Facebook has been, without a doubt, one of the greatest business success stories in American history, boasting a market capitalization of over $500 billion, and just coming off yet another terrific quarter, with revenue jumping a remarkable 26% to $15.1 billion year over year. Despite this, the company is at a serious crossroads as it continues to face an increasing number of threats including social, political, and technological, as well as major concerns regarding privacy issues and an aggressive (though slightly diminished) attack from major media sources (including once friendly organizations such as the NY Times).
This continuing war on Facebook threatens the company’s long-term viability as the world’s most dominant social media platform. More specifically, these threats include not only an ongoing reputational risk, as well as the risk of potential boycotts (on a major scale, or by smaller constituencies through campaigns such as #deletefacebook efforts and others), but major regulatory risks including: i) the prospect of being regulated like a utility due to its monopoly-like position in the social media space; ii) the possibility of some sort of “vice” tax (similar to those placed on alcohol or tobacco products) due to claims regarding the addictive nature of the platform and the associated health issues; and iii) the prospect of being forced to limit the amount of time certain users (particularly younger users) may spend on its platform on a daily basis.
Furthermore, the company faces a very real antitrust risk from the United States government, which may be as dramatic as a potential breakup of the company, or equally damaging, being forced to be compatible with (or provide open access to) other social media sites in a way that would be analogous to how the Telecommunications Act of 1996 impacted the entrenched carriers in the communications space at that time. The company also faces similar risks with respect to foreign jurisdictions including the EU and others, which have already imposed massive fines on the company.
In addition, Facebook also faces a very real technology and business model risk based on the fact that innovation in the social media space has been almost completely stagnant over the past several years. For all practical purposes, the user experience (for Facebook as well as the other major social media platforms) has remained virtually unchanged over the past decade, operating under the same paradigm of post, like, comment, and share. The addition of gimmicks such as filters, red backgrounds, emojis and other items offer no real benefit to the user experience or the value proposition overall. This in itself presents a huge opportunity for innovative next-generation social media companies to enter the space and draw away enormous numbers of users (along with the associated advertising revenue).
Additionally, the net effect of all these risks taken together may create a positive feedback loop causing a decrease in employee morale, leading to a loss of talent and all of the associated consequences.
Fortunately, at the present time, the company continues to have unprecedented access to world-class technology and programming talent, as well as virtually unlimited amounts of capital and cash flow to develop solutions to these problems. It is imperative however, that the company acknowledge the problems in the most objective manner possible (emphasis on the word “objective”), and precisely tailor solutions towards the resolution of these problems.
Needless to say, along with all these risks, there are also numerous opportunities for the company to leverage its resources, including its people, technology, talent, infrastructure, partnerships and unrivaled base of nearly 2.4 billion users, to strategically expand into other areas. Of course, the key question is – what exactly are these areas?
Facebook is at a major crossroads, but so is the world in general. Thanks in large part to social media (primarily Facebook), countries, cultures and allegiances are no longer defined by borders, geographic areas, or even languages – they are evolving towards being defined by various belief systems, each tied together by online communities. This is true both domestically, as well as internationally. Truly understanding the dynamics of this evolving macro environment, including specifics as to where we are with respect to trends, fads and geo-political factors will be critical to making the right strategic decisions.
By far, the scarcest ingredients in this equation are vision, imagination and a true diversity of thought (in particular, people from other industries and those with a contrarian approach). As innovative as Silicon Valley may be, groupthink still exists, and groupthink – regardless of how smart the participants may be – will unquestionably suppress innovation and ultimately erode the success of any business venture. Therefore, in addition to the skills of a conventional management team, it is imperative for companies in any industry to leverage multi-disciplinary experts who can help understand and drive innovations from a different perspective, as well as help to assess the risks to a company from any and every point of view.
