22 October 2018
If Facebook gets overly aggressive in monetizing its user base, it could eventually turn off its fans and hurt its long-term value. Photo: Reuters
If Facebook gets overly aggressive in monetizing its user base, it could eventually turn off its fans and hurt its long-term value. Photo: Reuters

Is Facebook on the right track in monetizing its vast user base?

Facebook may soon trial a re-ranking of all posts on the social network, with paid posts getting better spots, according to reports.

Investors might have underestimated the potential impact of such a move. When you open your Facebook page, ads typically appear on the right side, while sponsored posts are part of the newsfeeds based on content pages tracked or liked.

The rise of social media has created new professions such as the YouTuber and the Key Opinion Leader.

Think of a young model who has been hired to promote a makeup product on Facebook. When she sends out a post at midnight, Facebook users will usually see it the following morning. Postings are largely done in chronological order, with the most recent at the top.

However, if the new approach is adopted, posts will be arranged according to the amount paid to Facebook, among other considerations. So, our model will have to share part of her income with Facebook if she wants to make sure her posts reach the people who have liked her page.

Media and bloggers would also need to pay Facebook to ensure they get enough social media exposure.

Facebook founder Mark Zuckerberg has always said that he wants to bring the world closer together. Actually, his company seems to care more about maximizing the time people spend on the social platform.

Whether the content is of the best quality or positive may no longer be his priority. Whether the content can draw the attention of users might now be a more important consideration.

The more you pay, the better spot your ads will take: this is the price discrimination theory in economics.

Such a move is likely to boost Facebook’s income and profitability in the short term, especially if one considers that the social network has increasingly become a part of life for most users and advertisers.

Nonetheless, balancing user experience and monetization has always been a struggle for social media.

You might have noticed that there are more and more ads on Facebook. And oftentimes, the posts you see are not what you are interested in.

Such an approach will enable Facebook to monetize its massive user base in a more aggressive way, but this could turn users away in the long run.

Therefore, the long-term investment value of Facebook hinges more on whether it can keep innovating or identify good acquisition targets such as WhatsApp and Instagram.

This article appeared in the Hong Kong Economic Journal on Nov. 22

Translation by Julie Zhu

[Chinese version 中文版]

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Columnist at the Hong Kong Economic Journal

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