17 January 2018
Following a post from Mark Zuckerberg last Friday, Facebook has confirmed that they will be making changes to the news feed algorithm to further prioritise ‘meaningful’ content (such as from close friends and family) over public content (including videos and other posts from publishers and businesses).
Facebook is not making any changes to their Ads products in line with this currently.
Over the last few years, the amount of public content on Facebook from publishers, brands, celebrities etc. has increased rapidly, leaving users feeling that Facebook isn’t about their friends as much as it used to be. Facebook is making changes to refocus the platform on their original purpose of bringing people closer and helping them stay connected with their friends and family.
With this announcement they are also continuing their fight against “engagement bait” on the platform.
Off the back of the press, speculation has been that the Facebook app specifically within their ecosystem (so excluding others such as Instagram and WhatsApp) is losing some of its “stickiness” in mature markets, reflected in metrics like time spent with the main app. This led to the share price decreasing soon after the announcement.
The initial interpretation from many media commentators is that “stickiness” is suffering. Facebook is reacting with a re-emphasis on posts from users over businesses and this will eventually result in a supply decrease of available ad inventory within their auction method. CPMs will rise and advertisers will react by shifting investment elsewhere.
In our view, this change will mainly affect publishers who have until this point benefitted from high organic reach i.e. news publishers (News and Fairfax) that use social to syndicate content off their own platforms and digital-only content partners (e.g. Buzzfeed) who have created business models based on delivering content views on social platforms – as opposed to their “owned” environment. Historically Facebook has prioritised meaningful content from credible sources within consumer news feeds and now like advertisers it looks like publishers will likely see a significant drop in organic reach, calling for them to adapt their organic-first Facebook publishing strategy.
This channel will now be pay to play. As an example, Buzzfeed, last week announced their model of “social traffic first” would shift to a focus on growing their own app usage.
In terms of advertisers, we don’t foresee an impact in the short-term, as the Facebook auction has a “relevancy” component (the Facebook quality score).
Facebook’s updates seek to bring new users and/or increase existing users’ time spent on the platform. If successful, this will rebalance the equation in favour of ad opportunities versus demand. With their latest attribution tools, Facebook is simultaneously providing better means to track the value of advertiser investment. While the adjustments go through the various stages of product development, advertisers should continue to utilise the platform to leverage Facebook’s data and reach, measuring business outcomes to look beyond efficiency (e.g. CPM) toward effectiveness.
Despite Facebook’s emphasis on restructuring for engagement, we believe Facebook will continue to position the platform as a mass reach channel, built to drive real business outcomes, rather than returning to their original advertiser proposition (as an engagement channel).
Bigger picture, we speculate this could mark the start of several platform changes this year. While the advertising offering is to date unimpacted, with the planned launch of Facebook Watch (their streaming platform) and Marketplaces, we could see Facebook start to further separate its ad products by channel – perhaps this could look like the news feed for content publishers, the marketplace for performance and Watch for mass video.
We shall continue to monitor any changes and share insights with you across the year.
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