PAUL BUDDE. Facebook is set to fail (Paul Budde Consultancy).

With a tumbling share price and increased pressure from governments across the world Facebook will have to make major changes quickly if the company is to survive.

Despite the enormous success – indicated by the fact that people just love to use Facebook, as well as the enormous amount of good that the company has provided, as Mark Zuckerberg correctly keeps mentioning – the damage to democracy has been so high that the negatives start outweighing the positives. However, the company seems to be too immature to face and understand the problems it is creating in society – it simply didn’t understand its own complexity and how to manage that.

It is sad to say that the misuse of the social media is a reflection of the current state of affairs of our global society. The polarisation around identity politics and the competition for global power between the USA, China and Russia are some of the key issues that is driving this, and the business models of social media companies – and in particular that of Facebook – are unable to handle the misuse of the services. They were simply built around increasing advertising revenues based on schemes that are selling data analytics gathered on the interests (likes) of the individual Facebook users to advertisers and other commercial users.

Of course, Facebook is not alone here. There is a very large and complex network of marketing technology organisations that includes most of the larger publishers, online content providers, big data companies, advertising bureaux and so on, many of them involved in manipulating user tracking data and selling it on to advertisers. With literally thousands of companies involved in the marketing tech business it is not too difficult to see that there will be many opportunities for data leaks and the misuse of data even for criminal purposes such as undermining democratic processes.

Obviously leading companies such as Facebook have been leaving it too late to make changes that could have avoided these looming disasters. Initially they believed that they could change the world for the good, but once they went public this went all pear-shaped, as shareholders wanted to see big profits, and to increase revenues these companies developed more and more algorithms and were very casual in making that data available to others purely for commercial reasons without checking where the data actually ended up.

Over the last two decades I have unsuccessfully argued for ‘permission-based systems’, where the users (and not algorithms) are in control of their own data and where users have the sole power to allow what personal data can be made available to others; this right should not be in the hands of the social media companies. Without proper privacy regulations in their country these American companies were able to bypass very relaxed privacy laws and this, along with their lax attitude to oversight, made it possible for rogue organisations to obtain this data, and use it for their own illegal purposes.

The question for Facebook will be if they can make changes to their complex system of algorithms that would make it possible to stop fake news, lies and a range of what can only be called criminal behaviours. Not only is this almost technically impossible (unscrambling the egg) but such changes could limit their lucrative advertising business; and this fear is reflected in the falling share price.

It has become very clear that Russia and China and a whole range of people and organisations with criminal intent are using the social media to undermine democracy. The Trump election and Brexit are well-known examples, but there are many more in Africa and Asia that are not reaching the headlines in the western press. Some of this became clear when the Cambridge Analytics disaster was revealed.

It is hard to believe that in the case of Russia and China there are no links to their governments, as several of the places where these undermining cyber activities are taking place are well-known and nothing is done by those governments to close them down. This is very worrying.

At least in the west there are democratic institutions that are keeping an eye on the activities of their governments. The PRISM case in the US a few years ago – following the revelation from Edward Snowdon – saw that those institutions do have real power. However, in an increasingly polarised world I am not holding my breath about resolving the illegal cyber activities that are also conducted by groups in western democracies; but, so far at least, being illegal here they don’t have the same impact as the Russian and Chinese activities.

Another action that could be taken by Facebook is that when they become aware of fake news they send a message to all those people that received that info or clicked on it indicating that this news was fake.

In the end governments will step in to ensure that this will stop as the overall negatives now outweigh the overall benefits of social media.

It would be very sad to see that happen. Facebook also offers platforms for millions of people around the world to communicate, organise themselves, stimulate grassroot movements and so on. I, for one, am an active user of Facebook and within the context of my private use I do love the service. But, while Facebook will not be the end of social media, the next round of organisations will have to base their business models on the ‘permission-based’ concept and put the users in charge.

In the meantime there is still time for other digital moguls such as Google and Amazon, as well as many of the other online publishers – all relying on tracking-based advertising schemes – to change their business models and put the interest of its users as well as the national interest before profit.

Paul Budde

This article was published by Paul Budde Consultancy

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One Response to PAUL BUDDE. Facebook is set to fail (Paul Budde Consultancy).

  1. Kim Wingerei says:

    Interesting points, Paul, I agree with much of what you are saying. Facebook’s corporate governance is a huge risk, with the typical complicated shares structures that American tycoons love, Zuckerberg has full control. He has proven that he has been able to grow with the company up to a point, but the size and reach of the company is now such that no one individual “should” have the power that he has. For now, he remains a benign dictator of his own domain, but imagine if he runs for office as is mooted!

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