Do You Guys Know How to Post Videos to Facebook? Why Mark Zuckerberg Should Buy a Sports Network

As we watch coverage of events at the Olympics that occurred 8 hours ago, social media websites such as Facebook and Twitter happen to be among the largest beneficiaries of the London games. Whether it’s complaining about NBC callously deleting a tribute to victims of terrorism from the Opening Ceremony (and then continuously digging themselves into a deeper hole again and again and again trying to justify the decision) or lauding the record-breaking Michael Phelps, we’ve seen further proof that what was once considered to be a solitary activity of sitting on a computer or checking a smartphone has actually been powered by large events that many of us experience together. Indeed, Bill Simmons asked Mark Cuban a few months ago at the MIT Sloan Analytics Conference about whether social media is eroding TV viewership, to which Cuban responded with a strong negative and used a line that ought to be plastered all around Silicon Valley: “Television drives social media.”

The irony in a world that is increasingly geared toward on-demand viewing and the use of time-shifting devices such as DVRs is that the events that are shown live and can draw large aggregate audiences watching them all at the same time have skyrocketed in value despite overall TV ratings being down. As I noted last year, sports leagues have arguably gained the most from this phenomenon since they not only draw large live audiences, but get the hardest-to-reach (and therefore most valuable) demographic of age 18-34 males. Advertisers still pay a significantly greater premium to reaching a lot of people in the same place, which is something that on-demand services and online streaming websites haven’t been able to replicate.

On the flip side, there’s suddenly a whole lot of bearish attitude toward the revenue generating capabilities of social media sites, particularly Facebook. Yesterday, Facebook’s stock dipped below $20 per share for the first time and is hovering around 50% of its initial public offering price. A large part of Facebook’s problem is that its most valuable asset (the exhaustive treasure trove of wide-ranging personal information of its users) cannot be fully and effectively leveraged on the Facebook website itself. Targeted ads based on information that you plug into Facebook always sounded great in theory, but the issue is that clients such as General Motors haven’t found such ads to be very effective. At the core, we don’t log onto Facebook seeking to click on Internet ads, buy products or even glance at banner messages, so no matter how targeted a particular ad might be, it’s ultimately a shot in the dark as to whether we will even notice it. Contrast this with Google, where its ads that pop up in connection with search terms has shown to be fairly effective and profitable since people that are searching for products are often looking for ads. The much smaller social media player of Yelp! has been rewarded by investors on a similar basis, where its content of restaurant and business reviews by users naturally draws in people who are going to notice advertising.

The upshot is that Facebook’s asset of user information is actually more valuable for advertising platforms other than Facebook itself. Hmmmm. What’s the one advertising-delivery technology that we have found to be inextricably linked to the use of social media webstites? Television. Holman W. Jenkins, Jr. of the Wall Street Journal made the argument even before Facebook’s IPO that Mark Zuckerberg’s baby ought to buy ABC, CBS and NBC based on a number of the arguments that I outlined above. I’d take that one step further and say that Facebook’s optimal purchase would be a sports network where live events are able to drive a disproportionate amount of (a) watching commercials as they are aired as opposed to avoiding them via a DVR and (b) social media engagement on Facebook itself, which in turn creates more valuable personal information for Facebook to leverage and creates a self-sustaining profit cycle. As the Internet increasingly becomes the mechanism to deliver programming to television sets as opposed to cable and satellite*, Facebook would receive a further advantage by being able to use its information to have targeted TV advertisements that will surely be coming down the pike and can’t easily be avoided during games (unlike ads on the Facebook site).

