Big problems for Facebook last week as over $100 billion was wiped off the value of the firm. That was driven principally by an announcement saying that user numbers were down in Europe, and that costs were likely to rise faster that revenues in the near future.
Facebook announced that the number of its users in Europe fell by 3 million in the first quarter, to 279 million. North American users stayed flat at 185 million.
The decline in Europe was driven in part by the trouble around Cambridge Analytica and use of data from the platform, which has made some users nervous about the care Facebook takes of that data. The introduction in late May of the EU General Data Protection Regulation (GDPR) also may well have played a part, as users cleaned up their web use generally.
But two other issues may have more serious long-term implications for the business. These must be part of the general concern from investors, and one of those rests in part at least on the shoulders of procurement professionals and their colleagues.
That is related to Facebook’s poor performance in terms of removing offensive, dangerous or simply evil material from the site. Other sites such as YouTube have the same issue, but headlines from The Times last week such as “anti-Semitic hate posts allowed by Facebook” don’t look good. Reports that moderators at Facebook were also trained to allow videos of children being beaten, or explicit videos showing people self-harming, for instance, also played into the view that Facebook is not taking these issues seriously enough.
The company has always argued it is a platform, not a publisher, so should not take full responsibility for what appears on the site. But that argument looks weaker as time goes by. We have to take responsibility for what you read here at Spend Matters – why shouldn’t Facebook take responsibility for what you see and hear on their website?
In turn, that means advertisers are getting increasingly nervous about the reputational risk of having their messages placed in close proximity to content that is unsuitable. How would you feel about your lovely brand being promoted next to pictures of a beheading, a disgustingly anti-Semitic cartoon, or a video showing a kid taking a razor blade to their own arm? (By the way, you can read more about supply-chain related reputational risk in our briefing paper here, written with risk management platform providers riskmethods).
So marketing and procurement executives are reviewing their budget allocation, and the seemingly inexorable rise of Facebook as a home of significant marketing budgets might be coming to an end.
That’s maybe not a bad consequence. As we heard at the ProcureCon Marketing conference in June, and indeed at the event in previous years, too much marketing spend on digital media is made without any real understanding of what is being gained from the investment. That understanding should be a key objective for brand and procurement managers; if you don’t know what you’re getting for your money, that’s a pretty basic problem, we’d suggest!
The second issue for Facebook is that young people now see it as an “old people’s” site, as they turn to other sites and apps such as Instagram (which of course is owned by Facebook) or Snapchat. While growth continues amongst over 55 year-olds, Facebook users under 25 are expected to decline in mature markets. In the long run, that could have more serious consequences for the firm than GDPR or data security.