Gamble, J. E. (2023). Meta Platforms, Inc.

In 2023: Will the Company's Name Change Resolve Ethical Issues at

Facebook and Instagram? In, Crafting and Executing Strategy: The Quest for Competitive Advantage, Concepts and
Cases (pp. C375-C386). McGraw Hill.

This work is protected by copyright and the making of this copy by Toronto Metropolitan University was authorized
by McGraw Hill.

This copy may be used solely by students registered in BUS800 - Strategic Management - F2024 at Toronto
Metropolitan University, and may not be distributed to any person outside the aforementioned class, whether by
copying or by transmission, and whether electronically or in paper form.
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Meta Platforms, Inc. in 2023: Will the Company's Name Change Resolve Ethical Issues at Facebook and Instagram?

CASE 26

Meta Platforms, Inc. in 2023:

Will the Company’s Name
Change Resolve Ethical Issues
at Facebook and Instagram? ®

John E. Gamble
Texas A&M University—Corpus Christi

M
eta Platforms, Inc. was created in October active person (MAP) users in 2023, the amount of time
2021 through the renaming of Facebook, Inc. users spent on Facebook and Instagram was decreasing,
and reflected CEO Mark Zuckerberg’s grand new user growth was declining, and annual advertising
vision of the future of the internet. The newly named revenue growth had reversed from a 37 percent increase
company would continue to operate Facebook’s between 2020 and 2021 to 1 percent decrease between
family of apps—Facebook, Instagram, Messenger, 2021 and 2022. Opportunities for growth in social
and WhatsApp and develop and market the compa- media usage in the United States and Canada were
ny’s Oculus VR goggles. Mark Zuckerberg called the almost nonexistent since saturation rates were near 100
renaming as “the beginning of the next chapter of the percent for Facebook and Instagram. Also, teens were
internet, and it’s the next chapter for our company reducing the number of sessions on Instagram as they
too.”1 His vision was an extensive online world that shifted to new platforms. The amount of time users of
would exist across several technology platforms. The all ages spent on TikTok doubled between 2020 and
metaverse was a concept based upon science-fiction 2021 and continued to increase in 2022 and 2023. Meta
novels such as Ready Player One and Snow Crash and expected the use of Facebook to experience an overall
would allow people to exist in a shared digital space decline of 4 percent by 2024, with usage among teens
using avatars that would live as those in the physical expected to decline by 45 percent.
world. Digital avatars of users would not only engage The company’s name change also quickly followed
in video games but could attend digital concerts, try the September–October 2021 publication of “The
on digital clothes in digital stores, and work in digi- Facebook Files” by The Wall Street Journal—an inves-
tal offices. Meta Platforms CEO Mark Zuckerberg tigative journalism series that chronicled information
explained “We’ve gone from desktop to web to phones, gathered from internal Facebook documents disclosed
from text to photos to video, but this isn’t the end of by whistleblowers within the company. The investiga-
the line. The next platform and medium will be even tive series profiled unethical business practices at the
more immersive and embodied internet where you’re company and focused on the company’s algorithm
in the experience, not just looking at it.”2 changes that fostered discord, the company’s rules
Analysts believed that the company’s shift to a focus that favored elites, the use of the company’s apps by
on the metaverse was largely in response to the declining drug cartels and human traffickers, and Instagram’s
growth of its flagship apps, Facebook and Instagram. effects on teenage girls. “The Facebook Files” was fol-
While the company had more than 3.74 billion monthly lowed in October 2021 by a U.S. Senate Hearing that
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C-376 PART 2 Cases in Crafting and Executing Strategy

