The changing face of Facebook

James Kouzinas James Kouzinas
Blog | January 15, 2020

Counter to Lady Gaga’s poker face, Mark Zuckerberg has shown his cards in a detailed Facebook post last week. The ‘Zuck’ covered an array of topics in the post, pertinent updates included the concept of two digital landscapes Facebook is having to consider:

  1. The town square (current state of Facebook): where users publicly display themselves and engage with people/businesses in a public forum.
  2. The living room (Facebook’s new focus): space where users interact privately with close friends and family ‘in the safety of their own home’.

‘Zuck’ highlighted that the private living room concept will need its own platform. The development framework of the new platform will be based around the following principles: 

  1. Create a safe space for private interactions.
  2. Encryption of all user generated content, where no one including Facebook can see what is being shared between users.
  3. Create a natural environment through reducing the permanence of content. The space will encourage users to be themselves without fear of future retribution (messages and stories looking to be deleted after a given period of time).
  4. Interoperability across all Facebook applications, allowing users to communicate across all group networks (FB/Instagram/Whatsapp and Messenger).
  5. Secure data storage. 

Mark alluded to the impact this new focus will have on businesses using Facebook:

“The reality is any impact will be longer term and we don’t know exactly how this will play out yet. But on some of the questions like whether encrypting content will hurt our business, I’m more confident that won’t be a significant issue. We don’t use the content of messages between people to target ads today, so encrypting that content won’t change what we do.” – Mark Zuckerberg

One of the notable updates being the reduction in the permanence of data. Businesses who use the Facebook platforms for advertising purposes may have limited amounts of data to draw from after the proposed changes. Zuckerberg stated that he views the private platform shift as an opportunity rather than a risk, especially with the cannibalisation of public platforms in countries like India where Whatsapp is the preferred platform.

I am interested to see how the old ‘town square’ will stay relevant after the introduction of the shift and how the Facebook business model will be impacted if users gravitate towards the ‘living room model’.

Other noteworthy points made by Zuckerberg include:

  • The inclusion of governments when framing how social media interacts with speech, elections and data privacy.
  • The encouragement of global adoption of data privacy regulation i.e GDPR. 
  • Fears for fragmentation of the internet where countries follow an authoritarian regime (e.g. Australia) giving them the freedom to access user data. 
  • Zuckerberg made mention of the difficult trade-offs that must be made regarding free speech vs. hate, complete privacy vs safety threat and data privacy vs data portability.

Facebook in the same week released their Q1 earnings report, which included the growth Facebook is continuing to realise across all channels (FB/Instagram/Whatsapp and Messenger) with now 2.7 billion people using one of the four apps monthly and 2.1 billion people using one of the apps daily. 

“In the first quarter of 2019, we reasonably estimated a probable loss and recorded an accrual of $3.0 billion in connection with the inquiry of the FTC into our platform and user data practices…We estimate that the range of loss in this matter is $3.0 billion to $5.0 billion.”- Mark Zuckerberg

Its of interest to see the The Federal Trade Commission’s most recent billing as a potential sign of how they will start to regulate big tech. With Facebook reporting a $15.07 billion in revenue in Q1 of this year, up from $11.96 billion in Q1 of 2018. The expected fine will be consumed in a single quarter while the tech giant maintains profitability with an onward march. Facebook’s stock surged through the news, peaking at a nearly 8% increase the following morning.

Advertising was responsible for 99% of Facebook’s Q1 revenue. If the FTC rules in favour of any change that would make Facebook’s ad platform less powerful i.e. make changes to the way Facebook can harness user data for content targeting, said change will blow a hole in the core revenue model of each of Facebook’s businesses. Companies like Google are similarly reliant on monetizing user data through advertisement and most of Silicon Valley is watching for the FTC’s final decision and the precedent it will set.

F8, the annual Facebook conference starts Tuesday 30th April, where we can look forward to seeing more key issues being fleshed out.

Rebecca Jones

Director of Platform

Nebula Ventures

References:

  • AngelList Weekly blog ‘Facebook vs. The FTC’
  • https://www.facebook.com/zuck/posts/10107243286682221

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