Why Facebook empire is crumbling

Facebook, Instagram and WhatsApp offline

Facebook, Instagram and WhatsApp

By Umair Haque

Finally, Facebook’s empire is beginning to crumble. By now you’ve heard that it lost users for the first time globally, which triggered a massive crash in the share price, which went on to crash the stock market in general. All of this, though, has been eminently predictable, if a long time coming. What’s really going on here?

It turns out that hate, because it is toxic for people, is not a great business model. I know that every second-rate venture capitalist and wannabe Zuck thinks hate is awesome. But that’s far from the truth. Let me try to explain.

The early web platforms, like Facebook, succeeded because of simple facts of what’s called “network economics.” To understand “network economics,” you only need to grasp three things. One, the network with the most users sees a kind of positive feedback effect, a kind of snowball effect. If I’m on the network, and you are, then our friends are more likely to be, too, because it’s the place to be — these are called “network effects.”

Second, because of that, there is a “first mover advantage” — the first one to launch tends to win, or at least one of the first ones. Third — and this is the crucial bit — once you’ve established this kind of dominance, your advantage is almost unshakable.

Now if another network comes along, it has to hit a point of critical mass, to get people to defect and use it. I’d need most of my friends to go somewhere else to convince me. But so would they. This is called “lock-in,” and it explains why internet companies, once they succeed in building a network at large scale, like Facebook did, end up being monopolies. These economics hold true for everyone from YouTube to Spotify and so on.

Lock-in is incredibly powerful. It is almost impossible to defeat a network once it’s scaled up, because the point of critical mass is too high — all your friends have to leave, not just one or two.

I say that because that is how badly Facebook has screwed up. It has done the impossible — defeated the laws of network economics, and ruined its own market dominance. LOL. Defeating network effects was said to be almost undoable. And yet somehow, Facebook made itself so toxic, so awful that even network effects and lock-in couldn’t keep people on the platform.

And what that means is that Facebook’s worst enemy turned out to be…itself.
What happened was something like this. Facebook built this huge empire thanks to the laws of network economics — network effects, first-mover advantage, lock-in. It was, in the beginning, a dumb, gross app to rank the “hotness” of “girls.” VCs, being the dudebros they are, threw money at it.

First mover advantage. People joined. It grew to scale, establishing network effects. People were locked in. The money started rolling in.
And then Facebook decided that all this gave it a license to put personal politics first. It allowed hate to spread, vitriol became the norm, disinformation was rampant, and so forth. More or less anyone sane grew weary with Facebook.

But Facebook’s management didn’t care. In their estimation, hate was a wonderful business model. But they had fundamentally misunderstood the economics at work here. It wasn’t hate that was keeping people on the platform — it was network economics. All the hate, the vitriol, the disinformation? That was making people distrustful of Facebook. Weary with it. Tired of it. It was starting to chip away even at the immense power of network effects and lock in.

But Facebook’s management didn’t get this. They conflated these two things. They thought that hate and controversy and whatnot were the secret to their success. They never were. It was just network effects and lock in and first mover advantage. And the distrust and unease people felt at Facebook’s obvious indifference to by now terrible, terrible things — it helped a genocide here, it helped install a Trump there, it fuelled misogyny and racism here — was undoing the network effects and lock in at the heart of its success.

Who really wanted to stay on Facebook? Join it? No one much, really. Do you see how these two things — network effects, and hate — were conflated by Facebook’s managers, from Zuck to his minions?

For Facebook, the platform had become basically a way to spread the personal politics of its own management. Zuck obviously leans hard right, and so do his minions — why else allow things like they’ve done? They imagined, in their dream world, that this was all great business. Unfortunately for them, it was going to lead to a crisis, because people simply did not want to do business with Facebook much anymore, unless they absolutely had to. The idea that platform is just a base for the personal politics of its top management is a big mistake, especially when those politics are ugly and misogynistic and racist and hateful.

And so when rivals did come along — what happened? Well, they exploded, particularly amongst the young. Because young people, especially, do not share the politics of Facebook’s founders. They do not believe in hate and supremacy and misogyny and cruelty and greed. Young people these days? They’re all practically Karl Marx, because they can see how violently and stupidly capitalism has failed them. They lean so far left that the ghosts of Einstein and Orwell — both of whom were socialists — are smiling in the quantum beyond.

