I first stumbled across Scott Galloway in 2015 via a YouTube video called The Four Horsemen. Those 15 minutes revealed Galloway, an NYU Stern School of Business Brand and Marketing professor, as an insightful critic of the tech landscape. That video led to multiple Masters in Business interviews (here, here, here, and here). Beyond that, Galloway forced many people to rethink their attitudes towards growth regardless of the collateral damage it caused.
During our MiB conversations, one question was “Which of these disruptive firms is most likely to be disrupted itself?” We agreed the most vulnerable was Facebook.1 A two-day 25% crash wiped out about $240 billion in Meta market capitalization.2 Is this the vulnerability we were discussing?
Perhaps, but as the chart even before this week’s crash, FB was radically underperforming its FAAMG peers. Over the past 5 years, Apple and Microsoft have gained 437% and 383% respectively. Amazon is up 296%, Google has added 254%.
Facebook? It’s up 83% over the same period.
Some other thoughts:
–Ad Dependent: Google’s ad revenue is down to 81% of the company’s total; At Facebook, it is 97%. Over the decade it has have been public, Facebook seems to be unable to diversify its revenues sources.
–Competition: TikTok is cited as the biggest competitor to FB, but really, all of the social networks have relatively short half-lives: Friendster, My Space, LinkedIn, Pinterest, Flickr, Tumblr, Instagram, Clubhouse, Twitter, Gab, etc. Something new comes along all the time, the cycle turns…
–Apple’s Privacy Changes: Kudos to Tim Cook for protecting its users’ privacy via “App Tracking Transparency.” The Europeans and California have been moving in this direction but it took Apple to counter the worst of FB’s creepiest behaviors. (That itself is problematic).
–Dated: The original Facebook concept was brilliant in its day, but it’s now 15 years old. The site is a cluttered mess, heavily dependent on advertising. The initial concern about Mom and Dad joining FB would send their kids scurrying was probably part of it, but boredom and the chance to try something new is as good a reason. What was once fresh becomes stale, nothing lasts — especially corporations.
–Poor Corporate Governance: The supermajority voting shares Mark Zuckerberg commands mean that corporate policy for a near trillion-dollar company is set by a 37-year old. Zuck was the flash of insight that created FB, and drove a few excellent acquisitions, but to expect that streak to continue forever is naive. Spending $10 billion on the Metaverse isn’t the problem, it’s missing the competitive threat for the core business while you do that. In the past, investors have protested with their proxies but this time, they voted with their dollars.
–Bad Actor: Facebook gave a platform for the world’s worst behaviors, amplifying vaccine misinformation as well as false political advertising, and propaganda. Whistleblowers called out the company’s double speak on misinformation. Russian AgitProp found a home at Facebook; the site contributes to genocide. Instagram increases thoughts of suicide in teenage girls. We continue to learn that Facebook’s own rules did not apply to everyone, especially the political allies of its earliest investor, Peter Thiel. At a certain point, the company became an undesirable place to be affiliated with.
I am sure we will hear more post-mortems. Maybe FB can recover; perhaps the investment in the Metaverse pays off. Or maybe, just maybe, we have already seen “peak Facebook.”
How Facebook F*#ked Up Its Own IPO (May 22, 2012)
Cognition, Bias & Facebook (November 17, 2016)
#DeleteFacebook? Try Taking Control of Your Facebook Account First (March 21, 2018)
Less than meets the eye at Facebook (February 18, 2012)
How to Fix Facebook (July 27, 2018)
MiB: Max Chafkin on Thiel & Tech (December 25, 2021)
Scott Galloway on The Four Horsemen: Amazon/Apple/Facebook & Google (March 15, 2015)
Galloway: Let’s Talk About Facebook (March 25, 2018)
1. Galloway is launching a CNN+ show soon; given his track record, its worth checking out.