{"id":26029,"date":"2021-08-30T12:02:29","date_gmt":"2021-08-30T12:02:29","guid":{"rendered":"https:\/\/rbsitsoftwaresolution.com\/blog\/move-fast-and-break-facebook-a-bull-case-for-antitrust-enforcement.html"},"modified":"2021-08-30T12:02:29","modified_gmt":"2021-08-30T12:02:29","slug":"move-fast-and-break-facebook-a-bull-case-for-antitrust-enforcement","status":"publish","type":"post","link":"https:\/\/www.rbsitsoftwaresolution.in\/blog\/move-fast-and-break-facebook-a-bull-case-for-antitrust-enforcement.html","title":{"rendered":"Move fast and break Facebook: A bull case for antitrust enforcement"},"content":{"rendered":"

This is the second post in a series on the Facebook monopoly. The first post<\/a> explored how the U.S. Federal Trade Commission should define the Facebook monopoly. I am inspired by Cloudflare\u2019s recent post<\/a>\u00a0explaining the impact of Amazon\u2019s monopoly in its industry. <\/em><\/p>\n

Perhaps it was a competitive tactic, but I genuinely believe it more a patriotic duty: guideposts for legislators and regulators on a complex issue. My generation has watched with a combination of sadness and trepidation as legislators who barely use email question the leading technologists of our time about products that have long pervaded our lives in ways we don\u2019t yet understand. <\/em><\/p>\n

I, personally, and my company both stand to gain little from this \u2014 but as a participant in the latest generation of social media upstarts, and as an American concerned for the future of our democracy, I feel a duty to try.<\/em><\/p>\n

\n

Mark Zuckerberg has reached his Key Largo moment.<\/p>\n

In May 1972, executives of the era\u2019s preeminent technology company \u2014 ATT \u2014 met at a secret retreat in Key Largo, Florida. Their company was in crisis.<\/p>\n

At the time, Ma Bell\u2019s breathtaking monopoly consisted of a holy trinity: Western Electric (the vast majority of phones and cables used for American telephony), the lucrative long distance service (for both personal and business use) and local telephone service, which the company subsidized in exchange for its monopoly.<\/p>\n

Over the next decade, all three government branches \u2014 legislators, regulators and the courts \u2014 parried with ATT\u2019s lawyers as the press piled on, battering the company\u2019s reputation in the process. By 1982, a consent decree forced ATT\u2019s dismantling. The biggest company on earth withered to 30% of its book value and seven independent \u201cBaby Bell\u201d regional operating companies. ATT\u2019s brand would live on, but the business as the world knew it was dead.<\/p>\n

Mark Zuckerberg is, undoubtedly, the greatest technologist of our time. For over 17 years, he has outgunned, outsmarted and outperformed like no software entrepreneur before him. Earlier this month, the U.S. Federal Trade Commission refiled<\/a> its sweeping antitrust case against Facebook.<\/p>\n

Its own holy trinity of Facebook Blue, Instagram and WhatsApp is under attack. All three government branches \u2014 legislators, regulators and the courts \u2014 are gaining steam in their fight, and the press is piling on, battering the company\u2019s reputation in the process. Facebook, the ATT of our time, is at the brink. For so long, Zuckerberg has told us all to move fast and break things. It\u2019s time for him to break Facebook.<\/p>\n

If Facebook does exist to \u201cmake the world more open and connected, and not just to build a company,\u201d as Zuckerberg wrote in the 2012 IPO prospectus<\/a>, he will spin off Instagram and WhatsApp now so that they have a fighting chance. It would be the ultimate Zuckerbergian chess move. Zuckerberg would lose voting control and thus power over all three entities, but in his action he would successfully scatter the opposition. The rationale is simple:<\/p>\n

    \n
  1. The United States government will break up Facebook. It is not a matter of if; it is a matter of when.<\/li>\n
  2. Facebook is already losing. Facebook Blue, Instagram and WhatsApp all face existential threats. Pressure from the government will stifle Facebook\u2019s efforts to right the ship.<\/li>\n
  3. Facebook will generate more value for shareholders as three separate companies.<\/li>\n<\/ol>\n

    I write this as an admirer; I genuinely believe much of the criticism Zuckerberg has received is unfair. Facebook faces Sisyphean tasks. The FTC will not let Zuckerberg sneeze without an investigation, and the company has failed to innovate.<\/p>\n

    Given no chance to acquire new technology and talent, how can Facebook survive over the long term? In 2006<\/a>, Terry Semel of Yahoo offered $1 billion to buy Facebook. Zuckerberg reportedly remarked, \u201cI just don\u2019t know if I want to work for Terry Semel.\u201d Even if the FTC were to allow it, this generation of founders will not sell to Facebook. Unfair or not, Mark Zuckerberg has become Terry Semel.<\/p>\n

