Facebook Is Now Obsessed With The News Business - And The News Business Should Be Grateful And Afraid

Facebook is suddenly obsessed with the news business.

The news business, in return, should be both grateful and afraid. Grateful for the extra readers Facebook is creating for their content, but afraid that in the long term, Facebook has the ability to extract a price for that traffic.

Facebook is about to launch a news app called "Paper," that will reportedly look a bit like Flipboard. Facebook vp of product Chris Cox - one of the top execs in the company - reportedly dislikes sites like Buzzfeed, which carry a lot of useless, trivial "news." And the company has revamped its News Feed to play down pictures of cute cats and babies and to emphasize useful, relevant news.

The results have been dramatic: Facebook is now second only to Google in traffic referrals to other sites, putting Reddit in the shade in terms of share of referral traffic. Facebook has "almost tripled" the amount of traffic it sends to news sites over the last year.

But why is CEO Mark Zuckerberg bothering?

News is an infamously awful business to be in: Its big brands are better known for their layoffs and losses than for their innovations or big ad budgets.

Yet for about a year now, there has been increased competitive pressure among social and media brands to dominate news traffic:

• Yahoo has launched a news app, News Digest, that is an attempt to recreate the way newspapers used to summarize the news once or twice a day.
• Twitter, of course, is a news-heavy product with an audience of headline-obsessed users. It has found hundreds of millions of ad dollars to ride alongside those tweets.
• Even the New York Times is making money - after years of failure - from its digital news delivery.

Suddenly, the news business looks relevant again.

FacebookThe "Monterey Daily" that Zuckerberg regards as a model for Facebook.

Zuck's local paper

Zuckerberg first indicated he wanted to change the way we see and distribute news back in March 2013 when he displayed a mock local newspaper, "the Monterey Daily," at a press conference about changes coming to the News Feed. "What we're trying to do is give everyone in the world the best personalized newspaper we can," he said at the time. (It even had a cute headline about otters.)

The idea slid behind the horizon as not all the changes actually got rolled out system-wide.

But now news is back in a big way at Facebook. Pro-news changes to Facebook's News Feed have given the site control of up to 5% of the entire web's referral traffic since they were enacted.

And publishers - Business Insider among them - saw record months for incoming traffic as a result in November and December.

Here's the bad news

Those publishers may be celebrating, but they should have a quiet conversation with their colleagues in the ad business before they pop the champagne. As brands know well, Facebook once turned on the firehose for them, too, giving companies Brand Pages that allowed them to reach their fans for free. Over time, however, Facebook has adjusted the "reach" of those Pages so that posts on them are seen by a smaller and smaller segment of their audience.

The only way they can reach the majority of their fans is to pay to promote posts. And as advertisers are used to advertising, they've paid with enthusiasm. Facebook's revenues were up 59% in Q3 2013.

What news publishers should realize is that what Zuckerberg giveth, Zuckerberg can taketh away.

The News Feed firehose can be shut down as well as cranked up. For publishers who become dependent on selling that incoming traffic to advertisers, it is a poison chalice. If they can make a business out of all that "free" traffic, Facebook is likely to notice, and demand its cut.