Libra is another WhatsApp moment for Facebook and regulators must not let it happen

In 2012 Facebook bought Instagram for $1 billion, and two years later it acquired WhatsApp for $19 billion. Despite initial mockery for what many perceived to be outlandish amounts for startups with zero revenue, these deals turned out to be some of the most important strategic decisions Facebook ever made. The company prevented future competitors (as well as another tech giant from buying them), gained access to massive amounts of additional user data, and – maybe most importantly – it created fallback solutions in case the original Facebook would lose its appeal to people. The positive psychological effect of this cannot be underestimated, because it allowed for entire different forms of risk taking. Instagram and WhatsApp became Facebook’s psychological “safety net”.

WhatsApp and Instagram play a critical role in how the company Facebook got into today’s dominant position. Through at least one (but often two or even all) of these services, the company is entrenched in the daily life of billions of people. At times Facebook already appears too big to fail, considering that the vast number of cases of serious missteps and data scandals that the company has been involved in over the past years haven’t diminished the company’s societal role at all, nor significantly impacted its financial performance. Many people simply feel that they cannot leave Facebook (or WhatsApp, or Instagram).

Today even some market-friendly observers acknowledge that the competition authorities shouldn’t have given green light for the acquisitions of Instagram and WhatsApp. But at their time, the evaluation of whether an acquisition would threaten competition was made solely based on the financial numbers. And since WhatsApp and Instagram didn’t make any money, the regulators didn’t see any major problems.

Now everybody is wiser, and there is widespread understanding that in today’s digital economy, the perspective of antitrust has to change and to adjust to new circumstances and phenomenon.

Facebook’s announced launch of Libra, a “simple global currency and financial infrastructure that can empower billions of people”, is in an important way another WhatsApp moment: It is again Facebook making a move without precedent which doesn’t show any measurable signs of potential anti-competitiveness right now, but which risks massively increasing the company’s entrenchment in the future, making it invincible possibly for decades to come.

Libra is not an acquisition but a joint financial project with about two dozen other tech & payment firms, venture capitalists and some non-profits (presumably to make it look friendlier), so the tools regulators have at their disposal and the entities that could be involved are different ones. Also, I am not a regulation and antitrust expert. My argument therefore is not a legal one. It’s a reminder of how the regulators twice missed putting brakes on Facebook’s expansion when they should have done it, and how Libra likely can turn out to be another watershed moment for Facebook, with far reaching-consequences if not prevented.

My stance is straight forward: Facebook should not be allowed to run, lead or play a significant role in any kind of undertaking which involves the creation of an alternative currency which extends beyond one of its own services, or any other undertaking which will, in the long run, make it harder for consumers to choose alternatives to critical services provided by Facebook or its subsidiaries. And looking at the level of ambition of Libra as well as Facebook’s massive reach, nobody should believe that the goal would be anything else than total domination of the global payments market.

Facebook is already very powerful, featuring multiple layers of lock-in effects. Therefore, for this company, an extreme level of regulatory scrutiny is justified. Because there is such a thing as too big, too powerful. Particularly in the age of algorithms and surveillance capitalism. A lot is at stake. Too much to take this lightly or to let oneself be lured by the appeal of “crypto”.

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How Facebook and Google could collapse

What do Google and Facebook have in common, aside from that they are multi-billion dollar tech giants headquartered in Silicon Valley? Both companies currently experience massive internal tension.

At Google, the issue seems to be particularly related to ideological division (the whole “Google Memo” controversy last year was a clear sign of something bigger bubbling under the surface) and to moral questions about which type of projects the company should engage in or not (e.g., Should it get involved with the Pentagon for development of AI technology? Should it launch a censored search-engine in China?). In addition, many employees are protesting against how accusations and cases of sexual misbehavior and harassment are being handled inside the company.

Facebook doesn’t have the same culture of open, even public dissent as Google (at least from my perspective as an outside observer). However, based on recent media reports, internally tensions are boiling over. No surprise considering the never-ending stream of scandals and revelations of alleged or proven Facebook wrongdoing. It must be tough working at a company which increasingly is being blamed for all the world’s evils; one that evidently has a pretty significant and in parts destructive impact on politics and the public debate.

