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June 13, 2019

Why you need ONE Facebook?

Tech Missteps:
Tech bashing is in season and Facebook seems to be the poster boy of all that is wrong. From data privacy to company culture to its infamous “PR initiatives”, Facebook seems to be in the news every other day for the wrong reasons. From being touted as a contender for the next trillion-dollar company, Facebook has dropped a couple of hundred billion dollars in Market Cap.

Chris Hughes, the co-founder of Facebook, wrote a powerful opinion piece in the New York Times on why we should break Facebook up. Similarly, Senator Elizabeth Warren is hell-bent on breaking up Facebook, Google and Amazon. Why? Because the tech trio has “too much power”.

Is this hyperbole for the upcoming election season or an evolution of the political mindset against Silicon Valley’s clout in shaping America’s perception? Whatever the driver, the answer is not breaking up big tech in my humble opinion.

The Messy Break Up:
The tech companies are not your Standard Oil where you can just decree breaking up the company into baby Facebook and all would be good with the tech world. Nor is this a case of Bell Systems, which had a pure monopoly on telephone services in the United States.

Facebook has genuine competition from the likes of Google for advertising and Twitter, Snapchat for social media and YouTube for video.  Chinese players like Bytedance’s TikTok app is constantly nipping at its heels as they make inroads in the millennial population and in India, one of Facebook’s largest markets.

Even more important to understand is that consumer tech is based on the network effect. More the users on a platform, the more dominant it will become. It is logical since you would like to be on the platform where you already have all your friends. This winner takes all framework is common for tech. Breaking up Facebook would simply result in one of the progenies becoming the next behemoth as network effects kick in.

The Way Forward:
The misuse of power on Facebook is real. No doubts about it. But the way forward is not illogically breaking up a company. That will be giving in to populist propaganda that neither serves the Facebook user or the economy. The laws need to grow up to new age business models and evaluate what checks and balances need to be created for tech giants. The solution lies in updating our legislation and giving real power to the regulator.

The data laws need to be stricter, boards must be held accountable, buying pure competitors must be harder and these companies should learn to carry the burden of responsibility when they house data of billions of users and have the power to shape opinions of entire nations. We have seen chickens coming home to roost for Travis at Uber. And if Mark Zuckerberg doesn’t change direction, he will meet the same fate at the hands of an unforgiving market. I am sure that stock markets will not be able to digest billion dollar fines perennially (whatever voting power Mark might have).

Afterthoughts:
I am not a fan of Facebook. But let us not make it a victim of its own success. Politicians, society and Facebook should work together to find a common path that is beneficial for all stakeholders. That will be a true victory for 2.4 billion Facebook users.

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