Is Meta collapsing?

Here’s what you need to know this week:

• Affairs of state: Is Meta collapsing?

State-by-state:

• Google threatened employees to perform
• Apple will expand its advertising business
• Microsoft may face harsher regulation over self-preferencing
• Amazon got a tax break
• Meta’s Instagram can cut out weight loss ads
• Tencent had to open its black box

Last week, Meta’s own chatbot – BlenderBot3 – criticised Mark Zuckerberg, saying “his company exploits people for money and he doesn’t care.” 

BlenderBot3 is a large language model that Meta released last month, and it was speaking to a reporter from the BBC. It told another journalist that Zuckerberg is “too creepy and manipulative”.

A deeper collapse in the value of Meta Platforms Inc, the company formerly known as Facebook, is happening alongside the general decline in the technology sector – which in recent weeks has seen its worst value losses since 2002. It’s a collapse evident in its faltering reputation, financial performance and vision. 

Reputation. In bashing Zuckerberg, BlenderBot3 isn’t thinking for itself, it just says what the internet tells it. It’s a chatbot – a piece of software that uses data to predict and simulate human conversation – which searches the internet in real time to come up with responses, and therefore pulls no punches in describing Meta and its founder. The data that BlenderBot3 was trained on is a reflection of the ambient level of hostility towards Meta and Mark Zuckerberg that abounds online.  

There is no shortage of reasons to be hostile. Just last week, this study found that Facebook appears to be profiting from searches for white supremacist organisations, of which more than 80 were found operating on Facebook. Some – including examples that had the name “Klu Klux Klan” in their names – had even been labelled by the platform as “dangerous organisations”. Yet the searches were monetised and some even returned adverts to African American church groups and other minority institutions.

Last year, whistleblower Fracens Haugen triggered one of the worst reputational crises in Facebook’s history. She levelled – using evidence from Facebook’s own internal research and communications – two main criticisms at the business:

• It puts profit ahead of safety. By prioritising engagement, Facebook knowingly made people – particularly young women and girls – more angry and unwell through its apps.

• It degrades truth. By amplifying false and inflammatory content, Facebook undermined democracy and the value of truth.

“The product had not been built to put societal good first,” Jeff Horwitz, the reporter at the WSJ who broke the story around Frances Haugen’s leaked documents, told us. “They built a product and didn’t really know what they were doing, and kept turning knobs to maximise engagement. And now we can look under the hood and see some pretty ugly stuff.” Despite pivoting its brand, and changing its name to Meta Platforms Inc in the wake of the allegations, the company couldn’t escape reputational damage. Polling after the leaks came to light found that Facebook was the least trusted of the major technology companies in the handling of personal data. 

Financials. Meta reported declining revenue (down 1 per cent to $28.8 billion) and profit (down 36 per cent to $6.6 billion) at its last earning call. Earlier this year the company reported its first decline in daily active users. Meta’s share price is down nearly 50 per cent on the year and Zuckerberg has directed blame for weakening financial performance at two main factors:

• TikTok. The Chinese-owned app is outcompeting Facebook, WhatsApp and Instagram for user acquisition. TikTok has grown its incomes in the US by 184 per cent this year.

• Software privacy changes. The changes, called App Tracking Transparency, brought in by Apple have limited Meta’s ability to track and advertise to users in the Apple device ecosystem. 

Meta still generates upwards of 95 per cent of its revenues from advertising, so losing eyeballs to TikTok and tracking capabilities to Apple is a massive blow. A former Google engineer has alleged that Meta is embedding code into in-app browser windows that allow it to track users’ online activity when they click a link in Instagram, WhatsApp or Facebook, rather than taking them to their default browser. 

Compounding Meta’s performance issues is its inability to retain top engineers. Earlier this year CNBC reported that four prominent developers have exited Meta’s artificial intelligence team. One source in London said that: “Meta’s office just collapsed and they lost most of their [top] researchers in the span of six weeks”.

Vision. Meta doesn’t yet have a convincing argument for its vision: the metaverse. Reality Labs, the division of Meta responsible for developing the dream, is haemorrhaging cash. 

• By the numbers. Reality Labs lost $2.8 billion last quarter, $2.9 billion the previous quarter, and a grand total of $10.2 billion last year. 

It’s important not to fixate on the short term losses. Innovation centres often run huge losses in their early stage. But the prospects for a mainstream metaverse has bigger problems.

• Uncertainty. The idea of the metaverse itself is uncertain. Users are not clear if it’s an experience, a product, an ecosystem or simply an idea. This makes it difficult to sell.

