Facebook’s Levy: ‘No Singular Event’ Triggered Decline in Businesses’ Organic Reach

 For the 25 million businesses on Facebook, the free ride is over. According to multiple reports, the social media giant has “slashed organic page reach,” reducing the number of users which can see a business’s photos, posts, and updates.

Some call the move a bait-and-switch — after convincing businesses, the bulk of which are small merchants, to invest heavily in building an audience on the platform, Facebook is now charging them for the use of that asset. Facebook, meanwhile, says it views the decreased reach as a user-experience fix — the necessary result of a media property with the unique challenge of managing an excess of content to show to users.

The answer likely lies somewhere in the middle. But the debate shines a light on a new set of strategic, legal, and ethical issues, which emerge from the unique relationships implicit in participatory, or social, media. Traditionally, the relationship between marketer and consumer was relatively clear: a business “owned” consumer relationships in channels like email or a company blog, and  “bought” audience from more traditional media properties. However, for Facebook and other social media properties, there’s a third model emerging marketing relationships: renting.

In a wide-ranging interview with Street Fight, Dan Levy, director of small business at Facebook, talks about the decline in organic reach for small businesses, the evolving relationship between marketer and consumer, and the company’s unique challenge of managing 25 million (potential) business relationships.

Talk a bit about what’s fueling the reports about decline organic reach for businesses and how Facebook views the relationships between paid and organic reach.
From our perspective, Facebook is valuable to the world and valuable to people and valuable to businesses because we’re showing the content that people want to see. Our real long-term value to users is to make the world more open and connected, and show them what the most important information from the friends, businesses, celebrities, places, brands that they care about. And if you play it to an extreme and you show kind of every piece of content from every business to every user, frankly, they’re not going to be on Facebook a year from now.

We think if we do what’s right for users in the long run, it’s going to end up being best for businesses in the short run. Even if that may mean that like not every single person sees every single post the business puts up. That’s sometimes the hardest thing for folks to understand. Or they understand it but they take it very personally, and I think that’s kind of a hard separation that we’ve made.

Many of the small business owners with whom we’ve spoken feel as though a rug was pulled out from under them on Facebook. Has the company made an explicit alteration to the algorithm or strategy over the past six months?
There was no singular event. The news feed is obviously one of the most critical elements of Facebook success. So it’s constantly being kind of looked at and tuned up. I talked to business owners a year and a half ago who had concerns about this. I think you’re hearing more about it because it’s starting to kind of snowball a little bit in terms of folks are talking about it, and other people are noticing it as well. But there was no singular event that we did to dramatically change like what’s happening with organic reach.

Among the critics of these changes, there’s a very strong sense of injustice, which largely stems from a sense of false ownership. Would you say that a small business has a right to the audiences and communities which they invest and build on Facebook?
I think that we are putting people first. And I think if you talk to Mark [Zuckerberg] about anything that we do, our biggest commitment is to the people who use Facebook. And obviously we understand that business owners are people, too. That’s a very clear point. But for their long-term enjoyment and engagement with Facebook, for our long-term success as a company, for frankly, all the businesses that own pages on Facebook, the best thing we can is to try to deliver the content that those folks want to see.

So I think a lot of page owners if you come at it from a business angle will say, “Okay, well they liked my page.” But if you go way back to the beginning of Facebook when likes started, likes were something that users chose to do to express who they were as part of their personal profile, even before content was being distributed for them. So I don’t know if it’s an entirely fair kind of dichotomy to drive between “like” whether it’s our customer or the business’s customer.

Clearly their customers are their customers, but what we are trying to do is deliver the best possible experience to people, even though we realize that sometimes businesses don’t always like it. And we think for the marketers who are successful, they’re going to figure out how to adapt and use this platform, much like they figured out how to adapt and use lots of other platforms over the course of history.

Switching gears for a moment, let’s talk about the state of Facebook’s go-to-market strategy. With 25 million businesses on the platform, the company’s merchant relationship operation is functioning at a scale only ever seen by Google. How do you think about structuring those relationships, and what can you learn from what Google did well and where they went wrong?
The biggest inspiration for us in terms of how to reach that level of scale of marketers and people was what we watched happen on the user side of Facebook. Facebook has reached over a billion people, and most companies would have at that point hundreds of thousands of people there to try to support all the problems.

But we don’t. We’re a much smaller company. We’re still under 10 thousand employees. And so we took a lot of inspiration from how that team and that product development group built the right tools and services for people, and how we could apply that to marketers and business owners. And if you think about it, most of the marketers and the business owners we deal with were people and customers on Facebook, too.

So there’s a huge parallel to draw. Obviously there’s scale and support and operations that we need to build behind that, but that’s one of the keys in organizing and strategic principles for us: if you can use Facebook as a user, you can use Facebook as a business.

Last year, it appeared as though the company was committing to a reseller approach. Is that still the case?
We’ve talked to just about every major distribution partner that works with small businesses across the world. And they’re all interesting because they reach a lot of small businesses and they provide something that’s really important, which is kind of the human connection with those businesses.

However, historically, we’ve not found it hugely valuable yet, simply because we have such a challenge in front of us already with 25 million active, engaged small business pages and only a million advertisers. We already have the touch point with the business, and for us it’s about trying to continue to prove the value to get them to engage more deeply and become advertisers, whereas I think a lot of the value of the channel is actually kind of getting out to reach those businesses. That is a fortunate problem that we don’t have right now.

Many have framed Facebook’s search product — graph search — as a potential force in the local discovery sector, competing with Google and Yelp. But it’s been over a year since its launch, and the company has remained fairly quiet. What’s taken the company so long to release these consumer-facing local services?
Well, the thing I would say is that product exists now. We have not exposed it to a huge number of people, but if you go onto the Facebook website and use graph search and you type restaurants near me that my friends have gone to, or restaurants in New York City, it’s operational. You can do the same thing on your iPhone — if you go into Nearby you can search for just about any type of business essentially ranked by the social context of who’s been checking in, liking it, and commenting or reviewing it.

I don’t think we have exposed it as much as we could because I think we’re still kind of figuring out how to make it the best possible experience for people that it can be. But we think it holds a lot of future potential value for businesses, and it’s a key reason why building up the graph of your customers on Facebook I think is going to hold value both now and kind of long into the future.

Steven Jacobs is Street Fight’s deputy editor.

To find out more, come to Street Fight Summit West, where Ted Zagat, the company’s Product Marketing Manager for SMB will talk about Facebook’s SMB strategy and partnerships.  Click here to buy tickets.