 to 3
Google News: ~1
These figures show how good you have to be in collecting readers from social sources to generate the same advertising ARPU as from a loyal reader coming to your brand because she likes it. Actually, you have to be at least six times better. And the situation is much, much worse if your business model relies a lot on subscriptions (for which social doesn’t bring much transformation when compared, for instance, to highly targeted emails.)
To be sure, I do not advocate we should altogether dump social media or search. Both are essential to attract new readers and expand a news brand’s footprint, to build the personal brand of writers and contributors. But when it comes to the true value of a visit, it’s a completely different story. And if we consider that the value of a single reader must be spread over several types of products and services (see my previous column Diversify or Die) then, the direct reader’s value becomes even more critical.
Taken to the extreme, some medias are doing quite well by relying solely on direct access. Netflix, for instance, entirely built its audience through its unique recommendation engine. Its size and scope are staggering. No less than 300 people are assigned to analyze, understand, and serve the preferences of the network’s 50 million subscribers (read Alex Madrigal’s excellent piece published in January in The Atlantic). Netflix’s data chief Neil Hunt, in this keynote of RecSys conference (go to time code 55:30), sums up his ambition by saying his challenge is “to create 50 million different channels“. In order to do so, he manages a €150m a year data unit. Hunt and his team concentrate their efforts on optimizing the 150 million choices Netflix offers every day to its viewers. He said that if only 10% of those choices end up better than they might have been without its recommendation system, and if just 1% of those choices are good enough to prevent the cancellation of a subscription, such efforts are worth €500m a year for the company (out of a $4.3bn revenue and a $228m operating income in 2013). While Netflix operates in a totally different area from news, such achievement is worth meditating upon.
Maybe it’s time to inject “direct” focus into the obligatory social obsession.
Facebook’s incredible global reach and success appear to forestall challenges. In the long run, though, the social network’s growth and its frantic quest for new revenue sources raise questions. (First of two articles)
Casting doubt on Facebook’s future is like going to Rome and questioning the existence of God. It’s not the right venue to do so. First, you can’t argue with figures, they’re overwhelming. Each institution features about the same number of devotees: 1.2 billion across the world. As for financials, Facebook’s annual report shows strong growth and wealth: $7.8bn in revenue for 2013 (+ 55% vs 2012), net income at $1.5bn and a $11bn cash pile. As for the Catholic Church, since it doesn’t not issue financial statements, we are left to guesstimates. Two years ago, a story in the Economist provided a back-of-the-envelope calculation putting the operating budget of the American Catholic Church alone to $170bn, the bulk being health and educational institutions, with $11bn for parishes where hardcore users are – which, for that part, is much better than Facebook.
Why, then, question Facebook’s future? Mainly for two reasons: ARPU evolution and diversification.
Let’s look at a few metrics. The most spectacular is the Monthly Active Users (MAUs) base: 1.23 billion people for the entire world. An interesting way to look at that number is to break down the global MAUs into geographic zones and combine those with ARPU numbers (calculated from the quarterly figures stated in the annual report). The results look like this:
Facebook’s long term challenge comes from these two factors: North American growth will be flat this year, and the rest of the world doesn’t bring much. The company is heavily and increasingly dependent on advertising: from 85% of its revenue in 2012 to 89% last year. Logically, its only option is to squeeze more money per user — which it steadily managed to do thus far. But, in the Facebook ecosystem, making more money from ads means milking more cash from users’ data. This, in turn, will lead to a greater invasion of privacy. It certainly doesn’t seem to bother Mark Zuckerberg, who is a transparency apologist.
Actually: Is he or was he?
As author David Kirkpatrick pointed out in his excellent opus, The Facebook Effect, Zuckerberg once said that “Having two identities for yourself is an example of a lack of integrity” (and judging by FB’s content policy, anyone can wonder if putting a breast-feeding pictures a sign of depravation?)
That was then.
Now, to address privacy concerns, Facebook is said to consider anonymous logins. It’s probably a good idea to back off a bit on the totalitarian pitch quoted above, but since the extensive data-mining performed by the network is made much more valuable by its use of real user names, anonymous logins are sure to impact the ARPU in the more mature markets. Along that line of thought, in Europe, Facebook’s ARPU is less than half of what it is in the US & Canada: $8.04 vs. $18.70. This significantly lower number stems from privacy concerns that are much more developed in European countries. There, the 20-25 segment seems especially worried about the consequences of spending too much time on Facebook.
