Facebook is embroiled in yet another scandal with its latest imbroglio involving data analysis firm Cambridge Analytica’s role in the 2016 US election. Could the environment be ripe for Facebook to be disrupted or fragmented? Or is it really too big to fail?
Of the five biggest tech companies — Apple, Microsoft, Amazon, Facebook and Google (Alphabet) — known by some as the ‘Frightful Five’, it is perhaps Facebook that faces the biggest threat to its position right now.
It is facing a massive backlash over its role in allowing Cambridge Analytica access to user data, but there are also several other factors that could be eroding the seemingly firm foothold the company has as the world’s number one social media network. Of course it’s very difficult to predict how these factors will play out and what the interaction between them will be, but they add up to worrying times ahead for Mark Zuckerberg and his executive team.
That fact is that Facebook is fighting battles on several fronts against a variety of foes, including itself.
Loss of trust
Critics have long been critical of Facebook’s business model, which is basically to package up its users as a data product for advertisers. The majority of Facebook users either go along with this begrudgingly or are only dimly aware of the price they pay for using Facebook and exposing their personal information to the world. At some level though, there’s an understanding or trust on the part of Facebook users that their privacy will be reasonably guarded and data breaches kept to a minimum.
The Cambridge Analytica case has poked even more holes in that trust for many users. Data was harvested from more than 50 million user accounts by a psychology test app created by Cambridge University researcher Aleksandr Kogan, which was then passed on to a third party, data analysis firm Cambridge Analytica. This was then used to target ad campaigns to voters for the Trump team during the 2016 US election.
In a post addressing the situation, Mark Zuckerberg has put his hand up to accept some responsibility for what has happened: “This was a breach of trust between Kogan, Cambridge Analytica and Facebook. But it was also a breach of trust between Facebook and the people who share their data with us and expect us to protect it. We need to fix that.”
So much of social media is built on trust. Part of the implicit trust people place in Facebook comes through social proof: ‘So many other people use it, including my family and friends, so why would there be any problem?’
Episodes like the current one erode that implicit trust and lead more and more people to search for other social options, possibly ones that place a higher premium on privacy and data integrity. If people who people trust start to swear off Facebook, that will become a massive problem for the platform. That trickle of trusted influencers could turn into a stream and then tidal wave of users jumping ship.
New forms of entertainment
Virtual and augmented reality could soon offer another alternative to scrolling through a Facebook news feed on your phone. While it seems like we’ve been waiting decades (in fact, we have) for VR to have its big breakthrough moment, when it does happen, it could very well reshape how we do social media. That’s one reason Facebook made such a massive investment in Oculus VR, a virtual reality company it acquired for US$2.3 billion in 2014.
Of course Facebook is not alone in making heavy investments in VR. The risk for Facebook is that if VR takes off, but the offering from Oculus doesn’t, it could be left playing catch up, especially if another platform like Snapchat gets VR right for social.
This is another problem area for Facebook in which it has been furiously battling Snapchat for the past few years. Snapchat doesn’t always make a lot of sense to anyone over the age of 21, but therein lies its appeal. Younger generations tend to like to mark out their cultural domain away from their parents and many of them now see Facebook as social media for oldies.
While Facebook continues to experience user growth across the world, Snapchat is rapidly growing its user base among teens and Millennials in the US and other developed nations. Facebook is countering the threat with its photo-sharing app Instagram, but Snapchat remains a persistent thorn in its side.
Changes to the underlying technology
The emergence of blockchain and blockchain-powered social networks like Steemit could pose a problem for Facebook in the next few years. Blockchain is best known as the underlying technology that enables cryptocurrencies like Bitcoin, but it’s also applicable to other end uses like social media. Steemit is one of the nascent social media applications being powered by blockchain, and while still in its infancy, it does present a new technology model for social media platforms.
As with virtual reality and the threat of Snapchat, Zuckerberg seems to have a contingency plan for blockchain, or at least that’s what he alluded to earlier this year in his annual New Year’s resolution post: “…one of the most interesting questions in technology right now is about centralization vs decentralization.”
Blockchain is definitely a technology with disintermediating and decentralising potential. It’s also seen as an enabler for trust and transparency. Could Zuckerberg be looking over his shoulder at the likes of Steemit or other blockchain contenders?
Antitrust and monopoly
The tech giants most commonly cited for monopoly and antitrust issues are Amazon and Google, with Google and its parent company Alphabet in an almost constant state of litigation with the EU. With Facebook’s internet advertising duopoly, alongside Google, and its role as a news platform coming under increasing scrutiny, government regulators in the US and Europe could start looking more closely at any perceived monopoly held by Facebook.
If the political powers that be see Facebook as corrosive to democracy, something that has already been suggested by a few critics, the social media giant might find itself having to answer more questions from regulators and held to even tougher account for its actions.
Drop in engagement
Another scenario facing the Facebook brains trust is that users might still keep their Facebook account and check in ocassionally, but they won’t be as invested, instead spending their time on other networks or in other pursuits.
The sheer number of Facebook users, 2.2 billion worldwide, is gargantuan; but beyond mere bulk, advertisers are more interested in engagement metrics. Having that many user accounts means close to nothing for an advertiser if the people you are trying to reach don’t seem interested in what is being served up to them; and by extension probably won’t be interested in what you’re trying to sell them.
That’s why Facebook spends so much time tinkering and trying to perfect its News Feed algorithm. Zuckerberg addressed issues with the News Feed in a post earlier this year, ahead of changes being made to the algorithm. “I’m changing the goal I give our product teams from focusing on helping you find relevant content to helping you have more meaningful social interactions,” he said in the post.
The News Feed is a major part of the Facebook business model. If that’s not working, Facebook is in trouble. You can have billions of people signed up, but if they lose interest, so will advertisers.
Facebook has become so big that it is now seen as a public utility by some and has to put vast resources into areas like monitoring and security; something which its competitors have to do far less of. Along with fighting the scourge of fake news and Russian bots, Facebook also has to deal with serious bullying and harassment issues, and the myriad of illegal and unsavoury posts that will almost inevitably pop up on a social network of its size.
In the space of 10 years (2007 to 2017), Facebook has gone from employing 450 people to 25,105 full-time employees. That huge increase brings with it all kinds of human resource and workplace culture issues as well as the exponential growth in bureaucratic layers and team and division silos.
Zuckerberg famously characterised the Facebook ethos like this: “Move fast and break things. Unless you are breaking stuff, you are not moving fast enough.” That motto has been superceded in recent times by a far more cautionary attitude. Instead of breaking, Facebook is in the business of fixing, as Zuckerberg outlined at the start of this year. “This will be a serious year of self-improvement and I’m looking forward to learning from working to fix our issues together.”
Someone, somewhere is working on that killer app…
Just as Mark Zuckerberg once sat in his Harvard dorm room dreaming up what would one day become Facebook, so too there is probably some whiz kid out there working on an app that could totally transform social media. It could be VR or blockchain based or something else entirely, but never discount the possibility of genius rearing its disruptive head and throwing us all for a loop.
When the disrupter is disrupted…
Facebook is unlikely to just disappear. It’s far too big for that to happen. But it does face a host of serious challenges that could conspire to diminish its reach, influence and value as a company over the next couple of years. Mark Zuckerberg and his team seem up for the challenge, but all that time being spent fighting fires could leave Facebook weakened and ripe for disruption.