On the morning of July 15, Iris Communications’ Sean Lewis sent out a press release on behalf of Paper Excellence. It was chockablock with carefully calibrated and curated PR, informing us that Northern Pulp’s 54-year-old pulp mill in Pictou County was set to become “a “best-in-class operation” and “one of the world’s cleanest, most environmentally focused, and community-based pulp mills.”
And oh, by the way, in just two hours Northern Pulp would be holding a virtual “technical briefing” on the “transformation concept,” which media could access online, and if they wanted to ask questions they could dial in on a special number.
The media briefing consisted of two men speaking for more than an hour, and then taking a handful of submitted questions.
They were Graham Kissack, Paper Excellence vice president environment, health & safety, and corporate communications, and Dale Paterson, an “experienced pulp and paper consultant” who heads the Northern Pulp Environmental Liaison Committee.
It was a surreal performance, as the two men attempted to cancel the mill’s history since Paper Excellence bought it in 2011, ignore the ugly details of its far-far-less-than-stellar political, social, and environmental record in Nova Scotia, and convince whatever media were tuned in that the company has turned over a shiny new leaf.
(The Halifax Examiner has reported extensively on Paper Excellence, its pulp mill in Nova Scotia, its pollution, political machinations, its attempt to strong arm the province into approving its proposal for a new treatment facility that would release treated effluent directly into the Northumberland Strait, and Northern Pulp’s creditor protection case in the British Columbia Supreme Court, and some of that coverage is available here, here, here, here, and here.)
But to listen to Kissack and Paterson as they ran through their slides outlining the “total mill transformation” they claimed Northern Pulp is planning, a credulous newcomer to the mill saga might almost believe that Paper Excellence is a saintly organization interested in nothing more than the health of Nova Scotia’s forests, economy, workers, air, and water. There was, obviously, no acknowledgement that the company that is ultimately owned by and part of the gargantuan and controversial corporate empire of the multi-billionaire Widjaja family of Indonesia, scattered in tax havens around the planet, and plagued by a poor financial, social, and environmental record.
For those who are not familiar with Paper Excellence and the Northern Pulp mill, it probably looked extremely encouraging.
The lofty ideals and pledges about all the “dramatic improvements” to be made to the mill site and the company’s behaviour were flowing fast and furiously.
Kissack spoke of the “sustainable future we envision,” for the mill, and the two men listed a host of planned improvements, including reduced odour and lower emissions, “best-in-class wastewater quality,” and tertiary treatment of effluent that would be released into Pictou Harbour, although the “exact location will be determined through further environmental study and community engagement.”
They also said the transformed mill would reduce its water consumption by 45%, taking 45 million litres of fresh water — the equivalent of 18 Olympic swimming pools — every day from the Middle River. Although this still sounds like rather a lot, it is, admittedly, an improvement over the staggering amount of nearly 90 million litres the mill was using daily before it went into hibernation in January 2021.
The company’s vision for the mill even involves repainting it and putting on new siding to improve its appearance, said Kissack, who noted that this was one of the areas for improvement identified by the Environmental Liaison Committee. Whether paint and siding will do the trick is questionable. The aging mill couldn’t really be uglier; people in the area have been known to suggest it belongs in “Mordor,” the fictional Land of Shadow ruled by the Dark Lord Sauron in J.R.R. Tolkien’s Lord of the Rings.
Northern Pulp wants “reconciliation”
Neither Kissack nor Paterson offered even a hint of apology to the people of Pictou Landing First Nation for all those decades of environmental racism and pollution in Boat Harbour, which the people of Canada and not Northern Pulp will be paying to remediate, or the numerous pipeline spills on sacred Mi’kmaq burial grounds, or the pressure the company put on the Nova Scotia government in 2018 and 2019 to allow the mill to continue to use Boat Harbour for its effluent until it had a new alternative treatment facility.
Nor was there any acknowledgement of the role that mill owners have played over the years in promoting environmentally harmful forestry policies in the province, including clearcutting and herbicide spraying that have decimated the biodiverse Acadian forests.