A remaining lever is what I’ll call the Big Tobacco strategy: Do elsewhere what you can no longer do on your home playing field. Facebook might not be as cynical as Philip Morris (reborn as Altria as an attempt to erase the stain), but it is undoubtedly bound to try and replicate its successful collect-and-milk consumer data mechanism.
This might take a while to achieve.
First because of the ultra-slim ARPU generated by emerging markets users. You might object that the Indian market, as an example, currently enjoys growth along two dimensions: more users, with growing incomes. Granted. But the more sophisticated the India market becomes, the more inclined it will be to create a social network much more attuned to its own culture than a Menlo Park-based system manned by geeks in hoodies. Never underestimate the power, nor the determination of locals. And, let’s not dream too much about a huge Chinese version of Facebook.
Also, for Facebook, the cost of operating its service will make the ARPU question one of growing urgency. Again, based on the 2013 annual report, FB’s Cost of Revenue — mostly infrastructure — amounts to $1.9bn. Divided by the 757 million DAUs, it costs $2.5 per year to serve a single daily user, that is connecting to his/er pals, hosting photos, videos, etc. If we aggregate all the cost structure components (networking, giant data centers and also R&D, sales & marketing, administrative), the cost of taking care of a single daily user rise to $6.69 per year and $4.12 for a monthly user. It’s still fine for an American and a European, much less so for an Asian who brings a yearly ARPU of $3.15, or an African who brings a mere $2.64 (in theory, the strain on the infrastructure is roughly the same, regardless of user location).
But some will argue Facebook is doing quite well on mobile. Out of its 1.23 billion monthly users, FB says 945 million reach its service via a mobile each month and 556 million do so on a daily basis. And, as stated in its 10-K, mobile is at the core of Facebook’s future:
There are more than 1.5 billion internet users on personal computers, and more than three billion mobile users worldwide according to GSMA Wireless Intelligence, and we aspire to someday connect all of these people.
Fine, but once again, the ARPU weakens the ambition. While a mobile subscriber in the US and Europe brings respectively $69 and $38 each year (source: GSMA), according to the Cellular Operator Association of India, a Indian mobile subscriber yields only $1.72 per year. This makes advertising projections a tricky exercise.
As it expands, Facebook’s current model will inevitably yield less and less money per user. Hence, its frenetic quest for diversification and service extensions — a topic we’ll address in a future Monday Note.
As for the Church, it certainly is a safer bet than Facebook: The user base is less volatile, the interface blends much better into local cultures, barriers to competitive entries are stronger (and much older), and believers have long sacrificed their privacy to articles of faith.
For publishers, developing an all-out mobile strategy has become both more necessary and more challenging. Today, we look at key data points and trends for such a task.
#1 The Global Picture
— 1.7bn mobile phones (feature phones and smartphones) were sold in 2012 alone
— 3.2bn people use a mobile phone worldwide
— Smartphones gain quickly as phones are replaced every 18 to 24 months
— PCs are completely left in the dust as shown in this slide from Benedict Evans’ excellent Mobile is Eating the World presentation:
The yellow line has two main components:
— 1 billion Android smartphones are said to be in operation worldwide (source: Google)
— 700 million iOS devices have been sold over time, with 500 million still in use, which corresponds to the number of iTunes accounts (source: Asymco, one of the best references for the mobile market.)
— 450 million Symbian-based feature phones are in operation (Asymco.)
#2 The Social Picture
Mobile phone usage for news consumption gets increasingly tied to social networks. Here are some key numbers :
— Facebook: about 1.19bn users; we don’t exactly know how many are active
— Twitter: 232 million users
— LinkedIn: 259 million users
When it comes to news consumption in a social environment, these three channels have different contributions. This chart, drawn from a Pew Research report, shows the penetration of different social networks and the proportion of the US population who get their news from it.
One of the most notable data points in the Pew Report is the concentration of sources for social news:
— 65% say to get their news from one social site
— 26% from two sites
— 9% from three sources or more (such as Google +, LinkedIn)
But, as the same time, these sources are completely intertwined. Again, based on the Pew survey, Twitter appears to be the best distributor of news.
Among those who get their news from Twitter:
— 71% also get their news on Facebook
— 27% on YouTube
— 14% on Google+
— 7% on LinkedIn
Put another way, Facebook collects more than half of the adult population’s news consumption on social networks.
