Another day, another curious acquisition. When CBS announced it was buying Last.fm, a social media platform that does not appear to be making much money, for $280 million, it certainly gave pause.
Last.fm is one of those irrevocably trendy Web 2.0-ish properties, complete with unknown business plan, a functionality depending greatly on user interaction, a bevy of competitors, and a media-designated tagline comparing it to the incumbent in the space: “this generation’s MTV”
Last.fm is an Internet radio property that creates a personalized station, based initially on a band that you choose. So, as the service says, “Last.fm radio learns what you like and gets better.”
While Last.fm relies mainly on user recommendations, its major competitor, Pandora, relies on an algorithm. Both, however, are riddled by inaccuracies and false connections, because it is just about impossible for an individual’s music preferences to be deduced from the wisdom of the crowds or a computer running code. Just because you like one punk rock band, doesn’t mean you’ll like them all. And the computer or the community will likely never guess you like some country if your favorite three artists are rappers.
While the user experience is always going to be a work in progress, it’s the economic uncertainty that had industry watchers initially skeptical of the deal. The company accepts ads, but, perhaps bowing either to the user experience or to underwhelming appetite, those ad displays are few and far between.
But, as demonstrated with Google’s acquisition of YouTube, the acquirers are only concerned with future profits, not what the company has managed to make on its own before the acquisition. CBS, no doubt, has ideas about how to monetize the 15 million-plus users Last.fm claims.
Major broadcasting companies, like CBS, are betting heavily (though a $280 million acquisition is not exactly breaking CBS’ bank) on creating communities for which to supply their future content. It won’t be enough for traditional broadcast companies to put shows up on TV. So, as Staci Kramer of PaidContent.org wrote , “The potential isn’t limited to radio; this is more about community and technology, in some respects, than music.”
What happens next, of course, for CBS and the other traditional players making significant acquisitions in the social media space will determine the success of such initiative. Kramer ended her column about the Last.fm acquisition saying, “CBS has made a lot of announcements lately about plans—Wallstrip, Joost investment, the audience network, social media. Next step: seeing some results.”