Instead, Kissack unleashed a torrent of platitudes and vague pledges.
“In terms of the future here, it’s focused on unity, input, engagement, and feedback,” he said. “It’s one that embraces the Lahey Report both on our own land as well as the Crown lands that we manage. It looks at and deals with reconciliation and outreach and partnerships with local First Nations, especially Pictou Landing First Nation and other local communities.”
“We really need to do better in terms of sharing information with the entire community, about who we are and what we do, and how we do it,” Kissack said. “And so we look forward to working with all those First Nations and Indigenous peoples in the area to take an interest in this project.”
Responding later to a submitted question about consultation with Pictou Landing First Nation (PLFN), Dale Paterson of the Environmental Liaison Committee (ELC) said:
We are striving to really improve our relations with PLFN. We keep PLFN] Chief Andrea [Paul] posted on issues as we move forward. We have not had a lot of detailed discussion with Chief Andrea. We will continue to reach out. We will continue to strive to reconcile our differences and have fruitful discussions with Chief Andrea and PLFN.
After the press briefing, the Examiner contacted Chief Paul for her reaction to these comments. She said she caught only the end of the briefing so was not sure what all was said, but added, “I would like to know how they define reconciliation.”
As for consultation, there hasn’t been any. Said Chief Paul:
Dale Paterson sends me emails. I haven’t talked to them [Northern Pulp and the ELC] nor met with them. Dale wanted to meet back in April however I was off recovering from surgery. I was not invited to a meeting they had with the mayors. I didn’t even know about this. I will be meeting with my council, legal and engineering, next week to review what they have presented and will comment further after that meeting.
In 2020, when the Environmental Liaison Committee was formed, Chief Paul posted on Facebook that she had refused to join because there is “no trust” between PLFN and the company, and she did not want her community to be used as an opportunity for Northern Pulp “to appear as being sincere.”
Who’s paying for the “transformation”?
But questions about the company’s new charm offensive and attempt to garner support for its latest mill plans go far beyond the local ELC and what it has been doing to try to garner local trust in Pictou County.
There are also big questions about the financing of the mill “transformation” that the company is talking about — who will finance it and how?
In July 2020 after the mill went into hibernation, Northern Pulp Nova Scotia Corporation and seven related companies declared themselves insolvent and petitioned the British Columbia Supreme Court for creditor protection, seeking relief from debt payments.
As the Examiner reported here, the total debt was about $311 million, with $4.4 million owed to 245 small creditors, employee-related liabilities amounting to $7.1 million, and nearly $85 million owed to Nova Scotians, much of it dating back to 2010 when the NDP government of Darrell Dexter gave Northern Pulp a 30-year loan of $75 million to buy 475,000 acres of land in the province.
But, as the Examiner reported, “the bulk of Northern Pulp’s debt — $213.3 million — is owed to one of the petitioners’ owners, Paper Excellence Canada Holdings Corporation.”
And Paper Excellence Canada Holdings Corporation is, in turn, a subsidiary of Paper Excellence B.V., which is a subsidiary of Asia Pulp and Paper, which is a subsidiary of the gargantuan Sinar Mas, which is controlled, as mentioned earlier, by the multi-billionaire Widjaja family.
And so the largest creditor by far that Northern Pulp was seeking protection from was, well, its own parents, none of which can be described as cash-strapped.
That didn’t stop Northern Pulp from asking the Nova Scotia government to provide it with $50 million in financing, which the province refused.
However, the province did agree to freeze repayments on the nearly $85 million in outstanding loans, as the Examiner reported here.
Meanwhile, Paper Excellence companies, which are the ultimate parents of Northern Pulp and its affiliates petitioning for creditor protection and pleading poor in the BC court, have been buying up mills all over the place.
In February 2021, Paper Excellence BV finalized its acquisition of Eldorado Brasil Celulose, one of the largest global producers of pulp and paper.
