Facebook, Privacy, Social Networks

Facebook: Unbelievable Earnings vs Terrible Newsflow

I cannot remember a time that the media news flow and the numbers were pulling so violently in different directions in the world of tech-driven media.

It has become commonplace to talk about deleting Facebook among the liberal, chattering classes. Following a month of news about data breaches, Cambridge Analytica and the platform’s alleged use for targeted, political manipulation, there is a desire to take back control of personal data.

But it has also been a week of breath-taking results not just for Facebook but for all the data-driven tech giants.

Facebook may be under pressure politically and morally, but it is on a tear commercially. The company’s first quarter results left 3 facts firmly lodged in my mind:

1. Advertising revenue growth of 50% year on year

2. Price of advertisements up 39% (now that’s pricing power in action)

3. Daily users up 13% globally (though numbers are flat in the US, Canada and Europe)

Amazon’s revenues were up 43% and Google’s a mere 26% in the same quarter, year on year. Even Twitter made a profit. Data gathering and its use to influence the consumer sits at the heart of all these businesses. It is the new gold mine.

Despite the recent media debate and the Twitter storm of #DeleteFacebook, I am yet to meet a person who has deleted their account as a result of the most recent media storm.

But over the last 18 months I have met a steady trickle of people who left Facebook before the current hiatus.

I decided to speak to them to understand what has motivated their actions. These characters are, in my experience, particularly influential in setting trends. If the depth and power of their feelings and their behavioural change is sufficiently powerful, the trend can take off and have tremendous impact.

But without depth and coherence, the storm can easily pass and life goes back to normal.

This is what 4 people who left Facebook long before #DeleteFacebook said about their decision-making. I believe their views reflect wider feelings.

Tania, aged 18.
A level student who intends to be a doctor.
Left Facebook 18 months ago.
**

“I can’t remember when Facebook was that interesting. It has always been full of stupid videos. There was a time I used to share things but the platform’s not that good and it looks ugly.

When I started A levels, school got harder. I realised how much time I was spending on social media so one weekend my best friend and I deleted Facebook and Snapchat.

Friends asked what we were doing and it was good to say we’d made the decision ourselves. There’s been cyber-bullying and stuff at school and there’s that nasty part of social media though it hasn’t affected us.

I still totally love Instagram and use it to post pictures and video and to research things. I couldn’t give Instagram up now but I can see that it is becoming less good – full of advertising - and in a few years’ time I think it will be just like Facebook. Hopefully something new will come along by then.”

Chris, aged 25.
Freelance journalist.
Left Facebook over a year ago.

Honestly never use this thing anymore, so go find me on Twitter (if you'd like to witness me fruitlessly screaming into the echo chamber) or Instagram (for craft beer, fishing and California photos).

“That was my Facebook sign-off. At first I just needed to create some space on my phone for the GoPro app and photos on my trip. My relationship with Facebook had got to the point that it felt disposable and I could always re-download it once I was back.

Taking a break from the chin-dribbling updates of people I’ve not seen in a decade felt like a healthy cyber cleanse. I realised that I no longer got anything constructive from it or wanted to give anything back to it so it became permanent. It disgusted me that I was at the behest of social media and Facebook in particular.

Having said that, I do feel like I get something culturally relevant from Twitter, and I get creative gratification from Instagram, so don’t mind those sticking around so much for now.”

Rachel, aged 37
Left Facebook 3 years ago.

“I started finding the Facebook feed upsetting.

I found it disturbing to see re-posted pictures and articles of animal cruelty and bad things happening around the world I could do nothing about whenever I looked at the feed. I have too much empathy to see things like that every day.

Otherwise it was banal. Lots of posts of what people ate for dinner or how long the queue was at Starbucks.

Then, in total contradiction to the above I felt deep FB envy! My life has been going through a tough patch and it really made me feel worse. Giving the impression of perfect holidays, perfect relationships, a life full of exciting and amazing events - even though I know it's not reality it made me feel worse about my own circumstances when I saw it everyday.

After I ditched FB, I joined Instagram - and I love Insta! It's more creative than FB. I follow far fewer 'friends' on Insta, mostly my real life friends and people through whom I can learn more about my interests.”

Christian, aged 48.
Retired solicitor with an interest in buildings
Gave up Facebook around 4 years ago, reducing usage then abandoning the platform

“Facebook became boring. I was a very early adopter and lost interest when user numbers swelled and friends’ feeds became prosaic.

I follow tech reporting and became aware FB was fiddling with the feed to manipulate users into enhanced levels of engagement. I felt very uncomfortable with this as it was clear how easily FB could manipulate and influence user actions. I didn't appreciate Chomsky’s foresight in suggesting that the fabric of western society might be ripped apart by the influence of social media; that is, until Brexit and Trump delivered the message with a considerable thud to my doorstep.

The general pattern for me is to use a platform until attempts are made to monetise, at which point I abandon because feed quality goes to shit + I dislike manipulation in the guise of a ’service’. By way of example: WhatsApp | Deleted - now use Signal; Instagram | Abandoned; Twitter | Used infrequently and reluctantly only out of necessity; Pinterest | used as a visual database and occasionally for discovery, privacy locked down to the max; YouTube - used regularly as a new source but privacy on lock down.

I might consider migrating to a ‘clean’ social network but am aware of the adverse effects and prefer direct communication with friends and family.”

Expect continued, phenomenal revenue growth as Facebook flexes its increasingly prominent, pricing muscles

Facebook has a gently building user problem but I don’t believe it is a disastrous one in the short-term. Rather than unifying, deeply felt issues such as privacy, it is a platform that is becoming a bit boring for an increasing number of regular users and heading into gentle decline. Turning this around will be difficult but a continued, slow fall in user hours looks like the most likely course.

The consumer desire for social networks is a deep one and Instagram – also owned by Facebook - is the direct winner from Facebook’s weakness. Instagram has grown by more than a hundred million users in the last year and could reach a billion users in late 2018 (though Facebook does not report Instagram numbers). Snapchat is a long way behind with around 190m active users and is growing more slowly at around 18% per annum.

If you want to be part of a social network it is almost impossible to avoid the Facebook Empire. The leavers want a new option but what is it? They also want an option that doesn’t make the same commercial compromises as it goes after exceptional profits.

There is little choice for the advertiser either. Expect continued, phenomenal revenue growth as Facebook flexes its increasingly prominent, pricing muscles. The maths suggests continued revenue growth will dwarf additional costs from the effects of the privacy issues.

Privacy issues won’t go away but the Facebook machine rolls on regardless - until a true competitor emerges or global regulation suddenly finds some teeth.

We wait impatiently for innovative capitalism to work its magic.

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About Tim Ewington

Co-founder of Shortlist Media. Previously co-founder of media strategy consultancy, Human Capital. Still innovating, consulting and investing.
  • London