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, recent and not-so-recent controversies, specifically its passive reaction (or delayed reaction) to combat racism and hate speech, which is now resulting in big-name advertiser boycotts, its role in the 2016 elections and data privacy abuses, have raised questions about its dominance and influence over its 2.6 billion users worldwide. In fact, it received a $5 billion penalty from the FTC in 2019 for failing to keep privacy promises to users, which is the largest fine of its kind in history. 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.
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 startup company valued at over $1 billion. Facebook has become the model of this success, launching in 2004 and earning $17.7 billion in revenues in Q1 2020, over 11% increase year over year. Though advertising sales have recently dropped because of the coronavirus and the current backlash from advertisers who are boycotting the platform due to Mark Zuckerberg’s slow response to banning misinformation from the platform, the company still plans for future growth that involve profiting from privacy, 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. Its more than 2.6 billion monthly users dwarf other social media giants including YouTube (around 2 billion), 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. However, the platform has been criticized for not treating all hate speech as equal. This means that while its AI has flagged a large majority of hate speech, it’s unclear how much still gets through and posted. Not to mention, there is wide criticism of the platform regarding the fact that it has seemingly bended its hate speech and misinformation polices to accommodate President Trump.
Controversy aside, a testimony of Facebook’s power can be found in the fact that more people are turning to Facebook as their medium for news consumption. Pew research shows that 52% of the US population consume their news from Facebook compared to YouTube at 28% 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 in questionable ways, 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 (and probably will again, if the “Stop the Hate” boycott will bring about structural changes) 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, a punishment that many say is too lenient. Additionally, Facebook willingly 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 and suicides. 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. It was projected that the online retailer’s market share of the US digital advertising market would be 8.8% in 2019. While Facebook’s revenue share would be 22.1%, Google’s revenue share was forecast at 37.2%. Facebook has competition.
Investors are turning away from Facebook for more than one reason. The most obvious is its recent 8.3% drop in share price driven by an increasing amount of advertising brands boycotting the platform. An additional yet less controversial reason is that investors may be in search of the next unicorn. In 2019, investors payed $166 per Facebook share, yet young users were the demographic most attracted to Snapchat parent company Snap’s initial public offering in March 2017, valuing the company at around $24 billion. While Snap revised downward its share price to $15 billion, it showed signs of a strong comeback. Plus, some of the public may even appreciate the fact that Snapchat has turned down Facebook’s advances more than once.
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 spiraling out of the company’s control. Do you think Facebook will continue to grow, or is it already tumbling down from its peak?