The surprising link between news quality and social media: the problem might be the business model

19 August 2021

New research suggests that social media users are not the only ones to blame for the poor quality of online news; the business model of ad-funded online outlets would be at fault. In a recent work presented at the European Summer Meetings of the Econometric Society, Melika Liporace (Bocconi University) argues that incentives to be shared on social media are simply too weak to work. Publishers’ investment in news quality remains low, even when social media users are rational and unbiased. She shows how the online news environment has surprising effects: most obscure topics are those generating the worst articles; and competition might have adverse consequences. She adds that the existence of news outlets does not necessarily make readers better informed. Even if regulations existed, not all interventions would solve the issue.

Have you ever noticed how every news article comes with a vast array of sharing buttons? We got used to it, but the introduction of those buttons profoundly changed the market for online news. For publishers who were already relying on advertisement revenues, visibility now requires to be shared. And this is how your online friends’ network became an incentive for news providers.

Understanding the effect of these incentives is central to assessing and regulating the market for online news. The prevalence of online news is growing, with more than 50% of US and EU adults including online outlets to their media diet [Source 1, 2]. Observers increasingly fear market segmentation, that could result in a two-tier market where only those paying for articles would be well-informed. Economists tend to see competition as beneficial; yet, in the last decade, the rise in competition [Source] was accompanied by a decrease in media trust [Source]. Should we worry about market segmentation, or is there hope for the ad-funded outlets to provide quality news? Should policy makers encourage competition? Are there good initiatives to fight the decrease in news quality?

Melika is not very optimistic; she argues that such outlets are bound to provide unreliable information, that competition should not always be encouraged and that not all initiatives to improve news quality would work. In her recent intervention, the economist presented a stylized model in which social media users want to share true news, so to asses the efficiency of the business model abstracting from irrationality. In her model, news publishers seek visibility, not reputation. Hence, she focuses on ad-funded online news outlets, which survive because of social media, not thanks to customers actively following them. About such outlets, the researcher underlines four shortcomings.

First, topics about which people are poorly informed are those for which news articles are the most inaccurate. Social media users can only judge the veracity of an article using the information they already have on the topic. If they do not know much, a news provider can write anything and still be widely shared. This means that these news outlets fail when they are the most needed.

Second, competition can be detrimental to the provision of qualitative news. While it makes it harder for bad publishers to survive on the market, it also makes the benefits from surviving in the market lower by reducing the size of the potential readership of such outlets. When more and more publishers enter the market, the latter effect dominates, and competition becomes problematic.

Third, the author argues that, because of these mechanisms, ad-funded news outlets are rarely informative. They are a good source of entertainment but barely qualify for news.

Finally, she discusses the efficiency of fact checking. Fact checking matters, but only if it helps news readers to distinguish true from false news. Therefore, flagging inaccurate articles might be our best shot at fighting the decrease in news quality. The same cannot be said for certifying the quality of news outlets. Even if readers were to know whether they can trust a given news outlet, publishers would still have no incentive to be more informative than what readers already know.

Contact the author

Melika Liporace

• Email: melika.liporace@phd.unibocconi.it
• Twitter: @MelikaLiporace