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Commentary

Is this the beginning of Facebook’s decline?

It is too early to predict the imminent collapse of the social network; at the same time, there are good reasons behind the notion that this is ​​the beginning of its decline.

Is this the beginning of Facebook’s decline?
Benedetto Vecchi
5 min read

It is a difficult time for Facebook, to the point that some are talking about the beginning of the decline of the social network, which has seen its shares collapse on Wall Street in a matter of hours. One criticism being brought against it is that it has become a company that shows little innovation.

Mark Zuckerberg’s company is also accused of failing to protect the privacy of its users, as shown by the Cambridge Analytica scandal. And it is rarer and rarer that it introduces any innovative products, a decisive factor to be able to withstand the fierce competition on the Internet today, and to head off the possible new players on the market, especially Chinese companies. China recently curtly denied Facebook’s request to operate in the country again, after it previously had to leave that market due to refusing to participate in the government’s Internet censorship.

We are a long way away from the time that Mark Zuckerberg would call Barack Obama by his first name, or from when he announced he was attempting to build a global community of men and women respectful of each other’s differences. Or from when he was touted as a possible liberal candidate to the US presidency against the populist Donald Trump.

It feels like all that was centuries ago, but in fact only two years have passed. At the end of these two years, Zuckerberg had to sit on the bench of the accused and submit to questioning by the US Congress and the European Parliament after the social network was accused of giving data to a company that used it to manipulate public opinion. Then it was time to publish its quarterly report for the second quarter of 2018, which showed lackluster numbers. The reaction was not long in coming. Facebook lost $118 billion on Wall Street in a matter of hours. An enormous loss, but one that the social network could handle given its stratospheric valuation on the stock exchange (before Thursday, more than $660 billion).

It is likely that Mark Zuckerberg will decide to take a hands-on approach and buy more stocks for his own portfolio, in order to staunch the depreciation of the stock. He has done this many times before, ever since 2012 when the social network debuted on Wall Street and its shares collapsed relative to the price set for the start of its foray into the den of casino capitalism. Zuckerberg’s direct interventions have worked so far, given that his injection of cash into the company’s stock has been interpreted as a sign of stability, thus winning back investors’ confidence.

However, it remains a mystery why the social network’s shares have lost nearly 20 percent of their value. Certainly, the quarterly numbers were not fantastic, especially the data that indicated that around a millions users stopped using Facebook. But the other data (advertising income, investments, revenue from exploiting Big Data) does not paint a picture of ​​a company in difficulty. Certainly, it shows a slight drop in revenues, but nothing to justify such a massive sell-off. Nor can the cause be identified as the troubles that Facebook has run into with the European Union. Google, for example, has been fined by the EU, but its quarterly reports have shown a considerable increase in the search engine company’s revenues, while its share price has certainly not taken any punishment.

Therefore, there can’t be just one reason for the collapse of Facebook’s shares. On one hand, it has become clear that the ruthlessness of Zuckerberg’s company when it comes to the business of Big Data is viewed very negatively, and this resulted in a penalty on the part of investors. Zuckerberg has announced that there will be a crackdown on the companies which purchase its data, but this has not dispelled the clouds of suspicion hanging over the matter of Facebook’s own share of the blame.

Then, there are also the recent changes in Edge Rank, the algorithm Facebook uses to decide what content to promote. For many users, the changes have radicalized even more the tendency to reciprocal exclusion by communities of people with “similar views,” not communicating with each other, which flies in the face of the much-vaunted project of building a global community, which for the past two years has ruled the conversation on the evolution of public opinion and the transformation of the Internet into an interactive medium, free from the constraints of the publishers. What seems to be happening instead is that the new version of the algorithm reduces the visibility of articles and television segments put online, an element which signals the fact that Facebook has ironically embraced the just demands by large publishing groups which discourage the publication of “their content” on the Internet.

Finally, another important issue is the lack of clarity on whether Facebook does or does not support Donald Trump’s project to create a two-speed Internet, after the repeal of net neutrality in the United States.

Facebook has behaved inconsistently on this issue. Initially, it said no to Trump’s project. Later on, Zuckerberg said, however, that he was willing to discuss a possible project put forward by Trump to charge for certain high-quality services, while providing other low-quality services for free. Regular Internet users did not appreciate this attitude.

All these factors point to Facebook being confronted with difficulties at the moment. It is too early, however, to predict the imminent collapse of the social network; at the same time, there are good reasons behind the notion that this is ​​the beginning of its decline. For years now, we have not seen decisions on Facebook’s part that would show it playing a dynamic role, but only reiterations of a business model that continues to rake in the cash, but that no longer has the capacity to exercise leadership in the field of platform capitalism. Facebook is still worth $551 billion—however, this is a figure that is not proportional with its ability to continue to exercise hegemony inside and outside the online world.


Originally published at https://ilmanifesto.it/il-declino-di-facebook-quotato-al-casino-capitalism/ on 2018-07-28
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