Lying – or at least not telling the whole truth - as a business model comes to haunt Meta

When a major inflection point passes through, institutions and the environment take a long time to catch up. But when they do, the consequences can be swift. Facebook’s current troubles illustrate this principle.

Source:  https://thewire.in/film/the-social-dilemma-netflix-media-review

My editor reacted with shock when I handed in Chapter 1 of my most recent book Seeing Around Corners. The reason? I said, back in 2018, that Facebook (now Meta) was overdue for a reckoning.  “You think Facebook is going to get into trouble?” he asked me, incredulous.  I said absolutely that it was.

Here’s what I wrote at the time: “The business model underlying this vast revenue source is completely opaque to many who, the data brokers argue, willingly give up their information to obtain the benefits of using these platforms for free.  Most of us, however, are oblivious to the specifics of how our most personal data is being used in ways that never were economically or physically feasible before the digital revolution.”

And… “just logging on to the internet creates a digital footprint that tells interested parties about your on-line behavior.  While users are dimly aware that web sites track them using cookies, what many are not aware of is what are called third party cookies.  For instance, if you logged onto a news site and that site has a Facebook “like” button on it, a cookie is placed on your computer that Facebook can access.  So even if you have never visited Facebook or don’t have an account, the social network still receives information about what you’ve been doing on the web.  So much for all those folks who say, “I don’t have a Facebook account, why should I worry about the network having my data.”

I also wrote:  “From its founding in 2004, to its current ability to reach over a third of the world’s population, Facebook’s growth has been exponential and its influence eye-popping.  Its attitude toward its use of personal data, however, has not changed much since its founding.  Its blind spot was failing to recognize that eventually the public, regulators, competitors and others could catch on to what the social network was doing.”

Raising alarms

What I wrote about then was that the business practices of data brokers in reality far exceeded regulators’ and others ability to understand and deal appropriately with the implications. For a while, all the social media companies that use targeting to derive profits from ads, Meta included, benefitted from the fact that the general public had no idea how pervasive the tracking was. 

Of course, I wasn’t alone.  Shoshana Zuboff’s well-researched book The Age of Surveillance Capitalism: The Fight for a Human Future at the New Frontier of Power also came out in 2019. It expressed dismay at how large tech firms manipulate factors such as choice architecture to mislead us into giving them permission to use information about us any way they choose.  R “Ray” Wang’s excellent Everybody Wants to Rule the World lays out just how powerful the business models of digital giants are, but also how they could well unravel given a loss of social legitimacy and a rise of powerful regulations. 

In a growing chorus, ex-Facebook associates have also taken issue with the societal effects of the platform.  Chamath Palihapitiya, now a former Facebook executive, bemoans the addictive nature of what Facebook created, blaming it for “ripping society apart.”  The dramatic documentary The Social Dilemma in 2020 gave all of us a behind-the-scenes look at how social networks are programmed to hijack human emotions and get us to pay attention to what they are offering, to the exclusion of all else.   

Some ex-tech executives have gone even further than issuing verbal critiques.  In founding the Center for Humane Technology, ex-executives at places like Google and Facebook are trying to create a unified institutional response to what they see as the negative social consequences of social media addiction.

Apple’s privacy move

Despite all the calls for the pervasive and unwelcome tracking to stop, nothing really changed.  That is, until Apple decided to get involved.  Since Apple doesn’t make its money with advertising supported revenue, it has no reason to allow others to benefit by tracking its users.  In one fell swoop, in the second quarter of 2021, Apple introduced App Tracking Transparency, (ATT), non-optional code that any developer who wants to sell their apps on i-devices is required to use. 

As a Fast Company report noted, “Turns out iOS users don’t much like being monitored while they’re using apps: Only 16% give Meta’s apps permission to track them. Consequently, Facebook and Instagram ads have a harder time finding receptive ears, and for businesses the ad spend needed to find new customers on the platform goes way up. Meta’s ad revenue growth began declining the very quarter Apple implemented ATT.”

The Comeuppance arrives

The Fast Company article on Apple’s move and its impact on Facebook, now Meta, sums it all up beautifully.  “Like many capitalist success stories, Meta was built on an inconvenient truth. Throughout the company’s history it’s talked endlessly about “connecting the world” and very little about how its ad business, which has always accounted for almost all its revenue, really works. Now that people and regulators know, the Wild West data grab that made Meta what it is today appears to be ending.”

Just this month, Meta announced that it would lay off 11,000 people (about 13% of its staff) to cut costs.  It hasn’t helped that, just as with my observations about the long likely timeframe for autonomous driving, the metaverse concept Meta’s CEO Mark Zuckerberg has invested heavily in, shows no sign of maturing any time soon.  And no amount of wishing will make it so that customers will adopt new technologies that don’t address their real jobs-to-be-done.

The metaverse in many forms, of course, already exists. There are lots of applications in which digital technologies and humans interact to do things we could never do before.  See this piece on engineering firm Ulteig and its use of Hololens technology to safely address engineering issues amidst the pandemic.  Such early stepping stones are always how entirely new ecosystems get started. But more companies than Meta have regretted jumping too early into such markets, hoping to establish a first-mover, dominant position.

It doesn’t help that Meta has a reputation as an ego-system player (as Ron Adner would waggishly say) meaning others are unlikely to trust it as a partner. 

What happens next?

The research on companies that, like Facebook, experience a growth stall is not encouraging.  What’s often needed is a change in senior leadership, a change in business model, or some other kind of major transformation.  Here’s the problem with Meta, however.  As Jeff Pfeffer shows, powerful people can act to consolidate their power.  Mark Zuckerberg can’t be fired. Not by anyone.  He’s unlikely to be giving a lot of time to those who challenge his metaverse optimism. My guess is that people trying to advise him to shift direction are not being welcomed.    

I’d put Facebook somewhere around where Blackberry was in 2011 – still relevant, still powerful, still incredibly rich, but absent some significant strategic shift, likely to evolve to be a shadow of its former self. 

Time, of course, will tell.

Meanwhile, at Valize

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