Last week’s announcement from Facebook Inc. (NASDAQ: FB) that it would change its News Feed to favor posts from family and friends rather than publishers sent the stock down more than 5% at one point and has caused publishers to do some serious thinking about how they will adapt to the changes.
While the end result remains a bit murky, what is clear is that publishers that based their businesses on developing massive audiences with little original content are going to be the first to feel the pinch. What publishers and advertisers call “organic reach” will be severely curtailed to be replaced — eventually — with higher engagement of smaller numbers of users.
According to media industry watcher Digiday, Facebook’s move is pushing publishers to diversify their traffic by focusing on loyalty and, ultimately, subscription revenue. Easier said than done however.
[T]here’s a growing sense that publishers are wanting out. It’s hard to find a publisher that’s happy with the money they’re making from all the content they put on Facebook’s platform. In a sense, this is just the latest in a string of half-steps and unkept promises by Facebook, whether it’s the ever-changing video strategy to fast-loading Instant Articles that haven’t provided enough monetization. For many publishers, the good will has run out. They’ll still post to Facebook, but have given up waiting for Facebook to become a significant revenue driver.
Justin Smith, CEO of Bloomberg News said:
The loser here is Facebook. I can’t imagine that taking off all this quality news content and replacing it with personal connections experiences will result in deeper engagement.
Facebook may be playing a longer game though. First, if Facebook can more deeply engage its users by focusing on family and friends, that means that users will be paying closer attention to everything they see in their newsfeeds. It follows that Facebook can charge more for advertising to more engaged users. Also, Smith’s notion of quality news does not apply to most of the content that will disappear from Facebook.
As important, perhaps, is that the change may help Facebook beat back government meddling into its business. At least that’s what the company hopes following its entanglement in the fake news charges surrounding the 2016 presidential election. Articles in users’ newsfeeds that simply roll by without any interaction will rather quickly lose their places in the rotation.
The company also has run into antitrust headaches overseas. Relaxing its grip on some advertising dollars won’t hurt Facebook in Europe especially.
On its own, the change won’t solve Facebook’s issues with governments, but it may reduce the noise level and forestall more appearances in front of congressional committees.