As the mother of teenagers, I know first-hand the challenges of ushering children through their formative years—and I see that since Facebook became an adolescent, they too have been experiencing growing pains.
In just the past few years, the 14-year-old Facebook has frustrated advertisers with a lack of transparency and brand safety. Additionally, Facebook faced backlash when the site—without permission from its users—allowed access to the personal data of 87 million Americans to Cambridge Analytica, a research firm aligned with the Trump campaign. The social network had also unwittingly provided a platform for Russian propagandists to spread misinformation about the 2016 election.
Furthermore, Facebook employers have accused the social media network of operating a political monoculture that is intolerant of diversity in ideology
Prominent politicians have accused Facebook of restricting conservative opinions. As a result, CEO Mark Zuckerberg and COO Sheryl Sandberg have testified in front of Congress about how Facebook uses its data. More recently, Facebook announced its biggest security breach to date, when hackers stole the login information of up to 50 million users.
In Facebook’s second quarter 2018 earnings report, they had 2.2 billion active monthly users worldwide. Globally, the social network earned $13.0 billion in ad revenue, a 42% increase from the prior year.
Although revenue and usage continue to be impressive, there are caution flags ahead
According to Recode, in second quarter, Facebook’s daily active users compared to first quarter grew by only 22 million globally, the smallest increase since going public six years ago. In North America and Europe, Facebook’s two most profitable markets, growth has stagnated.
Another alarming trend for Facebook is that many teens consider the platform passé. eMarketer says nowadays, less than half of Internet users between the ages of 12 to 17 will access Facebook on any screen. It’s been reported this year Facebook will lose two million users under the age of 24. Conversely, an additional 500,000 adults age 55+ are expected to sign up with the social network. As growth flattens and teens and young adults are fleeing the social network for other platforms, there is pressure for Facebook to find new ways to grow revenue.
As Facebook seeks new revenue opportunities, they have also recently experienced losses in key senior management positions at two of its high-profile acquisitions; Instagram and WhatsApp. In 2012 Facebook acquired Instagram, a mobile photo sharing app, for $1 billion. Two years later Facebook acquired WhatsApp, a messaging app used on phones for $19 billion. Initially, Facebook had provided autonomy with the two acquisitions, but with an emphasis on growing revenue, that has changed.
The founders of WhatsApp, Jan Koum and Brian Acton, left Facebook first
In a Forbes interview, Acton expressed regret at selling the app to Facebook and expressed displeasure with Facebook’s plan of targeting ads to users. Last March, in the aftermath of the Cambridge Analytica revelation, Acton, a long-time privacy advocate, initiated a #DeleteFacebook movement on Twitter.
In September 2018, Instagram’s two founders Mike Krieger and Kevin Systrom left Facebook.
It was widely thought Krieger and Systrom were clashing with Zuckerberg over Instagram’s future role at Facebook, as the social network looks for additional sources of revenue. Instagram has been a bright spot for Facebook. In June 2018 Instagram reported it had one billion monthly active users worldwide, a tenfold increase since February 2013. While Facebook is losing younger users, Instagram is expected to add 1.6 million users age 24 and younger in the U.S. this year. Instagram Stories, which copied Snapchat, now has 400 million daily users, doubling all of Snapchat. (A Facebook version of Stories has 300 million users and becoming more popular than their news feed). More importantly, Instagram is expected to produce $5.5 billion in ad revenue in the U.S., an increase of 70% from 2017.
There has also been some pushback from Facebook with advertisers
WPP’s GroupM, the world’s largest ad agency, is said to be looking at alternatives to Facebook in the wake of brand safety and a lack of transparency and responsiveness. Moreover, the digital duopoly of Alphabet and Facebook, which accounts for about 60% of U.S. digital ad spend, also raises anxieties on Madison Avenue, concerned the two companies have become too powerful and are looking at other digital sources to invest in.
Besides taking some time off, what is next for the two co-founders of Instagram?
One of their pet projects was the recently lunched IGTV, a standalone video app allowing content to run for up to one hour for popular or verified users. Facebook had delayed the roll out of IGTV since it was a potential competitor to their struggling Facebook Watch product. A standalone video product may be in the offering. Another area the co-founders were said to be developing was a standalone e-commerce app. In addition, there may have been other products they were thinking about to expand Instagram. In any event, whatever they develop, they will no longer be answerable to Facebook. Without Krieger and Systrom’s input, will Instagram’s extraordinary popularity among teens and young adults continue under the direction of Facebook? That may be the biggest change of all.
I also believe that it would bode well for Facebook to take a word of advice from their former Instagram colleague, Kevin Systrom. On a blog post, Kevin said that he wanted to take time off to explore their ideas, creativity and curiosity again. These are wise words for data-driven Facebook if they want to engage my teenagers.