But a closer looks at demographics slightly alters the picture because all social networks are not equal when it comes to education and income segmentation:
If you want to reach the Bachelor+ segment, you will get:
— 64% of them on LinkedIn
— 40% on Twitter
— only 30% on Facebook
— 26% on G+
— 23% on YouTube
And if you target the highest income segment (more than $75K per year), you will again favor LinkedIn that collects 63% of news consumers in this slice, more than Facebook (41%)
Coming back to the mobile strategy issue, despite Facebook’s huge adoption, Twitter appears to be the best bet for news content. According to another Pew survey, the Twitter user is more mobile :
Mobile devices are a key point of access for these Twitter news consumers. The vast majority, 85%, get news (of any kind) at least sometimes on mobile devices. That outpaces Facebook news consumers by 20 percentage points; 64% of Facebook news consumers use mobile devices for news. The same is true of 40% of all U.S. adults overall. Twitter news consumers stand out for being younger and more educated than both the population overall and Facebook news consumers
And, as we saw earlier, Twitter redistributes extremely well on other social platforms. It’s a no brainer: any mobile site or app should carry a set of hashtags, whether it’s a stream of information produced by the brand or prominent bylines known for their insights.
#3 The Time Spent Picture
Here is why news is so complicated to handle in mobile environments. According to Flurry Analytics: On the 2 hours and 38 minutes spent each day on a smartphone and an a tablet by an American user, news accounts for 2% as measured in app consumption, which accounts for 80% of time spent. The remaining 20% is spent in a browser where we can assume the share of the news to be much higher. But even in the most optimistic hypothesis, news consumption on a mobile device amounts to around 5 to 6% of time spent (this is correlated by other sources such as Nielsen). Note that this proportion seems to decrease as, in May 2011, Flurry Analytics stated news in the apps ecosystems accounted for 9% of time spent.
This view is actually consistent with broader pictures of digital news consumption, such as these two provided by Nielsen, which show that while users spend 50 minutes per month on CNN (thanks to is broad appeal and to its video content), they only spend 18 minutes on the NYT and a mere 8 minutes on the Washington Post:
All of the above compares to 6hrs 42min spent on Facebook, 2hrs on YouTube or Yahoo sites.
In actionable terms, this shows the importance of having smartphones apps (or mobile web sites) sharply aimed at providing news in the most compact and digestible way. The “need to know” focus is therefore essential in mobile because catching eyeballs and attention has become increasingly challenging. That’s why The New York Times is expected to launch a compact version of its mobile app (currently dubbed N2K, Need to Know, precisely), aimed at the market’s youngest segment and most likely priced just below $10 a month. (The Times also does it because the growth of digital subscriptions aimed at the upper market is slowing down.) At the other end of the spectrum, the NYT is also said to work on digital magazine for iPad, featuring rich multimedia-narrative on (very) long form such the Pulitzer winning Snow Fall (on that matter, the Nieman analysis is worth a read).
This also explains why the most astute digital publishers go for newsletters designed for mobile that are carefully – and wittily – edited by humans. (One example is the Quartz Daily Brief; it’s anecdotal but everyone I recommended this newsletter to now reads it on a daily basis.) I personally no longer believe in automated newsletters that repackage web site headlines, regardless of their quality. On smartphones, fairly sophisticated users (read: educated and affluent) sought by large media demand time-saving services, to the point content, neatly organized in an elegant visual, and — that’s a complicated subject — tailored to their needs way.
#4 The ARPU View
On mobile devices, the Average Revenue per User should be a critical component when shaping a mobile strategy. First, let’s settle the tablet market question. Even though the so-called “cheap Android” segment ($100-150 for a plastic device running an older version of Android) thrive in emerging markets, when it comes to extracting significant money from users, the iPad runs the show. It accounts for 80% of the tablet web traffic in the US, UK, Germany, France, Japan, and even China (source: Adobe.)
The smartphone is more complicated. A year ago, many studies made by AppAnnie or Flurry Analytics showed that the iPhone ecosystem brought four times more revenue than Android. More recently, Flurry Analytics ran a story stating that the average app price for Android was $0.06 vs. $0.19 for the iPhone and $0.50 for the iPad.
