The Facebook Papers, Part 3: Facebook pulls a page from the Amazon playbook

This is the third in a four-part series looking at what happens when what you do is now done by someone else.

In parts one and two of this series, we looked at the forces pushing publishers toward an ever-tighter embrace of Facebook. Parts three and four will look at how those changes will affect the shape of the media ecosystem, and what existing publishers should do about it.

Facebook’s launch of Instant Articles means that a media company wishing to host their content directly on the platform and rely on Facebook’s superior user-targeting for monetization can now do so.

Some publishers are leery of ceding so much to the platform, and there is no requirement to use Instant Articles. However, as Facebook prejudices traffic toward Instant Articles, the competitive pressure to adopt the format will be irresistible.

Likewise, while publishers are free to monetize Instant Articles themselves, the long-term question will be, "Who is better at monetizing Facebook — Facebook or an individual publisher?"

It’s probably Facebook.

To many publishers, this is no bad thing. They talk of a post-social world in which publishers can focus on the pure creation of content and outsource the extraneous rest to the platforms. This position resembles the taxi company that declares that now that Uber is handling customer acquisition, consumer trust, demand management and payment, it can focus on the core job of getting people from A to B.

The most consequential decision Facebook has made is to open up Instant Articles to any content creator. Those creators now have identical access and ability to leverage Facebook’s ability to host, distribute and monetize their content as traditional media companies. What they don't have is a large legacy cost base.

The AWS-ification of Media

In effect, what Facebook has done with Instant Articles is eerily similar to what Amazon did with Amazon Web Services. Prior to AWS, startup costs were so high as to create a significant barrier to entry for most new enterprises. Value accrued to the large companies that could leverage their scale to build new businesses. With AWS, new startups were able to compete with a fraction of the initial capital and infrastructure previously required. Now Facebook has broadly done the same thing to media.

The most consequential decision Facebook has made is to open up Instant Articles to any content creator.

Small ad-supported media companies previously didn’t have the scale to access high CPMs, couldn’t make the comScore Top 50, and were stuck in remnant hell making tiny CPMs. Even hot media companies like Vice would aggregate sites together to boost their audience numbers and make them more palatable. Now new entities will be able to spin up a company with a fraction of the investment required, and without the legacy overhead of their traditional peers.

Their content will be distributed through the same channels, hosted on the same platform, and monetized through the same (Facebook) sales team as the existing digital kings.

This kind of leveling of the playing field creates fertile conditions for startup creation. Just as we saw ultra-light startups emerge and use AWS to compete and disrupt the giants in their industry, so will we see ultralight media companies emerge and use Facebook to compete with traditional media. Ev Williams is attempting to provide much the same set of services with Medium’s publisher tools, making the bet that the platform-based world is the future, and that there's room for more than one.

The split of economic and uneconomic content

The indistinct media brands will see the same economics play out among their own staff. The journalist who has survived two rounds of layoffs, has been told she is responsible for marketing her own stories, and is now paid on metrics, has effectively been trained to think of herself as an independent.

She will start to make clear economic calculations about the value of publishing independently rather than under the rubric of a larger brand. For if the platform’s domination of distribution and curation made brand the essential element, their ability to also offer hosting and monetization make that brand intensely quantifiable.

When monetization is handled by the platform, brand is quantified as the incremental reach (and thus revenue) that a piece of content can get by being published under that brand. Then it becomes about the math:

If brand reach = 130 percent, and journalist cut = 45 percent, then publish under brand.

If brand reach = 120 percent, and journalist cut = 45 percent, then publish independently.

A common refrain is that many journalists are too risk-averse to consider leaving the job security of a larger company to either start a new entity or work independently. Such sentiments seem unfamiliar with the current trend line of job security within the publishing industry.

More importantly, publishers will correctly argue that much of their content requires the resources of a larger company to create. The journalist embedded in Syria is unlikely to be able to do the same job without them. However, the company spending $40,000 a week to keep a journalist safe in Syria is rarely seeing a positive financial return from their articles. Instead, that content is subsidized by the journalist sitting in Brooklyn in his underwear, writing articles on why people don’t listen in on conference calls anymore. It is those journalists who will see increasing economic incentives to move directly to the platforms where they capture a greater percentage of the value they create.

Expect to see a significant increase in the number of ultralight, platform-only publishers seeking to leverage their lower cost bases.

Already fractured by the unbundling of content on mobile discussed in part one, if the content that is economic to independently create is more profitable to publish directly to the platform, then the media companies will be left with the content that is uneconomic to create. Few would envy this position.

Thus we should expect to see a significant increase in the number of ultralight, platform-only publishers seeking to leverage their lower cost bases over those former digital upstarts lacking in brand strength and unable to get out from under their own infrastructure. The digital company saddled with its own ad tech, sales team and expensive offices designed to woo brand clients may begin to get a sneaking sympathy for the newspapers who bemoaned their printing presses a decade before.

The truly great brands will in part be insulated from this. There are reporters who dream of working with Marty Baron, or sitting in the Page One meeting at the New York Times, and few economic incentives can match that. Their reach also ensures that few but the most significant personal brands would not see advantage in publishing under their banner. However, these premier brands will still face challenges in their bid to remain competitive.

Avoiding the archipelago tax

Advertisers have a desire for efficiency that can sometimes be mistaken for indolence. They long for the days when they could make one phone call and spend $50 million on an advertising campaign. With the platforms, that will be increasingly possible again.

Advertisers long for the days when they could make one phone call and spend $50 million on an advertising campaign. With the platforms, that will be increasingly possible again.

Advertisers will be able to simply, safely and seamlessly ask the platforms to target 10 million Midwestern moms and know that they are highly likely to get exactly that. Then, for the remaining publishers, they must spend 60 percent of their allocated budget on teams of media buyers, planners and ad tech vendors to cobble together an archipelago of audiences for their message.

What this means is that there will be an effective tax on working with platform-independent publishers. To survive, those publishers must be able to deliver a meaningfully more effective campaign than the platforms, while doing so with less accurate data about their audiences.

It would not be crazy for an advertiser faced with a choice between simplicity and scale on the one hand and complexity and fragmentation on the other to simply place all their bets on the platforms to deliver for them. Publishers will have to leverage every ounce of their creativity to compete.

Read part one of this series here, and part two here.

Tony Haile is the founding CEO of Chartbeat and an adjunct professor of media and technology at Columbia and Stanford Universities. Reach him @arctictony.

This article originally appeared on Recode.net.

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