These internal conflicts might just blow over. But looking at their nature and how much they touch and are fueled by fundamental contemporary issues such as political polarization (this all is happening against the backdrop of Donald Trump, his impact on society and the debilitating strife between progressives and conservatives ), social justice, ethics, surveillance and the limits (and obligations) of capitalism, it’s more likely that things will keep escalating.

Essentially, what’s happening in many Western countries right now is happening inside Facebook and Google: Debates that in many regards are necessary but that have a tendency to polarize and to require a lot of attention.

For these companies’ business, which are built around the principle of moving forward fast (and often ruthlessly), these conflicts are a threat. They make it harder to maintain the pace and level of innovation that shareholders haven gotten accustomed to. They presumably also create internal uncertainty and confusion about what “disruptive” ideas can and should be openly discussed. One can imagine people walking on eggshells, mistrust grows, every little issue turns into a big thing because of existing tensions. Leaks are becoming more frequent, public scrutiny and pressure increases, more controversial decisions and past missteps are being revealed. The stock price is tanking. Morale plunges. Eventually people will look for jobs elsewhere.

And this how Facebook’s and Google’s dominant role could slowly deteriorate, until it collapses entirely.

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A message to WhatsApp founder Jan Koum

Jan Koum, the other co-founder and former CEO of WhatsApp, is leaving Facebook. His former colleague Brian Acton did the same a few months ago.

Judging from the media reports about Koum’s parting with Facebook, it seems that a long-standing disagreement of Koum and Acton with Facebook’s core values in regards to the collection of user data and ad monetization is one (or the) reason why both are moving on. Acton even went so far as to embrace the tiny #deletefacebook movement (which has little chances of success). Continue Reading

Most people cannot leave Facebook

It’s time to spell out something which everybody already knows: The majority of the 2 billion Facebook users are unable to leave Facebook, no matter how much they would want to.

A mix of different factors makes it literally impossible for most people to delete their Facebook account. Those are:

  • The need to supplant emotional labor with Facebook (read Sarah Jeong’s essay on how she tried to stay away from Facebook and really felt bad about it. For many, not having Facebook means an extremely weakened social support lmnetwork)
  • The need to use Facebook to get required information (such as parties, events, gossip, personalized news).
  • The need to use Facebook to run a business/make a living (Read: Emerging Markets Can’t Quit Facebook)
  • The need to use Facebook for work-related tasks.
  • The need to use Facebook to maintain and reach a personal audience (particularly relevant for influencers and people from the fields of media, marketing and communication, politicians etc.)
  • The need to login to 3rd party sites with Facebook credentials

Let’s pretend this list is complete (though it probably is not): Every person would weight the relevancy of these factors and the perceived lock-in for each of them differently. But every person who has been an active Facebook user for a while would find that at least a few of these factors do apply to them. To some, possibly all of them.

Taken together, these various lock-in factors allow for a drastic conclusion: Facebook is almost immune against a user backlash. Campaigns to delete Facebook will never catch on with the masses, because the perceived personal cost of giving up Facebook all together is too high for most people. I consider myself half-way out of there since about a year ago, but even for me, going all the way would be a sacrifice which I am hesitant to make (although I am pondering it).

This means that Facebook can carry on as usual, and it has enough wiggle room for more missteps, data leaks and unethical initiatives and experiments.

The majority of people need Facebook too much. Thus right now, the only risk for Facebook comes either from internal issues that would lead to significant strategic mistakes, or from regulation. But considering people’s reliance on Facebook, who do you think users would side with if regulation threatens to cut them off from whatever Facebook provides them with (see above)?

Facebook is the most powerful organization in the world at this moment, and it has eliminated people’s freedom of choice while technically being able to insist that people can leave if they want. In principle and regardless of how benevolent its leadership might be – this is a scary status quo.

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Facebook’s data scandal: A time for everyone to be humble and self-critical

In the early years of the existence of Facebook’s platform, app developers were able to access the data of friends of a user who installed the app and gave the necessary permissions. That’s the method Cambridge Analytica used for allegedly accumulating personal data of 50 million Facebook users.

