Facebook’s Foray into Audio

Facebook is getting into audio.

In a Discord conversation with Casey Newton, Mark Zuckerberg revealed that over the coming months, the social behemoth will be rolling out four new audio-centric features: 

1. A Clubhouse-style live audio chat room integrated within Facebook Groups and Messenger. 
2. A feature called ‘Soundbites’ which is like TikTok for audio
3. A feature that will let users listen to podcasts within Facebook. 
4. A Spotify integration which will let users play music through an in-app player. 

To support these new features with as much original content as possible, Facebook is also offering audio creators new monetization tools, and Facebook’s official announcement mentions an “Audio Creator Fund.” However, specific details have not been revealed as of now. 

At one level, the reasons behind this are obvious: Facebook wants to monetize our ears, not just our eyes. The live audio room format invented by Clubhouse seems to be here to stay. The window seems to be closing for anyone wanting to capitalize on the open nature of the podcast ecosystem, given recent moves by Spotify and Apple.

But when you look closer, there’s a lot more to unpack. How coherently can audio actually co-exist inside the big blue app, juxtaposed with text-based and visual content? Does Facebook have the DNA required to build trust with creators? And what should we make of their increasingly muddled-seeming strategy?

In this essay, we first break down the chances each of these new audio features have of success, and then take a step back to understand Facebook’s vision of where they see themselves in the creator economy, and how they plan to get there.

So let’s dive in!

First, let’s dissect Facebook’s new features on a micro level:

Facebook Groups are a natural fit for a Clubhouse competitor, but we’re skeptical about the rest.

Integrating Clubhouse-style live audio chat rooms within Facebook Groups is likely to work pretty well. First, the Groups product has recently become a major priority for Facebook, with 1.8 billion users participating in them every month. Groups are more engaging because of the common interests members share, and almost act as a proxy for an interest graph. This shared context feels like the right environment for high-value live audio rooms, because it’s built around communities with pre-existing relationships and shared values. The best rooms combine some sense of familiarity with the novelty of speaking to strangers online. Plus, Groups have leadership structures that can provide better context-specific moderation than Facebook ever could at the platform level.

But while an integration of live audio content within Facebook Groups seems like a thoughtful product strategy, their other product announcements seem to us more reactive and ill-considered. 

Let’s take Soundbites, for example. We’re not sure many people want to create or listen to short audio clips on Facebook. If Twitter’s version of this feature (audio tweets) has taught us anything, it is that short-form audio content doesn’t work well in a feed of mostly text and visual posts. While text is scannable, the content of short-form audio is completely unknowable unless the listener chooses to engage. This makes for a higher friction user experience, not to mention the host of content moderation challenges that come along with it. 

And then there’s the decision to integrate music and podcasts into the app. Unless they plan to build a dedicated section of the app devoted to audio discovery—essentially a full-blown Spotify competitor—it seems unlikely that many users would start at Facebook when they need something to listen to. Audio is a distinct habit from scrolling through feeds, and gets triggered by different circumstances. There is some value in being able to tap a button and play audio instantly, rather than jump into a different app to play audio, but in our opinion not that much. The real value in audio is being the top-level habit that people go directly to when they want to listen to something. And it seems unlikely that Facebook is going to earn that position.

Facebook’s dominant social graph might help it win in audio.

Even though some of these moves look reactive, there are at least a few reasons to be optimistic about Facebook’s chances in the audio market. 

For one, their decision to build within the shared-interest context of Facebook Groups could help them create a sticky experience for those users. Facebook Groups are heavily relied on by university cohorts and high school classes—so much so that Facebook launched Facebook Campus last year to foster a more education-focused network and attract Gen Zers. If Facebook can effectively lean into these established networks, they have a strong chance at succeeding. 

Moreover, Facebook owns one of the most relevant social platforms today—Instagram. Integrating social audio experiences within Instagram could potentially drive top-of-funnel discovery into new audio rooms. This might be a significant advantage because social audio consumption decisions are very personality-driven. Since we already follow our favorite creators on Instagram, they can seamlessly redirect us to the rooms they’re hosting. 

Facebook also has the resources to deploy dynamic ad insertion technology across all its platforms. They’ve been doing this for video content creators, and deploying the same technology in the audio space doesn’t seem like a long stretch. Ad-based monetization across a network of 3 billion users could make it extremely lucrative for audio creators, beyond direct monetization methods such as tipping and subscriptions. 

In short, if Facebook leverages its inherent strengths it has a good chance to win the ongoing race for audio dominance. 

