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Facebook: The Party is Over

Mark: You want to end the party at eleven.

Eduardo: I’m trying to pay for the party.

Mark: There won’t be a party unless it’s cool.

THE SOCIAL NETWORK

It’s eleven o’clock and a ton of people just found out Facebook’s party is over.

Facebook had a pretty terrible day yesterday press-wise. In the morning, an AP/CNBC poll discovered nearly half of Americans think the social network is a passing fad. A few hours later, Wall Street Journal reported that General Motors planned to pull its advertising. At nearly the same time, serendipity served up a third-party infographic (published by WSJ) showing click through rates to be far below average on Facebook’s display ads. These three stories are doing a ton of damage to Facebook’s image by attacking two core parts of its narrative that are usually untouched: the party and how Facebook pays for the party.

Now, Facebook has by no means had a free pass in the past when it comes to coverage. Privacy concerns have bloodied the company’s reputation repeatedly, and tech blogs give the network its fair share of grief. Rarely though do you see three stories on the same day from mainstream news outlets attacking two of its sacred cows: revenue potential and “coolness.”

First, the narrative of how Facebook pays for the party has just taken a sizable hit. With a major advertiser like GM literally saying that paid ads have “little effect on consumers,” it becomes much more difficult to sell social (as opposed to Google’s approach) as the optimal way to target ads. Adding insult to injury, the WSJ published this infographic that showed Facebook’s click through rate on display ads to not only be just 1/8th Google’s, but also below the average for US banner ads as a whole. While paid ads are only part of Facebook’s overall experience, they are a gigantic part of its business. If more anecdotes and data appear knocking the effect of paid ads, it won’t be long before advertisers start shrinking their still fledgling budgets devoted to Facebook.

Second, the party itself just isn’t cool anymore. Of the three articles the most damaging is CNBC’s and AP’s finding that nearly half of Americans feel Facebook is just a passing fad. Since its inception, Facebook has traded in an invaluable currency - it was undeniably cool. Ordinary consumers loved the company because it was radically transforming how they connected with friends, and investors fell over themselves trying to get a piece of its unprecedented growth. That narrative has rightly held up for quite some time, but it’s coming to an end. When Facebook announced the Instagram acquisition, many feared that Facebook (supposedly a company with its finger on the zeitgeist) would wreck the newer and “cooler” Instagram. This 12 year old summed it up best when she said, “Facebook is stupid and for old people.”

Facebook’s party just isn’t cool anymore, and the ads that pay for it don’t really work that well. The party’s over, and it’s no fun when all your friends figure that out right before your ~~birthday~~ IPO.

27th Apr 2012

Enterprise flying over NYC

26th Apr 2012 | 13 notes

Corgis and Journalism Want to Coexist

A few hours ago, Nick Denton took a shot at BuzzFeed in Gawker’s new commenting section.

Ben Smith’s quick-hit campaign “scoops” are about as viral as cat videos. That fits with Buzzfeed. But I suspect Smith has too much respect for journalistic accuracy to be comfortable with Jonah Peretti’s stunts. Remember that Buzzfeed’s founder made his name with fake news, like the Nike letter ([www.guardian.co.uk]). And Peretti’s craving for the quick viral fix will not be satisfied by the nourishing fare put out by prestige hires like Doree Shafrir and Matt Buchanan. Either before or after acquisition, Buzzfeed will collapse under the weight of its own contradictions. (Gawker)

Denton’s main point is that meaty journalism like John Herrman’s excellent explainer on internet copyright simply can’t sit peacefully alongside this stately frog. He claims that reporters like Ben Smith can’t and won’t countenance the deluge of dishwater cats and kitten picnics. As a result, Denton hints that BuzzFeed will inevitably be torn apart by a kind of civil war pitting meme against journalist.

Denton would have a very fair point if it weren’t for the fact that every “real” journalist who has joined BuzzFeed has likely done so embracing the site’s meme driven DNA and business model. When Ben Smith was brought on as Editor-In-Chief, it’s hard to imagine that Peretti somehow sold him on the job by making the site’s future out to be something it’s not.

