Is Facebook the new smoking? Zuckerberg and Sandberg may be inept at damage control but growth has plateaued, market share is declining and they have to raise prices to maintain revenue. Is something fundamental happening?
The pile on is definitely underway. Not since Uber have we seen such ferocity leveled against a once loved Silicon Valley darling. It was only five years ago, March 2013, that Facebook became a Fortune 500 company. It did it in only eight months after going public – a record. Consultants and pundits repeatedly remind us that in today’s digital world the pace of everything is accelerating. Are we watching FB quickly burning the brightest, only to just as quickly burn out?
Forget the accusations of a threat to democracy; a facilitator of ethnic cleansing, and a destroyer of journalism and traditional media. Well, don’t forget them, they are real and act as an acid on our institutions. But, could these just be symptoms of an entity built on poor foundations spinning wildly out of control and about to go down in flames?
Until recently, the rah-rah about the company’s growth and performance has obscured some worrisome trends. Subscriber growth is at its lowest overall and its base in the US is slowly declining from 185 Million to 184 Million. Plus, the share of user’s time spent on the platform is declining. America, FB’s most lucrative market, seems to be saturated.
Advertising revenues have declined – purportedly; based upon FB’s decision to tweak the News Feed to deprioritize publisher content with the consequence it reduces its attractiveness to advertisers. FB’s response is to just raise prices to maintain total revenue. After all, it is almost the only game in town (after Google) right? Maybe, it looks like FB’s share of the overall market will shrink for the first time, too.
For an enterprise that lives on advertising revenue and whose stock value is driven by a belief in relentless growth this is not good. Profits are not meeting shareholder expectations. Couple that with the disaster in the making, the Cambridge Analytica scandal, and you get dramatic stock declines.
Can we imagine a mass exodus of American subscribers from Facebook? Chamath Palihapitiya, a former executive regrets his role and won’t let his children “touch that shit.” Brian Acton, the entrepreneur who sold WhatsApp for $19 Billion to FB is encouraging people to #DeleteFacebook. Could a groundswell be building? We always knew we were surrendering our privacy for this “free” service but now we have had our noses really rubbed in it!
While FB’s share of the American population over 18 years old is a staggering 74%, there are still 66 million who don’t use it. The top reasons are the lack of privacy and the misuse of information. Among consumers who don’t use Facebook, 57% say its because they don’t trust the platform, 49% say Facebook invades their privacy, and 31% say the platform requires too much information according to a survey made last fall.
Facebook’s business model mandates growing subscribers (especially those attractive to advertisers) and then harvesting as much information about these subscribers as possible to enable advertisers to deliver precisely targeted messaging. Imagine if the underlying business model is no longer socially acceptable. We all know that when an internet service is “free” we are the product. Mostly, we didn’t care when it was for Farmville or a dating app but now when we see that it can also be a threat to our democracy will we care?
Europe appears to definitely be trending in that direction especially with its General Data Protection Regulation (GDPR) coming into effect. Sure lots of people are dependent upon FB to maintain their contacts with family and friends but if they recognize the devil’s bargain they made it could all evaporate. Don’t think it could happen? Remember MySpace? We forget how at one time it was more popular than Google. Then it became part of Rupert Murdoch’s empire and its business model shifted turning off subscribers. Now, it is effectively gone.
The average life of a Fortune 500 company is now down to just 17 years and shrinking. FB is about a third of the way to that point. Remember Mike from Hemingway’s “The Sun Also Rises” when asked how he went bankrupt: “Two ways,” Mike said. “Gradually and then suddenly.”
Image credit: Wired Magazine