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October 8, 2021

Global outages raise calls to dismantle Facebook social media monopoly

By MarketLine

Since its emergence onto the scene in February 2004, Facebook has drastically shaken up the technology market and transformed social media as we now know it.

What began as an exclusive network for Harvard university students has rapidly expanded into a global behemoth, recording an average annual growth rate of 37.4% between 2016 and 2020 and a monthly active user base of nearly three billion. This comes despite the numerous scandals in which the company has been embroiled in recent years, rendering it seemingly untouchable.

Facebook has actively pursued an aggressive competition strategy, evident through its acquisition of photo and video sharing social media site Instagram in 2012 for $1bn, and messaging platform WhatsApp in 2014 for $19bn. For those that it is unsuccessful in acquiring, such as Snapchat, Facebook has been known to launch similar product offerings through its own platforms. This has equipped Facebook with a near monopoly over the social media market.

Flaws in the business model

However, Facebook’s exponential growth has exposed deep-rooted flaws in the company’s business model, which has been described by Harvard professor Shoshana Zuboff as a form of ‘surveillance capitalism’ due to the company’s use of data to track and manipulate users’ choices and behavior. For instance, in 2019, Facebook was issued a $5bn fine from the Federal Trade Commission for violating consumers’ privacy. In recent years, the company has also been criticized for instigating and circulating misinformation, a phenomenon commonly referred to as ‘fake news’.

These issues reached a climactic point in October 2021 when former employee Frances Haugen testified against the company in front of the US congress. Drawing on internal documents, Haugen presented the case that Facebook harms young people’s mental health, destabilizes democracies, and puts profit over safety. This has placed the company under intense regulatory scrutiny and has the potential to destabilize its monopoly over the market.

Global outages have emphasized problems

Just days after it was announced that Haugen would be testifying against Facebook in Congress, the company was once again brought to the forefront of media attention on 4 October as it suffered a six-hour long outage. Attributed to an error during routine maintenance of its network of data centers, approximately 3.5 billion users across the US, UK, and Australia were left without access to Facebook, Instagram, and WhatsApp.

Aside from costing Facebook co-founder Mark Zuckerberg $7bn from his own personal fortune, the outage left billions around the world unable to conduct business or go about their daily lives due to the increased reliance of many companies on social media and messaging services in todays’ digital world. This once again exposes the flaws in Facebook’s market dominance and makes a case for diversity and fragmentation within the social media market.

Regulators, activists, and policymakers are divided on the future of Facebook

Facebook’s future remains uncertain as regulators are divided on how best to resolve the issue. For some, the establishment of a distinct authoritative body to regulate privacy, safety, competition, and transparency within the tech world appears to be the best way forward.

Others advocate for a more extreme shake-up of the market through ‘decentralized’ and ‘community-driven’ alternative to Silicon Valley incumbents. However, until policymakers can agree on the appropriate way to regulate Facebook, it is likely that the company will continue leverage its power to rise above such criticisms.

Regardless, with so many consumers’ businesses and livelihoods dependent on social media today, finding a viable solution remains imperative.