I originally published this post in my weekly-ish newsletter “Drinking from the Firehose.” Sign up to get it in your inbox: tinyletter.com/ataussig
As a business, Facebook has never performed better. Its stock price is at an all time high, worth over 4x its IPO price in 2012, and up over 50% in the last twelve months. Revenue growth is 47–69% in each of the last 8 quarters, with free cash flow margins of over 42%. Few businesses are able to achieve such levels of growth at this scale and profitability.
Yet, in this post, Mark compares Facebook in 2018, with its half a trillion of enterprise value, to Facebook in 2009, when it was unprofitable and struggling to make its business model work. If it seems like a stretch comparison, it is. The point Mark is making is that he must deal with an existential threat that he’s just coming to terms with.
Mark doesn’t call out the threat explicitly. He refers to “our issues” and mentions a few of their consequences: “abuse and hate,” “interference by nation states,” and “making sure time on Facebook is time well spent.” One might also read his comment on “the rise of a small number of big tech companies” as a reference to the spectre of antitrust regulation. But these are not problems. I suspect they are symptoms of an underlying sickness.
That sickness is the filter bubble. I’m not the first one to point it out. Eli Parser coined the term in 2011 and popularized it in this TED talk, as well as his book:
In the talk, he actually quotes Mark:
“A squirrel dying in your front yard might be more relevant to you than people dying in Africa.”
Sad, but true. Our own personal context makes subject matter more interesting to us. We’re more engaged when we see content that we identify with, or that confirms our worldview.
Filter bubbles aren’t unique to social media. Just turn on cable news any day, or pick up a newspaper. But those filter bubbles are tuned by editorial opinion. The internet was supposed to free us from the shackles of content gatekeepers like these. It hasn’t. As Parser points out in his talk from over 6 years ago (!), the gatekeeper has moved from a human to a set of algorithms. And the algorithms, with nearly perfect knowledge of their users and the ability to feedback and scale new learnings across billions of them, are far more powerful than their predecessors.
These algorithms and the underlying data that powers them are the core part of Facebook’s intellectual property. They are what drives the sky high engagement that makes Facebook one of the two best places to advertise on the internet. They, therefore, make Facebook wildly profitable. To relax engagement and focus on a metric that pops the filter bubble is tantamount to Facebook turning away from its profit motive. The track record of public companies executing that type of business model change is poor.
In 2009, Facebook needed to prove its business model could work. In 2018, Facebook must change that business model when it’s working better than ever before. I would argue that the latter is more challenging than the former. Mark Zuckerberg, who still controls the company, is one of the few CEOs who could actually pull this off. We will have to see what 2018 has in store for Facebook.
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