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ticians, regulators, tech leaders, consumers,
and employees—to not experience long-term
negative ramifications on its business.”
Regulation won’t kick in overnight, but
already competitors are capitalizing on
Facebook’s vulnerabilities. For the first time,
it has viable rivals in addition to arch-nemesis
Google. There’s Amazon, which has incompa-
rable purchasing behavior data on its custom-
ers, and TikTok, the music-video app that
recently passed 1 billion downloads, many
by customers much younger than Facebook’s
aging users. (Popularity with youngsters
brings baggage: The Federal Trade Commis-
sion recently fined TikTok $5.7 million for vio-
lating child privacy laws.) All of this adds up
to a strange new world for Facebook: There
is unprecedented scrutiny on its slowing yet
money making core product and more ob-
stacles than ever before to innovating quickly.T
THE DISCUSSION OF FACEBOOK’S travails often
toggles back to its past travails and what a
canny, wise-beyond-his-years operator Mark
Zuckerberg repeatedly has proved to be. He
resisted early calls to sell his company. (Yahoo
offered $1 billion in 2006.) He weathered user
outrage over various design changes. In 2012
he successfully converted Facebook from a
desktop-PC web program to a mobile app, a
feat that required a complete retooling of its
development process.
Facebook has already circled the globe look-
ing for users. It has saturated the markets that
are most profitable for the company, and now
it needs to turn to additional ways of making
money. If the future is in private messages
or pictures that auto-delete, then Facebook
wants to be there too. “I’ve always tried to
run the company in a way that we’re willing
to take on more costs or lower revenue ... in
order to get to what I think will be the bet-
ter thing over time,” he says, previewing the
painful changes the company’s new products
will require. “But I just think getting to the
right model over time is going to help build a
stronger community.” Make no mistake. Zuck-
erberg doesn’t just mean stronger for users, or
society, or lawmakers. He means stronger for
Facebook.mation is being collected on them and how it’s
being used. They’ll also be able to hit “delete”
on their online information—a kind of Clear
History button but for the entire Internet.
It’s a high bar that pretty much no one in
the tech industry wants to meet. California
Governor Gavin Newsom wants to take it a
step further. “I applaud this legislature for
passing the first-in-the-nation digital privacy
law last year,” he said in his first State of the
State Address in mid-February. “But Califor-
nia’s consumers should also be able to share in
the wealth that is created from their data.”
Newsom’s proposal is a “data dividend”
that would require Internet companies to
pay users for use of their information, and
he’s not the only one supporting it. Some,
like Democratic 2020 presidential candidate
Elizabeth Warren, are calling for companies
like Facebook to be broken up. At this point,
Facebook’s best hope is that federal regula-
tions come together faster than state-led laws,
as the Internet industry hopes the fed rules
will end up being more lenient.
Either way, the upcoming restrictions
will have a lasting impact on Facebook. The
company is already seeing the repercussions
of the European Union’s General Data Protec-
tion Regulation (GDPR). The new laws aim to
give European consumers more control over
their online information, requiring companies
to gain consent from users before utilizing
certain types of data. Failure to comply can
result in fines up to 4% of a company’s annual
revenue—more than $2 billion, in Facebook’s
case. Even worse, the laws can cut into the
company’s ability to sell targeted ads. “With
GDPR,” says Sandberg, “there’s a percent-
age of people in Europe that have opted out
of certain kinds of targeting. Those ads are
going to be less relevant.” In other words, the
Internet industry, including Facebook, already
is taking a financial hit there.
The regulatory changes promise to have a
cumulative effect. Historically, what advertis-
ers use Facebook for is its broad reach and
extremely specific targeting capabilities,” says
Debra Aho Williamson, principal analyst
with researcher eMarketer. “It is true that
those targeting capabilities are starting to be
chipped away from GDPR.” It’s a process that
could accelerate with similar moves around
the world, including in Washington, D.C. Says
Stifel’s Scott Devitt: “Facebook’s management
team has created too many adversaries—poli-
FEEDBACK [email protected]
“California’s
consumers
should ...
be able to
share in the
wealth that
is created
from their
data,” said
Gov. Gavin
Newsom.