(* To be clear, this needs to be distinguished from on-demand viewing and streaming. What I’m talking about here is “form” as opposed to “substance”, where the pipes that actually deliver television channels to your home will increasingly be via the Internet. That doesn’t mean that the Internet will eliminate television channels themselves, but rather your cable and Internet bills will effectively merge together into one at a higher price if you want to receive premium content. This is already an explicit goal of the Google Fiber project in the Kansas City area that will create Internet connections that are 100 times faster than what are currently in most American households. As much as chord-cutting and a la carte options have gained in popularity, those episodes of Mad Men or Breaking Bad that you might be watching on NetFlix or Hulu would never have been produced in the first place if there wasn’t the basic cable subscriber fee model that exists today. Therefore, if we want to continue to receive the content that we see on TV today, it isn’t going to come for free. Those TV program producers will have to raise the same amount of revenue if they want to create that type of content, so I’d envision a shift to “channels” along the lines of ESPN3 that are websites that charge Internet providers a subscriber fee similar to today’s basic cable subscriber fees. At the end of the day, we’re going to have to end up paying the same amount whether it’s for cable or the Internet for the same amount and quality of content.)

Jenkins noted that AOL cashed in its chits to buy “old media” company Time Warner back in 2000. It’s really quite amazing that all of those AOL trial disks that I used for beverage coasters back in college ended up paying for properties such as Batman, Bugs Bunny, CNN, HBO, TNT, TBS, the Warner Bros. studio and the Atlanta Braves. As we well know, AOL went from the most dominant force on the Internet to the Ariana Huffington-run blogger sweatshop that it is today in fairly rapid fashion, so it certainly made the right choice to use its sky-high valuation to buy tangible media assets when it did. With the way that the price of Facebook stock has been plummeting lately, Mark Zuckerberg ought to pounce on Disney (ESPN), News Corp. (Fox Sports) or Comcast (NBC Sports) while he still has the chance.

(Follow Frank the Tank’s Slant on Twitter @frankthetank111 and Facebook)

(Image from The Hollywood Reporter)

Frank the Tank’s Slant on Twitter

I apologize for the lack of blog posts over the past month as my family and work obligations have been impeding on my ability to write pithy comments about the Bulls’ obsessive need to draft more tweener forwards.  (That being said, I haven’t really missed writing about the White Sox and the general awfulness of Chicago baseball this summer.)  The full-length posts will soon return, but in the meantime, feel free to follow Frank the Tank’s Slant on Twitter as I’m more able to squeeze in some 140 character thoughts these days with my new iPhone.  This is a public page (so you can read my musings regardless of whether you have a Twitter account or not) where the types of content will essentially mirror what’s seen on the blog (meaning that I won’t be boring you with inane details about the contents of my cat’s lunch even though I might find such Tweets personally amusing) – microblogging, as the digerati like to say.  So, check out the Tweets and have a great Fourth of July weekend!

The New Facebook, Twitter, and Streaming Status Updates: The Internet’s Newest Marketing Fool’s Gold

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Normally, I’m the type of person that makes fun of people that can’t seem to handle technological changes.  My knee-jerk response to a complainer is to say, “Get over it.  Change is inevitable.  You’ll get used to it.”  Last summer, when Facebook went through the first major overhaul of its website, I not only ignored all of the group invites to the “1,000,000 STRONG TO BRING BACK THE OLD FACEBOOK”-type groups, but thoroughly praised the changes as a check on the preponderance of applications in order to ensure the site didn’t become bombarded with trashy graphics like MySpace.  It made for a cleaner website that focused upon what I believed to be Facebook’s true drawing power: it’s a place to easily connect with people that you actually know in real life (as opposed to trying to meet people online a la MySpace or other forums).  Eventually, the Facebook users stopped complaining and actually embraced the new functionality in general, while the addition of new users vaulted the site past MySpace in terms of number of members.

As the World Wide Web turned, though, Facebook underwent another significant overhaul in March, with the changes geared toward providing a stream of information on each user’s home page.  However, while Mark Zuckerberg tried to sell me and hundreds of millions of other users that the “New Facebook” would be an improved experience, it has been a complete boondoggle on numerous fronts.  I could understand why Facebook had previously wanted to differentiate itself from its main competitor of MySpace, but I was at a complete loss as to why it believed that it would be good idea to copy (at face value) its new competitor on the block of Twitter.  Pretty soon, I would feel my blood pressure boil whenever I saw a comment from that tiny fraction of users that for some reason liked the new changes with the same retort that I used to throw out myself to others: “Get over it.  Change is inevitable.  You’ll get used to it.”

