Business | News companies and Facebook

Friends with benefits?

Facebook and several news firms have entered an uneasy partnership

|SAN FRANCISCO

“INSTANT ARTICLES” is a new service announced by Facebook on May 12th, in partnership with nine news firms, including the New York Times, the Guardian and National Geographic. Facebook users will be able to read stories from these publishers without leaving the social network, since it will host the articles rather than just providing weblinks that send readers off to the news firms’ websites. In return, newspapers will be able to sell advertising that appears next to their stories and keep all the revenue, or let Facebook sell the ad space, and give it a 30% cut.

The nascent partnership highlights Facebook’s growing clout in the news business. Newspapers have become dependent on it to send readers to them, and tweaks to Facebook’s algorithm can dramatically change websites’ traffic. The New York Times gets around 15% of its traffic from Facebook; some news sites get over half. News firms have already cultivated legions of Facebook fans (see chart). Through the partnership publishers can reach new audiences, while Facebook will keep users from straying, and serve up more ads.

The friendship is not without its complications. With 1.4 billion users, Facebook has grown into a Goliath, controlling around 9% of all online advertising globally. Newspapers risk giving Facebook even more power by conditioning young Facebook users to think that they can get everything they need in one stop, and undermining their own websites as destinations. In the past, firms that have hitched their business to Facebook have been bruised. For example, Zynga, an online gaming company, excelled until Facebook changed how often its users were shown alerts from their friends boasting of their game scores.

Recently, news firms have tried to take a more analytical approach to their online businesses. Some are hiring teams of data-crunchers, and using traffic-analysis firms such as ChartBeat to help them see in real time where readers come from. However, the risk is that they pay too much attention to the number of visitors driven through social media and not enough to the time people spend engaging on their websites, says Gordon Crovitz, a media entrepreneur.

Other firms will follow in Facebook’s wake. “There is suddenly a lot of competition among the social networks to host premium content,” says Edward Roussel, chief innovation officer at Dow Jones, a media company. Earlier this year Snapchat, a messaging service, started offering articles from a select group of news firms to its users. Paul Zwillenberg of the Boston Consulting Group predicts that some social networks, including Facebook, will ultimately pay publishers to host content.

This will make news firms less vulnerable to the whims of any one social network’s algorithms. However, the gravest risk to publishers is that social networks continue to transform themselves into a form of modern-day newspaper, curating content, engaging users and selling their attention to advertisers.

This article appeared in the Business section of the print edition under the headline "Friends with benefits?"

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