Facebook has begun partnering and testing an initiative known as “Instant Articles; the delivery of publishers’ news articles directly within Facebook’s social media platform. The result will be lessened control, decreased brand awareness, and reduced overall revenue for online publications. In an already declining industry, Facebook taking a cut of publishers’ revenue could mean huge changes to the architecture of the news industry.
Let’s take two steps back and outline what Instant Articles is and what Facebook is trying to achieve. Facebook is building a platform within Facebook for publishers to host their articles. The new platform enables publishers to offer interactive content. For example, videos will autoplay like they do in your Newsfeed, you can click on a picture and move your phone around to look closely at the picture, and editors can even share audio files of them dictating their articles so that they have a voice and personality attached. The platform will let you bring over your own ads, or you can let Facebook serve up the advertising for you and they take a cut of the action. It all sounds great right? However, such a drastic shift in the industry will have huge implications.
Problem 1: Decreased Revenue
First, let’s talk revenue. Advertising is the primary source of revenue for most news publishers. While Facebook is allowing you to bring over your advertisements within the content, this excludes a huge amount of advertising real estate that is leveraged on desktop platforms. Typically the sidebar, header, and footer are all prime real estate for advertising. In-text advertising typically accounts for less than 50% of overall advertising. Additionally, you know that if Facebook is providing the platform, they are going to want a piece of the pie as well. You can count on Facebook putting their own advertising on such pages to support their platform. This all equates to less money for publishers.
Now you may be asking, “so publishers are making less money, big deal. It just means less filthy rich MSM companies in the world right?” Unfortunately, publishers (like any business) need to make sufficient revenue to continue to operate and they need to be sufficiently profitable to maintain any kind of longevity. Advertising revenue has fallen by over 50% since 2006 and news companies are feeling it. (See graph left) With the mainstream shift to digital consumption of news and the online advertising market being heavily saturated with non-news competitors, publishers are losing revenue as a result.
Keeping all of that in mind, reducing the ways in which publishers can advertise will mean less money to support operating costs. Less money will lead to a layoff of editors. Less editors will mean less articles. Less articles will equate to reduced advertising exposure. Less advertising exposure will lead to less revenue. It creates a downward spiral. Considering that many news organizations are barely scraping by, the lost revenue from Facebook’s Instant Articles could cannibalize the industry.
Problem 2: Facebook is an unstable platform (Loss of Control)
“Facebook is well-known for their stable unchanging platform”, said no one ever. There isn’t a business on the planet that wasn’t frustrated when Facebook changed their Newsfeed algorithm that basically required businesses to pay for any kind of visibility to their followers. What once was a platform praised as a blissful marketing fountain, is now just another paid advertising opportunity.
For companies whose operating expenses are low enough to profitably operate within Facebook’s Instant Articles stipulations, the platform could mean great things. However, changes made by Facebook tomorrow could equally terminate those same companies who benefited. If their past year has been any indication, Facebook will likely start by giving you free range of advertising within your content today and then slowly shift their policies as they inch further and further into publishers’ profits. This complete loss of control will mean Facebook holds the cards to the future of any publisher that relies upon Instant Articles as a primary revenue stream.
Problem 3: The End of Brand Awareness
News and media companies thrive on establishing themselves as experts in the industry and growing a loyal following. However, how many articles have you clicked on in your Newsfeed where you have no idea the company who posted them, but just consumed the content? Your answer is likely a very high percentage.
If Instant Articles takes off and becomes the primary way that people consume the news, brands will become irrelevant. Facebook will become one of the world’s largest aggregators of news content that, for all intents and purposes, is being delivered by Facebook. TechSmash is no longer the brand, Facebook is. You just show up for the content that you find interesting and come back to Facebook tomorrow for more.
The Solution to the Problem
I’m going to give you a big disclaimer that I don’t know what the solution is, but I can tell you a few things. First, Facebook is going to need to create something that is more enticing than faster more interactive content if they want to gain publisher adoption of the platform. Second, Facebook is going to need to promise visibility to a sufficiently large audience to make up for lost revenue from reduced ad-space. If Facebook can double every publisher’s readership, then losing 50% of ad revenue isn’t such a shot in the gut. Considering that Facebook has 500 million active users logging in each day, it shouldn’t be hard to increase publishers’ outreach.
If Instant Articles takes off, could it cannibalize the news? No, news isn’t going anywhere, but the industry may move towards a model that cuts out the publisher. Individual journalists could utilize the Facebook platform to publish their stories and they profit on an individual basis. This would cut back substantially on many of the “corporate” operating expenses that large publishers currently have. Is this the solution? We certainly hope not. Otherwise, TechSmash is a thing of the past.
Regardless of the outcome, the news and publishing industry is in for some serious alterations to the landscape. Finding ways to stay profitable in the digital world is a problem we are all trying to solve. Have a solution? Share it with us in the comments.