Background
Mark Zuckerberg is the world’s second-richest person, according to the Bloomberg Billionaire Index. The 35-year-old tech mogul rose to fame in 2004 when he founded the social media platform Facebook, Inc. As of April 2020, Zuckerberg was worth an estimated $58.7 billion and is currently the fifth-richest man in the world.
However, in spite of his colossal wealth, the Facebook founder has lost a significant amount of fortune over the years. Popularly, known as ‘the ‘Zuckerberg Crash’, this has been attributed to several factors, including scandals and Mark Zuckerberg’s own decisions.
Data
In 2020, Zuckerberg lost a total of $11 billion. This staggering amount is mainly due to a decline in Facebook’s stock prices after the company was accused of mishandling user data. This prompted the Federal Trade Commission to probe the company and fine them with a $5 billion fine, the largest in its history.
The scandal caused Facebook’s stock to drop by almost 20%. This, in turn, resulted in Zuckerberg’s wealth to reduce by $10.6 billion. In 2018 and 2019, Zuckerberg’s fortune dipped even further due to him selling off stock and donating over $10 billion to charity previously.
Expert Opinions
Some economic experts expressed their surprise and delight at Zuckerberg’s losses. David Mc Williams, an economic pundit, thought that the fine imposed on Facebook was a necessary step in regulating the company and reducing the amount monopolistic power it held. Mc Williams added that this was a great opportunity for tech companies to reassess their business models and become more accountable.
Similarly, Sophie Cannet, a technology journalist, also expressed her approval at the fine placed on Facebook. She believes that the fine is indicative of increasing legal scrutiny of social media and tech giants, which is a positive development.
Analysis
The losses suffered by Mark Zuckerberg are mainly attributed to bad decision-making and an alleged violation of user data. Despite his immense wealth, the risks taken by Zuckerberg have often out weighed their rewards. This cautionary tale serves as a lesson for the world’s wealthy—that even a multi-billionaire can succumb to bad decisions from time to time.
Zuckerberg’s losses have also provided an opportunity for other companies to reassess their current models and move towards a more responsible approach. Tech companies should focus on protecting their user data and formulating better ways to monetize their businesses.
Profiteering
It is worth noting that the hefty fines paid by tech giants has not damaged their businesses as much as predicted. In fact, the fines turned out to be a profitable venture because while they had to be paid, they resulted in the company’s future stock prices to rise.
For instance, despite the $5 billion fine imposed on Facebook, the company’s stock price rose by 12% in July 2019. This increase was a result of investors taking a more confident stance towards the company’s outlook.
Customer Perception
A study by the Centre for Research in Social Computing found that despite the scandals and fines, the public perception of Facebook remained largely unaffected. It was found that many users continued frequenting the social media platform because they enjoyed interacting with friends online and availing of its many services.
Furthermore, the study also found that despite their concerns about user data, many customers were unable to find an alternative platform that could match Facebook’s user experience. Therefore, users were compelled to remain on the platform despite their reservations about data privacy.
Business Strategy
Mark Zuckerberg has also been criticized for his business strategy. He is accused of attempting to absorb smaller companies under the Facebook umbrella. For instance, Zuckerberg is accused of acquiring Instagram for $1 billion in 2012 to curb its potential as a competitor against Facebook.
The tactic is similar to how Microsoft was accused of monopolizing the tech industry in the 1990s. This strategy allows tech giants to establish a duopoly over their respective industries and provide Facebook with a competitive edge in the market.
Objective Data
Objective data indicates that in spite of its losses, Facebook has remained the world’s most popular social media platform. According to Statista, Facebook had an estimated 2.62 billion monthly active users in 2020, 3.14% more than the previous year. In addition to this, it is estimated that by 2024, the platform’s user base will cross the 3 billion mark.
These figures suggest that despite the losses incurred by Mark Zuckerberg and its image taking a hit, Facebook remains one of the most popular—and profitable—companies in the world.
Business Impact
The losses incurred by Mark Zuckerberg have undoubtedly impacted the company’s business outlook. Investors now view Facebook with caution and the company has to work hard to build trust. As a result, the company’s stock price could remain volatile in the coming years.
Similarly, Facebook’s relations with its customers could also be impacted. Customers could now view the company with suspicion and may not trust its services. This could lead to users deserting Facebook and shift towards newer platforms.
Giving Back
Despite the losses, it must be noted that Zuckerberg and his wife Priscilla donated an additional $100 million in 2020 to tackle the coronavirus pandemic. This donation went towards various causes such as providing funds for small business, food security and healthcare. The charitable giving highlights the fact that Zuckerberg cares deeply about his actions and is willing to help those in need.
Regulatory Impact
The losses incurred by Mark Zuckerberg have forced governments to reassess the regulatory infrastructure of tech companies. In 2019, the European Union (EU) unveiled its General Data Protection Regulation (GDPR) to tackle perceived privacy issues linked to tech companies such as Facebook. The new regulations compel tech companies to be more transparent with regards to their user data.
Similarly, the US Federal government launched its Privacy Bill in 2020. The bill focuses on California consumers’ data privacy. These regulatory developments are indicative that tech companies are no longer viewed as unregulated monopolies but instead will be subjected to legal consequences if they fail to comply with similar regulations.
Competitive Landscape
The losses incurred by Zuckerberg have also benefited rival tech companies. For instance, Instagram’s CEO Kevin Systrom enjoyed a spike in the platform’s stock prices post the scandal. Similarly, Snapchat, another popular social media platform, also witnessed an increase in its stock prices resulting in its valuation exceeding $100 billion in 2020.
These figures suggest that while Facebook is still the world’s most popular social media platform, rivals are beginning to close the gap and pose a serious challenge.
Public Opinion
The public opinion about Mark Zuckerberg’s losses has been largely divided. Some people do not think it is fair that Zuckerberg has had to suffer whereas others believe it was a necessary measure to bring him down a peg or two.
The losses have also encouraged discussion about how billionaires should conduct themselves in terms of ethical behaviour. Issues such as cybersecurity and data privacy have been at the forefront of this debate and it appears as if the public is willing to accept that Zuckerberg’s losses were necessary for the development of a better, fairer, and more responsible tech industry.
