Angry Celebrities Aside, Facebook's Promoted Posts Are Its Path to Redemption

Facebook has been getting a lot of flack lately over EdgeRank, its algorithm that decides who will see your latest post show up in their Newsfeed. After the formula was rejiggered in September, some have seen their reach plummet as much as 50 percent. Enter Like-gate.

Power users aren't pleased. Star Trek alum and social media all-star George Takei — he's got 3 million Facebook followers — is dedicating an entire chapter in his new book Oh Myyy on his status update travails. "I am curious as to why interactivity rates on my page appear to fluctuate so much when I have done nothing different," writes Takei (on Facebook of all places). And then a couple weeks ago Dallas Mavericks owner Mark Cuban threatened on Twitter to quit Facebook altogether.

Much of the uproar hinges on the belief that Facebook is strategically shackling engagement to tempt users into ponying up for promoted posts in the company's post-public search for profits. Facebook claims the network is fiddling with filters to battle spam. For Cuban, that means paying $3000 to reach 1 million fans — which is apparently intolerable. So much that Cuban is threatening to move the Mavericks along with the 70 or so companies he's invested in onto new platforms. (Notice that there’s no mention of Google+.)

FB is blowing it ? This is the first step.. The Mavs are considering moving to Tumblr or to new Myspace as primary site twitter.com/mcuban/status/… — Mark Cuban (@mcuban) October 27, 2012

“It’s not feasible yet, but we have no choice but to continuously evaluate alternatives," he told ReadWrite in a followup interview. "We have already pushed more to Twitter. The new Myspace looks promising. And Instagram and Tumblr and others are much more open and are getting more of our attention."

I have to say, as a savvy investor, shouldn't you be doing this anyway? What business isn't multi-platform in this day and age? But I digress.

“The big negative for Facebook is that we will no longer push for likes or subscribers because we can’t reach them all," he continued. "Why would we invest in extending our Facebook audience size if we have to pay to reach them? That’s crazy. In many respects it has already blown up on Facebook. Their search for revenue has severely devalued every brand’s following and completely changed the economics of consumer interaction."

Cuban feels like the victim of a bait-and-switch. Collecting likes has always been a pure numbers game with little consideration for quality. Hardcore fans were treated the same as casual observers, which was fine as long as you could reach them all. With the new algorithm, you pay to reach followers, regardless of whether or not they care. Rather than having a bunch of likes from a million random people, it now makes more economic sense to have maybe a couple hundred thousand serious followers. Michael Arrington, who has 350,000 subscribers, pays only $50 to reach his entire user base versus Cuban's $3000.

Cuban is pissed because this wasn't made clear during the farming process, although it’s not clear that Facebook could have done anything about it since this is a relatively new development. "If someone likes your brand, it seems like common sense to me that you can expect your posts to reach 100% of those that like your brand," he says. "Doesn’t it to you?" Now he's going to have to pay to make sure everyone sees his posts.

"This is a turning point in our industry — as Cuban is refusing to go along with Facebook's new business model — which CHARGES brands and bloggers to get access to their entire 'customer' (follower) fanbase," writes Marc Canter, an open source social networking advocate and CEO of Broadband Mechanics.

I'm no Facebook apologist, but I'm going to have to step in and defend Zuckerberg and company here. There was never a guarantee, whether implicit or explicit, that Facebook's platform would allow you to engage 100 percent of your users all the time. Given the site's sheer size — 1 billion users and counting — that's impossible even without EdgeRank. In fact, you'd have to wonder how low the engagement rates would be without an algorithm and how much would simply get lost in the noise. Just look at Twitter. And can we really blame Facebook for charging a fee? Does Mark Cuban not think he's getting his money's worth? Where else can he reach 1 million fans for $3000?

Cuban seems to understand this. “And one more point. I get that they want to reduce the speed at which news scrolls off of people’s Facebook pages," he says. "The more stuff, the less you see; the less you see, the less you engage. All good points by Facebook. But it’s a reflection of overall design and strategy weakness. Again, why would a brand invest in getting likes they can’t reach without paying a premium?”

This is a real Facebook problem and EdgeRank may be an imperfect solution — it's certainly annoying to me that only 15-20 percent of my friends will see any post I make, but it’s something I’ve come to accept. Better this than the FarmVille-infested feed of yesteryear. There's really not much you can do when everyone is on the same network. Too many users, too much content. Then again, everyone is on the same network. It’s a nice option to have, even if it comes with a price.

For Dalton Caldwell, this isn’t Facebook's turning point, it's the social network's path to viability. They've finally figured it out. "I believe this debate is missing the big picture, and what we are in fact witnessing is the unfurling of the full-fledged Facebook business model," Caldwell writes on his blog. "Facebook is showing us how they will cross the chasm from low-CTR (click-through rate) low-CPM (cost per thousand views) ad-units into what investors have been waiting for since the beginning: a Facebook analogue to Google Adwords."

As such, Facebook's robot curator is simultaneously making our Newsfeeds more compelling while giving advertisers a direct line to their fans (at a cost). Caldwell believes Promoted Posts will be the social network's future lifeblood. "We can expect to see Facebook deemphasizing traditional advertising units in favor of promoted news stories in your stream," Caldwell continues. "The reason is that the very best advertising is content. Blurring the lines between advertising and content is one of the most ambitious goals a marketer could have."

The freshly public Facebook still has plenty of wiggle room and time to make the necessary adjustments. By their own admission, they’re still testing things out. And according to Inside Facebook, the social network is already rolling out a new feature that allows users to opt-in on specific pages or friends so they receive a notification whenever a new post is made.

Meanwhile on Wall Street, Facebook shares rallied over 12 percent, one of Mark Zuckerberg's best days since that dreaded IPO, despite 800 million more shares being available with another lockup period ending. After a strong third quarter, the stock is stabilizing. Part of the reason is that the short sellers are calling it quits. In other words, those looking to make a quick buck on a Facebook fizzle are giving up hope.

So Cuban can check out the new MySpace all he wants (and let the rest of us know how it is). But more likely than not (and whether he Likes it or not), Cuban's going to stick with Facebook. At some point, he might even pay.

Follow Alec on Twitter: @sfnuop