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The Economics Behind Facebook’s Decreasing Organic Reach

Posted by Vaibhav Kalamdani on April 28, 2015

Organic reach on Facebook is considered to be one of the most precious metrics by brands. This is because organic reach means the number of Facebook users who see a post from a Facebook Page, without the brand having to pay money to Facebook.

As Facebook has grown in popularity over the years, brands and agencies have complained about decreased organic reach. Where the brand posts were reaching 16 percent of their fans organically on an average in 2012, the number has dropped down to mere 1 – 2 percent currently, as per reports. This has led the Facebook advertising budget burn a bigger hole in several brands’ marketing spends in order to communicate their messages to a wider audience on Facebook.

Many term this as a tactic by Facebook to enhance its bottom-line and keep its shareholders happy. However, Facebook denied this theory and said that the declining organic reach is partially a natural and unavoidable phenomenon. The increasing number of posts made everyday by users and brands has led to decreasing attention span on individual posts by users on their news feed.

Demand and Supply

As per Facebook’s latest changes in its algorithm, the news feed (consumption demand) shows content mainly from those brands and friends which the user tends to interact more with. Therefore, every brand is fighting hard to grab a spot in their fans’ news feed – which provides a fixed amount of space to display content – indicating high supply and less consumption demand.

Using this economic theory, organic reach for brand posts on Facebook is inversely proportional to the number of posts made by brands and users on Facebook.

As you can see, the red line is the consumption demand curve and the blue line is the supply curve. With increasing posts made on Facebook, the organic reach for brand posts decreases, and hence the two are inversely proportional to each other.

 

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