Last week saw the growth of users in Facebook hit a plateau, and Wall Street hit Facebook with a platter. Over $100 billion in market capitlization was wiped out in one day of very violent trading. Look at this graph:
But it wasn’t only the stalling growth – Facebook had been hoping to edge into the world’s biggest Internet market (China) but got their toes stuck in the closing door of Beijing’s central regulators. That closing door represents a physical barrier to growth that is about as hard to overcome as the lack of connectivity in rural areas (remember those massive solar WiFi drones?).
If Facebook had succeeded in getting limited regulatory approval for China, it would be easy to predict another billion users falling into the Facebook ecosystem. Without China, Facebook faces an existential crisis. What happens when nearly everyone with an internet connection in the western world is on your platform? How do you grow when you’ve exhausted a market’s potential? And more importantly, how can you possibly continue to be held in such high esteem in the face of scandal, crisis, and shooting yourself in the foot? There is no where to go but down, especially as people start to abandon the platform.
Facebook as a business will be just fine. Ad revenue keeps piling in and user growth on Instagram is accelerating after passing 1 billion MAUs last month. WhatsApp is another billion user beast with deeper penetration in developing markets like India. What the stock market reaction reveals is that growth is the most important thing for a web platform like Facebook that doesn’t produce anything physical. If Facebook is hitting the top of its growth potential, time for investors to get out now while the getting is good. A run like this could spell financial disaster for the blue lady.
We will see if the OG social network can rebound, but for the past few days the stock has stayed where it was after the fall, a sign that it’s not a temporary sell-off but a permanent re-calibration of Facebook’s corporate value.
I’m going to go out on a limb here and predict that Facebook without the Chinese market is going to have a tough time for survival. The days of discovering old friends on Facebook and reconnecting are over. Everyone is already on Facebook so now it becomes more annoying than anything else. Now we avoid people on Facebook just as often as we search them out, it’s not just young, connected people sharing cool content, it’s everyone sharing the shit from their lives and beliefs. Facebook has come to resemble life a bit too closely.
Plus, there are going to be tons of opportunities for Facebook to be exploited – look at the mid-term elections coming soon in the US. The GRU (Russian hackers) are already starting to exploit loopholes and inflame cultural tensions. We are one major hack away from a large number of people having their personal information spread all across the web. The algorithm that keeps changing and delivering more and more sensational content becomes less and less bearable as time goes on.
All of this could be OK, but the problem is that there is not any opportunities for Facebook to play the hero. If Facebook successfully fends off social manipulation such as foreign actors trying to subvert elections, they will not be hailed as savoirs, they will simply be doing their job. No bonus points for that.
So from the top, the only way to go is down.
Or, much more radically, to change direction.
“What?” – Said everyone.
Hear me out.
Facebook refuses to call itself a media platform because of the responsibility that that position entails. But what if it becomes a participatory media platform? Leave Instagram to the purists who want the social experience and Whatsapp for messaging, but position Facebook as a personalized news outlet created just for you.
I’m talking about letting people decide the information they want to see. For example I want to see only information about who is getting married, who is having a baby, who is moving, who started a new job, and posts about digital strategy. I don’t want to see any obnoxious viral videos or any articles from Buzzfeed. I don’t want to see people’s video from the club on Saturday night and I really don’t care about what anyone has for breakfast, no matter how pretty it might be. Facebook is the only service that could do that for me. And you know what? I would probably pay for that to avoid being targeted for those god-awful Mahabi slippers.
As I’ve written before, Facebook cannot claim to be neutral while determining what it shows you. They might try to be neutral but they are not. Nor can they become a sort of moral authority and decide what is true and what isn’t. What they can do is become a place where people say exactly what they want to know about. It liberates Facebook from people using it for shitty reasons, removes the advertising revenue pressure that enables nefarious actors, and would restore some of the original mission of Facebook. If I want to see someone’s recent photos, I will go to their page. I will no longer rely on Facebook to tell me what I should be seeing.
The alternative is harder to imagine, but I could easily see people dropping off from Facebook, especially as Messenger becomes more ubiquitous and if Facebook’s Events app takes off. That might not mean that people delete their accounts, but if their eyeballs are not there, neither is Facebook’s revenue.