This has been a rough year for Facebook. After a series of scandals and growing public distrust, politicians and consumers alike are criticizing the social media giant for a lack of transparency and unethical data policies. Year to date, the company has lost billions of dollars in value, and it may see a shrinking user base in light of these revelations.
So is Facebook going to disappear? And if so, when?
The Value of Facebook
Let’s start by looking at exactly why Facebook is so valuable—and why it continues to succeed. Facebook makes most of its revenue through advertising on its platform. This is valuable because Facebook collects hundreds of data points on every individual on its network, and has billions of users worldwide. Companies therefore gain access to a bigger audience and more detailed data than they can get from most other advertising platforms.
Facebook is also powerful because of how easy it is for advertisers to use. With a good Facebook dashboard, they can easily dig into the effectiveness of each of their ads, customize their campaigns, and adjust to ensure they’re getting the highest possible marketing return on investment.
If Facebook were to go obsolete, it would be because of one of three main reasons:
- Its user base declines significantly. If Facebook no longer has billions of potential consumers to advertise to, it could easily be outcompeted by another, more popular platform. Loss of users is the biggest threat Facebook faces.
- It can no longer collect or use consumer data. Facebook could also have problems if massive and far-reaching regulations cut back on its ability to collect or use consumer data. If advertisers aren’t getting detailed information about the people they’re marketing to, Facebook loses one of its best value propositions.
- Facebook no longer offers advertisers an optimal experience. Facebook could also lose its main source of revenue if it no longer offers advertisers an inexpensive, easy way to advertise. Facebook knows this, of course, and will continue to do its best not to undermine the advertiser experience.
Pressure on All Fronts
So let’s see whether the recent bad news about Facebook is likely to affect its longevity.
The Cambridge Analytica scandal earlier this year was probably the most significant event to hit Facebook. Put simply, a political consulting firm gathered data on Facebook’s users without their consent, for political purposes. Accordingly, public trust in Facebook dropped to just 41 percent, compared to competitors like Amazon, whom 66 percent of consumers trusted.
Yet this didn’t seem to have much of an effect on Facebook’s user base. Despite the brief popularity of the “#DeleteFacebook” hashtag, users didn’t leave the platform in droves—in fact, privacy seems somewhat low on their list of priorities when determining which, if any, social app to use.
Later on, an investigation by the New York Times summarized a list of Facebook-related messes, including Russian election interference and privacy and data breaches. In the wake of these insights and revelations, Facebook has dodged investigations and attempted to avoid related conversations, rather than taking accountability and making massive internal changes.
The EU, with its Right to Be Forgotten Act and other legal protections for consumer data and privacy, has opened an investigation into Facebook as well. It’s uncertain what new regulations Facebook could face in the wake of its most recent scandals.
So let’s consider what bottom-line impact this is having (or will have) for Facebook. It’s unlikely that Facebook will change or compromise its advertising platform. The EU and other regulatory bodies could restrict how and when Facebook gathers data on its users, but such regulations are likely far off, and may not have many teeth—especially if they affect only one geographic location. Remember, Facebook operates worldwide.
Most of Facebook’s future comes down to whether users will continue using the platform. While loads of new competitors have exploded in popularity in recent years, like Snapchat and Instagram, Facebook is still a primary platform for billions of users. Its user base has grown consistently every quarter since 2008, and while growth momentum has slowed, it doesn’t seem to be directly affected by recent controversies. It’s hard to say whether that trend will continue, but for the time being, Facebook’s massive user base seems practically untouchable.
Overall, while Facebook has dozens of messes to clean up and has suffered a massive blow to its reputation, its viability as a company remains—and it’s unlikely to lose users or market share in the near future.