Facebook's Instant Articles Should 'Concern' Publishers

Facebook Inc FB hopes to become a media powerhouse with a new feature called Instant Articles. Numerous publishers have already signed up, including The New York Times, National Geographic, NBC News, The Guardian and BuzzFeed. These outlets might be attracted to the 1.25 billion people who use Facebook on a mobile device, but they may not be aware of the risks. "Facebook, other than games, owns the top four apps," Mitchell Reichgut, CEO of Jun Group (an ad platform that gets consumers to engage with branded content), told Benzinga. "They are the core of the Internet right now. If you are a major publisher, that has to concern you." Reichgut said there are a lot of opportunities in this relationship, as well as a "tremendous, tremendous amount of risk." Zynga Inc ZNGA, a game company that relied heavily on Facebook, had to distance itself from the social network because it yielded too much power. "The Zynga [example] is possibly the real highlight of it," said Reichgut. "It's great for a year, and then all of a sudden the rules change. Facebook can change the rules. They're not regulated -- they're a private entity."

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Partners By Necessity

Why are some of the world's leading publications coming to Facebook? "One thing Facebook does really well is they're good at iterating their own product and creating click-through or interest in their own product," Sean Udall, CIO of Quantum Trading Strategies and author of The TechStrat Report, told Benzinga. "They're targeting things, finding people who are most willing to click on a subject matter." Regardless, Reichgut believes publishers don't have any choice but to support Facebook. "I think they're doing it because they need to -- I don't think they're doing it because they want to," said Reichgut. "Yes, there are benefits to it, obvious benefits. And certainly there are a lot of benefits to Facebook, not the least of which is that it can really help them raise their CPMs by having all this prestigious content available. And it certainly makes the experience richer for their users." That doesn't mean publishers are excited about the deal, however. "But if you're a publisher, you're not saying, 'Wow, I better get in on the ground floor of this because it's so great,'" Reichgut added. "You're saying, 'I kind of have to do this because [Facebook has] 1.3 billion people. That's my audience! I have to be there!'"

Exit Strategy

Zynga's problems ran much deeper than its relationship with Facebook, but it shows that publishers might want to have an exit strategy. "I think you have to play, be a part of it, but you'd better protect the backside of it," said Reichgut, referring to Facebook's publishing partners. "What that means is, develop your own app user base, get your own audience back, find any way, shape or form that you can have that direct relationship with consumers." Reichgut said it is a "scary thing" that "all of a sudden social media is the first tier and elite publishers are second tier." "They're not used to being in that situation," he concluded. "It's indicative of this magnitude of change in behavior across the Internet from the desktop Web to the mobile app." Disclosure: At the time of this writing, Louis Bedigian had no position in the equities mentioned in this report.