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"It's looking less and less like Facebook (NASDAQ: FB ) and more and more like 'Spambook,'" said Richard Greenfield, a media analyst for BTIG Partners. Greenfield's remarks came a few weeks after Facebook announced its redesign to the news feed that's supposed to declutter users' feeds. But will the new design deliver? Or is Facebook monetizing the news feed at the expense of the experience?
The balancing act
When it comes to monetization, Facebook is undoubtedly firing on all cylinders. In the company's first quarter, revenue increased 38%, year over year. Meanwhile, Facebook's monthly active users grew by only 23%. The disparity here is clear evidence that Facebook has successfully found ways to earn more money per user during the past 12 months.
But a deeper question lingers. Are these gains sustainable? Or has the user experience been watered down by large ads right smack in the middle of your news feed?
The argument goes both ways. Like Greenfield, some are arguing that Facebook's ads are cluttering the feed. Even more, Greenfield believes many ads are completely irrelevant to the user.
On the other hand, there are some advertisers reporting that Facebook recently made it more difficult for advertisers to reach users. A recent change to Facebook's algorithms, for instance, reduced some advertisers' reach by as much as 50%, reports Jeff Doak, who handles the Ford account at WPP ad agency.
In response to Doak's findings and several complaints, Facebook said:
We're continuing to optimize the news feed to show the posts that people are most likely to engage with, ensuring they see the most interesting stories. This aligns with our vision that all content should be as engaging as the posts you see from friends and family.
Even more, CEO of Optimal Rob Leathern, a Facebook ad buyer, decided to analyze his own news feed to really see what's going on. The results were surprisingly in favor of the experience over monetization. Only 16% of the posts in his news feed were from brands that he had "liked" (he had "liked" 150 brands). Just 3% were from paid ads. Everything else in his feed was from friends.
What's next for your news feed?
Facebook's news feed will definitely change as time goes on. One big change is just around the corner: video ads. These could soon show up in your news feed, with 15-second spots, according to the Financial Times.
As the news feed continues to evolve, investors should evaluate Facebook's performance from two angles: monetization and experience. Monetization is a given, but monetization won't last if the experience is undermined.
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