Facebook is an American company with a very American perspective, and it’s now finding itself under pressure from the outer reaches of its empire — including here in Australia.
The Morrison government has been strutting the global national security stage with its world-first anti-encryption legislation targeting Facebook’s WhatsApp. Now Facebook (and the other major platform, Google) faces a further deep look from the Australian Competition and Consumer Commission (ACCC) at how its secret algorithm targets Australians for ads.
It could all be a bit “we warn the tsar!” if it weren’t inspiring others. Now, India has blown past us with anti-encryption laws that throw overboard all the carefully constructed constraints designed to mollify privacy and civil rights concerns.
All these proposals threaten to undermine Facebook’s business model to deepen its cut of advertising by holding users on the site while diversifying with privacy-protected messaging and a commercialised Instagram. How’s Facebook going with its play?
As of late 2018, platforms must apply or design interception tools for otherwise encrypted communications when asked or directed by security agencies or police. Through WhatsApp’s 2 billion global users, Facebook has the largest end-to-end encrypted platform.
Labor voted for these measures with a promise that the *ahem* Shorten government would later improve encryption laws. It’s trying again with a private members’ bill in the Senate this month. Home Affairs has reported that seven requests were made in the first six months — five by the AFP, two by NSW Police.
Now, Bloomberg (the media outlet, not the presidential candidate) has reported that India is about to require platforms with more than 5 million users to track (and tell any government authority that asks) the origin and journey of an encrypted post. Fake news spread through private WhatsApp groups has had fatal consequences.
According to the Center for Democracy and Technology, the new regulations will effectively bar WhatsApp style end-to-end encryption which relies precisely on the platform not knowing (and not being able to know) what’s being sent from one end and read or viewed on the other.
In developed countries like Australia, Facebook saturates the market. Its active users are flatlining, up by only about 2-3% a year. Along with Google, it dominates the finite world of advertising. Its end 2019 figures, released last month, showed average revenue is US$41.41 for each of its 190 million daily active users in North America.
In Boston Consulting Group’s growth matrix, the core Facebook offering is a “cash cow” — a stable product to be milked for maximum income. But its market share price depends on continued growth.
The company thinks there’s scope to get users to spend more time on site with additional tabs such as video and news tabs. Although, four months on from the joint announcement with News Corp, the news tab is still being tested in the US market.
Facebook operates in an unstable world. Its social license is under pressure from fake news and other toxic content. There are questions over its use of data in advertising, which will be a big target of the forthcoming ACCC investigation. It’s threatened with break up by several of the Democratic presidential candidates.
Facebook’s response is to slough off responsibility for content, in the short term by defiance (CEO Mark Zuckerberg asserted it would not be fact-checking political speech last October), and in the medium term by rebuilding “a privacy-focussed vision of social networking”.
This relies on more end-to-end encryption, not less — and it starts with Facebook Messenger (and making Messenger interoperable with WhatsApp). After all, you can’t moderate what you can’t see.
It’s easier said than done. According to a recent report in Wired, Messenger encryption “remains years away”.
For now, the company is looking to Instagram. It’s the fastest growing (and millennial-preferred) part of the Facebook group. Although Instagram is also advertising-based, the company seems to see it as the platform most open to facilitate direct commercial sales, particularly for up-market goods which the company can clip on the way through.
In the wake of the kick-back against Facebook, Zuckerberg has pivoted his messaging: “My goal for the next decade isn’t to be liked but to be understood.”
Good news! Facebook now has the opportunity to be better understood by the ACCC. Or is that not what he meant?