Unless Facebook and its peers take a bath on Wall Street, nothing will really change. Your move, advertisers.
On the very same day that Facebook’s general counsel faced an alarmingly combative set of Congressional hearings, Facebook CEO Mark Zuckerberg was presiding over a world-beating earnings call. The hearings ended with a push — Facebook and its colleagues Twitter and Google were given a firm dressing down, but it was mostly practiced theatrics. But Facebook’s earnings were a home run: The company reported its first ever quarter with more than $10 billion (yes, with a ‘b’) in earnings. The Facebook monopoly on our attention was on raw display, and its stock jumped 12 percent on the news.
During the call, Facebook CEO Mark Zuckerberg acknowledged the issues driving the Congressional inquiries. “Our community continues to grow and our business is doing well,” he declared at the very top of Facebook’s earnings release. “But none of that matters if our services are used in ways that don’t bring people closer together. We’re serious about preventing abuse on our platforms. We’re investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits.”
This quote, and Zuckerberg’s emphatic elaborations on the call itself, became the leading narrative in Facebook’s earnings’ coverage — essentially a version of “See? They’re Taking This Seriously!” The implication was clear: We’ve got this. Leave us alone as we figure it out. Here’s Zuckerberg trading on Facebook’s social capital to that very end:
“Now for those who followed Facebook, you know that when we set our minds to something, we’re going to do it. It may be harder than we realized up-front and may take longer and we won’t be perfect, but we will get it done. We’re bringing the same intensity to these security issues that we brought to any adversary or challenge that we have faced.”
Wall Street bought the story, the stock has continued to rise in the two weeks since the company’s earnings release.
But unfortunately for Facebook and its shareholders, the rest of the world remains deeply skeptical. Here’s the FT, questioning whether capitalism can contain its Facebook problem (sub required):
And here’s a former Facebook data protection executive, questioning Facebook’s ability to self regulate in a damning essay currently going viral over at the New York Times:
And here’s the Poynter Institute, questioning whether Facebook (and Google) can even claim to understand their own creations (a question I’ve raised here before):
And here’s the FT again, beginning to question what was previously unquestionable — whether Mark Zuckerberg is the right person to be running a platform as powerful as Facebook:
And if you want to see a full gallery of fresh skepticism, just check out this curated set of takedowns, courtesy Media REDEF:
Without question, Facebook is a consolidated monopoly in social networking and targeted consumer attention. That’s why Wall Street loves the company — it has unrivaled leverage over marketers, who simply can’t afford to quit Facebook. As long as advertisers must advertise, Facebook’s profits will increase, and so will its stock price, regardless of the company’s CEO warning that profits will take a hit because of pesky “security” concerns.
But the questions Wall Street won’t ask are starting to come to the fore. Can Facebook really police the world’s bad actors? Can it protect western democracy, ease our divisive politics, and “bring our world closer together?” And honestly, do we really want a world where we trust one company with the execution of such sweeping bromides? Isn’t that why we invented, I dunno, government?
Last Friday, NYU professor Scott Galloway, author of The Four, argued that the only solution is to break Facebook (and its peers) into component parts — the original Facebook, Instagram, and WhatsApp, for starters. While one might argue that long term, shareholders might unlock more value through such a move, it’s clear Wall Street believes that Facebook is far more powerful — and profitable — in its current incarnation. Only one thing will change that dynamic: A prolonged slump in Facebook’s earnings.
Your move, advertisers.