Facebook – American ByteDance.

Congress seems to want to give Facebook the ByteDance treatment.

• Facebook has had a bad week but the allegations being made have been quite effectively shot down by Mr. Zuckerberg, highlighting the possibility that this event is being used as an excuse for the US government to take control of Facebook’s ability to distribute news and information.
• The main allegation made by the “whistleblower” Frances Haugen is that Facebook prioritises profit over user safety which I suspect has some truth to it but far less than the media is making out.
• One of the biggest problems with this story is that the media is not a neutral observer.
• This is because prior to the rise of the internet, the media had a collective monopoly on the distribution of news which enabled it to earn excellent returns.
• The internet broke this monopoly meaning that anyone could distribute news which led directly to the long, drawn-out death of print media as well as live broadcast for anything other than sports.
• Facebook’s engagement is now so good that many people in the USA get their news from Facebook posts rather than visiting the websites of the various news outlets.
• This is threatening to the traditional media, and it means that it stands to benefit from any restrictions that are placed on Facebook’s ability to disseminate news and information.
• The situation is highlighted by what happened in Australia where it became very clear that the media needs Facebook more than Facebook needs it (see here).
• Hence, it has come as no surprise to me that the media coverage of the “whistleblower” and the congressional hearing has been almost universally negative for Facebook.
• Mr. Zuckerberg makes some good ripostes:
  • First, priority: It was a long time ago that Facebook announced that it was going to tweak its algorithms to surface what it called Meaningful Social Interactions.
  • This meant fewer viral videos and more content from friends and family.
  • Facebook knew and stated at the time that this would have a negative impact on monetisation but it went ahead and did it anyway.
  • These are not the actions of a company hell-bent on beating next quarter’s earnings at any cost to get the share price to go up.
  • At the same time, I don’t think that this was as altruistic as it sounds but was aimed at preserving the value of the network such that there would be a greater opportunity in the long-term to monetise new products.
  • Regardless of the motivation for the decision, I think it successfully rebuts the allegations of Frances Haugen particularly because Facebook took this action long before the current issue came to light.
  • Second, advertisers: Facebook has been doxed repeatedly for allowing its customers’ advertising to appear alongside questionable content.
  • Consequently, the allegation that Facebook deliberately promotes questionable content for monetary gain is nonsensical because its customers don’t like it.
  • Furthermore, they have pulled their advertisements from Facebook temporarily when these events have occurred supporting Mr. Zuckerberg’s point.
• I am pretty sure that Facebook does prioritise revenue generation over other issues some of the time but that is its duty as a private business with shareholders who are seeking a return for their retirement plans.
• Overall, I think that the allegations and the painting of Facebook as an evil empire of corporate greed are a substantial misrepresentation of reality.
• The net result could well be legislation that curtails Facebook’s ability to run its own business without government consent, which is precisely what has happened to ByteDance (TikTok owner) albeit to a lesser degree.
• ByteDance’s brush with Chinese regulation has resulted in a private business effectively becoming state-controlled.
• The Chinese state now has a small shareholding in ByteDance and critically, it has a board seat ensuring that nothing will be done that the CCP does not like.
• What is being proposed for Facebook is not dissimilar to this action and in my opinion, will be detrimental in the long-term as less value will be created thereby slowing the pace of innovation in the ecosystem that Facebook has created.
• This is exactly what is happening in China, albeit on a much smaller scale, where draconian crackdowns are likely to force entire segments of the Chinese technology industry to develop their products overseas.
• There is certainly a case to be made for greater oversight of the technology industry as the collective power over society that now rests in the hands of a few private individuals is unnerving.
• However, a draconian crackdown (as seems to be on the cards) will hurt the US’s position as a technology superpower in the long term.
• One only has to look to China for examples of what the effects of going too far are likely to be.