Brian Wieser of Pivotal Research has been bearish about Facebook for months. But that was mainly because he could see a natural limit to the growth of its targeted digital advertising — a limit its shareholders didn’t seem to see when the stock was trading at 26 times its earnings forecasts for 2018.
But after the latest hullabaloo, he has one big, new warning (with our emphasis):
Facebook is exhibiting signs of systemic mismanagement, which is a new concern we had not contemplated until recently.
He put together a comprehensive list of Facebook’s missteps over recent months, and concluded that the company has an altogether “different class of problem”.
1) Failure to follow up on a “massive reported data leak”: Even if the data wasn’t exactly obtained in a breach, it was enough to freak everyone out.
2) Problems with its advertising metrics: Facebook has a problem with New Jersey, as we’ve previously covered.
3) Lack of content moderation: Turns out some disturbing stuff can happen when there’s a live video feed with no moderator.
4) Alleged violations of the Fair Housing Act: See ProPublica‘s coverage.
5) Alleged violations of political advertising laws: See that whole Russia thing.
The company has responded to all of these incidents as they have occurred. Most recently it published a blogpost ahead of the reports about Cambridge Analytica’s data mining, assuring users it is “constantly working to improve the safety and experience of everyone on Facebook,” and said it had banned the firm from its platform.
But Wieser says the company has been tone-deaf in its responses to public outcry. Taken together, he says these incidents raise questions about the management of Facebook:
Many of those items can be chalked up to bad judgement or bad luck, or both. By contrast, operational failures are in some ways more problematic, because they strongly suggest that even when the company intends to comply with its legal and commercial obligations it is not always able to do so. They are worse when third parties find the errors, because the company should have been looking to anticipate those errors before others found them.
He concludes that management is having trouble handling the company at its current scale, and sees a couple of directions the company can go from here — either shrink, or change management.
But it seems a bit strange to think that such a change in management could involve Zuckerberg, the Techno-Pope himself who, Axios reports, is planning to finally speak about the issues.
Remember, he still holds essentially all of the voting rights for his company — and if executives sell their shares, it serves to consolidate his power rather than reduce it.
We suppose it’s possible that Zuckerberg might remove himself from management to save his techno-church, but it doesn’t seem like a huge probability.
Maybe we should be watching out for a tech-Galileo or Jan Hus…
Related links:
Why be president when you can be pope? — FT Alphaville
Facebook money and voting structures — FT Alphaville
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