Facebook Product Changes Aimed at Maximizing Revenue

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Brands love being on the Facebook platform. With Facebook reaching 3 out of every 4 Internet users in the US, it’s been a great way to reach customers where they’re spending their days. And the best part? It’s free. That combination has been a powerful driver, bringing brands and marketers on to the platform, with companies forsaking their own websites, driving traffic to Facebook to gain new fans. All with the hope that this new opt-in-lite “fan” asset will be a longterm winner, creating new customers and revenues. But two recent seemingly-unrelated changes on Facebook may signify the party is almost over, and that Facebook will be coming for it’s cut of the pie for the privilege of connecting with customers on Facebook.

The first change rolled out week’s ago to much fanfare and debate. The new Sponsored Stories. The Sponsored Stories product lets brands promote organic mentions, reviews and other shared information by users of Facebook, gaining guaranteed visibility for the item that may otherwise have gone unnoticed in the river of the hidden-by-default “Most Recent” news items. Most marketers loved this idea, because trying to get your items into their much more visible “Top News” feed is an art and science that has yet to be figured out completely.

With Sponsored Stories, Facebook gave brands a way to pay to get that extra visibility that everyone wants, in a consistent and guaranteed way. It was pitched as a boon to advertisers who wanted to stand out among the noise, and already, brands like Levi’s have lined up to take advantage. It was a smart move for Facebook in terms of wooing advertisers, and an innovative way to drive revenue.

But, then, just a few days ago, Facebook changed what users see in their news feeds. Switching the default view of the feed to “Show posts from: friends and Pages you interact with the most”, hiding tons of content that could’ve previously been visible to the user under the old settings. Of course, there are some obscure controls at the bottom of the News Feed that let you customize and restore the “Show posts from: All of your friends and pages”, but really, how many users even know they can change the global settings on their news feed, let alone know that something’s been changed for them that’s materially altering their experience on the site?

And this is punch #2 of the 1-2 product punch for Facebook. Because with a new, more restrictive filter on the News Feed, plus a new vehicle for driving revenue with Sponsored Stories, Facebook is making it harder and harder for brands to get organic mentions in front of casual fans – the exact people they want to reach and engage with on Facebook. It’s a shrewd and calculating move. Cut off organic access quietly, shortly after trumpeting a new, innovative way to get more visibility. And I predict that as brands see less engagement on their organic posts, more and more are going to be considering the Sponsored Stories as the de facto way to ensure key messages hit their target audience on the site. Driving tons of new revenue to Facebook.

But how will this sit with the advertisers who have been lured into a false sense of security where now the only way to leverage Facebook is to pay whatever the going rate is? Will brands feel taken advantage of now that their organic updates are less effective and the only way to the customer is through the Facebook sales department? Or will brands just merrily pony up cash to reach more people on Facebook, counting their number of fans like chits and assuring themselves they’re building a permission-marketing asset?

What do you think? Did Facebook intentionally roll these changes out together to drive more revenue? Or is one just a case of improving user experience by reducing clutter and the other a new ad model? That’s the benevolent angle I guess – but not the one I’m betting on.

It remains to be seen; but either way, the trap has been quietly set, and Facebook is counting on reaping a ton of cash from access-starved marketers who, now addicted to connecting with their customers for free on Facebook, will pay the going rate to keep feeling the love.

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3 thoughts on “Facebook Product Changes Aimed at Maximizing Revenue

  1. I think that it is two fold. Facebook is determined to prioritize that which their algorithm determines is most “relevant”. This is just taking their two tier news stream to a new level. Remember when that first happened and the web (and friend’s Facebook posts) were all buzzing with what the differences between “Top News” and “Most Recent” were? I think that iteration of filtering didn’t quite work out as well as Facebook would have liked and so now they are taking things a step further and creating this new filter that you have to opt-out of.

    Their mail system (which I have not signed up for) supposedly functions in the same manner; places messages that they have determined that you will find most “interesting” at the top and those that may be either spam or from an Aunt that you would rather not deal with, at the bottom. Gmail has done something similar with their Priority Inbox which I hated then loved then hated again. Thankfully when Google made the change it was MUCH more obvious and they have published that people now are spending 16 less minutes on email a day – quite a triumph if you ask me.

    However, there is the other side (and apologies for this comment that is nearing the length of a blog post); Facebook needs to make revenue. Deals have started off as free but they have repeatedly said that they are “starting off” as free, pre-conditioning retailers as to the inevitable implementation of a pricing structure. This move to a auto-filtered newsfeed seems much more hostile than the Deals “deal” to businesses that are using Facebook. However, like you mentioned, they now have us and them so hooked on what it does for business and us as consumers that companies will have to pay.

    This new pay-to-play structure saddens me for a few reasons but the main one is that I feel social media was finally the tool that was going to save us from big-box homogamy. However, if the little guys can’t afford to pay the rates that the big guns can (simple economics here), then we will see even more of the little guys going under.

    • morganb says:

      Thanks for sharing your thoughts Julie,

      I agree. Facebook can and should make any change they want to the news feed
      in order to help the users surface more of the content that is important to
      them. If users abandon ship due to spam or a better product then everyone
      that has invested in Facebook loses (I’m not talking about investors, I mean
      invested ad dollars, resources to build Facebook pages, staffed up community
      managers for FB, etc.) So I’m all for optimization of the user experience.

      To me it was more interesting from a PR perspective and a product launch
      strategy. Big fanfare around Sponsored Stories and almost a silent roll-out
      of the new News Feed settings. Too cunning by half, I think.

      And I agree that revenue is critical and I applaud Facebook for looking for
      new ways to monetize the social space without just adding more ad units.
      Innovation and new revenue models are part of what this space needs. I just,
      like you, hope they don’t choke off the organic channel completely, because
      it will quickly turn into another platform where whoever has the most money
      wins (a la TV, and other old media.)

    • morganb says:

      Thanks for sharing your thoughts Julie,

      I agree. Facebook can and should make any change they want to the news feed
      in order to help the users surface more of the content that is important to
      them. If users abandon ship due to spam or a better product then everyone
      that has invested in Facebook loses (I’m not talking about investors, I mean
      invested ad dollars, resources to build Facebook pages, staffed up community
      managers for FB, etc.) So I’m all for optimization of the user experience.

      To me it was more interesting from a PR perspective and a product launch
      strategy. Big fanfare around Sponsored Stories and almost a silent roll-out
      of the new News Feed settings. Too cunning by half, I think.

      And I agree that revenue is critical and I applaud Facebook for looking for
      new ways to monetize the social space without just adding more ad units.
      Innovation and new revenue models are part of what this space needs. I just,
      like you, hope they don’t choke off the organic channel completely, because
      it will quickly turn into another platform where whoever has the most money
      wins (a la TV, and other old media.)

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