More recently, in May 2021, Paper Excellence announced that it was purchasing the US-headquartered pulp and paper giant Domtar, with four pulp mills in Canada, in an “all-cash transaction” with a value of “approximately $3.0 billion.”
So, not all that poor.
Using the online tool provided for submitting questions at the media briefing, the Examiner asked why Northern Pulp, a Paper Excellence company, is in creditor protection and yet is now talking about a refit of the mill worth $350 million (the online tool limited the length of questions, so there was no opportunity to ask about the company’s ability to spend billions on new mills while not being able to make payments to Nova Scotia on its outstanding loans).
This is Kissack’s reply to the question about how a company unable to pay its debts could envision a mill refit worth $350 million:
The quick response is when the organization [by which he meant Northern Pulp and its affiliates] sought protection 12 months ago we were in a position where we had bills piling up and we lost all of our revenue stream and we had to protect the organization. And that’s what works, that’s what CCAA [Companies’ Creditors Arrangement Act] is designed to do. So that’s what we did. Where we are today, I think is quite different than where we were 12 months from now. And we still are working on all of the plans around financing the new site. And that’s still going to take time.
Not all that helpful, but there was no option to submit a follow-up question.
“Tentative green light from government leadership”
But then came another question from another unnamed media participant, who asked how the proposed transformation project would be funded, whether it would be through the company or if they would be seeking government funding.
Kissack’s reply was intriguing, to say the least:
I intimated earlier on the call it’s still early days as to where we are in terms of establishing our funding and how we’re going to get there. Right now, we have a tentative green light from government leadership around the project. But the specifics are still being built out and recognize where we are today and recognize the time frame I shared with you. You know, we still have many years in front of us to fasten down those details.
According to CBC reporter Michael Gorman, Northern Pulp submitted its most recent proposal for a “transformed mill” and a new effluent treatment and disposal facility to Nova Scotia Environment earlier this spring.
At the time of the Northern Pulp media briefing on July 15, the department had not yet announced whether the project would require a Class I, or a more rigorous Class II environmental assessment.
Then, coincidentally (or not), just a few hours after the media briefing, Nova Scotia Environment issued its own press release saying that Northern Pulp’s effluent treatment plant project would be subject to a Class II assessment, as it “involves changes to the pulp mill itself, as well as the design and construction of a new effluent treatment plant.”
The company now has to register its new project, and an environmental assessment panel will be appointed to review the project and report to the minister, a process that typically takes 275 calendar days to complete, said the press release.
Still, if Kissack is to be believed when he said during the media briefing that Paper Excellence had a “tentative green light from government leadership,” for the project, that would suggest the company had already gone over the heads or behind the backs of regulators in Nova Scotia Environment to speak with and get tacit support from higher-ups in the Liberal government.
Which is, well, worrisome. But also par for the course when it come to the Pictou County pulp mill that has had an over-size influence on politics and forestry policies in this province since even before it opened in 1967.
No pipe, no mill … no wait!
What was perhaps most remarkable — and curious — about the media briefing was the stark difference between the tone and messaging coming from Paper Excellence and Northern Pulp now, compared to back when it was warning the province what would happen if the McNeil government failed to approve its proposal to treat the effluent on site and pipe it 14 kilometres overland into the Northumberland Strait beside the Caribou terminal for the ferry to PEI.
Throughout the environmental assessment approval process for that proposal, whenever there was criticism from PLFN and fishermen and others concerned about the effluent being piped into the Strait, the standard Northern Pulp response was “No pipe, no mill.”
Why the change in message, and what should Nova Scotians make of it?
Hoping to follow up on this, I called the designated phone number to register that question. After identifying myself and being prompted to pose my question by the operator, I noted that it seemed odd that the company had changed its mind and its tune. It is, after all, the same company, with the same owners, and as the Examiner reported here and here, pollution, environmental misdeeds and lack of community trust were not unique to Paper Excellence’s mill in Nova Scotia; the same is still happening at its Fibre Excellence mills in France. It has also been busy closing mills or running them at reduced capacity in BC, while managing to wrangle tax breaks for itself.