But of course, at this point, any attempt to analyse Facebook’s new audio products on a granular level is bound to be speculative. However, exploring the reasons behind why they decided to get into audio in the first place might help us understand what's really going on at Facebook: how the business is doing, it's strengths, weaknesses, and the role it sees itself playing in shaping the future of the creator economy. 

Why is Facebook expanding into audio in this way? Four reasons:

1. Audio is a relatively untapped source of attention, compared to text and video.
2. Attention is shifting towards creators. 
3. It serves as a hedge against possible challenges to their advertising business.
4. Facebook can’t buy, so they have to build. 

First, Facebook has been fairly proficient at capturing our attention when we’re looking at our phones, but until now they haven’t captured any of the time people spend listening to their phones. This is an opportunity to grow their advertising business without needing to add more users—especially important in mature markets like the US. Although Spotify is leading the way in dynamic audio ad-insertion technology, if Facebook can capture the attention it’s hard to imagine they won’t be able to monetize it better than Spotify, given their superior targeting capabilities.

But the risk is—how to attract attention? This is where creators come in.

Attention is shifting from our social connections to our creator fandoms. Watching MrBeast offering people $100,000 to quit their jobs, or Emma Chamberlain eating fast food for breakfast seems to attract way more eyeballs compared to links shared or life updates from a distant relative. Creators have a much stronger connection with their fans because of shared interests—making fans choose them over their social connections. That’s why Facebook is integrating monetization features for creators from the start, like tipping, and it’s why they’re building an “audio creator fund” which perhaps will look something like Snapchat’s Spotlight fund.

For now, unlike other creator economy platforms, it seems like Facebook has no plans to generate revenue from taking a cut of payments from users to creators. Instead, they will take zero fees, and use creator content as a way to increase engagement, which increases advertising impressions. But what if the advertising business were to face challenges? For example, Apple’s new privacy features in iOS 14 will be a big setback for Facebook. And during the pandemic, even though more people are spending more time than ever before on Facebook, ad revenues still experienced a noticeable decline as businesses decided to cut back on their advertising spending. Advertising is already making a strong comeback, but one lens to view Facebook’s creator economy ambitions is as a hedge, just in case they need to diversify their revenue streams beyond advertising.

But wouldn’t it be easier to just buy creator economy platforms like Clubhouse and Substack instead of going to the trouble of cloning it? The problem is, Facebook can no longer rely on their old-school ‘see and conquer’ strategy due to increasing scrutiny from the FTC. Since Facebook can’t acquire emerging platforms with promising network effects, they are trying to replicate them in-house.

Of course, that’s easier said than done.

Facebook’s pitch to creators: scale.

The reach that Facebook products enable is significantly greater than any other platform in the creator economy—more than 3 billion people use one of Facebook’s platforms. If social platforms help us play status games, then Facebook offers the largest arena possible. There’s a reason why creators like MrBeast and PewDiePie are redistributing their popular YouTube content on Facebook. 

Facebook is also set to offer audio creators a host of monetization opportunities: 

1. The ability to tip audio creators through Facebook Stars—an in-app currency that fans have been using to tip video creators, who are paid out $0.01 per Star. Stars have seen relative success among Facebook’s Gaming creators, who earned $50 million through stars in 2020. More than 2000 gaming creators are making $1000 per month through Stars. 
2. The ability to organize one-off paid live audio events, as well as set up recurring subscriptions—a feature that other creators have been using since 2018. Facebook had announced a 30% take rate on subscriptions starting January 2020, which it subsequently dropped to 0% in August 2020. 

Facebook wants to leverage its inherent strengths as a platform, paired with monetization features to play an active role in the growing creator economy. 

But they might have overplayed their hand.

Facebook is trying to do everything, but in the process, it risks becoming nothing.

So far, Facebook’s creator oriented product rollouts have been reactionary and defensive—a smattering of fragmented tools, with overlapping uses and confusing eligibility requirements—which they attempt to explain on their creator page. A quick look at the current suite of monetisation tools they provide reveals a lack of focus: 

1. In-stream ad insertion for video content. 
2. In-stream ad insertion for live video content. 
3. Tipping through Facebook Stars, their in-app currency. 
4. Fan Subscriptions. 
5. Brand Collaborations Manager‚ a sponsorship marketplace connecting creators with brands. 
6. Paid Online Events. 

Creators are confused with these fragmented monetization opportunities. This bloated suite of creator tools is not because Facebook doesn’t understand the creator economy. It might just be a function of the internal engineering and product resources Facebook has. Its New Product Experimentation (NPE) team is constantly churning out new derivatives of existing networks, figuring out what catches traction and what doesn’t.

