Facebook’s dominance over other social networks is undeniable. As the poster child of social media and its reign over it, expectations for Facebook have always been high. Despite its unquestionable prominence today, the last year hasn’t exactly been what the social media giant expected.
Very recently, Facebook has been attracting a lot of bad press due to controversies and scandals. From data leaks to the instability in the market, it hasn’t completely been a joyride, to say the least. Users are slowly losing trust in the brand and from all the reasons they might just be justified in doing so.
Facebook shares plunged 20 percent recently after it warned about a slowdown in ad revenue and it lost $120 billion in stock market value in one day. This plunge is one of the worst in the U.S. stock market history. This brought CEO Mark Zuckerberg from the third richest person in the world to the sixth position as he faced a paper loss of $15.9 billion from his fortune. Although the stock market can be very unpredictable and it’s not unusual for a company to suffer such blows once a while, it still becomes a measure for people to judge a company’s success on. Many speculations have been made for what the real reason behind this slowdown could be. This sudden fall opens doors for various questions, most important of those being, “How is Facebook going to deal with its recent slowdown?”
So, what is actually going wrong and what are the ways Facebook can deal with it.
1. Data privacy
2. Spreading misinformation
This isn’t directly the fault of Facebook, but as Zuckerberg himself admitted in his testimony before a joint Senate Committee back in April, Facebook didn’t do a lot to help with the situation, either. There were several fake articles coming up on users’ news feeds during the 2016 election, which was initially believed to sway the result of the 2016 U.S. elections in Donald Trump’s favor. Eventually, the results were out and the speculations turned to allegations making it hard to deny the role Facebook played in spreading the so-called “fake news”. To quote Zuckerberg’s testimony:
[I]t’s clear now that we didn’t do enough to prevent these tools from being used for harm as well. That goes for fake news, foreign interference in elections, and hate speech, as well as developers and data privacy. We didn’t take a broad enough view of our responsibility, and that was a big mistake.
Owning up to it is a beginning, but there’s a long way to go.
3. The ads fiasco
Facebook claims that its recent slowdown in revenue was due to the new privacy law in Europe called the GDPR (General Data Protection Regulation). This law basically prevents tools like “Partner Categories” that target ads to people based on data from outside Facebook like shopping sites and other commercial websites. Because of this crackdown, Facebook says it has lost active users in Europe. Advertisers who spent a large percentage of their advertisement expenses for ads on Facebook do not seem happy with the new developments. Targeting ads could soon be a thing of the past for Facebook as it says it will get rid of the Partners Categories tool globally. It has already done away with this tool for a couple of European countries and reports claim that it has resulted in a drop of 3 million users in the region.
Amid all this, Facebook is planning on bringing in unskippable ads to stories. Stories are expected to take over the entire social media business because of how simple and concise they can be. And, hence, like other story-based apps like Snapchat, it is also looking to make ads unskippable in order to generate more revenue. According to recent trends, the news feed, where the social network generates a large sum of its revenue, may be taken over by Stories soon. And, as people can easily scroll past ads on newsfeeds, it’s not effective advertising. Facebook has also started mid-video ads recently. For an ad break to pop up, the video should be at least three minutes long and the ad can’t play until the one-minute mark. This is a great opportunity for advertisers as people are watching many more videos on Facebook compared to other social media platforms. The revenue generated from a particular ad is split between the advertiser and Facebook where Facebook gets 45 percent of what is earned. All these efforts may be very helpful in getting Facebook out of its current situation.
4. WhatsApp and Instagram
As Facebook faces some turbulence, all hope’s not lost as its products WhatsApp and Instagram are its saving grace. WhatsApp and Instagram have been doing consistently well in the past couple of years. Instagram is becoming more ad-friendly and there’s a lot that can still be done with the popular picture sharing app. Data marketing company 4C estimated a 200 percent increase in Instagram advertisement spending. Facebook wants to increase revenue by adding advertisements to the messaging application, WhatsApp. WhatsApp business, launched earlier this year, already has 3 million active users. It’s also testing out in-app purchases for WhatsApp Business. These Facebook products have the potential to heFacebookook get back its momentum and grow further.
Facebook: A need to change