Althouse: "How Facebook Went So Wrong So Fast/There are four theories, and three of them are alarming."

July 27, 2018

"How Facebook Went So Wrong So Fast/There are four theories, and three of them are alarming."

Bloomberg analyzes.

54 comments:

Oso Negro said...: Was the Douchebag Theory one of them?; 7/27/18, 8:16 AM
Henry said...: From the article:

...changes to limit the mindless use of Facebook could hurt business.

LOL. I'd like more details on that.; 7/27/18, 8:18 AM
Oso Negro said...: @Henry - Good Grief, man, have you never been on Facebook?; 7/27/18, 8:19 AM
Sebastian said...: What if Facebook is a bubble all by itself?; 7/27/18, 8:20 AM
Seeing Red said...: I don’t and never did have an account.; 7/27/18, 8:21 AM
MayBee said...: Haven't we been through this before? I'm not going to look it up before I ask, but wasn't the original IPO disappointing or something?

(I'm getting a lot of Blogger errors again); 7/27/18, 8:25 AM
GRW3 said...: Not mentioned was the very obvious intent to limit information and connectivity to about half of the user base.; 7/27/18, 8:25 AM
Henry said...: @Oso Negro -- Oh I know. I just like that phrasing.; 7/27/18, 8:25 AM
I'm Full of Soup said...: Nevertheless, I think its stock will creep back up to $190 or so within 6 months.; 7/27/18, 8:27 AM
rhhardin said...: The business model went to un-PC and the mob attacked.

The product is vapor so it went to zero fast.; 7/27/18, 8:27 AM
rhhardin said...: Facebook turned a large nearby cornfield into large server farm buildings and a huge power substation to run it, still being worked on. Roads widened. They ought to be able to sell that to somebody.; 7/27/18, 8:29 AM
rhhardin said...: A stock's value is the current worth of the discounted total of all future earnings. If a company's growth rate is larger than the discounting rate (interest rate), the company's value is infinite. That gives a large up-side speculative edge.

When the company's growth stops, the stock drops instantly back to a dollar a share.; 7/27/18, 8:33 AM
Kevin said...: I quit after 10 years, the morning before the stock dumped. I don't miss it. I like to go to music gigs for my favorite bands, and this is going to make it a little harder to hear about shows in my area, and a little harder to discover new artists. But that's it. It's not worth the trade off.

All my free time, on computer, on iPhone, scrolling, scrolling, scrolling, looking for what? Did I ever find it? Would I ever find it? Now all I want to find is the thousands of hours I lost.

I had always looked down on people who flip on the TV with no objective in mind, and go from channel to channel to channel to channel and then the next thing they know the whole evening is gone. Facebook is no different. It's just a little more customized to your interests.; 7/27/18, 8:34 AM
Sal said...: I personally hate Facebook but the company owns a shit-ton of other companies, some of which may have the potential to make a lot of money.; 7/27/18, 8:34 AM
rhhardin said...: One of the nicer stock manipulation scams that Facebook can try is to start buying low P/E companies (unglamoroous but profitable) with their stock. That adds the earnings of those companies to the company's earnings, and is indistinguishable from growth of the buying company to the casual eye.

Growth boosts the company's stock, enabling it to buy yet more low P/E companies for stock next year, and the stock rises more.; 7/27/18, 8:38 AM
Ken B said...: Vapid article.

I would be happy if it were a death spiral but it’s not. Nothing real happened. Expectations shifted.; 7/27/18, 8:40 AM
rhhardin said...: If Facebook takes over American Electric Power or Consolidated Edison, you'll know they're into it.; 7/27/18, 8:40 AM
Kevin said...: I agree with Ken B., this is nothing long term. Especially if based on the reasons in the Bloomberg article. Facebook has fundamental weaknesses, and they are terminal. But they don't appear to be on the company's or the critics' radar at all in this temporary crisis.; 7/27/18, 8:44 AM
Ron Winkleheimer said...: From the article:

The company has been saying for months that it was increasing spending drastically for a range of priorities, including hiring more people and devoting more technical resources to prevent its digital hangouts from being overrun by misinformation, politically motivated propaganda and incitements to violence.

