Let’s not read too much into Facebook’s latest quarterly results
Facebook’s quarterly results, released on Wednesday show growth in digital advertising sales and in the number of its users slowed down in the second quarter in the context of a series of recent scandals. Its share price fell more than 23% from its historical maximum in after-hours trading, erasing more than $125 billion in market value in less than two hours; an unprecedented fall that many pundits are interpreting as a sign that the company is vulnerable, and a dire warning to the markets.
Needless to say, no company is invulnerable, and the drop in Facebook shares is undoubtedly important. However, I think it’s important to put things in context. Facebook is dealing with important growth problems: the largest social network in the world has finally accepted albeit it too late, that it can be used on an unprecedented scale for political campaigns of questionable legality. It has been implicated in the spread of fake news that have resulted in lynching and ethnic cleansing. Mark Zuckerberg has been called to testify before parliamentary committees in the United States and in Europe, and as a 2017 article suggested, when we knew only half of what we now know, that Mark Zuckerberg himself barely grasps what Facebook has become. This has been the year in which a communication tool used regularly by more than 2.2 billion people and by 1.4 billion daily has had to deal with issues such as the gross invasion of its users’ privacy, widespread and systematic circulation of fake news, along with an unsustainable loss of democratic normality.
Perhaps this is not surprising for a tool that was invented for use on a university campus. While criminals, governments and all kinds of organizations, companies and agencies were experimenting with Facebook’s potential to manipulate popular opinion, Zuckerberg was too busy making money, until finally, confronted with a series of scandals that have threatened its very survival, the company says it is to take measures to prevent misuse. Can Zuckerberg be believed? Maybe, maybe not, but one thing has proved true, implementing those measures has come at a cost to the company.
There’s no denying Facebook’s share value has taken a dive and investors will be unhappy. But seen in the context of the company’s evolution since its IPO in May 2012, yesterday’ fall is a small blip, smaller than several it has recovered from. The company has not lost users or money: instead it has gained no less than 22 million daily users as well as earning $13.2 billion dollars. But those 22 million users less than half the amount it attracted in the previous quarter, while that $13.2 billion is lower than the $13.4 the analysts expected. Bad news? Sure, but on the other hand, no company can keep growing at the same pace: after all, there are three billion people in the world with internet access, and 2.2 billion of them are Facebook users, which is impressive by anybody’s standards.
None of which means the company doesn’t have problems: its user base is aging, but acquisitions such as WhatsApp and Instagram are providing access to a younger demographic. Do we want Facebook to correct the problems it faces, which are fundamentally about human nature? Sure, but that’s not going to be easy. Its plans to crack down on fake news are ambitious, but if we believe the company should do more about certain issues we should be aware of the possible consequences. Facebook needs to protect user privacy, but at the same time, people need to understand how to use those features. In fact, Facebook already has extensive privacy controls that allow users to make decisions on a wide range of issues related to their data, but one has to wonder how realistic it is to expect 2.3 billion people to use the service to its full potential.
Is Facebook finished? Not by a long way. Its growth may have slowed down, its market may be overcrowded and its efforts to control how it is used by third parties, which has involved hiring thousands of people, may have hit its quarterly results, but these are normal processes in global companies: Google has experienced and continues to experience significant problems because its search engine is so widely used; Facebook is having a hard time because it’s the social network used by 75% of connected people in the world.
Is Facebook finished? No way, but it will have to deal with complex challenges and its management has been given a rude wakeup call. Similarly, the patience of its investors and users is not limitless, and it’s clear that simply apologizing when things go wrong isn’t going to cut it any more, either.
(En español, aquí)
