Shares of Facebook Inc fell more than 4 percent on Friday, 12 January, and were on track for their worst session in more than three months after Chief Executive Mark Zuckerberg announced changes that he said would hit user engagement in the near term.
Zuckerberg said late on 11 January that the world's largest social network would adjust its centerpiece News Feed to prioritise what friends and family share, while reducing the amount of non-advertising content from publishers and brands. He lost $3.3billion off his net worth on Friday, Bloomberg News reported.
A warning by Zuckerberg that people could spend less time on Facebook in the short term as a result of the changes sent the company's stock $8.29 lower to $179.47.
“There is too much uncertainty relating to the economic impact of Facebook’s pending News Feed changes for us to be comfortable retaining a Buy rating on the stock,” wrote Stifel analyst Scott Devitt in a research note, cutting his recommendation to “hold” from “buy.”
The change announced by Zuckerberg follows criticism that Facebook's algorithms may have prioritised misleading news and misinformation in people's feeds, influencing the 2016 American presidential election as well as political discourse in other countries.
What Does This Mean for Businesses?
Facebook said its new ranking system would hurt non-advertising content from publishers and brands, like news stories and viral video posts, but not change the ranking of advertising that has been paid for.
That will leave businesses that want publicity on Facebook no choice but to spend more on advertising, and as a result prices will climb, predicted Eric Schiffer, chairman of Reputation Management Consultants, which advises corporate brands on social media.
This now means that posts which are not paid for and depend on their ‘virality’ for traction are not going to be able to have those posts viewed by a large audience anymore. Companies will need to adjust to yet another change by the tech giant, only they don’t have the rulebook, only Facebook does, as Bloomberg reports.
Several media companies which have made Facebook the central focus of their business will take a hit. Those who tailor content for the Facebook audience, use live videos and make their content go “viral” on the social media platform will be disadvantaged, as Motherboard reports. It will however force the websites, especially those in the business of news, to shift focus on what serves the public interest rather than what content is more shareable.
(With inputs from Reuters)
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