And:

The company is spending more, and changing its priorities, to ensure its digital hangouts are happier and healthier places. Those decisions will be good for the world, and eventually for Facebook’s finances, too.

Translation, Facebook has decided to depart from a common carrier model and go all in as a tool for the status quo. Can't say I'm surprised. There was a throw away line on some TV show whose name I can't remember at the moment. Ex-NSA employee/genius mentions that it was hard to get intimate details of peoples' lives until he invented social media and people began to self-report them. They call it political propaganda, the other side says its speaking truth to power. You know, youtube is full of videos purporting to prove that the earth is flat. Should those be removed? What about the ones with compilations of how the MSM reacted to Trump's surprise win? What Facebook is doing is picking a side and attempting to purge the other side from its platform. That's going to reduce its user base substantially. People may not quit, but if they can't get their daily dose of "propaganda" and "misinformation" then they aren't going to be visiting Facebook nearly as often. Fewer views = smaller ad revenue. Get woke, go broke.; 7/27/18, 8:47 AM
Ron Winkleheimer said...: Facebook has fundamental weaknesses, and they are terminal. But they don't appear to be on the company's or the critics' radar at all in this temporary crisis.

The real fundamental issue is that Facebook is based on a centralized model which was a requirement when it was first designed due to the technology available at the time. That is no longer true. Why should I have to "login" to Facebook to inflict cat videos and homages to politicians I like on my friends and relatives? Open sourced software using a peer-to-peer architecture will make Facebook obsolete.; 7/27/18, 8:52 AM
chickelit said...: Facebook is running out of fresh idiots willing to compromise their personal data. It’s a good sign, actually.; 7/27/18, 8:54 AM
Henry said...: Open sourced software using a peer-to-peer architecture will make Facebook obsolete.

Just like a gas grill and your neighbors make McDonalds obsolete.; 7/27/18, 8:59 AM
Fernandinande said...: Gut bacteria byproduct protects against Facebook, study finds.; 7/27/18, 9:01 AM
Kate said...: I recently quit twitter, which I've loved for years. Althouse, ahead of the curve, already quit fb. The time, the toxicity, the purposelessness...we're all realizing. What's that called? Preference Cascade?; 7/27/18, 9:02 AM
Jimmy said...: Who cares?? Remember this. They hate you. Actively and completely. They despise you. The tech elite, and the rest of the chosen people are building a perfect society, and you ain't gonna be part of it. When HRC described half the country as deplorables, she wasn't kidding. She actually toned it down, a lot. She thought it was a mild description of the way her and the other elites feel about you.
You aren't hip enough, rich enough, to ever be part of their club. Wrong school, wrong friends. Wrong. You are simply a product. To be used to build their perfect world.
Trump could have been a charter member of that group. He decided that America was more important than a world society run by those nimrods. And they really really hated that. And they, and their lackys will never ever forgive him for that.
stock price? check your portfolio for AOL or yahoo.; 7/27/18, 9:07 AM
Ron Winkleheimer said...: Just like a gas grill and your neighbors make McDonalds obsolete.

The Internet is littered with the bones of once prosperous companies that were rendered obsolete via changing technology. AOL anyone?

Did you know way back in the olden times services such as CompuServe didn't allow their users to email people on other BBSes? Even after the internet became a thing and providing the means to do so would have been simple. The reasoning was that if you wanted to email someone then you should get them to join the service, thus increasing the service's revenue. Eventually they had to give that up, but it was to late.

Or, if you objection is to open source software, much of the internet runs on it now. Chances are pretty good that we are using an apache web server running on some version of Linux to communicate via this blog right now.

