Why Facebook is so terrifying to media companies

Facebook is the most powerful media company the world has ever seen. It's also the most worrisome for traditional journalism companies because it has completely redefined "news."

Today, Facebook acknowledged something that folks in digital media have been seeing for a couple months in the form of decreased referrals: it's changing the composition of the Facebook News Feed to favor more posts from friends and relatives - baby pictures, status updates - instead of news articles or entertainment posted by media companies.

Some journalists like Farhad Manjoo at the New York Times seem surprised by this. Facebook has been making a lot of overtures toward journalists in the last couple of years with things like Instant Articles, which give publications a way to display their articles directly on Facebook's mobile apps so they load more quickly, and Live Video, which is being created by publications with direct paid subsidies from Facebook. (Business Insider participates in both of these projects.)

But Facebook is a weird beast that a lot of journalists still don't understand. That's because it's taken the definition of "news" back to the era before mass media even existed. Yet, as a business, it looks exactly like a mass media company and competes aggressively for the same advertising budgets.

Think back to the times before newspapers, radio, and TV existed. What was "news"? What kinds of events did people talk about?

They talked about things that happened to friends and family members. Things that happened in nearby places, or to relatives or old friends who now lived far away. Occasionally a piece of what we'd think of as "news" today was relevant enough break through the noise - a new leader, a war, a disaster of some sort, an odd or unbelievable tale. That news spread slowly through word of mouth, often picking up slight changes and distortions along the way like a game of telephone.

This is exactly what Facebook has created, only on a global scale, with zero time lag. Gossip and news is indistinguishable and transmitted instantly, everywhere.

This is what people want. Facebook has created an audience of more than 1.4 billion people who check the site every month. That's how it's become one of the two big players in online advertising - along with Google - essentially coming out of nowhere to grab the same advertising dollars that used to be spent on traditional media.

While Mark Zuckerberg talks often about free expression and connecting people, the company doesn't seem to understand or particularly care about capital-j "Journalism" as we know it today. It was caught flat-footed when conservatives leveled accusations of bias in its Trending Topics feature (which surfaces news stories that are supposedly trending among users). It had no statement whatsoever on the fact that one of its board members, Peter Thiel, was secretly funding lawsuits against media company Gawker.

At the same time, Facebook's flirtation with journalism wasn't doing much for the business. Engagement on the traditional personal-sharing kinds of posts was way down, according to several report. So - lack of engagement plus all the bothersome ethical and moral questions that journalism companies deal with every day. Who can blame Facebook for pulling back?

News publishers who thought that Facebook was going to carve out a niche for them are in for the same kind of rude awakening that social gaming company Zynga experienced once Facebook users got bored with all that sheep throwing.

Easy come, easy go. There's still one way for traditional news publishers to thrive: tell great stories that people love so much that they feel compelled to share them on Facebook (or wherever else). Forget the algorithm and go directly to the people.