further investigated Facebook’s business practices and In 2005, Facebook dropped “The” from its
heard testimony by former Facebook product manager “thefacebook.com” name, received $12.7 million in
and whistleblower, Frances Haugen. Ms. Haugen met venture capital, and expanded account privileges to
before investigative committees in the U.S. Congress U.S. high school students and university students
and lawmakers in the United Kingdom and European outside the United States. By 2006, anyone with a
Union. Ms. Haugen stated that her intention was not valid email address was allowed to have a Facebook
to bring harm to Facebook but to make it better and account. Zuckerberg sold a 1.5 percent interest in
that “Until we bring in a counterweight, things will be the venture to Microsoft in 2007 for $240 million,
operated for the shareholder’s interest and not for the which began a long-term friendship with Microsoft
public interest.”3 founder, Bill Gates. By 2008, Facebook had grown
However, in mid-2023, it was not clear that to be the largest social media platform and had
Mr. Zuckerberg’s vision of the metaverse was serving made Zuckerberg a 24-year-old billionaire. The com-
the interest of shareholders. The company had found pany’s 2012 initial public offering (IPO) pushed
that user interest in metaverse games and applications Zuckerberg’s net worth to an estimated $19 billion.
was less than anticipated. In fact, sales of its Quest 2 The company’s business model primarily generated
virtual reality headsets which were essential to the revenues from impression-based ads, with advertising
metaverse experience had declined during the first fees based upon number of impressions displayed or
quarter of 2023. Also, Meta Platforms was coming off number of clicks by users. Facebook’s advertising model
a 2022 fiscal year that marked its first annual decline was especially powerful as marketers could target ads to
in revenues. As a result of the declining revenue, net Facebook users based upon information gathered by
income and cash flow, Meta Platform’s March 2023 Facebook while the user scrolled posts from friends and
common shares were trading at about 60 percent of read news stories. The company added its Messenger
their value in mid-2020. The company had eliminated service in 2011 that allowed Facebook users to send
approximately 13 percent of its workforce in 2022 private messages to other users. Facebook acquired
and announced in mid-2023 that it would reduce rival Instagram in 2012 for $1 billion to gain access to
its workforce by an additional 13 percent in what a larger number of users and acquired the WhatsApp
Mr. Zuckerberg had described as a “Year of Efficiency.”4 communications platform in 2014 for $19 billion.
The company’s Reality Labs division developed and
marketed its Oculus virtual reality (VR) goggles and
COMPANY HISTORY AND Facebook Portal video calling devices. The Reality Labs
BUSINESS MODEL division was created after the 2014 acquisition of Oculus
VR for $2 billion, Beat Games in 2019, and Ready at
Facebook was founded in 2004 by Harvard University Dawn and Sanzaru Games in 2020.
students, Mark Zuckerberg, Eduardo Saverin, Chris In 2021, the company had more than 3.59 billion
Hughes, and Dustin Moskovitz. The original function- monthly active persons (MAPs) accessing Facebook,
ality of the social media platform allowed Harvard Instagram, WhatsApp, and Messenger worldwide
University students to post a profile and photos using a and annual revenues of $117.9 billion. Approximately
template developed by Zuckerberg and his three friends. 97.5 percent of Facebook’s 2021 revenues were
The site was extended beyond the Harvard campus and generated from advertising. The company’s Reality
quickly grew in popularity as college students across Labs division contributed revenues of approximately
the United States wished to keep in touch with out-of- $2.3 billion in 2021. Facebook changed its name to
town friends or share photos of their latest experiences. Meta Platforms, Inc. in late 2021 to reflect its aspira-
Thefacebook.com had more than 250,000 registered tions to capitalize on the virtual reality capabilities of its
users from 34 universities by June 2004. Mastercard Reality Labs division and extend Internet connectivity
became Facebook’s first source of revenue in 2004 into more aspects of daily life. Exhibit 1 presents Meta
when it began paying to place ads on the site. By year- Platform’s consolidated statements of income for 2019
end 2004, Zuckerberg had dropped out of Harvard and through 2022. The company’s consolidated balance
moved to Palo Alto, California, to concentrate on the sheets for 2021 and 2022 are presented in Exhibit 2.
Facebook business venture, became CEO of the startup Revenues by source and segment for 2020–2022 are
and began to pitch the investment potential of the shown in Exhibit 3. The company’s operating income
nascent business to Silicon Valley venture capitalists. by segment for 2020–2022 is provided in Exhibit 4.
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Meta Platforms, Inc. in 2023: Will the Company's Name Change Resolve Ethical Issues at Facebook and Instagram? 3

CASE 26 Meta Platforms, Inc. in 2023: Will the Company’s Name Change Resolve Ethical Issues C-377