In a trenchant blog post, James Allworth describes the dramatic extent to which the Facebook platform through its Graph API allowed third party apps to harvest data from in theory every user registered and active on Facebook, until the rules were changed in 2015. “What was Facebook thinking?”, he rightly wonders.

But here is another, equally astonishing question: Why did no one else see this coming? Continue Reading

Facebook bought tbh – but not the similar app with the same name that launched in 2013

Facebook has acquired a smartphone app named tbh (which stands for “To be honest“). It allows its currently 2.5 million users in the U.S., to give compliments to each other. According to TechCrunch, the app was launched in August by a Canadian startup called Midnight Labs, which according to its founder had built about 15 products since 2010. None of them really flourished. Until now.

The name “tbh” sounded familiar to me in an app context. I researched my old blog posts. Indeed, back in 2013, I had written an article (in German) mentioning an UK-based app called TBH. This service went nowhere. The app and website are not available anymore and any mentioning of it on the web dates back to 2013. The TBH website’s only available 2013 record on doesn’t produce a proper site anymore. But if you read the press release from TBH 2013, both apps’ philosophies sound very similar: Continue Reading

Benevolent digital dictators, without control

What is Facebook? That strange but relevant question was recently at the center of a long piece by Select All. Clearly, to describe Facebook and other highly influential tech firms simply as profit-driven companies like any other enterprise falls absurdly short, as it doesn’t allow us to grasp what they do and what they represent. It is like labeling every person as a “human”, and then ignoring what she/he does with their life. Obviously, it matters to our understanding of that person whether we are talking to a car mechanic, artist or president of a state.

The title of the article posed the question if Facebook CEO Mark Zuckerberg knows what Facebook is. Most likely he doesn’t. Facebook’s conflation with essentially every of our civilization’s and daily life’s major systems, has turned Facebook into a thing which doesn’t represent anything that humanity has seen before, and that lacks a proper descriptive name.

Bill Fitzgerald describes the status quo like this:

“For all the talk of disruptive innovation, how tech entrepreneurs are the smartest people in the room, etc, etc, we are now in a situation where billions of dollars have been spent creating platforms that the creators neither control nor understand.”

So we don’t know what Facebook, Twitter and other tech companies are. Neither do their leaders. Nor do they have control. Sounds awkward and uncomfortable.

This also leads to another question: Who/What is Mark Zuckerberg, who/what is Twitter CEO Jack Dorsey? If Facebook and Twitter aren’t just companies like [enter any major brand or manufacturer of consumer goods or traditional media company], then these guys aren’t just CEOs. They are something else.

Here is my proposal: They are a type of dictator. A digital equivalent, not ruling over geographical nations but over something akin to a digital nation. For now, these dictators are not intentionally evil. They are, or at least want to be, benevolent. And last but not least, as we just learned, they are kind of clueless and have lost control.

Digital, benevolent, clueless dictators without control over what’s happening with their platforms. But with the (accidental and undemocratic) power to change the whole world. That’s something to chew on.

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Facebook needs you to consume Stories, not news

Soon, Instagram will let users post Stories directly to their Facebook profile. This is huge. The launch of Stories has been a big success for Instagram. But Facebook’s own implementation of the functionality hasn’t seen widespread user adoption at all. With the latest move, Facebook makes clear that it is willing to do anything to make Facebook users consume Stories – even if the Stories “originally” have been uploaded to (Facebook-owned) Instagram.

By generating more Stories content on Facebook, the social network certainly hopes to create an additional opportunity to show ads. There is a natural limit on how many ads the company can show in the news feed before users get fed up. But, to speculate a bit, this is not the only reason for the introduction of a cross-posting feature from Instagram Stories to Facebook Stories: It might be simply that the Facebook management wants to get rid of the news feed altogether.

The news feed is the cause of many of Facebook’s current concerns and public conflicts in regards to fake news, (foreign) election meddling and the erosion of democracy and its institutions. Without the news feed, these issues would presumably become much less impactful. Even Stories can be utilized for malicious purposes, but Stories are created and consumed differently than the news feed, with a much bigger focus on people’s personal experiences, not world news. Re-purposing external content for viral distribution via Stories is, at least for the moment, harder, as is viral sharing. That could change in the future. But as a functionality in an early stage of its life cycle and with few to no expectations from Facebook users about their interaction with Stories, Facebook has the opportunity to leverage its learnings from the past to shape (and limit) Stories in a way so they’ll be less susceptible to systematic democracy hacking.

