Mark Zuckerberg wants to talk about his social network. Facebook is ready to change.
This is in early February, the 34-year-old CEO sits on the sofa in the meeting room of Facebook's newest office building. Designed by renowned architect Frank Gehry, the building features a 3.6-acre roof-top garden and 40-foot-tall mahogany trees.
Zuckerberg sums up the changes in Facebook around the “four major categories we have been following”, all of which have hidden the harsh criticism that his company has faced in the past two years.
He said one of the categories is “Content Management, which helps balance free expression and security. The other is the principle of data privacy. In a world where everyone shares a lot of information, what is the right way to protect this information and let people control it. ”
Zuckerberg's last two categories are "Digital Health and Well-being" —— this acknowledges a surge in the number of devices and too much time for users to watch the screen —— and “ election integrity and prevention of interference&rdquo ;
These conversation points are equivalent to Zuckerberg's apologies for all the damage done to Facebook. In the process of building a $500 billion empire, he and his company have extensive contacts with old and new friends. Of course, they also found themselves caught up in various controversies from hate speech to data breaches. Zuckerberg wants to prove that he understands this. He said that Facebook's mode of passive response has turned into a proactive mode. ”
Core business growth slows down
A month later, Zuckerberg’s performance showed that he had been painstakingly practicing his lines. The tech tycoon is like a comedian who spoke some exquisite words on the night of the opening. In early March, Zuckerberg posted a highly acclaimed post on Facebook, announcing that his company will develop a new, privacy-friendly information product, from the “town square” approach to a more similar living room. The way to talk.
He wrote: “People should have a simple, intimate place to communicate, where they can clearly control who can communicate with them and believe that no one can access what they share. ”
In other words, they should have a completely different place to communicate with Facebook.
For Facebook, change is a complex topic. On the one hand, it is of course doing a lot of work to solve its problems, such as hiring tens of thousands of employees to manage its content. On the other hand, however, for the foreseeable future, Facebook is still the way it has grown in the past decade: it is an information publishing platform that collects 2.3 billion user data for marketing customers.
These customers helped Facebook achieve $56 billion in revenue last year. Facebook may be changing, but its goal is to preserve the existing stuff until it comes up with a way to replace the existing business, otherwise too many changes will jeopardize its core business.
Mark Zuckerberg attended the European Parliament in Brussels in May 2018.
The urgency of Facebook's adjustment of its business model is also more serious than many people realize. & mdash; it does so not only to cope with the review it faces. Facebook's core business growth is slowing sharply due to potential regulatory obstacles and fierce competition for young users.
Its flagship product, Blue, Facebook is losing popularity, especially among younger users. Moreover, the company's growth in the number of users in rich countries has also slowed down. Most of the company's revenue comes from these countries.
Facebook's revenue in 2018 increased by 37%. But this reflects the rapid decline in its growth rate, from 54% in 2016 to 47% in 2017. According to S&P Global, Wall Street predicts that Facebook's growth rate will continue to slow, falling to 23% this year and 21% by 2020.
Zuckerberg did not directly comment on the slowdown in Facebook's revenue growth. He said his goal is to plan a two-way street that will protect Facebook's current products and find new ways to make money through services such as payments and e-commerce.
He said: "We are working hard to create a service that everyone can use. “The best way to do this is to make these services “affordable, even free” and to fund them through advertising (Facebook's existing business), he added.
When asked how his new interest in privacy and small group communication would become a business, he did not answer either because he didn't know it or because he was not ready to say it. (The declaration he published in March did not mention more specific content.)
He said that users "want to figure out and should also figure out how their information is being used and controlled", Facebook will develop products for them and let them have this control. Zuckerberg said: "We need to do this. ”
Is improvement, not change
Mike Schroepfer, Facebook's chief technology officer, pointed to two side-by-side pictures on his laptop and asked reporters to distinguish between “good” and “bad”. The answer is not obvious. These two photos look a lot like marijuana. Finally, I even guessed with a tape: "Will the left side be marijuana?" & rdquo; Schropper applauded and nodded.
This demo shows how Facebook uses technology, especially artificial intelligence, to clean up its platform content. Schroppel said that artificial intelligence is more accurate than humans. He said that Facebook's artificial intelligence system 93.77% is convinced that the picture on the left is marijuana, and 88.39% is convinced that the picture on the right is broccoli. It is much faster than humans.
“You may need more than a second to recognize it. & rdquo; He said. But the company's technology "can do this in a hundredth of a millisecond, and can identify billions of times a day. ”
People, like computers, are part of the Facebook solution. The number of content managers it hired has tripled, and the number of contract workers has increased from 10,000 in 2017 to 30,000 today. Moreover, Facebook has also strengthened the recruitment and redeployment of experts.
Molly Cutler, a former deputy general counsel at Facebook, now leads a “strategic response” team that meets weekly with chief operating officer Sheryl Sandberg. Samid Chakrabarti, head of corporate citizenship, has shifted his focus from voter registration to preventing election intervention. Facebook has reassigned engineers from its once independent “Safety and Security” team to individual product teams.
These changes are real, but they are designed to improve Facebook, not to radically change it.
