Millennials are reluctant to pay for news, and Facebook (NASDAQ: FB) seems set to capitalize on that by partnering with leading news organizations to bring them content for free.
The generation that reached adulthood around the year 2000 is much more likely to pay for entertainment content than news, according to a survey by the Media Insight Project. The study also showed that a shocking number of the 18-34-year-olds surveyed were still "borrowing" services other people paid for.
However, just because Millennials are reluctant to pay for news does not mean they consider being informed unimportant. Eighty-five percent of those surveyed by the Media Insight Project said keeping up with the news is important to them.
|Percentage of millennials who...|
|Say keeping up with the news is at least somewhat important to them||85%|
|Get news daily||69%|
|Regularly follow five or more "hard news" topics||45%|
|Usually see diverse opinions through social media||86%|
|Pay for at least one news-specific service, app, or digital subscription||40%|
"This generation tends not to consume news in discrete sessions or by going directly to news providers," according to the survey. "Instead, news and information are woven into an often continuous but mindful way that Millennials connect to the world generally, which mixes news with social connection, problem solving, social action, and entertainment."
That puts Facebook in a prime position to deliver news to an audience that is surprisingly hungry for it (as long as they don't have to pay).
What Facebook is doing?
The company is looking to make deals with major publishers to host news content directly on its site, according to The New York Times (which is one of the publications negotiating with Facebook). Currently, news organizations post article links to the social media site that connect to an off-site article. Having them appear directly on Facebook would create a seamless experience and might keep users engaged with the social network longer.
In theory, these native articles hosted by Facebook would also have greater reach than off-site links that are subject to Facebook's fairly aggressive throttling (a system in which Facebook only shows posts from a business to a small percentage of the company's overall followers). Details as to how these arrangements would work are scarce, and perhaps still developing, but the Times reported Facebook is focused on improving user experience, not extracting payment from the publishers.
On the user side, Facebook hosting the stories will lead to faster load times and less bouncing between pages. There articles will simply appear in your feed and be readable without leaving Facebook -- a potentially dramatically better experience than articles which open in a pop-up window.
For the media companies, the newspaper reported, Facebook has floated the idea of a revenue share for ads that run alongside the content.
This is great for millennials (and Facebook)
Millennials want news, and the Media Insight Project survey shows they value it more when their peers offer comments and context on the content. This fits exactly with how Facebook works.
"Millennials also appear to be drawn into news that they might otherwise have ignored because peers are recommending and contextualizing it for them on social networks, as well as on more private networks such as group texts and instant messaging," according to the report. "Once they encounter news, moreover, nearly 9 in 10 report usually seeing diverse opinions, and three-quarters of those report investigating opinions different than their own."
In theory, Facebook would bring news to an audience hungry for it from trusted sources that might not otherwise be go-to sources for the 18-34-year-old audience. This could bring new readers to publications such as the Times, but millennials' reluctance to pay for news perpetuates an ongoing problem for the news business.
This deal is good for Facebook, which gets increased engagement, time on site, and high-quality content it does not have to pay to produce. It's also good for millennials, who get access to top-end journalism without paying for it (or having to borrow their parents' accounts).
The most likely potential losers in this scenario are media companies that could be giving away content that is expensive to produce to an audience that has already rejected paying for it. Facebook provides exposure, but it's hard to see value in that increased audience if there is no chance of turning a free "customer" into a paying user.
It could be still worth it
Millennials have shown a willingness to pay for content they perceive has value, just not news. Newspapers have watched their paying audience erode as digital media has taken over from print. Traditional media has missed so many digital boats that it's probably tempting for the industry to jump on any deal Facebook offers just for fear of letting another opportunity pass by.
Millennials want free news, and Facebook will deliver it while media companies foot the bill. So they both stand to win with this deal.
It's tougher to see how the publishers make out, but the potential stream of advertising revenue from an audience of noncustomers, and who are not likely to become customers, might be better than nothing.
Daniel Kline owns shares of Facebook. He still (sometimes) reads The Boston Globe in print. The Motley Fool recommends Facebook. The Motley Fool owns shares of Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.