As Facebook Tweaks Its Algorithm, Ads (And AntiTrust Issues?) Rise to the Top

In a perceptive March 3rd, 2013 New York Times piece, Nick Bilton has identified a growing concern among Facebook watchers: As Facebook experiments with finding "the right balance for the algorithm that decides what people see in their news feeds," prioritizing paid content over user's friends' updates may actually drive people away from Facebook.

The problem? In a push to earn more revenue, Facebook is "now replacing free content with paid content, which means a large number of free posts will disappear from people’s feeds as sponsored ads float to the top."

Here's what Nick Bilton's reporting shows the experts are saying about this shift toward favoring paid content in newsfeeds: "“Certainly Facebook has changed its policies and adjusted its products in order to squeeze as much revenue out of all of the openings of the business model in a way that they didn’t have to do before they went public,” said James McQuivey, an analyst at Forrester Research and author of the book “Digital Disruption.” “It’s very possible there’s now a giant pendulum swinging within Facebook, where every division is under pressure to find revenue and advertising solutions.”"

But will people still flock to Facebook as it increasingly crowds out updates from real friends, in favor of paid content?

And what about the little businesses (like indie filmmakers) that have been using posts to Facebook - for free - to market themselves to people who've liked their page?

What happens to the small entrepreneurs who've been using Facebook to promote themselves - but can no longer reach their "fans" because Facebook will only show users content that is earning Facebook paid ad money?

As "Eben Moglen, a professor at Columbia who specializes in Internet law, [told Nick Bilton] although Facebook’s decisions to prioritize paid content could be seen as unethical, the company is not breaking any antitrust laws, yet."

What Prof. Moglen is referring to is that, as Facebook continues to grow, there may even come a time when their practices come under regulatory scrutiny.

In general, it's OK (the American way?) for a company to shift their business model to reap more profits... but when that company dominates a market sector (especially an important media industry) and their business strategy favors their own content, making it very difficult for others to get their products into the market, regulators can step in (in the US, under the Sherman antitrust law) to sanction and even break up that dominant player.

Students of movie studio history are familiar with the way that accusations of such behavior (i.e., alleged antitrust law violations) have been a recurring problem for the major studios and (even as recently as 2011) with big movie theater chains.

And it isn't just movie studios and movie exhibitors that can run afoul of antitrust law. As Nick Bilton observes: "Microsoft in the late 1990s took advantage of its hold on PCs to force Internet Explorer onto people. Recently, Google has caught the attention of the Federal Trade Commission and a number of European regulators for highlighting its own products in search results. But in both instances, the companies were monopolies."

So is Facebook about to get a nasty letter from the FTC?  Not likely.  At least, not yet.

As Nick Bilton writes: "Although Facebook has one billion users, there are plenty of other social networks and billions of people still not on the site."

So (for now) Facebook may continue to tweak their algorithm and squeeze more money out of advertisers - without fear of government regulators stepping in.

There is, however, that other big problem that Facebook's new strategy is courting... There may come a tipping point, where great numbers of Facebook users sign-off permanently from the service.

As Nick Bilton says, there are lots of other social media platforms out there.  Perhaps another platform will find a way to appeal to burnt-out Facebook users. If that happens, it may be too late for Facebook  to recover the users who've grown to feel manipulated and ill-used by a company that once gave them access to friends and then began targeting them for a barrage of non-stop ads.

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