By Saul Klein
Social media share prices took a beating recently with Facebook investors losing US$120 billion of share value and Twitter ones losing US$5 billion.
Both these companies lost 20 per cent of their value in a day, along with Snapchat, which lost five per cent.
Are investors waking up to what consumers already know, that social media has passed its peak?
Facebook and Twitter have grown rapidly on the promise of greater connectivity. Along with the benefits, however, the dark side of these new technologies has come to the surface and consumer trust is eroding fast.
The annual Gustavson Brand Trust Index shows how social media brands are perceived by consumers. Of 299 brands surveyed in Canada in 2018, Twitter ranked #296, Facebook ranked # 295, and Snapchat was #294. These are also among the brands that Canadians are least likely to recommend.
If we recognize that people don’t want to do business with brands they don’t trust, the over-inflated growth projections of social media brands was clearly an illusion.
Now that it is becoming clear that the emperor has no clothes, we should expect continuing turbulence in the social media space. Continuing large increases in subscriber growth are unlikely to materialize unless the companies do something about the way they are perceived.
What was once seen as the advent of a new era of free and open communications has turned into a nightmare of manipulation, loss of privacy and hate-speech.
Rather than new media creating strong alternatives to traditional channels, allowing a greater diversity of views with governments and other powerful stakeholders having less control over access to information, the opposite has happened. Authoritarian regimes are now more able to control content and manipulate readers and viewers.
Without legitimate gatekeepers, truth has evaporated and it is becoming increasingly difficult for consumers to distinguish fake news from any other kind.
What was once seen as a benign tool for people to stay in contact with one another, to build communities around common interests and share experiences, has become a vehicle for unscrupulous agents to use personal information to target and shape opinion. The loss of privacy has led to intervention in our democratic processes and sharp increases in identity theft and online scams.
What was once seen as a boon to free speech has created a platform for vitriol and online bullying.
Where we previously saw self-restraint on the expression of abhorrent opinions, reinforced by social norms, we now see impulsive and imprudent commentary and reaction.
Where we wanted greater diversity of opinion, we now have greater containment of views and are increasingly exposed only to those who share the same opinions as we do, reinforcing the fractionalization of our societies.
Is it any wonder that we have lost trust in social media?
In many cases, the social media brands themselves have aided and abetted the dark side. They have been slow to protect our private information, happy to sell our data to the highest bidder, and tried to avoid taking responsibility for online abuse and the spread of hate-speech.
As many other companies have come to appreciate, the route to long-term success is based on serving the needs of one’s consumers, not on manipulating and exploiting them for short-term results.
That requires building trusted relationships and behaving responsibly. Until and unless the social media brands appreciate this reality, their value is likely to continue to slide.
Saul Klein is the dean of the Gustavson School of Business at the University of Victoria