Facebook Reaps $1 Trillion Reward for Grow-At-Any-Cost Culture
(Bloomberg Businessweek) -- Facebook Inc.’s critics have long pleaded with the company to revise its data-mining business model, tweak its algorithm to prevent misinformation and hate speech from going viral, and stop its practice of copying and acquiring competitors. But its investors have consistently delivered a different message: Keep up the good work. Facebook’s stock price has climbed relentlessly, and on June 28 the company became the fastest to reach a $1 trillion market value, just 17 years after its founding and nine years after it went public.
The news that triggered the milestone was a judge’s dismissal of a lawsuit from the Federal Trade Commission scrutinizing Facebook’s monopoly power. The suit could be refiled, but, for now, Chief Executive Officer Mark Zuckerberg is celebrating. “I'm grateful to get to build things that so many people find meaningful in their lives,” he wrote on Facebook, receiving more than 300,000 “likes” and “hearts” from his followers.
Every scandal, regulatory hearing, and lawsuit that hasn’t changed the way Facebook operates has seemed like a public-relations speed bump en route to the stock price validating Zuckerberg’s work. With shareholders seeming to cheer its every move, Facebook has no incentive to listen to its critics or change its strategy. Nor does any upstart founder looking to grow the next trillion-dollar business.
Despite Zuckerberg’s proclamations, reaching $1 trillion is not a reflection of how meaningful people find Facebook’s products. Rather, it’s the result of his grow-at-all-costs culture and ruthless business tactics. Zuckerberg runs his company like an emperor paranoid about obsolescence. Every gain in territory—a product tweak that ensures a half-second longer spent in an app, or a slightly faster upload speed in an emerging market—matters. “The internet is not a friendly place,” he says in an employee handbook. “Things that don’t stay relevant don’t even get the luxury of leaving ruins. They disappear.”
Internally, the growth priority is justified by feel-good mission statements, which declare that achieving better numbers equates to “connecting the world” or, more recently, “bringing the world closer together.” But Facebook employee bonuses and promotions hinge on achieving incremental gains, and workers say morale swings with the stock price. Those who suggest changes that may improve users’ well-being but threaten the upward trajectory find that their ideas face resistance. Sophie Zhang, who advocated for shutting down networks of bots supporting despot politicians, and Yaël Eisenstat, an election integrity staffer who suggested the company consider fact-checking politicians’ claims in ads, are among many former employees detailing their frustrations publicly.
Facebook’s biggest regulatory threats may still be ahead. Several bills aimed at curbing the powers of big tech companies are moving through Congress, albeit at an uncertain pace. The more serious challenge to Facebook may again come from the FTC.
U.S. District Judge James Boasberg dismissed the FTC’s case saying its lawyers failed to show that Facebook has a monopoly in social networking. The regulators have 30 days to either address that issue or start working on an entirely new argument.
It might be time for a fresh angle. In the now-dismissed complaint, filed at the end of the Donald Trump administration, the FTC says that Facebook, by acquiring Instagram and WhatsApp and copying any other product that became popular, deprived consumers of the innovation and quality they might have enjoyed if the products were still competing.
The regulator suggests that breaking up Facebook by spinning off those apps would resolve the issue. But it would be hard for the FTC to prove that an alternate reality would have been better for consumers. Plus, at Facebook, the innovations that earned its dominance aren’t in product design. They’re in the growth strategy. A breakup won’t change Facebook’s priorities.
Lina Khan, the new FTC chair, was appointed because she thinks about monopoly power differently than her predecessors. She built her reputation through academic writing that explains how existing laws, focused on preventing companies from cornering a market and overcharging for their products, aren’t an adequate check on the way tech businesses grow today: by offering free or low-margin services and building market influence through business line expansion, especially by providing the infrastructure on which other companies, including competitors, operate. Her most well-known paper was about Amazon.com Inc., but similar analysis can apply to other tech companies in the trillion-dollar club, including Facebook.
To understand its economic power, forget defining its share of the social networking market, which can be sliced and diced a million ways. Instead, ask businesses that rely on Facebook, Instagram, and WhatsApp to interact with their customers—through advertising, direct sales, or audience development—what it’s like to have their livelihoods in Facebook’s hands. An unexpected algorithm tweak can lead to layoffs at a news organization; a faulty content-moderation call by artificial intelligence can leave an Instagram creator unable to log in and reach their audience; a breakdown in Facebook’s advertising system can ruin holiday sales for a small business.
There are still other ways to look at Facebook’s power, like considering its share of the average American’s information diet or the hold it has over personal data. Either way, Facebook’s regulatory weakness is that it has prioritized making people more dependent on its platforms, without building adequate systems to prevent things from going wrong or addressing its responsibility when things do.
Whatever the FTC does or Congress proposes will face fierce pushback from Facebook’s army of lawyers and lobbyists. In the meantime, according to the market, it’s Zuckerberg’s job to keep Facebook growing. It’s only the fifth U.S. company, after Alphabet, Amazon, Apple, and Microsoft to reach $1 trillion in market value.
That milestone is a success not because it’s good, but because that’s how we define success. It’s incredible the way reaching 100 million followers on Instagram is incredible or having the most viral post on Facebook is incredible. To make a different, healthier Facebook, regulators need to understand not just the company’s size but also its impact, and give it new targets to hit. A company so culturally driven by metrics will be able to understand them.
Read more: Antitrust Crusader Lina Khan Faces a Big Obstacle—the Courts
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