After over a month of using the New Facebook, I’m still not over it or used to it.  The entire crux of the problem is NOT about how the site looks (which is what most of the “get over it” contingent seems to believe people are complaining about).  While the home page appeared to be designed by someone that got smoke some potent peyote, opened up his Twitter account, blew chunks on his computer screen, and then figured that it would be a nice new user interface for Facebook, I can get over the fact that I personally don’t find the site as aesthetically pleasing anymore.  However, it’s the taking away of extremely useful functionality that has been abhorrent to a large portion of the site’s users (including me).  I’ll refer to some other well-written and coherent posts (not from the “1,000,000 STRONG TO SAY THE NEW FACEBOOK SUCKS DONKEY DUNG” crowd) here, here, and here that explain fully just how many useful tools were stripped away.  These writers are far from people that can’t handle change.  Instead, these are Facebook users that are in the tech and marketing industries that know full well constant change is vital to survive on the Internet, but don’t understand why particular changes were made that were completely unnecessary and removed options from users.  (Note that Facebook engaged in a half-assed attempt to “respond to feedback” from users, but pretty much missed the point on all fronts.)

While Facebook’s changes and the removal of useful functional tools have been well-documented from a technological user standpoint, what I’m trying to get to the bottom of is how exactly Zuckerberg and Co. thought such changes would improve the site’s chances for profitability.  Obviously, the powers that be thought that these changes would result in a better advertising model for the company – that’s the real reason why any website makes a change to its format.  As a person that is about as far from a commie pinko rabble rouser as you can get (I majored in finance in college and have spent most of my legal career representing high tech companies), I’m perfectly fine with Facebook examining ways to maximize its revenue since I know Microsoft didn’t pay $240 million for a piece of a charitable institution that it valued at $15 billiong.

At this time, there appears to be a monolithic group think forming among a lot of business and technical people that online streaming a la Twitter is the going to be the advertising model of the future on the web.   The theory is that in an increasingly mobile world, streaming will allow marketers to instantly connect with potential customers via cell phone or regular computer Internet use in a highly targeted fashion.  Of course, Twitter itself acknowledges that it essentially doesn’t really know how it’s going to make money yet.  At the same time, the problem I have with the supposed efficacy of online streaming as a business model is that virtually every supposed category killer in terms of web advertising has failed to come anywhere close to expectations (if not downright failed) since Internet usage became ubiquitous in the late 1990s.  In the beginning, click-on ads on websites were supposed to be a treasure trove for marketers, yet the click-through rates have turned out to be so abysmal that newspapers, for example, are dying en masse due to the loss of ad revenue online compared to physical papers despite the fact that their articles are actually being read by literally millions of more people than in the pre-Internet age.

For an almost identical comparison to the current tulip bulb craze over online streaming, look to your own email account.  Substantively, receiving alerts on Twitter is no different than receiving email alerts, where choosing to “follow” a person on Twitter is just like signing up for an email alert (whether it pertains to news links, coupons, products, etc.).  For most people, and certainly in my own personal case, there was a tipping point where my email inbox became filled up with more email alerts than emails from actual people and I simply started ignoring around 99.9% of such email alerts.  I’m not even talking about spam in its true form: these are email alerts that I pro-actively signed up for at one point but the sheer volume of them over time made it all into white noise that I don’t look at anymore.  When anyone has an email account that gets to that point, an email alert becomes an almost completely ineffective marketing tool.

As of now, Twitter is in its relative infancy, so the media has been regaled with anecdotal stories of businesses that have expanded rapidly because of a presence on the service.  Of course, the simple fact that Twitter allows for accounts to be created that are not for real life people mean that it will be sooner rather than later that the average Twitter user is going to be inundated with more follower requests from businesses and products than friends and family.  This was the fate of MySpace, where I had to delete my page on that site because my inbox was completely filled with friend requests from random musicians and porn stars.  As a result, MySpace, which was widely proclaimed to be the future of the Internet as the social networking giant back in the ancient days of 2005 (spurring Rupert Murdoch and News Corp. to shell out a whole lot of coin on the company), is now losing members and just pushed out its founders a couple of weeks ago.  (Tom, I hardly knew you!)  Any business success on Twitter is going to be short-lived once marketers populate the website en masse.  For the average person that isn’t constantly looking at his or her Twitter account, there are only so many Tweets that one can read through before it all becomes white noise just like email alerts and MySpace before it.

