The future of Facebook and what opportunities it creates
What does it mean? What actually happened? What will happen next and what opportunities does it create?
“I think we will dig through this hole, but it will take a few years, I wish I could solve all these issues in three months or six months, but I just think the reality is that solving some of these questions is just going to take a longer period of time.”
- Mark Zuckerberg 30, March 2018.
As Forbes points out, after just 14 years in operation, Facebook has more users (2.2 billion) than the Catholic church and is one of the five largest firms on the planet in terms of market capitalisation ($442 billion).
So despite the recent headlines, let's not forget that today, Facebook is one of the most successful firms in history, however, to retain its position Facebook now has to work out its next steps fast before consumers, maybe, take their data someplace else.
Each of Facebook's 2.2 billion users has created an individual page, sometimes with years of personal content. From these pages, Facebook gathers a detailed—and accurate—portrait from users' clicks, words, movements, and networks.
This has heralded a new era of communication possibilities, raised a number of big questions and created challenges that, until now, too many people have been totally unaware of. While people use Facebook for "free", Facebook makes money from over five million advertisers who pay to reach their users. Facebook enables both scale and an unrivalled degree of targeting. That is every marketer's dream and a dream that has turned into the nightmare of Cambridge Analytica.
The current headlines stem from activity in 2013 when a university researcher collected data from 270,000 users who opted to take a quiz. At the time, Facebook allowed third parties to collect information about users as well as those of their friends. This meant the researcher was able to get data on millions of Facebook users without having to ask permission.
Facebook claims this policy ended in 2014. However, it is alleged that a year later the researcher shared the data with Cambridge Analytica, a
UK specialist marketing firm that was then hired by the Trump campaign. Such sharing, without authorization, is against Facebook's policy.
Facebook has since made moves to strengthen other data controls: Today, friends of users must authorize third parties to collect their information and all Developers must now get Facebook's permission before they can ask users for sensitive information.
Advertisers across the world use Facebook to target individuals an unprecedented granular level. This has enabled Facebook to take the market share of ad revenues from Google and makes Facebook the world's biggest seller of display advertising.
The bigger question is will Facebook be able to continue using its data, and its ability to enrich it with third-party data, in its current form in light of recent revelations. What's more, how much will this activity be curtailed when Europe's new privacy law, the General Data Protection Regulation (GPDR) comes into effect in May 2018.
In last two months, Facebook has lost over a $100 billion in market capitalisation as Facebook's business conduct has come under attack in both U.S. and Europe.
The current media focus can be broken down into 5 key areas.
- Facebook's policies and use of sensitive personal data
- Facebook allowing fake news
- Consumer trust
- Investor relations
- The future
Facebook's policies and use of sensitive personal data
Illustration by William Joel / The Verge
The current headlines concern Facebook's harvesting of personal data on a huge scale and the sale of personal information related to Cambridge Analytica. Federal regulators and state prosecutors are now opening investigations into Facebook.
This current episode coupled with the introduction of GDPR in May 2018 will require a significant change of Facebook's policies and are sure to impact Facebook's ongoing business model.
Research by the Charles III University of Madrid reveals that 73% of Facebook's European users were targeted based on the use of characteristics that will be illegal under GDPR. These regulations will forbid companies from processing data on race, ethnicity, political opinions, religious beliefs, trade union membership or sexual orientation without active consent.
The Financial Times has cited a report that suggests that many of Facebook's current data collection policies will breach Europe's stringent new privacy rules, threatening its ability to sell advertising based on targeted user information. As part of this review, Facebook is performing an audit on all new Messenger integrations which means that no new Messenger applications can be added over the next few weeks. This is all part of Facebook is doubling down on improving data security, and on the recent announcements that they’ll be making changes to their Platform policies.
"That's fake news!"
Facebook allowing fake news although 44% of Americans, and a significant proportion of the world, turn to Facebook for its news, claim that it's not a media company, but a platform, which therefore in their eyes, makes editorial content, not their problem.
Staggering as this seems, why do they make this definition. The answer is simple, companies in the news business tend to recognise their responsibility and try to deliver editorial objectivity, fact-checking and journalistic ethics. It's a lot of work which dents profits.
Ironically, as we all know, frequently even this sort of news provision does not come without some form of bias. But this is now seen as an accepted form of bias, as it is more overt and consistent than when compared to the dark art of digital fake news that the Facebook ad targeting network and fake accounts have allegedly enabled on an unprecedented scale in recent elections around the world.
It's this covert ability to influence the fabric of democracy that has shaken a wider audience that until now were not so aware of the value of each of their "likes" and "shares".
That said who controls the News will undoubtedly continue to remain a contentious subject as demonstrated by Amazon's CEO Jeff Bezos, who also owns the Washington Post, current public wranglings with President Trump.
So from a consumer trust perspective what does all this mean?
RossHelen via Getty Images
Celebrities and leading figures like Elon Musk are taking to social media to announce their intention to #DeleteFacebook, which has been tweeted more than 400,000 times in the past 30 days. The question that everyone whats to know is are people abandoning Facebook as they begin to realize the extent of the data that Facebook has been accumulating including tracking their phone calls and texts for years (it's worth flagging that this still hasn't explained nor has what Facebook plans to do with that data been addressed).
