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Here's Why Facebook's Investing Another $100 Million in Local Journalism

By Adam Levy – Apr 1, 2020 at 10:20AM

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It's not just a generous donation to support the news industry.

Even at a time when practically everyone is consuming as much news as they can get their hands on, many news outlets are struggling. Despite the increase in readership, many marketers have pulled back their ad budgets amid the coronavirus pandemic. That makes it really hard for smaller news organizations, like those focused on smaller cities and regions, to sustain operations even when their readers need them most.

Facebook (META -1.08%) is coming to the rescue. The company announced a $100 million package of grants and marketing spend to support local news: $25 million in immediate relief, and a $75 million marketing budget to shore up their ad sales. The move comes on the back of a $300 million investment it made earlier this year.

Of course, Mark Zuckerberg isn't just doling out cash out of the kindness of his heart. News, particularly local news, is an important content source for Facebook. Supporting news organizations now, when times are tough, will buy Facebook lots of goodwill and perhaps ease an increasingly strained relationship with many companies.

The Facebook like symbol on the address sign at the entrance to Facebook's campus.

Image source: Facebook.

Everybody loves Facebook news, even if they say they don't

Facebook is already a top source for news among consumers. Over half of Americans get at least some of their local news from social media, according to a Pew Research poll, and 15% of respondents say it's their preferred source.

Facebook is by far the most popular social media news source. Amid the coronavirus panic, traffic to external websites from Facebook has increased 50%, according to an internal report obtained by The New York Times. The report described an "unprecedented increase in the consumption of news articles on Facebook."

But even while consumers are turning to Facebook more often as a source of news, the majority still expect it to be inaccurate at least some of the time, Pew said.  That suggests that if Facebook can improve the trustworthiness of the news on its platform, it could see even greater engagement.

To that end, Facebook launched a dedicated news tab for certain users last year. Local news will be an integral part of the news tab, as it's meant to surface the news Facebook thinks is most relevant to the user. If a user in Kansas City is seeing a whole bunch of stories about New York and Los Angeles, it's not the best user experience. Moreover, users may be more likely to trust their local newspaper more than a national news outlet.

Facebook will pay licensing fees to some publishers for sharing content in the news tab, but most of that money will go to big national outlets. Offering support to local news through its Facebook Journalism Project Grants is a way to sustain important local news outlets, without committing to specific terms for the news tab.

Facebook is hurting too

Just as many small news publishers are seeing their ad revenue disappear, Facebook is facing the same challenge. The company released a blog post noting weakness in its ad business in March amid social distancing efforts. Overall, the company is facing billions in lost revenue.

But Facebook has a balance sheet that enables it to absorb the negative impact of the coronavirus. It ended 2019 with over $19 billion in cash and equivalents on its balance sheet and produced free cash flow over $20 billion last year.

Committing to spend an extra $100 million while the advertising market is weak ensures it'll be able to bounce back strong when marketing budgets ramp back up.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Adam Levy owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

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