Please note that this is not meant to be a bashing of Twitter.  I have a Twitter account and find many Tweets very useful, such as updates on Metra delays so that I can plan for my commute or following the intense ramblings of Ron Zook.  Frankly, the only way that I can figure out where my sister is traveling at any point in time is to follow her daily litany of Twitter messages.  However, following lots of people and/or entities can quickly become a blur even if someone that has a fairly high tolerance to changes on the web.  Imagine how it is for people over, say, 50 years old that have a lot less web exposure.

I think the lesson of the web is that people really don’t like being overtly marketed to for random products.  When web advertising has been successful and profitable, it’s been tied to environments where people are searching for a particular product, with Google’s paid ads coming up in searches as the prime example – that is, the consumer is driving the process as opposed to the marketer.

At the same time, like almost any business whether it’s on the web or in the bricks-and-mortar world, Facebook needs to remember what it’s actually good at.  As I noted before, its hook is that it’s the simplest and most efficient way to find and reconnect with people that you know in the real world.  For some reason, there are business people and techies out there that believe that this is a liability for Facebook, where they look at the ineffectiveness of Facebook to meet and search for people that you don’t actually know in the real world as a constraint on its growth.  Of course, I consider this to be about as solid business thinking as (a) granting large shares of ownership in GM and Chrysler to the UAW members that did everything in its power to disallow those companies to make the necessary changes to make them competitive in a new global economy or (b) Kanye West foregoing being one of the best rappers on the planet in order to sing ballads with a vocoder.  (Why, Kanye?  Why?)  Almost every single website, blog, forum, and chat room on the Internet is designed for people to meet virtually – that market is completely loaded with millions upon millions of Internet sites.  The last thing that most people need is a place where they can meet virtual friends.  The difference with Facebook is that it’s one of the few mass market places on the web where people can actually feel safe and secure enough to use their real names, post real pictures, and submit real information.  (Whether this is a completely false sense of security is another topic for another day.)  That is the Facebook’s unique advantage and it made me believe that it would become one of the few social networking websites that could legitimately have some long-term viability.

I understand that Facebook needs to make money somehow in order to stay in business.  In my opinion, the best way for Facebook to become profitable is in small and relatively non-intrusive micro-targeted ads based on each user’s individual interests, where the aim is more informative on its face (in the same manner as, say, a magazine or newspaper ad) rather than interactive or click-through in nature (i.e. if someone notes on his profile that he’s a basketball fan, then a small ad on his Facebook home page appears with the match-up and time of the NBA playoff game that evening on TNT) .  This may not be a grandiose game changer that turns Facebook into the new marketing power of this generation, but it’s a reasonable aim to make money without making the same misguided mistakes of so many other websites, where they incorrectly believed that their user bases were so loyal that they could blatantly turn them into ad farms.  The greatest asset that Facebook has is the treasure trove of personal information of its users, but it must strike a delicate balance in using that information for marketing purposes.  Unfortunately, history says that any website can’t help itself when it has such information and ends up killing its long-term prospects for short-term ad gains.  If Facebook crosses that imaginary fine line where it becomes more of a marketing site as opposed to a social networking site, then it will end up not even having a market for those simple ads since people will either leave or stop using the site in droves.  With the new Facebook emphasis on trying to connect its users with marketers in a less-than-subtle manner (for instance, products and celebrity fan pages are now showing up in the “People You May Know” box), the website is putting itself at great risk of being another one of those white hot Internet brands (i.e. AOL, Friendster, LiveJournal, MySpace, etc.) that flames out after a few years.  I don’t want to see that happen since Facebook has reconnected me with multitudes of long lost friends, but I’m not nearly as bullish on the website’s long-term viability as I was a year ago.

(Image from Laurel Papworth)