Facebook has been in news lately. Facebook is not “ubiquitous” as it is made to believe. Some thoughts on Facebook, social media and psychological influences.

  • Facebook’s products and services
    • Facebook’s products services are non-essential and discretionary. Consumers have an easy choice of not using it, so the argument that Facebook is controlling the lives of billions of people and is in a position to harm consumers does not make any sense. For news and content, consumers can easily switch to traditional newspapers, TV channels, Youtube etc. For communication with their friends and family, they can use traditional telephones, digital services such as Skype and many other free chat services that are widely available. For photo sharing they can use cloud services provided by virtually every technology firm. Alternatives for Facebook is just a click away !!
    • So why do people use Facebook or Instagram or Whatsapp? The primary reason is that users are better able to connect to their friends and family, share content, form communities etc. Content providers are able to reach and connect to billions of users which was not possible traditionally. Advertisers are able to maximise their return on investment by reaching the right target customer. Large organisations got a huge advantage when advertising on TV was expensive and reserved for a selected few with resources. Today small and medium enterprises are able to reach their targeted customers easily, thanks to Facebook and Google. 
  • Monopoly and anti-competition
    • Monopolies are normally created by controlling distribution, supply and consequently the prices. Examples include cable companies, telecom companies, utility companies and even government services such as consular services. When a company has monopoly, it has no incentive to treat its users well or charge a fair price. Facebook does not control distribution or supply on either side – customers (users) or the suppliers (content providers or advertisers). Again it is important to remember that Facebook products and services are non-essential. You DON’T HAVE to be socially active, especially on the internet.
    • Killing competition – In a hindsight, given the tremendous success of Instagram and Whatsapp, it is natural to assume that Facebook bought these companies so that it can create a monopoly and control the social network of the world. Couple of thoughts here:
      • The very fact that Instagram and Whatsapp were successful before getting acquired by Facebook proves that it is possible for new players to not only succeed but also challenge the incumbents. Even today there are viable alternatives to all these products.
      • Second, why did the founders of these companies decide to sell “their precious”? Instagram was bought for $1b just 2 years after it was founded and WhatsApp was bought for a price tag of $19b. Both the companies had great product but were not making any money and obviously did not plan to make any money in future (as their recent exit from Facebook suggests difference of opinion with Mark Zuckerberg’s plan of monetisation of these products). So, essentially the founders wanted big payout for their product, have Facebook invest billions of dollars into their product and never monetise it? Every product or company need to make money at some stage for its own survival, if not for the employees and investors. Mark Zuckerberg’s responsibility as a CEO of the company is not only to build great products but also monetise them to ensure the sustainability and future of these products and company.
      • When Facebook paid $1b for Instagram and $19b for Whatsapp, many tech experts questioned the expensive deals and thought Mark Zuckerberg is a poor capital allocator. There are many companies in the world who could have bought these companies but they did not. The founders could have resisted the acquisitions but they did not. It is not important to analyse the “ifs” and “whys” because we probably know the reasons.
      • The Federal Trade Commission (FTC) is specifically mandated to investigate and approve all acquisition’s and buyouts to make sure there are no antitrust and anti-competition issues. Accordingly the FTC did a nonpublic investigation for all acquisitions of Facebook and approved them without citing any concerns. So questioning the same acquisition now is itself questionable.
      • I’d be more worried about Amazon on anti-competition risks. A large company like Amazon has the ability to kill smaller players or competition by selling things at a loss until the competition is wiped out (point in case – https://collaborativegain.com/the-diaper-war-amazon-whole-foods/). Secondly Amazon has access to all the data of the customers and sellers giving it the ability to analyse the data and take actions based on that insight. It can introduce private labels (clear conflict of interest) or reduce prices to the point where these smaller players shut down or even acquire these players.
  • Fake news – This one is a difficult problem to deal with. Not only Facebook but the entire media industry is responsible to address this issue. It is difficult to draw the line when you see politicians and presidents openly engaging in lies (essentially fake news) against each other. If some presidents are to be believed then pretty much every media, newspaper and TV channel out there is “fake news”. So either we need to shut down all of them or we need a proper oversight and control over all the media channels. We all agree that it is important for the future of the world that all media companies are policed well and address the issue of misinformation and harassment, while keeping the freedom of press which itself is under threat lately.
  • Data privacy – No one can question the importance of putting controls and regulations around data handling and privacy. The EU has taken a step in that direction by implementing GPDR (General Data Protection Regulation) that imposes strict rules on controlling and processing personal information. It also gives users an opt-in option of their data. The law applies to all companies handling data of EU residents irrespective of their geographic location. Couple of interesting thoughts here
    • The reality is that most users don’t care about privacy, particularly if it saves them money. Realistically, most users on Facebook understand that there isn’t much privacy if you are on a social network. It is akin to going to the biggest nightclub in the city and seeking some solitude. Almost all users provide false information such as birth date, status, profile photo and Facebook is not seeking important information such as social security id, credit card etc.
    • How are regulators protecting smaller companies by implementing rules such as GPDR? On the contrary, these rules provide a huge advantage to large companies that has the means to handle the ever-changing complicated regulations. Not only can these large companies implement these rules, they also have the means to hire some of the smartest lobbyists and influencers in the world.
    • Having said that, it is important for companies to protect the data of the users and there should be rules governing such data protection. Data belongs to the user and they should have total control over it.

Facebook has stumbled in many areas and made terrible mistakes such as Cambridge Analytica, hiring PR firm to attack critics etc., and they must be held accountable and penalised for these blunders.

Governments and regulators need to work hard to protect and police inauthentic behaviour or threats, irrespective of its source (domestic or international) rather than just shifting the responsibility or using someone as a punching bag. We need to hold the ultimate entity responsible for its bad behaviour rather than the channel or media used for that behaviour.

Users need to understand the limitations, danger and threats of social media. They cannot blame anyone else for trying to influence them or entice them. It is not new for companies to influence customers (through advertisement) by exploiting their emotions. As Don Draper said in a Mad Men episode, “Advertising is based on one thing: happiness. And you know what happiness is? Happiness is the smell of a new car. It’s freedom from fear. It’s a billboard on the side of the road that screams reassurance that whatever you are doing is okay. You are okay.” The same emotions can be used by companies such as Coca Cola or Russian hackers to influence you.

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