EXHIBIT 1  eta Platforms, Inc.’s Consolidated Statements of Income,

M
2019–2022 ($ in millions, except per share amounts)
2022 2021 2020 2019
Revenue $116,609 $117,929 $85,965 $70,697
Costs and expenses:
Cost of revenue 25,249 22,649 16,692 12,770
Research and development 35,338 24,655 18,447 13,600
Marketing and sales 15,262 14,043 11,591 9,876
General and administrative 11,816 9,829 6,564 10,465
Total costs and expenses 87,665 71,176 53,294 46,711
Income from operations 28,944 46,753 32,671 23,986
Interest and other income, net (125) 531 509 826
Income before provision for income taxes 28,819 47,284 33,180 24,812
Provision for income taxes 5,619 7,914 4,034 6,327
Net income $ 23,200 $ 39,370 $29,146 $18,485
Earnings per share attributable to Class A and Class B common
stockholders:
Basic $8.63 $13.99 $10.22 $6.48
Diluted $8.59 $13.77 $10.09 $6.43
Weighted-average shares used to compute earnings per share
attributable to Class A and Class B common stockholders:
Basic 2,687 2,815 2,851 2,854
Diluted 2,702 2,859 2,888 2,876

Source: Meta Platforms, Inc.’s 2022 Annual Report.

EXHIBIT 2  eta Platforms, Inc.’s Consolidated Balance Sheets, 2021–2022

M
($ in millions)
2022 2021
Assets
Current assets:
Cash and cash equivalents $14,681 $16,601
Marketable securities 26,057 31,397
Accounts receivable, net 13,466 14,039
Prepaid expenses and other current assets 5,345 4,629
Total current assets 59,549 66,666
Non-marketable equity securities 6,201 6,775
Property and equipment, net 79,518 57,809
Operating lease right-of-use assets 12,673 12,155
Intangible assets, net 897 634
Goodwill 20,306 19,197
Other assets 6,583 2,751
Total assets $185,727 $165,987
(continued)
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C-378 PART 2 Cases in Crafting and Executing Strategy

EXHIBIT 2 (continued)
2022 2021
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable $4,990 $4,083
Partners payable 1,117 1,052
Operating lease liabilities, current 1,367 1,127
Accrued expenses and other current liabilities 19,552 14,873
Total current liabilities 27,026 21,135
Operating lease liabilities, non-current 15,301 12,746
Long-term debt 9,923 —
Other liabilities 7,764 7,227
Total liabilities 60,014 41,108
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.000006 par value; 5,000 million Class A shares authorized, — —
2,247 million and 2,328 million shares issued and outstanding, as of December 31, 2022
and 2021, respectively; 4,141 million Class B shares authorized, 367 million and 413
million shares issued and outstanding, as of December 31, 2022 and 2021, respectively
Additional paid-in capital 64,444 55,811
Accumulated other comprehensive loss (3,530) (693)
Retained earnings 64,799 69,761
Total stockholders’ equity 125,713 124,879
Total liabilities and stockholders’ equity $185,727 $165,987

Source: Meta Platforms, Inc. 2022 Annual Report.

EXHIBIT 3  eta Platforms, Inc.’s Revenue by Source and Segment,

M
2020–2022 ($ in millions)
2022 2021 2020 2022 vs. 2021 % change
Advertising $113,642 $114,934 $84,169 −1%
Other revenue 808 721 657 12%
Family of Apps 114,450 115,655 84,826 −1%
Reality Labs 2,159 2,274 1,139 −5%
Total revenue $116,609 $117,929 $85,965 −1%

Source: Meta Platforms, Inc. 2022 Annual Report.

EXHIBIT 4  eta Platforms, Inc.’s Income from Operations by Segment,

M
2020–2022 ($ in millions)
2022 2021 2020 2022 vs. 2021 % change
Family of Apps $42,661 $56,946 $39,294 −25%
Reality Labs (13,717) (10,193) (6,623) −35%
Total income from operations $28,944 $46,753 $32,671 −38%

Source: Meta Platforms, Inc. 2022 Annual Report.

