Nieman Foundation at Harvard
Intellectually, we all knew that the Internet was so big as to be virtually infinite. But it’s hard to know what to do with that squishy concept.
Then BuzzFeed CEO Jonah Peretti outlined his all-in approach in front of a couple thousand nerds at SXSW Interactive last week. He was both surrendering to and embracing that infinity. Or, put a different way, he embraced ubiquity as a business model. If the universe speaks to you, then answer back.
For BuzzFeed, Peretti said, that would mean populating BuzzFeed content in the far reaches of the Internet, on distant social planets. The eight-year-old startup, valued at $850 million on but $125 million of revenues, would no longer sprinkle just links to its content on social platforms and other sites around the web. The company would explode the age-old media model — publish good stuff and bring people to your product, digital, print, or broadcast — and let its content flow freely here and there and there and there.
Certainly, BuzzFeed, with its vision of exponential growth, might warmly accept the apparent inevitability of people being able to access the stuff they wanted on their platform of choice. It does seem so democratic: Why should publishers force you to come to their house, when you are more comfortable hanging out elsewhere?
It all seemed so abstract, given that Peretti skipped over the part about how the strategy would generate money. But last week’s abstraction now suddenly seems concrete. That social planet is Planet Facebook, that new center of the known digital world, drawing a good half-dozen hours a month from its 1.4 billion active global visitors.
As The New York Times broke the news that its own company — and BuzzFeed — were close to finalize a new, apparently sweeping, distribution of content on Facebook, we could see what Peretti’s slides only hinted at. The web had taken (OMG) a new turn, shaking once again all we have believed to be true.
Well…not quite. Publishers have been doing distribution deals with high-traffic sources for almost two decades now. Both Yahoo and MSN, since their own infancy, have been given links — and some full content — by publishers, intent on finding new audiences. The business models have matured since then, adding more direct monetization through advertising, but the idea persists. As I’ve talked to both publishers and distributors this, it’s clear that the new Facebook program elevates the distributed-content conversation because of its sheer reach. But it’s vital to put this partnership hoopla in context.
As publishers hammer out the all-important details of their Facebook partnerships, all are aiming to answer this question: Where do we find sufficient money to pay the content producers? That’s the big question here for BuzzFeed, The New York Times, and any and all other publishers who get faint when they do the math of Facebook’s outsized reach. While the goal of making money is a common one, the potential benefits of a broad Facebook partnership may differ for these two companies. The ubiquity game offers different rules to BuzzFeed than to the Times.
Let’s think about those fundamental differences between the two, which can stand in as a proxy for legacy companies on the one hand and digital startups on the other — and how they inform what kinds of Facebook partnership deals may get signed.
BuzzFeed already plays the ubiquity game. It’s a growth company, with audience growth the number one objective and maximizing so far meager profits on the back burner. While the question of how it pays its journalists is of concern to BuzzFeed, it is at this point more of a theoretical concern. With the valuations of venture-backed digital news startups soaring, their game is rapid growth at all costs. Those that keep on growing, at all costs, will end up winning, most likely through being acquired. Those that don’t will fade. That’s why venture money has competitively matched venture money from BuzzFeed to Vox to Business Insider: Grow or die.
For them, Facebook’s offer of greatly multiplied reach fits well. Why be satisfied with reeling in a small percentage of site referrals from Facebook and other social, when your content can be found where so many of the eyeballs are?
In Austin, Peretti laid out, with a single GIF (of course) the numbers behind his religious conversion to the Church of Ubiquity.
BuzzFeed gets an astounding 75 percent of its traffic from social overall. His business is already dependent on Facebook, with relatively little traffic coming direct. (In fact, BuzzFeed’s new push into apps acknowledges this dependence and forms part of its strategy to newly win direct, loyal readers.) As Peretti demonstrated, links to content were all well and good, but presence — of content — on social networks should really be the new ballgame.
In the gif, shared with Peter Kafka at Recode, we note the great number of referrals that BuzzFeed gets from its current social links. Those numbers are impressive: Facebook: 349 million. Pinterest: 60 million. Twitter: 12.5 million.
Then, though, we see the big circles. Those indicate the number of impressions of BuzzFeed links on those sites. Those numbers are literally astronomical: Facebook: 11.3 billion. Pinterest: 6.4 billion. Twitter: 847 million.
Why work social for only two percent of the benefit — that’s the ratio of BuzzFeed social impressions to actual referrals back to its site — when you partake in that universal readership?
Ah, but what’s the value of all that exposure? BuzzFeed makes its money almost solely on advertising, fetching about $10 per thousand readers. How will increased Facebook reading benefit its topline of revenue? Peretti didn’t speak to that issue in Austin or in a wider interview with Kafka.
As a company without reader revenue — no subscriptions or paywall — at risk, offering up wider content off-site comes with less risk. The bet: The very omnipresence of BuzzFeed content on Facebook builds brand awareness and will bring enough visitors — probably more than that two percent of current referrals — back to BuzzFeed.
Let’s also recall a little discussed part of the pioneering BuzzFeed native ad business. BuzzFeed measures views of the native content it creates for advertisers, of course. That measurement, though, includes viewing not only on BuzzFeed.com, but anywhere on the web. BuzzFeed builds the ads themselves to go viral, and it prices in that virality. We don’t know how much of its current business model rests on that virality, but we can expect it to grow, as BuzzFeed itself exploits the social web for everything it offers. In this sense, it has leg up on the competition — selling and creating advertising that isn’t dependent on being viewed on BuzzFeed itself. Consequently, the company is more naturally comfortable with an off-site distribution strategy.
