Why Facebook makes millions and Clubs can’t claim their share

How many times we heard complains that Facebook is making millions in advertising and it’s not sharing a penny with the content creators (call them publishers or call them clubs if we are talking about football business). Sentences like “Facebook is getting revenues thanks to our work”, “Facebook should pay us 50% of its revenues” has been repeated time over time by little know-all people.

But the oddest thing is that in the remote case Facebook would had agreed in sharing millions, football clubs would be probably upset because those ads would probably be in conflict with its sponsor brands. OMG!

Anyhow, Facebook didn’t share either, so there was no topic.

Clash of models

The intrinsic business model of the Internet is Advertising, and in a tiny fraction is paid subscription.

In the other side, sport and football business model is based on brand association and sponsorship as it’s the best way to maximize the value in the long-term.

So they are like oil and water: hard to combine.

Mainly because of this conflict, monetising digital in sport it’s not easy:

  • You get in a trouble if you allow advertising in your Youtube channel
  • You can’t hardly distribute your content to third party publishers if they have an advertising model
  • You can’t allow your licensed digital products to include advertising

At the end of the day, you are constrained to align everything you do to our beloved sponsorship model:

  • Block Youtube advertising in your videos and convert your Youtube channel into an asset for your sponsors
  • Include your sponsors’ brand in your content and give them visibility in your web and app
  • License only to apps and videogames that work under IAP or subscription models

And after doing all of these things, struggle to make the sponsors pay additionally for them (good luck!).

The secret sauce: Why Facebook is making money and this is OK

So we said we can block Youtube advertising in our channel, but we can’t stop Facebook placing ads and earning money.

The reason of this is how Facebook places advertising compared with Youtube or other platforms.

In Youtube, you have pre-roll commercials before your video plays, banners over the content, mid rolls that cut your video if it’s long enough, etc.

So Youtube advertising is really combined and integrated directly with your content and the brand association between your content and the advertiser is extremely high.

In the contrary, Facebook ads are placed as if they were content. The ads are part of the feed like any other post and they are not directly associated with an specific publisher. You can’t claim Facebook of doing brand association between the advertiser and your brand as the ads are not over or in touch with your content, they are simply mixed among many content pieces from other publishers, a few of your posts and tons of personal posts.

That’s very smart from Facebook.

Something is changing within Facebook

In 2015, Facebook decided to declare war to Youtube to be the biggest video platform, and defined a new strategy for engaging publishers to start publishing their videos in Facebook: revenue sharing. But it’s not sharing whole platform revenue, it’s just sharing the revenue coming from the video feed (a sort of related videos and commercials feed the user sees when clicks on a video).

The success of this has been quite limited and Facebook seems it’s changing again or experimenting with a new model: mid rolls.

This strategy of mid-roll video ads (and Instant Articles, where Facebook places ads in between your text) is forcing Facebook to start sharing the revenue with the publishers as it’s finally placing ads inside the content.

This is good news for Publishers, or at least it’s better that it was before.

But, are good news for Clubs? At the end, this advertising will probably not respect sponsorship exclusivity model so it will put Clubs in conflict with their sponsors. Let’s see how things unfold in the coming months.

Conclusion

The content distribution through third-party digital platforms should be seen in the same way Clubs sell their audiovisual rights to TV broadcasters.

As Clubs are not blocking commercials or blacklisting advertising categories to TV broadcasters, Clubs should consider third-party platforms in the Internet as broadcasters that have their own business model (advertising). Sponsorship works great for sport properties but it can’t be imposed out of their fences because then, there’s no business.

Takeaways

  • Sport organisations using a classic sponsorship model have a clear conflict when approaching third-party platforms as most of them are based on advertising.
  • Facebook has been able to monetise content without sharing any revenue as the ads are placed as content and not bound to an specific content.
  • To grow and compete, Facebook is now adding new advertising models that mimic more traditional models like Youtube and it’s forcing Facebook to start sharing its revenues.
  • If sport organisations want to take advantage of this revenue sharing opportunity, they will need to rethink if they want to keep the sponsorship model or switch to an advertising model when partnering to third-party platforms.

Leave a Reply

Your email address will not be published. Required fields are marked *