    The government will break up Facebook<\/h2>\n

    It is not a matter of if; it is a matter of when.<\/p>\n

    In a speech on the floor of Congress in 1890, Senator John Sherman, the founding father of the modern American antitrust movement, famously said<\/a>, \u201cIf we will not endure a king as a political power, we should not endure a king over the production, transportation and sale of any of the necessities of life. If we would not submit to an emperor, we should not submit to an autocrat of trade with power to prevent competition and to fix the price of any commodity.\u201d<\/p>\n

    This is the sentiment driving the building resistance to Facebook\u2019s monopoly, and it shows no sign of abating. Zuckerberg has proudly called Facebook the fifth estate. In the U.S., we only have four estates.<\/p>\n

    All three branches of the federal government are heating up their pursuit. In the Senate, an unusual bipartisan coalition is emerging, with Senators Amy Klobuchar (D-MN), Mark Warner (D-VA), Elizabeth Warren (D-MA) and Josh Hawley (R-MO) each waging a war from multiple fronts.<\/p>\n

    In the House, Speaker Nancy Pelosi (D-CA) has called Facebook \u201cpart of the problem<\/a>.\u201d Lina Khan\u2019s FTC is likewise only getting started, with unequivocal support from the White House that feels burned<\/a> by Facebook\u2019s disingenuous lobbying. The Department of Justice will join, too, aided by state attorneys general. And the courts will continue to turn the wheels of justice, slowly but surely.<\/p>\n

    In the wake of Facebook co-founder Chris Hughes\u2019 scathing 2019 New York Times op-ed<\/a>, Zuckerberg said<\/a> that Facebook\u2019s immense size allows it to spend more on trust and safety than Twitter makes in revenue.<\/p>\n

    \u201cIf what you care about is democracy and elections, then you want a company like us to be able to invest billions of dollars per year like we are in building up really advanced tools to fight election interference,\u201d Zuckerberg said.<\/p>\n

    This could be true, but it does not prove that the concentration of such power in one man\u2019s hands is consistent with U.S. public policy. And the centralized operations could be rebuilt easily in standalone entities.<\/p>\n

    Time and time again, whether on Holocaust denial, election propaganda or vaccine misinformation, Zuckerberg has struggled to make quick judgments when presented with the information his trust and safety team uncovers. And even before a decision is made, the structure of the team disincentivizes it from even measuring anything that could harm Facebook\u2019s brand. This is inherently inconsistent with U.S. democracy. The New York Times\u2019 army of reporters will not stop uncovering scandal after scandal, contradicting Zuckerberg\u2019s narrative. The writing is on the wall.<\/p>\n

    Facebook is losing<\/h2>\n

    Facebook Blue, Instagram and WhatsApp all face existential threats. Pressure from the government will stifle Facebook\u2019s efforts to right the ship.<\/p>\n

    For so long, Facebook has dominated the social media industry. But if you ask Chinese technology executives about Facebook today, they quote<\/a> Tencent founder Pony Ma: \u201cWhen a giant falls, his corpse will still be warm for a while.\u201d<\/p>\n

    Facebook\u2019s recent demise begins with its brand. The endless, cascading scandals of the last decade have irreparably harmed its image. Younger users refuse to adopt the flagship Facebook Blue. The company\u2019s internal polling on two key metrics \u2014 good for the world (GFW) and cares about users (CAU) \u2014 shows Facebook\u2019s reputation is in tatters<\/a>. Talent is fleeing, too; Instacart alone recently poached<\/a> 55 Facebook executives.<\/p>\n

    In 2012 and 2014, Instagram and WhatsApp were real dangers. Facebook extinguished both through acquisition. Yet today they represent the company\u2019s two most promising, underutilized assets. They are the underinvested telephone networks of our time.<\/p>\n

    Weeks ago, Instagram head Adam Mosseri announced that the company no longer considers itself a photo-sharing app. Instead, its focus is entertainment. In other words, as the media widely reported, Instagram is changing<\/a> to compete with TikTok.<\/p>\n

    TikTok\u2019s strength represents an existential threat. U.S. children 4 to 15 already spend over 80 minutes a day<\/a> on ByteDance\u2019s TikTok, and it\u2019s just getting started. The demographics are quickly expanding way beyond teenagers, as social products always have. For Instagram, it could be too little too late \u2014 as a part of Facebook, Instagram cannot acquire the technology and retain the talent it needs to compete with TikTok.<\/p>\n

    Imagine Instagram acquisitions of Squarespace to bolster its e-commerce offerings, or Etsy to create a meaningful marketplace. As a part of Facebook, Instagram is strategically adrift.<\/p>\n

