News Corp.'s Phone Hacking Scandal In a Nut Shell

Its been about a month since the world of Rupert Murdoch came a sudden halt due to the phone hacking scandal (although the story feels likes its been going for a lot longer than that). The business and reputation of both Rupert Murdoch and News Corp. have suffered some very serious damage, which in a nut shell can be summarized as follows:

• In 2007, a reporter and private investigator who worked for the News Corp.-owned News of the World tabloid, were both convicted of phone-hacking. The company at the time claimed that the incident was limited to those rogue individuals.

• Investigations in 2009 suggested that phone-hacking was a more widely used tool at News of the World than initially thought. The story continued to remain in the backwaters of major news events, until a report by UK’s Guardian newspaper a month ago alleged that other victims included the families of British troops killed in combat and murdered schoolgirl Milly Dowler. The public outrage immediately catapulted the story to front page status, and sent News Corp. into full blown crisis mode.

• The dramatic fallout, loss of advertisers and public anger forced Rupert Murdoch to shut down the 168 year old newspaper, which once held the title of being the biggest selling English language newspaper in the world. The paper’s former executive editor, Neil Wallis and former editor, Rebekah Brooks have both arrested in relation to on-going investigations.

• Members of both the UK government and parliamentary opposition called for News Corp to abandon its $12 billion bid to buy the 61% of satellite broadcaster BSkyB that it did not already own. The company initially resisted the move, however on July 13th they finally relegated and withdrew their bid.

• The company has continued in its attempts to contain the public fallout, including publishing public apologies in a number of British newspapers on July 16 and 17. The apologies provide further details on what steps the company is taking to address its systematic abuses of privacy laws.

• Though the phone hacking allegations have to date been primarily limited to the UK, the company is starting to see effects on its worldwide business. The ratings agency, Standard & Poor's, placed News Corp.'s BBB+ rating on a negative watch stating that its credit rating could be cut as the snowballing British phone hacking scandal threatened to claim more victims, and lasting damage is done to its business franchise.

• To date, no senior management company executives have been implicated in the scandal.

What Should Facebook Do Next?

Following last week’s blog post, I’ve had some hands on time with Google+. Though I consider myself to be a relatively mild user of social media, its already become clear that Google’s enthusiasm for conquering social media has not been dismayed one bit but all their failures. In fact, it seems that their mishaps have merely strengthened their resolve at finally cracking this media market. I have absolutely no way of knowing if this latest attempt will finally succeed (although I can say from my limited experience so far, its yet to disappoint me), but I am pretty confident in concluding that succeed or fail Google will be banging on this door for quite some time, and its reasonable to assume that at some point they will have some form of measured success.

Which then got me thinking, if I was a Facebook executive what on earth would I do next?... The answers I believe are pretty straightforward:

• Go public... ASAP! Facebook has had a meteoric rise, but is yet to reap any true financial rewards. Given that the 500Ib gorilla of technology wants a piece of its action, I would stop all the hesitation today, and pull the trigger on the IPO. Who knows when this window of opportunity will close?

• They copied your product, and you should copy theirs. Its obvious that Google liberally ripped off Facebook’s highly regarded spartan-yet-functional design layout. If I were Facebook I would be dissecting and lifting all those nifty features Google seem to be hanging their hat on. The best of which are, segmenting your friends into groups that you can individually share things with, and the ability to conduct group video/ text chats.

• Prepare for the worst, and prepare to fight... Perhaps all the biggest mistakes ever made by technology companies have really only ever boiled down to one thing, they never took looming threats seriously enough. IBM, Dell, Palm, Myspace all failed to really guard their territory with equal ferocity to their baby-faced competitors. Facebook have the home court advantage, they are the current masters of this field, and they should be doing everything humanly possible to guard their territory against this possibly gathering storm.

Why Google Wants To Rule Social Media

So another week and another attempt by Google to crack the social media game. Its latest salvo is named Google+ and from all the reports that I’ve read so far, the service is a very close copy of Facebook, its most obvious target. Google in recent times has had a bumpy time trying to work the social media landscape. Google Wave was released last summer with promises that it would redefine email communication amongst groups, and that service turned out to be a very big flop, put out of its misery earlier this year. Then came the much maligned Google Buzz, which seems to have mostly been the victim of a very, very poor roll-out and communication strategy. The early reviews with Google+ are pretty positive, especially surrounding a few features that seem to separate it from the competition. Although time will be the ultimate judge, its pretty safe to say that this latest effort is the company’s best start yet.

However, the real question for me is why does Google, with an almost monopoly-like market share of the internet search business want a piece of social media so bad? Well, the answer clearly has something to do with money. If reports are to be believed, Facebook is set to generate $5 billion in revenue this year, which is more than double what they generated last year. Those are not numbers Google can afford to sneeze at, especially when you consider that Google brought in $30 billion in revenue last year, which is only 6 times more than 7-year old Facebook. The writing on the wall is pretty clear, there are big bucks to be had in social media, and Google clearly wants a piece of the action.

A bigger and more important reason however might be that whomever is able to ultimately rule social media, will become the ultimate gatekeeper of what people do on the internet. Primarily as a result of Facebook’s advent, a growing number of people have begun to think of the internet as what happens within their social networks. Facebook users in January spent an average of 2hrs and 12 minutes sharing updates, news, pictures, and general items of interest with everybody in their network. This 6.5% increase over last year represents a growing trend of internet users using their social portals to decide where on the web they want to go. It is this gatekeeper power that I believe Google is most interested in wrapping its large arms around.