Facebook’s scandal plagued 2018 and looming regulation will do little to damage it in the near term, according to Forrester analysts. Long term, however, it is a different story, with analysts tipping the company’s maniacal focus on growth will bring about its downfall.
Forrester senior analyst Jessica Liu examined the social media giant and its ability to shrug off scandals like Cambridge Analytica, election interference, and “perpetuating tyrannical governments”. The resilience — demonstrated by Facebook’s growing user numbers and revenue — lies in its platform approach, according to Liu.
“Because unlike most companies that focus on only one relationship — the one with their revenue-generating customers — Facebook uniquely must focus on two, users as its product and advertisers as its customers,” Liu writes in her report.
While users may be rightly alarmed at Facebook’s behaviour, Liu argues their own behaviour doesn’t reflect the outrage, and generally consumer attitudes change gradually.
Despite a scandalous 2018, around one in three of the world’s population used a Facebook app last December.
According to Forrester research, 35 per cent of consumers in its Consumer Energy Index agreed that ‘Facebook app has a positive impact on my quality of life’ in March 2018, falling to 8 per cent by December 2018.
But, Liu points out, “32 per cent stated, ‘I will use Facebook app’ less, increasing to 39 per cent in the same time frame — a much slower rate of change.”
And advertisers, which could theoretically starve the company of its revenue, aren’t going anywhere until users do, according to Liu.
Regulation, which Facebook has so far largely avoided, seems increasingly inevitable, with the company now openly embracing “the right” regulation, in stark contrast to its traditional opposition.
But the wheels of regulation turn slowly, Liu says, and Facebook will have ample time to brace for the new limits which will consequently entrench its market dominance further.
“While we await this battle, Facebook is busy bolstering its most valuable assets and unique differentiators and squashing any perceived vulnerabilities,” Liu writes.
The social media giant is so far ahead in data collection, users, and developing countries that any new regulations will ultimately hurt its smaller rivals more, according to Liu.
However, the Forrester analyst argues without a “major change in direction” Facebook will “suffer severely”. She says the social media giant is being lured by the success of Chinese tech giant WeChat, which has a much for extensive platform; allowing users to shop, message, book transport, manage finances and payments, as well as social media.
But trying to replicate that company’s broad approach with a renewed focus on messaging within the US and across multiple other jurisdictions will bring about Facebook’s downfall eventually, according to Liu.
“In its latest company manifesto, Facebook finally copped to this ambition and announced that it would redefine itself with messaging. We understand why: Accessing social networking sites is the third most popular activity on smartphones (52 per cent of US online adults), after messaging (65 per cent) and emailing (64 per cent).”
Liu said global regulators will prevent Facebook from deploying such a wide array of services as it will push it into monopoly territory, a problem for Facebook in the US and EU, but not so for WeChat in China.
More services would also make Facebook’s new privacy stance more tenuous than it already is, Liu said. If it did opt for more services and encrypted messaging it would likely have to scale back data collection, a move which would make its “ad hypertargeting more challenging”.