Top 10 Best of 2018: For how long can Facebook bite the hand that feeds?

Originally published on 2 October 2018.

2018 has not been kind to Big Tech.

This is the year people finally had their eyes opened to how these companies operate. And they didn’t like what they saw.

Google has had its fair share of bad publicity, with its killer drone tech helping the military, and the censored search engine its building to help China suppress human rights.

Amazon has faced a backlash against its facial recognition technology, which it has sold to police and government agencies so they can identify anyone, anywhere, any time.

But it is Facebook that has borne the brunt people’s ire.

First it had the Cambridge Analytica scandal. Then Mark Zuckerberg had to defend his practices before Congress, and now he has had the founders of WhatsApp and Instagram walk out on him.

Not to mention the news that came out last week about Facebook selling users’ security information on to advertisers.

If you’re not aware, for extra security, you can add a phone number to your Facebook login to prevent hackers. So if someone new wants to login, they also have to enter a security code sent to that phone number.

Users reported getting spammed with Facebook notifications on these numbers and Facebook claimed this was a bug.

But then last week it admitted selling users’ security numbers on to marketers and advertisers.

At this point, no one was really surprised.

The public’s opinion of Facebook is at an all-time low. It may still be growing worldwide, but in the west, opinion is changing fast.

From Pew Research last month:

Just over half of Facebook users ages 18 and older (54%) say they have adjusted their privacy settings in the past 12 months, according to a new Pew Research Center survey.

Around four-in-ten (42%) say they have taken a break from checking the platform for a period of several weeks or more, while around a quarter (26%) say they have deleted the Facebook app from their cellphone.

All told, some 74% of Facebook users say they have taken at least one of these three actions in the past year.

The findings come from a survey of U.S. adults conducted May 29-June 11, following revelations that the former consulting firm Cambridge Analytica had collected data on tens of millions of Facebook users without their knowledge.

Although Pew published its findings last month, the actual surveys took place between May and June. This was after Cambridge Analytica, but before the real backlash started.

I would be very interested to see what those numbers would look like on surveys taken today.

WhatsApp founders quit Facebook over privacy concerns

The only services Facebook has that people actually like are WhatsApp and Instagram.

Which is why it’s doubly disturbing that both the WhatsApp founders and the Instagram founders have walked away from their now Facebook-owned companies in the last few months.

WhatsApp was all about privacy and protecting its users. Its end-to-end encryption makes it very hard for Facebook to sell users data on.

But, Facebook pushed and pushed for it to betray its users. And so, instead of breaking their principles, WhatsApp’s founders, Jan Koum and Brian Acton, quit the company.

Giving up $400 million and $850 million respectively.

From Forbes:

Under pressure from Mark Zuckerberg and Sheryl Sandberg to monetize WhatsApp, he [Acton] pushed back as Facebook questioned the encryption he’d helped build and laid the groundwork to show targeted ads and facilitate commercial messaging.

Acton also walked away from Facebook a year before his final tranche of stock grants vested. “It was like, okay, well, you want to do these things I don’t want to do,” Acton says. “It’s better if I get out of your way. And I did.” It was perhaps the most expensive moral stand in history. Acton took a screenshot of the stock price on his way out the door—the decision cost him $850 million.

Now, news has surfaced of how Facebook will monetise WhatsApp with ads.

It will first start putting ads into WhatsApp statuses.

After that there are rumours it will roll back WhatsApp’s famous end-to-end encryption so advertisers can feast on all that sweet, sweet personal data to better target ads that no one wants.

Should this happen – and it’s looking likely – it will be very interesting to see if people simple take it, or if they make a switch to a less invasive messenger.

Let’s not forget, WhatsApp has only been around for a decade or so. It rose in popularity fast, but if it starts sending people ads in their private conversations the tide will soon turn against it.

Privacy-focused alternatives like Signal, which Acton donated $50 million to in February, could jump in popularity.

WhatsApp could go the way of Myspace in an instant.

Instagram founders quit Facebook to build new things

And then there’s Instagram. Potentially the only social media platform that’s still “cool”.

As SFGate said:

Instagram’s simple design — just a collection of photos and videos of sunsets, faraway vacations, intimate breakfasts and baby close-ups — has allowed it to remain a favorite long after it became part of Facebook. If people go to Twitter to bicker over current events and to Facebook to see what old classmates are up to, Instagram is where they go to relax, scroll and feast their eyes.

And as the same article points out:

“It’s probably a bigger challenge (for Facebook) than most people realize,” said Omar Akhtar, an analyst at technology research firm Altimeter. “Instagram is the only platform that is growing. And a lot of people didn’t necessarily make the connection between Instagram and Facebook.”

Instagram had just 31 million users when Facebook snapped it up for $1 billion; now it has a billion. It had no ads back then; it now features both display and video ads, although they’re still restrained compared with Facebook. But that could quickly change. Facebook’s growth has started to slow, and Wall Street has been pushing the company to find new ways to increase revenue.

That “pushing” to increase revenue must have had something to do with both Instagram founders, Kevin Systrom and Mike Krieger, quitting the company last week.

They vaguely described their reasons for leaving in a blog post:

We’re planning on taking some time off to explore our curiosity and creativity again. Building new things requires that we step back, understand what inspires us and match that with what the world needs; that’s what we plan to do.

Will Instagram remain simple, sleek and cool after their departure? Probably, for a few months. Then it will surely be amalgamated forevermore into the Facebook machine.

What does all this mean for the future of Facebook?

Right now, Facebook is still the undisputed king of social media.

If it has a competitor, it simply buys it up, or deploys its vast resources into beating it at its own game.

That is a strategy which has worked well for Facebook for a number of years. But will it continue to do so?

The thing is, people are now wise to how Facebook operates. When it first started making shady moves, it go the benefit of the doubt. But as you’ve seen, this year people wised up.

It is now clear to everyone how Facebook operates and the contempt it holds for its users.

So, what happens when a new startup starts gaining traction and has the gall to say no to Zuckerberg?

What if the new startup’s founder doesn’t need the money? And what if, when Facebook copies it, users avoid the Facebook version out of principle?

It seems clear that whatever the WhatsApp and Instagram founders make next they won’t let Facebook corrupt.

I mean, the WhatsApp founders walked away from a combined $1.25 million to get away from Facebook.

None of them want for money now. I can’t see any of them selling out to Facebook ever again.

In a few years the social media landscape could look very different from how it does today.

This could well be the start of Facebook’s downfall.

The question is, what’s going to replace it?

Until next time,

Harry Hamburg
Editor, Exponential Investor

Category: Technology

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