Goodbye to Facebook?
Mark Zuckerberg’s business prospects have dimmed considerably. That is welcome news.
- Facebook has become the dominant digital media gorilla of the world through its “surveillance capitalism” but has suffered several recent setbacks.
- The future for Facebook is murkier than it has been in years as EU and US leaders scramble to put forward legislative packages that can reign in the toxic company.
- Some EU leaders are embracing the possibility of Facebook disappearing from Europe including Germany’s economic minister Robert Habeck.
- Facebook’s disappearance could bring about new opportunities for EU companies to compete and innovate in the digital platform economy filling the gap.
- Facebook needs the EU more than the EU needs Facebook.
Even as its stock continues to sink faster than a lead zeppelin, the Meta-Facebook complex has tried to double-down on its destructive business model.
EU regulators are drawing up laws that would ban Facebook’s practice of transferring and processing data from its European users on its U.S.-based servers.
Meta responded with its usual Silicon Valley arrogance.
The EU threatened to shut down Facebook and Instagram across the whole of the European Union.
Zuckerberg’s self-destructive strategy
Europe, fear not. Because even the half a trillion-dollar Facebook cannot afford to follow through on its latest example of blowhard bluster.
Why? Because Europe accounts for roughly a quarter of Meta’s global revenues and about 15% of its 2.9 billion monthly active users.
In the ultimate analysis, Facebook is taking so many hits to its revenues and business model that it can ill afford to self-inflict another one.
Facebook’s content privacy violations
This latest scandal stems from a decision in July 2020 by the European Court of Justice. It ruled that the data transfer standard between the EU and the United States did not adequately protect European citizens’ privacy.
The Court added that the standard violated the General Data Protection Regulation because EU citizens had no eﬀective way to challenge U.S. government surveillance.
U.S. spy agencies such as the NSA or CIA could demand that internet companies like Facebook and Google hand over data on any EU citizen.
While that ruling has not yet been enforced to date, the EU is now moving forward to codify that ECJ ruling into law.
Facebook’s authoritarian reflexes
This is not the first time that Facebook has tried to flex its authoritarian muscles against a representative democracy.
A year ago, Facebook shut down its operations in Australia for several days. That was after the government there had demanded that Facebook, Google and other digital media platforms compensate Australian media companies fairly.
The Aussie government’s fully justified objection was that Facebook, Google and other digital platforms were misappropriating proprietary news content from Australian media outlets to boost Facebook and Google’s own global advertising revenues.
those media outlets were misappropriating proprietary news content to boost Facebook’s own global advertising revenues.
In 2014, Spain passed legislation requiring Google to pay Spanish news outlets for the article extracts Google published to boost its own ad revenue. Google then closed its new service there.
These acts have prompted charges of “big tech authoritarianism” by a number of experts and critics.
Following global outrage over the Australian shutdown, Facebook backed down and negotiated an agreement.
Facebook’s clock is ticking
Facebook has become the digital media gorilla of the world through its unsavory business practices known as “surveillance capitalism.” Many critics welcome the news that the company has suffered a number of recent setbacks to its dominant competitive position.
Rivals like TikTok are cutting into its audience share resulting in Facebook reporting that its number of daily active users fell for the first time in its history, by 1 million users.
Apple cuts the track
Another huge hit against Facebook’s destructive business model was perpetrated by Apple in 2021. It released a new iOS for its iPhone that allows users to switch off tracking by companies like Facebook.
An iPhone user now sees a simple dialogue box that pops up when you launch an app for the first time, asking if you want to allow it to track your activity across other companies’ apps and websites.
If you select the “Ask App Not to Track” option, the app is barred from tracking your activity once you leave it.
Here is the important news: Users are allowing the average app to track their behavior just 27% of the time. So, this new feature substantially overturns Facebook’s surveillance business model.
Resisting data grabs
Beside reducing its privacy invasions, Matt Stoller from the American Economic Liberties Project points out that the inability of Facebook to grab data means it cannot figure out if their ads are working. This is why Facebook has had to reduce the price of ads to advertisers.
Apple’s common sense change resulted in a whopping $10 billion decline in Facebook’s revenues.
Apple on privacy enforcement
This single act of privacy enforcement shows how easily Facebook’s destructive surveillance model can be overturned, if other companies follow Apple’s practice.
The next hammer fell on Facebook when projections were made of its annual revenue growth, losing the momentum it has enjoyed since its IPO in 2012.
This brought about a complete collapse of its stock.
Facebook’s Tumbling stock price
Following its quarterly report on February 2, Facebook’s stock lost 26% of its market cap.
$250 billion of market cap went up in smoke in the largest one-day wipeout in market cap of any U.S.-listed stock in history.
CEO Mark Zuckerberg himself lost $31 billion of his net worth.
Unlike in the past, when Meta-Facebook’s stock quickly recovered after suffering a decline, Facebook’s shares have continued dropping. They are now down by a third since February 2.
Murky future for a toxic company
The future for Facebook is murkier than it has been in years. Lurching from scandal to scandal, it is now coping with new competition and Apple’s technological lassoing of Meta-Facebook’s surveillance practices.
And the $10 billion it has invested in its virtual reality “meta-verse” — in which humans will partly live, entertain and invest in a Facebook-designed digital paradise – is a longshot gamble that has been met with great skepticism.
New guardrails needed
So the question is this: Will EU leaders cave in to Facebook’s latest threats? Other EU regulatory efforts have been a mixed bag.
The various European agencies have been advancing several well-meaning yet flawed legislative packages, such as its forthcoming Digital Services Act.
Yet, several EU leaders seem to understand the importance of adding guardrails to this 21st century digital infrastructure.
In reaction to Facebook’s latest arrogance, some EU leaders are embracing the possibility of Facebook disappearing from Europe.
Germany’s economic minister Robert Habeck told reporters, “After I was hacked, I have lived without Facebook and Twitter for four years and life has been fantastic.”
Speaking alongside his German colleague, France’s finance minister Bruno Le Maire added: “I can confirm that life would be very good without Facebook, and that people would live very well without Facebook.”
Realistically, Facebook needs the EU more than the EU needs Facebook.
If somehow Facebook disappeared, there is no doubt that a whole bunch of new services would quickly fill the gap.
And that would provide new opportunities for EU companies to compete and innovate in the digital platform economy.