Facebook Still Courting Media Business

Media companies are both enamored with and cautious of the social media giant

Mark Zuckerberg has long encouraged other industries to follow the lead of the gaming business, which he believes has been transformed by social media. The Facebook CEO often points to companies like Zynga, which have built massive businesses entirely on Facebook’s platform, as a model for industries like music, books and, of course, media.

Over the past year or so, Facebook began intensifying its courtship of the media industry. So far, media definitely finds Facebook attractive but seems afraid of getting hurt. In fact, while it seems clear that while Facebook and the media business are becoming further intertwined, media has so far rebuffed Facebook’s larger ambition—to be the place where media is consumed, talked about and shared for the majority of Web users.

Take Hulu for example. The Web video hub was one of the first companies to build an app on Facebook leveraging its Open Graph—the company’s set of automated content-sharing tools. The thinking was, users could download the app, watch their favorite shows on Facebook, and their friends would be alerted instantly that Gregg loves Grey’s Anatomy.

But last month, Hulu ditched what Facebook calls a "canvas app" and instead redirects users to Hulu.com. Hulu executives wouldn’t comment, but it's likely that Hulu didn’t see any reason to cede some its traffic to Facebook, not to mention all that data on its users’ habits.

Among Hulu’s brethren, while most TV networks have dedicated (and quite popular) show pages, NBC doesn’t have a viewing app, nor does The CW. Fox never even built one. Even when Hulu was streaming shows on Facebook, ABC never permitted its shows to be delivered on the site. Curiously, the non-Hulu network CBS does allow fans to stream full episodes of shows like The Big Bang Theory on Facebook—but that’s using CBS’ player, not within an app.

The movie business is being equally cautious. Take Warner Bros. The company made headlines last year when it announced that Facebook users would be able to pay $3 to stream The Dark Knight. Warner Bros. still offers 14 titles, but the offering hardly seems to have taken off and other studios have steered clear.

Magazine companies aren’t exactly rushing to build Facebook editions either. Time.com has enabled frictionless sharing, and Sports Illustrated is looking to follow suit. But as far as delivering full-fledged magazines on the site? Not right now. “We’re exploring ways to implement Facebook sharing in ways that make sense for us. Ideally we want it to benefit our properties,” said SI.com editor in chief Paul Fichtenbaum.

What about the Web publishing world, which seemed to embrace the frictionless sharing made possible by the Open Graph in a big way? Early partners like Yahoo News and The Washington Post saw traffic referrals soar and their brand profiles blow up as their headlines flooded Facebook News Feeds.  But look at what’s happened lately.

Publishers including ESPN.com, MSNBC.com and The Daily Beast have all implemented automatic sharing on their sites but haven’t built Facebook apps.

“It became apparent that a domain integration is better way to go than an app on Facebook,” said Daniel Blackman, chief digital officer at The Daily Beast during Adweek’s NexTech event a few weeks ago. "That should have a much better impact on traffic than a social reading app that keeps people in Facebook.”

Even then, according to Ashley Wells, MSNBC.com’s vp of creative development, the days of News Feed overload are probably over. As Wells explained, Facebook eliminated an Activity Feed box atop its site which showcased recently read stories and also dialed back the frequency of news sharing, favoring other social activities on the site. That coupled with more publishers signing on means Facebook traffic is no guarantee. “Facebook doesn’t want to flood people," Wells said. "The irritation factor played into these decisions. We’ve seen these changes effect referrals. If you book revenue against that traffic, you’re in trouble."

Facebook doesn’t book any revenue from any of its Open Graph partners, and that doesn’t seem to be a priority. Take Vevo, for example. Since integrating with the Open Graph, it's seen traffic to Vevo.com jump 144 percent.

Vevo also serves and handles ad sales for videos on thousands of Facebook artist pages. “That helps us become one-stop shopping for brands, which can check off the video and the social box,” said David Kohl, Vevo's evp of sales and customer operations.

But unlike with revenue generated by companies like Zynga, Facebook doesn’t take a cut of Vevo's ad revenue, whether it's generated on or off Facebook. And that doesn’t seem to be the plan for now. “They want to be a platform,” said Jim Spanfeller, CEO of Spanfeller Media Group. “I don’t think they are after media dollars just yet.”

As one media executive explained it, “They are generating traffic and a business on the back of our content, and we’re building a database on their backs. No money changes hands, but it works well.”

For now at least. But wouldn’t it make a lot of sense for Facebook to start taxing its media partners when and if they start making serious money on Facebook? Especially in light of the fact that Facebook seems to have a challenge on its hands in nabbing big branding dollars from the GMs of the world?

“I don’t see the connection,” said Wells. “They want to be the identity system of the Web.”

The same thing could be said about Apple, and Google and probably Amazon. Whoever wins that battle, if one company can, could potentially influence the future of media and commerce on the Internet.

But unlike Apple and Amazon, Facebook doesn’t have much of a commerce business—yet. The company’s Credits currency claims 15 million users (out of roughly 900 million or so Facebook members). That’s probably a big reason you don’t see a lot of people renting The Dark Knight yet.

But post-IPO, Credits could become a much bigger priority for the company, argues Peter Vogel, co-founder at Plink (which just happens to maintain a Facebook Credits rewards business). If Credits becomes more widespread, it’s easy to imagine more media companies looking to trade their wares on Facebook. Credits could theoretically pay for a day of Spotify listening, a week of The New York Times or a few days worth of Hulu Plus. “Facebook has been very slow to promote the Credits economy,” said Vogel. “But that’s the next logical step following the IPO. You could see a big future in charging and hosting any sort of shareable media: UFC events, concerts, magazines, books.”

Then maybe the rest of the media business might start acting a lot more like the gaming business.