How Facebook made itself a hostage to fortune Premium

Mark Zuckerberg’s reluctance to read the writing on the wall is costing the social network dearly

Meta and Facebook logos are seen in this illustration taken | Photo Credit: Reuters

A lot can happen in a year. And what a year it has been for Facebook. In January 2021, when Facebook CEO Mark Zuckerberg presented the social media giant’s fourth-quarter earnings, he said he plans to increase privacy-focused features, blend social commerce with messaging applications, and build the next computing platform.

The company’s plan to weave shopping and messaging was aimed at integrating its platforms to create an ecosystem where Instagram, Facebook and WhatsApp applications could talk to each other and share data.

To make that happen, WhatsApp announced a privacy update last January, under which it could share limited user data with Facebook and its group firms. The update would allow businesses to see the contents of the message between them and a user. They could also use that information for marketing purposes, including advertising on Facebook.

The announcement caused a backlash among users. The tone of the policy update made several users jump to rival platforms like Telegram and Signal. In India, where WhatsApp has its biggest user base, Facebook executives were queried by a parliamentary panel on the need for the changes, and the country’s technology ministry had asked the messaging platform to withdraw its privacy policy update.

Buckling under pressure, Facebook first postponed the policy update, and later removed the deadline for opting in. The company continues to send the notification to users who have not accepted the new policy as WhatsApp is important for the company which was seeing its core app’s user base languish.

Facebook waning

Though Facebook does not share data about the number of active users app wise, its core platform’s appeal has been falling across demographics since 2018 following the Cambridge Analytica election meddling scandal.

According to a Social Habit 2019 study, conducted by Edison Research, about a third of Facebook users use the platform less often than when they joined, regardless of age.

“Not only have millions of Americans stopped using Facebook entirely, nearly a third of Facebook users tell us they are using the service less,” said Tom Webster, SVP at Edison Research, about the study. “While Facebook remains the leading social media brand in America, it is being wounded on multiple fronts, as every demographic has their own reasons for spending less time there.”

While the appeal for the social network’s app was waning, its acquired platforms Instagram and WhatsApp continued to see growth and increased user activities. It was one of the reasons why Zuckerberg toyed the idea of integrating its family of apps which did not seem to go well with the founders of the photo-sharing app and the messaging platform. They left the social network over difference of opinion over Facebook’s position on user data management.

But Zuckerberg kept pushing for integration, particularly WhatsApp, where a multitude of small groups congregate and share information. That is the sweet spot for ad targeting and to make it marketable, Zuckerberg needed to change the policy of the app which users first signed on to.

Unfortunately, the push didn’t work well for the 18-year-old company, which was also facing criticism over its Instagram app for causing mental health issues among teens. After constant regulatory pressure, it abandoned plans to launch an Instagram Kids app.

Another reputation hit

As it was fire-fighting criticism around Instagram, an ex-Facebook employee turned whistle-blower revealed shocking details about the company’s policies around engaging teenage users. The former employee Frances Haugen had also shared thousands of Facebook documents with the Wall Street Journal that went into the creation of the Facebook Files series.

This would have been an opportune time for the company to soul search and put things in order. But that did not happen. Instead, Lena Pietsch, Facebook’s Director of Policy Communications, issued a lengthy statement disputing Huagen’s revelations of the company’s own research, and rejected the claim that the social network furthered political polarisation.

And then, the company, like a magician pulling out a bunny from inside a hat, said it would focus on the metaverse, a mixed reality land that exists only online. It renamed its parent company, and said it would invest in talent and technology to build this alternate digital reality. Its bet on the metaverse was based on its AR/VR division, which sells the Oculus headsets. Zuckerberg’s strategy shift came at time when its mixed reality division was reporting a loss of $2.6 billion for the September ending quarter.

In the next three months something worse happened to the social media giant. Apple’s new ad-tracking policy gave control back to the users. It let them opt in or out of being tracked by an app.

Apple’s impact

That single privacy-focused move by Apple had cost Facebook $10 billion this year, according to the company’s own estimate.

When it presented its December ending quarter earnings a few weeks ago, it posted sharper-than-expected decline in profits. The company’s cash cow was hit. It said that ad-tracking changes introduced by Apple dented its advertising business.

Facebook’s future, after two reputational crises within half a decade, is looking bleak. The company’s shares tanked more than 20% after it reported its earnings earlier this month.

It is entering the metaverse at a time when both advertisers and users are migrating to rival platforms.

Zuckerberg could have averted all this, had he given heed to what his users wanted — privacy and data security.

THE GIST

In January 2021, Facebook planned to weave shopping and messaging by integrating its platforms to create an ecosystem where Instagram, Facebook and WhatsApp could talk to each other and share data. This announcement caused a backlash among users. The tone of the policy update made several users jump to rival platforms like Telegram and Signal.

Later, an ex-Facebook employee turned whistle-blower revealed shocking details about the company’s policies around engaging teenage users. The former employee shared thousands of Facebook documents that went into the creation of the Facebook Files series. Instead of updating its company policies, it renamed its parent company to Meta and said it would invest in the metaverse — an alternate digital reality.

Apple’s privacy focused new ad-tracking policy gave control back to the users. It let them opt in or out of being tracked by an app which hit Facebook’s revenues.