A little over a year ago, this ad aired during the Super Bowl.

With Chris Rock and Rocky Balboa on the payroll (clearly playing on the “Rock” pun), Facebook highlights the quirky and unique power of “Groups,” a Facebook forum for people with similar interests.

The advertisement came on the heels of Facebook’s April 2019 annual stockholder presentation, in which Mark Zuckerberg announced a new strategy for its flagship product – a strategy that overhauled the platform to place Groups “at the heart” of the product.

One year and one capitol riot later, however, and Facebook is going back on this strategy, according to an interesting article on the Wall Street Journal.

The context

In North America, Facebook user growth is reaching its peak and is beginning to stagnate. In fact, in the last two quarters of 2020, the number of active users in North America has actually declined.

There are a host of reasons. You could chalk it up to data privacy concerns, the spread of fake news, censorship complaints from conservatives, increased competition in social media (e.g., Tik Tok), a natural ceiling on potential users, or just that people don’t post on Facebook as much anymore.  

Whatever you call it, Facebook clearly needs a revitalization. And that’s what management tried to do by redesigning and prioritizing Groups.

The complication

Groups became a breeding ground for extremist groups, partisanship, and violence, to the point that “70% of the top 100 most active US Civic Groups were considered non-recommendable for issues such as hate, misinformation, bullying and harassment,” according to an internal Facebook investigation.

Ahead of the 2020 US presidential election and in response to the investigation, Facebook temporarily banned many of these big or especially toxic groups. While Facebook placed some protections / limits, the company was not able to stop groups such as the “Stop the Steal” group, which quickly formed and organized a ton of election protests.

These events all culminated in the riot at the capitol, leaving Facebook at least somewhat responsible for aiding the spread of this information. Now, Facebook is partially going back on their strategy by disabling certain Groups tools and discontinuing the practice of recommending Groups to people.

For a deeper view on this situation, I’ll again promote the WSJ article here.

The strategy

Ignoring the political and social ramifications for a second, I believe that the decision to prioritize Groups made a lot of sense from a business perspective.

In my mind, Groups help alleviate two main problems:

1. Problem: Facebook needed something unique that could retain users on the app. In business strategy, you might call this product differentiation or a competitive advantage.
   • Solution: Facebook made a bet on Groups – something that made it unique. In a crowded social media landscape, no other platform offers an experience quite like a Facebook group.
     
     
2. Problem: With poor growth in the US, Facebook was also struggling with the consequences of network effects.
   • Context: A network effect is the phenomenon that the more people there are using a product, the more value the product has to others. The strength of network effects vary by industry but are especially strong in social media. Network effects helped Facebook gain users while it grew, as people are much more likely to build a profile if their friends are on the platform. However, network effects are a double-edged sword. In the same way that more users = more value, as the number of users (especially young people) in North America decline, users find less and less value from the network.
     
   • Solution: Groups offered a way for Facebook to build upon network effects by giving people access to content they care about outside of their immediate set of friends. Even if fewer of your friends are on the network, with Groups you are able to build interactions and derive more value outside of your feed.

However, you can never really ignore the political and social ramifications of a business decision. Business decisions aren’t done in a vacuum, as broader societal risks can clearly come back to impact the business. Even if the decision made sense on paper, these are the types of risks that must always be assessed.

And unfortunately, the political and social consequences of business decisions will likely only get more severe as our political climate becomes even more divided and polarized.

What’s next for Facebook?

Facebook is in a tough position.

In addition to the laundry list of issues mentioned earlier (data privacy, fake news, censorship, competition, fewer users), Facebook is also being sued by the FTC for antitrust concerns surrounding their acquisitions of Instagram and WhatsApp in 2012 and 2014, respectively.

On the bright side, however, Facebook’s other products (Instagram and Whatsapp) are doing extremely well and its flagship product is doing well internationally. Additionally, despite a small blip in 2019, Facebook’s revenues and net income are showing no sign of slowing down from their exponential pace.

If you were Facebook management faced with this situation, what would you do?

I’m not an expert on social media, but here’s my hypothesis.

• Facebook is still far bigger than Instagram or Whatsapp, so its importance as a platform should not be understated.
• Amid troubling growth figures in the US, Facebook should continue to 1) explore areas to differentiate its product and 2) extract maximum value out of the aging platform.
• Groups still has the potential to be the flagship differentiator for the Facebook product. Facebook, however, must be aggressive in stomping out calls for violence and extremism.

What do you think? If you were Facebook management, do you double down on drawing out the uniqueness of Facebook, or do you put your time / energy / investments into your high-growth platforms (Instagram and Whatsapp)? Would you sell off one of your platforms?

What would you do with Groups? How would you balance tackling fake news vs. censorship?