For some reason, Twitter is universally considered an essential tool for media and yet it’s also universally reviled by most for its lackluster performance and inability to challenge Facebook. In some ways, it’s unfair to ask Twitter to challenge Facebook, the purpose of the platform is quite different and while it’s a media heavyweight in its own right it’s an unfair comparison. But it is a comparison that agencies and advertisers are desperate to make.
This year, the one stat I hear quoted most often is Morgan Stanley’s Brian Nowak’s analysis that 85 cents of every new dollar spent online will go to Google and Facebook. That’s a staggering amount of money consolidated into the two largest media empires and there doesn’t appear to be anyone poised to stop the juggernauts. Media mavens have been holding out for years to see the duopoly broken by a third media player that could help reshape the media ecosystem. The hope is that a third option would transfer some of the negotiating power back into the hands of agencies and advertisers. For some time that white knight was supposed to be Twitter, but in the wake of their recent challenges and the management shakeup, a new challenger emerged in the form of Snapchat.
Snapchat is currently the golden child, having had the temerity to spurn several overtures from Facebook and subsequently raise several rounds of financing bringing them to a rumored $20 billion valuation. Clearly seeing success in its sights the parent company Snap Inc. is apparently filing for an IPO. Arguably, to take on Google and Facebook Snapchat’s going to need the money to build out their media offering and become as dispensable for media consumption as Facebook and Google. But even if Snapchat succeeds in their efforts it raises a question about the future state of online media and what that means for the consumer.
The growth of the media giants has resulted in an ever increasing shift in attention and consumption to platforms like Facebook, Snapchat, and Google (FS&G). As FS&G increase attention to their platforms, we continue to see an atrophying independent media ecosystem. Stalwarts like the Wall Street Journal continue to see sales decline, buyouts and layoff continue, a full 20 years after the disruption the internet brought. And it is not just the old world media that’s taking hits, new media properties have also seen their fair share of companies shuttering. Call me wrong here but you can be rest assured that the internet media companies you relied on for news and entertainment a mere 5 years ago are unlikely the ones you’re relying on today.
In fact, what we’ve seen emerge from the dust of the great media consolidation is a bunch of news and entertainment sites tooled specifically to take advantage of a social world where news is often consumed through FS&G vs on the originator’s site. There’s plenty of examples of forward leaning content creators who produce social snackable content including big names like BuzzFeed, Vice, Quartz, Vox, Mic and others.
Take BuzzFeed as an example and you see a big media company putting out both news and entertainment touting a $1.5 billion dollar valuation with a recent $200M cash infusion from NBCUniversal. And this is where things get interesting.
What made BuzzFeed the company it is today is arguably the lists and quizzes it created for consumption across the variety of platforms it supports: The 25 Funniest AutoCorrects of 2011, Why are you single? Which popstar should be your best friend? 32 Pictures you need to see before the world ends. BuzzFeed provides some of the most engaging snackable content online and yet a portion of their audience never visits BuzzFeed.com. The same can be said for Vox video on YouTube.
In fact, the new content distribution model looks a lot like the old content distribution model. Take NBC as an example. They own a lot of media properties but if we focus in solely on the core broadcast TV network we see the similarities. NBC broadcasts their signal across the majority of the US. Anyone with a digital antenna can pick up that signal and tune into NBC content whenever they want. However, if you live in the US like me you’ll know that the majority of US consumers have a cable TV subscription — in fact, according to the National Cable Television Association, a full 85% of the population had a cable TV subscription a mere 2 years ago. Because of this NBC can’t rely on their broadcast signals alone to deliver content to consumers, so they pay carriage rates to the cable companies (now called MVPDs) in order to have their content distributed to consumers.
Let me pause here and make the analogy quite clear. TV broadcasters can distribute content through their own channels: over the air or over the top through apps (e.g. Apple TV). But if they want true reach they need to pay cable companies to reach their audiences. This is not too different than BuzzFeed creating content for Snapchat’s Discover section, or YouTube Red. In many ways FS&G are modern versions of cable companies and their distribution pipes and reach becomes absolutely essential for the success of Media 3.0 content creators.
