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Facebook Changes the Game With a Simple Algorithm

A recent progress update from Facebook (NASDAQ: FB  ) on its News Feed algorithms highlights the power of the company's flexibility.

A key competitive advantage
A few adjustments, and voila! That's the power of the nimbleness of 21st century technology -- at least that's how things seem to go for Facebook.

On Tuesday, Facebook said it is going to try to be more open about its algorithms going forward. The public's first taste of the company's algorithm was definitely sweet. With two simple changes, Facebook was able to make substantial improvements in users' social interactions.

While the changes are definitely interesting, it's not the changes themselves that are good news for investors; it's Facebook's ability to make meaningful changes so easily. Unlike a company that launches a physical product, Facebook can test changes to its platform on a large group of people with very little risk.

According to AllFacebook, the social network tested its new Story Bumping algorithm in the News Feed on 7,000 daily active users in July.

Source: Official Facebook for Business blog.

Story Bumping allows members to see important stories they would have otherwise often missed if they didn't scroll down far enough.

"Now, organic stories that people did not scroll down far enough to see can reappear near the top of News Feed if the stories are still getting lots of likes and comments," said Lars Backstrom on the official Facebook for Business blog.

After testing the feature on a sample of users, Facebook discovered that the change resulted in a 5% improvement in shares, comments, and likes on the organic stories users saw from friends, and an 8% increase in shares, comments, and likes on the organic stories they saw from Pages.

Furthermore, Story Bumping helped Facebook boost the number of stories users read from 57%, to 70% of the stories displayed in the News Feed.

Now, Story Bumping is already in effect for about 99% of users on desktop, quietly working its magic. Mobile Story Bumping is next -- and it probably won't take long for the company to roll it out, either.

Improving the experience in a matter of days
Long-term Facebook investors are less concerned about competitors, and more concerned about the company's ability to keep users engaged. Facebook's recent changes to its News Feed algorithm provide solid evidence that the company not only has room to improve its platform and grow engagement, but that it can do it very quickly.

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  • Report this Comment On August 09, 2013, at 9:54 AM, nofoolingforme wrote:

    This stock price is bloated. Just compare it's revenue of 9 billion to GM with a revenue of $150 billion. GM has 600,000,000 less shares outstanding yet the two companies have around the same share price. Either one of them is extremely overpriced or the other is a great bargan. Take your pick and, if you own FB shares, get ready for a reality check.

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9/29/2016 4:00 PM
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