This Week in Review: Facebook’s IPO gone bad, and New Orleans loses its daily newspaper
[This review was originally posted at the Nieman Journalism Lab on May 25, 2012.]
Facebook’s quick fall: A week ago, Facebook had just launched the largest, most buzzworthy initial public offering in years. And now, that IPO has already brought them a potentially massive lawsuit and a federal investigation. Aside from the whole “pocketing millions upon millions of dollars” thing, it’s been a brutal week for Facebook execs. Here’s what happened.
Facebook dominated the conversation online last week (GigaOM has a good roundup from last Friday’s IPO), and a lot of that wasn’t positive. As data from Pew’s Project for Excellence in Journalism showed, much of the chatter online, particularly on Twitter, was about Facebook as an overhyped (and overvalued) stock. Those online observers may have been more right than they knew: As reports from Reuters, Business Insider (two posts), and The Wall Street Journaldetailed, Facebook was allegedly telling top investors they had overestimated their projected financial figures, all while publicly talking up their earning potential and even expanding their stock offering to the rest of us. The result, so far, has been a U.S. Securities and Exchange Commission investigation and a (potentially class-action) lawsuit from investors.
There were a number of good analyses of what went wrong — at The Guardian, Heidi Moore laid out the list of sins involved and concluded, “Facebook didn’t know how to work its own privacy settings for investors. It couldn’t figure out, essentially, who should know what.” Reuters’ Felix Salmon was more specific with his list of incompetents, declaring that the only winners in this game were the ones who didn’t play at all. The Big Picture’s Barry Ritholtz also ripped apart the debacle.
The whole scandal still leaves open the question of what Facebook should, in fact, be valued at. At Technology Review, Michael Wolff was most provocative with his assessment, arguing that Facebook is just another business inextricably reliant on a fatally flawed online advertising model: “The crash will come. And Facebook—that putative transformer of worlds, which is, in reality, only an ad-driven site—will fall with everybody else,” he wrote. Harvard’s Doc Searls echoed Wolff’s thoughts about the brokenness of Facebook’s (and the web’s) ad model, and media consultant Terry Heaton countered that the broken industry isn’t the ad-supported web, but Madison Avenue’s insistence on the status quo on that web.
Others looked more closely at the future of Facebook’s services and of the social web more generally. The Atlantic’s Alexis Madrigal wondered whether Facebook’s users would keep sharing and what would become of its native and mobile users, and ReadWriteWeb’s Dan Frommer examined the company’s four biggest risks (there’s mobile and advertising again!). There were other problems spotted: All Things D’s Peter Kafka looked at the continued decline of Facebook’s Social Reader apps, and The New York Times’ Nick Bilton contrasted Facebook and Twitter’s approaches to privacy. Tech blogger Dave Winer insisted that we can do better than Facebook, while Slate’s Farhad Manjoo contended that Facebook has improved Silicon Valley.
The end of an era for New Orleans news: The American newspaper industry absorbed another big blow this week when the New Orleans Times-Picayune announced that it would drop back from daily publication to just three days a week, a change accompanied by the creation of a new corporate entity to run the paper and heavy layoffs — possibly a third of the newsroom. The change will leave New Orleans as the largest city in the U.S. without a daily newspaper.
The news was broken by The New York Times’ David Carr, and according to the New Orleans alt-weekly Gambit, Times-Picayune employees learned of the paper’s fate through his report. (They later got this memo from the paper’s publisher.) All this came despite the fact that, as Jim Romenesko reported, the paper remains profitable. For some of the background on the paper — which is owned by Advance Publications, a division of the Newhouse publishing empire — see this post at the Columbia Journalism Review. (Advance also announced they’d be doing the same thing with three of its Alabama papers, led by the Birmingham News.)
Media analyst Ken Doctor has an extremely useful analysis of what exactly Advance/Newhouse is trying to accomplish with this move, and what perils it faces. Doctor called the paper’s transition to digital a “forced march” because the paper simply isn’t ready for a digital transformation, particularly in terms of digital circulation. Others were similarly skeptical: The immediate comparison was to Advance’s 2009 transition of the daily Ann Arbor News to AnnArbor.com, and Forbes’ Micheline Maynard gave a bleak picture of what’s left of that news organization and the hole it’s left in the community.
Forbes’ John McQuaid, a former Times-Picayune reporter, described the way Advance’s web strategy has been “only lightly tethered to newsgathering,” and concluded that “with Advance, news has always been an adjunct to its vanilla branded sites, not something that is driving the internal business conversation, and it shows.” And former Wall Street Journal writer (and Times-Picayune intern) Jason Fry said he doesn’t see any reason for optimism that Advance will get the web right in this case.
