It's Zuckerberg and Facebook's Time to Bend
(Bloomberg Opinion) -- Mark Zuckerberg has a problem, and he can fix it.
Public furor over Facebook Inc.’s content policies has led some of its biggest advertisers to take action, with brands from Starbucks Corp. to Unilever, Coca-Cola Co. and Verizon Communications Inc. all vowing to pull ads from the social media giant’s namesake Facebook platform as well as Instagram for at least the month of July.
The move was initially spurred by a campaign led by a coalition of civil rights groups — including the Anti-Defamation League and NAACP — to force Facebook to do more to curb hate speech and language promoting violence. As the effort has gained traction, the numbers joining the boycott are increasing on a daily basis. On Monday afternoon alone, Best Buy Co. said it would pause its ad spending on Facebook, while Axios reported that Microsoft Corp. had suspended its advertising as well.
Facebook has come in for criticism about its practices before and got past it largely by riding out the negative publicity while offering some incremental fixes. For example, Facebook already survived the Cambridge Analytica data-privacy scandal a couple years ago without serious long-term ramifications. And so, Zuckerberg may be tempted to hunker down this time as well.
On a purely short-term financial basis, it would make sense. According to Pathmatics data, the top 50 advertisers on Facebook accounted for just 4% of the company’s sales last year. The vast majority of the rest comes from millions of small- and medium-sized businesses that are less affected by any public shaming from activists, and arguably more reliant on the exposure they get from buying ads on Facebook and Instagram. But a decision based purely on dollars and cents would be short-sighted in this instance, and bad for business.
More and more, it’s becoming clear that the recent wave of protests over racial injustice isn’t a short-lived phenomenon, but one that appears to reflect a sea-change in perception and beliefs, and — like the #MeToo movement before it — demands a change in behavior. The backlash that started at the grassroots level and moved on to corporate action is likely to move next to the political and regulatory sphere.
Wouldn’t it be better for Facebook, already in the public glare, to bend and make its own meaningful policy changes instead of being forced to accept more punitive prescriptions and further potential damage to its reputation and business?
Facebook is already facing increased regulatory scrutiny in the U.S. Politicians from both sides of the aisle have made proposals to reform Section 230 of the Communications Decency Act, which shields internet companies from legal liability over user-generated content. For now, Republicans and the Department of Justice are focused on issues of conservative speech censorship, while Democrats have asked for the faster removal of misinformation and false claims inside political ads.
The disparate points of emphasis likely means nothing will happen in Congress before the November election. However, if one party controls both houses of Congress and the White House next year, the probability of regulation will rise considerably.
In the near term, the risk for Facebook may be greater from Europe than the U.S. The region’s authorities have identified antitrust as the more effective way to tackle Silicon Valley’s shortcomings than regulation, whose limits have been exposed by the General Data Protection Regulation that kicked in two years ago. GDPR has done little either to change the business practices of Google or Facebook, or to reduce their market power. And discussions about data or content are always questions of regulation, rather than antitrust.
But antitrust is far more of an existential threat to Facebook than is regulation. That’s not simply because it could, in the most extreme circumstances, result in a breakup of the company. It’s because antitrust by definition seeks to tackle its business practices.
Just last week, Germany’s highest civil court ruled that Facebook must stop logging browsing activity outside of its platforms without users’ explicit permission, and that such permission couldn’t be a condition of using its other services. Crucially, though, the decision was based not on data protection but antitrust laws. It said Facebook was abusing its market power to force users to accept the terms because it is the dominant social network. And the ruling fundamentally attacked the company’s business model, which is built on using such data to target ads effectively. An effort by Britain’s Competition and Markets Authority is even less ambiguous: It’s carrying out a study into online platforms and digital advertising.
While the U.K. is no longer a member of the European Union, the bloc’s regulators are following the findings of the study closely. After years of tackling Google, Facebook is now high on the European agenda. The two firms’ dominance of digital advertising is fueled by their low incremental costs. Tackle their business models, and you might resolve the harmful content problem, runs the argument. The EU plans new rules by the end of the year on content regulation and platform liability, while Margrethe Vestager, the EU’s antitrust and tech chief, is seeking new powers to break companies up. And the European Commission has more power than U.S. regulators: It can impose decisions unilaterally, which companies can then challenge in court. In the U.S., regulators generally need court approval first before any ruling is imposed.
So, Zuckerberg needs to acknowledge the growing uproar is symptomatic of new and lasting societal, political and regulatory crosscurrents. While he has long been adamant it is not Facebook’s job to be the “arbiter of truth,” there is no better climate, in the face of pressure from advertisers, politicians and civil rights groups alike, to alter that stance — he can change tack without losing as much face.
Serious changes are needed — from being more effective in taking down hate speech quickly to clamping down on false claims and disinformation from all users. Such moves would help the company get ahead of future actions from regulators. That would be wise as government regulation will likely be far more punitive – whether it be from the European Union or a potentially new American administration.
Simply, Facebook’s traditional hands-off approach isn’t good enough anymore. It’s time for Zuckerberg to show some real leadership.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.
Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.
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