Facebook’s ‘pivot’ is less about privacy and more about profits

Facebook’s founder and CEO Mark Zuckerberg’s latest promise is that his social media conglomerate will become a “privacy-focused” one. By turns lauded and lambasted, this move does not quite address users’ primary problems with the company.

His move is the pragmatic shift of a CEO toward where the market is already headed. Ironically, Zuckerberg’s announcement provides more evidence for Facebook critics who say the company doesn’t understand even the concept of user privacy.

Zuckerberg has chosen an interesting metaphor to describe this change. He claims that people are shifting from publicly broadcasting their activities and views in a digital “town square” – and would rather discuss issues in a more secure, privacy-protective online “living room.” His company already owns platforms representing both venues: Facebook is the town square, the largest platform for sharing widely, and WhatsApp is the living room, the largest platform for sharing in small groups.

As a former partner in McKinsey’s strategy practice and now, as a scholar of strategy at Tufts’ Fletcher School studying the effects of digital technologies in 80 countries, I have been analyzing Facebook’s changing strategies for several years. I see Zuckerberg’s latest move as Strategy 101: a market-driven shift of focus. That, by itself, is welcome. What is not so laudable is trying to package the move as a revolutionary solution to his company’s widespread problems with privacy, facilitating fake news and underhand deals to share user data.

Worse, the changes will be difficult to execute and will not happen soon – or at least not soon enough for many users.

Driven by market forces

The writing is already on Zuckerberg’s wall: Users are leaving the town square and filling living rooms. U.S. Facebook users’ activity dropped in late 2018, while WhatsApp and Messenger activity grew.

Zuckerberg is merely preparing to shift resources to follow users from one platform to the other. However, Facebook’s business model dictates that the company cannot make a true pivot away from the town square and toward the living room. As a publicly traded company, Zuckerberg has a fiduciary responsibility to shareholders to deliver returns on their investments. The town square makes all the money – and a lot of it.

Despite its troubles, Facebook made more money in 2018 than in previous years, and made more profit too. Most of the company’s billions were generated by the town square version of Facebook.

Zuckerberg hasn’t yet shown a plan for making the WhatsApp living room platform even remotely as profitable. Currently, his company makes 98 percent of its revenues from advertisers. It’s had only limited success with advertisements in the Messenger app and hasn’t even tested the concept in WhatsApp.

Moreover, the advertising revenue comes from companies that want to target the extensively detailed subgroups of Facebook’s social network users. WhatsApp collects far less data and is encrypted, which means its users are harder to target as effectively.

Gradually shifting, not replacing

It may take Facebook a very long time to figure out how to make money from its shift to more private messaging.