Facebook’s perceived success fails to hide underlying issues

Facebook recently celebrated reaching the one billion user mark, with CEO Mark Zuckerberg waxing lyrical about the company’s successes. But this success may yet prove superficial, as share prices plummet, legal battles ensue and millions of fake accounts are revealed.

Zuckerberg announced that on September 14that the social networking site had amassed one billion active users globally, eight years after the site’s inception. Zuckerberg told fans: “If you’re reading this: thank you for giving me and my little team the honour of serving you. Helping a billion people connect is amazing, humbling and by far the thing I am most proud of in my life.”

“I am committed to working every day to make Facebook better for you, and hopefully together one day we will be able to connect the rest of the world too,” he added.

Yet Zuckerberg’s statement can be viewed as somewhat naïve at a time when a multiplicity of indicators point to the start of a demise for the infamous social networking site.

Since launching on the NASDAQ exchange in May of this year, Facebook has watched its share price freefall nearly 50 per cent amid ongoing scandals. Having opened at a stock price of US$38 per share, the company’s valued today stands at US$19.88 – having in the intervening period even hit an all-time low of US$17.55.

Meanwhile, at least 33 investors have sued Facebook for compensation, alleging that the company hid certain negative aspects of its business outlook from investors in the lead-up to the company’s US$16 billion IPO, causing those investors apparently left in the dark to put funds into the company’s stock which then promptly lost almost half of its value.

This is not the only legal suit that Facebook has faced recently, as the site’s privacy policies also came under fire from five users whose photographs and names were used in advertising campaigns by companies they had liked on Facebook, with the social networking site’s blessing: the case of so-called “sponsored stories”. Zuckerberg’s company decided to settle the lawsuit in May for an undisclosed sum. This followed public uproar last December when Head of Global Communications and Public Policy Elliot Schrage’s commented to the BBC that by clicking “like” on Facebook, users were implicitly giving their consent to their identity being disclosed as a supporter of the company in question for use in sponsored stories.

Matters have not been helped either by the BBC’s revelations of the prevalence of fake users and false “likes” across the breadth of the site. While Facebook relies financially on income generated by targeted advertising, the BBC uncovered in August that the majority of “likes” generated through Facebook’s advertising model in fact come from fake users. Advertisers had, then, been largely targeting users who do not even exist.

Facebook eventually admitted that it estimates there are 83 million fake users registered on the website, accounting for 8.7 per cent of the August subscriber base of 955 million accounts. Following the admission in August, shares plummeted further as investors lost confidence in the company’s viability.

Facebook finally got around to beginning a cleansing spree, announcing that it would be ridding the social media site of false users. The company stated that false “likes” contravene Facebook’s mission of “helping the world share”, and assured users that roughly one percent of likes would be removed through enhanced automated security, though many of those being removed are claimed by users to be genuine.

Regardless, the presence of fake users on the site must throw doubt on Zuckerberg’s much-publicised claim to have reached the one billion mark.

Posted in: Social Media

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