More than anything, Smith probably signed on believing in BuzzFeed’s business model of getting people to come for the fashionable ducks strutting in couture and stay for the real reporting. The model probably works something like this. BuzzFeed mints page views off of super viral posts (like this one that has over 2.5 million views in about a week) and then leverages the accompanying revenue to fund the kind of reporting that guys like Matt Buchanan live to do. Over time, repeat visitors start coming back not just for the adorable bear cubs but also for their daily political or tech news. Sure, a lot of folks are just looking for their next anthropomorphized animal fix and will never touch the real news. But a percentage will start making BuzzFeed their one stop shop for content on the web. Given the ridiculous reach of their viral posts, that percentage could eventually become bigger than the daily traffic for dedicated news sites. Sell some ads against that traffic, and you’ve got a pretty nice (and profitable) business.

As far as I can tell, BuzzFeed isn’t going away any time soon thanks to what appears to be pretty sound business model engineered from the ground up to take advantage of the web as it is today, not as it was two years or even one year ago. But really, BuzzFeed’s probable future success can all be traced back to one immutable law of nature. Corgis and journalism just naturally want to live together.

(Corgi image courtesy of BuzzFeed ‘duh’ / Newspaper image from here)

12th Apr 2012

Picking up where textsfromhillaryclinton left off.

19th Feb 2012

Branches (Taken with instagram)

30th Jan 2012 | 4 notes

Mitt Romney’s latest direct mail flyer.

(Photos originally from Reuters and found (sans captions) via BuzzFeed)

23rd Jan 2012 | 1 note

What the media does to your candidate’s face when they don’t meet expectations.

Possible BusinessWeek cover via BuzzFeed

17th Jan 2012 | 2 notes

Getting Rid of Super PACs is Good, Right?

You know something’s gonna get done when The Daily Show and Republicans hate the same thing. At last night’s Republican debate in South Carolina, there was what initially appeared to be a moment of lucidity when Mitt Romney called for the end of Super PACs. Seems like a great idea. Nearly all the candidates have been victims of Super PAC funded ads stretching the limits of credulity, and doing away with the groups across the board would be a huge plus not only for them but for electoral discourse in general.

But the willingness to reform or get rid of Super PACs isn’t necessarily cause for optimism when you look at some of the alternatives. In the post debate Spin Room, Romney said the following (skip to 2:18 for the relevant tid bit):

This whole idea that there are these organizations out there that run ads that we as candidates…can’t tell them what to do and what not to do. It’s an outrageous setting and it makes us all uncomfortable.

Here, Romney is mainly taking offense at candidates’ inability to coordinate with Super PACs rather than the unlimited funds at their disposal. Assuming legislators reflected this emphasis, reform could possibly focus just on giving candidates more control by loosening rules around collusion. The problem is that once you allow some forms of cooperation and exclude others, the line between campaigns and the groups supporting them becomes impossibly vague. As a result, Super PACs could evolve into functional arms of candidates’ campaigns in practice if not in name.

Alternatively, legislators could snuff out Super PACs all together. Also in FOX’s spin room, Newt Gingrich implied just that and recommended that instead candidates themselves should be able to accept unlimited donations (skip to 3:18).

If we had a very simple law that said, “Anyone can give any amount of after tax income to a candidate as long as they report it that night so that everybody knows who’s financing who, you would clean up 90% of this. Because if a candidate had to put their face and name at the end of an ad, it would clean up most of the really bitter and miserable stuff overnight.

Although Gingrich is right that greater accountability would “clean up” a bunch of the current vitriole, he would be doing so at the expense of completely obliterating campaign finance restrictions. In his view, donations like Sheldon Adelson’s $5 million cash injection into the Gingrich-friendly Winning Our Future Super PAC would go directly into his own campaign coffer and spent at his discretion. Even if legislation limited donations over a certain amount to ads, a campaign finance environment like the one Gingrich has in mind could enable the ad budgets of entire campaigns to be financed by one person or by one corporation - they’re people too now, remember.

The real danger here is that the debate over campaign finance regulation will focus on high profile Super PACs instead of the Supreme Court decision that ushered them into existence, Citizens United. Any attempt to reform or eliminate Super PACs that ignores the fundamental problem of unlimited donations allowed in the name of “free speech” could result in regulatory regimes not disimilar to the ones put forth by Romney and Gingrich. Unless Citizens United is overturned, the obvious reform (restricting the size of donations) is off the table. Any limit on donations would be an infringement on that donor’s right to free speech. As a result, much reform might simply cause these funds to spill further into the electoral process.

It seems pretty clear that Super PACs as they currently exist are not long for this world. Of course we will see some pushback from those in favor of stricter campaign finance laws that will result in slightly better regulation. But if we get stuck focusing on treating the symptoms (Super PACs) instead of the disease (Citizens United), “Mitt the Ripper” will be the least of our worries.