Mario's Corner - November 2018.

The Continuing Saga of Facebook: Can Mark Zuckerberg Learn From His Mistakes?


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I have written in the past about Facebook and Mark Zuckerberg, its CEO.  I have been following it and its stock price closely for the last few months.  During this time, the stock has fallen from a high of $216.00 per share in July to slightly over $150.00 today.  This means the stock is over 30% off its high and closer to where it was one year ago.  What are the key reasons for this drop and what can Mark do to fix the once-flying company?


Unfortunately, the decline has been due to a combination of external events and internal missteps by the company.  Let's take a look at a few of these and ponder what Facebook and its Founder might do to reverse this decline


1.  Over the last two years, Facebook has been heavily criticized for giving access of its private user information to a British analytics company, which in turn sold the information to various political and propaganda groups.  Although this was an external event, Mark and his COO, Sheryl Sandberg, instead of reacting immediately to it, were preoccupied with other activities.  Sheryl, in particular, was too busy making appearances to promote her book, "Lean In," to pay attention.  Mark, in his CEO capacity, should install tight controls and policies to direct what the company can share with its developers and partners.  He should also ensure his executives are more engaged in running the business than in self-promotion.


2.  The recent breach in September exposed private account information of 50 Million users. This was the largest in the company's 14 years of existence.  For a company that continually touts its engineering, this breach is a sign that any software-based company can be breached - no matter how smart its engineers.  Mark needs to ensure that enough investment is made in human and technical resources to bring the company back to the Quality Control it had in its early days.


3.  Facebook users have resisted the growth of the advertising model that Facebook is based on.  This is a more complex, longer-lasting issue than the previous two I have mentioned.  Since Facebook's growth in revenues is predicated in "monetizing" its users, if these users stop using Facebook, or use it less frequently, it will have an impact on the revenue it earns from this advertising.  As a consequence of this resistance, Facebook has started developing new offerings including "Stories," a product that is similar to Snapchat since it disappears 24 hours after the user posts them.  Mark has always been clear that this monetization takes place, but his team needs to invest in PR and advertising to explain to its users that the reason Facebook is "free" is precisely because of this user monetization.  It is better when CEO's are honest about their company's intentions.  This point brings me to the next and, I believe, most important issue facing Facebook.


​4.  Throughout its history, Facebook executives and Mark have been secretive and very hesitant to be honest and transparent with users of the site.  Since the beginning, Mark has been slow to accept any blame or responsibility for what Facebook creates - whether it is political turmoil or a negative impact on a person's life.  Facebook's executives are also unwilling to face public scrutiny.  It took the threat of a subpoena by Congress to get Mark to testify in front of a committee.  It is this reticence to accept any responsibility or publicly accept its mistakes that has continuously created a perception that Mark and the rest of his team are arrogant, and this has led many analysts and members of the public to wonder about Mark's potential immaturity and lack of business judgement.


Mark's strengths are many and his ability to solve the multiple problems facing Facebook are all in his control.  It starts with taking responsibility for his company's actions and working proactively to fix these.  Additionally, he needs to ensure that all his executives practice transparency and show some humility and contrition when mistakes are made.  He might want to look at another technology company, Amazon, and its CEO, Jeff Bezos, for examples of how to accomplish this.


​Facebook still continues to be a great company, but one that needs its CEO to lead proactively, instead of just observe, to fulfill its potential. 

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Please do not hesitate to call me at 1 (617) 391-0347 or e-mail me at mariocastaneda@bluesailconsulting.com to talk about this or any other subject.  I always like to hear from clients and readers.  

 

Also, please don't forget to read my interview with BostonVoyager magazine.  To read it, click here.

 

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I look forward to seeing you again in December!

 

Best Regards,

 

​Mario