Facebook to Die Under the Knife of Magazines and Newspapers? Your Crystal Ball Is Malfunctioning.

Who doesn’t want a piece of the multibillion dollar US advertising pie? No one! According to a Kantar Media report, 2010 US ad spending topped $130 billion. Outspoken marketing and publishing veteran Bob Sacks, aka BoSacks, is “prepared to predict the death of Facebook. It’s lost its way … Over-commercialism and abuse will kill it.” That is why Facebook is moving toward what some are calling “the dark side,” abandoning its user-centric methodology for one where it can cash out and exploit its relationship with users to sell the most advertising.

Newspapers and magazines have struggled for over a decade to determine which strategy will bring them some, if any, long-term success. Between pay wall construction and destruction and various implementations of paid content, which future strategy will win: the gated newsstand (e.g., Apple or Amazon) or the app model (The Daily) or, better yet, some other combination with social integration?

The first big-league tablet experiment was News Corp.’s The Daily, with daily news delivery to mobile technology, i.e., the iPad. The Daily is an experiment in applying a news model to mobile technology with a subscription-based service. Rupert Murdoch claims that The Daily, first launched on the iPad in early 2011, needs 500,000 subscribers paying $0.99 per week to be profitable. As of October 3, The Daily publisher Greg Clayman reported only 80,000 subscribers. Murdoch’s experiment was on one hand a massive win for tablet proponents, who see this path as the future, but on the other a strategic failure. Applying broad-reaching, mass media to what is essentially a hyper-local online ecosystem where the social level drives the most relevant content is a fundamentally flawed approach. Staci Kramer of paidContent.org covered the basic accounting associated with The Daily and figured that, based on the first year’s figures with the current circulation, it cost a whopping $375 per subscriber to produce. It is not uncommon for a magazine title to take several years to mature to profitability, yet this venture sets an intriguing (and cost-prohibitive) precedent. More recently Courtney Boyd Myers of TheNextWeb.com reported that the app has been downloaded 800,000 times but has brought a loss to News Corp. to the tune of $10,000,000. On a side note to be filed in the “DUH” record books, UK online trade pub MarketingWeek reports that a recent qualitative analysis by Ipsos Mori of UK’s biggest women’s weeklies suggests that titles that reply to readers via social media gain more long-term interaction. While studying the business model and its successes and failures is interesting on an academic level for understanding how the news is evolving, the indicators for the advertising world and its link to new technology should be of more interest.

John Mehl covered the strengths and weaknesses of digital editions earlier on Utterly Orange. The bottom line is this: As long as competitive forces––like print magazines and social networks––exist in the marketplace, the print-gone-digital model for news and magazines is going to be a hard sell. The market was splintered with the entry of the i-era: the iPad and iPhone, the mobile and smart devices.

In August 2011, Utterly Orange discussed the technical challenges that Condé Nast experienced in its ventures into digital publishing formats. Applying a traditional, editorial business model to an electronic workflow is fundamentally flawed. NYU Professor Scott Galloway sees magazines “on the verge of a massive double dip.” Galloway points out that brands like Burberry, Gucci, and Chanel have positioned themselves as “innovative” front-runners in the world of social media. Facebook competes for eyeballs and more importantly lets anyone introduce content that can trump the magazines any day. Which model will win? Not sure, but you can bet on this: Social media is critical to the future, and Facebook probably won’t be the long-term winner.

Author: John Carew


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