Facebook CEO Mark Zuckerberg’s recently announced changes to the company’s news feed have the potential to dramatically affect how people interact on the social network.
Over the next few weeks, Facebook’s news feed will start showing fewer news articles, and less marketing content and ads, Zuckerberg wrote on Thursday. Instead, users should start seeing more vacation videos from their friends, photos of their nephew’s college graduation, and other more family-friendly posts about the people they know.
It’s a major change for Facebook, which over the years has shifted from being a social networking service connecting friends and family to one of the world’s biggest distributors of news and online ads.
Here’s what you need to know about Facebook’s big news feed change:
Why is Facebook changing its news feed?
To hear Zuckerberg explain it, the increase in news articles and marketing has created an imbalance that “is crowding out the personal moments that lead us to connect more with each other.” Based on Facebook’s internal research and outside studies, he said that people are generally happier and have a better “well-being” when they use social media to connect “with people we care about.” What “may not be as good,” however, is merely “reading articles or watching videos,” even if they’re informative or entertaining.
Left unsaid are the controversies Facebook has faced in recent years over its relationship with the news industry. For example, critics slammed Facebook (FB) for failing to prevent the spread of misinformation, dubbed fake news, on the news feed during the run up to the U.S. 2016 presidential election.
The company also made an unpopular decision in 2016 to block a Norwegian newspaper editor from posting an iconic Vietnam War photo of a terrified, naked child fleeing her village after a vicious napalm attack. At the time, Facebook noted the photo’s historical relevance, but said it was “difficult to create a distinction between allowing a photograph of a nude child in one instance and not others.” Eventually, after a fierce backlash, Facebook allowed the photo on its service.
Facebook has likely had enough of these kinds of editorial dilemmas, as the company has long argued it’s not a media company in the traditional sense, but rather a platform that happens to distribute other publishers’ content. Showing less of this kind of content eliminates some headache for Facebook, which can then put more energy into making money.
It’s also possible that the number of hours people have been using Facebook is declining, and the company is trying to adjust the news feed to get people to stay online for longer than they have been, according to Pivotal Research Group analyst Brian Wieser. He analyzed Nielsen data about Facebook’s online audience over a 14-month period ending Sept. 2017, and found a small, but general decline in people’s use of Facebook. The report said that “Facebook (including Messenger but excluding Instagram) saw a decline in total person-hours (number of users multiplied by hours of consumption per person) during September of -0.1% year-over-year following a -0.9% decline in August.”
“We can speculate that the concerns reflected in Zuckerberg’s post may very well have been driving these declines,” Wieser wrote in the research report.
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How will Facebook’s news feed change impact the news industry?
We won’t know how everything is going to play out, but it’s going to hurt in the short term, Wieser told Fortune. Publishers that have relied on Facebook for so-called organic distribution, essentially articles that publishers didn’t pay to have inserted into people’s news feeds, “will find Facebook a less accommodating environment,” he said.
With Facebook de-emphasizing news on its service, news organizations face the dilemma that traffic to their respective websites may tumble. “If you weren’t already reducing your reliance on Facebook before, you definitely are reducing your reliance on Facebook right now,” Wieser said.
News organizations have been attempting to create content that they believe could be widely shared on Facebook, such as short videos that are in line with Facebook’s desire to show more videos to its users. These efforts are mostly futile with Facebook’s news feed changes.
Publishers that ignore Facebook now that Facebook has de-emphasized news will now be more likely to create more content tailored to match the interests of their readers—and not Facebook’s mysterious algorithms.
How will businesses and advertisers be affected?
Online advertisers and businesses that distribute marketing through the news feed will face similar challenges as the news industry.
“Facebook has clearly put a stake in the ground that user experience is more important than the brands that pay them,” HubSpot’s senior product marketing manager Marcus Andrews said in a statement. “By making this shift they clearly prioritized one over the other, and are potentially a bit nervous about the current (really negative) narrative about the negative impact of social media on society.”
Businesses may actually end up buying more online ads on Facebook to promote themselves, because simply creating content and attempting to share it on the news feed for free will no longer work as well as it once did. “That definitely is a potential consequence” Wiseler said.
How is Wall Street reacting to Facebook’s news feed changes?
Not well. Facebook’s shares fell 4.5% to $179.37 on Friday, indicating that investors are worried that the news feed tweak will hurt the company’s revenue. It probably didn’t help that Zuckerberg conceded that the new changes could temporarily cause “some measures of engagement” to go down.
As Bank of America analyst Justin Post wrote in a research note, “the goal appears to be realigning Facebook as a social platform and less of a media/news outlet.
“We expect the content shift and commentary on potential usage pressure to raise some concerns on potential revenue headwinds,” Post said.
Still, Post believes that while Facebook’s advertising business “may face some added pressure in 2018,” an “improving user experience” (ie. happy Facebook users that aren’t bummed by the news) “could drive higher ad prices to counterbalance.”
Daniel Ives, an analyst with GBH Insights, also shares Post’s optimism that by altering the news feed, Facebook could make even more money because advertisers will want to pay more to show ads to a happier audience.
“While the News Feed changes just announced could be worrisome in terms of an ad growth hiccup, we believe this overhaul was the right move for longer term user engagement and driving ‘meaningful content,’ which remains the core ingredient in Facebook’s recipe for success for the coming years,” Ives wrote.