When the Facebook tiger bites

Facebook’s changes to the newsfeed illustrate the dangers for businesses in depending upon the internet giants.

Two years ago Buzzfeed’s head of global operations visited Sydney and laid out the company’s vision of being the New York Times.

As Scott Lamb explained, an important part of the Buzzfeed model was generating traffic through social media shares — at that time a tactic which Iwas working well.

Since then the gloss has gone off Buzzfeed as the company misses financial targets and traffic plateaus.

Now Facebook has announced further changes to its newsfeed which sees more emphasis on users’ family and friends’ posts than news and brands.

Sites like Buzzfeed are left in a bind as one of their key sources for traffic dries up and, once again, Facebook’s cahnges show how risky it is for publishers and marketers to rely on individual online platforms.

In truth all of the major online services are predators with Facebook, along with Google and Amazon, being at the top of the food chain, just like tigers.

For those riding the internet tigers, the risk of being mauled is real. As Buzzfeed and others are finding.

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Subverting the house rules

An Arab Spring seems to have come to the US Congress as members occupy the chamber and stream their own video footage.

It seems the Arab Spring has come to the US Congress where Democrat representatives protesting the house’s refusal to vote on gun control legislation have occupied the house.

House speaker Paul Ryan, a Republican, ordered the chamber’s TV cameras to be shut off but the occupying members responded by streaming their own media feeds through Facebook and Periscope.

Once again we’re seeing how new media channels are opening up with the internet. While they aren’t perfect, they do challenge the existing power structures and allow the old rules to be subverted.

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The smell of social media defeat

While Microsoft’s acquisition of LinkedIn is a triumph for the Silicon Valley greater fool model, it shows social media is largely an investor’s graveyard.

“There’s a shared sense of alignment,” says LinkedIn CEO Jeff Weiner during his video with Microsoft’s Satya Nadella to announce Microsoft’s $26 billion dollar acquisition of LinkedIn.

Weiner has been trying to reinvent LinkedIn’s business model for three years and Microsoft’s acquisition is an admission of defeat with the company’s market capitalisation half of what it was a year ago and profits proving hard to find.

The fact revenues were slowing in the face of anemic returns is probably the reason why LinkedIn’s board was happy to accept Microsoft’s deal that’s 46% more than the social media site’s $17.5bn market capitalisation on Friday.

LinkedIn’s capitulation shows what a graveyard social media sites have been for investors. With the exception of Facebook, almost all have failed to deliver the profits or promise hoped for by those making big bets on the platforms.

Both LinkedIn’s and Twitter’s managements have been distracted by the search for revenue streams to justify their huge stockmarket valuations which in turn has alienated core users. LinkedIn’s surrender means Twitter’s acquisition is only a matter of time.

Microsoft now has to show how it is going to derive twenty-six billion dollars worth of value out of LinkedIn. The company’s track record of acquisitions is execrable as we’ve seen with Nokia, Yammer and Skype and there’s little to indicate this deal will fare any better.

Commentary that LinkedIn as a ‘cloud company’ will help Microsoft Azure against an already rampant AWS is downright silly, Nadella himself in a Bloomberg interview with LinkedIn’s Weiner was at pains to point out the networking service’s fit with the Dynamics product.

Plugging LinkedIn’s ‘social graph’ with Microsoft Dynamics might give the Nadella’s team better tools to compete with Salesforce in the CRM market, it seems a high price to pay and almost justifies Salesforce’s Marc Benioff rejecting Microsoft’s overtures last year.

LinkedIn’s capitulation marks the end of social media’s growth phase. Now, as Facebook becomes the platform that rules all, the others have to find their niches in a market dominated by one services. For Twitter the race is now on to find a buyer.

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The rise and fall of a social media influencer

The story of one Tumblr influencer illustrates much that is wrong with the social media industry.

Jess Miller from suburban Melbourne was a social media star. Two years ago at the age of sixteen she was earning $10,000 a week as ‘Pizza’ on Tumblr.

Miller was a classic social media influencer, with 700 thousand young followers she was popular with advertisers then along came the payday of reposting fake diet pill testimonials.

Miller started to make serious money. She’d already been able to make a little cash: fashion companies and some small Etsy stores paid her to post pictures of clothing on her blog, with a nudge to her followers to check out their sales. She’d earned about $4000 in this way.

But then the big one came along. Two 18-year-old American social media entrepreneurs, Zach Lilley and Jeremy Greenfield – fans and friends of Pizza – approached Jess Miller and other top-performing Tumblr bloggers in April 2014 with a proposition for a money-making scheme. It used a decidedly old-school lure: diet pills.

Lilley, Greenfield and their associate Dennis Hegstad ran a website called Exposely, which connected brands to people with strong followings on social media. Lilley and Greenfield used their social media skills to create diet pill ads that masqueraded as Tumblr posts, essentially fake testimonials from women talking about their weight-loss journey. Miller would re-blog these posts, and get a small payment if the user clicked on the link. If the user bought the pills, Miller would get $23 and Exposely would get $26. She watched the money roll in – to her mother’s PayPal account.

 

Eventually the breaches their terms of service, not to mention ethics, became too much for Tumblr’s management and they deleted Miller’s blog along with a group of others in the scheme.

Miller’s story illustrates the manipulation that is a big part of the social media influencer industry with behaviour that’s almost certainly illegal and most definitely unethical. It also illustrates the risks of basing an income or business on service where you can be closed down any time.

For Miller, she seems relieved her time of fame is over. Those building their businesses around these platforms may not be so philosophical.

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Facebook and its mobile river of gold

Facebook’s revenues show how the service is leading the way in making money from the mobile internet.

It seems Facebook has found its river of gold with the company’s quarterly stock market statement reporting a 57% increase in revenues and a stunning 195% in net profits.

Particularly impressive was mobile sales made over 8o% of the company’s advertising revenue, up from just short of three quarters in the previous years.

For other online services, particularly Google, Facebook’s success on mobile must be galling as they struggle with the shift to smartphones.

How long that growth can continue remains to be seen. For the moment though, Facebook is showing how to make money on the mobile web.

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Guessing ethnic affinity

Big data can create big risks, particularly when a service like Facebook starts racially profiling

What’s your ethnic affinity? Apparently Facebook thinks its algorithm can guess your race based upon the nature of your posts.

This application is an interesting, and dangerous, development although it shouldn’t be expected that it’s any more accurate than the plethora of ‘guess your age/nationality/star sign’ sites that trawl through Facebook pages.

Guessing your race is something clumsy and obvious but its clear that services like Google, LinkedIn and Facebook have a mass of data on each of their millions of users that enables them to crunch some big numbers and come up with all manner of conclusions.

Some of these will be useful to governments, marketers and businesses and in some cases it may lead to unforeseen consequences.

The truth may lie in the data but if we don’t understand the questions we’re asking, we risk creating a whole new range of problems.

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Twitter’s inconceivable losses

Twitter lost half a billion dollars last year. An inconceivable sum that shows management’s incompetence.

Last year Twitter managed to lose five hundred million dollars in losses.

It’s possible to see how a car manufacturer, steel maker or airline runs up a half billion dollars loss. But a social media company?

Twitter has lost its way and a complete change in management is needed. Maybe it’s time to time to turn the company into a user co-operative, at least the subscribers have an idea of how the products works.

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