In Which, Finally, I Understand Facebook

I’m one of those who has been slow in coming around to Facebook. For years the bourgeoning social network site seemed like one more distraction that I did not need. I friended those I knew who asked, admired the digital persona that my friend the columnist Alex Beam devised (so like the real thing only more so), saw the movie, followed the news of star appointments to its corporate high command, but still didn’t quite understand.

Now, thanks to Joshua Gans, of the Melbourne Business School (and a visiting researcher at Microsoft Research, in Cambridge, Mass.), I finally get it. “Facebook is the largest news organization ever,” Gans wrote last month in a post on a blog maintained by the Harvard Business Review.  By the time I finished his short argument, the scales had fallen from my eyes. It was clearly an indea he had been husbanding for a long time.

As a newspaperman, I was aware for many years of the efforts of publishers to learn how to drill down in their communities in order to produce what they called “hyper-local news.”  Some initiatives started twenty-five years ago.  The idea was to somehow parlay newsgathering expertise and reputation into a geyser of local content, sufficient to attract ever more readers and advertising from every corner store.

Facebook, Gans wrote, is what has become of that hyper-local notion.  “It just turned out that it wasn’t a geographic neighborhood but a socially connected one.”  Facebook, he wrote, provided a platform whereby individuals became reporters and editors.

Software did the rest, pooling the contributions of members of social networks large and small into a “news feed” – the company’s terminology – consisting of items and assorted clips from mainstream media, blogs, songs, jokes, games, photos, a stream of content piped continuously back to contributors, such that almost anyone who becomes familiar with the feature will ordinarily begin to look at their Facebook page once a day, at least after their network of friends reaches a certain critical mass.

“You are not interested in this kind of information from people you don’t know,” writes Gans, “but you are interested in it from people you do know.” Facebook has become a collaborative news experience, a kind of locally-constructed newspaper, produced by people who were already of interest to the reader.

That’s where the advertising comes in.  The explosion of alternative information media in recent years – cable television, talk radio, podcasts, news aggregators, blogs, the web pages of old media and, above all, search – has led to a massive fragmentation of attention, and a corresponding shattering of the once-calm world of advertising.

What Facebook offers advertisers that other news organizations do not, says Gans, is a quality he calls magnetism – limited content of high value, frequently renewed. Few readers remain on the site for very long.  But they return to it regularly:  they are faithful. And this creates a proposition that advertisers may find compelling. If they want to reach a large fraction of the US population over the next few days, Facebook may be the way to do it. The alternative is to purchase multiple digital impressions in many media, hoping to find the right eyeballs.

Roughly speaking, this is what Facebook founder Mark Zuckerberg has done. He has assembled readers in order to sell their attention to advertisers – it’s a classic two-sided market, just like a newspaper or a television show, except that before Facebook, Gans says, “No one had figured out how to sell ads while your friends and family were talking to you.”

Moreover, from the beginning, Zuckerberg has paid close attention to what he calls “the user experience” – a point made to good effect when he scolds an eager advertising salesman in the film.   Only a small amount of space is devoted to ads, Gans notes, only one or two per page.  “Magnetic content and a limited supply of highly desirable spaceis a recipe for printing money,” writes Gans.  This much I understand.

What I don’t understand very well at all is how advertisers make their decisions these days about where to place their ads.  The Web has changed everything, obviously, but it is not yet obvious exactly how. Gans is among a bright new generation of media economists who are, improbable as it sounds, helping to transform the newsgathering businesss by fathoming and redesigning its revenue base. In work with Susan Athey, of Harvard University, and Emilio Calvano, of Bocconi University, he argues that the fact that switching among outlets has become so easy that advertisers must rethink their strategies altogether.

But that’s a question for another day.  For now, excuse me, please.  I must prepare to post this weekly to Facebook, and begin my online life anew.

2 responses to “In Which, Finally, I Understand Facebook”

  1. The best way to think of facebook is that the `users’ who log in to facebook are the product. The ads are secondary and probably not even necessary since the real-time market research data doesn’t even need the advertising clicks to be collected.

    The ‘trick’ if any is in convincing users to allow their private conversations to be recorded and processed for someone else’s profit (or perhaps more nefarious reasons?)

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