Facebook is too big to change
As Facebook faces a sustained wave of critical coverage pushing the company to reform itself, it also confronts a law of corporate physics: Transforming a gargantuan company is nearly impossible.
The big picture: Facebook's critics — and some of its own employees, as internal documents have shown — say it has long prioritized growth and profits over safety. Shifting that kind of mindset in a large organization takes time and will — and the company has to really want it, which Facebook has yet to make clear.
Driving the news: CEO Mark Zuckerberg addresses a Facebook developer conference Thursday, at which he's expected to outline more details of a master plan to shift Facebook's focus towards building a 3D "metaverse."
- He might announce a new name for Facebook, which could also involve a reorganization of the company into something more like Google's 2015 establishment of the Alphabet holding company.
- On this week's earnings call, Zuckerberg also said Facebook would stop trying to "optimize" itself for everyone and focus on young users as its "north star."
Between the lines: These moves are partly a tactic to distract investors and users from the flood of negative headlines based on internal documents provided by former Facebook employee Frances Haugen.
- They're also part of a larger strategy to demonstrate that Facebook is still able to build big new things — but also that it has learned from its mistakes, and intends to build the metaverse with care and ethical forethought.
Yes, but: "Culture eats strategy for breakfast," as management thinker Peter Drucker is often credited with saying.
- In other words, a company's internal culture shapes how it does everything — and top-down edicts demanding change get sabotaged by employees who think, "That's not how we do things here."
- Successful projects to alter a big company's culture take years.
- It took Microsoft more than a decade — and two changes of CEO — to soften the bare-knuckles culture Bill Gates built. And that only happened under the pressure of federal antitrust action.
That's how it goes when company leadership wants change, but that's not at all a given for Facebook.
- Zuckerberg holds an absolute majority of Facebook's voting shares and he continues to call the shots at the company.
- His enthusiasm for the metaverse project is palpable. Facebook said this week it's spending $10 billion on the effort this year and expects to spend more.
- Zuckerberg's dedication to altering a "growth at any price" mindset, that many have identified inside the company, is harder to gauge and widely doubted among rivals.
The other side: Facebook's spokespeople argue that Haugen's documents "mischaracterize" the company and regularly point to the resources it has dedicated to user safety — $13 billion (since 2016) and 40,000 people.
Our thought bubble: "Growth first" got Facebook to 3 billion users and enormous profits. Wall Street doesn't see any reason to mess with that.
- Meanwhile, regulators will make it harder for Facebook to grow further by acquisition, as the company did a decade ago in buying Instagram and WhatsApp.
- Zuckerberg isn't likely to drop growth as a central goal. After all, expectations of future growth are what keeps Facebook stock climbing.
- Legislation aimed at forcing Facebook to follow new rules is always a possibility, but devising and enforcing new laws that achieve their desired goal in this realm is notoriously tricky.
The bottom line: To build a vast new metaverse platform for remote work and entertainment, Facebook will have to persuade partners and the public that it has turned over a new leaf and can be trusted. That's looking harder by the day.