Free Press’ Josh Stearns noted that while the future-of-news world has been optimistically focused on experiments to sustain quality journalism in certain hubs like San Francisco, Chicago, and New York, they need to pay closer attention to mid-sized cities like New Orleans, where the infrastructure simply isn’t there to pick up the journalism being cut at major traditional news organizations.
What’s behind Buffett’s newspaper buy?: I briefly mentioned Warren Buffett’s purchase late last week of 63 newspapers from Media General in last week’s review, but some smart commentary has come out about the deal since then (along with a few other pieces I missed at the time), so it’s worth touching on again. Media analyst Ken Doctor did a sharp rundown of the deal, pointing out that the upside of Media General’s broadcast properties and the real estate involved with the newspapers Buffett’s buying should help buffer him from the inherent danger of buying a set of newspapers. Reuters’ Jack Shafer pointed out several of Buffett’s past bearish statements about newspapers, but said he’s most likely buying because he sees an undervalued asset, not for any sentimental reason.
The Columbia Journalism Review’s Justin Peters and The Washington Post’s Erik Wemple both explained why these papers might be surprisingly valuable for Buffett: While major metro dailies have taken a beating, smaller community newspapers in rural areas have weathered the digital storm fairly well so far, in part because of their monopoly on local news and the slower rates of broadband adoption there.
Former journalism professor Philip Meyer made a similar point, arguing that Buffett is the type of buyer who’s happy with the new normal of lower profit margins for newspapers: “It looks like he is betting that the slide in newspaper earning power has leveled out. The Internet has done all the damage it can, and papers still make money.” PaidContent’s Jeff John Roberts looked at the economic sense Buffett’s paywall plan makes, while media consultant Dan Conover said he should be open to other non-paywall-based models. Poynter’s Andrew Beaujon, meanwhile, said we may be ignoring another big reason for news org purchases like Buffett’s — they’re a platform for personal philosophies of how journalism should be done. Buffett did tell his new papers’ publishers that he would be hands-off with them, and that he expected to buy more small and mid-sized papers.
A dubious bid to outlaw anonymous comments: This bill is almost too ridiculous to merit an item, but I’ll give it a quick mention here anyway. New York lawmakers have proposed state legislation that would make anonymous comments illegal — New York-based blogs and websites would have to add a name to posts or delete them. Wired’s David Kravets, who brought the bill to national attention this week, pointed out that there was no identification required of those requesting such post takedowns.
The bill, which was supposedly meant as a weapon against cyber-bullying and attacks against “local businesses and elected officials,” was predictably (and rightly) met with derision from scholars and those on the web. Columbia’s Tim Wu told The Guardian the bill was “an obvious first amendment violation,” and the bill was also ripped at sites like Techdirt and Animal. BetaBeat reported that some of the lawmakers involved with the bill were surprised by the blowback about it, while The Atlantic brought out a dissenting opinion, with a point/counterpoint on the value of anonymous online discourse.
Reading roundup: Plenty of other stuff going during this week of Facebook:
— The Wall Street Journal reported on some of the ongoing struggles with AOL’s hyperlocal journalism project, Patch, breaking the news that 20 Patch employees were being laid off and that one of AOL’s major investors is trying to get Patch killed, sold, or put into a joint venture. Jeff Bercovici of Forbes said it’s going to take a lot more cost-cutting or revenue-raising to get Patch to profitability by next year, and The Washington Post’s Erik Wemple said hyperlocal journalism’s business model doesn’t have room for executives in suits.
— The New York Times’ public editor, Arthur Brisbane, will leave his position in September after two years, declining an optional third year. The Washington Post’s Erik Wemple, who broke the story, took the opportunity to criticize his most recent column, and Poynter’s Craig Silverman proposed five qualifications for the next public editor of the Times. Poynter also held a chat about the role of ombudsmen with Washington Post ombudsman Patrick Pexton and Reuters’ Jack Shafer.
— This week in Murdoch was a relatively quiet one. News Corp. was reported to be considering spinning off its British newspapers — the Sun, the Times, and the Sunday Times — in order to preserve the rest of its media empire, something Murdoch denied but the Columbia Journalism Review’s Emily Bell saw as quite sensible. Here at the Lab, Ken Doctor examined what a trust for those papers might look like.
— A couple of interesting pieces of survey data discussed this week: The study that drew most of the headlines was one that looked at the political knowledge of audiences for various news outlets, finding NPR’s listeners to be the most informed and Fox News’ viewers to be the least informed. Another study found that about half of media professionals abandon websites when they hit a paywall.
— Finally, a couple of cool pieces on data journalism — Simon Rogers of The Guardian urged us to take on the punk “anyone can do it” mindset toward data journalism, and Alex Howard of O’Reilly Radar talked with former Guardian digital editor Emily Bell about her efforts to put data journalism into action with students at Columbia University.