Facebook is driving brands away to rival social networks, says billionaire investor

Mark Cuban: Readwrite reports on another potentially damaging problem for Facebook concerning the billionaire investor Mark Cuban airing his dissatisfaction with the social network. It has echoes of the General Motors story earlier this year.  I’m sure you’ll remember when GM announced it was to cease advertising on the site, and concentrate on content, in a blow to Facebook as it headed for its IPO.

This time it is tech and media billionaire Mark Cuban, who also owns the NBA basketball team the Dallas Mavericks, who says that he is tiring of the way that Facebook does business and is considering taking his considerable business elsewhere.

His issues relate to changes that Facebook has made to its algorithm, known as Facebook Edgerank, that means that many brands have experienced a considerable drop off in the reach of their posts.

Cuban told Readwrite that he is moving not just the Dallas Mavericks, a team with several million Facebook likes, but also the business of 70 or so companies in which he has invested. These include the HDTV cable network AXS TV of which he is chairman.

He says while Facebook had to date been the priority in terms of social media marketing that would not be the case anymore. Instead he said he would be looking to grow his brands on social channels other than Facebook. He says he is looking to Twitter, Instagram, Tumblr and even the new MySpace.

“We are moving far more aggressively into Twitter and reducing any and all emphasis on Facebook. We won’t abandon Facebook, we will still use it, but our priority is to add followers that our brands can reach on non-Facebook platforms first,” Cuban told Readwrite.

Cuban’s decision regarding Facebook follows a Tweet he sent two weeks ago where he shared a screen grab of an offer he’d received from Facebook.

He said that Facebook wanted to charge him $3,000 to reach one million people. Cuban’s take on that offer was pretty simple: “FB is blowing it? This is the first step. The Mavs are considering moving to Tumblr or to new MySpace as primary site”.

Mark Cuban:

Cuban says that he has already “pushed more to Twitter” and says that the new MySpace looks promising. He also says that Instagram, ironically owned by Facebook, and Tumblr “are much more open and are getting more of our attention.

“The big negative for Facebook is that we will no longer push for likes or subscribers because we can’t reach them all. Why would we invest in extending our Facebook audience size if we have to pay to reach them? That’s crazy.

“In many respects it has already blown up on Facebook. Their search for revenue has severely devalued every brand’s following and completely changed the economics of consumer interaction,” Cuban told Readwrite.

He argues the changes made at Facebook since its bumpy IPO are the result of  the social network searching for more revenue since its flotation. Something that obviously it is going to do. It needs to make money, but it has to find a happy balance.

As Cuban points out the danger is that the more expensive Facebook becomes for brands to acquire and reach followers then the less appeal there is to those brands in being on Facebook. That’s a problem that needs to be dealt with.

If Facebook focuses increasingly on driving revenue rather than working more closely with brands instances like this, of billionaires sounding off, could become more widespread and more damaging to Facebook’s overall market proposition. Brands could begin to relocate to other social networks and Facebook could find itself going the way of the old MySpace.

The fact that this is not an isolated incident, and that it has echoes of the General Motors story, underscores that Facebook has a real problem on its hands and one that it has not been able to sort out since before its IPO almost six months ago.

Cuban also says that from his perspective MySpace, Twitter and Tumblr are all “ready, willing and able to support brand activation without holding followers hostage for additional revenue”.

It will be very interesting to see if he and others follow through on the talk and that as a result rival social networks start to experience any kind of uptick to Facebook’s detriment.

One thing, however, has not changed. Cuban makes no mention of Google+.