So, I asked, “Why should Nova Scotians trust this company now when they’re speaking completely differently from what they were saying three years ago?”
Before I finished voicing the question, the operator interrupted to thank me for calling, an automated voice cut in to inform me the briefing had ended, and my phone went dead.
Plus ça change?
 This is a more complete list of Halifax Examiner articles on Northern Pulp and Paper Excellence:
Feb. 24, 2021. The French Connection. People in southern France are battling pollution at a paper mill owned by a corporate behemoth: Paper Excellence Canada, the owner of the Northern Pulp Mill in Nova Scotia.
Nov. 6, 2020. Excellence in paper profits. Court documents show that after Northern Pulp made $59.9 million in loan repayments to its corporate owner Paper Excellence, it asked the province of Nova Scotia for $50 million in new financing, over and above the $85 million it already owes the province. The province declined to provide new loans, but did agree to a freeze on all payments from the existing loans.
July 19, 2020. Corporate shell game: Part 1. Northern Pulp seeks protection from creditors in a BC court – and its largest creditor is its owner, Paper Excellence.
July 21, 2020. Corporate shell game. Part 2. Northern Pulp-affiliated companies say that without major concessions, they won’t be able to pay back nearly $86 million they owe to the province of Nova Scotia. So far, however, the government has not caved, and is not agreeing to new financing.
May 12, 2020. Nova Scotia government doles out $10 million more for Northern Pulp. The effluent pipeline may have been turned off but the provincial money pipeline continues to flow.
Jan. 31, 2020. The province issues tough new orders to Northern Pulp.
Jan. 24, 2020. Northern Pulp takes province to court: The saga continues. The unfolding saga of the 53-year-old Pictou County pulp mill operated by Northern Pulp Nova Scotia – a Paper Excellence company that is part of the corporate empire of the billionaire Widjaja family of Indonesia – continues to get “curiouser and curiouser” as Alice in Wonderland once remarked.
Jan. 10, 2020 Northern Pulp, past and future: “It ain’t over till it’s over”. https://www.halifaxexaminer.ca/province-house/northern-pulp-past-and-future-it-aint-over-till-its-over/
Dec. 17, 2019 Pictou Landing First Nation: “We are sticking to the January 31, 2020 date.” https://www.halifaxexaminer.ca/province-house/pictou-landing-first-nation-we-are-sticking-to-the-january-31-2020-date/
Dec. 11, 2019 Northern Pulp lobbyists and the revolving door with government. https://www.halifaxexaminer.ca/province-house/northern-pulp-lobbyists-and-the-revolving-door-with-government/
Dec. 8, 2019. Deciding Northern Pulp’s future: A tangled mess of dubious science, loans and liabilities will determine who government officials will act in coming days – and how much it will cost Nova Scotians.
Nov. 21, 2019. Northern Pulp’s “political game”: It’s decision time for the Nova Scotia government. It will either approve a pipeline for pumping mill effluent into the Northumberland Strait, or won’t. And it will either extend the Boat Harbour Act, or won’t. Those affected by the mill operation are laying out their case and preparing next moves.
Oct. 3, 2019. Northern Pulp’s sci-fi future
July 8, 2019. Northern Pulp Mill’s missing environmental data. The mill says its effluent comfortably meets federal regulations, but a new study published by Dalhousie researchers suggests there is no way to know.
April 9, 2019. Nova Scotia has a mercury problem. Facilities associated with Northern Pulp’s proposed effluent pipe are immediately adjacent to a mercury-contaminated toxic waste site left over from the Canso Chemicals operation.
Mar. 7, 2019. The Canso Chemicals mystery: With the chemical plant long gone, why is the company still alive? And what about all that mercury pollution?
Mar. 5, 2019. Northern Pulp’s environmental documents, missing mercury, a pulp mill that never was, and oodles of contradictions.
Feb. 21, 2019. Northern Pulp says it “cares” – but for whom and what?
