Facebook has become a household name around the world for revolutionizing communication. Its services have forever changed how people interact with each other and businesses. However, a string of controversies, specifically its role in the 2016 elections and 2020 US Capitol riots have raised questions about its dominance and influence over its 2.7 billion users worldwide.
Business-wise, its mere size raises the question of its ability to maintain growth, especially in the ultra-dynamic digital world. Culturally, with societies (and advertising brands) around the world becoming more sensitive and less tolerant to social media platforms’ role in enabling hate speech, Facebook is facing challenges to its model and sense of responsibility as an industry leader, as evidenced by the recent decision by its own oversight board to uphold former President Trump’s suspension from the platform.
Here are three arguments for Facebook being so successful that its status can’t really be jeopardized and three more arguments that the company has already passed its high point.
Facebook is in a league of its own that can’t be challenged
The true unicorn
In Silicon Valley terms, a ‘unicorn’ is a tech start-up company valued at over $1 billion. Facebook has become the model of this success, launching in 2004 and earning $20 billion in revenues in 2020, a more-than 22% increase year over year. Though Facebook experienced a drop in advertising sales because of the coronavirus and unrelated backlash from advertisers who boycotted Mark Zuckerberg’s slow response to banning misinformation and hate speech from the platform, the company is still planning for future growth that involves profiting from its growing dominance in the field of VR and from payments and e-commerce, including its own currency.
Facebook has sustained its growth by acquiring other in-demand apps, like Instagram and WhatsApp, and building an all-in-one information empire, providing services that are hard to match (heard of Oculus?). Its more than 2.6 billion monthly users dwarf other social media giants including Instagram (around 1 billion) – which Facebook bought in 2012 – and Twitter (around 330 million).
Facebook built a platform users don’t want to leave
Facebook’s real power over users is evident in its ability to keep them on its platform for longer times and for a greater variety of needs. By knowing its users and showing them what they want, Facebook has developed a habit-forming product that keeps users online every time there is a moment of boredom, an ego boost, a social connection – especially when forced to social distance – or an urge to check what’s new. In fact, studies have been done that suggest that brain patterns in people who report compulsive urges to use Facebook are similar to those of drug addicts.
The company’s endless tweaks to its algorithm aim to maintain its appeal. Back in 2016, for example, the company changed the algorithms running its News Feed so that “things posted by friends you care about are higher up” in the feed. Since then, changes in its algorithm have centered more on eliminating fake news and hate speech, especially after the US Capitol riots.
Their efforts have worked: more people are turning to Facebook as their medium for news consumption. Pew research shows that a third of Americans get their news from Facebook compared to YouTube at 23% among online sources.
The amount of personal information Facebook has is insane
While Facebook has been known to obtain sensitive device data from hundreds of thousands of users, the platform has long been legitimately collecting information its users willingly give to use its services, from age, location and gender to long-distance relationships and expectant parents. This is how Facebook makes its money: from selling this information to advertisers targeting users based on what they’re likely to buy. The Federal Trade Commission reports that Acxiom, one of Facebook’s largest advertising partners, has 3,000 data segments for almost every US consumer. It sounds like the old adage: “If you’re not paying for the service, you’re the product.” With such targeting abilities over a massive user base, it’s easy to see why advertisers were pouring in money to obtain results that are harder to get from other platforms.
Nothing lasts forever
Facebook has come under fire more than once for security breaches. Considering the amount of user information Facebook has access to, these breaches – culminating in election scandals, which left Facebook $60 billion poorer – could have severe impacts on everything from identity theft to election fraud.
Data analytics firm Cambridge Analytica obtained personal information of over 50 million Facebook users without their consent, and used it to target individuals with ads in order to help Donald Trump win the 2016 election. As a result, Facebook negotiated a $5 billion settlement with the Federal Trade Commission. While being the largest fine of its kind in history, many say that this punishment is still too lenient. Additionally, Facebook reportedly gave data on millions of its users to former President Obama’s second election campaign, which could be a major violation of federal campaign finance law.
In light of all this, many people think that Facebook can’t be trusted with its users’ personal information. One lone corporation should not have this much power at its disposal. To allay users’ and critics’ fears, the company has agreed to create a privacy committee to protect user data, in addition to an external assessor, appointed by the company and the FTC.
Facebook can’t control its content
Over recent years, several instances have eroded users’ trust in Facebook. The launch of Facebook’s live-streaming service in 2015 has resulted in unintended consequences as people have begun using it to broadcast mass killings, rapes, suicides and the riots at the US Capitol building. Some question whether the live streaming has opened a social media Pandora’s box, especially after a terrorist used Facebook’s live-streaming while attacking mosques in Christchurch, New Zealand, and a German shooter used Amazon’s Twitch to live broadcast his mass attack on a synagogue in Germany. Despite changes to Facebook’s algorithm to prevent the prevalence of fake news and hate speech, Facebook has still come under scrutiny for its inability to control the proliferation of it on its site. An Ipsos Public Affairs poll shows that 18% of respondents trust news on Facebook most of the time, compared to 44% who said they almost never do.
Facebook faces competition from other online advertisers
Other tech giants are looking to advertisements for growth, and Facebook’s biggest competition is Google and Amazon. The online retailer’s market share of the US digital advertising market was over 10% in 2020. While Facebook’s revenue share was 25.2%, Google’s revenue share was 28.9%. Facebook clearly has competition.
An additional reason is that investors may be in search of the next unicorn. Enter TikTok: In 2019, the Chinese app TikTok was downloaded more than 738 million times, beating Facebook and Instagram. The app’s growth continues, in the West and in China, where Facebook is not allowed to operate. In fact, in 2020, alone, TikTok had 500 million new users sign up, which is half of all Instagram users.
Facebook’s F8 Developer ConferenceGetty/ Justin Sullivan
The Bottom Line: Facebook controls an enormous amount of personal and public information, giving it an advantage in the market that is very hard to match. But maintaining that level of dominance is almost impossible, and Facebook is facing mass criticism for privacy issues, content issues and influence that seem to be spiralling out of the company’s control. Do you think Facebook will continue to grow, or is it already tumbling down from its peak?