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CASE 26 Meta Platforms, Inc. in 2023: Will the Company’s Name Change Resolve Ethical Issues C-379

FACEBOOK’S PRIVACY time a user remained engaged with the app. MAPs,
DAPs, and user engagement were essential to gath-
PROGRAM AND ALGORITHM ering data helpful to advertisers and, ultimately,
CHANGES TO INCREASE Meta’s annual advertising revenues. Beginning in
2017, the company’s key managers began to notice a
USER ACTIVITY decline in user engagement, with likes and reshares
Facebook and other social media companies required dropping at alarming rates. Facebook management
users to abide by terms of service agreements that “never really figured out why metrics declined”
were designed to protect other users from harm- but decided to revise its News Feed algorithm to
ful content and also allowed Meta Platforms to sell improve user engagement.7
data gathered from users. Data such as what kinds The new algorithm deemphasized the impor-
of groups a Facebook or Instagram user had joined, tance of likes and added heavier weights on reac-
what pages they had liked, what news stories a per- tions, replies to invitations, lengthy comments,
son read, and online purchasing history was very messages, and RSVPs. For example, the internal
valuable to advertisers wishing to target their prod- point system weighted a “like” as one point, a reac-
ucts to social media users most likely to make a pur- tion as five points, and a significant comment as 30
chase. The company’s ability to offer advertisers user points. The result of the algorithm change was that
data facilitating targeted ads allowed it to generate innocuous or largely positive posts would attract
average revenue per person (ARPP) of $11.57 across mostly basic “like” button clicks (earning one point),
its family of apps in 2021. ARPP generated by users driving the post lower in the News Feed. Posts or arti-
in the United States and Canada amounted to $60.57 cles introducing a controversial subject might elicit
and ARPP for users in Europe was $19.68 in 2021. an anger reaction button (earning five points) or a
A significant number of privacy concerns by lengthy, hostile comment (earning 30 points), plac-
users had emerged by 2010, which the company ing the post higher in News Feeds. As more people
addressed by establishing a privacy program to pro- saw the post and were drawn into the argument, the
tect user privacy, safety, security, and data protec- post or article could become viral. Facebook internal
tion. Meta’s privacy controls allowed app users to memos showed that the algorithm change had not
control who could see what a user shared, manage affected the amount of time that users spend on the
what was shared, and control who could view their app but did significantly boost the DAP (daily active
profile. The company also offered advice on staying persons) metric for Facebook which was essential to
safe while using social media, keeping user accounts generating advertising revenue.8
secure, and shopping safely. Meta Platforms also Online publishers began to complain to Facebook
abided by the requirements of the EU-U.S. Privacy in early 2018 that the algorithm change had led to a
Shield Framework and the Swiss-U.S. Privacy Shield decline in readership of news articles with a positive
Framework which required that “individual users focus, with BuzzFeed suffering a 13 percent decline in
have the right to opt out of (1) disclosures of their traffic compared with the prior six months, Topix los-
personal information to third parties; or (2) uses ing 53 percent of traffic, Breitbart losing 46 percent
of their personal information for a purpose that is of traffic, and ABC News losing 12 percent of traf-
materially different from the purpose(s) for which it fic according to online data firm, Comscore.9 The
was originally collected or subsequently authorized CEO of Buzzfeed sent an email to a top official at
by the individual.”5 The company’s Privacy Shield Facebook to complain that the new algorithm was
notice also stated that “Meta may transfer data within not rewarding content that “drives meaningful social
the Meta family of companies and to third parties” interactions” but was pressuring publishers to “make
should a user not opt out of personal data sharing.6 bad content.”10 Facebook’s CEO, Mark Zuckerberg,
Meta’s use of user data also helped the company said that the algorithm change was to strengthen
direct relevant content to a user through its News bonds between users and improve their well-being.11
Feed service. The delivery of interesting content to An internal report developed by Facebook employ-
Facebook users was essential to driving daily aver- ees in 2019 also showed that the algorithm encouraged
age persons (DAPs) logged in and the amount of hostile, negative political environments in countries
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C-380 PART 2 Cases in Crafting and Executing Strategy

