Facebook's Newest Update Is Great News for You, Bad News for Websites

By Markets Fool.com

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Digital publishing has endured many changes in the past decade. Earlier, content discovery was dominated by link-outs from web portals such as America Online or MSN. The second phase was the rise of powerful search engines, most notably Alphabet's Google, which allowed content discovery without the need for portals. The newest addition has been the growing influence of social-media networks.

The most powerful social-media network is Facebook thanks to its nearly 1.7 billion monthly active users. And it's not only in social media: Facebook is now the most-important digital outlet period. For example, eMarketer found Facebook accounted for 30% of all digital display ad revenue in 2015, up from 25% the year before. As a digital publisher, you simply cannot afford to not have a major presence on the site.

The problem, as publishers see it, is Facebook may be a little too powerful. Unfortunately, these publishers are essentially beholden to Facebook because they've built their digital strategy on another company's user base. As a result, any change of algorithms has the potential to severely disrupt their monetization models.

6 words that publishers fear: "We're tweaking our News Feed algorithm"

According to an article from technology site Recode, Facebook is changing its algorithms to emphasize posts from family and friends. It will favor putting more of those in your feed. And this makes sense from Facebook's standpoint as it tries to boost user engagement. Earlier this year, a report from The Information noted a drop in both personal posts and sharing on Facebook from mid-2014 to mid-2015. Facebook continued to grow during this period, but this points to less engagement from users.

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The reported 5.5% decrease in overall sharing is slightly disconcerting but not a reason to outright panic. However, personal updates -- the posts users share about their lives, experiences, and thoughts -- fell a whopping 21% during this time frame. This is a worrisome because these personal updates are essentially the glue that keeps Facebook's user audience sticky. It makes sense Facebook would emphasize user-generated content.

The losers under this change are publishers

While personal updates have been declining, posts from digital publishers have ramped up. This has been great for digital websites dependent on increasing digital audiences to grow advertising revenue, but Facebook is now walking back publishers' reach. According to Recode, Facebook Vice President Adam Mosseri stated that publishers will see a "small but noticeable" decrease in their organic reach as a result of Facebook's changing algorithms. Of course, these publishers are free to pay Facebook for "promoted posts" to increase their reach.

This is not the first time Facebook has taken steps to the detriment of publishers. Last year, The Wall Street Journal [subscription required] reported that Facebook's Instant Articles content-hosting format frustrated publishers because of the platform's onerous advertising restrictions.Facebook later loosened these restrictions to the delight of publishers. Recently, in what was initially celebrated as a win for publishers, Facebook changed its policies to allow publishers to post "native advertising," but with restrictions that make the advertising format less effective.

The newest limitation will most likely draw complaints, but it's not as if publishers can afford to remove their content from Facebook. As earlier stated, Facebook has the power in this relationship on account of its 1.7 billion users, with 66% saying they get news on the site. Mark Twain cautioned against drawing the ire of the publishing industry when he wrote, "Never pick a fight with people who buy ink by the barrel." Facebook may not be aiming to pick a fight, but it's most likely the only entity to be able to do so and emerge unscathed.

The article Facebook's Newest Update Is Great News for You, Bad News for Websites originally appeared on Fool.com.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Jamal Carnette owns shares of Alphabet (C shares) and Facebook. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.