★ Facebook’s Problems

Last week David Leonhardt devoted the Monday edition of his The Morning newsletter/column at The New York Times to “Facebook’s Four Problems”, which he defined as:

• “The age problem” — Young people aren’t using Facebook at all and are using Instagram less, but the success of both platforms as advertising revenue bonanzas is predicated on usage by the youth demographic.
• “The innovation problem” — Facebook hasn’t invented a new hit since the blue app itself and its other successful were all acquired.
• “The metaverse problem” — They’re betting the company on AR/VR, but it remains to be seen whether that’s going to be a big thing.
• “The antitrust problem” — No summary necessary.

As usual for The Morning, Leonhardt consulted with and quoted from other Times writers, particularly Kevin Roose. What struck me is that “Apple” didn’t appear once: App Tracking Transparency not only didn’t make the list, it wasn’t even mentioned. As I’ve been arguing, I think this is correct. That’s not to say ATT isn’t a problem for Facebook. Clearly, it is. We all know Facebook has profited from surveillance advertising, and ATT — to some degree — has decreased the ability for cross-app surveillance on iOS. We also all know that iOS users are a far more profitable demographic for advertising than Android users. I just don’t think ATT is one of the top problems facing Facebook, and it seems like others are starting to agree. I also think Mark Zuckerberg knows this better than anyone, and he’s been trying to focus public attention on ATT as an unfair attack by Apple, a competitor, to distract from Facebook’s more serious systemic problems. All four of Leonhardt’s problems would exist for Facebook even if ATT didn’t exist.

Some notes from Leonhardt’s column:

I know that many readers probably still think of Facebook as a behemoth. And in many ways it still is. As Kevin has written: “It can simultaneously be true that Facebook is in decline and that it is still one of the most influential companies in history, with the ability to shape politics and culture all over the globe.”

I’m not counting them out, but unless something dramatic changes, I think we’ve seen the beginning of a long slow decline into general irrelevance. I’m thinking maybe Facebook is the next Yahoo, except that Yahoo’s decline was nothing but sad to watch. I look forward to dancing on Facebook’s grave if, say, Verizon or AT&T acquires them after a stock collapse.

Regarding “the metaverse problem”:

Zuckerberg feels so strongly that the metaverse — based around the world of virtual-reality, or VR — represents the future of the internet that he renamed the company after it.

I do think Zuckerberg is effectively betting the company on AR/VR, but I don’t think the above is quite right about why. (I also think they changed the name of the holding company from “Facebook” to “Meta” not as proof of that commitment but because the name Facebook is now poison in the public mind, like when Philip Morris changed its name to Altria Group.)

It’s too simplistic to say “the future of the internet is AR/VR”. I think what Zuckerberg now sees clearly is that Facebook missed out by not owning one of the major mobile platforms. However big a problem ATT is for Facebook, it wouldn’t be a problem at all if Facebook owned and controlled a mobile phone platform like the iPhone or Android. They tried, halfheartedly, to make the Facebook Phone a thing a decade ago, but “halfheartedly” might be a generous description of how committed they were to that turd.

The nuance I’m trying to emphasize here is that I don’t think anyone believes with certainty that VR is going to be huge. Personally I’m deeply skeptical that it will be. And true AR — all-day augmented reality via normal-looking eyeglasses (let alone something utterly unobtrusive like contact lenses) remains outside today’s technology. Zuckerberg just wants to own a platform, it’s far too late for that to be a phone platform, AR technology isn’t here yet, so ... VR it is.

I think Zuckerberg’s thinking goes like this: We missed out when mobile phones exploded in popularity and became most people’s primary devices. These opportunities for disruptive new platforms only come along once a decade, at best. The only new thing on the horizon that might be such an opportunity is AR/VR. Thus, we should try to own and control the leading, or at least a leading, AR/VR platform. As Ben Thompson wrote back in 2013: “Facebook is an app, not a platform.” Zuck wants a platform.

Platforms are hard, though:

When Zuckerberg unveiled parts of the company’s platform last week, critics mocked it as looking dated. He responded by acknowledging it was “pretty basic” and promised “major updates” soon.

One positive sign for the company: It has sold more than 10 million of its VR headsets, which may suggest the niche is growing. But it remains unclear whether VR has anywhere near the mass-market appeal that social media does.

Leonhardt is asking the wrong question here. VR and social media are different levels of the stack. It’s not even apples-vs.-oranges because apples and oranges are both fruit. It’s more like owning a grocery store chain vs. growing fruit to sell in grocery stores.

Social media is hugely popular on mobile phones. Apple and Google create the only two meaningful mobile phone platforms. Apple and Google both benefit tremendously from their control and ownership over those two platforms. But neither Apple nor Google own meaningful social networks. The social networks play in Apple and Google’s gardens.