As easy as it would be to start this post with “Facebook is in the news…,” it wouldn’t be a terribly helpful intro. Facebook is always in the news. And almost everything Facebook is in the news for is bad. No matter how any of us feel, in late 2021, about Facebook as a platform or a tool or anything like that, I think most of us can agree that Facebook as a company is a bad company that does bad things.
That in itself is nothing new. We’ve had the bot-follower blow-up, the Cambridge Analytica data harvesting thing, the Russian misinformation/election interference thing, more and more sponsored posts flooding news feeds, the theory that Facebook is able to access audio from a smartphone mic, the widespread suspicion that popular “quiz” posts are password-mining schemes. Facebook allows hate speech to stand on the platform, while removing innocuous posts. Mark Zuckerberg is probably pretty conservative politically, with former G.W. Bush White House higher-up Joel Kaplan allegedly one of his closest policy advisors and gross mega-villain Peter Thiel prominently on the company’s board. Facebook gives extreme right-wing content a wide berth on its platform, and both lagged and hedged on deplatforming Donald Trump. This is a bad company.
Whistleblower and former Facebook product manager Frances Haugen’s recent testimony to Congress laid out in clear language something a lot of folks didn’t quite realize: Facebook analyzes sentiment around news feed posts (importantly, links to off-site articles) and algorithmically prioritizes posts with more emotional engagement. And one of the more potent emotions in this mix is anger. So, part of Facebook’s strategy for boosting engagement (and resulting ad revenue) is to make people angry.
I’ve worked in media and advertising technology for a long time, where it’s always been commonly understood that this is part of Facebook’s revenue strategy. Engagement with content is part of every ad-supported media business’s revenue strategy. But to my mind, Facebook is a bad company in part because it doesn’t even create the content it’s piggybacking on to keep people angry and arguing with each other. And that’s a big part of why I don’t comment on article posts on Facebook, why I don’t share article links to my news feed, and why I don’t click on article links either. (I admit I’ve broken my own rule maybe twice this year. My willpower isn’t always all that great.) I don’t need to contribute to boosting Facebook’s ad rates. There’s always another way to get to the articles I want.
Intro to Digital Publishing’s Business Model
I don’t want to sound like I’m talking down to anyone — it’s 2021, after all — but for anyone who needs to know, here’s a little about how digital media monetization works. For-profit digital publishers (and when we say “publishers,” we mean any business that creates content people actually engage with, which could be a news or entertainment site, or a broadcaster, or this blog, or a brand’s website, or phone listings, and on and on) make money largely through advertising, subscriptions, or a combination of the two. (There are others. Sponsorships. Events. Pay-per-article micropayments, although that method generally isn’t considered viable. But anyway. We’re focusing on ad revenue. That’s kind of the big one.) Publishers don’t get paid by advertisers just for getting “clicks;” it’s more complicated than that. Engagement metrics really matter when publishers determine how to price their advertising. It’s not just the number of visitors, but the amount of time they spend on the page. How deep they scroll. Where they stop scrolling. Where else they go on the site after reading that first article or watching that first video. Wherever there’s deeper engagement, the publisher can set higher ad rates. And this is important not only because publishers need to make money to hire people to create the best content possible, but because high-quality publishers typically want to reduce the number of ads on their site. I know this from my work, where I’ve had countless conversations with people from countless publisher businesses and the ad tech companies that serve them. Everyone hates ads, except maybe advertisers. If you load up your site with ads, you create a worse user experience, people won’t want to stay on your site, and then they leave, and that’s a loss of engagement. Quality publishers generally want to host fewer ads priced at higher rates. Pretty straightforward.
Now, you need data to understand user engagement. That’s not terribly difficult when you own the data. Activity on your own sites is measurable. Again, pretty straightforward.
Where Facebook Sits in the Whole Digital Ecosystem Thing
That’s where Facebook comes in. People often think of Facebook as a social platform, which it is, but its business is that it’s a content distribution platform. You have to remember that in its early days, Facebook didn’t really have a business model. It made money through investor funding. Eventually, especially when it went public in 2012, it needed a business model. And it tried a few things — a lot of messing around with apps, gaming apps most memorably, that were integrated in the Facebook platform and kept people logged into the site. The app thing became less important over time. Instead, Facebook decided to make it easy for publishers to syndicate their articles across its platform. Facebook, remember, does not create any of its own content. All the stuff it hosts is either user-generated content, or content piped in from third-party publishers and advertisers. Publisher content would keep people logged in and commenting, and publishers would see Facebook as a valuable driver of traffic to their own sites.
