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Facebook's Major News Feed Revamp Could Exacerbate Fake News

Facebook (NASDAQ: FB) announced last week that it was pursuing a major revamp of its most important product: the News Feed. Following a test in a handful of smaller countries, the company is planning on segregating social content by friends and family from professional media content by publishers.

Shares fell on the news, as investors worry the change could adversely impact Facebook's top line, and a move like this absolutely carries incredible risk to the business (which is why Facebook tests potential News Feed changes extensively). CEO Mark Zuckerberg believes that the change will be better for the Facebook community, and that it will be worth a financial trade-off. Ultimately, His Zuckness thinks it will be the right thing to do, instructing his product teams to shift "from focusing on helping you find relevant content to helping you have more meaningful social interactions."

Person viewing News Feed on a smartphone
Person viewing News Feed on a smartphone

The almighty News Feed. Image source: Facebook.

Investors that don't share that value should remember what Zuck Dawg wrote in his founder's letter at Facebook's IPO: "Simply put: we don't build services to make money; we make money to build better services." However, there's another potential problem: The change could exacerbate Facebook's problem with fake news.

Unintended consequences

Facebook has received no shortage of criticism for its role in Russian meddling during the 2016 election, and Zuckerberg has vowed to fix Facebook's problems this year. Zuckerberg expects users to see less content from businesses, brands, and media outlets overall, which you might intuitively think would help suppress misinformation.

The New York Times reports that in some of the test markets (Sri Lanka, Bolivia, Slovakia, Serbia, Guatemala, and Cambodia) late last year, the change actually amplified fake news and misinformation, precisely because the onus of sharing content is now placed more on the user than on the publisher. Fake news can sometimes go viral if it's sensational or attention-grabbing.

In some cases, efforts to combat the fake news were made harder since official accounts now get lower rankings in the News Feed algorithm, according to the report. Real publishers in those markets have seen major traffic hits, anywhere from 30% to 60%.

Risky business

The News Feed change represents one of Facebook's biggest risk factors, since it is the product where users spend the majority of their time on the service. The company's risk factor legalese states: "Similarly, from time to time we update our News Feed ranking algorithm to deliver the most relevant and meaningful content to our users, which may adversely affect the distribution of content of publishers, marketers, and developers, and could reduce their incentive to invest in their efforts on Facebook."

So in addition to the financial uncertainties associated with revamping its core product, Facebook will also have to navigate the chances of inadvertently compounding the biggest social risk it has faced thus far: Bad actors leveraging its platform to divide people instead of bringing them closer together.

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Evan Niu, CFA owns shares of Facebook. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.

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