The empire and the Strike Back

10 years ago, Facebook was idealistic. Chasing advertising dollars has given them incredible financial and social power, but changes may be ahead.

Mark Zuckerberg is, at the age of 35, emperor of a virtual country of 2.4 billion people called ‘Facebook’. Given he has the majority of the votes, he could be seen as a dictator, though many of his subjects would say he is entirely benign. He even allows you to live there for free – the only thing he wants is your data.

Before it listed on the stock market, Facebook’s stated aim was to connect the world – surely a noble cause. But then it needed a business model – a way of generating revenues and profits. Whilst often described as a media or software company, Facebook is now simply an advertising business, generating 99% of its sales in this way.

Until recently, no one had really considered the data that we routinely give away. How valuable are our ‘likes’, ‘check ins’, or reviews to Facebook? Well, given they have 2.4 billion active users and are expected to generate over $80bn in revenues this year, the average user’s data is worth about £30 to them, monetised by selling targeted ads to its clients.

However, a series of recent scandals has called into question the integrity and future viability of this model. From Cambridge Analytica and the harvesting of data, to use for its political clients through hosting fake news, hate speech, bullying and selling ads to foreign governments, Facebook is under pressure like never before, and any form of trust held by its users is rapidly evaporating. It is not regulated as a media company due to a quirk in a 1996 US law, and is regarded merely as a platform for the views of others. It has become apparent since then that social media is as big a revolution as the invention of the printing press.

The regulators are circling. Consider, for example, the $5bn fine for privacy violations in the US, as well as the growing interest in Europe regarding the power of their position in the advertising industry. In addition to this, most governments and central banks have expressed concerns regarding Facebook’s plans for Libra, a digital currency, to the point that it seems difficult to believe it will get off the ground. 

Facebook may also be running out of friends in Western political circles. American Republicans claim that its algorithms filter out more right-wing views, whilst Democrats – historically well connected in Silicon Valley and having credited Facebook with taking Obama from community volunteer to the White House – are rapidly losing patience.

On its journey to social media domination it bought out rivals like WhatsApp and Instagram, and so it operates as a near monopoly across its ‘Family of Services’ in the social media world. If regulators want to get tough, one idea might be to legally separate Facebook. This is certainly the route that Presidential candidate Elizabeth Warren has pledged, expressing her desire to break up the company (and other large technology companies) if successful in the Presidential race.

These threats, however, come at a time where Facebook is focusing on the very opposite as their current strategy is set on becoming more integrated and dominant than ever before. Going forward, Mark Zuckerberg likens the future of social media and his company to two types of platform. The first is the public and digital equivalent of a ‘town square’ – a place of interaction, joining communities, sharing business ideas, fund raising and even dating. Then there is the second platform – the digital equivalent to the ‘living room’ – the ‘encrypted’ private space. Zuckerberg’s vision is to fully integrate the messaging services offered by Facebook, WhatsApp and Instagram into a single underlying and encrypted messaging platform, where the privacy and security of one’s data within this private space is of highest priority. 

 

“Today’s big tech companies have too much power – too much power over our economy, our society, and our democracy. They’ve bulldozed competition, used our private information for profit, and tilted the playing field against everyone else”
Elizabeth Warren

The prospect, however, of an even larger and more integrated platform of inaccessible ‘encrypted’ communication which connects a third of the world, gives governments a justifiable reason to fear. Authorities will be unable to monitor, restrict or investigate the dissemination of information and interaction between users, and they are vocal in their concerns: “Security enhancements to the virtual world should not make us more vulnerable in the physical world” (US Federal Government).

Despite the numerous scandals that have already come to light, user numbers continue to rise. The problem for governments and regulators is that social media is so intrinsically wrapped around so many of our lives. It connects us with opportunities, holds our family memories and organises our social calendars – users simply don’t want to delete it (even if they did fully consider the 14,000 words in the Terms and Conditions document) – and this is the headache that regulators and governments face.

With the monetisation of user data in regulators cross hairs and a focus towards the private ‘digital living room’ it is likely that Facebook’s business model may have to adapt. They have numerous options, such as the introduction of a ‘fremium’ model – free for those willing to share their data or subscription-based for those wishing for it to remain private. So, whilst regulators and governments may be about to come down hard on them, Facebook may emerge even richer and stronger than before if they can adapt and take their users with them.

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