Facebook is convenient but there is no reason an open source peer-to-peer social network couldn't be even more convenient. The main issues are security on your personal computer since you will be joining a peer to peer network and Facebook's entrenchment. But AOL seemed pretty entrenched at one time too.; 7/27/18, 9:12 AM
AMDG said...: Facebook’s value proposition is based on selling data access to its customers.

Facebook is not a thing with teenagers. It’s user base is aging.

User privacy concerns are requiring Facebook to put tighter controls on its use of user data.

Both these factors make their product less valuable to their customers.

I never understood why Facebook was valued so highly. Stock price is a function of future cash flows. The speed at which technology changes could make Facebook obsolete in a matter of months. There is a possibility that they could be 18 months away from being worthless due to the next big thing. I am not sure this factored into their stock price.; 7/27/18, 9:24 AM
stevew said...: I think the issue is much simpler and Ms. Althouse's experience and behavior explains it: Facebook has ceased to be a sought after web destination for a lot of people, even to the point of becoming and avoided destination. In the parlance of a certain generation, it has jumped the shark.

-sw; 7/27/18, 9:39 AM
gerry said...: Another shorting opportunity missed.; 7/27/18, 9:50 AM
Mike (MJB Wolf) said...: Zuck should brace for another $100M fall next quarter too. He's just clueless how to handle the platform he built.; 7/27/18, 9:58 AM
Mike (MJB Wolf) said...: I know this one was a $100B dip, but next time only $100M loss...; 7/27/18, 9:59 AM
gerry said...: Things are going unexpectedly wrong. I lean toward this explanation, with sprinkles of the first three. I tend to believe Facebook was caught off guard because of the simultaneous deterioration of user growth, particularly in the U.S. and Canada, which generate most of its revenue; in its revenue growth rate and expectations for a further slowdown; and in its profit-margin forecast.

Might the "deterioration of user growth" be due to crapping on many users' politics, moral values, and privacy?; 7/27/18, 10:02 AM
Leland said...: It seems Bloomberg's theories are really just; Facebook was overvalued. Indeed, some of the things described as going wrong wasn't Facebook, but investors not paying attention. I think their is truth to investors not paying attention; I talked to one of them who was trying to convince me to give him my business.

What Facebook did wrong was enter politics. It's one thing to sell user information to marketers selling products, so they can tailor ads directly to buyers. But when the marketers and ads are for politicians, bad things start to happen. First, how many people like hearing or seeing political ads? I'm fairly certain that the majority of people (remember, a majority of citizens do not actually vote at all) can't stand political ads. They are mostly negative, banal, and overplayed.

Then one campaign reasonably asked and got permission to get extra data to do even more specialized election campaign work. I wouldn't say Facebook necessarily chose sides at this point. Rather, I think they found another revenue stream from an organization that had good ideas on how to use Facebook's available data. Eventually, the other side figured this out, and Facebook allowed them access too, which is why I don't think they chose sides at that time. But whether they chose one political spectrum over another; they did side with the political class over those users that had no interest over politics.

Then both sides decided to out Facebook so they could sling mud at each other. Now, users knew what was going on. Further, voting users had reason both ways to feel alienated by Facebook. You can say it is bad to alienate half your users by choosing sides; but Facebook alienated apolitical users and then both sides of the spectrum.

There was further enhanced by efforts to censor and control speech. Now, not only were users targeted by ad campaigns they didn't want. But users wanting to speak out on their own interests could be blocked from doing so, and in ways that hid the actual censoring that occurred.

It's hard to build a better storm to drive away users. I don't seem to get that take from Bloomberg. At best, Bloomberg explains that new revenue stream efforts failed (like video on demand and "stories" timelines), but it misses that Facebook destroyed its core business of free and open communication among users that enjoyed that benefit.; 7/27/18, 10:19 AM
Caligula said...: Facebook's p/e ratio has been declining for a long time as the company has transitioned from a high-growth model to a slower-growth model. The recent decline perhaps reflects a new awareness of investors that Facebook is really not so much of a growth stock anymore and therefore doesn't justify such a lofty price.

