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Chris Hughes

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Further fueling the ongoing debate over the future of the news media and independent journalism, eBay founder and billionaire Pierre Omidyar last month committed $250 million to a news site co-founded by journalist and author Glenn Greenwald. Omidyar’s investment followed the announcement over the summer that Amazon founder and CEO Jeff Bezos had purchased The Washington Post, also a $250 million investment. The late Steve Jobs’s wife, Lauren Powell, and 29-year-old Facebook co-founder Chris Hughes are also pouring money into old and new media ventures.

Could this new band of news media owners shape a technology-led business model that will be profitable and protect the integrity of impartial, ideology-free journalism? Ultimately, according to Wharton experts, the ball will rest with the consumer.

Any new business model that those in the technology world would bring to the media realm would have to address the major pain points currently facing the industry. News organizations have “suffered a lot financially in the past couple of years,” says Wharton marketing professor Pinar Yildirim. Circulation numbers and advertising revenue have shrunk as both readers and companies turned their focus to the Internet. The industry has tried to adjust to the new normal — some newspapers and magazines have cut back on issues or the number of days they produce a print product. Other news organizations have started charging for online access. Still more have tried to add content that mimics what tends to be most popular on the web, especially entertainment-related coverage, Yildirim notes.

Omidyar has indicated that he was motivated more by a desire to protect independent journalism than the prospect of getting a return on his investment, at least for now. In a blog post published on his website last month, Omidyar wrote that his investment in Greenwald’s venture (tentatively called “NewCo.”) stems from his “interest in journalism for some time now.” In 2010, Omidyar founded Honolulu Civil Beat, a news website with a stated focus on “investigative and watchdog journalism.” Earlier this summer, he explored buying The Washington Post newspaper before Bezos became the winning bidder. Around that time, Omidyar said he began thinking about the social impact he could help create with an investment in “something entirely new, built from the ground up.”

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facebook credits

Editor’s note: Dean Alms is the VP of Marketing & Business Development at social entertainment company Milyoni. Follow him on Twitter @deanalms.

Roughly 16 billion Facebook Credits were distributed and consumed in 2011. In 2012, I predict that the use of Facebook Credits will soar by three times to over 40 billion Credits spent on virtual goods, digital goods and more. The growth will be fueled by new digital content available on Facebook, use of Facebook Credits to reward brand loyalty and better marketing of a social currency that is still in its infancy.

The following chart shows the growth of Facebook Credits revenue reported by Facebook from 2009 to 2011.

This chart demonstrates that with a growth rate of 300 percent in 2012 (lower growth rate than in prior years) the number of Facebook Credits in circulation will soon reach 47 billion. If 7 billion remain unused in consumer accounts by the end of the year, then 40 billion will have been spent on social gaming, social entertainment and new innovative applications. At 10 cents per credit, total revenue generated from the Facebook Credits market in 2012 will reach approximately $4 billion.

Can Facebook Credits really grow to over 40 billion in circulation in 2012? The answer is yes. Here are some of the key assumptions and business drivers of this new international currency for virtual and digital goods.

  • Facebook, seeing the opportunity and its contribution to the bottom line, will put forth a stronger marketing effort in order to communicate the value this currency brings to both merchants and consumers. Facebook Credits are still new and their value can still be hard to understand. Many don’t know much about this currency, where to get them, what they can and cannot use them for, and why they matter. This marketing effort will likely leverage mainstream marketing channels: TV, Radio, and Print to simply get the message out—Facebook Credits are hugely valuable and everyone should use them.
  • Retail efforts will pick up steam. iTunes gift cards will face stiff competition from Facebook as young consumers begin asking for these cards for birthdays and holidays instead of a single-brand card like iTunes. The variety of apps with built-in social interaction will create a strong demand for the next-generation of entertainment.
  • Hundreds of big brands and thousands of smaller brands will use Facebook Credits in 2012 as an incentive tool. Facebook Credits will be the airline miles of the next decade as consumers are rewarded with Facebook Credits for brand loyalty. Companies will encourage customers to visit online stores and reward customers with Facebook Credits in varying amounts because the online world-of-mouth and viral effects are endless.
  • Social Gaming will continue to grow with new games and new audiences playing them. Social Gaming, currently led by Zynga, will make billions of dollars in this market with Facebook taking a fee from every transaction conducted on its social network.
  • Social Entertainment will grow in size and significance. In 2012, thousands of movies and hundreds of live events (concerts, sporting events and more) will be available on Facebook for 30 to 100 Facebook Credits each. Today, 89 of the top 100 Facebook Fan pages are entertainment-oriented – music, movies, and sports properties or personalities—and fans always want more content from these pages. In 2012, they’ll be more and more likely to use Credits to access it.
  • Facebook Credits are a global currency. My company, Milyoni, has created a number of live and video on demand offerings on Facebook. Many of them have reached fans from over 30 countries using Facebook Credits as the only currency. This frictionless currency conversion experience is a key factor in the global adoption – no need to worry about exchange rates or fluctuating monetary values. Facebook provides seamless currency conversion for 47 currencies, and climbing.
  • The Facebook Open Graph. Less appreciated, but very important, is the open graph API’s and Facebook’s support of the platform where people, apps and interactions continuously grow. If Facebook’s team does not meet a specific need, there are other innovative start-ups that will leverage the Open Graph to produce the apps and services that both consumers and merchants need to make this ecosystem thrive.

Given this context, spending 40 billion Facebook Credits or $4 billion in virtual and digital goods is achievable. As music, movies and other entertainment content supplements an already growing base of social gamers, this number may end up being on the low side. The bottom line for all businesses with social media ambitions is: create a strategic initiative to leverage Facebook Credits; ignoring it means missing out on the massive market opportunity they represent.

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