Despite these significant downsides, the answer to the question of has this impacted Facebook's user numbers In simple terms the answer is no. Experts report that if you actually look at the data on Facebook usage what you see is the opposite. In the United States and the United Kingdom, the number of monthly active users has grown by more than 4 percent in the last 90 days.
In India, monthly active Facebook users are up a whopping 12 percent in those same three months.
These numbers were compiled by Singapore-based marketing company Kepios, and from reports by We Are Social, HootSuite and Facebook. Ultimately, no one but Facebook knows exactly how many active users Facebook. But this data seems pretty robust.
These numbers suggest that for many nothing has changed and that for those that care it's just not that simple to delete something that is an everyday form of communication which is common to half of the world's internet users. And let's not forget that Facebook already has some significant succession plans in place as it also owns What's App and Instagram too. So its a case for many of can't live with it, can't live without it.
People love Facebook. Reining in Facebook isn't likely to be a consumer-led revolution any time just yet. Customers, to date, have acted as though connecting with their friends on Facebook is so important that they are willing to endure substantial risks to their data and privacy.
People like Facebook because that's how they maintain their contacts and stay in touch with life. If people are outraged by what's going on, there is one place to express their outrage - Facebook! Innovation has enabled Facebook to become simply the way many people live in today's digital world, for now anyway.
From an investor relations perspective, this current episode is messy for Facebook. Investors are suing following revelations of a major data breach that has sent its shares plummeting by almost $100bn which equates to 18% of its value. US court filings show that shareholders now want to sue the business for "significant losses and damages".
The future for Facebook
At a very simple level, Facebook could start by following Google's more transparent approach and regularly say to users "This is what we know about you. These are your friends. This is how your data is shared” …and in a GDPR world… "and this is how you can ask to be forgotten”. GDPR will make this happen, as it demands that consumers have the right to be forgotten. But this has huge implications for Facebook and many other platforms.
The scale of the information platform that Facebook and other platforms have created is inherently problematic with the new data regulations coming into force along with the likely much closer data scrutiny that will follow recent events. This could become a fundamental challenge to Facebook and other tech giants with a similar revenue model. Time will tell if their advertising business model of choice remain possible as users begin to understand the value of their data and have more rights over how it is used.
This will require fundamental changes that could have a huge impact on many businesses like Facebook. Time will tell and users will eventually vote with their usage once they have alternative choices and a clearer understanding of their individual value. Ultimately there is a basic question about whether the business model employed by businesses like Facebook is ethical and trustworthy.
Consumers are used to using the products or services for free, in exchange for providing their information to advertisers. If we change the advertising rules it's also going to shift the way that services are provided to consumers. What we will see unfold is a greater understanding of an individual's worth in respect to their data that today they have traded almost unknowingly for service.
Today Millennials have a more relaxed attitude about data privacy since they're used to giving out personal information to get free services. 40% of people choose to keep their Facebook likes public. So it's possible that in a few weeks from now everyone will forget about it, or it will create opportunities for innovation as consumers begin to better understand their digital value.
Facebook's mission is to make the world more open and connected — the assumption being that a more open and connected world is a better world. However, I think we can all agree that assumption has been properly stress-tested over the past year. The question now remains does a more open world can make it easier for governments to undermine each other’s elections from afar and can a more connected world can make it easier to spread hatred and incite violence.
Facebook is often been billed as the most innovative firm on earth, the question is will that be enough to keep it flourishing as they regroup an reposition themselves. They offer advertisers the chance to reach billions of users on one platform. The fact that up to 40 million of Facebook accounts may be fake is still seen by some a minor distraction. Is scale everything or does quality have more value?
One line of thought for the business community is:
Does the future lie in the value of fostering relationships with customers, rather than mass audiences?
Today Facebook owns the audience and brands have to pay to reach them. What every brand needs are ways to create direct relationships with their customers so they have more control, that relationship comes from a more trusted and conversational experience.
A worldwide scale is not everything for every brand but a relationship with their customers is.
It's much more important for brands to have a deep relationship with a core audience who's going to be loyal and buy from them repeatedly. Most importantly brands need to own their own audience and not be held to ransom by platforms like Facebook.
Consumers are going to increasingly demand value and satisfying experiences that earn access to their personal data in an agreed value exchange It will be up to brands and services to figure out what that actual value exchange looks like. Watch this space as consumers increasingly better understand the value of their data.
In summary, the car was not the evolution of the horse nor was the light bulb the evolution of the candle, Facebook will have to change but progress will demand a better version, not just a brighter candle or a faster horse. We know this is how the world works and that is what creates new opportunities.
We are entering a phase where the power increasingly resides with consumers who are becoming better informed and more aware of their individual value. They will demand quality services and a more honest, authentic conversation. Brands that deliver this and services that enable brands to build and own their own audience will thrive too
So, Maybe* let's get on and innovate.
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