That brings us back to the data thing — analyzing engagement. A publisher owns the data on its own sites. But Facebook owns data on its platform. So publishers say to Facebook, “Hey, can we have that data about how our article posts are performing? It’s kind of important. This is our content, and we need insights about it so we know how to set our ad rates and figure out who our advertisers should be, based on what we know about these users coming to our sites.” And Facebook says, “Lol no. We’re gonna give you some of that data. This is our data. You can’t just have it.”
Publishers frequently refer to Facebook’s ad network as a “data black box.” They don’t know what’s in it. They see only what Facebook decides to take out of the box. I don’t think I’ve ever spoken with a single publisher who likes this arrangement. But publishers feel like they need to stay plugged into Facebook, keep syndicating, because they consider Facebook too important a driver of traffic to just kick it to the curb. It’s nuts. You have this big, dumb tech company that produces software and earns gobs and gobs of money from stuff it doesn’t produce.
About those gobs: Facebook gets 23.7% of all digital advertising spending for the entire world. One company. A company that doesn’t produce its own content. Altogether, Google, Facebook and Amazon get 58.1% of all global digital ad spend. The rest of the ad spend is what’s left for literally everyone else in the marketplace. Every other platform, every other publisher site of any variety. This is major, and on the publisher side of the digital ad business, we talk about this constantly. The sense of urgency is additionally high because the overwhelming bulk of the growth in ad spending year over year goes to Google and Facebook (combined), too.
You’ve Dealt With Tech Vultures Before
Okay, now remember during the depths of the Covid pandemic, when we were supposed to stay at home for as much time as we possibly could, and limit our runs into the outside world? So we were ordering delivery and takeout way more than usual? Of course you do. Now remember that stage of stay-at-home when your friends in the restaurant industry started speaking up, saying, “Um, could you use third-party delivery apps less often, please? GrubHub, Seamless, all of those? Because they charge fees to restaurants. And we can’t raise our prices too much, if at all, because we have too much competition from other restaurants. So you’re out here paying the same, our restaurants are making less money, and now we don’t know whether we’re going to be let go because our employers can’t afford to pay us. You should really just call the restaurant directly to place an order.”
It’s true — those delivery app fees are bonkers. They used to be even worse. Early in 2020, the app’s take fee could have been up to 30% of the cost of an order. Later in 2020, NYC capped the take fees at 20%. That’s still a lot. So we said, “Oh! Yeah, that makes sense. We want to keep our favorite local restaurants in business. We want to make sure their employees get paid. We can call the restaurant direct.”
It’s not too much to ask. If you know what you want to eat, and where from, you know how to find the restaurant’s number. When you call direct, you keep your money going where you want it to go.
It’s the same thing with Facebook and every publisher that integrates with Facebook. When you click through an article link on Facebook, Facebook snatches some of your data and doesn’t let go. If you’re trying to read an article or watch a video, and you can see from the news feed link that it’s from a quality publisher you’d like to see stay in business, continuing to produce that content you want, you know where else to find it.
That’s how I’ve been operating lately. Because, yeah, I’m still on Facebook. I don’t like it. I limit my time on it. But I rely on community reach, and Facebook is, unfortunately, one of the best channels at my disposal for that. While I’m there, of course I see links to articles I want to read. I’m not going to jump into the comments, because (beyond my belief that I can’t change anyone’s ingrained opinions) Facebook doesn’t need that much more of my data. I know where to find The New York Times, Reuters, Billboard, whatever. I can open a new browser and go directly to that site. If I value one of their articles enough to read it, they’ve earned whatever pittance of ad revenue my session generates.
Very helpful info. I don’t scroll much on Facebook, but if I see an interesting article I’ll search for it directly … I guess without using Google, the other third of the 58%!
Thanks! Glad you agree! Google is an interesting case. Sometimes they play a villain role — they’re just so huge that they can make decisions that everyone has to treat like industry-wide protocol — but they’ve also come around and decided to play nice in some important cases. They’re a huge ad tech provider behind the scenes, and of course it’s complicated when everyone in any industry is plugged into tools controlled by a company with a lot of self-interest in the marketplace, but some of their tools are really helpful for publishers. Google also isn’t so vulturous with publishers’ content. The lion’s share of Google’s ad revenue comes from search ads, and the overwhelming share of their revenue from search comes from ads on commercial searches. Like when the user is searching for product/service info anyway. I feel like that’s fair. Google and Amazon can duke it out.