Gene Munster, a senior analyst at venture capital firm Loup Ventures, believes that removing content that claims to be terrorism is a joy, especially when it comes to Facebook's more difficult problem of processing user data. “They like to talk about this because it can be solved. & rdquo; He said.
“Only good news”
In fact, Facebook believes that there are few problems to solve except for the perpetrators who inadvertently indulge. It insists that as long as people, especially the public, can better understand its advertising model, its problems will become less. “This is the core of our business. “Sandberg said when it comes to the sacred trinity of Facebook user data, advertiser fees and free content,” this is the hardest to explain. ”
Sandberg and Zuckerberg work in the same building, and her meeting room has a name: “Only good news. "This is either a joke that Sandberg just wants to hear good news from a visitor, or the greatest example of a company's positive thinking in history." She and Zuckerberg strongly denied that Facebook gave the user data "sell" to marketers. Facebook is simply “marketing staff” to “anonymous users” to allow Facebook and its paying customers to monetize this data.
She explains why Facebook doesn't —— doesn't actually —— abandon this pattern: “In fact, this business model is really powerful and much better than any other model. ”
More importantly, Facebook believes that its business model is a win-win situation.
“This is much better than selling a subscription fee, because only the rich can afford it. If you charge, you can't have 2.7 billion people using your service. For many people who use our services, even a dollar is beyond their reach. ”
Regardless of whether the public can afford to pay for online services, Facebook is undoubtedly facing a difficult problem for the rich/poor. Its growth depends on the latter, but its profitability depends on the former. Last year, its total number of users increased by 9%, most of which came from markets outside the mature market.
Facebook says that in the US and Canada, it generates an average of $35 per user per quarter, which is more than 10 times the company's revenue in the Asia Pacific region.
The company said in its 10-K annual report in January: “We expect future user growth to be concentrated in areas with relatively low average revenue per user. ”
Sandberg claims to be concerned about this trend. She said: “We will not prioritize which country and its users to develop based on monetization opportunities. We just want to connect everyone. ”
In the US digital advertising industry, the proportion of advertising revenue of companies
Facebook's photo-sharing app, Instagram (acquired for $1 billion in 2012) and instant messaging app WhatsApp (acquired for $22 billion in 2014) has not been turned into a huge source of revenue.
Instagram has been growing rapidly. WhatsApp has a huge impact globally —— it has 1.5 billion users worldwide, but there is no obvious business model. The initial development of Facebook has not changed much.
Scott Devitt, an analyst at Stifel Financial, wrote in a letter to clients: “Most of the growth comes from Instagram. ”
In 2012, Usama Fayyad recruited two French doctors in an ambitious project. Their task is to calculate the extent to which Facebook can accurately determine a user's purchase behavior based on the data it can obtain. The Silicon Valley company had about 1 billion users at the time. He made himself the object of research.
Nearly a decade ago, after the Internet giant Yahoo acquired his data mining startup DMX Group, he served as Yahoo's first chief data officer. During his tenure at Fayyad, Yahoo's advertising business grew from $20 million to $500 million, and he pioneered the use of user behavioral targeting.
Now he is the Chief Technology Officer of Blue Kangaroo, a personalized shopping app for mobile devices, who is trying to assess the effectiveness of Facebook ads. (Spread: These methods have been very effective in the past and the present.)
Due to concerns about sharing too much personal data online, Fayyad's own digital footprint on Facebook is limited. In 2006, shortly after the non-university student was allowed to register, he created a Facebook account, but his page had almost no clear personal information.
Fayyad did not join any group and did not comment on other people's posts. Although he has made thousands of Facebook friends", most of them are not people he often interacts with.
It turns out that Facebook’s understanding of Fayyad’s friends’ habits is enough to make it guess what purchase decisions Fayyad might make.
“ I am quite aggressive in the shopping behavior & lsquo;signal & rsquo; & rdquo; He said, "Your friends are likely to like what you like." ”
In the years following Fayyad's research, Facebook's ability to target customers increased as their data sources grew. Much of the data comes from Facebook itself, such as its live video service Facebook Live, or its Reflections feature, which is an optimized version of the Like button that allows users to express their love, sadness, anger and content on the platform. Other emotional reactions. (Videos that users watch and their reactions to various content can tell marketers a lot about them.)
But the company has also accumulated a variety of other data sources from third-party providers. It turns out that Facebook has no control over how third-party information and its own data can be combined. For example, Cambridge Analytica violated Facebook's rules by collecting and improperly using information from Facebook users.
The ensuing storm began to undermine Facebook's credibility —— although the ads that marketers bought from the Facebook platform helped them create great value. Subsequently, Facebook decided to cut off the business of the third-party data provider, which harmed not only its reputation.
Allen Finn, a marketing expert at WordStream, an online advertising consultancy, said: "They really got their feet." After Cambridge's analysis of the company's data scandal, they weakened their ability to deliver targeted advertising. ”
At the Facebook F8 Developers Conference in San Jose in 2017, Facebook Chief Technology Officer Mike Schropfer was on the stage. Facebook is deploying artificial intelligence to help remove unwanted content from its website.
