Facebook must ditch Zuckerberg if it is to prosper

As parent company Meta reveals its first fall in revenue, Kim Kardashian highlights the wrong direction the online giant is taking

Kim Kardashian isn’t normally regarded either as a prophet of Wall Street or a technology visionary, but inadvertently she may have signalled the beginning of the end for Facebook’s founder and boy emperor Mark Zuckerberg.

Meta, Facebook’s parent company, has just recorded its first ever fall in revenue, and profits fell too, by 36pc. What spooked Wall Street even more was that the outlook was also glum: Meta’s formal guidance of $26bn (£21bn) to $28.5bn for the next quarter was considerably short of the $30.3bn the market predicted. A decline isn’t surprising given the macroeconomic conditions, but Kardashian was highlighting Zuckerberg’s questionable product choices, and investors should pay much more attention to the cost of these increasingly strange decisions.

Meta is under revenue pressure on several fronts, not all of them economic. Underneath, Meta is fundamentally a consumer data processing business, like Google. If you sell dog accessories, and want to target 40-year-old couples with chewtoys for chihuahuas in Chorlton-cum-hardy, or divorcees with golf accessories in Godalming, Facebook allows you to do so. It can slice and dice this demographic data to allow precision ad targeting, and does so better than anyone else. This should be a win for the business and the consumer, and is particularly valuable to small businesses and niche products.

The problem is that Meta does not entirely control the window through which the consumer must peer, as Google can. The web browser and the smartphone are controlled by somebody else. Google, the other half of the Silicon Valley giant ad duopoly, enjoys a monopoly market share with both on mobile. Apple has just made acquiring that data more difficult for Meta, by allowing users to opt-out of tracking, in a move that Meta says has cost it billions. Privacy activists hate tracking, but it’s an open question how much we really care. People certainly do express a desire to “take back control” and have the kind of relationship that comes with owning data: withholding it, deleting it easily, and finding a better price for it. These are all characteristics of a property right, and nobody disputes that personal data is a kind of property.

But this is where Mark Zuckerberg can be considered to be a very lucky general. For Facebook’s critics – activists, regulators and the policy world – can’t agree on data ownership, and so there’s no consensus on how to proceed. A marketplace for data would expose Meta’s inefficiencies, and several groups, including Sir Tim Berners Lee, have devised “data trusts” which might form the basis of privacy-protecting, market-based alternatives. But the people who hate Facebook also hate the idea of us owning our own data, and hate it even more so. So Zuckerberg continues to set the price. Thanks to this, I consider Meta’s ad business to be fundamentally safe as long as it doesn’t mess up its products, and lose its audience. Which brings us to Kim Kardashian, for that’s exactly what she says Meta is doing.

Kardashian was bemoaning Instagram’s new emphasis on video. Kardashian spent millions crafting one single dramatic image. But users are now badgered to perform in short home-made videos; photos are now a “legacy format”, according to company executives. This is a response to Tiktok, and Meta has reacted not by creating a new video product, but by turning an existing product into something completely different. This is a trick you can do with software – the equivalent of turning an articulated lorry into a cruise boat overnight. But it’s remarkable that Meta has so little faith in its own abilities to invent a new social media brand of its own, even with billions of users. In response to a competitive threat, it redesigns a key product. These poor choices threaten the fundamental audience-gathering machinery far more than the privacy activists do. But more damaging still is Zuckerberg’s long-term obsession with the “metaverse”, the 3D world where he believes people will spend their time engaging, in crude cartoon digital costumes.

Zuckerberg has so much faith in this bizarre vision, he changed the company name to Meta. But consider this. Eight years ago, Facebook acquired a leading virtual reality headset maker, Oculus, and has since turned it into the leading consumer virtual reality product today. VR is wonderful fun for games, and for shared experiences for families to enjoy. So the natural strategy for Meta would be to acquire games studios and great creative talent to compliment its technical lead in what is really gaming hardware. Microsoft is spending $69bn on one studio, Activision Blizzard, to bolster its gaming Xbox service. But Meta doesn’t really see 3D computing this way, as a games experience. It wants to bludgeon 3D into everyday life, insisting that we’ll be in VR Zoom meetings, or pottering around buying cryptocurrencies or NFTS instead. It’s a quite lunatic crusade, and last week Meta quietly increased price of a Quest 2 headset by $100, making it even harder to play games on Meta hardware. Silicon Valley companies are structured to insulate their eccentric founders from shareholders. But the arrangement also insulates the founders from reality. For the first time it’s possible to imagine a much more prosperous Meta without the very odd man who started it, Mark Zuckerberg.

Users are now badgered to perform in short home-made videos