But just because Facebook can replicate, doesn’t mean they should. As the classic strategy expert Michael Porter once said: “Strategy is about choice. Strategy means saying no to certain kinds of things.” Every company, no matter how powerful and large, needs to have a cohesive strategy. Facebook’s constant experimentation confuses creators and makes them feel like they’re building on unsteady ground. They eventually need to pick something they can do and be good at it—instead of trying to do everything. 

Reddit Unveils a Clubhouse Competitor 

What Happened? 

• Talk is Reddit’s take on social audio. The feature will be hosted within subreddits, and only mods have been given the ability to host rooms to mitigate content moderation issues. Access to Talk will be rolled out in phases, and mods can join a waitlist to get access. 

---

Top Newsletter Writers Unite to Launch a Discord Community 

What Happened?

• A collective of eight highly prominent writes across tech, media, and culture—Casey Newton, Anne Helen Petersen, Nick Quah, Delia Cai, Eric Newcomer, Kim Zetter, Charlie Warzel, and Ryan Broderick—have launched a Discord Community called Sidechannel. 
• The community will serve as a virtual newsroom with the latest links, updates, and insights for paid subscribers who support any one of these newsletter writers. 

---

Jake Paul Records $75 million in PPV Revenue

What Happened? 

• Jake Paul’s recent boxing bout with Ben Askren attracted 1.5 million paid viewers. The matchup was a part of Triller’s Fight Club. 
• It is also worth noting that Triller’s parent company recently acquired Fite, a streaming platform for boxing and other ring sports, as well as Amplify.ai, a customer engagement platform.

---

A Vanity Fair Veteran Might Be Launching an Every Competitor

What Happened?

• Jon Kelly, a former editor at Vanity Fair, is launching Heat Media, a publication that will give its writers equity, as well as a share of the subscription revenue the company generates. 
• The publication plans to use an algorithm that will help attribute subscription revenue to specific writers.

---

YouTube Explains It’s Creator Responsibility Policy

What Happened?

• YouTube recently clarified the details surrounding its Creator Responsibility Policy, which has imposed sanctions on creators such as David Dobrik, Shane Dawson, and Logan Paul. 
• These sanctions include: demonetization content, blocking recommendations, and loss of partner manager support. Actions that might attract these sanctions, such as ‘participating in abuse or violence’ have been specifically outlined as well.  

---

Apple Music Reveals Music Streaming Payouts

What Happened?

• In a letter to artists, the streaming service revealed it pays out 1 penny per stream—two times more than Spotify. The company paid out 52% of its subscription revenue to copyright holders—record labels and artists. 

---

Substack Launched a $1 million Fund to Support Independent Local Journalists 

What Happened?

• Substack will offer cash advances of 100,000 with access to mentorship and design services, along with benefits such as health insurance, in exchange for a 85% take rate during the first year and its standard 10% subsequently.

---

Passion Economy Financings: 

• Pearpop, a platform that lets fans pay for collaborating with famous TikTok creators, recently raised a $16 million funding round—split between a $6 million seed round led by Sound Venturers and Slow Ventures, with participation from Atelier Ventures, as well as a $10 million round led by Seven Seven Six and Bessemer Venture Partners. Pearpop is used by the likes of Snoop Dogg and Tyga, who charge $250 and $500 respectively, for fans to have the opportunity to collaborate with them. The platform has a 25% take rate on the revenue creators generate. 
• Squarespace, the highly popular website builder for small businesses and creators alike, recently filed for a direct listing on the NYSE. In 2020, the company generated a profit of $522.8 million, with 3.6 million unique subscribers using its services. 
• Soona, a platform that makes remote photo and video shoots easier for creators, recently raised a $10.2 million funding round led by Union Square Ventures. Currently, Soona has 4000 customers who ship their products to the company, and watch the photo shoot in realtime to provide immediate feedback and approval. They then pay $39 for photos and $93 for videos of the product. 
• Pico, a creator monetization and fan-relationship management tool, raised a $6.5 million funding round led by Ann Lai at Bullpen Capital. Pico’s customers have grown 5x since last year. Their current suite of offerings include creation tools such as setting up a landing page and offering newsletters, as well as monetization tools such as one time donations and tiered subscriptions. 
• Clubhouse, the widely discussed  live audio social platform, recently closed a Series C funding round which valued the company at $4 billion. Currently, Clubhouse has 10 million weekly active users. The platform also faces stiff competition from new and incumbent social platforms—with Twitter, Spotify, Facebook, Discord and LinkedIn all building similar products. 
• Creator+, a company that’s building a content creation studio and streaming service specifically for creators, recently raised a $12 million funding round led by Petra Group and Freestyle Capital. The company will help creators with distribution, and share revenues via a 50:50 split. Creators will have access to audience insights and retain their intellectual property.