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Straight Talk Media & Entertainment

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One of the biggest stories in the media and entertainment industry in the past decade has been the growing influence of Internet players. While Google has long been seen by traditional media players as a “parasite” (to quote Rupert Murdoch) and a potential threat to their business (and that story is set to run and run in Europe), Facebook’s stellar rise, not just as a social media platform but as a platform for the distribution of content, has somehow attracted less opprobrium.

Yet Facebook is a massive media player. It now serves more videos on its platform – 4 billion each day – than YouTube. The launch this month of Instant Articles, whereby news publishers (including The Guardian and the New York Times) publish content directly onto Facebook, rather than solely on their own sites, marks a further significant development in the evolution of Facebook as a media distribution platform, with mobile at its core.

Facebook’s nominally more generous arrangement (it allows media partners to advertise on Facebook and keep 100% of the revenue) contrasts with Google’s historical insistence on taking a hefty cut from any such arrangements. Facebook is smart enough to recognize the importance of a firehose of great content from third parties in keeping its users on the site for longer.

Globally, as Facebook rolls out its project, it is seeking to extend its role in emerging markets too. For many of its users, Facebook will be their primary portal to the mobile Internet, a kind of 21st century AOL. And the integration and expansion of media content through partnership with a range of providers will be a key part of its growth strategy.

Content brands must not be reliant on Facebook alone. The demise of Zynga, whose Farmville was once a huge driver of traffic to Facebook, is a reminder of what can go wrong. Based on its latest deals, Facebook appears to realize that mutual dependence is key: it needs to work with great content providers, and vice versa. Google, by contrast, is heading for a potentially painful and expensive showdown with the European Commission as a result of its long-running dispute with some of Europe’s largest media players.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

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