Its business model is threatened by lower usage and advertiser discontent
Big tobacco is what the bosses of several large technology firms have started calling Facebook in private and in public. The company has spent the past year fending off critics who claim it is addictive, bad for democracy and overdue for a regulatory reckoning. Being compared to the tobacco giants is one of the business world’s more toxic insults, but it is not the only unflattering analogy circulating. A lower blow is the suggestion that Facebook may become like Yahoo, the once high-flying internet firm that plunged.
Even a year ago the idea would have been unthinkable. The social-networking giant, which runs Instagram, WhatsApp and Facebook Messenger as well as its own core service, was thriving. But since January it has become mired in a series of controversies, misjudgments and missteps.
- It became clear that it had done too little to stop Russian interference in America’s election in 2016.
- It had to admit that it had shared the personal data of 90m users with outside firms without permission.
- It later suffered a data breach affecting 50m users.
.. The past week has brought more bad news. Mark Zuckerberg, Facebook’s chief executive, has been forced onto the airwaves to defend his second-in-command, Sheryl Sandberg, after the New York Times on November 14th published a report alleging that they had tried to downplay the extent of Russian electoral interference to the firm’s board of directors, and hired lobbyists and the kind of “opposition-research” firms commonly used in political campaigns, to deflect blame onto other firms and to tarnish critics. The revelations have cemented the idea that Facebook is “grossly mismanaged”, says an advertising executive. Its shares have fallen by 27% since the start of the year.