Tag Archive: Zuckerberg

1. Facebook’s woes show no sign of abating

   October 4, 2018 10:48 Comments Off on Facebook’s woes show no sign of abating

   A massive security breach is just the latest chapter in a bad year for the tech giant.

   After a bad year, Facebook needed to regain its users’ trust

   The fourth quarter of 2018 started at the beginning of this week, and there are probably few people who are looking forward to turning their backs on 2018 more than Mark Zuckerberg. This year has been something of an ‘annus horribilis’ for the Facebook CEO. Having perhaps thought that the worst was behind him with Russian interference in the US presidential campaign, the social media platform was hit with accusations that it had allowed Cambridge Analytica, a political consulting firm, to harvest data from up to 87 million Facebook users. Cambridge Analytica then used that data in the campaign that helped elect Donald Trump to the US presidency. This, along with the introduction of GDPR in the European Union, was blamed for Facebook losing daily active users in Europe, flatlining in North America and the resultant slow-down in revenue growth in Q2 of this year. The conclusion? Facebook needed to work on regaining its users’ trust in order to guarantee its future prosperity.

   And then, 50 million user accounts are hacked

   Unfortunately, things sometimes don’t go according to plan. Last week, Facebook discovered its most severe security breach to date, impacting 50 million user accounts. The ‘view as’ tool lets users understand their privacy settings: a bug allowed hackers to use this functionality to take over user accounts, meaning they could see everything in the user’s profile and, potentially, in any third party sites that users logged into with their Facebook accounts, for example Tinder, Airbnb and Spotify. Facebook acted to secure these accounts but the damage has been done: Zuckerberg said ‘I’m glad that we found this and were able to fix the vulnerability, but it is definitely an issue that it happened in the first place.’ What’s more, this is the second serious security breach for Facebook in recent months – in June, a bug made 14 million people’s private posts publicly viewable to anyone.

   A test of the EU’s GDPR

   While it is estimated that only 10% of users affected by this month’s breach were in the European Union, it is the EU that is the biggest headache for Facebook in this saga. GDPR requires companies that store the data of European citizens to declare any security breaches of this nature within 72 hours: Facebook notified the Irish Data Protection Commission which is now assessing whether it needs to carry out an enquiry. If it does, and Facebook is found to have been negligent in its duty of care for customer data, it could face a maximum fine of 4% of its annual global turnover – $1.63 billion. This is the first major test of GDPR, but the EU does have form for implementing large penalties to tech companies. It fined Google $2.8bn in 2017 for violating antitrust rules with its online shopping practices, and earlier this year slapped the tech giant with a $5 billion fine for abusing its power to force smartphone operators to pre-install Google search apps on any phone using the Android operating system.

   A battle on many fronts

   Facebook is under fire from many fronts – federal investigations into its privacy and data-sharing practices, the possibility of increased regulation from the US congress following high-profile hearings on the privacy practices of the big tech companies – and now this latest fiasco.

   Regain trust to keep advertisers

   The priority for Zuckerberg as he looks to 2019 and beyond must be to regain the trust of users around the world. Consumers are increasingly wary of the big tech companies and how they use their data, and if they start to log off in their droves, advertising dollars will follow them.

   Thumbnail image: Shutterstock

2. In the news this week: Comcast wins Sky bid, and Instagram founders resign

   September 28, 2018 13:07 Comments Off on In the news this week: Comcast wins Sky bid, and Instagram founders resign

   There’s never a quiet moment in the media industry, and this week was no exception, with two major pieces of news that could have major ramifications for advertisers, albeit in very different ways.

   Comcast gains full control of Sky

   On 22^ndSeptember, it was announced that Comcast, the American telecommunications giant that offers digital cable TV, internet and telephony services, had won the bidding for Sky, at a cost of $38.8 billion, beating 21^stCentury Fox. Four days later it emerged that Fox would also be ceding its pre-existing 39% ownership to Comcast for $15 billion, giving full control of Sky to Comcast.

