Mark Zuckerberg swore in open congressional hearings this past summer that Facebook no longer shares or sells user data, and that said users are in total control of their data.
Last week, the egg-faced tech giant had to expose Zuckerberg’s sanctimonious testimony as a lie, admitting that it’s been sharing our private messages and data with Bing (Microsoft’s search engine), Spotify, Netflix, the Royal Bank of Canada, and other entities.
Not only has Facebook thoroughly destroyed all its trust, and, therefore, its brand, it has exposed its real business model: selling user data.
Why was Facebook secretly betraying users in the first place?
When an entrepreneur pitches his company to a venture capitalist (VC), in the quest for equity capital, he always gets two fundamental questions from the would-be investors: How will you monetize your business? How will you scale your business?
Facebook has excelled in both endeavors — by cheating.
In my first book on branding, "Be Unique or Be Ignored," I analyzed Facebook and didn’t understand how the social giant would succeed.
On May 15, 2012, General Motors announced that it no longer would advertise on Facebook, because the poor ROI didn’t justify the expense. A year later, Sheryl Sandberg, Facebook’s COO, convinced GM’s CEO to try again.
I was unconvinced. The fundamentals weren’t there: How can GM get anyone’s attention on Facebook? I asked myself.
In late July 2012, I was chatting at a cocktail party with a NASDAQ executive, teasing her about the “botched” Facebook IPO, which had occurred two months before. I opined that Facebook’s business is fluff, based on dysfunctional behavior — a heretical comment in Silicon Valley. If it were a real business, I continued, its stock would have at least recovered to the $38 IPO price (it was $28 that day and then increased to around $49 about 18 months later).
Then, this NASDAQ exec reinforced my point about dysfunction with a personal anecdote about her teenage daughter, who had wanted to invite some friends over for dinner. Mom counseled her daughter to invite her friends by telephone. Call them? No way! Who calls people? Instead, the teen “invited” her friends via an impersonal announcement on her Facebook page. “And, what if your friends don’t see the invitation?” Mom asked. “That’s their problem,” her daughter sniffed.
Such an infantile exchange is no surprise, and it typifies today’s entitled youth and coddling parents — leading me, again, to ask myself about Facebook: How is this is a business?
In 2007, Diana West penned “The Death of the Grown-Up: How America’s Arrested Development Is Bringing Down Western Civilization.” West posited that Americans are in a state of perpetual adolescence, and that the transition to adulthood does not end until the age of 34. At a Heritage Foundation book event, West gave some eye-popping stats to explain America’s infantilization:
- More adults (18-49) watch the Cartoon Network than CNN
- Readers as old as 25 are buying young-adult fiction, which is expressly written for teenagers
- The average video gamester was 18 in 1990; now, he’s going on 30
- The National Academy of Sciences has redefined adolescence as the period extending from the onset of puberty (12) to age 30.
West’s stats are key to understanding Facebook’s saga.
On October 30, 2013, Facebook announced its 3Q13 results: $425M in earnings, compared with a loss of $59M the previous year. But, on the call with investors, the CFO admitted that teens had left Facebook in droves (moving to Instagram, a Facebook company, and Snapchat).
Whether branding, speaking, selling, publishing, broadcasting, or entertaining, you need a captive audience. Otherwise, you are talking to yourself. You can’t control any audience distracted in a noisy room. Facebook is a noisy room.
Obviously, Facebook decided that the only way it could monetize and scale its business was to attract as many users as possible, sell their data, and lie about it — making it a huge farce.
Walt Mossberg, legendary tech analyst and journalist, announced last week that he’s shuttered his Facebook and Instagram accounts. Why? Discomfort with Facebook’s policies and actions. A big deal.
Moreover, based on a query this month of 1,000 people, research company Toluna concluded that Facebook is the least-trusted tech company — because of multiple privacy breaches and the dishonesty of Mark Zuckerberg and Sheryl Sandberg.
So, why is Facebook still here, with a stock price still exceeding $120, notwithstanding the aforementioned?
Inexplicably, many investors, advertisers, and remaining users are looking the other way, reinforcing the farce.
Marc Rudov is a branding advisor to CEOs, speaker, media commentator, and author of "Brand Is Destiny: The Ultimate Bottom Line" and "Be Unique or Be Ignored: The CEO’s Guide to Branding." Find him at MarcRudov.com. For more of his reports, Go Here Now.