Enter the Privacy Network?

It has been a tough couple of years for social media networks. After years of rapid growth, Facebook has faced a significant backlash following several high profile scandals. Twitter has faced questions from investors about whether it will ever be profitable. Google+ has finally been shut down long after it ceased to be relevant due to a potential security breach caused by bugs in their API. Oh and MySpace apparently lost a large chunk of their user's uploads during a server migration.

It is clear that many people are finally reconsidering how much time they spend online and how much they share on social media. Quitting Facebook has grown from a niche phenomenon to a widespread consideration and a subject of mainstream discussion. Few do it, but many are actively considering it. There have long been anecdotes about the downsides of sharing personal details too openly, but it wasn't until the Cambridge Analytica scandal that this truly broke through to the mainstream. People have become a lot more vigilant about how the information they provide tech companies since Cambridge Analytica were found to be in possession of Facebook profile data that users hadn't agreed to share with them.

The more pressing concern for Mark Zuckerberg is the possibility of regulatory scrutiny from the European Union and the US Federal Government. This has been a looming threat ever since foreign citizens were found to have influenced the US Presidential Elections by posting fake news on both Twitter and Facebook. Restrictions on who can post political advertising and how political ads are displayed have been introduced, but some campaigners want more action to be taken. To head this threat off, Facebook appointed former UK deputy prime minister Nick Clegg as their VP of Global Affairs and Communications - effectively the chief lobbyist. His job is to use his experience and address book to build a less adverse relationship with a European Commission that has a history of investigating prominent tech giants for anti-trust issues. Google have already been hit multiple times this year with fines after several long-running investigations.

Core Metrics

Despite the hype, the core metrics by which the social networking giant is measured by are heading in the right direction. The number of active Facebook users has not dropped, but growth has definitely slowed as fewer young people sign up for accounts. The sharpest slowdown has come from developed economies in North American and European markets, with most of their growth coming from emerging markets in Asia-Pacific and Latin America. The problem Facebook has is that they get significantly more revenue per user from developed markets than from emerging markets due to wealth disparities and the higher cost of advertising to US audiences compared to other groups.

Mark Zuckerberg has a grand plan to arrest this slowdown in growth before it turns negative, but many analysts are sceptical about whether the world's largest social network can make it happen. His attempt to rebrand Facebook as a privacy network has received a lot of scorn and ridicule from all quarters. To pull it off requires not just product updates and a change in public perception, but also a total reinvention of Facebook's corporate culture. The company has in the past struggled to differentiate between actions that benefit the company and activities that benefit their users. Ex-employees have described the company as cult-like, with an emphasis on following management strategy and discouraging any dissent. The way that Facebook has reacted to the various scandals have contributed to the perception that Senior Executives can't handle criticism. Each incident has been accompanied by strenuous denials, counter-attacks and stonewalling of press and politicians rather than open engagement with critics. Even when they admit their mistakes, it is often too little too late, contributing to the suspicion that the company has something to hide and isn't serious about making changes. If the apologies aren't genuine, then people simply won't believe the fixes are either.

The Privacy Pivot

When Facebook announced their intention to refocus their core product around group communications rather than the public News Feed, there was general scepticism about the motives of doing so and whether the redesign would be anything more than skin deep. Groups will now be the starting point for the daily Facebook user experience, with group news being the first tab users see after logging in. Users will also be offered recommendations about Groups they should join right on their home screen. For marketers, this makes generating traffic from Facebook much harder. Brands will want to build and promote their own groups, rather than relying on updates posted to their company page appearing in followers news feeds.

This is a net win-win for Facebook's bottom line, as it hopes the changes will regain consumer interest whilst ensuring that consumer brands will have to invest more in advertising in order to get their content seen. More likely, is the continued migration of younger audiences away from Facebook towards Instagram. That shouldn't disrupt Facebook's financials that much, given that they own both sites. Recent ventures into e-commerce and shopping ads, should lead to increased advertising revenue from the still mostly image based Instagram. Then there is a mooted crypto-currency product, which might take blockchain based electronic currency into the mainstream, but probably won't. Even that particular venture does fail, it does show that the company still has plenty of ideas about new technology and the ability to bring it to market, so don't write off Mark Zuckerburg just yet.