I have a picture in my office of a man on a raft, and the raft is divided into five sections, labeled Facebook, Amazon, Apple, Google, and Microsoft. The artist is trying to represent how dependent we have all become on these five companies in our day-to-day lives.
Like modern-day Robinson Crusoes, we cling to our own cobbled-together blend of these services sometimes as if our lives, or at least our work and social lives, depended on them.
{mosads}Have we gone too far? Those telling others to “#deleteFacebook” seem to think so. In response to this, there has been talk of how FANG (Facebook, Amazon, Netflix and Google) company investors may be shying away from Facebook.
Some Facebook users have truly signed off, but many find it hard to leave the largest registry the world has ever known — in fact, the only registry the world has ever known. For what else can keep track of over 2 billion people, their life events, friends, ups, downs and seemingly, almost everything else?
Is it likely that Facebook could be easily replaced? No, because as people become more skeptical of social media, they would be even less likely to try a new social platform.
Although these top high-tech companies are linked together, in fact, each has a distinctly different business model.
Facebook grew out of a dorm-room inspiration by Mark Zuckerberg that would allow people to connect on the internet. Quickly, Facebook realized that the real money was to be made in advertising, and today they are second only to Google as a platform for digital advertising.
Amazon is a one-click mastermind that makes it easy for all of us to buy and many of us to sell. Amazon’s billions of transactions per day helped to take this behemoth out of the red after 14 years and are now making it one of the most active stocks around.
Some of its most important sales are now those between businesses and Amazon Web Services or AWS, which takes away headaches for all sizes of companies with its logistics, storage, web design and other services.
Netflix is a media company that gained its reputation originally by sending CDs and DVDs through the mail, via a subscription service, but was ready to change business plans when the world went to the cloud. This quick switchover made the company even more profitable, and now it collects most of its money through its internet-based subscriptions.
Google (now part of Alphabet) makes its money primarily through advertisements (reportedly $110.8 billion in revenues for 2017) but has an increasingly popular enterprise cloud services business and fledgling hardware efforts, like Pixel phones and Google Home speakers.
But the main reasons we all frequent Google are the four functions it excels in: search, email, Google Maps and Google Applications.
Why should these companies be linked together? And why should the dangers each face be considered common to all four? In fact, the dangers they face are very different. We’ll focus here on the dangers facing Facebook.
What could cause it to fail? Facebook has enjoyed unbelievably high profit margins for a company with a relatively small staff. Since going public in 2012, its revenues have increased 8-fold. Its market capitalization is approaching twice that of ExxonMobil. This advantage is not going to disappear overnight.
They’ve also done a lot to become known as one of the best places to work. There is a reason so many students want to enjoy the Facebook workstyle, with its bevy of “hipster” snacks selected by the employee snack committee and entertainment attractive enough to keep employees staying in the office late on the Friday night I visited. They can afford to pamper their employees and see it as a cost of being able to attract the best.
Their ability to attract the brightest could fade if they are no longer considered members of the club that pays enough to attract without losing their “social justice good guy” credentials. If it stops being a popular place to work, it may stop being cool entirely.
The younger generations have already shown their preference for Instagram (owned by Facebook, a fact that many don’t know), while staying on Facebook to be able to communicate with older relatives.
Instagram, in its obsessions with selfies, pictures of food and drinks, and pets, rather than politics, will be helpful for Facebook as it goes through this period.
What will happen if privacy issues mean that fewer people are going on Facebook regularly though? This is the danger. Facebook won’t be able to sell as many ads, because there will be fewer click-throughs, which will mean less revenue.
Currently, over 98 percent of their money comes from digital advertisements. That may take a dip, but other than Google, who is more proficient at selling ads than Facebook?
Zuckerberg went to Washington to answer recent privacy concerns. Facebook’s stock price rose as he testified. The market liked what it saw, as did many young people on Twitter, who praised him for his patience in explaining how the internet works to Congress. He will have to keep explaining.
But Congress did send a clear message that they wanted Facebook to care about privacy more than it has up until now. Many hearing viewers concluded that having stammering legislators regulating social media wasn’t a great idea, but that something needs to be done.
If Facebook can take steps to regulate itself appropriately, with a renewed emphasis on privacy, then perhaps some damage can be undone. Then, Facebook employees and users will ride their rafts to a safer harbor, where more privacy can be found.
Betsy Page Sigman is a Distinguished Teaching Professor of Operations and Information Management at Georgetown University’s McDonough School of Business.