Facebook and Monetizing News On The Internet

The internet has ripped apart the old economic model of dead tree newspapers supported by advertising. New economic models have been tried one after another on the net, but none that have yet proven profitable for the content producers. That's not all bad, as we watch the left wing rags like the New York Times circle the financial drain. But what arises in its place may well be a monolith - Facebook - that exercises significant control over the content we see. This from MediaPost:

At issue is the negotiations with BuzzFeed, National Geographic and The New York Times to host those publishers’ content on Facebook itself. That is: not to link to the source, but to have the content actually reside on Facebook. The originating media company produces the content, but Facebook distributes it and sells the ads against it.

Permit me to tell you my initial reaction when I read about this possibility in the Times one month ago, and I quote: “Holy fucking shit!”

Why such a reaction? Well, for starters, I am not just a student of media monetization, and a very interested party in media monetization livelihoodwise, I also teach media monetization at a famous-name Ivy League University. This semester, we’ve looked deeply at micropayments, affiliate marketing, data, crowdsourcing, subscriptions, native advertising, noblesse oblige -- in all, 11 revenue streams or business models underwriting everything from the best journalism to the emptiest of content calories.

Tragically, none of them alone -- nor all of them put together -- seem capable of sustaining more than a small fraction of the media we expect and deserve. You may have read about this somewhere. I call it the Chaos Scenario.

But then I saw the March 23 story and understood instantly: this could be the magic beans everybody has been seeking, the way to achieve vast scale at relatively high CPMs without running headlong into the law of supply and demand. With 1.8 billion users and the world’s biggest dataset, Facebook could deliver both vast audience and valuable narrow targeting beyond even the Times’ mighty reach.

Let's say Facebook treats partner content like iTunes treats songs; it takes 30% of ad sales and passes 70% along to the content owner. This arithmetic doesn't require much imagination: 70% of twice your ad revenue, with no increase in the marginal cost of the goods, is far better than 100% of your existing ad revenue. And 70% of, say, quintuple your ad revenue starts to look like the good old days. This gets us into William Randolph Hearst territory. This gets us into Caligula territory.

In other words: salvation. Woo hoo.

But this is the Good News/Bad News game, and we aren't finished. Now comes the bad news. And I hope I have room.

• Far more than now, the Times and all other Facebook partners would be incented to produce the most shareworthy content for Facebook. Goodbye, Sierra Leone and environmental coverage. Hello, Grumpy cat.

• Facebook would have to be trusted, once becoming the center of the Times distribution world, not to change the rules midstream. Such as, hypothetically, by tweaking the EdgeRank algorithm to influence which articles get into the newsfeeds of whom -- either to squeeze its partners for a bigger rev share or to deemphasize “problematic” content. Of course, they've never pulled such highhanded stunts -- except for, you know, constantly from the beginning.

• The very fragmentation that has destroyed the media economy has, 'til now, performed a great service. From the 1970s on, one of the great threats to the marketplace of ideas and to democracy itself was deemed to be media concentration. When Gannett, Disney, Time Warner, The Tribune Co. and News Corp. owned such a huge percentage of media properties -- scholars worried -- where would we get diversity of opinion, dissident voices, fresh sources, truly independent journalism? Well, the Internet obliterated those worries.

We have nothing if not a bustling marketplace of ideas. Unless. Unless the distribution of news and commentary is placed predominantly into the hands of Facebook and Google, in which case the worst nightmares of scholars Ben Bagdikian and Robert McChesney would seem like sex dreams.

Or, to revert to the earlier metaphor, imagine the magic beans taking root and producing a soaring beanstalk reaching to the heavens -- where an angry giant or two terrorize us into abject submission. Whereupon our illusory salvation quickly becomes our ruin.

That all sounds quite ominous indeed.

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