"I hate Facebook, but it's the future"

"Wired" editor Spencer Reiss: Google is a one-trick pony. Facebook and the applications world are replacing the Internet.

"I hate Facebook, but I think that it's the future. Facebook in the 21st century is what the telephone company was in the 20th century. I consider it an infrastructure company," "Wired Magazine" contributing editor Spencer Reiss told "Globes" in a special interview.

Reiss's career includes 20 years in journalism in various positions at "Wired" and "Newsweek". He specializes in new media, green energy, and commercial space flight. He will participate in the "Globes" Israel Business Conference 2010 on December 12-13 in Tel Aviv.

The public debate over new media creates the impression among many people that it is a passing fad and not a real business. "In terms of market cap, the world's top 20 new media companies are equal in value to the 20 largest traditional media companies, with an aggregate market cap of $500 billion," says Reiss. "So, belying what people think, new media isn't child's play."

Reiss cites "The Huffington Post" as an example. It is a news organization that was once defined as "the most influential blog in the world". Reiss says, "I was skeptical when "The Huffington Post" started out, but now I believe in the model. They have 80 engineers building a platform that combines social media with personalization and a social advertising network. They have 80 editors who package and rewrite the content of outside correspondents. They use famous bloggers who create amazing content, which brings them traffic and popularity. After creating this platform, they built, in an evolutionary process, all the business aspects, they built popularity and began to think about money, too.

Globes: In your opinion, should you first build something big, and only then think about how to make money out of it?

Reiss: That doesnt always work, but its possible and its worked before. Dr. Yossi Vardi, one of the owners of ICQ, which was sold to AOL, has said, Revenue is a disruption. He was sharply criticized for that, but he was right. Its possible to see in the "The Social Network" movie about Facebook how much energy Eduardo Saverin wasted trying to find advertisers for Facebook. Then Peter Thiel came and said, Heres a check. Forget about revenue. Well worry about that later. Theres a stage in building an Internet media group when thinking about the business model is simply destructive.

Branded content is like a soap opera Facebook, the worlds largest social network with more than 500 million users, has hundreds of millions of dollars in revenue. Since it a private company, it keeps its figures close to the chest of founder and CEO Mark Zuckerberg, and far from the public's eyes. But a company of its size finds it hard not to look for a business model. How can it make money?

Traditional, conventional advertising cannot work in a social environment, says Reiss. Facebook isnt a classified ads site, and its a mistake to think of it as one. The solution should be in the form of branded content advertisements that people will consider as content. Thats how the soap operas began.

For example, a user receives some kind of social game gratis, sponsored by Coca-Cola. He can also share it with his friends and play with them, without payment. Everywhere the game is played and people are having fun, theyll always be reminded that Coca-Cola gave them this game. Thats a kind of advertising.

The main thing is to create an experience that is not based on disturbances. Today, advertising is something that bothers us when viewing content; in social media, the advertisement is the content, part of the experience.

One of the companies that found a tight Internet business model is the search giant Google Inc. (Nasdaq: GOOG), which has a market cap of $185 billion, but is not permanently immune.

Google is a monopoly in a very limited field, asserts Reiss. In contrast, Facebook dominates our communications with friends, is involved in all aspects of our lives, and holds everyones identity in a single place. Its a good idea, but there will be someone who will ask if its politically correct for one company to control so much.

Google is a one-trick pony, a company that has a primary source of income, which is search-based advertising. It has a lot of money and it has tried dozens of outside activities and failed with nearly all of them.

Until recently, Google was the place where all the information available on the Internet could be found. Then came Facebook and created a black hole that cannot be scanned. Then came Apple and created another black hole the world of applications, which Google also doesnt know how to check.

Google isnt the same company that we all loved five years ago. Today, its seen more as a giant corporation, such as Microsoft was once seen. It isnt surprising, therefore, that Googles share price is falling and its employees are leaving for Apple and Facebook, which appear to be much more promising companies.

Reiss says that modern times are good for people with ideas. Facebook and the applications world are replacing the Internet. Its happening partly because good ideas come more quickly and more cheaply to a lot of people. Thats the good news for entrepreneurs and users, he says.

Twitter is worth more under Google Google reportedly wants to use its vast cash reserves to make a big acquisition. It sought to buy Groupon Inc. for $6 billion, but its owners politely rejected the offer. Google also tried to acquire micro-blogging platform Twitter, which Reiss describes as a company with an interesting product and a lot of users, but which has no idea what to do with the money.

Google will try to acquire hot platforms, such as Groupon or Twitter, because it cannot do it itself, says Reiss. Most of Twitter's current revenue is from investors who believe that at some point it will be possible to turn the platform into something that will make money. Its not crazy to think that Twitter can be worth more the moment it becomes part of Googles basket of products, just like what happened with YouTube, the video-sharing site, which under Googles auspices still functions as an independent site.

According to Reiss, Apple Inc. (Nasdaq: AAPL), the company founded by Steve Jobs and which brought applications to the world, is one of the few companies in the world that has demonstrated capability to enter new industries and revolutionize them, while reaping huge profits. There is a tendency to attribute most of its success to Jobs, but I would attribute more importance to his team.

If you had an option to learn business administration at Harvard for three years, or become Jobs aide for the same length of time, which do you think contributes more to your knowledge? The answer is obvious to me, so I think that that people who have worked with him for a decade certainly know something, no?

"Digital doesnt just mean uploading Internet content"

In addition to being the contributing editor of "Wired Magazine", Reiss is the director of the Monaco Media Forum, an annual meeting in Monte Carlo of print and online newspapers and broadcasters.

News Corp. chairman Rupert Murdoch recently announced the establishment of a paperless iPod-based newspaper. What's the logic behind this?

"He has failed over the past five years in turning his newspapers into digital papers. When you start a new venture from scratch, however ambitious it is, at least there's no war with the staffs of the commercial departments and the editors. You're setting up a new business without the politics.

"I worked at "Newsweek" for many years, and when the business was sinking, the people who were supposed to lead didn't know what to do. The significance of the ability to build a digital platform is not only making content available online. Anyone who doesnt understand this complexity, won't survive."

After News Corporation (NYSE: NWS; ASX: NCP) acquired MySpace, Murdoch said that the birth of mass media destroyed the world of kings and aristocrats, and that the new media world was transferring power from the editors and publishers to the public, to the people.

Reiss says, "At that time, 2005-06, Google was at its peak, and there was a feeling that the world was headed in the direction where the best content wins. A world of dispersed power and a lot of small content suppliers would replace the creators of hits. Contemporary reality is that the creators of hits, such as the movie "Avatar", are more successful than ever. There's polarization - the big are getting stronger and the mid-sized are weakening. The smart thing is to be either very big or very small, not in the middle."

Published by Globes [online], Israel business news - www.globes-online.com - on December 8, 2010

Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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