   A year of mega-deals

   This is the latest in a series of ‘mega deals’ over the last 12 months, where content distributors and creators are merging in an attempt to confront the existential threat posed by the rapidly growing streaming companies such as Netflix, and the tech giants who are ‘scope creeping’ into TV; in June, AT&T acquired Time Warner for $85 billion, and the following month Disney beat Comcast to buy 21^stCentury Fox for $71 billion. In an industry quirk, it was then Comcast who effectively beat Disney, as 21^stCentury Fox’s new owners, to the purchase of Sky; Sky was originally going to be part of the deal that sold 21^stCentury Fox to Disney.

   A global footprint and more original content for Comcast

   Comcast’s purchase of Sky will be a major boost to their global footprint: Sky has 23 million subscribers in the UK, Ireland, Germany, Austria and Italy, and has launched an over-the-top service in Spain and Switzerland, meaning Comcast will be better equipped to fend off the likes of Netflix and other tech giants. The acquisition also bolsters Comcast’s original content capabilities: Ovum’s chief entertainment analyst, Ed Barton, said ‘they could look at licensing content on a combined basis, which would lower the cost on a per-subscriber basis, if you have something you can show to a European and US audience.’ This merging of content would also mean a larger library to leverage as they roll out into other markets globally.

   Combining technical know-how

   The cultural affinity between Sky and Comcast could also be important for advertisers; it is likely, even inevitable, that they will combine their technical and data assets to forge ahead with an addressable advertising offering which will make TV as targeted as online.

   Instagram founders announce their resignation

   The other big news for the media and tech industries this week was the departure of Instagram’s co-founders from the company, which they announced on Tuesday and which sent Facebook’s share price tumbling. Kevin Systrom and Mike Krieger founded Instagram in 2010, before selling it two years later to Facebook for $1 billion – an almost unprecedented amount for a two-year-old start-up. It has since become the jewel in Facebook’s crown and its fastest growing revenue generator.

   A snub to Zuckerberg?

   Sysrom and Krieger said that they were leaving the company to explore their ‘curiosity and creativity again’.  That is being seen by many as a veiled snub to Facebook and its founder Mark Zuckerberg, who have made a raft of unpopular changes to Instagram, in many cases in an attempt to boost traffic to the core Facebook platform. Sysrom and Krieger wouldn’t be the only ones to leave following differences with the Facebook CEO – last year, WhatsApp founder Jan Joum quit over privacy disagreements with his bosses, who were keen to monetise the service.

   Monetising the jewel in Facebook’s crown

   As discussed at length in the press and in previous ECI Thinks posts, Facebook has in recent years been battered by criticism of its approach to data privacy, fake news allegations and for allowing foreign interference into national election campaigns – and its user base is showing signs of disengagement as a result. Instagram has largely escaped these problems: it has more than a billion active monthly users and successful updates such as its stories feature, messaging and IGTV have seen off competitors from the likes of Snapchat. In this context, it’s unsurprising that Zuckerberg and his team are so keen to squeeze as many ad dollars as possible out of Instagram; Lynette Luna, a principal analyst at GlobalData, said “Facebook’s strategy has been to allow companies it has purchased to operate independently to garner growth, and then monetise. When they start monetising that’s when there’s a little conflict with the founders.” Systrom and Krieger may well have wanted to retain the independence to run Instagram as they wanted.

   It is not yet known who will replace Systrom and Krieger, but it will be interesting to see if changes to Instagram, particularly to its revenue model and integration with Facebook, accelerate in the wake of their departure

   Thumbnail image: Shutterstock

3. What’s Facebook’s problem?

   August 2, 2018 15:03 Comments Off on What’s Facebook’s problem?

   For years, Facebook has been the darling of the tech and media worlds. Is the inevitable conclusion of its latest quarterly report that its star is fading?

   The unstoppable rise of Facebook – until now

   For many years, Facebook seemed unstoppable, unbeatable. Since its beginnings in Mark Zuckerberg’s dorm room in Harvard University, it has grown into a technology behemoth with 1.47 billion daily active users and 2.23 billion monthly active users. Facebook has very efficiently monetised these users’ data, with advertisers flocking to Facebook and contributing to a company value of over $500 billion, and to Zuckerberg’s personal fortune of around $70 billion. But it is Facebook’s handling of its users’ data that seems to be at the root of its recent reversal in fortune.

