How far will Facebook fall?

And what will they take with them?

For most of the last decade, logging in to a new web site often meant, for many people, clicking on a button to “log in with Facebook.” Now even that is changing. Numerous companies are ditching the option to use Facebook credentials to log in—for reasons including privacy concerns, competition from Google, and declining popularity for Facebook.

Having faced a boycott from companies like Patagonia and Ben and Jerry’s since 2020, this new round of corporate turnarounds seems to have more to do with waning interest in and trust of Facebook’s products and less with principle. But it has all fed back into the same issue—since the Frances Haugen whistleblower revelations, Facebook has been adrift in terms of leadership, product, and share price.

share price (intra-day): 1 year chart

Now that the much-hyped but ultimately disappointing Sheryl Sandberg has departed Facebook, the media obsession with personality will inevitably focus on Mark Zuckerberg, as seen in this recent article which says that Zuckerberg has “lost his way” and goes on to outline the numerous ways in which he is a bad, arrogant leader. However unfortunate it is, Facebook was never on course to be a productive and useful corporate entity. Facebook was always designed as a tool of manipulative mediation, finding ways to match speaker and audience in a way to maximize anger and hopelessness (and thusly, ‘engagement’) and thus offer highly directed ad campaigns around it all while tracking users across the web.

Having lost the ability to track user activity all around iOS has translated directly into large losses for Facebook. This reveals a simple equation for everyone to see: the less privacy for users, the more profit for Facebook. This has always been their business model. Now a wave of scandals, inevitable in hindsight, have cast a harsh light on the company and although it took quite a while, the online and investing worlds have started to turn on them as their cynical methods became unsustainable.

I have previously considered what could happen to the React framework if Facebook/Meta continues to go downhill, but what could happen to social media—and the overall Internet landscape? Not a lot of serious consideration has been given to the possibility that Facebook and its products could quickly slide into MySpace territory, but it seems to be happening right in front of us anyway.

People will still use social media. Tik-Tok is obviously pretty popular right now and is already taking advantage of Facebook’s waning popularity—even while Facebook products continue to try to imitate Tik-Tok, for example recently when Facebook’s Instagram was updated along those lines and a backlash occurred. It’s easy to imagine this dynamic continuing for a while, but ultimately most users know that Instagram has become the imitator.

The desire by Facebook to curb new entrants actually led to the FTC finding cause to file a federal anti-trust case—they are accused of manipulating the market by illegally acquiring companies because they were unable to compete on mobile. So aside from taking up space that could be used more productively, Facebook tried to destroy any competition that might provide users better experiences.

Facebook’s decline has not been good for the image of the Silicon Valley establishment (this is a company that includes Marc L. Andreessen on its board) and it is probably not good for the Republican Party. Zuckerberg was known to be friendly with Trump, and initially tried to lie his way through the story about Russian manipulation. During the confirmation hearings for Brett Kavanaugh, Facebook executive Joel Kaplan sat directly behind the nominee in support.

Other social media apps could eventually see gains as the Facebook product mix gets staler. Snap (SNAP) has slid down massively in the last year, but they had only seen the big run up in their shares fairly recently and may be more able to weather this downturn. Twitter (TWTR) may also be seen as a rival that could benefit, however they have their own lane in terms of audience and their own problems in terms of takeover lawsuits so they are unlikely to benefit much from this in the short term.

One other area that could benefit could be providers of group sites for small business. Facebook for a long time had a strong market share of small businesses making small sort-of-websites and groups of people sharing information for clubs and social organizations. Maybe more users will move off Facebook and build their own sites using tools like SquareSpace (SQSP). Maybe more people will stop doing business over Instagram and start a Shopify (SHOP) store or use PayPal (PYPL).

But whatever happens Facebook is shrinking, and there are a lot of possibilities now for companies and startups. Maybe in the future more direct communication will start happening, with fewer cynical mediators misdirecting attention for their benefit and against the public interest.

Disclosure: Through personal holdings that I control and through investment LLCs in which I am a partner, I buy, hold, and sell stocks, bonds, ETFs, options, and cryptocurrencies, not limited to but including some of those discussed in this newsletter.