where politicians and political parties relied on social

media to communicate with voters and constituents.
FACEBOOK’S USE OF
Facebook’s researchers surmised that in Poland “One ARTIFICIAL INTELLIGENCE
party’s social media management team estimates that
they have shifted the proportion of their posts from a
TO IDENTIFY HARMFUL
50/50 positive/negative, to 80 percent negative, explic- CONTENT
itly as a function of the change to the algorithm.”12 The A major element of Facebook’s user protection
report listed similar findings for Spain, Taiwan, and approach was the utilization of artificial intelligence
India and concluded “Engagement on positive and pol- (AI) to replace employees formerly assigned to the
icy posts has severely reduced, leaving parties increas- identification and removal of harmful content.
ingly reliant on inflammatory posts and direct attacks Facebook employees had discovered that it was far
on their competitors.”13 more difficult to program AI to identify misinfor-
mation, violence, and gore than envisioned. For
FACEBOOK, INC.’S example, Facebook’s AI could not consistently iden-
APPROACH TO COMBATTING tify first-person shooting videos or racist rants or
distinguish between a car crash and cockfighting.
HATE SPEECH AND Facebook internal documents showed that its AI had
DANGEROUS CONTENT missed close-up videos of a person shooting some-
one and videos of car crashes with “dismemberment
Facebook had long acknowledged that its platform and visible innards.”16 Facebook’s internal review
attracted users who engaged in posts that violated also found that AI had labeled a video of a carwash
its terms of service agreement and rules. CEO Mark as a first-person shooter video, mistook a video of
Zuckerberg had stated in public comments that the a shooting for a carwash, and could not distin-
company supported free speech and attempted to be guish between a fighting rooster and a non-fighting
neutral in refereeing public discourse.14 The company rooster.17 Facebook researchers estimated that AI had
used multiple tools to identify hate speech, hoaxes, successfully removed 3 percent to 5 percent of hate
conspiracy theories, and misleading news articles. speech posts, and 0.6 percent of all content violating
The company’s “Sparing Sharing” tool targeted Facebook’s policies against violence and incitement.
hyper-posters or accounts that tended to dispropor- CEO Mark Zuckerberg had expressed confidence
tionately share false or incendiary information. in AI to detect “the vast majority of problematic con-
tent.”18 Despite the limitations of AI in detecting harm-
ful content, a Facebook internal document showed
TRUSTED NEWS AND that the shift from human content reviews to AI had
PUBLISHERS saved the company $2 million per week or $52 million
in personnel costs for the first half of 2019.
The company also developed an internal trust rating
that prioritized news articles in its News Tab based
upon their trust rating. The rating system focused FACEBOOK, INC.’S RULES
on quality news reporting and barred publishers that
repeatedly shared misinformation or violated its list
FOR ELITES
of community standards. The News Tab prioritized Mark Zuckerberg had stated publicly that Facebook
articles from publishers that paid Facebook to pro- treated its billions of users equally in terms of stan-
mote their content, but also listed articles from non- dards of behavior and freedom of expression, regard-
paying publishers based upon users’ interests and the less of their status or fame.19 The company’s terms of
trust rating. An internal study by Facebook research- service allowed it to assess whether posts met rules
ers conducted in August 2019 found that the rating against bullying, hate speech, or incitement to violence
system tended to suppress articles from nonpaying and then take appropriate action. Such actions could
publishers whose articles were accurate and not mis- range from deleting the content to disabling the user’s
information but were viewed as not consistent with account. When such instances occurred, Facebook was
the content of Facebook’s paid news media clients.15 not obligated to notify the user of why the action was
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CASE 26 Meta Platforms, Inc. in 2023: Will the Company’s Name Change Resolve Ethical Issues C-381