    Likewise, a standalone WhatsApp could easily be a $100 billion market cap company. WhatsApp has a proud legacy of robust security offerings, but its brand has been tarnished<\/a> by associations with Facebook. Discord\u2019s rise represents a substantial threat, and WhatsApp has failed to innovate to account for this generation\u2019s desire for community-driven messaging. Snapchat, too, is in many ways a potential WhatsApp killer; its young users use photography and video as a messaging medium. Facebook\u2019s top augmented reality talents are leaving for Snapchat<\/a>.<\/p>\n

    With 2 billion monthly active users, WhatApp could be a privacy-focused alternative to Facebook Blue, and it would logically introduce expanded profiles, photo-sharing capabilities and other features that would strengthen its offerings. Inside Facebook, WhatsApp has suffered from underinvestment as a potential threat to Facebook Blue and Messenger. Shareholders have suffered for it.<\/p>\n

    Beyond Instagram and WhatsApp, Facebook Blue itself is struggling. Q2\u2019s earnings may have skyrocketed, but the increase in revenue hid a troubling sign: Ads increased by 47%, but inventory increased by just 6%. This means Facebook is struggling to find new places to run its ads. Why? The core social graph of Facebook is too old.<\/p>\n

    I fondly remember the day Facebook came to my high school; I have thousands of friends on the platform. I do not use Facebook anymore \u2014 not for political reasons, but because my friends have left. A decade ago, hundreds of people wished me happy birthday every year. This year it was 24, half of whom are over the age of 50. And I\u2019m 32 years old. Teen girls run the social world, and many of them don\u2019t even have Facebook on their phones.<\/p>\n

    Zuckerberg\u2019s newfound push into the metaverse has been well covered, but the question remains: Why wouldn\u2019t a Facebook serious about the metaverse acquire Roblox? Of course, the FTC would currently never allow it.<\/p>\n

    Facebook\u2019s current clunky attempt at a hardware solution, with an emphasis on the workplace, shows little sign of promise. The launch was hardly propitious, as CNN reported<\/a>, \u201cWhile Bosworth, the Facebook executive, was in the middle of describing how he sees Workrooms as a more interactive way to gather virtually with coworkers than video chat, his avatar froze midsentence, the pixels of its digital skin turning from flesh-toned to gray. He had been disconnected.\u201d<\/p>\n

    This is not the indomitable Facebook of yore. This is graying Facebook, freezing midsentence.<\/p>\n

    Facebook will generate more value for shareholders as three separate companies<\/h2>\n

    Zuckerberg\u2019s control of 58% of Facebook\u2019s voting shares has forestalled a typical Wall Street reckoning: Investors are tiring<\/a> of Zuckerberg\u2019s unilateral power. Many justifiably believe the company is more valuable as the sum of its parts. The success of ATT\u2019s breakup is a case in point.<\/p>\n

    Five years after ATT\u2019s 1984 breakup, ATT and the Baby Bells\u2019 value had doubled<\/a> compared to ATT\u2019s pre-breakup market capitalization. Pressure from Japanese entrants battered Western Electric\u2019s market share, but greater competition in telephony spurred investment and innovation among the Baby Bells.<\/p>\n

    ATT turned its focus to competing with IBM and preparing for the coming information age. A smaller ATT became more nimble, ready to focus on the future rather than dwell on the past.<\/p>\n

    Standalone Facebook Blue, Instagram and WhatsApp could drastically change their futures by attracting talent and acquiring new technologies.<\/p>\n

    The U.K.\u2019s recent opposition<\/a> to Facebook\u2019s $400 million GIPHY acquisition<\/a> proves Facebook will struggle mightily to acquire even small bolt-ons.<\/p>\n

    Zuckerberg has always been one step ahead. And when he wasn\u2019t, he was famously unprecious: \u201cCopying is faster than innovating<\/a>.\u201d If he really believes in Facebook\u2019s mission and recognizes that the situation cannot possibly get any better from here, he will copy ATT\u2019s solution before it is forced upon him.<\/p>\n

    Regulators are tying Zuckerberg\u2019s hands behind his back as the company weathers body blows and uppercuts from Beijing to Silicon Valley. As Zuckerberg\u2019s idol Augustus Caesar might have once said, carpe diem. It\u2019s time to break Facebook.<\/p>\n

    Article source: http:\/\/feedproxy.google.com\/~r\/techcrunch\/social\/~3\/lu6kSi_ZPbc\/<\/p>","protected":false},"excerpt":{"rendered":"

    This is the second post in a series on the Facebook monopoly. The first post explored how the U.S. Federal Trade Commission should define the Facebook monopoly. I am inspired <\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[3],"tags":[10,7,14,15,6,12,11],"class_list":["post-26029","post","type-post","status-publish","format-standard","hentry","category-latest-update","tag-computer-news","tag-downloads","tag-microsoft-download-news","tag-networking-updates","tag-technology-update","tag-wordpress-plugin-download","tag-wordpress-theme-download"],"aioseo_notices":[],"aioseo_head":"\n\t\t\n\t\n\t\n\t\n\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t\n\t\t