There has been a bit of violent conversation, starting with The Social Network, but expanding to the question of whether Facebook is really a Media Company.

Here’s what I think…

Since the web started, there have been two very different types of sites/services, etc. One kind is driven by content over which the site/service has (for the most part) control. Content Businesses. The other is the Tool Businesses category, in which I would include Yahoo!, YouTube, Google (which has expanded into other businesses now), and really, the browsers, RealPlayer, QuickTime, etc, etc, etc.

The mega businesses are – though there must be an exception somewhere – the Tool Businesses that give people tools to use the web in a new, inventive, or significantly more convenient way. Invariably, they realize, after massive valuations, that they need something proprietary to hang onto if they are going to last longer than, say, a decade. And usually, that’s when they start slipping.

It gets very blurry, especially as Traditional Media moves fully into New Media. The thing to hang onto is that, for instance, The New York Times, has been and always will be a niche business. It’s a niche of a few million and it is influential well beyond its reader base. But be clear, if a movie being released relied only on every NYT reader going to see it on opening weekend, the gross would be under $15 million. It’s not nothing. But Facebook has over 400 million users… and if one in forty sees The Social Network, it is a $100 million movie. That’s the mindfuck that everyone seems to be trying to sort out. Facebook is much less influential than the massive size of its base… in great part because the purpose of the site is not to be an influencer… which is an inherent reason why it is so widely popular.

Content has a naturally narrowing effect. Tools are just tools. Everyone needs a hammer, even if everyone uses it differently. Content doesn’t offer a hammer, but it tells you how to use it.

Another example… YouTube is an important site and its existence is influential. But they did something quite simple. They made streaming video free to the public and to businesses. The public and businesses took care of the rest. It wasn’t brain surgery. It was a big light bulb idea and a hugely risky one at that. As the price of memory and streaming has dropped, YouTube has become closer to being a financially viable long-term operation. Had the cost of streaming/memory not dropped, they might not be in business today. But for all the content on YouTube, the site itself is a Tool Site, first and last. Giving people something they didn’t have before for free is not content creation… it’s offering a tool people want at a perfect price point… major… but not content.

Even The Huffington Post launched as more of a Tool Business pretending to be a Content Business. The Tool was this idea of aggregating more than a sample of content. They focused on a very specific market, stole most of their content from others by creating branded ad-ready pages that offered other people’s content, and did just enough original content to convince the public that it was a content play. But being The Liberal Site was limiting for a Tool Business, so they quickly expanded to soft-core porn, gossip, sports, etc… not their original concept at all.

HuffPo is now working hard to become the content site they promised, as they now face new challenges. Their Tool was not unique enough to dominate. And perhaps aware that soon the whip will crack and Traditional Media will start protecting their content much more aggressively, destroying their tool of choice. So they are down to Huffington’s strong suit… self promotion. In the current media culture, a dozen voices is enough to be real in the content world… so they are… now… even as they milk free writing from others and still steal content with seeming impunity, so long as they keep Mrs Huffington up front, regally claiming to have already won the war.

And by the way, this is not just a web business reality. Blockbuster was a “tool” business. It didn’t create the content it rented. It just came up with a better way to get it to people. It was followed, evolutionarily, by Netflix, first with subscription-based mailed DVDs and now with streaming. But as you have seen, Netflix is now trying to evolve from Tool Business to Content Business, as their idea of streaming is not in any way proprietary and subscriptions are driven by content, not by how cool Netflix is. They are grossly overpaying for content in a bid to plant their flag in the streaming business (still a Tool Business) so firmly that when the industry converts its libraries fully, the Tool is made ubiquitous, and post-theatrical relies on being a Content Business again (not as good a business), they will not be left out.

And just for fun, a note that Nikki Finke and Deadline Hollywood is 100% a Content Business… and will never grow past the narrow base. This doesn’t mean it cannot be successful in that context… though by trying to expand the business into something beyond the strongest personality to hit movie coverage in decades (for better or worse), there is jeopardy of spending more than can be earned. My sense of it is that the folks at MMC have confused Content with Tool and think they can convert to the much wider-based model. And who knows, maybe they are the geniuses who can change the game completely. Probably not. Going from Content to Tool is, it seems to me, almost impossible.

So… I wish I was in the Tool Business mindset. It is where all the real money is. It’s not some backhanded insult to Facebook to say it is a Tool Business and neither a media business nor a Content business. Neither was MySpace or Friendster, nor is Twitter. Rotten Tomatoes was and is a brilliant Tool Business… and frankly, the money they have spent on building their Content side is kind of a waste. They may make a success of it and it may be wonderful to spend time wandering through, but first and last, RT is what it started as… an aggregator and compiler. That business will always be worth more than any Content Business they can build under the brand. And this is likely true of Facebook and others.

You can’t get 20 million people to use a content site. One day for one announcement or something, sure. But in terms of an ongoing business, even 10 million is not a realistic expectation for Content Businesses. And, simply, none exist at that size now… or ever have. But Tool Businesses… sure. Because they serve a macro self-interest, not just a micro interest.