This post is cross-posted from my joint newsletter with Ranjan Roy, The Margins. Please check it out, and consider subscribing.
Imagine you are a business analyst for a public company, and one day the CEO of your favorite company says they are shifting the business to an entirely new business model. Think big here; suppose the company shifted to focusing entirely on what it considered the biggest threat to its business.
What would you expect the stock to do? Go up, because it’s now focusing on handling the threats head on? Or should the stock take a dive, because markets generally don’t like such proclamations and favor conservatism?
Mark Zuckerberg, the supreme leader at Facebook recently unveiled a new vision in a 3000 word manifesto. The entire memo is worth your time, especially so if you enjoy reading, like I do for both professional reasons and entertainment, tech CEOs waxing poetic.
Two main takeaways from the memo are “we won’t know what you are saying on Facebook” and “now you can also message your friend on Instagram from WhatsApp but don’t ask how it happens”.
Given Facebook’s business model is built on knowing as much as about you, and then selling your attention —don’t call it data— to the highest bidder, would you expect the stock to go down, since Facebook will seemingly know less? Or would you expect it to go up, because Facebook is clearly doing what it needs to be doing?
The moral seems to be that you should never underestimate the force of inertia, especially when the rock is as big as Facebook.
To any informed observer, there’s very little new in the manifesto. The grand proclamations are less about Facebook actually giving up on its main business, but rather adding some new capabilities and protections. Let’s dive in.
First, the encryption. Zuckerberg might appear to leave data on the table when he decides to encrypt all communications, but that’s hardly the case. Facebook doesn’t use the contents of the messages today for advertising. Yet the company’s targeting is so good and people more predictable than they think, people accuse the company of listening their private conversations. Moreover, even when Facebook encrypts all the messages you send and receive, it will still be collecting tons of other sources of data, such as the metadata about the messages, location information gathered but the apps, your browsing habits via the various trackers on the web, data shared by apps that use Facebook SDKs, and the huge troves of data buys from other data brokers. None of that, seemingly is changing.
In fact, with these changes, Facebook might end up collecting more data, and or least the more valuable kind of data. Personal communications are “interesting”, in almost a voyeuristic sense, but the privacy implications of looking into them surely hasn’t matched the potential economic benefits. Zuckerberg touches on how on top of this “private foundation”, Facebook can build more value added services, probably similar to WeChat. Facebook might be throwing in the towel for expansion in China, but the strategies are free to copy. When you buy the actual pair of sneakers through Instagram, who needs to know you were planning on buying it?
No one expects Facebook to do something bad for Facebook itself, and this memo is no exception. Yet, the Zuckian double-speak is there. Zuckerberg claims that the big reason to merge all the chat applications company owns into one end-to-end encrypted system (which was previously reported) is about interoperability. That sounds unconvincing. By definition if you are talking to someone on a platform, you are already talking to them. This is where Facebook’s notion of privacy, where it’s about keeping your data private from others but not Facebook, clashes with reality.
A WhatsApp user whose profile forcefully gets merged with their Facebook account is at a less private position, not more. Facebook does not and probably never will commit to knowing nothing about you, because the spread between what Facebook needs to know and what you provide is where Facebook earns its margins. And for chat applications, that margin is practically zero.
More cogently, Facebook’s new interoperability and encryption pushes act as a strong defense against government regulation and scrutiny in multiple ways. If Facebook cannot see your messages, it can’t respond to government inquiries on them. Depending on your position on governments’ responsibilities, that can be a good thing. But also, a fully integrated “interoperable” WhatsApp, Instagram and Messenger makes Facebook much harder to “break up”. When there are no seams, where do things break?
Zuckerberg is only human. And Facebook is not just his life’s work, but it’s also the lens through which he experiences reality. That’s understandable. It’s also however hard to shake off the eye-rolls every time he pens a new manifesto. I am old enough to remember when Facebook was like chairs. Then it became building a new community, with once again a liberal and Facebook-specific interpretation of the word. Now, it’s a living room? There’s more to life than blue pixels.
The more commonly experienced reality is that whatever changes Zuckerberg proposes will take years, both organizationally and technically. There are thousands of decisions that are yet to be made. At Facebook’s scale, a subtle nuance might easily affect an entire nation’s worth of people. Contours of the New Facebook are going to be as controversial of sovereign borders, yet will be decided by a lucky few over in Menlo Park. Writing thousands of words, laying out a new vision is fun and exciting, but when you make it a habit, it’s fair for people to wonder if you are more interested in writing memos than executing. With so many years and unknowns, the vision gets blurry and it becomes harder to see what might happen in the future.
This is not to say Facebook cannot make the changes. If anything, company has proven time and time again that it’s not afraid to change course dramatically; be it from desktop to mobile, HTML5 to native, to buying competitors and copying other competitor’s features with reckless abandon.
Some of the current projects, like News Feed will soon show signs of decay. With such fan fare, it’ll be harder to assign the top resources on not “top-of-mind” projects. No one wants to work on the old stuff, especially when your boss tells the entire world there is the new stuff, with a short-story length memo.
Yet, still, there’s less new here than meets the eye. The peaking ad loads on News Feed and the popularity of Stories format has been out there, for years. Merging of all the different chat platforms to a new fully end-to-end encrypted version was also reported, and already “priced in”. What did Zuck actually announce?
Zuckerberg is a shrewd businessman. Just like any company, Facebook’s long term strategy is to entrench its competitive edge. For several years now, this edge has been primarily the scale, and the reach that comes from it. A Facebook product is used by practically everyone in most of the developed world, and it’s all across the web and in all the apps. Wherever it cannot reach organically, it buys its way in, either through buying the data or the companies themselves.
This new privacy focused Facebook changes very little to Facebook’s own business than what we knew from before. Less of a shift, more of an addition of new capabilities and some protective measures. Markets shrugged. Let’s see what happens in a few years.