Despite the Outrage, the World Will Not Give Up on Facebook
The tagline of the 2010 Hollywood movie that tells the story of the world’s best-known social media platform reads, “You don’t get to 500 million friends without making a few enemies along the way.”
Facebook, Inc. (NASDAQ:FB) now boasts over two billion “friends,” or users. The number of enemies, however, has also grown—to the point that the company faces huge class-action lawsuits. Yet that’s just the proverbial tip of the iceberg.
The Facebook-Cambridge Analytica scandal risks bringing down the very concept of social media as we currently understand it.
The U.S. Congress and the British Parliament have called for hearings. Organizations and media of all kinds are experiencing the fallout from the scandal. Who are Cambridge Analytica’s customers and what are their sources?
Even if the target appears to be Facebook, Twitter Inc (NYSE:TWTR), LinkedIn Corp, Instagram (owned by Facebook, Inc.), Snapchat (owned by Snap Inc [NYSE:SNAP]), and a host of others will find it tough to avoid scrutiny.
Every Scandal Has Its Irony
In every scandal, there’s some irony. A movement has erupted on the scene, urging people to stop using Facebook: #DeleteFacebook. It relies, of course, on Twitter. It’s like giving up sugar by using honey.
Meanwhile, Facebook keeps losing steam on Wall Street. The company’s stock lost some 15% last week. Facebook’s founder Mark Zuckerberg has lost some $7.0 billion in his net worth. If the stock price keeps falling at this rate, will #DeleteFacebook even be necessary?
Elon Musk of Tesla Inc (NASDAQ:TSLA) and SpaceX fame has already deleted his company’s pages from Facebook. (Source: “Elon Musk deletes Facebook accounts for Tesla and SpaceX,” CNN, March 23, 2018.)
Elon Musk’s almost cult-like status means that many young and impressionable users will notice. It’s certainly a sign that the end of social media is approaching—at least in the way we have been using it (and in an increasing number of ways, abusing it).
Yes, the scandal has become that serious. Facebook is only the first and most visible target of scrutiny. To refresh readers, the scandal involves the manipulation of personal data, collected through an app relying on Facebook, for political and commercial gains. Yet, a closer look at the issue reveals a curious phenomenon: social media has always been political.
Many of the political movements that have taken hold in Europe, displacing older and more established parties in recent elections, have relied almost entirely on social media. The most classic example is Italy’s Five Star Movement. This is the party that effectively won the most votes in the election on March 4.
Social Media Has Become a Necessary Service
Facebook and its counterparts are not mere companies; they have encouraged one of the biggest and fastest shifts in society ever. Whether these changes are for the better is another matter entirely. The impression that is emerging is that social media has created the world about which George Orwell warned us in his novel 1984.
Facebook was the first company to show that social media could generate wealth. It has triggered a new Wall Street phenomenon in the manner of the dotcom boom of the 1990s. As always, investors forget that there are risks that come with the opportunities. The “black swan” or “tail risk” event that could bring the whole sector down has arrived in the form of Cambridge Analytica.
No More Smiley Faces on Facebook?
Despite its recent loss, Facebook is still worth some $475.0 billion in market capitalization. That’s as much as several large European industrial groups put together. Yet the Cambridge Analytica episode is exposing the company to risks as well as questions. One of those questions is, “How can a company such as this become so rich?”
Such has been the perception of power, influence, and wealth of Mark Zuckerberg that serious pundits have put forth his name as one of the potential Democratic Party candidates for the 2020 presidential election.
Now, Donald Trump, no stranger to the use of social media, (a noted user of “Twitter”), has little to fear from Zuckerberg. In a political campaign, despite the words that Zuckerberg proffered to appease users (taking full responsibility for the privacy breach), the Cambridge Analytica scandal won’t forgive.
There’s a higher chance that Facebook will fail than there is of Mark Zuckerberg running for president. Indeed, the world appears to have reached what the Gospel of Luke described as Redde Rationem. In Latin, this means nothing short of a showdown and, in a lesser form, to give account for one’s actions. It’s no coincidence that Facebook and similar services gathered steam during the Great Recession.
In that sense, perhaps social media offered a distraction that helped prevent social protest. It also offered a form of social control.
Certainly, having the ability to express opinions on the major issues of our time, venting anger by clicking “Like” channels disappointment—as well as satisfaction—in such a way that it avoids the kinds of protests that became staples of the early 2000s. It’s remarkable how, after years of G20 and G8 violence, protests have moved online.
Meanwhile, large-scale mass movements such as the Women’s March to protest the election of Donald Trump started on social media, as did the #MeToo campaign and so many others. Social media was also used to mobilize a significant section of the protests that prompted the so-called Arab Spring (especially in Tunisia and Egypt).
Still, for all the gloom and doom about Facebook in recent days, it’s too early and a little presumptuous to suggest that the end of social media is upon us. Yes, users have gotten a warning. Their data and privacy are subject to abuse, and many will take advantage of it.
If the Product Is Free…
Only the most naïve fail to understand a basic tenet of business. Or perhaps two.
The first lesson is that there’s no such thing as a free lunch. The second, and most relevant one, when it comes to Facebook, is: if the product is free, you are the product.
Yes, the site is free to use; it provides distraction and information, which—if you’ve chosen your friends carefully—could be rather interesting. That, of course, does not deny the fact that you and your identity are the product.
The danger for these types of companies or applications is that users could start to adopt more caution in what and how much they share about themselves. The more paranoid have already pulled back some of their personal details. The effect is one akin to a diet or to quitting smoking. And Mark Zuckerberg is counting on it.
Yes, there may be a drop in usage and a shift in the type of usage, but few users will drop out altogether. Moreover, human nature is such that, in no time, everyone will resume their previous habits.
Convenience Is Key
The main reason for people continuing to use Facebook is convenience, and most humans enjoy that. Facebook has become a virtual Internet passport. To explain: how many times have you wanted to buy a product, read an article, or post a comment on a web site? You are often presented with two options.
Either you sign up, invent a username, and conceive a complicated password that would put NASA code to shame. Or, you click on the easy and ultra-convenient: “Sign up using your Facebook account” button. Yes, 100%, that’s the option I choose. Alternatively, I use a LinkedIn account.
This is the biggest of the Facebook tricks. It’s also how a variety of companies get access to your data and details. I don’t mind, but I consciously made that choice. And I understand that there’s a trade-off. This is the trick that the “thisisyourdigitallife” app exploited to gather data from Facebook users and sell it to Cambridge Analytica.
There’s a name for the wider use of this technique, especially when it comes to politics: psychometrics. It’s an evolution from the old-style survey. Frankly, it’s more convenient and, if a company is using my likes and posts to understand my political preferences, I don’t mind. It offers a way for me to channel my opinions to the people who might be elected to make decisions for me. Better if they understand what I want.
I suspect that most people won’t mind. After all, few complain about Amazon.com, Inc.’s (NASDAQ:AMZN) ability to predict the books that you may like, based on your purchase history. Frankly, I have read many good books thanks to that algorithm.
That’s why I suspect that social media may register only a temporary blip. I also suspect that the political campaigns of the future will use algorithms in an increasing fashion. What may change is Facebook. It is the pioneer and, often, business pioneers are the first to fall. After all, we have hundreds of airlines serving passengers today, but we no longer have the pioneers of commercial aviation, TWA or Pan Am.