Facebook, Google and Twitter have had a really rough time of it in 2018. Versus their 2018 highs, their stock prices are off -38%, -15%, and -30% respectively, but more importantly, have major issues with their business models. Specifically, these three companies are confronted, and seem perplexed, by two key threats: the privacy issue and the publisher issue.
The Privacy Issue- The public really became aware of the privacy problems with social media in March of 2018, when it hit the news that Cambridge Analytica was supplied with extensive Facebook user information. Industry analysts, and the general public, were shocked how naïve Facebook management was about the risks in allowing open access to user records. Individual users and governments around the world suddenly woke up to the fact that extensive user data was being captured electronically and exploited by the social media companies.
With Facebook, Google, and Twitter, their fundamental business models are built on having detailed info on their users. That enables them to sell ads that are highly targeted to individuals. Given the explicit data they have on users, they know which users should be inclined to be interested in which advertiser’s particular products. Thus, these social media companies get premium fees from advertisers for such targeted ads. Given that the very existence of these three companies depends on collecting explicit user data, it is super risky to collect it in such a clandestine manner; with user being uninformed.
This is a very solvable problem. Just tell users up-front what data is being collected and how it will be used. These companies fear doing this, because of the risk that users won’t opt in. Sooner or later, they are either going to have to provide some leadership and make the bold move to offer opt in/out upfront, or governments will get highly involved in their business and it will get very ugly!
The Publisher Issue– Running Facebook, Twitter or Google YouTube is like running a widely circulated publication, such as a major newspaper, with absolutely no control over your writers. The providers of stories and news items don’t have to be factually correct, bizarre opinions are welcome, comments that make no sense are just fine, and slander seems to be no problem. This has led to all kinds of accusations about impacting elections, ruining careers, fake news, etc.
For example, very recently the country of Vietnam accused Facebook to failing to take down anti-government comments on its platform. The country is considering preventing advertisers in Vietnam from using Facebook.
In response, the three social media companies are hiring thousands of “gatekeepers” to “monitor and control” the content. The latest problem is that groups representing the full spectrum of opinion are now attacking these companies for bias in “controlling” content.
This is a real mess and requires social media companies to come to grips with the fact that they are publishers with no control of content providers. Dealing with this will require some strong leadership.