Deciphering The New Strategy of Facebook: Less Is More

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It is said that all publicity is good publicity, but you’ll forgive Mark Zuckerberg and company for clinging to another idiom these days: “this too shall pass.

No, this doesn’t – even remotely – mean that Facebook Inc. (NASDAQ:FB) is on the ropes and that it’s time for executives to consult a bankruptcy attorney. Last July, the social media juggernaut surpassed the $500 billion valuation milestone on the strength of $18 billion in annual revenue, of which nearly $4 billion was profit. And with apologies to Snapchat, Instagram and LinkedIn, Facebook has the astonishing luxury of facing no direct apple to apple competition — which means there is still plenty of joy ahead.

Yet, life over the last year hasn’t been all sunshine and blue skies in the land of Facebook, and like an overwhelming amount of stuff going on these days, it can be traced back to the fateful date November 8, 2016 — a.k.a. Election Night in America. In the aftermath of what folks on all sides of the political spectrum agree was the biggest upset in U.S. political history (ironically, this is probably the only thing that everyone agrees on), Facebook became a poster child for the Fake News epidemic.

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It’s clear that Facebook was hoping to ride out the storm and wait for someone or something else to take its place in the line of fire. For example, despite mounting criticism, even as recently as last November Zuckerberg claimed that it was “a pretty crazy idea” to believe that Facebook-enabled fake news influenced the election.

Well, just like a mission to mars and frozen pizza that doesn’t taste like cardboard, that pretty crazy idea had some legs — and, whether relenting to investor pressure, or because it saw the light of truth (or most likely a mix of both) — early this year Facebook rolled out significant changes to its newsfeed algorithm.

Ostensibly to improve user experience — but essentially to stop getting associated with fake news several times a day — Facebook is now pushing what it deems as “more meaningful” content to its users, such as stuff published friends and family members. Of course, sketchy articles and viral videos of dubious origins are still widely available. Except now, they’re a little harder to find (and in the social media world, a little harder is probably enough to dissuade the majority of users for whom “out of sight, out of mind” is a guiding principle).

Alas, the Law of Unintended Consequences being what it is, Facebook is now facing a battle on a new front: dwindling usage. In the late January, during Q4 2017 earnings call, Zuckerberg said that the newsfeed algorithm changes were responsible for 1.4 billion daily active users around the world reducing their Facebook time spent by roughly 50 million hours a day, or about 2 minutes per user. And while that might not sound like much, it translates to 3 billion fewer minutes of potential ad time — which explains why investors are starting to get nervous.

And so, the big question goes: is this drop an outlier, or will pundits of the future point to it as the faint trace that foretold the beginning of the end? If behavioural psychology has a seat at this poker game, then it’s likely to be the former. That’s because Facebook’s “less is more” strategy — if it works — has the potential to get more people actively using the platform for targeted purposes vs. passively drifting in and out of content wastelands. This shift would bode well for advertisers who generate more traction — and hence make more money — by engaging mindful, interested target audiences. After all, Zombies make for good TV, but they tend not to buy all that much.

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This, however, doesn’t mean that Facebook is in the clear and it’s smooth sailing from here on in. The fake news stigma isn’t going to disappear overnight, nor are the legions of troll armies behind them. And while a market valuation of $500 billion is a long enough runway to work with — actually it’s enormous — Facebook wouldn’t be the first monolith to enter the dustbin of business history (see: Kodak, Blockbuster, Pets.com…the list goes on).

Only time will tell whether the short-term pain will be worth long-term gain for users and investors alike. If so, then $500 billion will be just the beginning. If not, then what unfolds in the months and years ahead could make 2017 seem like a walk in the park for Facebook and friends.

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