taken. In some cases, the company’s automated sys- the Oversight Board recommendations, but refused
tems might incorrectly flag a post as inappropriate. to implement provisions to enhance transparency
Nevertheless, the user had no recourse for a deleted and prevent political favoritism.24
post or suspended account. Mark Zuckerberg esti-
mated in 2018 that Facebook gets 10 percent of its
content removal decisions wrong.20 USER PROTECTION FAILURES
The company was very concerned about inap- AT FACEBOOK AND
propriately removing posts made by high-profile
users such as elected officials, entertainment celeb- INSTAGRAM
rities, or journalists. The company developed a Facebook’s unequal treatment of VIPs relative to
program called “Cross Check” or “XCheck” that typical users of the company’s family of apps also
shielded VIP users from the company’s normal seemed to apply to user protection for special groups
enforcement processes. Offending content posted by of users such as users in developing markets and
VIPs and identified by Facebook employees could children. The company had also been criticized for
be removed with approval of senior executives or, the use of its apps by drug cartels and in facilitating
in some cases, the approval of Mark Zuckerberg or human trafficking across the world.
Facebook Chief Operating Officer Sheryl Sandberg.
The privilege was not extended to candidates for
public office, only current office holders—a prac- FAILURES IN DEVELOPING
tice that some suggested provided incumbents with
an advantage in messaging to prospective voters. MARKETS
Facebook employees were baffled by XCheck, as While Facebook was aggressive in its efforts to iden-
elected officials might have a greater incentive to tify and remove hate speech and misinformation in
share misinformation. In addition, the accounts the United States, its efforts in developing markets
of politicians, celebrities, and other VIPs had the appeared to be less of a priority. India was Facebook’s
broadest reach, exposing far more users to misinfor- largest market with 300 million Facebook users and
mation than was possible through a post of a typical 400 million WhatsApp users. Facebook users in the
Facebook user. An internal memo by a Facebook United States and Canada had fallen from about
researcher stated “We are knowingly exposing users 30 percent of total users in 2010 to less than 10 percent
to misinformation that we have the processes and of total users in 2021. The company’s user base in
resources to mitigate.”21 India and Asia had increased from less than 20 per-
An internal review at Facebook found that XCheck cent of the company’s total users in 2010 to more than
was “not publicly defensible” and that “Unlike the 40 percent of total users in 2021. Despite the growth
rest of our community, these people can violate our in users outside of the United States and Canada, the
standards without any consequences.”22 By 2020, company devoted far fewer resources to combatting
Facebook included nearly anyone with a large social polarizing nationalist content, misinformation, vio-
media following in the XCheck program, which had lence, and gore in India and other developing country
grown to approximately 5.8 million account hold- markets than was allocated to its United States geo-
ers. In 2021, Facebook had informed its Oversight graphic market. In 2020, Facebook employees and
Board, which was created to ensure accountability in contractors spent more than 3.2 million hours search-
enforcement of its rules, that the number of XCheck ing and taking down posts the company deemed to be
accounts was small. Facebook spokesperson com- misinformation. Although more than 90 percent of
mented to The Wall Street Journal that XCheck “was Facebook’s users were outside the United States, only
designed for an important reason: to create an addi- 13 percent of those hours were spent working on con-
tional step so we can accurately enforce policies on tent outside the United States. The limited resources
content that could require more understanding.”23 allocated to Facebook’s largest markets were inconsis-
Dissatisfied with lack of action on the XCheck pro- tent with laws in countries such as India that required
gram, the Oversight Board issued 32 recommenda- social media companies to remove inflammatory
tions to reform the program. In March 2023, Meta content that had the potential to undermine national
Platforms management agreed to implement some of security, public order, and “decency and morality.”25
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C-382 PART 2 Cases in Crafting and Executing Strategy

