The Real Fallout for Facebook May Be Still to Come – WWD

Facebook’s awful week brought a basic truth to painful light for merchants of all stripes: When giants stumble, everything tethered to them goes down as well.

The social giant’s six-hour blackout on Monday, which tanked Facebook, Instagram, Messenger and WhatsApp, was “the worst outage we’ve had in years,” chief executive officer Mark Zuckerberg explained in a Facebook post on Tuesday. The downtime, due to an internal update that went wrong, cost the company an estimated $164,000 for every minute, took some $6 billion to $7 billion out of Zuckerberg’s pocket and eradicated more than $45 billion in Facebook’s market cap, at least temporarily.

The company is already seeing signs of recovery, however, that do little to reverse the losses felt by businesses that rely on Facebook for survival. London-based cybersecurity monitoring firm NetBlocks estimated that the flawed configuration change, which hobbled server communications, “made a dent in the global economy exceeding $1bn [billion] U.S. dollars.”

Businesses rely on Facebook and its fleet of apps for everything from brand awareness to promotional efforts, e-commerce transactions and customer service. That makes the true fallout hard to measure.

Some marketers may go back to business as usual, eager to put the latest glitch in the rear view mirror. But others view the event as a cautionary tale about the risks of relying on one platform or one company too much.

“Yesterday’s outage of major social media platforms was not only an inconvenience to users, but brands who rely on social media to connect with consumers,” said Ryan Brelje, senior product marketing manager at San Francisco-based marketing firm Iterable. He recommended that brands use multiple modes to connect with mobile users, including texts, in-app messages and other forms beyond just social media.

The advice underscores the criticism that Big Tech companies wield too much power, a common refrain echoing in the halls of Congress and thundering across regions globally. The sentiment typically revolves around esoteric matters, like the collection of user or merchant data. Now there’s a concrete, real-world impact tied to the stakes.

The severity of the Facebook outage looks particularly deep, given that the company has been pushing to bringing its various apps together in front of and behind the scenes. With their systems increasingly tied together, a single gaffe like this runs a high risk of taking down the company’s entire ecosystem.

So far, Facebook hasn’t elaborated on how it will ensure a similar glitch won’t happen again in the future.

That may rattle marketers, but it hasn’t shaken analysts’ faith in Facebook’s resiliency. Estimating that the social giant lost up to $120 million in ad revenue, Chicago-based investment research firm Morningstar characterized the sub-0.1 percent loss as a drop in the bucket compared to the company’s total revenue.

“While the stock will likely remain under pressure from negative news (the outage impact will likely be negligible), we think Facebook’s network effect remains intact,” wrote Ali Mogharabi, senior equity analyst for Morningstar.

The firm is more concerned about another damaging headline this week: Whistleblower Frances Haugen’s contention that Instagram is not only bad for young girls, but that the platform and its parent company knew and refused to take action on that as, she claimed, it put profits above safety concerns.

“I am here today because I believe that Facebook’s products harm children, stoke division and weaken our democracy,” the former Facebook product manager said during Congressional testimony on Tuesday. “The company’s leadership knows how to make Facebook and Instagram safer but won’t make the necessary changes because they have put their astronomical profits before people.”

Haugen, who leaked thousands of pages of internal documents to the media, state attorneys general and other federal agencies, was the key source behind a Wall Street Journal exposé last month and a “60 Minutes” interview last weekend. The segment focused on Facebook’s approach to disinformation, misinformation and protection of its co-founder and CEO. But above all else, according Haugen, the company’s machinations amounted to protection of its own profits and growth “at all costs.”

One of the standout allegations was that Facebook ignored its own research about Instagram’s harmful effects on teenage girls. According to the leaked documents, nearly one in three young women who felt bad about their bodies said they felt worse after going on the photo- and video-sharing platform. The backlash prompted Instagram to scrap plans to release a version of the app for kids.

In a Tuesday evening Facebook post, Zuckerberg denied that the company values “profit over safety and well-being” and attacked the allegation as a “mischaracterization,” asking, “If we wanted to ignore research, why would we create an industry-leading research program to understand these important issues in the first place?”

He laid out another argument that seemed designed to silence criticism. He wrote, “If we attack organizations making an effort to study their impact on the world, we’re effectively sending the message that it’s safer not to look at all, in case you find something that could be held against you.”

Whether any of that helps make his case remains to be seen. Zuckerberg also acknowledged taht legislators may need to provide guardrails

Regardless, the fundamental consideration may hit close to home for fashion and beauty brands, as well as any other companies driven by image-conscious social content or influencers propelled by young women. For Morningstar’s interests, the issue clearly eclipses the tandem outage that tanked Facebook’s platforms.

“In our view, Instagram’s impact on younger girls will likely have the most enduring effect on the firm,” Mogharabi added. “Platforms like Instagram, TikTok and Snap clearly want to increase engagement, which is driven by content that stirs emotions whether positively or negatively. As such, we wouldn’t be surprised to see more control over usage enforced by the firm, parents lawmakers, or all the above.”

Facebook is no stranger to controversy and scrutiny. But when it comes to the welfare of children, it may find that the issues are harder to sweep under the rug — if not for brands, then for lawmakers, many of whom have been eager to regulate the largest tech platforms. That the explosive revelations arrived alongside a massive outage could give businesses multiple reasons to rethink their reliance on the company.

Notably, as Facebook and Instagram braced for one of their worst-ever weeks, Snapchat saw one of its best: A new fall 2021 report from Piper Sandler, “Taking Stock with Teens,” saw the rival platform become the most popular social media app among teenagers.

In the poll, conducted between mid-August through mid-September, 35 percent singled out Snapchat as their favorite, up from 34 percent a year ago and 31 percent in the spring. TikTok, in second place, claimed 30 percent and Instagram trailed at 22 percent. Facebook’s core platform nabbed a mere 2 percent.

Popularity aside, however, Instagram registered as the most used app among the respondents. It ranked first in monthly engagement, with 81 percent of the teenagers reporting that they log on at least once monthly.