Technology major Meta Platforms, Inc. (NASDAQ: META) owned social media giant Facebook will stop paying the U.S. news publishers and will no longer feature their content in the Facebook News Tab, according to a report by Wall Street Journal.
Why is Facebook Not Renewing Contracts With the U.S. News Publishers?
Facebook believes that the majority of the audience on its platform does not access news, and any allocation of resources for this purpose is a waste. Meanwhile, regulations around the world requiring technology platforms such as Facebook to pay for news also played a role in the company’s decision.
Although not revealed by Facebook, the decision is expected to affect deals worth over $100 million with notable organizations such as The Wall Street Journal, the New York Times, and the Washington Post.
Moreover, earlier this month, the company revealed that it would be reallocating resources from its News tab and newsletter platform Bulletin towards metaverse and other short-form video content creators.
However, the Facebook News tab will remain as a feature and existing deals with publishers in countries like the U.K., France, Germany, and Australia will stand.
Management’s Commentary
A spokeswoman for Facebook said, “A lot has changed since we signed deals three years ago to test bringing additional news links to Facebook News in the U.S. Most people do not come to Facebook for news, and as a business it doesn’t make sense to overinvest in areas that don’t align with user preferences.”
Wall Street’s Take
Yesterday, Raymond James analyst Aaron Kessler reiterated a Buy rating on the stock with a price target of $215, which implies upside potential of 33.8% from current levels.
Overall, the Wall Street community is cautiously optimistic about the stock with a Moderate Buy consensus rating based on 27 Buys, six Holds, and two Sells. The META average price target of $227.47 implies the stock has upside potential of 41.5% from current levels. Shares have declined 55.2% over the past year.
Key Takeaways
Facebook recently reported its first-ever quarterly sales decline. To arrest this decline, the company is taking steps to reduce its costs and direct its resources toward other important growth segments.
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