No matter whose side you are on the latest issue plaguing Facebook, you have to feel sad for the company if you pay attention to the fundamentals. The company’s business model is built on ice. They have to keep the temperature very cool to stay in business. Turning up the heat will put the entire castle at risk of dissolution. Companies considered too powerful have been dissolved before. And the truth is that it can happen again. If it will happen, Facebook is very close to the line.
What does Facebook sell? Every business sells something. Medium sells information and creativity spark. Apples sells phones and other tech products. Microsoft sells software. Nike sells shoes. A business that does not have clarity regarding what it sells is still quite far from success. The problem of Facebook is what it sells. Facebook sells data. The data happens to be people’s information showcased willingly on the platform. The problem is that people didn’t sign up for companies and corporations to reach them with a product they’ll like to have. But it’s the perk for using the platform.
Facebook is not free; you just don’t pay with money. Most don’t consider their personal data valuable, so they willing trade it off because it is not money. But this is what Facebook sells to make the massive revenue they record every quarter. It’s a cyclical business model; users get to connect with friends online, Facebook get to receives personal information about you and your friend. Companies pay Facebook for the data. However, problems arise when data sold is too deep, without consent, and deemed to be an abuse of personal data (just like what we are seeing now).
Apparently, it seems Facebook doesn’t really sell the data, but gives organizations access to the data so they dig out what they want. Now, it appears some organization dug out what shouldn’t have been made accessible. Hence the current squeeze and market reaction. Here is the question; is this the last time this will happen or it’s just a new beginning of many errors to come?
If Mark wants to stay in business (who has been handling the whole situation quite maturely), this better be the last time in the next 1-2 decades. The business model is already one that is very questionable. Giving governments reasons to clamp down on the company’s operations is the last thing everyone owning a piece of Facebook wants. The EU already announced new tariffs on social media companies. And it is not going to end here. An option for Facebook though is to tailor their services by country. Which means to focus on local growth everywhere they are operational.
To avoid the fate of Standard Oil, Facebook must evolve. This is because cases like the current case will keep popping up no matter how careful they become. The solution must be by design. And the design might have to shakeup the business model of Facebook.
*Disclaimer: I do not have any stakes or shares in Facebook. The purpose of this information is to educate.