Facebook Inc. shares fell 4% on Friday after CEO Mark Zuckerberg announced changes to the platform’s centrepiece news feed. Investors fear that this change would reduce user engagement on the platform.
Zuckerberg confirmed on Thursday that the company would change the filter for the news feed to prioritise what friends and family share. This also included the reduction of non-advertising content from publishers and brands.
If the premarket declines in shares hold, Facebook stands to lose nearly $23 billion from its market capitalisation on Friday as a result of the move.
Pivotal Research Group said its analysis of Nielsen’s digital consumption rates showed that usage was already declining prior to Zuckerberg’s announcement. Although, from very high levels of consumption.
“We can speculate that the concerns reflected in Zuckerberg’s post may very well have been driving these declines,” Pivotal’s Brian Wieser wrote in a note.
The company has been criticised for algorithms that may have prioritized misleading news and misinforming people’s newsfeeds. It is said to have influenced the 2016 American presidential election as well as political discourse in many countries.
Facebook Inc. confirmed that the direct effect would mean that people would spend less time on Facebook and the measures of engagement would decline in the short term. However, advertising would be unaffected to these changes.
This change also could have an impact on major suppliers of news and other content, as people have become reliant on Facebook for news updates.
John Ridding, the chief executive of the Financial Times, warned on Friday that the domination of online advertising revenue by search and social media platforms was putting pressure on media firms.
“The FT welcomes moves to recognise, and support trusted and reliable news and analysis. But a sustainable solution to the challenges of the new information ecosystem requires further measures,” he said.
“In particular, a viable subscription model on platforms that enables publishers to build a direct relationship with readers and to manage the terms of access to their content.”