Meta’s crisis stems from not telling us the whole truth
4 min read 23 Nov 2022, 11:32 PM ISTIts users were largely unaware of its tracking model for ad revenues and its metaverse pivot looks weak
PremiumJust this month, US-based Meta Platforms, which owns Facebook, WhatsApp and Instagram, announced a massive lay-off of 11,000 employees, about 13% of its workforce, to cut costs. Major inflection points cause tectonic shifts in institutions and the environment, with swift consequences. Meta’s troubles illustrate this.
In a 2018 book, Seeing around Corners by Rita McGrath, one of us had predicted that Facebook was overdue for a reckoning. “The business model underlying this vast revenue source is completely opaque to many who, the data brokers argue, willingly give up their information to obtain the benefits of using these platforms for free. Most of us, however, are oblivious to the specifics of how our most personal data is being used in ways that never were economically or physically feasible before the digital revolution."
Just logging on to the internet creates a digital footprint that tells interested parties about our online behaviour. While users are dimly aware that websites track them using cookies, what many are not aware of is what are called third-party cookies. For instance, if you logged onto a news site and that site has a Facebook ‘like’ button on it, a cookie is placed on your device that Facebook can access. So even if you have never visited Facebook or don’t have an account, the social network still receives information on what you’ve been doing on the web. So much for all those folks who say, “I don’t have a Facebook account, why should I worry about the network having my data." From its start in 2004 to its ability to reach over a third of the world’s population, Meta’s growth has been exponential. Its attitude toward its use of personal data, however, has not changed much. Its blind spot was failing to recognize that eventually the public, regulators, competitors and others would catch on to its game.
The business practices of data mongers far exceeded regulators’ ability to understand and deal with the implications. For a while, all social media companies that use targeting to derive profits from ads benefitted from the fact that the general public had no idea how pervasive the tracking was. Others too had expressed dismay at how Big Tech firms manipulate factors such as choice architecture to mislead us into giving them permission to use our personal data any way they choose. These powerful digital giants have even subliminally swayed voter minds in countries like India.
Former Meta associates have also taken issue with the platform’s societal effects, often bemoaning the addictive nature of what Facebook created, blaming it for “ripping society apart." The 2020 documentary The Social Dilemma offers a behind-the-scenes look at how social networks are programmed to hijack human emotions and get them to pay attention to what they are offering to the exclusion of all else. Some former techies have gone beyond issuing verbal critiques. The Center for Humane Technology, founded by ex-employees of Google and Facebook, is trying to create a unified institutional response to what they see as the negative social consequences of social media addiction.
Despite calls for all-pervasive and unwelcome user-tracking to stop, nothing really changed. That is, until Apple got involved. Since Apple doesn’t make its money from ad revenue, it has no reason to let others track its users. In 2021, Apple introduced App Tracking Transparency (ATT), non-optional code that any developer of an iOS app is required to use. As it turned out, iOS users didn’t much like being monitored. Only 16% gave Meta’s apps permission to track them. Facebook and Instagram ads had a harder time finding receptive eyes and the ad spends needed by businesses to find customers shot up, even as Meta’s ad revenue growth began declining in the very quarter that Apple implemented ATT.
As reported by Fast Company, “Like many capitalist success stories, Meta was built on an inconvenient truth. Throughout the company’s history, it has talked endlessly about ‘connecting the world’ and very little about how its ad business, which has always accounted for almost all its revenue, really works. Now that people and regulators know, the Wild West data grab that made Meta what it is today appears to be ending." It appears that the metaverse that Zuckerberg has invested heavily in shows no sign of maturing any time soon. Perhaps Meta needs to address users’ real pain points and privacy worries. As a concept, the metaverse in many forms already exists. This is so even in India. There are lots of applications in which digital technologies and humans interact to do things that were never done before, like in education, surgery, emergency medicine, solar tower maintenance, etc.
What happens next? Research reports on companies that experience a dramatic growth stall, as Meta clearly has, are not very encouraging. What’s often needed is a change in senior leadership, a change in business model, or some other kind of major transformation. Here’s the problem with Meta. As Jeff Pfeffer shows, powerful people often act to consolidate their power. Mark Zuckerberg cannot be fired. Not by anyone. Internally, he’s unlikely to give much time to those who challenge his metaverse optimism. Those who try to advise him to shift direction are reportedly not getting a hearing.
We would place Facebook somewhere around where Blackberry was in 2011; that is, still relevant, still powerful, still incredibly rich, but in the absence of some significant strategic shift, likely to evolve into a shadow of its former self.
Rita McGrath & M. Muneer are, respectively, a professor at Columbia Business School and founder of Valize; and co-founder at the non-profit Medici Institute. Twitter @MuneerMuh