But the answer to that question is quite different for a print-legacy, reader-revenue-rich company like The New York Times than it is for BuzzFeed.
More than 60 percent of the Times’ revenue now comes from readers. Its paying digital audience of about 900,000 now outnumbers its daily print paying audience. That’s been a hard-won effort over the first half of this decade. The Times is going profoundly digital, but its prospects for digital ad growth are uncertain, given the hyper-competition. Consequently, reader revenue is the linchpin of a sustainable and profitable future — and the main way to keep its 1,200 highly paid journalists paid.
Put it altogether, and Facebook is attractive. Facebook measures its average time on site per month in hours; the Times measures it in minutes. That’s the nature of today’s world. To be sure, the Times isn’t as dependent as BuzzFeed is on Facebook referrals; like many news publishers, less than 15 percent of its traffic is driven by social sites, with Facebook the biggest driver among them.
Still, the question: How can the Times tap into Facebook’s enormous digital presence while preserving the Times’ paid business? The answer, I believe, will be found in the Times embracing social ubiquity via Facebook…but selectively.
Yes, selective ubiquity.
The Times has already dipped its toe into that kind of deal. In 2012, the Times inked a deal with Flipboard that surprised some. The Times would make its content available on Flipboard, but the full report would only be available to NYT subscribers. Flipboard agreed to do the tough work of integration, and a couple of similar deals followed with the Financial Times and The Wall Street Journal, with The Washington Post next up. The idea is similar to Facebook’s: Let readers pick their platform; don’t force them to go to the Times’ sites or apps.
How well has it worked? The Times considers it a small success, providing some help in retention; more than 10 percent of Times’ digital subscribers have “activated” their subcriptions on Flipboard, says Josh Quittner, Flipboard’s head of news and partnerships. It has satisfied some readers, earned a little extra revenue (through an ad revenue sharing program), and provided some lessons about reader behavior off-site.
Quittner, a veteran of Time Inc., says the partnership equation — Flipboard’s or Facebook’s — isn’t tough to understand. “Distribution without monetization is a sucker’s bet,” he says. Quittner and others in field say the distribution game is moving well beyond the old “give me a few links and a little whole content and I’ll send you lots of traffic” era to one in which things — particularly money — can be measured. It’s a movement still in progress.
Could Facebook authenticate Times’ subscribers in a similar way? Certainly it could, but we don’t yet know whether that’s on the table. One way or the other, the Times would use Facebook to broadly sample. It can offer discrete sets of content — changing the offerings as it tests — to widen the top of its traffic funnel. Further, Facebook can use one of its many tools, like promoted items within the News Feed, to heighten Times awareness. The Times’ clear goals: move that 900,000 number to 1 million and then 1.25 million, and make some money on Facebook-partnered advertising.
The potential downside is also clear, of course: too many Times digital subscribers find enough free content on Facebook that they drop their subs. We know that there’s high duplication of reading among Times digital subscribers and Facebook users, so the peril could be real. How much can leakage is controllable, if and as a deal allows the Times’ sufficient flexibility to adjust what’s offered — when and to whom and on what device — over time?
For the Times and all content publishers, including BuzzFeed and the high-growth pack, the key issue is knowledge. We can pitch this broadly as “data,” a now-limp term that tells us too little, or even as “analytics,” which is accurate but way too dry. Jeff Jarvis made the good continuing point about “relationships” in light of these likely partnerships, and that works better too. What we’re all getting at is that the one-product-to-many approach of publishing is (slowly) crumbling. Many reading consumers have little idea of how much auto-customization is beginning to happen in the background as they read. Publishers are minding their profiles and their cookies — first-party data — and giving more of us more stuff like the stuff we have read. In this business, the algorithm is the thing, and the algorithm is constantly informed by more reading data. So do publishers get the reading data as if it were first-party data — not simply basic profile info — from Facebook as part of a partnership venture? If so, how much, how deep, how often? Even if publishers can’t make complete use of it yet — for most, application of the data is very much a work in progress — can they figure it into their strategies?
Big question: Can they maintain the real, paying, loyal relationships they now have with paying customers and eat their Facebook cake as well?
Unsurprisingly, the Facebook partnership program has been reported, and on commented on, largely from a publisher’s perspective.
It’s impossible though not to see it through the lens of the titanic digital battle of our time: Facebook vs. Google. The two have formed a duopoly in dominating mobile ad sales, with Facebook growing rapidly in its battle for advertising with Google overall.
Facebook can claim lots of momentum and assets. Google’s search engine fed its ad business, capturing shopper intent. Facebook, with its tentacles into every part of the human condition, knows more — and is using it to better hyper-hyper-target its advertising.
Further, in the news area, social discovery is growing greatly; search discovery still grows, but tepidly. And when we say social discovery, it’s Facebook that dominates greatly, with Twitter and Pinterest far behind.
What Facebook gains in these publisher partnerships is more fuel for furthering its formidable time on site. News remains hugely valuable, a currency that drives repeat visits, especially when presented in the context of Facebook’s other assets. For Facebook, news partnerships won’t be a huge driver, but they are one more weapon in its drive for preeminence.
Is recognition of Facebook’s growing dominance the surrender of publishers that some claim? I doubt it. We — all of us who live on the web — love to get all our stuff in one place, and for a huge number of people, Facebook is the place of the moment. It may only be a digital moment, but it’s one nobody can ignore. It’s a sun that much of the digital world revolves around. For publishers, ignoring it makes little sense.; the key, rather, is finding a comfortable place in its uncertain firmament.