The gap is closing as Android terminals attracts a growing number of affluent users. Still, compared to iOS, it is notoriously difficult to carry paid-for apps and services in the Android ecosystem, and Android ads remains cheaper. It’s likely to remain the case for quite a while as iOS devices are likely to remain much more expensive than Android ones, and therefore more able to attract high-end demographics and the ads that go to them.
How this impacts a smartphone strategy: Publishers might consider different business models for the two main ecosystems. They could go for fairly sophisticated apps in the iOS world, served by a well-oiled payment system allowing many flavors of In-App add-ons. By contrast, the Android environment favors a more “go-for-volume” approach; but things could evolve quickly as the Android share of high-end audience grows and as the PlayStore gains in sophistication and gets as friction-free as the AppStore.
Facebook’s new Home on Android smartphone is an audacious attempt to demote the OS to a utility role, to keep to itself user data Android was supposed to feed into Google’s advertising business. Google’s reaction will be worth watching.
Amazon’s Kindle Fire, announced late September 2011, is viewed as a clever “Android lock pick“. Notwithstanding the term’s illicit flavor, Amazon’s burglary is entirely legal, an intended consequence of Google’s decision to Open Source their Android mobile operating system. Download the Android source code here, modify it to your heart’s — or business needs’ — content, load it onto a device and sell as many as you’d like.
Because it doesn’t fully meet the terms of the Android Compatibility Program, Amazon’s proprietary version isn’t allowed to use the Android trademark and the company had to open its own App Store. In industry argot, Amazon “forked” Android; they spawned an incompatible branch in the Android Source Tree.
The result of this heretic version of Android is a platform that’s tuned to Amazon’s own needs: Promoting its e-commerce without feeding Google’s advertising money pump.
And that brings us to Facebook’s new Home.
Zuckerberg’s new creation is the latest instance of the noble pursuit of making the user’s life easier by wrapping a shell around existing software. Creating a shell isn’t a shallow endeavor; Windows started its life as a GUI shell wrapped around MS-DOS. Even venerable Unix command line interfaces such as C shell, Bourne, and Bash (which can be found inside OS X) are user-friendly — or “somewhat friendlier” — wrappers around the Unix kernel. (Sometimes this noble pursuit is taken too far — remember Microsoft’s Bob? It was the source of many jokes.)
Facebook Home is a shell wrapped around Android; it’s a software layer that sits on top of everything else on your smartphone. Your Facebook friends, your timeline, conversations, everything is in one place. It also gives you a simple, clean way to get to other applications should you feel the need to leave the Facebook corral… but the intent is clear: Why would you ever want to leave Home?
This is audacious and clever, everything we’ve come to expect from the company’s founder.
To start with, and contrary to the speculation leading up to the announcement, Facebook didn’t unveil a piece of hardware. Why bother with design, manufacture, distribution and support, only to sell a few million devices — a tiny fraction of your one billion users — when you can sneak in and take over a much larger number of Android smartphones at a much smaller cost?
Second, Home is not only well-aligned with Facebook’s real business, advertising revenue, it’s even more aligned with an important part of the company’s business strategy: keeping that revenue out of Google’s hands. Android’s only raison d’être is to attract a captive audience, to offer free services (search, email, maps…) in order to gain access to the users’ actions and data, which Google then cashes in by selling eyeballs to advertisers. By “floating” above Android, Home can keep these actions and data to itself, out of Google’s reach.
Facebook, like Amazon, wants to keep control of its core business. But unlike Amazon, Facebook didn’t “fork” Android, it merely demoted it to an OS layer that sits underneath the Home shell.
On paper and in the demos, it sounds like Zuckerberg has run the table… but moving from concept to reality complicates matters.
First, Facebook Home isn’t the only Android shell. An important example is Samsung, the leading Android player: it provides its own TouchWiz UI. Given that the Korean giant is obviously determined to stay in control of its own core business, one wonders how the company will welcome Facebook Home into the family of Galaxy phones and phablets. Will it be a warm embrace, or will Samsung continually modify its software in order to keep Home one step behind?
More generally, Facebook has admitted that differences in Android implementations prevent the first release of Home from working on all Android phones. In order to achieve the coverage they’ll need to keep Google (and its Google+ social networking effort) at bay, Facebook could be sucked into a quagmire of development and support.
Last but not least, there’s Google’s reaction.