• Headaches. Prolonged use of virtual reality headsets causes headaches. For a concept which relies on constant, intense engagement with virtual worlds, this is a big problem. 

• Competition. Despite having changed its name to something close to the word metaverse, Meta doesn’t dominate the market. Meta Quest is the largest headset by market capitalization at 90 per cent, but other major technology companies – Apple most significantly – have yet to release their rival headsets.

The tide of public opinion has shifted thoroughly against Meta, and the economic headwinds it now faces mean that the investment community may well start to jump ship also, putting its mission to the metaverse in jeopardy. In a sea full of harsh competition from the likes of TikTok, Meta’s outlook is bleak. 

BlenderBot3 said what many of us have been thinking. 

Why this story? If we do not recognise the harms caused by profit-seeking social media platforms now, we risk the harms becoming irreversible. It takes a long time for academic consensus to settle and years to conduct and publish studies, and longer for an overwhelming weight of evidence to emerge. As Johnathan Haidt argues, if we only agree in 2030 that Facebook and other social media platforms undermined democracy and mental health in the early 2010s, it may be much too late to do anything about it. 

Do you think Meta is in decline? If you are using them, would you consider giving up the tools they make? Let me know at luke.gbedemah@tortoisemedia.com.

Google executives told employees that if next quarter results “don’t look up, there will be blood on the streets”. As was first reported by Insider, employees at Google are on edge as – nearly a month in – the company has still not reversed what was meant to be a two-week hiring freeze. After Sundar Pichai said the company’s headcount doesn’t match productivity at an all hands meeting at the end of July, one employee reportedly said “everyone has been talking about the company tightening its belt” while others have reportedly described the current climate as “a real vibe change.”

Apple is reportedly planning to significantly expand its advertising business. Bloomberg reported that Apple currently generates around $4 billion annually from its advertising business, but plans to expand that into the double digits. Apple News and Stocks show ads already, but in the future adverts may be found in the App Store, Apple Maps, Books and Podcasts. The company’s advertising system uses personal data from its other services and users’ Apple account to decide which ads to serve. It’s a big deal, because Apple has a well-respected reputation for protecting user privacy – just last year it launched a feature called App Tracking Transparency (ATT), which allowed users to decide whether apps can track them across apps and websites and caused social media giants like Meta and Snapchat to lose billions of dollars. Increased advertising risks tarnishing that reputation. 

Self-preferencing is when a company unfairly positions its own products or services ahead of others in a market. A common form of self-preferencing in the technology world is pre-installation – when a company sells a system or devices with its own apps preloaded – anyone who’s had to constantly reject attempts by Microsoft Edge to become their default browser again after switching to Google Chrome will be familiar with the process. In Germany the competition watchdog is considering bringing Microsoft into the scope of a ruling that allows for rapid market interventions by the regulator over anti-competitive actions. Google, Meta and Amazon already fall under the rules. Apple is surely also in the crosshairs.

At the two extremes of Amazonland, a real wage cut, and massive tax breaks. Last week we reported that workers at Amazon in the UK had been offered a 3 per cent pay increase in the midst of nearly 10 per cent inflation. Amazon has also been able to claim 30 per cent of the value of its investment into infrastructure in the UK as a tax break. This means that Amazon got a £75 million discount on its tax bill, and will pay no tax in the UK for 2021. This is partly because much of the company’s income in the UK is still accounted for in Luxembourg. 
Also: Look at this dystopian image of a mindfulness exercise pushed to a worker in an Amazon facility in the US.

A new feature on Instagram allows users to control whether they see adverts for weight loss products. The list of selected topics that Instagram already allowed users to block includes alcohol, parenting, pets and “social issues, elections or politics”. Meta has faced criticism over the role it plays in worsening mental health conditions for young women (see above), and a CNN investigation found that accounts named “I have to be thin”, “Eternally starved” and “I want to be perfect” were being promoted to 13 year-old users who had expressed interest in weight loss and dieting. In theory, this new feature would stem those recommendations. 

Chinese regulators have achieved something that their counterparts in the US, UK and Europe have never managed. Tencent Holdings and ByteDance – amongst other internet giants in China – have shared details of the algorithms that function on their various digital platforms. In compliance with measures set out by the Chinese regulator which are aimed to limit the power of big tech, Tencent has revealed the scope of the algorithms it uses to the Cyberspace Administration of China and may have to provide more detailed underlying code in future. A list of 30 algorithms – from content recommendation systems to data gathering – was published on the watchdog’s website last week. Whilst it is intended to promote transparency, this feels mostly like a power move on the part of the regulators. 

Thanks for reading,

Luke Gbedemah
@LukeGbedemah

Sebastian Hervas-Jones