Facebook (NASDAQ:FB) is taking a second shot at appealing to publishers with its news platform "Instant Articles," where publishers post stories directly to the social network, rather than linking to pages on their own web properties
The first attempt, rolled out in October, didn't go so well. And while Facebook has announced tweaks that should better please publishers, there's still reason to remain skeptical that this feature will take off anytime soon.
Understanding Instant Articles
The Instant Articles platform makes good business sense for Facebook because it keeps users inside its network. They aren't following links outside to read stories, then continuing to read and comment on those publishers' proprietary properties, or straying elsewhere on the web.
In short, it helps Facebook establish a walled-in garden of sorts, where users will stay put to read news. That's why the social network can afford to allow publishers to keep 100% of the revenue from ads on Instant Articles that they have sold on their own.
That's great for Facebook, but what's the appeal to publishers?
Posting directly to Facebook can extend an article's reach beyond posting a link with a headline and teaser. But there's also the matter of monetization. In posting directly to Facebook, a publisher relinquishes some of its own advertising opportunities surrounding that article. That brought a tepid response from publishers in the feature's first iteration.
Making publishers happy
To address concerns from publishers, Facebook made a few significant tweaks to the platform in December. In the first iteration of Instant Articles, publishers were able to include one display ad per every 500 words -- significantly fewer than most publishers are likely used to serving up on their own properties.
That's been dropped to one ad every 350 words. In addition to that, Facebook ceded some control to publishers to allow more opportunities to link from Instant Articles to articles or features on their own websites. The result could be an increase of up to 40% more ads per article, a Facebook rep told Adweek in December.
Additional changes that have not yet been rolled out should help publishers sell premium-priced ads on their Instant Articles. That's important, since publishers collect all of the revenue from ads they procured themselves, but only a percentage of the revenue from ads placed through Facebook's Audience Network.
Those changes should be welcomed by those 100 publishers already experimenting with Instant Articles, as well as the 300 others reported to be enrolled and waiting to be brought on board.
Not an easy decision
But publishers have ample reason to remain skeptical about Instant Articles.
The news industry has already been struggling to fight off the commoditization of its product. Surrendering still more traffic to Facebook would seem to only further weaken their brands, while strengthening Facebook's, which has been gobbling up an ever-larger share of its users' time spent on digital media, as well as an increasingly larger share of the overall digital advertising pie. Research firm eMarketer estimates that by 2017, Facebook will control some 16% of the total $75 billion digital ad market.
It could also weaken publishers' standing with advertisers over the long run. Publishers will be in an unusual position of selling ads for their own content that will appear on the Facebook platform. Would good results on those ads do more to strengthen the publication's position as an advertising vehicle -- or Facebook's?
Publishers will have to wrestle with these larger questions as they see what the platform can provide in terms of revenue. They need to be careful not to too enthusiastically embrace a short-term revenue stream at the expense of lasting damage to their brands and bargaining power with advertisers.
For Facebook, it's all about user experience
For Facebook, there is also an important balance to strike. In order for the Instant Articles platform to be successful, the company must make it appealing to a broad array of publishers. They must be able to make more money from articles posted to the Facebook platform than they could by keeping them exclusive to their own sites. That requires Facebook to be more lenient with its advertising rules than it would probably like.
But allowing too many ads on a page -- or too obtrusive of advertising -- would make the platform less appealing to users, who are more likely to stay in the walled garden only if it is a simple, pleasant experience compared to the rest of the ad-cluttered web.
Whether Facebook can strike that balance with Instant Articles remains to be seen. The recent changes should draw more interest, but they may not be enough to earn a broad buy-in from publishers.
John-Erik Koslosky owns shares of Facebook. The Motley Fool owns shares of and recommends 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.