Facebook strains under its scandals
“Facebook just learned the true cost of fixing its problems,” said Fred Vogelstein in Wired. The tech giant’s market value nose-dived by more than $100 billion last week, handing it a dubious honor: the biggest one-day plunge in Wall Street history. As growth slows in users and advertising, the company is juggling multiple scandals around hate speech, fake accounts, election manipulation, and Russia’s disinformation campaign. While Facebook was already expected to spend $1 billion annually to beef up safety and security, the company now says costs will be even higher. Facebook’s stock had until now “proven impervious to all manner of bad news,” but telling investors it will be “a much less profitable company” proved too much. “The steepness of the decline suggests investors are re-evaluating the viability of Facebook’s core business,” said Craig Timberg and Elizabeth Dwoskin in The Washington Post. New privacy protections will put Facebook’s business model, predicated on “collecting extensive data on users so that they can better target them with advertising,” under tremendous pressure.
“Facebook is running out of humans,” said Max Read in NYMag.com. Investors relied on Facebook to add millions of users every quarter; now it may have reached a saturation point. Worldwide, 2.23 billion people now use Facebook, about the same as the number of global citizens who consider themselves Christian. More worryingly, the U.S., Canada, and Europe still make up 70 percent of Facebook’s advertising revenue; in those markets, Facebook’s audience has ceased growing. The company has also hit a ceiling with the number of ads it can cram into its News Feed, said Sarah Frier in Bloomberg.com. Suddenly the remaining options for growth require a leap into the unknown. There are the virtual reality headsets Facebook often sells at a loss to entice customers, and the internet television division that has cost it “hundreds of millions of dollars in content deals.” Both are hardly slam dunks. Meanwhile, it’s still cautiously experimenting with potential business models for Facebook Messenger and WhatsApp that won’t alienate their billion-plus users.
Let’s all take a breath for a moment, said April Glaser in Slate.com. Facebook is still one of the world’s most profitable companies. It banked $10 billion in profits in the first half of this year and raked in 42 percent more revenue than at this time a year ago. Globally, the user base continues to grow at 11 percent a year. The most pressing problems come from the series of blunders over two years that forced Facebook to send CEO Mark Zuckerberg on “an apology tour.” The company still struggles to fix the scourge of false news that pollutes the platform. The key question for Facebook may be whether it can make it through the 2018 election season without another major crisis.