Nov. 3, 2018. Containing Northern Pulp’s mess: A half century of toxic waste in Boat Harbour, a leaky pipeline, and what happens next in the mill saga.
April 26, 2018. Dirty Dealing. Part 4. Message control and the Northern Pulp Mill’s cancer-causing air emissions.
Mar. 20, 2018. Battle for the mill: The plan to pipe effluent from the Northern Pulp mill into the Northumberland Strait is dividing the community of Pictou, pitting neighbour and fishermen against mill workers.
March 8, 2018. Dirty Dealing. Part 3. Elevated levels of cancer-causing air emissions from Abercrombie Pulp Mill, peer-reviewed study reveals.
Feb. 13, 2018. Dirty Dealing. Part 2. Wading through the quagmire of Northern Pulp’s fast-tracked environmental assessment
November 27, 2017. Dirty Dealing. Part 1. Northern Pulp Mill and the province are set to roll of the dice with Boat Harbour’s replacement, but a cleaner alternative exists.
 The political influence that the pulp mill owners have had over the years on policies in Nova Scotia, including the involvement of former Premier John Hamm as chair of the Northern Pulp Board for years, is detailed at great length in my 2017 book, The Mill – Years of Pulp and Protest. In my submitted question at the media briefing, I asked if – given Paper Excellence’s stated intention to be more open and engaged with the community – the company was ready to issue an apology for having orchestrated a campaign in 2017 to successfully have my book signing at the Coles bookstore in New Glasgow, Nova Scotia, cancelled. Paper Excellence VP Graham Kissack replied that he was sorry he wasn’t aware of the “issue” or the “events,” which suggests he needs to look a little more closely at Northern Pulp’s recent history as the event made the front pages of newspapers across the country.
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NBA Plans Daily, Weekly Podcasts in New Deal With IHeart Media – BNN
(Bloomberg) — The National Basketball Association is developing a slate of original podcasts about the league’s greatest moments and players, part of a new deal with IHeart Media Inc., the largest radio station owner in the U.S.
The NBA and IHeart will collaborate on the shows, with the San Antonio-based radio giant handling the production, distribution and advertising sales, according to a statement Wednesday. In addition to its radio stations, IHeart operates one of the largest networks of podcasts in the U.S.
The NBA believes podcasts can help it reach a new audience, and lure more casual fans to watch games. Viewership of the NBA has slipped from its pre-pandemic heights. The audience for the most recent season was down about 25% from 2019. But the league has been one of the best at turning its players into global celebrities.
“We’ve been looking for the right partner to help bring our archives to life,” said David Denenberg, a senior vice president in charge of distribution and business affairs at the NBA’s entertainment arm. “We have tons of audio footage that’s never seen the light of day.”
The NBA has been dabbling in podcasting for a couple of years, and helped produce an audio companion to the popular documentary series “The Last Dance,” about Michael Jordan’s final year with the Chicago Bulls. The league has been an early adopter of many popular new media services, forging deals with YouTube, Twitter and Snapchat. About 80 million people listen to a podcast every week in the U.S., up 17% from a year ago.
IHeart and the NBA are in the process of formalizing their first slate of shows, which they plan to announce in the coming months. The lineup may include daily programs, as well as limited series running about 10 episodes. IHeartMedia owns the podcast “HowStuffWorks” and has discussed making something similar that explains basketball to casual fans.
There are already dozens of NBA podcasts, and the most popular sports podcaster, Bill Simmons, follows the NBA more closely than any other professional league.
Yet the NBA isn’t interested in talk podcasts, which make up the bulk of such shows. Instead, the 75-year-old league thinks its vault of recordings about players and historical moments will make it stand out.
“The NBA has an ability to drive culture beyond just sports in a way a lot of leagues are envious of,” said Conal Byrne, chief executive officer of IHeartmedia’s digital audio group. “We’ve had our eye on this league for a while to help it ramp up faster into podcasting.”
©2021 Bloomberg L.P.
