Facebook’s future battles

Facebook appears to be on the back foot, with bad press depressing growth rates in key markets, but the appointment of Nick Clegg as Vice-President for Global Affairs and Communications may be a smart move.

Another week, another bad news story for Facebook. This time, a complaint lodged with the US Federal Trade Commission (FTC) alleges a failure to protect data and a relationship with its users that is “unfair, deceptive and misleading”.

Facebook’s failings and the old media’s revenge

Facebook faces many problems.

It is accused of lacking respect for individuals’ personal data (as in the current FTC complaint, the Cambridge Analytica story and others) and of not complying with privacy legislation. With GDPR and a constant stream of data breaches from organisations in every sector, these issues are a growing concern for users.

Facebook is also accused of facilitating the spread of “fake news”; of enabling interference with the democratic process; of supporting terrorism and the promulgation of extremist messages; and of damaging the mental health of users. Those charges are not unique to Facebook, of course, but the biggest player takes the biggest knocks.

The trouble for Facebook is that, however bad the reality, the public’s perception is much worse. That perception is only aided by traditional media outlets gleefully reporting every transgression.

It appears that the charges are having an impact.

According to the 2019 Edelman Trust Barometer only 34% of people in US/Canada and in Europe trust social media as a source of news (compared to 65% and 60% respectively for traditional media). Across the world, 73% worry about false information or fake news being used as a weapon.

Slower growth rates

Growth rates for Facebook’s Monthly Active Users (MAU) have dropped dramatically, from 14.5% in 2017/2016 to 9.0% for 2018/2017.[1]

In key revenue regions of US/Canada and Europe (where Facebook earns 50% and 25% of its total revenue, respectively), YoY growth has more than halved. In North America, MAU growth has dropped from 3.5% to 1.3%. In Europe, it has halved, from 6.0% to 3.0%.

The American figure might be due to market saturation (72.4% of the population uses Facebook, there). In Europe, that seems less likely. European penetration is only 41.7%.[2]  

As Michael Henage suggests in a compelling analysis on Seeking Alpha:

“The core issue with Facebook may be that users just don’t need or want the platform as they once did.”

Sir Nick Clegg, a smart hire

The company may be anticipating a battle to please three key stakeholder groups: users, advertisers and legislators. In its 2018 Q4 Earnings Call it advised that, “2019 total expenses will grow approximately 40-50% compared to 2018.” At the same time, 2019 revenue growth would “decelerate by a mid-single digit percentage.”

Facebook’s decision to appoint a senior, European politician as its Vice-President for Global Affairs and Communications seems like a smart move. It’s an indication of where it sees its future battles being fought.

In the UK, we largely remember Sir Nick Clegg as Deputy Prime Minister in David Cameron’s coalition government (2010 to 2015). Taking the Liberal Democrats into government (for the first time in nearly 100 years) was a brave move, but he was soundly punished and subsequently lost his parliamentary seat.

However, before his time in government, Clegg built up extensive experience in the corridors of Brussels. He worked for the European Commission and as policy advisor for Vice President and Trade Commissioner Leon Brittan. He also sat as a Member of the European Parliament between 1999 and 2004. He should be well-placed to engage with those in Brussels who are leading the thinking in future regulation of social platforms.

It’s a big task. Facebook is seen as over-arrogant and under-interested in addressing its issues. Already, it is fighting a rear-guard action rather than leading the debate.

As we’ve seen with attempts to regulate the press, government is too often a heavy-handed and ill-informed regulator. We may not like the darker side of Facebook, but we do need informed technologists to help forge rules fit for the 21st century.

Image: Gerd Altmann at Pixabay.

[1] All data from Facebook Q4 2018 Earnings Slides, https://investor.fb.com/financials/default.aspx

[2] Source: Statista. As at June 2017