Independent researchers had found that that of social media a day.”30 In 2022, CNN Business pro-
inflammatory content on Facebook spiked 300 per- filed the stories of dozens of families who believed
cent following religious protests in the country dur- their children’s suicides were a result of social media
ing late-2019 when more than 50 people were killed platform algorithms that encouraged “never-ending”
during riots. Facebook researchers had concluded scrolling and exploited minor users’ underdeveloped
that the company’s algorithms were emphasizing decision-making and impulse control capabilities.31
posts promoting misinformation and violence. Calls Facebook’s number of teen users had dropped
for violence had also spread widely on WhatsApp.26 consistently since the launch of Instagram and
India’s government had threatened to jail Facebook declined at an accelerated rate as Snapchat and
and WhatsApp employees if their take-down requests TikTok emerged. More than 22 million U.S. teens
of such inflammatory content were not honored. In logged onto Instagram each day, compared to just 5
2020, India had temporarily banned TikTok and had million U.S. teens logging onto Facebook each day.
instructed Twitter to block hundreds of accounts. Also, more than 40 percent of Instagram users were
A Facebook executive stated that the company had under 22 years old. A 2021 Facebook internal docu-
technical systems in place to catch offending content ment reported on by The Wall Street Journal stated,
in five of the 22 languages spoken in India and that “Global teen penetration on FB is low, and acquisi-
the company had human language expertise in many tion appears to be slowing down.”32 The company’s
more languages and continued to work to improve research indicated that the daily number of teens
its systems.27 A former Facebook vice president com- using Facebook had declined by 19 percent between
mented to The Wall Street Journal that Facebook 2019 and 2021 and that it would likely fall by an addi-
treats harm in developing countries as “simply the tional 45 percent by 2023.33
cost of doing business.” He continued that Facebook A 2018 Facebook internal document labeled as
focused its user protection efforts on wealthier confidential had commented that “With the ubiquity
markets with powerful governments and media of tablets and phones, kids are getting on the internet
institutions.28 as young as six years old. We can’t ignore this and
we have a responsibility to figure it out . . . Imagine
a Facebook experience designed for youth.”34
DAMAGES TO CHILDREN Facebook’s first product developed for children was
AND TEENS Messenger Kids that was launched in 2017 and was
designed for children aged 6 to 12. The company’s
The effect of social media on teen mental health had research showed that the product was not catching on
long been of concern among the health care commu- with children and that Messenger Kids usage tapered
nity, with bullying and other unhealthy dialog known off after age 10 and that tweens viewed Facebook as
to affect the self-esteem and emotional development a product for old people.35 A Facebook team was
of children and teens. As early as 2012, the United assigned to study preteens and given a three-year
States National Institutes of Health published stud- goal to increase usage among younger age groups.
ies considering the link between social media and A Facebook internal document expressed that “Our
teen suicides, which were reaching historic highs.29 ultimate goal is messaging primacy with U.S. tweens,
A 10-year study of social media use and suicidality which may also lead to winning with teens.”36
found that teenage girls who spent at least two to three Facebooks efforts to build its user base across
hours per day on social media had a higher clinical younger age groups resulted in a recommendation to
risk for suicide as emerging adults. The lead author of complement its family of apps with a six–age-bracket
the study summarized, “Research shows that girls and bundle of products targeted to adults, late teens aged
women in general are very relationally attuned and over 16, teens aged 13 to 15, tweens aged 10 to 12,
sensitive to interpersonal stressors, and social media children aged 5 to 9, and children aged 0 to 4. The
is all about relationships. At 13, girls are just starting company’s policies in 2021 complied with U.S. pri-
to be ready to handle the darker underbelly of social vacy laws forbidding data collection on children under
media such as FOMO (fear of missing out), constant age 13 and children were allowed to register only as
comparisons, and cyberbullying. A 13-year-old is a user for Messenger Kids. Adam Mosseri, head of
probably not developmentally ready for three hours Instagram, commented to The Wall Street Journal,
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CASE 26 Meta Platforms, Inc. in 2023: Will the Company’s Name Change Resolve Ethical Issues C-383