Although there may also be a perception that the public is fickle and killer-apps come and go with some rapidity, and Facebook remains vulnerable to being replaced (wholesale or piece-by-piece) by something else(s) that does/do what it does but does it better.; 7/27/18, 10:31 AM
Bay Area Guy said...: The best thing about Facebook is checking out old girlfriends. Some -- still fine after all these years! Yowza! Some -- oh my god, what happened, girl? You used to be hot, now, it would take a carton of Viagra to just turn on the engine.

I like seeing my junior high and high school buddies. Many turned out surprisingly well.

I also stay away from politics on FB -- too many of my liberal friends and family members get really bent outta shape. They dish it out, but can't take it.

I also stay away from food pictures. We have enough fat people in America who eat more than their fair share.

And since I don't own stock in FB, I don't give a fuck about its stock price.; 7/27/18, 10:43 AM
rcocean said...: It can't go broke soon enough.

I was surprised to learn Facebook is for old fogeys. All the cool kids are going elsewhere.; 7/27/18, 10:56 AM
Yancey Ward said...: Facebook has gotten caught up in the politics and is in the process of alienating half the customer base in the US.; 7/27/18, 10:59 AM
Ron Winkleheimer said...: Or, if you objection is to open source software, much of the internet runs on it now. Chances are pretty good that we are using an apache web server running on some version of Linux to communicate via this blog right now.

And I wouldn't be surprised if the back end DB is MySQL or even MariaDB.; 7/27/18, 11:07 AM
mikeski said...: gerry said...
Things are going unexpectedly wrong. [...]

Might the "deterioration of user growth" be due to crapping on many users' politics, moral values, and privacy?

That is what Instapundit usually means by "unexpectedly", yes...; 7/27/18, 11:10 AM
Gospace said...: Any online company based solely on online services is overvalued. Why? Because they could be replaced tomorrow with someone offering something better or even exactly the same.

Myspace still exists. But is focused to musicians and artists. Whereas Facebook is still focused on connecting everyone. But so is Mewe.com which promises greater privacy. But then, how will it make money?

Facebook runs ads. Sometimes I click on them. I mean, who doesn't want comfortable shoes? And I'm willing to back a kickstarter project. But comfortable shoes for me means they come in wide, and 100% of the shoe ads I've clicked on Facebook don't show wide shoes. So by definition, for me, they're not comfortable. But somebody is buying things from those ads. I've brought from one Facebook advertised site- https://gadsdenandculpeper.com/ . If Facebook does target ads based on what it sees, then none of my liberal friends have seen ads for their site.

Facebook is providing a service- for free! TANSTAAFL. Nothing is free. If you're using a service for free, you're the product. Advertisers are the customers, not you. They will only continue to advertise if they get results. I don't know what Facebook's ad rates are- I'm not a customer. But it has to be less than massive TV coverage. If campaign consultants are actually trying to do their jobs and elect candidates I expect to see an increased number of targeted ads this campaign season. Syracuse TV stations cover a bunch of congressional districts and even more state legislative districts. Even if your targeted constituency sees your ad, the message is lost in the multitude of ads for other candidates in other districts. Facebook ads can be targeted by zip code. And- you can likely target by interests. Send your pro- gun rights ads to anyone who likes the NRA page in your district's zip codes, and point out your opponents extreme anti-gun positions. Or if some likes the Planned Parenthood site you can target your ads to them, supporting a woman's right to kill her unborn child. Facebook doesn't need to sell the information they have, just sell access to people based on that information.

I have 40 likes and 9 groups. 3 Musicians, 20 books, and a dozen movies. It knows where I've visited and told my friends. What restaurants I've eaten at. Algorithms can put all that together and allow targeted ads to me- and anyone like me. Facebook, Google, Amazon, Ebay, the two primary email services I use, they all know a lot about me. And different things. And sell access to me. I really can't complain about selling access to me. OTOH, actually selling all the info on me is another thing. The two are not the same. Those are the online companies. Walmart, Riteaid, Wegmans, Tops, via shopper loyalty cards and purchases by credit/debit card rather than cash know my shopping habits, and can sell access to me based on that. And the credit card companies? Think of what they know about you. And where you bought things.

