The Next Thing – Issue 173
It's a bit of a long one this week. Sorry about that, I blame AI (not that it wrote the words, but it's providing quite a bit to talk about).
Speaking of AI, a few weeks back I officially launched FOMA with digital doyens Dave King and Ben Keenan. FOMA is a generative AI consultancy - we're working with businesses, marketers and agencies on education, prototyping and research all around AI. Check out the shiny website here, and hit me up if you're keen to here more.
The New New Media ??
It’s been a tumultuous few weeks for the one-time darlings of the digital-led new-media landscape. BuzzFeed founder Jonah Peretti made the decision to close?the Pulitzer Prize winning BuzzFeed news division, impacting 180 people – 15% of the total BuzzFeed workforce. Peretti indicated that he doesn’t believe there’s a sustainable business model for quality news online, and cited a slowdown in digital advertising and a change in user behaviour as key factors for the decision.
As BuzzFeed rose to prominence and established a “serious news” division, Vice was quick to follow. So, it was unsurprising to see that?Vice News followed BuzzFeed's lead and shut down?the bulk of its operation a couple weeks back. Shortly after it was revealed Vice was facing bankruptcy, entering?last minute fire sale talks, and as of Tuesday?filed for Chapter 11. It’s a far cry from a USD$5.7B valuation in 2017.
BuzzFeed and Vice, along with brands like Vox and Business Insider (both of which have also made significant cuts recently) came to the fore during the social media boom. BuzzFeed understood how to game the Facebook algorithm like nobody else, while Vice led the charge on edgy video content (war zones and drugs, preferably at the same time). Social relevance led to social traffic, which led to advertising dollars. Those days are long gone (as are the dollars).
But now, news media may be seeing a?return to the early days of digital. Social platforms like Facebook and Twitter are no longer the primary source of traffic for most major publishers.?Recent Chartbeat data?across over 1,000 news sites shows Facebook is just over 10% of all referral traffic, compared to 30% five years ago.
And this behavioural shift by audiences is driving a shift in strategy. HuffPost (purchased by BuzzFeed in 2020) has become profitable by focusing on homepage traffic and ad-supported content. Other media companies are focusing on podcasts and short-form video on their own platforms, rather than being at the whim of Facebook and friends. Amongst this swing back to the homepage, changes to tracking capabilities by the likes of Facebook and Google are making publisher audiences more valuable to advertisers.
It’s certainly not an easy road ahead for the sector, but it’s definitely a change of direction.
The New New Google ??
Google has been facing a few challenges of late. Q1 reporting showed a?2.6% YoY drop in YouTube ad revenue, although the search business did return to growth of 2% after being in decline for a few quarters.
But in the new AI era, Q1 was practically last century. And here lies Google's challenge. They're playing catchup, and are quite possibly at a fork in the road where The Innovator's Dilemma kicks in and attachment to the old business model (10 blue links and rivers of SEM gold) blocks a new business model opportunity.
Not surprisingly then, Google announced a slew of AI related thingies at their I/O conference last week. One count claimed 142 mentions of AI in two hours.
The major announcement for brands and media is "Search Generative Experience" (no time for naming workshops at Google, clearly). Essentially, when users ask a question of Google (their example was asking for a good holiday destination for a family with a dog) the top of the results will now be an AI generated answer. To the right of this answer will be three links to relevant sources. Google also showed a demo that focused on shopping recommendations that shows a summary of product considerations, and the best online prices.
For media companies, it's another case of the big-dogs of slurping up content and reformulating it via an AI black-box. This may actually turn out alright for the big media brands who will feature in the three links and still see some traffic. For smaller publishers this is definitely not good news (but Google thanks you for your content).
领英推荐
The recent pivot to affiliate revenue by many media sites may take a big hit too. The AI product summary will use the excellent review from the big-name publisher, but then point the user to the cheapest price it can find. (My sympathies to anyone in a news product team who has spent the past decade of their lives flipping from building sites to appease Google, and then Facebook, and then affiliates, and now the AI bots)
For brands, the future of Google is a big unknown. In the Google demo, search ads were still featured under the big AI-generated box - but only just visible on a laptop screen. My bet is that those ads will become a bit more prominent as the feature rolls out, but it seems likely that paid traffic will drop and become more expensive. Meanwhile for brands that love a bit of SEO, the future might not be as rosy – it's hard to see how keyword-stuffed product posts will get into the "three links" of the AI result.
Or maybe, none of this works! With immaculate timing, last week The Verge dropped?a solid read on Google's long history of trying to take over the web?and strong-arm publishers. It's worth a read as a reminder that the bright shiny future pumped by big tech rarely turns out as planned.
Oh Canada ??
Canada is following Australia's blueprint?in compelling tech companies (Google and Facebook primarily) to negotiate deals with news media when using their content in both news summaries and general search or social links. Google and Facebook are following their Australian blueprint again and?say remove news content, somewhat bizarrely pretending that this worked well last time.
The Australian government managed to come up with what is possibly the worst conceivable solution to what is actually an important problem. Asking Australian media companies (total market cap ~$15B) to negotiate with Google and Facebook (total market cap $2.1T) created an immediate imbalance. Smaller publishers were completely ignored. The deals have been opaque, and depending on their structure arguably incentivise clickbait and probably aren't resulting in the funding of actual journalism.
New to the issue is AI, and it's easy to see where Google will go with News given their I/O announcements last week. Arguably there is far more value to be extracted for free from media companies via training large language models than the rather pedestrian usage that ideas like News Media Bargaining Code target. So this entire process is probably already out of date (or at least should include AI companies using news for training as well).
With the UK hot on the heels of Canada, and Brazil and South Africa likely to follow, it seems plenty of countries that aren't the US are starting to worry about the sustainability of their media companies. It's a legitimate concern, healthy democracies need healthy media. But it's worrying that they all seem to be following Australia's lead.
Is there a better solution then?
Look I'm no policy wonk, but it's interesting to note that the ACCC has estimated that the bargaining code has resulted in $200M per year going to Australian publishers.?Meanwhile,?Facebook paid $33.7M in tax last year in Australia (or 2.4% of $1.4B in sales). Google fared slightly better paying $92.6M on $1.95B. You don't need to squint too hard to find a better solution than the bargaining code.
Live Shopping is Wild ???
If you need a break from AI and tech giants, this is an?amazing read on live shopping in China. As with so many things China the numbers are ridiculous. In 2022 apps like Douyin and Kuaishou were the source of over $500B of sales via live streaming, a number that is up 8x in 3 years.
The format (a bizarre mix of influencer-entertainment and oldschool TV shopping network vibes) took off during lockdowns, but unlike the eCommerce boom in western markets it hasn't slowed. Star streamers are building huge audiences along with immense trust, and that's attracting big brands including Louis Vuitton and Ikea. And because China, it's also attracting the eye of The Party. ??
I run a creative agency and am bringing more nature into dense cities ??
1 年O Canada.