Facebook is approaching a reputation tipping point
DISASTER STRIKES the world’s largest social network on October 4 when Facebook and its sister apps were taken offline for six hours. It was one of the less embarrassing moments of the company’s week. The next day, a whistleblower, Frances Haugen, told Congress about all kinds of nastiness in the business, ranging from promoting eating disorders to endangering democracy. Some wondered if the world would be a better place if the blackout was permanent.
Some of the stigma accumulated on Facebook is inconsistent. Politicians are angry but so far seem unable to coordinate reforms to curb them. And investors kept buying the stocks, regardless of the headlines. However, the company should not be reassured. The unleashed blind fury shows that his reputation issues have spiraled out of control.
Some of the reviews this week were biased. The reports highlighted internal research showing that Instagram, Facebook’s photo-sharing app, makes one in five American teenagers feel bad about themselves. They’ve paid less attention to finding that Instagram makes twice as good about themselves. Facebook critics are right that it should be more open. But the company gets half a point when it says the hysterical reaction to unsurprising results will lead companies to conclude that it is safer not to do such research at all.
Other complaints are actually criticisms of the Internet at large. The question of how to regulate viral content for children goes beyond Facebook, as any parent who has left their child with YouTube knows. Likewise, dilemmas over how the business amplifies attention and how to draw the line between maintaining free speech and minimizing harm. Facebook reiterated its plea that Congress should weigh in on issues such as minimum age, rather than leaving it to businesses. He has been more successful than most in settling free speech issues with his “watchdog board,” a pompous but quietly helpful body that dispenses decisions on issues ranging from misogyny to disinformation.
The most damaging claim this week attracted the least attention. Ms Haugen alleges that Facebook has hidden a decline in its young US users. She revealed internal projections that a drop in teen engagement could lead to an overall drop in US users of 45% over the next two years. Investors have long faced a lack of open disclosure. Deceptive advertisers would undermine the source of almost all of the company’s sales and could break the law. (The company denies it.)
Does all of this matter? Although Facebook’s share price lags behind some tech giants, it has risen nearly 30% in the past 12 months. Politicians threaten to break up the company, but the antitrust case is flawed. The Justice Department’s claim that Facebook is a monopoly hinges on defining its market in a way that excludes most social networks. The absurdity of this was demonstrated by the outage, when users flocked to apps like Telegram, TikTok, and Twitter. The action is more an expression of frustration than a powerful argument on competition law.
But fury can matter. Facebook is approaching a reputation tipping point. Even when he presented plausible answers to Ms Haugen, people no longer wanted to hear. The company risks joining the ranks of untouchable companies like big tobacco. If this idea takes hold, Facebook risks losing its young liberal staff. Even if its aging customers stick to the social network, Facebook has bigger ambitions that could be thwarted if public opinion continues to harden. Who wants a metaverse created by Facebook? Perhaps as many people who would like their health care to be provided by Philip Morris.
If rational argument alone is no longer enough to get Facebook out of its hole, the company should take a serious look at its public face. Facebook’s all-powerful founder Mark Zuckerberg made a reasoned statement after this week’s outburst of anger. It has been ignored or ridiculed and looks more and more like a handicap. ■
This article appeared in the Leaders section of the print edition under the title “Facepalm”