This piece originally ran on BUSINESS SPECTATOR
Facebook is often perceived as the elephant in the digital media room. Generally none of the big players really want to talk about it.
And whilst the platform isn’t, right now, commercially much of a threat to the existing digital powers, it could well be in the future.
The word is that as a company it is profitable. Recent funding rounds have meant they have large amounts of cash reserves, and with this they are aggressively pursuing talent.
Make no mistake, Facebook considers itself in a similar zone to Google – not just a media company but a company designed to create a positive impact on people’s lives.
Now, to date, Facebook’s attempts to commercialise its significant user-base have been relatively awkward. Its self-service ad platform is helping change this, but the company has failed to nail a compelling advertising product with the scale required to even begin to meet market expectations.
However, Facebook – either by accident or design – now has its sights set on a bigger scalp – the local reliance on Yahoo! and MSN on traffic, revenue and engagement from their email and messenger properties.
And what Facebook could do to disturb these two operators could, long-term, be a lot more damaging than an ad product. It threatens their very survival.
It’s funny when you think about it. The web has evolved so much over the last 15 years, but the properties people spend the most time on outside of Facebook are generally the oldest and most boring, email and instant messenger.
Both of these tools became mass in the late 90s, but 10 years on their respective owners rely on them more than they would like.
What Facebook has done is change the landscape. It has made people less reliant on email for personal communication and has made real time exchanges of words, images and data easy and centralised.
For many, it’s replacing email and messenger – or at least reducing the user’s reliance on these tools.
At the same time, some advertisers are reconsidering whether they use these practical communication channels as vessels for paid advertising. Are they really the right environment or are there better places to engage the right consumer?
In Australia, ninemsn has the leading email platform and the leading messenger platform. Ninemsn Messenger has 5.38 million users each month, eight times that of Yahoo! Messenger (which has 618,000 users). Windows Live Hotmail is the leading email service on the web, with 4.58 million users. Yahoo! Mail is number three (behind Gmail) with 1.78 million users per month. (Source: Nielsen Netview, October 2009.)
Impressive numbers no doubt. However it’s not all smooth sailing.
Generally online publishers talk in total network terms – ie, “we have x million users across our network spending x amount of time with us every month”.
Time spent is an important metric for advertisers – it’s one metric they can use to see how engaging and important to readers a publisher’s content is. Advertisers want to align with quality content and loyal audiences.
Ninemsn has a challenge. A massive amount of the time their users spend with their network is across Mail and Messenger – an awful lot.
In September 2009 users spent a total of 1.96 billion minutes on the site. Of those minutes, 1.68 billion were on Mail or Messenger.
Which means that combined, Mail and Messenger account for 86 per cent of the time spent on ninemsn. This means as properties they are incredibly important for the company in all aspects – user retention, repeat visitation and revenue.
For Yahoo! the situation is also potentially alarming. In September 2009 users spent 567 million minutes on Yahoo!7. 355 million of those minutes were on Yahoo! Mail and Yahoo! Messenger. This represents 63 per cent of total time spent on the site.
If you take Mail and Messenger usage out of both of these networks numbers they don’t look nearly as impressive as they do with them included. What it does show is a massive reliance on two tools that seem to be losing user relevance at a rapid rate.
What happens in three to five years as email and messenger continue to lose relevance and the new social web continues to take users’ attention? What impact will this have on both of these businesses? What do they have left to sell?
Another consideration is around how important these properties are at driving users to other, perhaps more valuable, content areas of the networks. Without large volume around these ‘entry points’ there’s a challenge to hold/build audience in these valuable content categories.
If this was a TV network, it would be the equivalent of a network relying on two pieces of programming to generate the bulk of viewing time. I’d imagine – not having worked at a TV network – that this would be considered risky.
So, while Facebook right now wouldn’t be ‘stealing share’ in a revenue sense from the main players, in the long-term it appears to be in the middle of inflicting some serious structural damage.