Don Zuckerberg sends two more lieutenants to sleep with the fishes
Could the Facebook godfather's shows of strength prove his greatest weakness?
In every gangster movie there comes a moment when the Don has to lay down the law. Maybe his lieutenants are getting uppity, maybe rivals are moving in on his patch – the result is the same, a montage of assassinations in which order is restored, the hierarchy re-established.
There is only room for one boss.
Facebook is not the Cosa Nostra. But it is a hugely powerful organisation, credited with shadowy influence across the world, run by people who all appear to be working to the same goal but actually have their own ideas of what’s best and harbour their own ambitions.
Now the inevitable has happened. Kevin Systrom and Mike Krieger, Instagram’s founders, now sleep with the fishes. Or, in the Silicon Valley parlance with which they made their announcement, Systrom and Krieger will be “taking some time off to explore our curiosity and creativity” and get back to “building new things”.
They will be lucky if they ever again build something as big as Instagram. Since it was acquired by Facebook six years ago for $1bn, the photo-sharing app has grown both vast and vastly profitable. When Facebook came calling it had 13 employees and 30 million users. Now it is used every month by more than one in seven people across the planet, bringing in advertising revenue that is second only as an earner to Facebook’s news feed.
No wonder Zuckerberg dispatched the man who led that news feed product, Adam Mosseri, to Instagram earlier this year. Mosseri is now the insiders’ tip to take over at Instagram. For in a tech industry where it is growth, and potential for growth, that really has investors’ eyes gleaming, Instagram’s figures are near unparalleled.
But who should take the credit? Is it Systrom and Krieger? Or is it Zuckerberg?
Answer that question and you get to the heart of this power struggle – and others that have recently roiled the world’s eighth-biggest company, currently worth just shy of half-a-trillion dollars. For hard though it might be to associate with apparently mild-mannered chief executive Mark Zuckerberg, blood on the carpet has in recent months become a regular occurrence at Menlo Park, Facebook’s Californian HQ.
Certainly, Zuckerberg can be credited with one enormous gift: talent spotting. Facebook may seem like the same site it was when it launched. But it has changed out of all recognition, expertly navigating the move from desktop to mobile and the growing importance of image-led sharing as device screens have become bigger and cellphone cameras better.
A key factor in that agility has been its acquisitions, notably Instagram in 2012 and messaging service WhatsApp two years later, for almost $20bn. As if to confirm its strategy of buying its way into crucial emerging markets, Facebook splashed out another $2bn in 2014 on Oculus, makers of virtual-reality headsets.
But bringing in brilliance is just one part of the deal. For Zuckerberg also credits himself with leveraging Facebook’s extraordinary global reach to turn those acquisitions into world-beaters themselves. Hence, he says, Instagram’s growth is occurring at twice the pace it would have done.
Naturally, such boasts did little to endear him to Systrom and Krieger. But more was to come. For leveraging is one thing, integrating is another. And at a certain point subsidiaries like Instagram and WhatsApp became not just add-ons, but fundamental to Facebook’s core business.
The reason is inescapable. With Facebook having already signed up 2.2 billion users, room for growth is limited. This July it admitted that attracting more registered users in future would be slower and cost more. To hard-hearted, cold-eyed financiers, that news was more than three times more damaging than the immediate impact of the Cambridge Analytica scandal, which knocked 6% off Facebook’s share price.
July’s news, by contrast, wiped out 20%, or $119bn, making it the most expensive single-day collapse in stock market history. And unlike the Cambridge Analytica scandal, after which Facebook stock took just two months to recover, stuttering growth has knocked it into a spin from which it shows no sign of pulling up. Shares today trade at $165, $11 less than after July’s rout.
Zuckerberg, then, is facing pressure from all quarters. In America, he is painted as the man whose company helped Russia interfere in the US presidential election. In Europe, EU commissioners lambast him for dragging his heels on exploiting private data. And on earnings calls, eagle-eyed investors wonder where the next billion users are coming from. The answer, of course, is from Instagram.
With a little more than one billion users, it is still far from saturation point. But the more growth is becoming important to Facebook, the more Zuckerberg wants to exert control. The boss wants to flex his muscles, to let everyone know who is in charge.
It’s not just the appointment of Mosseri. Earlier this month Instagram’s chief operating officer Marne Levine was summoned back to Facebook after four years during which she has carved out a reputation as something of a peacemaker between the two organisations.
Facebook is famed for its tight-knit cadre of executives, many of whom have stuck together since its early days. Yet in the past 18 months it has undergone unprecedented internal turmoil. Instagram’s founders are not the only ones to have departed. Oculus creator Palmer Luckey was fired in 2017, and later said the lessons he had learnt at Facebook were “be careful who you trust” and “be careful who has control”.
In April, Brian Acton and Jan Koum, the founders of WhatsApp, also walked, and they too were clear about their reasons for going – a fight for the soul of the product they designed to enshrine privacy, but whose user data Facebook is increasingly keen to get its hands on. When they left, Chris Daniels, a Zuckerberg loyalist, took over.
The Don, it seems, is going toe to toe with his biggest internal rivals. And winning, for now. But those gangster movies which begin with the boss laying down the law, picking off the opposition, only end one way.
Increasingly withdrawn and paranoid, the mobster-in-chief loses the vision and foresight that put him on the throne in the first place. Suddenly, the enemies that once existed only in his head are circling for real. And then the man, once untouchable, hailed by all, is vulnerable.
Mark Zuckerberg’s show of strength, then, may well be his greatest display of weakness yet.
– © The Daily Telegraph