Tuesday, April 17, 2018

Media—"Data Lords: The Real Story of Big Data, Facebook and the Future of News"

We don't link to TPM all that often but their understanding of newsonomics is very interesting. Here's our comment on last years "Is Venture Capital Destroying Online Journalism?":
I don't know but having spent some time trying to front run Sand Hill Road and understand things like Uber I have to say this is an interesting insight.
From Talking Points Memo, November 17:
There’s a Digital Media Crash. But No One Will Say It...
And here's the latest from Talking Points Memo:
This afternoon I saw a friend on Twitter say that he doesn’t buy the idea that if people just paid Facebook some sort of fee the data and privacy issue would go away. Because he subscribes to the Times, the Post and the WSJ and they each track his readership habits and sell that data to advertisers or make it available to them for targeting. This is at least partly true – I’ll discuss the ins and outs of that point in a moment. But this is a good opportunity to discuss the real relationship between publishers and big data. It’s actually very different than it looks.

First, what my friend says is true. These publications are all in the data collection and sale business. Indeed, TPM is too – not directly at all but because of the ad networks (like Google and others) we have no choice but to work with. The key on the main claim is that the issue is one of diversity of revenue streams. Each of those big publications mentioned has at least three big revenue sources that are relevant to this conversation. They have premium advertisers for which the kind of data we’re talking about has limited importance. They also have subscriptions. The final bucket is made up of advertising that is heavily reliant on data and targeting.

The difference is that Facebook is almost 100% reliant on advertising which is not only reliant on data and targeting but reliant on the most aggressive kinds of data collection, tracking and targeting. That is Facebook’s entire business. Anything that cuts deeply into that model and advantage represents an existential threat.

But here’s the really salient point. Almost every publication participates in the data economy. But the data economy is almost universally a bad thing for publications, especially ones that have real audiences.
Allow me to explain.
Different publications have different kinds of audiences. If you want to sell consumer goods to a mass audience, you might advertise in People magazine or Yahoo News. If you want to advertise to affluent investors you might advertise on WSJ or Barron’s. If you want to advertise to highly educated progressive news junkies who are what ad industry types call ‘opinion leaders’ you might advertise on TPM.

Different publications have different audiences and they have different relationships with those audiences. Some have deep bonds of trust, others don’t. Historically (and increasingly today), publications sell subscriptions. They also sell ads which can command different rates depending the value advertisers attach to talking to different groups of people. If you have a strong brand and a key audience, a publication can command profitable advertising rates because they become a kind of gatekeeper for a given audience.

The evolution of big data, tracking, targeting and advertising over the last half dozen years has transformed this dynamic.

Let’s take a hypothetical publication, Fishing Times. In the old days, paper or digital, if you’re advertising fishing equipment, Fishing Times is a must-buy. But tracking and targeting changes that. Now Google or Facebook or a number of other players whose names you haven’t heard of can target people interested in fishing or even Fishing Times readers wherever they go on the internet. Let’s call these “Fishing Times readers” collectively.

So Fishing Times’s ad department is selling access to the prime Fishing Times readership. But the Data Lords can say, ‘we can show your ad just to Fishing Times readers when they’re on Facebook, or on some meme site, on the Times or TPM or really anywhere.’ Because the Data Lords have the data and they can track and target you. The publication’s role as the gatekeeper to an audience is totally undercut because the folks who control the data and the targeting can follow those readers anywhere and purchase the ads at the lowest price.

That’s not all. The Data Lords can also create something called ‘look alike audiences’, a key part of what Facebook (but by no means only Facebook) does. This means that the data may show that people with brown eyes, Toyota Camrys, fans of Katie Perry and chocolate milk buy the most fishing equipment and are the most intensely loyal readers of Fishing Times. Now the Data Lords can show your ads not only to Fishing Times readers (wherever they go on the web) but to this demographic profile which may seem to have no connection to fishing but yet has a demonstrated propensity to purchase fishing gear in the same way Fishing Times readers do....