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Good News in Facebook's Drive to Win Over Publishers

By John-Erik Koslosky – Mar 9, 2016 at 6:21AM

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Some big names in news are happier with an updated version of Instant Articles, and Facebook now has plans to roll the platform out to publishers operating on a smaller scale.

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It looks like Facebook (META -6.79%) is about to become a much bigger player in the news arena. After one not-so-successful attempt at cajoling publishers to post their news stories directly to the social network, the company has reportedly tweaked its offering enough to appease bigger publishers testing out the updated Instant Articles platform. And now it has plans to extend its reach into news much further, bringing aboard other online news publishers and bloggers starting this spring, when it will open Instant Articles to all publishers.

The latest move has the chance to help Facebook in two ways:

  1. It gives the company a potentially huge new funnel of relevant content to wrap ads around, even if it's collecting, at most, just 30 cents on the dollar and letting publishers keep the other 70 cents.
  2. That new content should make the social network an even stickier platform, as more users will do more reading in-app, rather than following links back to the sites of the news publications themselves.

Facebook has been trying to get its Instant Articles platform off the ground since last May. Its initial rollout with some publishers last year, however, didn't go over very well. Those who tested out the platform found that it wasn't delivering the kind of ad revenue that would make it advantageous for them to publish articles directly to the social network rather than publish to their own sites and use social to guide readers to the content.

Round 2 has gone better
Facebook took a step back later last year and made changes in hopes of easing some of the news publishers' concerns. It now offers the publishers 70% of the revenue generated on the Facebook-procured ads on their Instant Articles and 100% of the revenue of any ads they procure themselves.

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It also loosened up restrictions on how many ads the publishers could place on each article page. Facebook, understandably worried about diminishing its users' experience, had initially set ad limits that publishers testing the pages found too restrictive to make the type of money necessary to consider staying on board.

Those changes were apparently enough to satisfy some very popular publishers. Several spoke recently to The Wall Street Journal, including Business Insider, Vox, and Mic, all major players in online news with varied audiences. Each had good things to say about their ability to generate revenue through the platform, and through the use of the ads procured through the Facebook Audience Network.

Bringing Instant Articles to smaller publishers
Soon after that WSJ report, Facebook announced plans to extend Instant Articles to all Web publishers. The company is no doubt comfortable with what it heard back after the tweaks and is ready for a major expansion to the platform, which is expected to come sometime after the F8 Facebook Developer Conference in April.

The move to post content through Instant Articles will not be not an easy one for many news publishers. It has the potential to offer a healthy source of digital ad revenue, which can be frustratingly elusive for companies that don't deal in the type of big data that Facebook and Alphabet do. It also offers the potential of a much greater reach, with the ability to share content with friends an important component in delivery.

But publishers have to reckon with a downside, too. Publishing directly to Facebook's platform has the potential to further commoditize the news content they deal in, siphoning off even more of their brands' strength over time.

On top of that, it creates the potential for the publications to become increasingly more reliant on Facebook for their digital traffic -- and digital ad revenue. That's not a problem as long as the rules are working in their favor, but if Facebook were to change these rules, the publishers could be in a much weaker bargaining position than they were when they demanded better terms from Facebook last year.

Maybe not a "win-win," but it could be mutually beneficial
But it's not as if they were in a strong position to start with, either. Generating digital ad revenue has been difficult for many publishers. If Facebook's platform offers them the ability to generate as much or more revenue than they can from the same story on their own site, we should expect them to continue publishing directly to Facebook.

For that reason, it made good sense for Facebook to have sweetened the pot enough to get them to stick around. While it's sharing a bigger portion of its ad revenue now, the long-term gains would seem to go to the social network.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John-Erik Koslosky owns shares of GOOGL. and FB. The Motley Fool owns shares of and recommends Alphabet GOOG, GOOGL, and FB. 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.

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