The news feed has become to Facebook what the Diesel now is for German car manufacturers: A big headache. The only reason why Facebook has to stick to it is because as long as the news feed is the heart of the Facebook experience, this is where people see ads, and so this is where Facebook needs people to spend as much time as possible. But there is no reason to believe that Facebook sees the existence of the news feed as essential to its future. In fact, in 2017 the news feed has become a weakness of Facebook, if not actually a threat to it. Aggressively pushing people to Stories is the best way for the company to put itself into a position where it can let go of the feed and all the issues associated with it.

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If you are worried about “hacked” democracy, quit Facebook

During a recent panel discussion, The Exponential View’s Azeem Azhar and a couple of invited expert guests talked about democracy’s vulnerability in the age of information technology and social media (you can listen to the recording here). As probably surprises no one, Facebook’s role in the weakening of democracy and its institutions came up several times. And, as also should surprise no one, there was little optimism among the participants about that dubious characters will suddenly stop leveraging Facebook through bots, micro-targeting, fake news and the creation of alternate realities to undermine democratic values and essential shared minimum consensus.

But there is something everyone who is worried about the damage of social-media-enabled manipulation to the public discourse, can do: quitting Facebook. Continue Reading

I stopped using Twitter and Facebook, but shareholders wouldn’t know

In their quarterly reports, publicly listed social networking companies highlight several key performance indicators (KPI). One of the metrics they often emphasize is “daily active users” (DAU). Facebook reached 1.28 billion DAU on average for March 2017. Snapchat reported 166 million DAU for Q1 2017. Twitter doesn’t specify the number of DAU in its quarterly reports, mentioning only a “14 % year-over-year increase” for DAUs for the most recent quarter, and 328 million monthly active users (MAU).

The DAU metric is useful to evaluate young companies with still a comparatively low number of users, since it clearly shows the growth rate over time. For maturing companies which have been around for a while, I’d argue that the DAU metric is a weak measurement of a company’s ability to engage and retain users. Here is why:

In November, I stopped tweeting and reading my Twitter timeline. Early 2017 I significantly reduced my use of the Facebook app (not counting Messenger, Instagram or WhatsApp, of course). I’d estimate that I cut the time I spend with both services by 90 %. But if you only look at the DAU, this drastic reduction would not be reflected. Because I still almost every day check both apps at least once in order to have a quick look at the notifications. Just in case. If you, like me, frequently publish stuff on the Internet, you might get mentioned/tagged somewhere, and it’s nice to know.

Nevertheless, my contributions to the bottom line of these two apps have shrunken dramatically, because I hardly see any advertisements anymore. I don’t scroll through the news feed nor the timeline. On most days, I spend no more than at max a few minutes with Facebook and Twitter. On average, Facebook earns $17,07 per year from a user in the U.S. and Canada, and $5.42 from a user in Europe. Assuming that my usage of Instagram, WhatsApp and Messenger (the latter two are essentially not monetized at the moment) remains stable in 2017 and that my usage in 2016 was completely average, then this year, Facebook will generate significantly less revenue with my activity compared to last year’s $5.42.

The DAU metric masks negative changes in user patterns of long-term users, but these are in fact what matters when evaluating the outlook for mature social networking services. Only the radical step of deleting one’s account would be reflected in the DAU metric, at least in aggregate terms. I’d argue that this is not how most people actually behave. Rather, they’d grow increasingly tired and decrease their usage over time, while still wanting to be able to do quick checks on notifications, events, live streams or whatever. While these users are not totally lost (and Facebook is doing a brilliant job of keeping them engaged through their other apps), they nevertheless mean a reduction in revenue potential for the particular service. Even if this would be the case for millions of users who reduce their usage, shareholders would not see it when looking at the DAU.

Therefore, as much as publishing DAU numbers can be considered an improvement over the totally useless MAU, it’s still just an arbitrary vanity metric that masks actual changes in user behavior in order to entice investors.

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