What will it really take for Facebook to fall?

Scandals, trust issues and regulator crackdowns won’t affect the behemoth in the short term, predicts a new Forrester report.

It’s rare these days to go longer than a month or so without seeing Facebook in the news. Privacy issues continue, many users are losing interest and regulators worldwide are taking the social network to task over a range of issues in heavily-publicised inquiries.

The setbacks, contends Forrester senior B2C marketing analyst Jessica Liu, will not be enough to affect Facebook in the short term. Liu’s report, ‘Facebook, Inc’s Scandals Will Not Doom The Company’ first looks at the perceived threats of data scandals, user mistreatment, user and advertiser exodus and regulator scrutiny.

It’s safe to say Facebook’s 2.7 billion active users have the most potential to have profound impact on the company but people, especially in large volumes, change their behaviours very gradually.

Advertisers are the company’s main source of income and could thus affect it the fastest, but until users disappear, there’s no commercial motivation to move away from the platform.

Sanctions from regulators, says Liu, will actually strengthen Facebook in the short term. The key reason is the fact that regulators move so slowly. Enacting and enforcing regulation takes so long that Facebook will be able to shore up its assets and unique advantages in the short term and eliminate vulnerabilities before any changes materialise.

Another way regulation will strengthen Facebook is that any statutes or enforcements applied to the network will be applied to its competitors, too. As regulators play catch-up, Facebook continues to hoard and sell first-party data on billions of users for a number of purposes. The data is sold to advertisers to be used within its own ecosystem – a luxury not enjoyed by many others who compete for ad dollars.

Facebook’s going strong and the numbers prove it. In December 2018, 2.7 billion people used at least one of the company’s apps. The global population currently sits at 7.5 billion, so approximately one in three people in the entire world are part of its ecosystem. One in five people went on Facebook or Messenger every day in Q4 2018. The platform performed commercially, too, increasing overall app revenue to $16.9 billion in the same quarter. This represents a 30% year-over-year growth, keeping pace with user growth.

The Internet.org project, which brings internet access and connectivity to 65 countries including Zambia and Thailand, solidifies its global influence. “In effect, Facebook is the internet in these countries because users go online via a Facebook app account.”

Finally, Facebook’s power is growing among its partner community of those using its technology. “Very few tech vendors were willing to speak to us on the record for this research,” says Liu, because their businesses rely on being a member of Facebook’s partner programs.

“Without the Facebook seal of approval, these vendors have no product to sell and, subsequently, no new clients. Their fear of speaking publicly about the social media company in any controversial manner was palpable and indicative of Facebook’s immense power over the broader marketing and advertising technology universe.”

 

Not with a bang but with a whimper

It seems, at least according to Liu’s report, catastrophic events won’t bring about Facebook’s demise, but instead, the passing of time may. This, combined with Messenger’s vision to take its place as a global version of WeChat. In its latest manifesto, Facebook announced it would redefine itself with messaging and Forrester understands why: accessing social networking sites is only the third most popular activity on smartphones, after messaging and email.

Social media, in its current form, is predicted to age out. “In 2018,” reports Liu, “only 63% of 12-to-18-year-olds state they use smartphones to access social platforms daily, compared to 69% of 25-to-34-year-olds and 64% of 35-to-44-year-olds”, suggesting that – contrary to popular belief – teenagers aren’t really more enamoured with social media than their older cohorts.”

“History has taught us that existing apps ‘max out’ and then decline as users tire of the services or the company. The Facebook app is already experiencing this; Instagram and WhatsApp will follow in a natural peak and then eventually decelerate, too.”

In encouraging users and diversifying to messaging, it will also fail. “WeChat is so much more than a messaging app,” says Liu. “In addition to messaging and photo sharing, users can schedule appointments, manage finances, pay friends and businesses, order car services, book flights and shop.” Any attempt to emulate this broad spectrum of capabilities on a global scale would be incredibly difficult. WeChat operates in a government that allows monopolies, but scaling Messenger globally would invite a whole new layer of regulator clamp-downs. “Global regulators won’t easily approve further merger and acquisition activity,” predicts Liu, “and should antitrust regulation break up the company, it will suffer a slow asphyxiation if it has to rely solely on, say Facebook app or Messenger.”

“Antitrust break-ups in the telecoms industry in the 1980s and with Microsoft in 2001 opened the market to other players” reminds Liu.

Finally, this rush to add new services will conflict with Facebook’s current ‘vision’ to become a ‘privacy focused’ platform. Its forays into hardware – Oculus and Portal didn’t make a splash – haven’t yielded fruit, and the fact that its content is mainly user-generated mean it won’t have much to trade on in this future.

 

Last week, Facebook unveiled its first look at Libra, its idea for a new global cryptocurrency. It didn’t take long for regulators to express concerns. In April, it estimated the entire cost of FTC fines to hit US$5 billion. In March, two top executives departed, and in February German law ordered that it will now need to obtain consent before combining user data from across its platforms.

 

Image credit Victor Zastolskiy © 123rf

Ben Ice
BY Ben Ice ON 26 June 2019
Ben Ice is editor at MarketingMag