   What went wrong?

   Facebook’s sheen started dimming two years ago, when it was first implicated in fake news and political meddling. This didn’t seem to have any impact financially until its second quarter 2018 report last week, which made for painful reading for its investors. The report disclosed that the number of users in Europe dropped by 3 million, ending its nine-year streak of quarter-on-quarter growth in numbers of European users (note that this was for Facebook only, and not its other owned properties such as Instagram, WhatsApp and Oculus), and user growth in North America flattened. It gained just 22 million users worldwide in quarter 2 (largely in Asia), less than half of the quarter 1 figure. Worse, in the eyes of investors, was that it missed revenue forecasts for the quarter, bringing in $13.2 billion versus the $13.4 billion that analysts had projected. All this led to $120 billion being drained from Facebook’s value and a 20% decrease in stock price in after-hours trading on Wall Street, as investors were spooked further by Facebook’s predictions that its revenue growth would continue to decelerate.

   Scandals, data, addiction and saturation

   With the problems that have beset Facebook over the last few years, it was perhaps inevitable that this point would come. The first and perhaps most serious headaches for its leadership have been the twin issues of political interference – notably in the US presidential election and the UK’s Brexit referendum – and fake news. This culminated in the Cambridge Analytica scandal of earlier this year. Facebook was fined $656,000 – the maximum possible – for breaching UK data protection act, but has had to spend much more to offset the negative press. It exacerbated Facebook’s increasingly toxic reputation as a company that interferes in and affects society and politics, and it is likely that many users deleted their accounts in disgust, particularly in the UK where Cambridge Analytica was based.

   Another challenge for Facebook this year has been the implementation of GDPR in the EU, which set guidelines for the collection and processing of the personal information of individuals within the European Union. It is believed that GDPR was directly responsible for the loss of 1 million of Facebook’s monthly active users in the EU, with many possibly choosing to opt out instead of confirming assent to Facebook’s new data collection practices.

   Facebook, as with all media largely consumed via mobile phones, has of course been affected by the growing concern among consumers of the effect that spending a lot of time on smartphones and social media is having on their mental health and concentration. Across the world people are choosing to cut down on the amount of time they spend on their phones.

   Scandals, data protection and switching off aside, it may be that saturation is Facebook’s most serious long-term issue. Of the 3.5 billion internet users globally, 2.5 billion use at least on Facebook app, which means that user growth in many places, especially in mature markets, has naturally stagnated – there simply aren’t many people who don’t use Facebook, at least occasionally. This means that the business model must focus on increasing revenue per user, which Facebook has struggled with – newer initiatives such as Stories (Facebook’s answer to Snapchat) have proven difficult to monetise compared to the Newsfeed. And compared to Google’s parent company Alphabet, Facebook appears to be over-reliant on ad revenue: $13 billion – over 98% of its overall second quarter revenue of $13.2 billion – was from advertising, compared to 86% of Alphabet’s. This is thanks to Alphabet’s more diversified product offering, which includes hardware, the Google Play Store and Cloud services that are non-ad revenue. This discrepancy could be part of the reason that Google appears more resilient than Facebook, despite the fact that its record isn’t squeaky clean either.

   All is not as gloomy as it seems

   Despite the recent doom and gloom around Facebook’s latest financial reporting, the future isn’t too bleak for the social network. While the financial and user growth figures didn’t meet investors’ expectations, they’re still extremely healthy, particularly considering the storms that it has had to weather. The furore around its Q2 report is rooted in the fact that its growth has slowed, rather than in any actual crisis. Facebook has announced that it is investing billions into safety and security initiatives; these will future-proof the company but do eat into profit margins in the shorter term. Perhaps Facebook’s real problem is that it has been the subject of – and purveyor of – too much optimism and exuberance in recent years: it’s now time for it to settle down and accept its responsibilities as one of the world’s major technology companies.

   Thumbnail image: Wachiwit/Shutterstock.com