Sure the democratized nature of these platforms is designed to let consumers drive content selections but consumer control over these platforms is at the mercy of the algorithm that drives them. The rise of promoted content and or commissioned content is sure to be the first domino in a strategy that forces media creators to actively engage with FS&G and eventually invest to ensure their content is top-billed on the platforms. As recently as last week there’s been rumors of changes happening on YouTube that has been affecting creators resulting in less of their content showing up in recommendations. Sure it’s all speculation and likely the result of efforts to improve consumer experiences but it really highlights the truth of the matter which is that content creators these days really are at the mercy of FS&G.
So thing brings me to my theory. In Feb of last year, the FCC deemed Internet suppliers to be considered utilities. This was seen as a win for the Net Neutrality camp because in classifying internet suppliers as utilities the government essentially decided that everyone deserves the same level of access to that utility.
With this designation the FCC laid out some clear rules to govern Internet access:
- No Blocking: broadband providers may not block access to legal content, applications, services, or non-harmful devices.
- No Throttling: broadband providers may not impair or degrade lawful Internet traffic on the basis of content, applications, services, or non-harmful devices.
- No Paid Prioritization: broadband providers may not favor some lawful Internet traffic over other lawful traffic in exchange for consideration of any kind — in other words, no “fast lanes.” This rule also bans ISPs from prioritizing content and services of their affiliates.
Basically, in classifying broadband providers as utilities they’ve ensured fair competition online. Yes, we can assume that the FCC efforts will come under assault by the incoming administration, however, the premise still holds: broadband suppliers were classified as utilities because they need government oversight to protect the consumer’s access to a free and competitive internet. While the Internet may still be free today it’s become far from competitive. No longer can you walk down the streets of Wall Street and bump into legions of start-ups shopping their IPO, instead, walking down those streets you’re bumping into companies angling to get acquired by FS&G. Finding alternatives to the traditional IPO exit are now part of the typical start-up strategy.
Facebook, Google and now Snapchat are becoming more entrenched with consumers as the go-to places to consume news and entertainment — each with their own niches. Those same companies are also investing in their own content often through collaborations across other media properties. Furthermore, all of these companies control the consumer experience on their property through the manipulation of algorithms “tuned” to the interests of the consumer. It’s those algorithms that took the front stage throughout the election for both the promotion of fake news and the echo-chamber effect. It’s also the main source of conflict with content generators who seek to understand exactly how the algorithms work so they can maximize impact for their brand. Often the success of new media offers falls to those who best understand how the FS&G system works and not always those with the most creative minds.
So back to the original question of whether FS&G are utilities? They’re content distributors with powers not unlike those wielded by the big national newspapers 25 years ago. However, they’re growing to become like the broadband providers the FCC went after last year in that they’re becoming essential to fair and equitable content distribution. Success in the media space these days requires a distribution strategy and with the distributors getting into the game we’ll likely end up with FS&G looking a lot more like Comcast and a lot less like tech companies. Are they utilities? By the standard definition not really but they’re drifting in that direction. On one hand, they’re companies and as such, they seek growth and competitiveness but on the other end their success will only mean greater scrutiny and oversight. It’s worth us all cheering along with agencies and advertisers to see Snap Inc. succeed in their IPO. We also need to find the next brave soul to turn down multi-million dollar buyout offers and build the next competitive platform. I’m sure FS&G would welcome and respect that kind of competition, however, they’re not going to stop buying small innovative start-ups, we just need to find enough of them that are committed to scaling big media platforms.
P.S. Before you skewer me for it, I recognize that I didn’t talk at all in here about Amazon, Netflix, or any of the emerging video platforms. While I agree that they all serve as media distributors in their own right they’re not operating in the same way. Amazon is still mainly a retail company and the media they’re distributing through their Prime Video program is all premium, mostly not ad supported and not consumer generated. The same is true of Netflix and others.