Chinese stocks pare losses as state media try to stem panic – Al Jazeera English
The wobbly trade in Chinese markets came as state-owned securities newspaper urged calm on Wednesday and talked up markets.
Chinese shares fell on Wednesday but trimmed earlier losses amid volatile trade as state-run financial media called for calm following a wild rout triggered by investor concerns about tightening government regulation.
The Shanghai Composite Index fell as much as 2 percent before finishing the morning session down 0.59 percent. The blue-chip CSI300 index clawed back some of its losses to end the morning flat, but was still down more than 6.6 percent for the week.
In Hong Kong, the benchmark Hang Seng Index flitted between gains and losses to fall 0.24 percent at midday after plunging an eight-month closing low a day earlier. The Hang Seng China Enterprises Index was up 0.38 percent.
Andy Maynard, head of equities at China Renaissance in Hong Kong, said the market mood on Wednesday was “nervous” rather than panicked.
“Is the downside over? No, it’s not. Do we think there’s going to be more? Yes, there probably is. Do I think there’s some relief here? Yes.”
The Hang Seng Tech index, which hit record lows a day earlier, was barely lower. Real estate firms in Hong Kong rose 1.5 percent even as a mainland index tracking the sector fell 0.45 percent.
A CSI index tracking education firms listed on mainland and Hong Kong markets fell 0.52 percent.
Talking up markets
Chinese state media talked up the market after a wave of selling that had seen nearly $1.5 trillion of market value wiped off Hong Kong and mainland shares in the three trading days through Tuesday, according to Bloomberg-compiled data. Investors have dumped stocks in the crosshairs of Beijing’s sweeping regulatory crackdowns, with selling also spreading to bond and currency markets.
In a front-page commentary on Wednesday, the state-owned Securities Times said systemic risks “do not exist in the A-share market overall”.
“The macroeconomy is still in a steady rebound stage, and short-term fluctuations do not change the long-term positive outlook for A-shares,” the commentary said.
“The recent market decline to some extent reflects misinterpretation of policies and a venting of emotion. Economic fundamentals have not changed and the market will stabilise at any moment,” it said.
Other major securities dailies echoed the commentary in market reports.
In a front-page story citing domestic fund managers, the official China Securities Journal said the sell-off was a “structural adjustment”, a sustained plunge is unlikely and the market does not face systemic risk.
A story in the state-run Shanghai Securities News quoted domestic analysts as saying the sell-off would not continue, and that the market will gradually stabilise.
“For institutions, the decline brings the opportunity for positioning in high-quality shares,” it said.
Fixed income and foreign exchange markets were relatively steady on Wednesday after succumbing to Tuesday’s sell-off. The most-traded 10-year Chinese government bond futures, for September delivery, were last down 0.09 percent, following a 0.35 percent drop a day earlier.
China’s yuan firmed from a more than three-month trough against the dollar hit a day earlier, as some investors expected leading state banks could step in soon to support the currency. The yuan’s late slump fed into the People’s Bank of China’s weakest daily fixing in three months on Wednesday.
Facebook eyes a future beyond social media – The Economist
FACEBOOK HAS always had two faces. One is the grimace of a company that many people, in particular politicians, love to hate. President Joe Biden recently accused the social-media giant of “killing people” by spreading misinformation about vaccines against covid-19. (He later rowed back a bit after Facebook pointed out it does quite a lot to stop the spread of such content and to promote legitimate vaccine tips.)
The other face is a happy one of a firm that users, advertisers and investors cannot live without. Analysts predict it will be grinning again on July 28th, when it presents second-quarter results. Revenues are expected to rise by nearly 60%, year on year, to around $28bn—despite Apple’s update in April to its iPhone operating system that allows users easily to opt out of being tracked around the web by apps like Facebook. That would put it on track to exceed $100bn in sales this financial year. Quarterly net profit could come in just shy of $10bn, double that of a year ago. No wonder Facebook looks poised to become a long-term member of the exclusive club of companies with a market value above $1trn, which it joined earlier this year (see chart).
