Facebook has erased most of its year-to-date gains in pre-market trading as investors see CEO Zuckerberg’s decision to shift news feeds to personal posts and away from businesses and media outlets creating a risk to the company’s financial performance.
As we detailed overnight, Facebook is making major changes to its flagship social network, shifting users’ news feeds back toward posts from friends and family and away from businesses and media outlets — a transition that is likely to mean people spend less time on the site.
In a post Thursday, Chief Executive Officer Mark Zuckerberg said community feedback has shown that public content has been “crowding out the personal moments that lead us to connect more with each other.” The goal of the product teams will be to help Facebook’s more than 2 billion monthly users find content that will lead to more meaningful social interactions, he said.
“By making these changes, I expect the time people spend on Facebook and some measures of engagement will go down,” Zuckerberg wrote. “But I also expect the time you do spend on Facebook will be more valuable. And if we do the right thing, I believe that will be good for our community and our business over the long term too.”
As Bloomberg points out, the changes promised today aren’t entirely new — Facebook has been shifting the content on its news feed toward posts from friends and family and away from brands and publications for more than a year.
A large part of brands and media companies’ strategies is to post articles and videos from their pages to engage consumers — items that aren’t considered “meaningful interactions” between people. Downplaying those posts from brands and businesses may put revenue at risk, said James Cakmak, an analyst at Monness Crespi Hardt & Co.
“There will be less opportunity to expose Facebook users to brands,” Cakmak said.
Stifel analyst Scott Devitt (buy, PT $ 195) has “less conviction in our call vs any other time in our coverage history” as FB either addresses the platform issues despite the effect on monetization or ignores the challenges and risks the franchise.
The move could exacerbate slowing trends in user engagement, although the trends don’t take into account Instagram or WhatsApp usage, which have both grown rapidly.
The reaction to Zuckerberg’s self-censorship decision is clear…
Shareholders clearly prefer more fake news to less.
As we concluded previously, ironically, the newsfeed overhaul is also said to be “an attempt to encourage more sharing and personal connecting, amid a backlash with many people worrying about social media sucking up time and damaging users’ mental health” according to the FT.
In reality, it will only succeed in further alienating an already deeply polarized American population.
Yet while it remains to be seen what impact on Facebook, or Zuckerberg’s 2020 presidential ambitions, this latest foray into censorship has, the biggest losers are clear.
Last year, the company tested separating friends and family posts from those posted by businesses and publishers. It created a tab called “Explore” for those other posts in six countries including Sri Lanka, Slovakia and Cambodia. What happened next? Publishers in those countries complained that traffic fell dramatically.
At the time, Adam Mosseri, head of newsfeed, said Facebook currently had no plans to roll this test out further in other countries and said it was unfortunate that some had “mistakenly made that interpretation.” It now appears that this “test” is about to applied to everyone.