Facebook rebrands to Meta amid continuing controversies

Advertising revenue

According to Facebook’s third-quarter financial results for 2021, which were released on 25 October, a few days before the Meta announcement, its advertising revenue has dropped to $28.3bn, from $28.6bn in the previous quarter.

While ad revenue was still up by 33% year-on-year, it comes in significantly below the 56% projected by Facebook during its Q2 financial results, which expected an increase in demand for online advertising as a result of the pandemic.

“We expect fourth quarter 2021 total revenue to be in a range of $31.5bn to $34bn,” wrote Facebook’s chief financial officer David Wehner. “Our outlook reflects the significant uncertainty we face in the fourth quarter in light of continued headwinds from Apple's iOS 14 changes, and macroeconomic and Covid-related factors. In addition, we expect non-ads revenue to be down year-over-year in the fourth quarter as we lap the strong launch of Quest 2 during last year’s holiday shopping season.”

He added that, beginning in the fourth quarter of 2021, Facebook will implement a new financial reporting segment structure: Family of Apps and Reality Labs.

While the former will include Facebook, Instagram, Messenger, WhatsApp and other services, the latter will include the company’s augmented and virtual reality-related consumer hardware, software and content.

The new financial reporting structure was also included in the company’s blog introducing Meta.

Facebook’s trust problem

Facebook’s rebrand to Meta follows the leaking of thousands of internal documents to the Wall Street Journal by former employee Frances Haugen, who claims the company routinely prioritises profit over users’ privacy and safety.

In April 2019, using about 7,000 pages of confidential documents, Computer Weekly revealed that Zuckerberg and other senior executives, including chief operating officer Sheryl Sandberg, planned over several years how to control competitors and consolidate the social network’s power, using people’s personal data to do so.

Following a disastrous initial public offering (IPO), Facebook’s executives proposed a new plan to make money, which it dubbed “Data for $”, leading to the company proposing special deals for “friends” of Zuckerberg and Sandberg (including Netflix, Dropbox, Spotify and Foursquare), while simultaneously cutting off competitors’ access to its data after initially promising developers a “level playing field”.

Facebook’s PR team then spun the plans to restrict third-party apps’ access to data as a move to protect privacy, but the internal documents revealed it was more to do with growing Facebook’s revenues.

According to Zuckerberg’s founder’s letter: “Privacy and safety need to be built into the metaverse from day one. So do open standards and interoperability. This will require not just novel technical work – like supporting crypto and NFT projects in the community – but also new forms of governance. Most of all, we need to help build ecosystems so that more people have a stake in the future and can benefit not just as consumers but as creators.

“This period has also been humbling because as big of a company as we are, we’ve also learned what it’s like to build on other platforms. Living under their rules has profoundly shaped my views on the tech industry. I’ve come to believe that the lack of choice for consumers and high fees for developers are stifling innovation and holding back the internet economy.”

As part of its work developing the social networks of tomorrow, Facebook announced the launch of Ray-Ban Stories smart glasses in early September 2021, as a first step towards realising virtual and augmented reality as the next major platform.

However, Daniel Leufer, a Europe policy analyst at digital rights group Access Now, said in a blog that the glasses could lead to all sorts of privacy violations, including the recording of bystanders without their consent or knowledge, adding that Facebook’s failure to prioritise human rights during the product’s development is especially worrying because it’s the company’s first proper foray into augmented reality.  

“As we’ve previously noted, AR can have many cool, beneficial applications. But if it’s done wrong, it can be the next frontier of human rights violations,” wrote Leufer. “We have the opportunity to design AR glasses with privacy and other human rights at their core, or we can prioritise sales and profit margins above everything else. The debacle of Ray-Ban Stories shows that, despite big claims about ensuring that the next generation of computing is developing responsibly, Facebook’s priorities lie with its own bottom line, rather than with protecting our rights.”

Mike Proulx, Forrester’s vice-president and research director, said that simply rebranding to Meta will not erase the systemic issues that have been plaguing the company: “If Meta doesn’t address its issues beyond a defensive and superficial altitude, those same issues will occupy the metaverse,” he said.

“The success of Meta’s metaverse strategy all comes down to trust. Forrester found that less than half – 41% – of online adults surveyed in the US say they trust Facebook (the company). In the UK, it’s just 26%. If the majority of online adults don’t trust Facebook as a social media company, why would they trust it as a metaverse company? Without trust, Meta’s metaverse plans are already at risk.”

Amrit Dhami, an associate analyst at GlobalData, said that while this was probably the right time for Facebook to be distancing itself from social media, it still had a long way to go in winning users’ trust back.

“It is serving an online community that is more concerned about mental health than ever before, which may make it harder for the company to avoid accountability,” she said. “Facebook must win over sceptics of its data privacy capabilities as it currently has the lowest possible score in GlobalData’s Social Media Thematic Scorecard, at one out of five, and ranks 27th overall in this sector out of 35 companies.”