Regarding Facebook, news is crucial—not the misleading type but the authentic content produced by professional journalists.

This is the conclusion drawn from a University of Michigan analysis, which aimed to assess how news content influences news aggregators, as well as how its presence affects user interaction and the creation of non-news material. In particular, the study indicates that news content on the global social media network yields economic advantages for the platform itself.

The results present fresh and valuable insights as numerous nations strive to formulate regulations viewed as equitable for both aggregators and publishers, such as modifications to copyright laws, according to researchers from U-M’s Ross School of Business.

Yu Song, a doctoral candidate at Ross, and Puneet Manchanda, marketing professor,
leveraged a “natural experiment” in 2021 when Facebook prevented all news from being viewed or shared by users on its platform in Australia for several days. This action was prompted by the Australian government approving legislation designed to compel tech behemoths to compensate news publishers for displaying or disseminating their news material.

Song and Manchanda discovered that during the blockade, overall user engagement with non-news content dropped by nearly 11%, and the daily count of non-news posts diminished by almost 9% in the short term. Concurrently, there were no changes observed affecting news aggregators and publishers in Australia’s neighboring country, New Zealand, which served as a control group.

The analysis additionally indicates that the inclusion of news has a significant economic influence on Facebook Australia’s ad revenue: It estimated the loss in advertising income to represent 4.3% of Facebook’s yearly ad revenue in Australia.

This research bridges a gap in understanding how news content impacts news aggregators. Even less has previously been known about how the existence of news affects user engagement and the generation of non-news material on major social media platforms like Facebook.

The findings, they assert, “suggest that incorporating news is advantageous for social media platforms through favorable spillover effects on non-news content.” The outcomes also furnish a valuable estimate for regulators as they contemplate what compensation, if any, should be granted to news publishers.

“Facebook’s prevailing narrative indicates it serves news publishers, but our study highlights that it also benefits from featuring news,” the authors comment in the research.

Song and Manchanda acknowledge certain limitations within the study, including that the shutdown was brief, so they couldn’t offer insights over an extended period. In such a case, Facebook might modify its algorithm to present content differently, and users could shift the avenues through which they access news.

The research has been approved for publication in Marketing Science. Manchanda serves as the editor-in-chief of the academic journal, though the research paper was submitted prior to his appointment being publicized and was reviewed by the previous editor-in-chief.