Why Is Facebook Willing To Give Up Ad Revenue To These Publishers?

According to a new story by the Wall Street Journal, Facebook Inc (NASDAQ: FB) is now attempting to persuade online publishers to allow content distribution directly on Facebook by offering enticing advertising revenue agreements. The potential offers are part of Facebook’s new push to host more third-party content directly on its site.

The Instant Articles Initiative

Many publishers already post links to content on Facebook.

However, there are two elements about redirecting traffic from Facebook to the publishers' sites that Facebook doesn’t like. First, the process of opening up the links can be frustratingly slow for impatient users, taking around eight seconds per link on mobile devices.

Second, Facebook users that get sent off-site for third-party content may not return to Facebook. By hosting the content directly, Facebook can ensure that all eyes remain on Facebook, even when users are enjoying “Instant Article” content from third-party sites.

Related Link: Is Facebook Video About To Ramp Significantly?

An Offer They Can’t Refuse?

Facebook is reportedly considering an Instant Articles revenue-sharing model that allows publishers to keep 100 percent of the ad revenue generated from ads that the publishers sell on Facebook-hosted news sites. Under this model, if Facebook sells the ad, it would keep 30 percent of revenue.

Why would Facebook potentially agree to lose out on so much ad revenue to third-party sites? For Facebook, lost ad revenue could be well worth the investment if users ultimately spend more time on the Facebook network.

Publishers Leery

Many publishers will likely be concerned over the details of a potential hosting agreement with Facebook. Among the potential concerns could be the use of Facebook’s advertising technology products Atlas and LiveRail rather than competitor Google Inc (NASDAQ: GOOG) (NASDAQ: GOOGL)'s products. Ad size and placement, and the collection of user data could also be concerns for publishers.

Facebook plans to begin hosting content from BuzzFeed, The New York Times and National Geographic as soon as this month.