Is Facebook Bad for News?

Carson Family Professor of Business Miklos Sarvary sees Facebook as an ambivalent force in the media, raising the quality of top newspapers while hurting profits for everyone.

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“Facebook is not destroying democracy because it’s not destroying newspaper quality,” says Professor Sarvary.
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Is Facebook raising the quality of top newspapers? According to new research from Carson Family Professor of Business Miklos Sarvary, the answer might be yes.

His analysis is detailed in “Social Media and News: Attention Capture via Content Bundling,” a working paper co-authored with Alexandre Cornière of the Toulouse School of Economics. The pair built a mathematical model of the relationship between a news provider (e.g., The New York Times) and a social media platform (e.g., Facebook) and assess how the newspaper may adjust its quality in response to Facebook bundling news in members’ newsfeeds.

Sarvary and Cornière conclude that different newspapers will respond differently: While media outlets for whom the cost of quality is high will lower their quality, the opposite is true for those who can increase quality relatively cheaply. 

“The genesis of this research was to figure out how Facebook impacts the news industry,” says Sarvary, who is co-faculty director of the Media and Technology Program. “We find that newspapers that were great before [Facebook] are becoming better in terms of quality as a result of the Facebook sharing model. Newspapers that were bad before are going to be worse. The model predicts that there is a larger variance in the quality of newspapers.”

As Facebook reaches 67 percent of US adults, two-thirds of whom get their news there, the social media giant’s impact on news quality is of growing interest and concern. Amid reports of the Menlo Park company being infiltrated and weaponized by bad actors attempting to spread disinformation and delegitimize elections, Facebook set up a “war room” to respond to unusual activity in the lead up to the US midterm on November 6.

But from Sarvary’s perspective, at least, concerns about Facebook’s threat to the press and democracy are overblown. “People should chill,” he adds. “Facebook is not destroying democracy — yet — and it’s not destroying newspaper quality.”

Prisoner’s Dilemma

In Sarvary and Cornière’s model, a social media platform provides consumers with a feed of both news and user-generated content (photos, friend updates, etc.). Depending on the time spent on social media and the publisher’s website, user happiness is a function of the user’s preference for news versus user-generated content, and the quality of the news. The social platform and the newspaper earn revenues from advertising depending on how much consumer attention they can attract.

Using game theory, the professors then derive a series of equations that describe how each player behaves while optimally anticipating the actions of other players. For the newspaper, the business tradeoff is between the cost of providing quality news and the benefit of attracting more consumer attention. The paper concludes that newspapers are always worse off as a result of Facebook’s content bundling strategy, although this does not necessarily result in providing lower quality news.

“Our model predicts that a high-quality newspaper should invest more under content bundling, while a low-quality one should invest less,” according to the working paper. “The rough intuition for this result is that, faced with increased competitive pressure by the platform’s content bundling, the newspaper can react either by saving on cost (i.e. reducing quality) or by investing more in quality to attract more consumer attention.”

“Depending on the cost of providing quality,” says Sarvary, “newspapers will respond differently.”

Given that a newspaper’s profit always goes down when the content is bundled on a social media platform, why don’t newspapers opt-out of Facebook? In an extended model with multiple competing newspapers, the professors show that newspapers have no choice but to share their content with Facebook because of a kind of prisoner’s dilemma; Unless everyone agrees to opt out of sharing content on the social media platform (which is unlikely to happen), then it’s not in anyone’s interest to opt out.

Highlighting how newspapers are attempting to overcome the prisoner’s dilemma, the News Media Alliance — a trade group that encompasses more than 2,000 newspapers, including top dailies such as the New York Times is asking Congress for permission to act as a team in negotiations with Facebook. The House is now considering a bill that would give publishers temporary anti-trust exemption.

Real-World Evidence

Sarvary says he’s on the lookout for empirical data that might confirm the hypothesis generated by the model. For now, anecdotal evidence goes both ways. While lower-end news sites have complained about losing access to consumers on Facebook, the social-media metrics company NewsWhip has also found that higher-quality sources are also getting less engagement on Facebook because of algorithm changes. The University of Michigan Center for Social Media Responsibility, meanwhile, credits Facebook for clamping down on misinformation ahead of the 2018 midterm. 

Still, the argument that Facebook might be raising news quality at all may arouse skepticism, given how the social media site was flooded with false information ahead of elections in the US and Brazil, how financially hard-hit news organizations have blamed Facebook for their woes, and how the social network has been called an increasing threat to journalism. But consider that Facebook has amassed a global audience that is spending more time than ever consuming digital media, which is providing an unprecedented number of readers a direct link to news organizations that must compete for viewership.

“You have to put things into perspective,” says Sarvary. “Here is the most spectacular media platform that has ever been created, with 2 billion subscribers on the planet, and it didn’t exist 10 years ago. These guys created one of the most technologically advanced media that has ever existed in the history of mankind. They’re struggling with an incredible amount of problems figuring out how to run this behemoth.”

“There is no question that we need to consider media regulations that apply to this new context,” he adds, “but we also have to be careful not to regulate Facebook and other platforms out of existence.”

Image credit Shop Catalog.

About the researcher

Miklos Sarvary

Miklos Sarvary is the Carson Family Professor of Business and the faculty lead for the Media and Technology Program at Columbia Business School. Miklos...

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