How can a firm with such political baggage be so successful? The answer is two sides of the same coin. With more than 2.7bn daily global users, Facebook’s main offerings—its flagship social network (known internally as Blue), photo-sharing on Instagram and messaging on WhatsApp and Messenger—are a digital magnifying glass of human nature. This glass amplifies the good (neighbourly help amid the pandemic) as well as the bad (conspiracy theories and quack cures). It also serves as a remarkable lens for advertisers to focus in on the world’s consumers. And the two-facedness is likely to become more pronounced should Facebook succeed with its biggest project yet: creating a “metaverse” that would combine a 3D digital world with the 3D physical one.
At its core Facebook is a giant advertising machine. Adverts generate 98% of its revenue. Blue remains a dominant ad platform internationally, raking in perhaps $55bn last year, according to estimates by KeyBanc Capital Markets (Facebook does not break out revenues by service). Instagram, which Facebook bought in 2012 for what seemed like a colossal $1bn, now chips in another $20bn or more, taking its share of overall ad revenues to nearly 30%, up from just over 10% in 2017.
Debra Aho Williamson of eMarketer, a data provider, praises Facebook’s ability to target ads as “incredibly precise”. Advertisers value this highly: Facebook earns more than $9 a year for every one of its users, about twice as much as Twitter does. The firm observes what its users do not only on its own services, but almost everywhere else online. This lets it pick what products to flog to a given user, identify others with similar interests and find out whether they bought something after seeing the ad.
Even before the pandemic hit, this was hard to resist, especially for smaller firms with fewer resources to run sophisticated marketing operations, which make up the bulk of Facebook’s 10m advertisers, but also for most big global brands. Even Chinese sellers are spending hundreds of millions of dollars on Facebook, says Brian Wieser of GroupM, which places ads on behalf of brands. Although Facebook’s apps are banned in China, Chinese merchants can plug their wares to Western consumers thanks to firms such as Wish, an American online marketplace that helps arrange ads, payment and shipping.
No commercial brakes
Covid-19 has turbocharged Facebook’s machine. Confined to home, the average American user spent nearly 35 minutes per day on Blue and Instagram in 2020, according to eMarketer, two minutes more than the year before. That adds up to thousands of additional years of collective attention. While some firms went belly-up or cut advertising spending amid last year’s recession, others were created: 6.6m in America alone since the start of the pandemic. Many want a slice of that extra attention. These days it is unimaginable to run an online consumer business without targeted ads, notes Mark Shmulik of Bernstein, a broker, just as it was once unthinkable to run a business without a bricks-and-mortar shop. A bigger share of such firms’ budgets will be spent on Facebook and its fellow ad-tech giant Google, says Mr Shmulik. Some admen are calling it “the new rent”.
Facebook has added more than 2m renters since the start of the pandemic. It is almost certain to add more of them as economies reopen and digital ads, which already make up 60% of overall ad spending in America, keep chipping away at TV and other traditional media. The impact of Apple’s new tracking opt-out, which four in five iPhone users have already embraced, according to Flurry, a data firm, will not be clear until the next round of quarterly results in October, observes Mark Mahaney of Evercore ISI, an investment bank. But even if this makes Facebook’s targeting a bit less effective, it will still be at least as good as its competitors’, he predicts. And although on July 23rd American trustbusters got another three weeks to refile a lawsuit against Facebook, which had been thrown out last month for lack of evidence, they will struggle to prove that the company is a social-networking monopolist under current competition law. For all the anti-tech bluster in Washington, DC, this is unlikely to change as long as Congress remains polarised.
The bigger threat to Facebook’s continued success, which has long preoccupied Mark Zuckerberg, its co-founder and chief executive, is that virtual masses finally tire of its apps and move elsewhere, pulling advertisers with them. Over the past two years a new generation of social media has emerged that could do just that. Although Facebook’s share of American digital advertising has continued to grow in recent years, its global social-media advertising has been edging down since 2016. The challengers range from specialists such as Clubhouse and Discord, two audio-chat services, to Snapchat and TikTok, which take on Blue and especially Instagram more directly. TikTok fans in America now spend more than 21 hours a month on the video app, compared with less than 18 hours that users spend on Blue, according to App Annie, a market-research firm.
