And how they’re still using monopoly power to kill competition

Facebook killed and maimed a lot of publishers with its video product. But who cares? This is like complaining that the nice white guy promised to sell your heroin and never came back.

However, that’s not the whole story.

Facebook engaged in a whole lot of monopoly practices that left us as bugs on their windshield. The company cheated and lied so egregiously that they were hit with a $5 billion fine and, now, a $40 million settlement. Large numbers to mortals, but speeding tickets to the three comma club. After the fine their stock price went up because investors were like, very good, you went fast.

As someone who was there for the whole thing, in a small way, here is how the dreaded pivot to video played out.

1. Anti-Compete

The first dodgy thing Facebook did was cutting out their competitor, YouTube. Our small startup started making videos because it was fun, and we posted them to YouTube. We shared those videos on our Facebook page and people could play and watch them inline, which was a good user experience.

Suddenly, however, that changed. Facebook broke the user experience to prioritize their own product. YouTube links became tiny thumbnails that you had to click to go to another page. Facebook’s own videos, however, played inline.

We resisted for a while, but then we started seeing the numbers on some of those Facebook videos. They were easily 10x a YouTube video, sometimes 100x. There was no clear monetization path on Facebook, but the numbers were good and we couldn’t ignore that audience. So what the hell, we uploaded direct.

This was obviously anti-competitive behavior. They degraded competitor video in their feed and optimized their own. Regulators are years behind, however, and they haven’t even been flagged for this.

2. Fake Metrics

The next thing they did was inflate the metrics. The most obvious thing is that they called a 3-second glimpse of your video a view, and made that the most prominent metric. This is obviously not a human engaging with your content and is a transparently inflated figure, but at least it’s transparent. In other cases they just lied.

Prepare for some basic math here.

The average viewing time was just completely fraudulent¹.

Average view duration should be just:

Time / People

Hence if your video was viewed for 1,000 seconds by 100 people, the average view duration would be 10 seconds.

That’s not what Facebook calculated. Instead they calculated this:

Time / (People - anyone who watched for less than 3 seconds)

Hence, you could be the only person that watched your one minute video while 100 people just scrolled past it. Facebook would could all of the time spent (160 seconds) and not count any users except you. You’d have a 160 second watch time on a 60 second video. In practice the numbers got laundered so that they looked real, but they were still fake.

This is like calculating your average sales by counting all the money in the till but only the people that paid with $100 bills. Of course the average will be higher, and of course it will be bullshit.

At the time however, the numbers seemed great. Our views were doubling every month, hitting nearly 2 million. People really liked this Facebook video product, and they liked us. We changed the length of our videos to match and communicated this wonderful new thing to advertisers.

We even said no to some investors because we thought this thing was going to blow and we’d be bigger than TV.

This was dumb.

3. Cut Out The Middleman

The final step was when Facebook turned off the juice. They changed their algorithm and de-prioritized pages and organic views began to plummet. Videos that used to easily get 50,000 views were getting 2,000. Unless you paid.

On one hand this was classic rent-seeking. They got publishers to come perform in their cool new space, and once we’d moved a bunch of staff and equipment in, they started asking for rent. What we thought was a public square was actually private property.

But that wasn’t even the worst of it.

By ghettoizing pages, Facebook made all of our ‘likes’ and ‘fans’ worthless. We thought we would be the middlemen between businesses and Facebook users, but we were really just bait. We brought the businesses and users, and then they cut us out.

If all Facebook pages are basically worthless, why would a brand go through a publisher at all? If Facebook Videos are only viewed for a few seconds, why invest in a publisher’s creativity and production values?

Companies could just make their own cheap videos and pay for Facebook to blast them to thousands of users. They didn’t need publishers at all.

It was a brilliant monopoly move, honestly.

Step 1: Eliminate your competitor
Step 2: Inflate the metrics
Step 3: Cut out the middleman
Step 4: PROFIT!

How We Advertised Our Own Funeral

In hindsight, Facebook Video was never meant for publishers at all. We just used our creativity and resources to promote their video advertising platform. And it is a good platform. You can upload videos and play to blast them all over. Like any ad, most people aren’t paying attention but some people are and you can sell them stuff.

It’s just not a good platform for publishers. So the publishers began to die. Mic went under, Buzzfeed had layoffs, Mashable sold for a song, Vice Media had layoffs, etc.

We had a small but excellent video team and they all moved on (to better jobs). We luckily weren’t completely exposed and had our core web business to fall back on, where we did control distribution.

Part of this was just creative destruction — executives took a bet on this shiny new thing and got burnt or, more precisely, their staff did. But the fact is that those decisions were based on anti-competitive behavior and fraud. So it wasn’t just our bad judgement. It was a monopoly distorting the market.

Monopoly Disruption

Whereas a startup usually disrupts a market based on merit, a monopoly just does it with brute force. They can throw money at a problem, and they can break laws or norms because they have money. It’s just a case of money making more money.

Facebook didn’t actually come up with a compelling video product for publishers, they used anti-competitive behavior and fraud to trick them. Once publishers gave them free labor and content, they cut them off and took all of the profits. It was just a monopoly playing Monopoly.

Hence, the dreaded pivot to video is a good example of why Facebook should perhaps be broken up or regulated as a natural monopoly.

Anti-Trust Them

If Facebook had been broken up then maybe Instagram Video and even Snapchat would be viable competitors. We could have put our eggs in different baskets, and those baskets would have competed for our attention. Perhaps our video content could have survived in a more diverse environment.

Alternately, if Facebook was regulated better, they could have been forced to enable autoplay and decent UX for competitors (ie YouTube), which would have again allowed competition.

Instead, hapless publishers were faced with a monopoly that was happy to herd us in, lie to us, and then cut us out. One conclusion I can draw is that if you can’t trust them, you should anti-trust them.

Left unchecked monopolies will kill, copy or buy competitors, squash creativity, and just leave us with a giant sucking sound of money leaving the room. That’s why we break up or regulate them, because after a while they start deleting value.

Facebook almost killed us, but who cares, we’re just some dumb publishers. The bigger issue is that they’re killing competition in everything they touch.

¹ Facebook Settlement Memo, Page 2