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Feeling optimistic about Music. ORLY ?

A few things came together over the past few weeks that have gotten me feeling optimistic about the recorded music business again. We’re starting to see how the next phase of revenue models are shaping up. Some are starting to gain traction and become mature platforms that music fans could start responding to in a meaningful way.

Signs of Life:

Facebook: Directly monetizing Facebook’s attention stream is still being worked on. The potential is obvious and astronomical. But the takeaway right now is about their adoption curve. When Facebook announced their f8 developer’s platform in May 2007, they claimed 23 million users per month and a signup rate of 100k per day. Today, according to Marc Andreesen, Facebook now has 175 million active users (half of which log on every day) and have well exceeded one million signups per week. It was recently reported that Facebook has just surpassed email as a total percentage of internet traffic. It now brings more users to such notable sites as PerezHilton.com, Dlisted, CafeMom, Evite, Tagged.com, and Twitter than Google does. 

America (and others) have just learned how to use a surprisingly complex technology platform within the span of a few months. This rapid adaptability will come in handy as we’re all forced to become more technological in order to be entertained.

LaLa: Totally decent user experience. Impressive inventory. Searchability is good, pricing model is aggressive and persuasive. Not sure how they’re going to scale up their own revenue over time, but the labels are happy. The one thing they did really right was not try to be iMeem. LaLa feels more like a useful device than a social destination. The iTunes experience is long in the tooth by now - people want more. Apple is vulnerable here.

Last.fm: The engineering team at Last.fm are very sharp and are solving really hard problems right now. Their track record indicates they’re open to sharing the fruits of their labor, so it’s safe to assume their solutions will benefit Music in general. The power of scrobbling can’t be denied. Perhaps not the mega hit that Facebook or even iLike are, but Last.fm provide something much more valuable: referential durability. They have built a potentially pivotal piece of the information backbone that will support the recovery of recorded music. Among the harder problems they’re solving: massively scalable data stores (via hadoop clustering) and more recently misspelled track and artist name reductions. One would imagine Last.fm providing a name and title lookup web service eventually. That would be a game changer. There aren’t many others out there able to both generate a clean taxonomy and provide a platform capable of keeping up with demand. Better data - better for Music.

MySpace Music: Newly relaunched, so to speak. Courtney Holt is no dummy. It’s easy to bash MySpace v1. But that was years ago now - and with some partnerish help from the Google, they’ve radically re-engineered their platform and have made solid improvements with their UE. If tweaked just the right way, MySpace could easily become another major music hang-out destination (along with iMeem and LaLa). No reason they can’t slowly take over most of the market share if they cultivate real music lovers and keep their tech under control. Don’t count these guys out. They are “re-emerging”  …with well over 100 million regular users. Good overview of the new MySpace Music at TechCrunch.

iPod/Blackberry/Android/Nokia: We have a healthy platform ecology here with big money being handed out to those who can best pull the mobile user experience out of the 1950’s. Apple hit this square on. The old guard have reacted surprisingly quickly and with real UE improvements. Android is the next disrupter of course. It will become the real value calibrator for the space. The more customizable and open it remains, the more the rest of the field will have to accommodate to stay competitive. The next big milestone for the non-Apple platforms will be to replicate or exceed the iPod/iTunes experience. Now that music is pretty much DRM free, this becomes a lot easier. Expect to see a lot more people throwing high quality media players into all sorts of devices. More players, more eyeballs, more monetization opportunities.

What’s your Facebook strategy ?

Well the numbers are in. We’ve crossed a crucial milestone - AdAge is reporting that Facebook is now shoving more traffic than Google to the Internet’s top destinations. PerezHilton.com, Dlisted, CafeMom, Evite, Tagged.com, and Twitter are all seeing the game change right in front of them.

This comes to us via Hitwise who use a three-way blended methodology for traffic estimates (panel/client, server logs, ISP monitoring). Probably safe to believe this claim.

Two things come to mind about this: 

Where they came from: the whole context of site visitation is changing. Web publishers need to think in terms of their content blending in more seamlessly with other content streams that visitors are involved in when they hit a new site. Apparently this now means Facebook. People aren’t searching to find you, they are pivoting to quickly scrape through your content and work their way back to Facebook. A highly chunked, low friction presentation model is worth considering. The internet as iPhone?

How you reach them: this is a good news / bad news situation. When Google ruled most of your traffic, there were well understood pathways to reach your audience: keyword affinity, CPM rates, auctions, search advertising, etc. But how do you garner Facebook traffic? Bad news: you can’t really do it shotgun style (run-of-site, takeovers, remnant buys). The good news: Facebook seems on their game about opening things up and allowing low friction attention flows between your content and their platform. More good news: they seem to have really good customer segmentation abilities which presumably means more impactful messaging when users finally see your content.

Unclear how this will effect bottom lines in the advertising economy if at all. It certainly complicates how we calculate the net value of display advertising. My hunch is that crossing this threshold is moving us into a “next phase” of increased optimization - one that hopefully spews more cash into the system.