In my book, Achieving Digital Trust: The New Rules for Business at the Speed of Light, learning how to count and measure digital information is a key strategy for building trust and creating wealth. During the last year or so, Facebook has been announcing new metrics that illustrate how that strategy looks in real life, highlighted by today’s announcements of how the track views of videos will be altered. What are they doing that I describe in my book? Well, the story is in the rest of this post.
An important disclaimer: I am not employed by or working for Facebook in any capacity, but it is very cool when your ideas for what the future will look like begin to be confirmed by reforms announced by global titans.
Facebook, according to several stories, has been pressured to create greater transparency into how users engage with their video content. Marketing agencies pay Facebook based on the user interactions; errors in how Facebook measures and reports video consumption directly affects how much is paid, and how much wealth goes to Facebook’s bottom line. Errors in those calculations were reported by Facebook in early Q4, 2016 and corrections and new metrics continue to be announced.
Counting and Creating Wealth
Facebook’s journey is no different than any corporation that acquires and integrates digital information into its products. The challenge is not limited to online media; any business acquiring and synthesizing third party content has similar negotiations:
“How will the acquired content be used? What will be created with the integrated content? What will users see? Does that create wealth—if so, who pays what to whom?”
Critical to success in building a working commercial outcome is the ability of the parties to count things that happen, and to achieve trust in the calculations that are provided. The trust is critical: if the information provided to calculate payments cannot be trusted, the relationships struggle and may not even get started.
For Facebook, that was their initial problem. In September 2016, they announced they had been miscalculating the average duration of video viewed. While Facebook stated billing was not impacted, certainly the trust any marketer placed in any metrics from Facebook eroded dramatically, including those on which Facebook does rely in calculating their bills.
Share Formulas Not Labels
Metrics touching digital information get complicated, often quickly. But the mistake made by Facebook was they attached a label to their count of views, but did not disclose the mathematical formula they were employing. The label “Average Duration of Video Viewed” seemed self-explanatory, but it was not. To fix the problem, Facebook had to disclose the formula they were adopting (and even changed the label).
Formulas are simple expressions of rules—how will certain results be calculated. But when those rules are not transparent, problems can develop, especially when the labels of what is being calculated do not conform to the actual formulas.
The Tsunami is Unleased
Following the September adjustment, Facebook has continued to announce new metrics that will be calculated and disclosed to marketers regarding the performance of advertising content placed by the marketers in securing audiences. All of these are shifting Facebook and its revenue sources (the marketers) into an entirely new alignment of transparency into performance.
To be paid well (and often), Facebook has learned transparency creates wealth. They have also learned they must be explicit in describing how things are to be counted. That level of disclosure enables trusts to be restored and sustained. In my view, this is a fundamental disruption in how the value of digital content will be converted into economic metrics. Facebook is now on the front edge of the tsunami; you still have the chance to catch the wave.
What Has to Change
Since information sharing began as a commercial activity, the global market has evolved slowly in expressing, measuring, and reporting the value created from the synergies of combining information. There simply is no better illustration than the manner in which personal information (including video viewing!) is scraped together and collected from data subjects with virtually no meaningful revenue sharing back. But in thousands of links in supply chains of every industry, data is shared and used without suitable reporting (or compensation) back to the data sources.
Facebook would not have video content to count without the marketers and ad agencies producing the videos in the first place. The same is true in every industry—the company that best aggregates information produced by others achieves the strongest advantage in the market. But what Facebook realized is that their continued dominance would be vulnerable if they did not provide better transparency into the ways third party information was performing, and to do so with metrics that were calculated against known rules (and formulas).
To be part of the disruption, any business must look in two directions—toward the companies that supply digital information to them, and toward the companies with whom their own digital assets are shared. To succeed in creating wealth, and enriching the trust that exists throughout a company’s ecosystem, companies must evaluate how they can be more transparent with their information suppliers, and what levels of transparency to demand from those companies who are outbound recipients. What are the right metrics to show how data or content (like videos) are performing? How will the reporting occur? Are the economic exchanges properly balanced by the value of the data being shared?
A Place to Start
The Rules for Composing Rules, a critical tool introduced in my book, is invaluable to beginning to develop answers to those questions. You can read more about the Rules in this earlier blog post [insert link].