Facebook might be in real trouble this time

Old-Zuckerberg can't get away with young-Zuckerberg antics.

One of the observations that has really shaped my thinking about technology over the past few years is just how stable the tech world has become. “Internet Time” is slowing down. The big tech companies of 2012 were the same as today — Apple, Google, Facebook, and Amazon.

(By comparison, in 2002, Steve Jobs had just barely released the iPod and no one was buying them yet. Google was two years away from going public. The biggest social network site was Friendster. 2002 was also the first year Amazon turned a profit.)

Big tech took a lot of hits during the techlash years, but it was never reflected in their stock prices. It didn’t seem to matter how often Mark Zuckerberg got hauled in front of Congress. The digital advertising economy just kept printing money for him.

That seems to be changing for Meta though. In February, the company reported its first-ever decline in Daily Active Users. This week, in its Q2 earnings call, the company reported its first-ever earnings decline. FTC commissioner Lina Khan is also gunning for them, threatening to block their acquisition of yet another VR developer. Facebook stock is down roughly 50% so far this year.

Alex Heath and David Pierce at The Verge reported yesterday on just how rough things are going inside of Meta. The harder I look at this situation, the more trouble I think Zuckerberg is in. Three highlights that stand out:

(1) Zuckerberg got snippy and told everyone, “Realistically, there are probably a bunch of people at the company who shouldn’t be here.”

This is the biggest headline in the piece, for good reason. Morale at Facebook/Meta is cratering. Many big tech firms are compensating their employees to make up for the industry-wide decline in tech stocks. Meta? Notsomuch. Zuckerberg seems to want to get back to the scrappy, startup mentality. Facebook against the world! Move fast and break things!

The reporting reminded me of a passage from Noah Smith’s interview with Marc Andreessen last year. Smith asked Andreessen to reflect on the dreams of the 1990s techies — “when we think back on the 90s, how should we remember that era, and what ideas from that era should we hold on to?” Here’s (part of) Andreessen’s reply:

One way to think about it is that we went from being pirates to being the Navy. People may love pirates when they’re young and small and scrappy, but nobody likes a Navy that acts like a pirate. And today’s technology industry can come across a lot like a Navy that acts like a pirate. 

On the other hand, a Navy without pirates isn’t necessarily great either -- a suppressive force that prevents new ideas and new activities from forming, a global orthodoxy and set of rules that lead to the death of creativity -- which creates the opportunity, and the need, for a new generation of pirates.

Facebook in the mid-00s was a pirate. Zuckerberg loved being a pirate. His early employees all loved being pirates too. And then they became the Navy. Now Zuckerberg wants to be a pirate again. He wants his employees to work startup hours and believe in the cause and fight like hell so their company can emerge victorious and change the world.

There’s just, like… no way in hell that’s going to work, right?

Facebook isn’t cool anymore. It’s so uncool that they changed the company’s name to Meta. You don’t go to work at Facebook because you want to chase the startup dream. You don’t work at Facebook because you think its an unalloyed force for good. You go to work at Facebook because it’s one of the biggest companies on Earth, and they can pay you a ton of money to work on interesting problems, and if you help make their product better then the impact can be huge.

Young-pirate-Zuckerberg could probably get away with insisting that if you were worried about compensation or vacation time then maybe you just weren’t up to the company’s standards. But that’s not going to fly for old-Navy-Zuckerberg. The best people working at Facebook are the ones who are going to get poached by other companies. Early-stage companies will try to poach them with the dream of getting as rich as the early Facebook employees did. Well-established companies will try to poach them by offering to pay them well and give them a better quality of life. The people who are going to leave Meta probably aren’t the ones that upper management thinks “shouldn’t be here.” It’s gonna be a total mess.

(2) Year one of building the Metaverse has not. gone. great.

Last summer, Zuckerberg announced to his employees that over the next five years he expected to transition “from people seeing us as primarily being a social media company to being a metaverse company.”

A year later, the goal posts are moving. Heath and Pierce write, “Meanwhile, Zuckerberg’s bet on the metaverse was a money pit that he didn’t see turning a profit until at least the end of the decade.”

Now, on the one hand, Zuckerberg’s public timeline for the Metaverse was always heavily footnoted by the engineering team. I pointed out last summer that the Metaverse pivot had much more to do with diverting attention from the company’s endless terrible news cycles than with any fundamental technical breakthroughs. I remain a Metaverse skeptic, but the serious optimists all seem to think it’ll take a decade or longer.

But what’s changed is that Apple’s new iPhone user privacy settings have taken a serious dent out of the Facebook money-printing-machine. (It turns out that if Facebook can’t scoop up data on everything you do when you aren’t even using Facebook, then its mighty ad machine loses a ton of value. Imagine that.) So now Zuckerberg’s grand strategy is to set giant piles of money on fire for a full decade while tech stocks enter the first serious downturn of his professional life and while his core business loses value.

The current plan for generating more revenue is to raise the price of the Meta Quest 2 VR system by $100. I think Ryan Broderick’s comment in his Garbage Day newsletter sums it up well:

So I actually have a Quest 2. I bought it for a project I’m working on. I really like it. I love Beat Saber and this game that’s sort of like Fornite called Gun Raiders. I think the Quest 2 is a genuinely exciting piece of technology and there are moments using it where I feel completely immersed. It also makes me nauseous almost all the time, it’s extremely uncomfortable to wear for more than an hour, it’s kind of heavy, I haven’t touched it in a month, and thought it was overpriced when I bought it. It’s not good for small apartments or to be used when I’m with other people. Curious to see if it’ll sell better now that it costs more.

(3) “Facebook and Instagram are being rearchitected to compete with TikTok.”

Facebook is for boomers. That’s the beating heart of the user base. Millennials use Instagram. Gen X uses Twitter, I think. Gen Z uses TikTok.

Zuckerberg is facing real competition from a social network that he wasn’t allowed to purchase outright for the first time in a decade. TikTok has gotten big enough that Facebook wasn’t able to snuff it out by copying all the main features and offering them to a much larger user base. So now Meta is rethinking the user experience at its two main sites, trying to turn both Facebook and Instagram into something-more-like-TikTok.

It’s going terribly so far. And while its tempting to think back to Zuckerberg’s history with features like the newsfeed — which users said they hated, but they loved it when they got used to it (side note: the new season of the Land of the Giants podcast is really good!) — I don’t think Meta has grappled with the generation gap here.

Baby Boomers don’t want to learn how to use TikTok. They don’t want a TikTok experience. They got used to the affordances of Facebook, and they generally don’t love being forced to learn new technologies when the old one worked just fine!

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So… yeah. Meta might be in a lot of trouble. I’ve said for years that Facebook didn’t fear competition; it feared regulation. And, in the short term, the company is still a behemoth with plenty of runway to make course corrections. Nothing big is going to change anytime soon.

But the company looks vulnerable in a way that it hasn’t in at least a decade. Apple isn’t doing them any favors. The FTC isn’t playing nice anymore. The Metaverse is a money pit. And the company is too big and too old to push its employees or its user base around like its still a startup-with-a-dream.

Things look pretty bad for Meta right now. And the harder I look at it, the deeper the problems run.