Facebook changed its News Feed in a big way this week, but it failed to communicate to its 750 million members exactly why.

The changes were intended to improve the signal-to-noise ratio on the social network, enabling people to subscribe to major media figures and engage with businesses on the social network without suffering from information fatigue.

Often, when Facebook makes big changes to the way its website works, the people who use it cry foul. They don’t understand why the changes were necessary or in some cases even what was changed. But Facebook has its reasons; they’re just not widely understood.

Here’s why the changes were made, and what they — and Facebook’s reasoning — mean for you as a Facebook user or as a business with a presence on the social network.

How Facebook Makes Its Money

First, we need to recognize how Facebook survives and prospers as a business. The social media site’s 750 million members don’t pay for the cost of developing and running the massive website. Rather, Facebook’s revenue comes primarily from ads. Were that not the case, people would have to pay to be members — and it’s a good bet that most people wouldn’t be okay with that.

Businesses and brands buy Facebook Ads, which are specifically tailored to individual Facebook users based on what Pages they’ve Liked and what personal information they’ve chosen to publicly share in their profiles (such as gender, age, relationship status, location, and education). Facebook members have the option of making much of this information private, but most don’t elect to — perhaps in part because they don’t know how.

Often, these ads point back to Pages that brands or businesses have set up on Facebook. The ads are meant to encourage individuals to Like those Pages so the businesses and brands can reach them to build lasting relationships, to offer special offers, and for other kinds of customer engagement.

TMI: Facebook’s Big New Problem

It’s therefore critical to Facebook’s success — and the success of every business or brand on Facebook — that people see the information they’re interested in. If they see updates from friends or brands they respect, they’re more likely to engage. Ads, Page updates, location check-ins, and personal status updates that a person isn’t interested in are of no value to any party involved.

Since people are Liking more Pages and adding more friends, they’re getting a lot more information than they can handle, diluting the value of the social network for businesses and making it more difficult for Facebook to make the case that it’s a worthwhile investment of a business’ ad spending.

Facebook tried to solve this problem by allowing its members to create custom lists of friends, which let those people control which updates, Pages, and friends appear in their News Feeds each day. For all Facebook’s attempts to show off this feature, explain how it works, and make it attractive, only a tiny percentage of people ever used it at all.

The people who work on Facebook wanted to give users control of their own news feeds, but generally those people didn’t accept the offer, so the problem remained. And the problem simply cannot remain if Facebook hopes to remain attractive to businesses or individuals.

Facebook is also competing with Twitter, Tumblr, and other social networks that have become tools for media publishers and celebrities reaching out to fans. To improve its standing here, the social network recently launched a “Subscribe” feature, which lets people follow the public updates of popular individuals without actually becoming their friends. This was a good move, but it will only exacerbate the too-much-information problem.

The Solution: The New News Feed

So, Facebook’s unpopular solution was born out of necessity. The solution is a controversial one, though: Facebook uses a complex computer algorithm that analyzes each member’s activity to determine which updates he or she would be most interested in.

Formerly, these select updates appeared in the “Top News” feed. Now they appear at the top of the News Feed — kind of like the stories on the front page of a newspaper. Scroll down past them, and you’ll get to a regular chronological sorting of the stories the computers think are less important.

But since many people still want the option to view a largely unfiltered and purely chronological series of updates, Facebook has tried to offer everything to everyone by adding a second component — the ticker. This updates in real-time with even the smallest of activities. This information was always visible in the past, but now it’s in a place where people who are seeing too much information can simply choose to ignore it and focus on the most important stuff.

Why It Matters

The ideal result would be higher engagement and satisfaction for all of Facebook’s members. Once people are seeing more of the information they’re interested in, they’re more satisfied with their experience over all — and businesses can feel comfortable that the people who are seeing their updates are actually interested in those updates so it’s worthwhile to send them or point ads to the Page that’s publishing them.

This scenario also allows Facebook to retain its users, whose eyes it effectively sells to businesses — but the company makes a real attempt for everyone’s benefit to make sure that it’s showing individuals ads and updates from businesses that they’re actually interested in, so nobody feels like they’re involved in a spam scheme.

Whether you just have a personal Facebook profile, you maintain a business presence on Facebook, or you work at Facebook, you have a stake in the signal-noise ratio problem’s resolution. Unfortunately, Facebook has again failed to adequately communicate to any of the parties involved what it’s doing or why its changes are necessary.

How do you feel about Facebook’s new News Feed and ticker? Was it the right solution? Let us know in the comments.

[Image credit: Robert-Couse Baker, David Beyer, Coco et Jo]