<https://www.theguardian.com/commentisfree/2022/feb/24/ive-been-waiting-15-years-for-facebook-to-die-im-more-hopeful-than-ever>
I’ve been praying for Facebook’s collapse ever since it attained liftoff. In a
2007 article, I predicted that “your creepy ex-co-workers will kill Facebook”
by demanding to know why you won’t “friend” them, prompting an exodus to the
next platform. That was the social network cycle back then: a new network
opens, and you and the people you genuinely like enjoy a rollicking group chat
until all the people you have to pretend to like show up.
That’s the double-edged sword of products that rely on “network effects” – the
economists’ term for a product that gets better when more people use it. Sure,
you might join Facebook because your friends are all there (and more people
might sign up because you’re there), but that also means that every time your
friends leave Facebook, it’s a reason for you to leave, too.
My prediction failed. For a decade and a half, Facebook resisted the fate of
all the social networks that preceded it. In hindsight, it’s easy to see why:
it cheated. The company used investor cash to buy and neutralize competitors
(“Kids are leaving Facebook for Insta? Fine, we’ll buy Insta. We know you value
choice!”). It allegedly spied on users through the deceptive use of apps such
as Onavo and exploited the intelligence to defeat rivals. More than anything,
it ratcheted up “switching costs.”
“Switching costs” is another economic term: it means “the price you pay when
you switch from one service to another.” Switching from Facebook to a rival
means saying goodbye to the communities, friends and customers you hang out
with on the platform. Normally, tech has really low switching costs: want to
change from T-Mobile to Verizon? Just port your number. Your friends don’t even
have to know you did; they can still call you and you them.
Tech’s rock-bottom switching costs are what kept the industry so dynamic in its
early days. Microsoft could deploy an army of corporate salespeople to turn
Microsoft Office into an industry standard, then Apple could come along and
reverse-engineer the Office formats and make the interoperable iWork office
suite. That means that Windows users could switch to the Mac and open their
Word docs in Pages, their Excel spreadsheets in Numbers and their PowerPoints
in Keynote.
It’s different for Facebook. The company’s ascendancy coincided with an overall
concentration in the tech sector, and, with it, laws that protected winners of
the latest round of the interoperability wars from new challengers. Apple was
able to reverse-engineer its way out of the Microsoft Office trap, but woe
betide a company that tries the same trick on Apple – try to make a program
that lets you run iPhone apps on an Android device, or read the media files you
buy in Apple’s book, movie or music stores, and you will quickly discover that
the law is now on the sides of the giants, not the upstarts.
That same legal shift is how Facebook has kept its switching costs high.
Fifteen years ago, it was safe to make a Facebook-MySpace bridge that would let
you leave MySpace but stay in touch with your friends there by scraping your
MySpace inbox and moving the waiting messages to your Facebook inbox. Try to
build one of those bridges today – blasting an escape tunnel through Facebook’s
walled garden – and Facebook will sue you until the rubble bounces.
But high switching costs have their limits. If you make your service terrible
enough, a certain number of users will find the cost of switching preferable to
the pain of staying. And as users leave, network effects start to work in
reverse: though every user that joins makes your service more valuable, every
user that leaves makes the service less valuable. If you’re only on Facebook to
stay in touch with a small group of friends, each one of those friends who
departs makes it easier for you to make the jump, too. And once you go, it’s
even easier for the rest of the group to bail.
This is very bad news for Facebook. After years of slowing US growth, Facebook
just experienced its first-ever US shrinkage, which precipitated a $230bn stock
crash, the largest in global corporate history.
Though most of Facebook’s users are global, its US users generate far more
profit than users in the rest of the world. Losing a US user is expensive. Even
more important: the US is Facebook’s home base, and its US user base is its
main bargaining chip in resisting US regulation, and in securing US support in
its regulatory battles abroad.
Speaking of regulatory battles abroad: Facebook is on the brink of having its
business model declared illegal under the European Union’s General Data
Protection Regulation (GDPR). Fending off that scenario will depend on vast
capital expenditures and friendly European regulators, and Facebook’s running
short on both. Oh, and Europeans are Facebook’s second most valuable users.
Admittedly, when a company’s shares decline, it’s not like the company itself
has lost any money – those losses hit shareholders, not the business itself.
However, Facebook’s costs and share-price are intimately bound together, thanks
to tech firms’ reliance on stock grants as a way of scoring a discount on their
wage-bills. Engineers, lawyers, and other high-paid, in-demand professionals
are glad to take much of their compensation in stock, betting that the
company’s share price will balloon and that they can cash out their shares and
keep their winnings, thanks to the tax-preferred status of capital gains – in
most of the world, the wages you earn for doing useful work are taxed at a much
higher rate than the winnings you get from lucky bets on stocks.
Even before its stock fell off a cliff, Facebook was mired in a multi-year
hiring crisis. Nobody wanted to work for Facebook because it’s a terrible
company that makes terrible products that everyone hates and only use because
the company has rigged the system to punish users for switching.
Facebook was already paying a wage premium, offering sweeteners to in-demand
workers in exchange for checking their consciences at the door. Those
sweeteners mostly took the form of shares, which means that all those morally
flexible “Metamates” got a hefty pay-cut when the company’s stock price fell
off a cliff. Expect a lot of them to leave – and expect the company to have to
pay even more to replace them. Companies with falling share prices can’t use
share grants to attract workers.
Facebook is now famously trying to pivot (ugh) to virtual reality to save
itself. It’s an expensive gambit. It’s going to alienate a lot of its users.
It’s going to alienate a lot of its in-demand workers. It’s going to freak out
a lot of regulators.
Meanwhile, the switching costs for people who want to jump ship keep getting
lower. It’s not merely that fewer and fewer of the people you want to talk with
are still on Facebook. Even if there’s someone whose virtual company you can’t
bear to part with, lawmakers in the US and Europe are working on legislation
that would force Facebook to allow third parties to “federate” new services
with it. That would mean that you could quit Facebook and join an upstart rival
– say, one by a privacy-respecting nonprofit or even a user-owned co-op – and
still exchange messages with the communities, customers and family you left
behind on Facebook’s sinking ship.
For 15 years, I’ve been waiting for Facebook to suffer the fate of every
network-effects-driven success story – to experience the precipitous decline
that is triggered by people leaving the service and taking the value they
brought to it with them. Facebook now has to somehow retain users who are fed
up to the eyeballs with its never-ending failures and scandals, while funding a
pivot to VR, while fending off overlapping salvoes of global regulatory
challenges to its business model, while paying a massive wage premium to
attract and retain the workers that it needs to make any of this happen. All
that, amid an exodus of its most valuable users and a frontal regulatory
assault on its ability to extract revenues from those users’ online activities.
Stein’s Law holds that “if something cannot go on forever, it will stop.”
Facebook can’t go on forever.
Cory Doctorow is a science fiction author, activist and journalist. He is
the author of many books, including the forthcoming book Chokepoint Capitalism,
with Rebecca Giblin, about monopoly and fairness in the creative arts labor
market. In 2020, he was inducted into the Canadian Science Fiction and Fantasy
Hall of Fame_______________________________________________
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