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And they began to defect, in huge, huge numbers, to a place like TikTok.
What is TikTok really about? Why is it so successful? Ask a beancounter, a VC, a Silicon Valley type, and you’ll get some nerdy answer. About “snackable” aka bite sized “content” and so forth. TikTok succeeds for a reason that’s so obvious, it’s right in front of their noses, but they’re too obsessed with nonsense to ever really see it.

I used to make fun of TikTok. But you know what? I was wrong. My lovely wife started to use it. And then I discovered something quite…sweet.
TikTok is a happy place. Americans hate that phrase. They think happiness is a bad thing. They are trapped in a cruel culture, and it’s made them cruel people. But don’t mistake me — I don’t mean it in a naive way. So let me explain. But first let me say it again, because it matters.

TikTok is a happy place. What do you see there? You see kids dancing. Isn’t that cool? Yes it is. It is cool. Dancing is always cool. It makes people happy. It bonds and connects them and gives them shared meaning. You see people sharing videos of the things that make them happiest — their art, music, loved ones, their dorky parents, their funny pets. You see them discussing their everyday struggles — money, romance, careers.
And you know what? By and large, all of this is free of hate.

Now, Silicon Valley douchebags do not understand this. Because they are emotionally stunted people. They’ve never really danced. They’ve never really created art or music. They don’t even really have relationships, apart from with money. Maybe that’s a stereotype — but doesn’t it apply to Zuck? And his ilk, all those other bro-dude “founders”? How about the techbros of the world? They don’t get it. They don’t understand the aching, beautiful, sweet humanity of it.

So let me say it again again. TikTok is a happy place. Do you know what happens I post videos of Snowy to TikTok? People laugh and smile. Do you know what happens if I do on Facebook or Twitter? Even that turns into political meltdown of some kind often. LOL.

If a kid posts a dancing video on Twitter, it’ll be full of Nazis or misogynists in minutes. Same on Facebook, except they’ll be bullies. But TikTok? It’s mostly… love. That’s a great thing. It’s people being human. Dancing, making art, giggling at their parents, talking about their challenges. And nobody, really, is there, to hate.

That is super, super important. There isn’t the atmosphere of hostility that there is on Facebook or Twitter or YouTube. There isn’t the sense of constant attack and enmity and vitriol. There isn’t the expectation that “if I post this, my God, I’m going to piled on by Nazis and misogynists and creeps of every kind.” There isn’t a chilling effect.

What happened on Facebook was that chilling effects dominated network effects. Chilling effects meaning just the above: “Hey, maybe I shouldn’t post this today, because I don’t want to deal with the bullies, the vitriol, the anger, the rage, the random creeps attacking me, the hate.” And then that thought happens more and more often. Until it’s the norm. And suddenly, chilling effects have overcome network effects.

TikTok shows us the power of true network effects — and reminds us what they’re really about, too. They’re about being human. Network effects happen because people like to share. We like to share because we are social beings. We share art, music, ideas, thoughts, relationships. We dance and wonder and think and love.

All of that is what network effects are really made of. As a simple example, language itself is a network effect. So is culture. We all have to share them for them to mean anything.

TikTok is getting it right. That is probably because it isn’t American. You can see that American internet companies have a huge, huge problem with hate. That is because America does. Those platforms reflect the personal politics of the people running them — Twitter, YouTube, etc — and those politics lean hard, hard right.

But hard right politics will always squelch network effects. If I have to wonder that some Nazi, bully, maniac, creep, misogynist is going to attack me every single time I post a video of something human — dancing, singing, laughing, playing, loving, wondering — then I will stop doing it.

So no, hate isn’t a great business model. Facebook teaches us that lesson in spades. Sure, it’s still making money. But the economics are what you should understand. Facebook squandered the greatest network advantage — billions of people on it, first — with hate. And that lesson matters. Because, like I said, if every time you want to share yourself, the beauty and wonder of you, living, breathing, here, for just another moment, dancing, singing, reading, thinking, learning, growing, loving — and there’s an army of bullies, Nazis, misogynists, fanatics, idiots, violent bigots, supremacists, in the way?

You are going to leave, and go somewhere else. To a place that isn’t corroded by hate. Because being human is the point of being here in the first place.

*Umair Haque is the Director of the London-based Havas Media Lab and heads Bubblegeneration, a strategy lab that helps discover strategic innovation. He regularly shares views on Medium

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