It was barely two years ago that things were starting to look absolutely awful for Facebook.
Its stock was hitting one new low after another, at one point falling to half of its IPO value. General Motors announced that Facebook ads were basically useless. The same people who named Mark Zuckerberg the Person of the Year began the calls for him to resign. And the whole “teens hate Facebook” line began to emerge, along with accusations that the company overpaid for Instagram.
The perception was that Facebook was sick, and the list of symptoms could have filled a Pepto Bismol commercial. What’s more, the company’s app and gaming platform, which at one point had seemed so promising, was falling apart as Zynga collapsed.
But the disease itself could not have been more clear — Facebook’s mission statement and core value proposition were not working. Maybe people didn’t want to connect with their friends and family anymore. Perhaps all those years of baby pictures and FarmVille sheep had turned them off from The Stream. Or could it have been that youngsters were paranoid about Mom and Dad spying on their social life? Some argued that an “everybody in one place” social network was giving way to specialized niche networks — a clear sign that Facebook was the next AOL or Yahoo.
Everybody was right, insofar as every dissatisfied user probably had a different reason for losing interest.
But as Facebook was losing tens of billions of dollars in valuation, a company thousands of miles away was growing like a weed — BuzzFeed. In fact, during the worst of Zuckerberg’s trials, CEO Jonah Peretti was in the process of raising big dollars at valuations rarely seen in media companies.
We didn’t fully realize it at the time, but BuzzFeed was giving Facebook the ultimate lesson. Through a combination of data savvy, content experimentation, and an almost shameless desire to win, Jonah Peretti was proving that what Facebook users really wanted… was to read shit.
Nobody will give BuzzFeed credit for making us human beings feel better about our species. Even the executives in Palo Alto confess their frustration at how the typical user would prefer a funny cat listicle over a long-form Mother Jones investigation on lead poisoning… by a margin of about 100-to-1. But that isn’t relevant. What BuzzFeed proved was that all people — young, old, black, white, male, female, gay, straight — find great delight in a story that resonates with them. Enough to keep coming back to Facebook.
And insofar as The Stream’s algorithm rewarded those entries with high click rates and ‘likes’, the folks at BuzzFeed proved beyond a reasonable doubt that news stories (however you define ‘news’) greatly eclipsed those drunken nightclub photos or a picture of your roomate’s sunburn.
Some people accused BuzzFeed of gaming the system. But that is a superficial and foolish way of looking at it. What BuzzFeed was actually doing was mathematically proving Facebook’s actual value proposition.
And when you look at Facebook’s mission, the pivot becomes more clear:
“Facebook’s mission is to give people the power to share and make the world more open and connected. People use Facebook to stay connected with friends and family, to discover what’s going on in the world, and to share and express what matters to them.”
Simply stated — with the help of BuzzFeed, Facebook pivoted from the front of their mission statement to the back of their mission statement.
And that has made all the difference.
In addition to winning back the teen audience, Facebook is now in an advantaged position with brand advertisers. It is no secret that popular brands have an aversion to user-generated content. After all, does Pepsi want to place their logo next to that picture of your drunk, under-age cousin puking at some Montauk house party? Nope. But a news reader is a much safer platform.
Today, when I go onto Facebook, I find that probably 60-70% of the entries are from publications that I follow… and I only follow about six of them. A user who enters a dozen quality publications into their “like” repository is sure to find an even greater array of professionally-created content…
… and the occasional ‘big event’ like a marriage, birth, or graduation.
People like me are not prepared to fully abandon the social network aspects of Facebook, but we now contextualize them as a type of “news”… when my friend had her daughter, I did consider that to be “news” in a broader sense of the word, and I enjoyed how seamlessly that story integrated with the sports, entertainment, and political news that I also found in The Stream.
And, who are we kidding, it’s hard to go on a date without doing a quick Facebook check beforehand. But that would bring me to the site once or twice a week at most. The thing that brings me back with each coffee break and conference call delay is the never-ending stream of content from sites that I like to read. It is the reason why — like millions of Americans — I no longer go to the New York Times front page to start my day. I get there through the ‘side door.’ Facebook.
When Facebook’s share price was hovering around $18, I never considered buying it. Today, the stock is at $75, and I think it is a much more compelling purchase at this new, higher price, than it was two years ago. Why? Because the company now offers a product that I want to use.
And while some would argue that Twitter is an equally compelling news reader, the macro statistics argue otherwise. Third party statistics demonstrate that Facebook drives massively more referral traffic than Twitter, and publishers I’ve surveyed confide that the ratio can be as high as ten or twenty to one. Twitter action seems to stay on Twitter. According to Forbes, even Pinterest drives more referral traffic to BuzzFeed than does Twitter.
Looking ahead, Facebook can now give Comcast, TWC, and Cox a run for their money. As Marc Andreessen pointed out in his memorable blog post on the matter, Facebook’s distribution of news is similar to the new and exciting pipelines that hit us in the ‘20s (radio), ‘50s (broadcast), and ‘80s (cable) [Disclosure: Andreessen is an investor in Pando]. Opening up Facebook during one’s lunch break is like surfing your cable guide… only you can do it anywhere on earth and at any time.
And just as cable television has a logical ecosystem that involves subscribers, content providers, and advertisers… Facebook has one now too.
Previously, brands like Taco Bell were buying ‘likes’ on their Facebook page and pushing content to readers who really didn’t want to hear from Taco Bell in their Stream. I mean, no offense to Taco Bell, I have mad love for them, but I don’t need to hear from them each day. But when professional content creators like BuzzFeed create branded content for Taco Bell, then re-invest $50,000 of that campaign into promoted Facebook reach… well that makes sense for the users, the content creators, and for the platform provider.
Essentially, Facebook is getting a cut of BuzzFeed’s advertising revenue in addition to whatever ads Facebook runs natively. But the key is that the alignment of users, content creators, and advertisers now makes much more sense.
The ecosystem works.
Facebook as a news reader is one of the most compelling and potentially powerful products imaginable. The company’s investment in curation is making the internet better, and it is a product that users of all ages will want. And as the Palo Alto company better understands its own relationship with users, publishers, and advertisers, it is possible that it will be at the center of both technology and media in the 21st century.
Editor’s note: This is a guest post by Bryan Goldberg. The post went through PandoDaily’s usual editorial process and Mr Goldberg was not paid for his work.