Facebook Fallout

As if to prove that Facebook’s F8 announcements were truly seismic we are still feeling the aftershocks now.  Interestingly though it is Spotify who is feeling most of the effect of Facebook’s moves towards becoming a 21st Century Portal.

When Spotify was positioned centre stage at F8 (literally in the case of Daniel Ek)  it wasn’t immediately apparent whether this was just Spotify as the first among equals of the dozen+ digital music services included at launch.  Now the dust is settling it is becoming apparent (to misquote Orwell) that

All digital music services are equal, but some digital music services are more equal than others.

Facebook, Guardian or Gatekeeper?

There are many quite logical strategic and financial reasons why Spotify’s bond with Facebook is so close (shared investors, scale, momentum of brands, closeness of Zuckerberg and Ek etc etc).  But in my opinion it is more interesting to look at what the long term effect of the fallout may be:

  • Facebook: Gatekeeper of the ‘Socially-Enabled Web’. Over recent years Facebook has slowly been flicking the switch on its strategy of integrating itself into the wider Internet, first with ‘Likes’ across external web sites and now with features such as the Timeline, and a play for the Universal Log In (see below for more).  What Facebook is doing is placing a social (i.e. Facebook) layer across more and more of our external web experiences and also bringing more of our external web experiences into Facebook.  This is what I term Facebook’s Socially-Enabled Web strategy. As leading content destinations such as Spotify, Vevo and Netflix jump on board they have their eyes firmly set on the 800 million potential customers and turn a blind eye to the longer term implications their collective activity is facilitating.
  • Facebook’s Digital Music Gentleman’s Club: Spotify’s tighter integration raises questions about Facebook’s role as a curator of out digital content experiences. Rdio and Mog for example appear to be given less prominence than Spotify within Facebook. Rdio users have complained that Spotify’s ‘featured music service’ status overrides some Rdio functionality within Facebook.  Facebook creating a social layer for content experiences is one thing, but choosing who gets in and who does not is an another thing entirely.
  • A Nail In The Coffin for Ownership? Universal Music’s UK Director of Digital Paul Smernicki said he saw the F8 announcements as a ‘coming of age’ for streaming services and a shift to access rather than ownership. The emergence of the consumption paradigm has been something I’ve long expounded, but it is interesting to hear it come from the world’s largest record label.  (And from a record label that typically doesn’t just let executive comment ‘slip out’.)  The addition I’d add to the argument is that we are in a transition phase where additional, complementary blended access / ownership models will be crucial to mass market revenue migration.
  • Facebook Boosts Spotify Usage, Though From What Base? New usage metrics (from a third party measurement company) suggest that active Facebook integrated usage of Spotify rose from 3.25 million to 4.5 million following the F8 announcements.   Spotify report their ‘active’ users at c. 6.5 million, which means that if these 3rd party numbers are broadly accurate that only 50% of Spotify’s ‘active’ users in a normal non-F8 month are active Facbook integrated users.  It also means that Spotify’s 2 million paying subs represent 61% of this user base.  There are some important caveats: the measurement company suggests their data should be considered as directional rather than absolute. Additionally ‘active Facebook integrated’ users is not the same as ‘active Facebook users’ but it is a decent proxy for the most engaged Spotify users. Which raises questions about just how many more potential new premium customers are left to convert. Which in turn helps explain why Spotify is widening out the funnel with a ‘6 months free Facebook streaming’ offer.
  • Facebook and the Universal Log-In.  Perhaps the most contentious issue of all has been Spotify’s insistence on all Spotify users using their Facebook log in details to access the music service.  Which of course means that if you are not on Facebook you cannot use Spotify.  Faceboook’s 21st Century Portal ambitions don’t stop with adding that social layer to content.  The Socially-Enabled Web strategy requires Facebook to become the lock and key for our digital lives.  The concept of the Universal Log In concept is far from new. Many have tried and failed.  Facebook’s scale gives it a great chance of success, and if implemented well (i.e. gradually and on an opt-in not force-in basis) it will deliver great convenience and benefit for consumers.  What Spotify are guilty of is rushing it through in a heavy handed manner.  But doing so was probably part of the price of the centre stage positioning Spotify got given.  Note that Rdio and Mog have no such requirements.  Interestingly some premium Spotify users indicate that it is possible to get around the requirement by opting out of the timeline functionality within Facebook.  It will be interesting to see whether this is a bug in need of a fix or indeed a benefit for paying users.

Expect more  fallout from the Facebook announcement, but don’t expect Spotify and Facebook to fall out

It is likely that the fallout will continue over the coming days and weeks and that Spotify and Facebook will both consider making changes (Daniel Ek even reached out to the Twitterverse to ask directly for their feedback and stated he would make changes if need be).  Indeed one survey suggested 20% of Swedes could leave Spotify in light of the changes.  But when the changes do come, don’t expect them to be a change in strategy, instead simply a slowing of the timeline (no pun intended).

The harsh reality is that Facebook’s Socially-Enabled Web strategy is simply too important to be put of course by a few disgruntled streaming music fans.

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