Bloomberg Media’s Justin Smith says the social network makes far more money from news feed than news organizations do from linked traffic.
Their content is keeping Facebook users happy, but the publishers that provide it are “feeding on the scraps” of the social network’s ad business, says Justin Smith, head of Bloomberg Media.
According to Jasper Jackson in The Guardian, Smith said that “even though Facebook was sending traffic to publisher websites, it was making far more from ads in its news feed which was filled with publisher content.”
“They keep the $16bn to $18bn they get in the news feed, and the news feed, with personal sharing down, is effectively all of our content, it’s effectively just an aggregation of premium publishers’ content,” Smith is quoted as saying.
“While that’s all legal, based on fair use, there is a real question about how fair it is that Facebook can have $16bn to $18bn dollars, $3bn or $4bn dollars in [earnings] on the back of our content,” Smith continued.
As if to prove the point, Facebook recently reported net income for Q1 of $1.51bn, three times what it made the same time last year, Jackson notes.
Smith warns that the situation is untenable, saying that “it’s a little bit like they [Facebook] are at the grown-up table and the publishers are propping it up while being fed scraps.” Only a few publishers, he predicts, will find it sustainable.
We saw it coming. Initial reports of publisher results were lukewarm at best, referral traffic has been tanking, and the whole idea of giving away so much control has some publishers terrified of the possibilities.
In a nutshell, third party distribution is a crapshoot, and it’s looking like a losing bet, not just for publishers, but for Facebook too when the publishers pull their content.