Last fall I warned you Facebook has a fundamental problem.
More and more people were realizing it and it would have an effect on the company’s business going forward.
Here’s the jist of it:
…the biggest problem with Facebook is it’s all fake intimacy; a pale simulacra of real life interactions with people you are supposed to care about.
But, I don’t care about 99% of the people I went to high school with. I went to college 1100 miles from those people and barely looked back. The people I truly value from that part of my life mostly feel about Facebook the way I do.
That’s what makes them people I value.
They value the value of their closely-held opinions and don’t dilute it by publicly sharing their banality. They realize that being friends is more than dropping political stink bombs in someone’s digital living room and saying, “I dare you to not breathe.”
So, here you are on a platform that is supposed to be all about you and the last thing anyone really wants to be on Facebook is … themselves.
In the November 2011 issue of the I led off that issue with this criticism of Facebook as a reason the company would soon hit the proverbial customer wall:
Facebook was built on the false premise that we want to be in contact with all of the people we ever met ALL THE TIME. But no, we really don’t. We all, as T.S. Eliot put it, “prepare a face to meet the faces that you meet.”
We are all different people depending on our venue. Public social networks force us to adopt one persona or face the wrath of the self-righteous.
A billion plus people who are all wrong on the internet. In real time. Lovely!
Social media is taxing. It’s fundamentally poor quality social interaction. It’s either endless moral preening and virtue signaling or a time-wasting diversion.
That’s not to say I don’t love a good cat video, because I do.
Either way it’s an addictive dopamine-producer, a digital drug meant to divert many people from the fact that their lives have so little meaning.
Once the curtain was pulled back and Facebook, along with Twitter and Google, were revealed to be in bed with certain political forces intent on enforcing a particular point of view, the exodus from Facebook by people began.
The news now is all about Facebook’s less than stellar Q2 earnings report. While it’s year-over-year growth numbers are still impressive to say the least. The market rightly dug behind the top line numbers and reacted not only to Facebook’s conservative earnings guidance going forward but also the lack of growth in the Americas and Europe.
However, , due to the introduction of GDPR. On a year-over-year basis, the company added 16 million users in the region.
MAUs in the U.S. & Canada region grew 5 million over the past year
That’s zero to slightly negative growth in the U.S. and Europe.
Yes, market penetration in those markets is high. No question, but Facebook is still being valued, or at least was, as a growth company.
Top line revenue, especially from advertising, keeps soaring but so do costs, as Free Cash Flow fell, so, margins are being squeezed as Customer Acquisition Costs (CAC), vital to a business model like Facebook’s, are rising.
This is why the stock was gutted.
Growth is flat in the West but rising strongly in East. Those customers will be lower revenue customers with higher acquisition costs.
But, I think the bigger story for Facebook it’s more pernicious than that.
There are people who simply will no longer use a platform that is hostile to them as a user. Facebook, as I pointed out in this post from March, continues to push voices it doesn’t like into smaller and smaller ghettos immune from multiplication.
Facebook is considering segregating off all traffic onto a different feed, fundamentally altering how billions of people interact with them.
They are doing this 1) for money, by forcing page owners to pay to be in users’ main feed. And 2) to destroy the traffic of those who, again, are the wrong people who say/think the wrong things…
If there is a core American value left at this stage of the Culture War it is the our inherent sense of “fairness.”
Donald Trump uses ‘fairness’ language to persuade people he’s right in starting trade wars with Europe and China.
For its faults, the Bernie Sanders revolt stemmed from the unfairness of bailing out the banks to the tune of trillions while everyone else lost their homes.
Wall St. gets fatter while Main St. gets squeezed. No wonder everyone is so ready to vent their spleen on Facebook or Twitter at anyone who will listen long enough to give them their dopamine hit of attention.
So, Facebook’s targeting conservatives and libertarians (which they’ve been doing from the very beginning), is back-firing on them. Up until now, they haven’t had to face reality that abusing your customers never ends well.
There were still greater fools to sign up.
But, like any other easy-money-created malinvestment, the false signals transmitted to the producers by consumers spending overly-cheap money, they eventually conflate success with power to dictate terms to consumers.
And that never, ever ends well.
Facebook and other platforms of Progressive control are feeling the heat of a populist wave that is now fighting back using the same techniques and fairness as they become more radicalized.
Facebook helped set the rules in this War and now they are beginning to feel the burn of what happens when the other side strikes back.
I’m specifically talking about boycotts and pressure campaigns from the Left which have cost people their jobs, like Rosanne Barr, being used now by the MAGA crowd who will play at that level, c.f. James Gunn.
Facebook is now being targeted by them and it’s showing up in the numbers. Just ask the NFL and Netflix.
The Cambridge Analytica scandal is having reverberations throughout Facebook’s business. Because the real value of Facebook is not it’s platform to issue shout-based ads at people constantly.
No, the real value of Facebook is its massive database of real-time preference data which can be funneled to advertisers and other intelligence services, business of ‘official,’ and the more people wake up to this the less real information they will be willing to share with Facebook.
Maybe this is why Mark Creeperberg was so aggressive in selling his stock after the Cambridge hearings exposed him as both a fraud and a control freak.
Bloomberg has also picked up on this insider selling deluge, and writes that .”
Chief Executive Officer according to data from InsiderInsights.com, which analyzes such transactions.
Creeperberg sold an astounding $3.5 billion in stock last quarter. This came after his last attempt to disenfranchise shareholders through the issue of non-voting rights, Class C, stock, failed.
This guy is a nasty piece of work who wanted to cash out via dilution to run for President while retaining ownership control of an Orwellian Panopticon.
Yeah, seriously, screw that guy.
I don’t invest in or recommend companies with poor leadership. Companies are a reflection of leadership. Yes, Facebook has made many people very rich. But, a 20% haircut in a day while insiders are selling billions is a major tell that there is something seriously rotten in the state of Facebook that won’t be fixed with a tweak to their feed algorithms.
Is the end nigh? No. But if you’re an investor you have to consider whether this company has passed its peak.