The year has begun for Facebook like last year ended. Having been barred from buying GIF-site Giphy last year, its CEO Mark Zuckerberg has discovered he can’t buy his way out of trouble as he did with Instagram and WhatsApp.
The cause of his conundrum is that he can’t reinvent Facebook or Instagram into a virtual reality (VR) app or TikTok. Both are floundering, and Facebook’s new holding company, Meta, is bereft of ideas on how to keep growing.
Zuckerberg’s disastrous VR focus cost about $10bn with little to show except awkward, lifeless and legless avatars from decades ago.
Coupled with a significant loss of advertising through Apple, which has enforced privacy protections that allow iPhone users to stop sharing their data with apps, Facebook has lost 70% of its value.
That this has happened since Facebook tried to shake off the bad publicity from the Cambridge Analytica scandal — a rebranding version of Lady Macbeth’s “out, damned spot” — by changing its name in October 2021 just adds to the irony.
As it happens, Facebook settled with a class-action lawsuit in late December for $725m over the Cambridge Analytica privacy breach when right-wing political operators harvested the data of about 87-million Facebook users.
But the EU has enacted aggressive new laws to protect its citizens’ privacy and digital safety and ruled that Facebook illegally gave its users an ultimatum to carry on using it.
Users had to agree to Facebook’s personalised advertising to use the social platform based on what they do online, which EU regulators rightly pointed out was no different to being made an offer you couldn’t refuse.
Because Facebook and all the other big-tech firms have their European headquarters in tax-friendly Ireland, that country’s Data Protection Commission is the lead EU regulator. It fined Facebook €390m for this behaviour, as well as for a string of privacy violations.
But the crux of this key ruling, which Facebook is appealing, is that the social giant forced its users to accept the personalised advertising in contravention of the wide-ranging General Data Protection Regulation (GDPR) privacy law that took effect in May 2018. Facebook “is not entitled to rely on the ‘contract’ legal basis,” the Irish data watchdog found.
The threat for Facebook is that this effectively undermines its business model for selling advertising in a market of 450-million people in 27 countries. This is 5%-7% of the social giant’s advertising revenue, says Wedbush Securities analyst Dan Ives. “This could be a major gut punch,” he says.
Facebook made $118bn in 2021, mostly from its highly personalised ads.
The implementation of GDPR has been seen as underwhelming, with critics warning it needs to be more aggressive. That appears to be just what happened. If the EU can force the world’s largest social network to toe the line, as opposed to following its own profit motives, then why can’t other governments do the same? Happy 2023, Facebook.
*Shapshak is editor-in-chief of Stuff.co.za and publisher of Scrolla.Africa
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