In the past, Facebook might have snapped up smaller rivals, as it did with Instagram. With trustbusters looking over its shoulder, it is instead placing a number of big bets. The first is on the “creator economy”, which lets people make money from digital works such as videos or newsletters. This is an extension of its ad business, but one where it has fallen behind new rivals. TikTok and YouTube, in particular, have been better at attracting creators who keep users glued to their smartphone screens. In April Facebook announced that it was developing new audio features, including Clubhouse-like chat rooms in which listeners can tip performers. In June it launched Bulletin, a newsletter-hosting service that is similar to Substack, which popularised the genre. The following month Mr Zuckerberg vowed to shower creators on Blue and Instagram with $1bn by the end of next year (without specifying what form these payments would take).
Facebook’s second wager looks beyond advertising to e-commerce. It already hosts 1.2m online shops on Blue and Instagram. That puts it in the same league as Shopify, a fast-growing rival to Amazon, which has 1.7m. A month ago Facebook launched a new way to lets buyers try on clothes virtually. It also plans to link its “Shops” offering with Marketplace, its existing peer-to-peer trading service, and WhatsApp, which Facebook wants to turn into a vehicle for chat-based “conversational commerce”, the latest trend in online shopping. Later this year it would like to phase in a version of Diem, its controversial cryptocurrency (formerly known as Libra), that would beef up its payments infrastructure.
For now Facebook has waived seller fees but they could add a few billion dollars to its turnover as soon as next year. Besides bringing in non-advertising revenues, an e-commerce business would also help the company with its tracking problem. If shoppers spend more time and leave more data on its platform the inability to follow them across the rest of the web becomes less important. Mr Shmulik expects the e-commerce landscape to fragment into such walled gardens, each combing shopping and advertising, and operated by a tech giant.
Mr Zuckerberg’s grandest gamble concerns the metaverse. When he spent $2bn in 2014 to buy Oculus, a maker of virtual-reality (VR) gear, many thought he was buying himself a toy. But in recent years Facebook has made further VR-related acquisitions, most recently BigBox VR, the developer of “Population: One”, a shooter game similar to “Fortnite”. This gives Facebook control of a hardware platform for VR and its sibling, “augmented reality” (AR), which serves users digital information as they survey the real world through smart spectacles and the like.
And as with e-commerce, part of Facebook’s rationale could be to create strategic sovereignty, by lessening its dependence on the whims of hardware-makers such as Apple. The potential prize is large. Sales of Oculus headsets contributed around $1bn to Facebook’s revenues last year. If the technology keeps improving, VR and AR are the obvious next phase of video-gaming, which has grown into an industry with global revenues of $180bn.
Mr Zuckerberg’s ambitions do not stop there, however. He doesn’t see the metaverse, which now has its own division within the firm, merely as a place to enjoy games or other immersive entertainment. Instead, he envisages it as a virtual space where people live and work, in keeping with a dream that geeks have harboured since 1992, when the term metaverse was coined by Neal Stephenson, a science-fiction author. In five years’ time, Mr Zuckerberg has said, he would like Facebook no longer to be seen primarily as a social-media company but as a metaverse company.
That would make Facebook cool again. It would no doubt also invite more scrutiny from critics worried about the firm’s power. Should users look on course to spend 35 hours a week immersed in its virtual world, rather than 35 minutes a day, this could invite regulation that actually bites. For now, the metaverse is encouraging something Mr Zuckerberg fears more: competition. Others sizing up the field include video-game firms like Roblox and Epic Games, as well as tech giants Apple, which is reportedly planning its own AR glasses, and Microsoft, which already sells AR goggles. If Facebook beats them to metaverse supremacy, it will have plenty to grin about. Otherwise, expect serious grimacing.
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