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Facebook, publishers look to cash in with more sponsored content

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Facebook, publishers look to cash in with more sponsored content

Clicking through Facebook, users may discover that Lady Gagais putting on a show, courtesy of Intel.

The superstar is among the array of verified users that now allows to postsponsored content ranging from videos to articles.

While the Intel alliance surely represents just a small sliceof Gaga's riches, the tweaks to Facebook's sponsored content rules could mean preciousdollars for publishers that have been struggling with declines in more traditionalrevenue streams, industry observers said.

Since launching InstantArticles in May 2015, Facebook has tweaked its content-sharing platformfor publishers several times, changing its ad-share model and later Instant Articles to more publishers.In making the platform more appealing and versatile for partners, the company ishoping to generate additional revenue for itself and participating publishers. Thatstrategy also is behind Facebook's recent move to expand the amount of sponsoredcontent appearing in users' Newsfeeds.

Branded content from publishers has traditionally been limitedto advertisements that often look like articles, with some subtle text that indicatesthe content was paid. Though the ad format, also known as native advertising orsponsored content, has been on publishers' websites for several years, media companiespreviously could not sell sponsored content ads to share on Facebook. The socialmedia company only recently announcedthat publishers, as well as other verified users, including influencers and celebrities,could start posting sponsored content to users' Newsfeeds.

"People will now be connected to more of the content theycare most about on Facebook as publishers and influencers gain an incentive to sharemore quality content — of all kinds — with their fans," wrote Clare Rubin,a product manager at Facebook, in a blog post. "We know that many of our partnershave existing partnership deals with marketers, and this update gives them the abilityto extend their branded content business onto Facebook."

The company pointed to the partnership between Lady Gaga andIntel as one example.

More sponsored content could be a win-win scenario for both Facebookand content publishers, according to industry observers. The strategy offers upa potentially lucrative source of income for publishers, who in turn might flockto Facebook in greater numbers.

"[It] generates content for Facebook, content for the mediacompanies," said Alan Mutter, a media analyst and lecturer at UC Berkeley'sGraduate School of Journalism, in an interview. "The idea here is that thisis just another way to cement that increasingly important relationship."

The Instant Articles platform aimed to speed up load times forarticles by hosting content on Facebook servers instead of redirecting to publishers'websites. Facebook also just announced more robust measurement tools for publishersto track Instant Articles via a partnershipwith Nielsen Holdings.The Nielsen partnership and sponsored content expansion come as publishers are searchingfor new, often digital-based revenue streams, while tech companies like Facebook,Apple Inc. and 's battle to become the go-toportal for social content sharing on the Web.

Sponsored content has grown into a significant revenue sourcefor some publishing companies. For instance, at The Atlantic, the stream makesup roughly 75% of revenue. At BuzzFeed, which saw total revenue reach $46 millionin the first half of 2014, sponsoredcontent is also a major source of revenue, according to Business Insider. Meanwhile,the effectiveness of traditional online banner ads has waned over time, as inventoryhas increased, shrinking ad rates, while ad blockers have proliferated and click-throughrates have dropped, Mutter said.

SNL Image
A sponsored content video highlighting Lady Gaga's partnership with Intel.
Source: Facebook

Looking at the tech side, Facebook overtook Google as the No.1 driver of traffic for publishers in 2015, according to Parse.ly,which tracks data on publishing companies.

More sponsored content access gives publishers the opportunityto become a one-stop-shop for advertisers looking to create sponsored content, headingoff the need for ad buyers to hire separate agencies for various tasks, Mutter said.

"I think it strengthens the offering for publishers andmedia companies … it's a nice gesture on the part of Facebook. It's trying to keepthese guys in business," Mutter said.

Sponsored content has generated some controversy over the years,however, as it can blur the lines between editorial and advertising. The distinctionon the part of some publishers was so unclear that the FTC stepped in, issuingnew rules governing native advertising in December2015. While the commission acknowledged that the digital media market has significantlychanged since the advent of ad blockers, it said that native advertising that isindistinguishable from editorial content can be deceptive.

"The Commission has long held the view that advertisingand promotional messages that are not identifiable as advertising to consumers aredeceptive if they mislead consumers into believing they are independent, impartial,or not from the sponsoring advertiser itself," the federal entity wrote.

Facebook has its own set of guidelines for native advertisingfrom media companies. Overly promotional features are prohibited, and Facebook coverand profile photos cannot feature products, brands or sponsors. Facebook has longbeen known to preserve the user experience by ensuring timelines and interactionsare not overtly promotional.

But while the federal government has taken umbrage with sponsoredcontent, industry observers say consumers' reactions have been more muted.

"I think the pushback that I'm most aware of came from journalistson the one hand who want to keep it classy," said Rick Edmonds, a media businessanalyst at The Poynter Institute, in an interview.

Mutter echoed the sentiment, saying that journalists were moreconcerned about sponsored content than consumers.

"The reality is if something is of interest to somebodynowadays, they will pursue it and read it and watch it," Mutter said. "Ifit's a video that talks about food safety at Chipotle or it's your cousin's batmitzvah or somebody doing an amazing feat of strength at the gym, people don't care.What they click on and what they stick with are things that are interesting to them."

Advertisers can utilize videos, photos and live video servicesfor sponsored content. Facebook has made a concerted effort to push the company'slive video efforts to consumers, even payingsome media companies and celebrities to use the live video feature.

But if Facebook's publishing ecosystem begins to gain popularity,the ad-share model could change.

"When they were starting out, the terms offered to publisherswere quite attractive," Edmonds said. "Over time, it's Facebook's platform,and they can change the rules and change the prices."