Image source:
What's going on?
Facebooks share price fell almost 5% on Friday after investors gave a collective thumbs down to plans to change how content is delivered on its news feed (tweet this).
What does this mean?
Late on Thursday, CEO Mark Zuckerberg said that Facebook is adjusting its news feed to prioritize content shared by users family and friends, reining in the proliferation of unpaid content from publishers and brands. Therell be no change to the prioritization of paid advertising, natch.
Crucially, Zuckerberg said that users might initially spend less time on the platform in response to the changes, which appeared to spook investors (less time on the platform means less room for Facebook to sell digital advertising).
Why should I care?
For markets: Facebook is going back to its roots as a social network.
Facebook clearly thinks its better off prioritizing the friends and family social element of its network rather than the role its acquired as a media platform. For one, being a media company invited controversy, including over its handling of fake news. It also took Facebook away from its original uniqueness its use as a digital meeting place for people that know each other which is something thats much harder to replicate (note Snapchats growth issues) and potentially more valuable. Facebook is betting the change will result in higher-quality engagement, stickier users and, ultimately, a more profitable platform.
The bigger picture: Relying on an external platform is a precarious strategy even if that platform has two billion users!
The biggest losers from this move are likely the content publishers that have increasingly relied on Facebooks platform to generate page views. Facebook is effectively saying to publishers that it doesnt really want their content or at least not anywhere near as much as it used to. Its a reminder that whoever controls the relationship with the end-user Facebook in this case often has the real power (Googles role in search and news is another prime example).
Originally posted as part of the Finimize daily email.
The top 2 financial news stories in 3 minutes. Join over one million Finimizers
