Commentary

Fool Me Once: Facebook's Alluring Proposition

Back in the ’90s, publishers were bamboozled by America Online on many different levels, but the most prominent method was the way AOL used media content to build up its own brand. Now Facebook is doing the same thing, and the media companies are falling for the ruse again. We have to laugh. Remember that old saw, fool me once, shame on you; fool me twice, shame on me? 

It has been just over a year since Facebook began its Instant Articles program, and a month since IA was made available to all publishers. Facebook’s chief product officer Christopher Cox talked with ReCode’s Peter Kafka back in Feb. 2015, and summed up Instant Articles this way: “Facebook is making a pitch to media publishers: Let us host your content for you, and we’ll make it look beautiful (and give you more eyeballs) in the process. …Reading news on a smartphone is still a very bad experience most of the time,” Cox said, citing problems like speed and general design. “We want to try and make that a better experience for publishers.”

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For someone who followed new media in the ’90s, things like this ring so many alarms it’s like a visit to a clock factory. AOL CEO Bob Pittman, a genius salesman, convinced every media company worthy of the name that unless it offered content to his brand, it would be forever left in the online dust. Companies such as Time Inc. and the New York Times rushed to allow AOL to use their stuff, because 1. they got paid for it and 2. they had no idea what to do online anyway. So getting paid looked like the best way to make it look like you were at least doing something digital.

Caught Flat-Footed
But in 1996/1997, Pittman changed the game. Suddenly, media and Internet companies had to pay AOL to appear there, and it wasn’t cheap. Those who had blindly signed up to AOL were caught flat-footed. As operating an AOL operation required one or two employees at most (Time magazine famously had one AOL guy, a friend named Robert Pondiscio, who doubled as a PR person), these companies had not invested in engineering infrastructure or, more importantly, learned anything about online metrics. Thus, they were suddenly on their own, not even able to register eponymous URLS when they tried to create Web sites. In 1996, a savvy freelancer, Farhan Memon, registered NYPost.com. When Rupert Murdoch wanted it, Memon asked $20,000 for it. Memon is now a VP at JP Morgan Chase working on Chase’s mobile application.

It would be a cliché to invoke George Santayana’s famous dictum, and if you haven’t heard it by now, you will never get it. At the moment, the Instant Articles equation looks better than what AOL had to offer. Publishers get their video and native ad content loaded faster on mobile, they get to keep 100% of revenue from the ads they sell; Facebook gets 30% only if it sells the ads. Moreover, unlike what happened in AOL’s walled garden, Instant Articles is compatible with comScore and Google Analytics.

That’s the deal now. But remember, AOL was paying heavily for content at first. When they switched it around, who was in a position to fight it?

If you accept the idea that Facebook’s platform and programmatic ad setup is just way better than anything you can come up with, which is probably true, aren’t you indenturing yourself to it forever? Think of how powerful Facebook is now, as it grabs a huge percentage of digital ads. Facebook took in $17 billion in ad revenue last year. What will it be like 10 years from now?

How Can They Quit?
Facebook is not AOL, likely to self-destruct through hubris and mismanagement. Facebook is a brilliantly run behemoth that is only going to get bigger and stronger. And then what? The New York Times is already said to be getting more than 15% of its Web traffic from Facebook. How can they quit it?

Instant Articles was a genius move because it roped in the media companies and Web competitors just as they were most vulnerable, and wondering about the advertising business model yet again. James Bennett, editor of the Atlantic magazine, stated when his title began to run content on Instant Articles that he was well aware that “Facebook might later change the terms to ones less favorable to publishers.” You think?

Perhaps this is all inevitable. Between 1896 and 1930 there were more 1,800 automobile manufacturers in America. Now, there are a handful, and one had to be bailed out by the U.S. government. In 1900, there were more than a dozen daily newspapers in New York. Now, there are five (with a couple just hanging on and counting the Wall Street Journal and Newsday). The Internet promised a cornucopia, but in the end, it might boil down to two or three super platforms, a not much different proposition than that faced by publishers when AOL was king.

5 comments about "Fool Me Once: Facebook's Alluring Proposition".
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  1. Kevin Lee from Didit, May 18, 2016 at 2:24 p.m.

    Many decision-makers at publishers and content providers (broadcasters included) were not around for the AOL fiasco.  However, they are surely old enough to remember the dramatic reductions in organic reach as the edgerank algorithm changed. 
    Gotta hand it to FB though... 

  2. Leonard Zachary from T___n__, May 18, 2016 at 3:10 p.m.

    Lambs, all Lambs to feed the FB data aggregator.

  3. John Motavalli from Freelance, May 18, 2016 at 4:39 p.m.

    That's it, you gotta hand it to Facebook. They got it, they're flaunting it, and they're getting away with it. Of course, one has to invoke Lord Acton's famous dictum, Absolute power corrupts absolutely. And they have just about as much absolute power as you can get in business. 

  4. Ari Rosenberg from Performance Pricing Holdings, LLC, May 18, 2016 at 5:44 p.m.

    John, thanks for the reminder.  The premium online pubishing business has always been scared they lack the technical expertise to compete in this new world, and as a result, they have given away their value to the tech platforms and they continue to do so as your article points out so succinctly.  This is going to end badly.

  5. John Motavalli from Freelance, June 30, 2016 at 7:58 a.m.

    Interesting that the NY Times has finally figures out that Facebook is abandoning them. See their story yesterday, reporting that Facebook is moving away from media content.

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