Wednesday, January 19, 2011

Bigger is Better: Why The Media Loves Facebook Stories

It was another big weekend for Facebook stories.  The Social Network,” won four awards at Critics' Choice Movie Awards last Friday and four more at the Golden Globe Awards Sunday Night.  The movie, which has grossed over $200 million so far, has, according to the LA Times   “won the majority of critics honors this year, including the Los Angeles Film Critics Association., New York Film Critics Circle and National Society of Film Critics.”

Meanwhile, Facebook was given a starring role in the overthrow of Tunisia’s long ruling President, Zine el Abidine Ben.  The LA Times coverage with the head "Tunisia protesters use Facebook, Twitter and YouTube to help organize and report" was typical. 

These stories reinforce a key fact about media economics: there is almost infinite positive return to scale in media. The bigger a story gets, the more profitable it becomes. The massive audience of Facebook makes anything about Facebook into a good story.  And the fact that people follow Facebook stories begets new stories.  Right now, anything with a Facebook angle will get an audience.  Even the mild interest of millions can be powerful.

A big story earlier in the month was the Goldman Sachs investment of $450 million in Facebook implying a $50 Billion valuation of Facebook.  Hefty, though well shy of AOL’s peak of $166 billion before the dot com bust; still a spectacular number for us all to talk about!  It grew to such a big story that Goldman Sachs was forced on Monday to ditch plans to peddle the shares to US clients for fear of triggering a de facto public offering in the eyes of the SEC.

A big story doesn’t have to be true to sell, just good.  Your humble blogger finally saw "The Social Network" with his date, along with a full house, Saturday night.  The story of The Accidental Billionaires is good.  The less juicy story of a prodigy programmer, tutored from childhood, already an entrepreneur and recognized by leading firms and publications while still a student at an elite private prep school, seeped in the academic research of social networks at a top college, quickly recognizing a promising phenomenon and successfully securing access to capital (the most important competitive advantage an early stage company can have) would be a harder sell.

The Facebook story of Tunisia should be tempered by an accounting of TV coverage and of who has the tanks.  We need to look at the political economics, not just the popular narrative.  The New York Times did note in coverage on January 14, that Al Jazeera has been airing nightly coverage of the unrest in Tunisa for the past month and that many in Tunisia “credit Al Jazeera’s broadcasts with forging the sense of solidarity and empowerment that moved Tunisians across the country to take to the streets simultaneously.”  And an article on the 16th noted that General Rachid Ammar, whose “for president” web page had 1,700 “likes” on Facebook (count ‘em) had pulled army tanks and personnel from from downtown Tunis (no count given).

Your humble blogger will leave the big valuation story for others to figure out.  Suffice to say we haven't seen the last chapter.                                                              

The media loves Facebook stories because we all do. Being part of something big whether it is a big event or the next big thing is something most people “like.”

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