There really is no privacy. Just don't do anything to attract attention and you're fine. Like using a traceable credit card to buy child porn from a website in India. Which is why my former doctor is sitting in jail...; 7/27/18, 11:18 AM
Jim at said...: They left out one:

The 'wrong' person won in 2016.; 7/27/18, 1:15 PM
Gabriel said...: @Ron Winkelheimer:The Internet is littered with the bones of once prosperous companies that were rendered obsolete via changing technology. AOL anyone?

Millions are still using AOL, and paying $20-ish a month...; 7/27/18, 1:58 PM
TreeJoe said...: Just to throw out some "technicals"

Facebook's "stock crash" brought it down to stock price levels it was at in May 2018.
It's "disasterous" growth report showed growth of ~22 million daily active users to 1.479 billion. To put that in perspective, from Q3 2017 to Q4 2017 it grew 33 million active users.

During said quarter, there was alot of bad shit going on with facebook but they continued to grow.

Facebook exceeded it's EPS target for the quarter.

I'm not saying facebook's future is rosy. But the amount of articles about the demise of facebook or how they've hit a wall is ridiculous.

There are ~3.5 billion people with internet access. About 2.3 billion have facebook accounts and 1.48 billion use facebook daily. And they continue to grow.; 7/27/18, 2:07 PM
Bay Area Guy said...: @TreeJoe,

Good numbers -- cuts through the fog of fake news.

Maybe, I should buy Facebook now.; 7/27/18, 2:40 PM
JaimeRoberto said...: I just assumed the reason was climate change or the Russians. Those seem to be the default scapegoats for everything. And Trump, but that just gets us back to the Russians.; 7/27/18, 3:12 PM
PackerBronco said...: For our family Facebook became intolerable after November, 2016. Once it was like a nice family gathering, then it became family gathering with crazy SJW relatives.; 7/27/18, 4:30 PM
Anonymous said...: The only way to have any privacy is to stay off the web. Period. I can't do it because I need my daily dose of Althouse.; 7/27/18, 7:43 PM
Anonymous said...: @Tree Joe Financial writers, like sportswriters, like political writers have to turn out something every day. If they have to make stuff up to get us to read it it doesn't bother them one little bit. Facts only get in the way of a good narrative.; 7/27/18, 7:46 PM
Michael K said...: Blogger PackerBronco said...
For our family Facebook became intolerable after November, 2016. Once it was like a nice family gathering, then it became family gathering with crazy SJW relatives.

I have a few leftist relatives and we either talk about family stuff or I block them. Easy.; 7/27/18, 7:57 PM
Michelle Dulak Thomson said...: Ron Winkleheimer, Gabriel,

I still use AOL, and I pay zero.

Why do I use it? Well, close on 20 years back, when dialup was still a thing, my husband and I were playing the Carmel Bach Festival every summer, and AOL had the greatest number of local dialup connections in Carmel. That's it. I saw no need to switch to anyone else, especially once they grandfathered existing accounts in as free-for-life.; 7/27/18, 9:47 PM
Zach said...: I wish I could filter it to see only the content that my friends write themselves and not see any of the content they've "shared."

Somedays it feels like nothing but high pressure salesmanship for dubious politics.; 7/27/18, 10:27 PM
Zach said...: Interesting that the profit margin is only 35 percent. This, from a company that generates no content and produces huge revenue. I wonder what they're spending all the money on?; 7/27/18, 10:33 PM
Unknown said...: its all about the data the collect.

Data scientists say data is the new oil.

They can use "like", "quizzes", and your connection to predict your behavior.

You are the product, not the customer.; 7/28/18, 12:29 PM
Unknown said...: google and facebook sell profiles.

Ads, content, and news are just things to get you to supply more data about your preferences.; 7/28/18, 12:33 PM