The news last month that Microsoft may wind up offering Facebook $500,000,000 for a 5% stake is great news … for the tiny number of Facebook insiders who stand to gain from this move which would effectively value the social media giant at about $10,000,000,000. For the millions of Facebook folks like me who provide the content and faces that drive Facebook it means … um … more advertising.
Gee, thanks Facebook.
When people wake up they may start to realize that we’ve got a potential crisis as small numbers of “info intermediators” like Google and Facebook scoop up the lion’s share of the online ocean of cash while the “info creators” are distinctly second class citizens in the big show. Small time web publishers and mom and pops are in this group. So are major newspapers like the New York Times and Washington Post and most other print outlets who tend to make relatively little online despite offering much of the web’s best content to date, especially now that the foolish paywalls of some newspaper outlets like NYT are coming down. Having no paywall will allow them to make more, but it’s not clear to me they’ll make enough to keep all that high quality content coming.
Print and newspapers are hurting and that is going to continue. That’s OK as long as websites and blogs continue to provide great insight and breaking news, but it’s about time the big players in the online world start working *a lot harder* to feed the hands that are feeding them. It’s about time they realize that the best web ecosystem encourages high quality content and not just socializing for the sake of hanging online with friends.
Yes, it is true that revenue sharing programs like Google adsense give publishers a nice share of revenues that come directly from activity at their websites. However lost in this debate is the fact that *most* of Google’s money (and virtually all of Myspaces), goes into the pocket of Google and Fox (owners of Myspace). This is because most of the cash comes from searches done at Google.com rather than publishing affiliate sites, and Google keeps all that despite the fact it’s generated *indirectly* from the ocean of content Google has categorized. Sure Google should make *a lot* from categorizing *your content* so effectively, but should they make 100%? You can argue this arrangement is fine if the big players turn around and do things with that money that make the internet ecosystem thrive and grow in ways it could not without their involvement. I think that argument was far more valid a few years ago than it is now. Literally thousands of startups are dying off as the Youtubes and Facebooks – built squarely on the shoulders of other people’s content – scoop up the super gigantic big money. It is not a problem that startups die – in fact it’s a good part of the ruthless evolution of things – but it’s problematic when the lion’s share of online resources from the work of so many are redistributed to so few. Not because this is “unfair”, but because this type of inequity does not lead to optimal system efficiency and growth.
Social media in all its various and sundry forms is a wonderful development. Finally we see clearly that people, not computers, will be at the heart of future online developments – probably for some time into the future. Facebook users are now leading the innovation in this area, though Alice at NYT thinks this could lead to unintended consequences.
To protect this new socially charged online environment from the ravages of our silly, stupid and prurient human interests we’ll need better incentives than the big players currently offer to quality content producers. Those incentives will ultimately shape the quality of online content for years to come.
Joe Duck 
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Social Media such as MySpace seems to a conglomeration of people chatting with each other about thier nightclub adventures and career endeavors. Such insignificant chatter seems of little real value but the platform is what has value and it has value mainly due to the existing database of contributors.
… insignificant chatter seems of little real value but the platform is what has value and it has value mainly due to the existing database of contributors
Yes, right FG. I would argue that the value of the platform is far less than the value of the collective contributor base because most of the current online platforms are – from a technical standpoint – reproducible at a modest amount. Google has a great search product but without the traffic they’d be worth a fraction of current valuation. Interesting to look at in all this is the rise and fall of social pioneer Friendster.com – once considered the next big thing and now considered a big failure. A lot hinges on timing, luck, and whimsy.
timing, luck, whimsy…
Sounds like alot of things: movie starlets, “in”-nightclubs, ladies fashions, etc.
Alot goes to the first one to have an idea, but except for a trademarked name, anyone can create a MySpace site. Its populating with users. VanessaFox recommends the enlisting of the dedicated “locals” to provide a core content. Well, I mentioned nightclubs. A good many places are “in” due to herd behavior and club promoters. So maybe Search Optimization will be best done by Touts for the Trendy, Inc.
Why did Friendster fail and a competitor or so prosper? Timing, luck and whimsy? Its probably true, but can you imagine the heads that will roll in Silicon Valley’s Venture Capitalist circles if return on investment is due mainly to Timing, Luck and Whimsy?
FG I think several of the VC folks I’ve met down there would agree that luck plays a very big role, though I think you are exactly right that they can’t make that case too strongly and pretty much have to say that “hard work and brilliance” are far more important than luck and can be determined through careful VC analysis. I would not agree but I’m not managing any $100,000,000 venture funds, either.
The most interesting thing I’ve heard from VCs is that on average a VC *loses* money. If true this is really strong support for my idea that you can’t predict which companies will win and which will be losers.
Yes, Venture Capitalists often have more losers than winners but they tend to cut off funding fairly promptly to the losers and they score big whenever they have a winner. The point with a Venture Capitalist is that they tend to have these MBA types who focus on ratios and markets and don’t really focus to much on luck and whimsy. Yet it seems that the sliderule approach for some reason would have favored Friendster but someone else prospered.
I recently had occasion to use MySpace briefly. It was obscenely grotesque in its colored graphics, barely legible, annoying spaced on the screen and contained rather large graphics either as personal logos or as spam-ads for ringtones posted as if they were personal comments from friends. What does the marketplace see in it?
Perhaps an apt analogy would be the ever-present corkboard at a local market or coffee shop: all the locals post their businesscards there and its a jumbled mess with insufficient thumbtacks and excessive notices by a few but its the only corkboard in the area because there is only one coffee shop or greasy spoon in the neighborhood.
Does this jumbled conglomeration of cards and flyers really have such value?
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