A Crisis of Trust
Facebook faces a dilemma unlike really any large tech company in history. What happens when your customers distrust both you and your product?
It's never a bad day to be a billionaire. That goes without saying. However, Mark Zuckerberg, has had—by any measure—a no good, very bad 2018! From the use of Facebook by the Russians to interfere in the U.S. elections—and beyond—to the controversies over everything from hacking to cloning Facebook accounts and now to the recent revelation that Facebook had been allowing companies like Netflix and Spotify to not just access users' friends lists and other pertinent info, along with their private messages, the social media giant is truly testing the age-old adage that "there's no such thing as bad publicity!"
What will be interesting to watch—from a strategic perspective—is how Facebook responds to what is basically a challenge unparalleled in business history to its very existence—and make no mistake, this is an existential crisis for the company. Now Facebook's stock has indeed fallen—but not abysmally considering the slew of negative hits that just seem to keep on coming, one after another, for the company. With negative market sentiment overall hitting Wall Street at the tail end of 2018, one might even argue that Facebook has held fairly steady—considering the headwinds facing not just the company, but tech stocks in general.
Facebook (FB) Stock Performance Over the Past Year
However, what Facebook is encountering is something really unique in all of business history. That is the fact that the company is facing an unprecedented loss of trust among its users in the integrity and security of its platform—which is, after all, Facebook's only product. You can point to instances in which companies have suffered massive blows when the integrity, safety, quality of their products or services have fallen into serious question in the minds of consumers. From recent headline grabbers like Wells Fargo and its scandals involving employees opening unauthorized accounts to Chipotle's problems with foodborne illness outbreaks at its restaurants to the historical cases of Ford with its Pintos that caught fire with alarming frequency and Johnson & Johnson's experience with the poisoning of its Tylenol capsules on store shelves by unknown actors (and even today with reports calling into question the safety of its talcum powder), leading companies have faced—and will continue to face—crises of confidence that serve as inflection points in their corporate lives. However, unlike Facebook, these stories, scandals and suits (lawsuits, that is) did not call into question the entirety of the business—the very basics of the business proposition that is the firm, the very reason for its existence—and yes, the source of its revenue and profitability.
The pressures facing Mark Zuckerberg and the top management team at Facebook are indeed immense, and it seems that each week, each month brings a new revelation that further erodes consumer trust in the company. So how should Facebook respond to this crisis of confidence in the core of its business—and its business model? That will likely be one of the biggest stories in all of business and technology in the year to come. And in time, whether Facebook can recover from the torrent of problems it currently faces or if it declines over time into something akin to where Myspace is today—or worse, either way, the company's story will be a case study for the ages.
Even before its current spate of troubles, Facebook had been facing challenges with its user base. For a multitude of reasons, the ads, the constant political arguments, and just plain user disillusionment and fatigue, Facebook's audience had actually already been declining in the U.S. and in other countries, and getting older. Some Facebook users sought total respites from social media, while others gravitated to other platforms, such as Snapchat, LinkedIn, and yes, Facebook-owned Instagram.
Now however, the challenge will be for Facebook to not just try and retain users (growth is not a thought at the moment), but to more importantly reestablish trust with its users and with the public. How can the company recover? Some have suggested that the leadership of the company needs to change. While Mark Zuckerberg is the public face of the company he famously founded, he is also the firm's largest—and controlling—shareholder. And so he is in a unique position in that any change will roll through him—and he is still only 34-years-old. So, unless he wants to follow an Elon Musk-like path to another challenge or a Bill Gates-like course to pursue a life in philanthropy, he will likely remain in place at Facebook. So, other than the prospect of retaining the Chairman of the Board title and stepping aside as CEO and bringing in a public "face" for that role who can help restore user—and advertiser—confidence in Facebook—and in the security and integrity of the social network, there really is not a "throw Mark Zuckerberg under the bus" option here. That is because it would be Zuckerberg who would have to throw himself into that position.
Certainly, the best options for Facebook right now are a couple of actions. First, they need to be very public and transparent (such an overused word, but it applies here) in their actions. They need to be upfront about what has taken place—from Russian efforts to interfere in American elections and politics to the unauthorized use of the private information of users by advertisers. In today's 24/7 media world, if you don't get out in front of the story as a company, there are investigative journalists out there who will do so for you.
Next, Facebook needs to make a "new deal" with its users—and maybe several versions of it. Fundamental to any new deal would be a simplified—and readable—agreement that users could actually understand. The social network needs to assure certain aspects of user privacy and safeguard at least some of their actions on the platform—messaging would seem essential. Some have even suggested that Facebook could become a subscription model, and the LinkedIn Premium model could well be a guide for how this might evolve. You could have two, three, four, or more levels of service and access on the Facebook platform, depending on how—and how much—you wanted to make use of the network. Depending on how much involvement you wanted to have with Facebook—and yes, how much you wanted to pay—perhaps you would have differing levels of privacy expectations—and expectations that you could easily understand.
Finally, because Facebook's crisis is unique, their marketing and public relations challenges are very real—and yes, very, very challenging. You are not talking about restoring confidence in a particular product or service, like making consumers feel that romaine lettuce is safe to eat again or that their car's airbag won't explode in their face—those are very doable as they deal with consumer trust in the product of the company, not in the company itself. Being that Facebook's only service is its social network makes it more difficult, as you have to restore confidence and trust both in the service and in the company itself.
The really only historical precedent I can come up with in my strategic management consultant/professor "brain sludge" does not bode well for Facebook. That is the 1996 horrific crash of a DC-9 jet in the Florida Everglades in which all aboard died. The crash of ValuJet Flight 592 came as the result of bad airline maintenance practices (which they had outsourced to a questionable third-party) and ended with the speculation that many of the passengers on that plane had been eaten by alligators! In the end, in less than a year, the ValuJet name was gone (merged into AirTran Airways, which is now part of Southwest), an outcome many industry analysts pointed to as stemming directly from the loss of consumer trust in the airline and its safety. The moral of the Valujet story is simple: If the public loses trust in the ability of a company to provide its core—and really, its only service—then the company will be mightily challenged to survive.
And so, Facebook will have to resuscitate the image of three things in the minds of consumers to have a chance that the company will indeed thrive, let alone survive, over the long-term. They have to rebuild—and some would argue build from scratch—the public's faith in the company, faith in the platform, and, so long as this 34-year-old is the face of the firm, faith in Mark Zuckerberg. That is a daunting challenge! The standard protocol would be to launch a very expensive and intensive series of ads to make people feel better about the company and to try and restore their trust in it. The standard PR and marketing playbook would also hold that the face of the firm needs to be out there publicly to yes, take blame for the mistakes and say, in concrete terms, what steps the company will take to make sure that those missteps are not to be repeated. So far, Zuckerberg has been a less than compelling figure in all of this, reluctantly testifying to Congress and appearing stiff in media interviews on the controversies at Facebook.
Whether Facebook—and Mark Zuckerberg—can successfully pull all of this off will likely remain an open question for some time. However, time is not on their side, and the circumstances facing Facebook today could well send the company and its pioneering social networking platform into relative obscurity—or worse—unless their top management is willing to take dramatic steps to reverse the current course.
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