So far, we’ve heard little but mellifluous pablum from Google in response to Home. (Microsoft, on the other hand, quickly attempted to point out that they were first with an all-your-activities-friends-communications shell in Windows Phone but, in this game, Android is the new Windows and Microsoft is the Apple of the early 90’s.)
Google has shown that it can play nice with its competitors — as long as they aren’t actually competing on the same turf. The Mountain View company doesn’t mind making substantial ($1B or more) Traffic Acquisition payments to Apple because the two don’t compete in the Search and Advertising business. Facebook taking over an Android smartphone is another matter entirely. Google and Facebook are in the same game; they both crave access to user data.
Google could sit back and observe for a while, quantify Facebook’s actual takeover of Android phones, keep tabs on users’ reactions. Perhaps Home will be perceived as yet another walled garden with a massive handover of private data to Facebook.
But Google already sees trouble for its Android strategy.
Many Asian handset makers now adopt Android without including services such as Google Search, Gmail, and Google Maps, the all-important user data pumps. Samsung still uses many of these services but, having gained a leading role on the Android platform, it might demand more money for the user data it feeds to Google, or even fork the code.
In this context, Facebook Home could be perceived as yet another threat to the Android business model.
A number of possible responses come to mind.
In the computer industry, being annoyed or worse by “compatible” hardware or software isn’t new. As a result, the responses are well honed. You can keep changing the interface, thus making it difficult for the parasitic product to bite into its host and suck its blood (data, in this case), or you change the licensing terms.
Google could change or hide its APIs (Application Programming Interfaces) in order to limit Home’s functionality, or even prevent it from running at all (at least until a particularly nasty “bug” is fixed). Worse, Google could makes changes that cause the Facebook shell to still run, but poorly.
I’ll hasten to say that I doubt Google would do any of this deliberately — it would violate the company’s Don’t Be Evil ethos. But… accidents could happen, such as when a hapless Google engineer mistakenly captured Wifi data.
Seriously, FaceBook Home is yet another pick of the Android lock, a threat against Google’s core strategy that will have to be addressed, either with specific countermeasures or with more global changes in the platform’s monetization.
The social web’s economics are paradoxical: The more it blossoms, the more it destroys value. In recent months, we’ve seen a flurry of innovative tools for reading and sharing contents. Or, even better, for basing one’s readings on other people’s shared contents. In Web 2.5 parlance, this is called Social Reading. For this, the obvious vector of choice is the iPad: it possesses a (so far) unparalleled ability to transform online reading into a cozy lean-back experience.
A year after the iPad’s launch, the app store is filled with a swarm of forcefully competitive offerings. Like everyone else in the business, I stuffed my device with about ten (and counting) such apps, gathered in a “Daily Me” folder.
Last week, I dissected Flipboard, one my favorites because of its simplicity, neat look and speed. But I’m also enjoying News360, a Russian crawler that scans more 100,000 sources (“200,000 in the next few months…”). News 360 adds a semantic layer whose purported goal, in short, is to increase relevancy. Zite carries spectacular personalization features as well as Cease and Desists Letters from publishers (see Zite Response here).
Taptu is a more recent one. It takes a further step in customization by using the most advanced graphical features found in iOS. Many of these mobile aggregators are available on Android as well.
All of theses apps start with the same raw material. They collect and rearrange RSS feeds, they crawl Twitter or Facebook streams. Unfortunately, from a news publisher vantage point, all these aggregating apps kill value by removing ads from the articles they assemble for our reading pleasure. In order to fit their elegant and efficient layout, these apps remove “visual noise”, that is all these “annoying” ads.
The paradoxical beauty of today’s web contents is this: On the one hand, 95% of all revenues are still ad-related. On the other, that same content becomes easier to read it without commercial distractions. Publishers didn’t merely accept it, they encouraged it. I already mentioned the negative effect of generous RSS feeds on the business: see RSS Lenin’s Rope. At first, the hijacking of RSS feeds by a new breed of apps was seen as an unfortunate consequence of publishers’ naïveté. After all, when the RSS mechanism was invented more than ten years ago, the idea of repurposing it into a bespoke e-journal wasn’t on anyone’s mind. Now, the media industry faces a completely different picture. Publishers of expensive contents can’t even console themselves by fantasizing their promiscuous supply of RSS links will bring back traffic. RSS super-readers are mostly self-contained and do not send any traffic to anyone else.