Over the past year, Facebook has gotten itself into numerous problems that are clearly having a big negative impact on the company. Most of these problems are due to their own faulty behavior. The impact on the stock price has been severe; dropping about 25% versus the beginning of the year. Here are some of the more glaring self-inflicted wounds:
1.) The wave of problems seemed to have begun when concerns emerged about the Facebook ads run by the Russians during the 2016 election. After months of saying nothing, Facebook finally admitted that it had done too little to stop Russian interference.
2.) In March of this year, it became public 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.
3.) The UK Parliament recently released a trove of internal Facebook emails that show the CEO contemplating enabling developers, for a fee, to have access to user data. This is a dramatic shift away from the promise to Facebook users to not share or sell the information they collect on them.
4.) The company faces an extensive set of question being raised by European and American regulatory authorities. The key concerns are how the company safeguards user privacy, treats its competitors, and controls access to its platform.
5.) It was recently made public that the Facebook COO had commissioned opposition research on a very vocal critic of the company. Specifically, the COO wanted to know if the individual was shorting Facebook stock. If he was shorting, the company could publically discredit the individual and the criticisms.
6.) The advertising industry is raising concerns about mistakes Facebook is making in a large number of its various ad measures used to set rates. One very vocal industry expert recently noted that “all of these mistakes have worked in Facebook’s favor. If these were true errors, you would expect some of them to benefit marketers.”
All of these issues have not only impacted the share price, they have had a big impact on employee morale and turnover. This year Facebook has seen the departure of numerous key executives, such as: the Instagram founder, the boss of Oculus ( the virtual reality acquisition), a co-founder of WhatsApp, and Facebook’s general council and its chief security officer.
One industry analyst summarized the Facebook mess as follows: “Facebook’s management team has created too many adversaries – politicians, regulators, tech leaders, consumers, and employees – to not experience long-term negative ramifications on its business.”
Let’s face it, eventually Facebook is going to have to come clean with the users, and have them up-front either opt in or opt out of allowing Facebook to know everything about them! This is the heart of their business model, and sooner or later they will have to face reality.