These changes have affected (but not destroyed) the effectiveness of Facebook ads because smart advertising technology experts have a way to combine Facebook data with third-party data.
Laura Joukovski, chief media officer at online retailer TechStyle Fashion Group, said: “With these changes, we have to adjust accordingly. ”
Facebook believes that one way to increase user trust is to help them better understand Facebook itself. The theory is that if consumers understand how advertising works, they will continue to view advertising as a positive aspect of the Facebook experience.
“Consumer —— this is not their fault —— don’t understand how digital advertising works. "Carolyn Everson, vice president of global marketing solutions, said.
One way Facebook tries to reveal its advertising model is to let users click on a single ad to find out why the ad appeared in front of them. But "Why would I see this ad?" The "function does not provide much detail, it only provides rough information, such as giving advice to retailers who want to reach a certain age group somewhere.
Facebook says it is still improving “ Why do I see this? & rdquo; This feature, in the process to increase transparency and improve user control of the data. For example, it has announced that it will provide a Clear History button that allows users to delete their online activities, as the web browser has allowed for years.
Adding these adjustments together only proves that Facebook is changing —— but only made as few changes as possible.
If Facebook really makes a more radical change, it may be because it has to change, not because it wants to change.
By 2020, the first US state data privacy law will enter into force in California. The so-called “California Consumer Privacy Act” (CCPA) is one of the strictest rules, and it may soon impose unprecedented restrictions on Facebook and similar companies.
The law will give consumers more control over their data, enabling them to see which of their online information is being collected and how it is being used. They can also click to delete their online information —— clear history button like Clear History, but for the entire internet.
This is a very high requirement, and almost no company in the technology industry wants to satisfy it. California Governor Gavin Newsom hopes to go further. In his first State of the Union address in mid-February, he said: "I appreciate the fact that this legislature passed the first digital privacy law in the United States last year. But California consumers should also be able to share the wealth created by their data. ”
Newson recommends the launch of “data dividends”, which requires Internet companies to pay users for information. He is not the only one who supports this proposal. Some people, such as the 2020 Democratic presidential candidate Elizabeth Warren, called for the spin-off of companies like Facebook. At this point, Facebook's biggest hope is that the federal legislature has rushed to introduce privacy laws, because the Internet industry hopes that the federal legislature's regulations will become more relaxed.
Make Facebook stronger
In any case, the upcoming restrictions will have a lasting impact on Facebook. The company has seen the impact of the EU “General Data Protection Regulations” (GDPR). The new law is designed to give European consumers more control over their online information, requiring companies to obtain user consent before using certain types of data. Failure to comply may result in a fine of up to 4% of the company's annual income —— for Facebook, the fine may exceed $2 billion. To make matters worse, these laws may weaken the company's ability to sell targeted advertising.
“With GDPR,” Sandberg said, “Europe will have a certain percentage of users opt out of targeted advertising. As a result, these ads will become less relevant. ”
In other words, the Internet industry, including Facebook, has suffered financial damage in Europe.
Regulatory reforms are expected to have cumulative effects. Debra Aho Williamson, principal analyst at market research firm eMarketer, said: “Historically, advertisers use Facebook because of its broad reach and targeted advertising. Ability. But now, these targeted ads are starting to be hit by GDPR. ”
Regulation will not take effect overnight, but competitors are already exploiting Facebook vulnerabilities. In addition to the deadly rival Google, it has a rival that rivals for the first time.
Amazon has unparalleled consumer buying behavior data, while short video applications have recently downloaded more than 1 billion downloads, many of which are much younger than Facebook users. (The pursuit of young people has also had a negative impact: the Federal Trade Commission (FTC) recently imposed a fine of $5.7 million on Vibrato, in violation of the Children's Privacy Act.)
All of this has created a strange new environment for Facebook: its core product, which has slowed in growth but is very profitable, has been rigorously scrutinized as never before, and it has encountered more than ever before in the process of rapid innovation. More obstacles.
At the hearing of the US Senate Intelligence Committee in September 2018, Cheryl Sandberg was tortured by parliamentarians on how social media responded to foreign intervention.
The discussion about Facebook's dilemma often reminds people of its past dilemmas and how savvy and savvy overage operators Zuckerberg is.
This has proven to be correct again and again. He rejected Yahoo’s proposal to acquire its company earlier. (Yahoo bought $1 billion in Facebook in 2006.) He has withstood the user's anger over various design changes. In 2012, he succeeded in transforming Facebook from a desktop web application to a mobile application, a feat that required radical changes to its development process.
Facebook has been looking for users around the world. The most profitable market for the company is saturated, and now it needs to shift to more ways to make money. If the future exists in a private message or picture that is automatically deleted, then Facebook also wants to appear there.
“I’ve been trying to manage our company like this: we’re willing to take on more or lower income to get what I think will get better over time. “He said that when the company introduced a painful change in the launch of new products,” I just thought that finding the right model over time would help build a stronger community. ”
Don't get me wrong. Zuckerberg is not just about making the community of users, society or legislators stronger, but also about making Facebook stronger.