Facebook parent company Meta Platforms Inc. reported a sharper-than-expected fall in earnings in late July, with its stock dropping to about half its value at the beginning of the year (it has since recovered slightly, part of a broader market “moderating inflation” narrative and relief rally). The company faces myriad headwinds detailed by market analysts, including a loss of user and advertising share from its flagship Facebook and Instagram platforms to TikTok, a decline in e-commerce spending as the impact of the COVID pandemic wanes, and significant investment associated with its development of the “metaverse” and related virtual and augmented reality technologies.
While Meta is no longer composed solely of Facebook, advertising revenue from the Facebook and Facebook Messenger platforms comprise a substantial majority of the company’s overall revenue, and the Facebook brand remains synonymous with “social media” in the minds of many. Having long ago lost its “cool factor” to upstart competitors Snapchat and TikTok, Facebook’s recent financial performance suggests that its ability to harvest a groundbreaking legacy product in order to invest in other areas such as the metaverse — as Microsoft has done with its Windows and Office software products — may be at risk.
The trajectory of my own experience as a Facebook user is illustrative of the product’s evolution. As a GenX-er, I was older than its original millennial demographic, but was invited by a former colleague to join in 2007 shortly after it was made available to the general public.
Like many of my generation, I didn’t “get it” at first, but gradually I came to see the value (and fun) of using it to connect with friends and acquaintances, and reach those with whom I had lost contact — a tangible benefit to anyone who (as I do) lives far from where they grew up. By 2009, I’d built a friends list approaching 1,000 people, and with the advent of the smartphone the amount of time that I (and many others) spent on Facebook increased considerably. During this period, the late aughts and early 2010s, Facebook continually improved its user experience and functionality and a news feed of simple status updates and photos posted from digital cameras to online albums morphed into one including photo snaps posted from mobile phones, links to articles, private groups, and much more.
Most significantly, during this golden age, Facebook came closest to becoming the sort of “digital commons” many had hoped social media could provide. As one with an abiding and lifelong interest in politics, public policy and current events, I found that a thoughtful post or article link could spur spirited but generally civil discourse on topics, and that such exchanges could kindle new friendships and deepen existing relationships.
And then, something happened.
Much has been reported about “the algorithm” in the context of not just Facebook but other social media and technology platforms, and I write from the perspective of a “typical user” and not that of a technologist. But the end result was obvious: Facebook became, around 2014 or 2015, a lot less fun, and at times even stressful. Exchanges once bounded by a level of decorum similar to in-person interactions took on the raucous tenor one would expect of anonymous gaming platforms, and “flame wars” breaking out in comment threads became common. While this phenomenon accelerated during President Obama’s second term, the 2016 presidential campaign, electoral outcome, and subsequent Trump administration exacerbated these characteristics. My time on the site began a gradual decline.
Apart from my experience, Facebook took various other actions during this period that undermined user trust and enjoyment of the platform. The Cambridge Analytica scandal, which harvested the personal data of Facebook users without their consent for use in political campaigns, alienated many users — particularly when it was discovered that the Trump campaign used the data. At the same time, Facebook was accused of suppressing politically conservative content and right-leaning media brands; just last fall, the Wall Street Journal published internal material from anonymous sources at Facebook revealing that it had suppressed the traffic of Breitbart News (and that of other conservative publishers) by up to 20 percent.
The pandemic ushered in additional changes, ranging from merely annoying to outrageous, which further degraded the user experience. While advertising, games and other third-party applications had long cluttered the site, Facebook generally had respected specific news feed posts. Now, “fact-checking,” COVID-resource legends, “sensitive content” notifications and outright post suppression and user bans were implemented for “wrong thinking.”
Even worse, beyond a general downgrading (akin to Twitter’s “shadow bans”) of conservative content, Facebook removed links to the New York Post’s coverage of the Hunter Biden laptop story during the 2020 presidential campaign, purportedly to slow the spread of “potentially false information.” Post-elections polls suggested suppression of the laptop story, now widely acknowledged by mainstream media, may have affected the outcome of the election. By 2022, many users, myself included, had left or significantly reduced their time on the platform.
In leaving Facebook, whether literally or substantively, is anything lost? As the first-mover social media application, many users have a history and maintain significant content on the platform, which has allowed old friends to reconnect and far-flung families to stay in closer touch. It’s a place not subject to the vagaries of changes in email addresses and phone numbers, and evidences a classic example of the network effect — that everyone is there (even if some, dispiritedly) creates its value. As such, it remains the “place to go” (at least for those over 30) for announcing major life events or other news, and its groups and Messenger functions further enhance its functionality. That it no longer credibly “keeps up with the Joneses” (as evidenced by its loss of share to TikTok) ironically allows its users to transcend the need to be tech-savvy or “hip” in order to use it.
Can these “good” aspects of Facebook be saved, while jettisoning those aspects that turn off users?
Setting its recent challenges against the still-considerable network effect of its large user base, perhaps Meta (and Facebook users) would be better served by splitting the company along the lines of the “good bank/bad bank” structures typically used to hive off troubled assets from the healthy parts of financial institutions.
In this construct, the “good bank” would be the social media assets, i.e., Facebook (along with FB Messenger, Instagram and WhatsApp), designed to recapture its halcyon “digital commons” heyday of the early 2010s. A “walled garden” with only private accounts (Facebook currently allows both public and private accounts) would check the Twitter phenomenon of woke cancellation mobs. The user experience would focus on status updates, photos and article links. Groups, which are inherently private, would remain, and while advertising would continue — it is the company’s business model, after all — “2012 Facebook” could consider alternative economic models with paid accounts that limit or restrict advertising and third-party applications. Similarly, content moderation would be apolitical; while extremist/violent content would be prohibited, bogus “fact-checking” and “sensitive content” (and other) legends would be removed. There also could be better policing of bot accounts.
For those finding the 2012 Facebook not to their liking, the “bad bank” (or “Meta”) could take everything else, including Facebook’s existing policies around “community standards” and “safety,” content suppression, account bans and all the rest of it. Games, applications, unlimited advertising and data mining would flourish, as would innovation, including the metaverse. Meta would be an open platform, akin to Twitter, and free to users. As with the current Facebook, it would combine the company’s preferences (not necessarily those of its users) with respect to community standards with new features and functionality.
Such a bifurcation of Facebook would be an interesting social experiment and would allow users to decide whether they prefer the Facebook of 2012 or that of 2022, while allowing for account continuity. I’d be willing to bet a significant number would opt for Facebook 2012. No matter the percentages, however, splitting the company in this way would give users what they want, while maximizing shareholder value.
Richard J. Shinder is the founder of Theatine Partners, a financial consultancy, and a frequent lecturer, speaker and panelist on business and financial topics. He has written extensively on economic, financial, geopolitical, cultural and corporate governance-related issues. Follow him on Twitter @RichardJShinder.