“If kids are under 13, they’re not allowed on Instagram developed for children under age 13, Mr. Zuckerberg
and should not be using our service . . . It’s not new replied, “I believe the answer is yes.”44 Senators
and it’s not a secret that social media companies try Richard Blumenthal and Marsha Blackburn fol-
to understand how teens and preteens use technology. lowed up with a request that Mr. Zuckerberg release
Like all technology companies, of course, we want Facebook’s internal research on the effect of the
to appeal to the next generation, but that’s entirely company’s apps on children. Facebook responded
different from the false assertion that we knowingly to the Congressional request with a six-page letter
attempt to recruit people who aren’t old enough to that didn’t include information from any internal
use our apps.”37 The Wall Street Journal noted how- studies conducted by the company and concluded
ever that Mr. Mosseri exclaimed “I don’t want to hear “We are not aware of a consensus among studies or
it” when an 18-year-old Instagram influencer blurted experts about how much screen time is too much.”45
out during an online Facebook event she had been As a result of the Congressional Hearings, Meta
active on Instagram for almost a decade.38 announced that it would delay the planned launch of
Between 2019 and 2021, Facebook conducted Instagram Kids.
studies to determine how Instagram and Facebook
affected its younger users. The conclusion of the
interviews and surveys conducted by the company
HUMAN TRAFFICKING
was that “We make body image issues worse for one The International Labour Organization estimated
in three teen girls” and that “teens blame Instagram that there were 24.9 million victims of human
for increases in the rate of anxiety and depression.”39 trafficking and exploitation worldwide in 2021, with
Similarly, an independent study of teens in the 99 percent of victims being women and young girls.
United States and United Kingdom found that more About 16 million of these individuals were trapped
than 40 percent of Instagram users reported feel- into private-sector domestic work or agriculture,
ing unattractive and that 25 percent of the group of 4.8 million were victims of sexual exploitation, and
Instagram users said they were “not good enough.”40 another 4 million were in forced labor imposed
A Wall Street Journal interview with a teen user of by a state.46 Human trafficking was prevalent in
Instagram who joined the platform at age 13 and almost every country, including the United States.
followed fitness influencers reflected on the expe- In February 2022, U.S. Attorney General Merrick
rience by stating “When I went on Instagram, all I Garland announced a national strategy to combat
saw were images of chiseled bodies, perfect abs and human trafficking, which would include undercover
women doing 100 burpees in 10 minutes.” Another operations carried out by the U.S. Department
interviewed teen commented “Every time I feel good of Homeland Security and U.S. Immigration and
about myself, I go over to Instagram, and then it all Customs Enforcement. The two agencies made
goes away.”41 Other teens complained that a small announcements in May 2022 about successful opera-
number of followers was a “kick in the gut” and that tions that led to arrests of 43 individuals accused of
using Instagram’s Beautification filters “left a bitter child sex trafficking in Arizona and the recovery of
taste in my mouth” since the images could be quite 70 missing children in West Texas.47
different from a user’s unenhanced appearance. Facebook internal documents showed that when
Instagram head, Adam Mosseri, told Wall Street Facebook employees notified superiors of users using
Journal reporters in May 2021 that Instagram’s inter- the company’s apps to facilitate human traffick-
nal research suggests the app’s effects on teen well- ing, the alert may or may not be acted upon. These
being is likely “quite small.”42 documents also revealed that Facebook employees
Mark Zuckerberg was called to testify before were increasingly frustrated as decision-makers in
U.S. Congress during a March 2021 Congressional the company that allowed users to post videos of
Hearing focused on Facebook’s impact on children. murders, incitements to violence, threats against
During his testimony, Mr. Zuckerberg offered that pro-democracy candidates, and advertisements for
“The research that we’ve seen is that using social apps human trafficking.48
to connect with other people can have positive mental The BBC and Apple began pressuring Facebook
health benefits.”43 When asked if the company had in 2019 to detect and eliminate ads and posts for
studied the likely effect of Instagram Kids, a product human trafficking after an investigative team found
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C-384 PART 2 Cases in Crafting and Executing Strategy

more than 300,000 instances of human trafficking CJNG was using Facebook’s family of apps to recruit
violations. Facebook responded by launching a software hitmen, track payments to hitmen, post photos of
tool that identified a dozen human trafficking net- bloody crime scenes, make shipments of lethal drugs,
works by the end of 2020, but deactivated the program. and conduct other illegal activity within Mexico and
The Wall Street Journal had notified Facebook that its the United States. The Facebook employee group
employees had called for the software tool to be reacti- pointed specifically the CJNG’s Instagram account,
vated, but the company responded that “similar screen- which showed a video of a person with a gold pis-
ing systems are in operation.”49 tol shooting a young man in the head, a photo of a
Nevertheless, a 28-year-old tutor in Nairobi beaten man tied to a chair, and another photo of
detailed to The Wall Street Journal her experience that a trash bag filled with severed hands.52 Facebook
began by responding to a Facebook job recruiting ad employees complained that CJNG met all criteria
in January 2021. The young woman was promised for a “Dangerous Individuals and Organizations” des-
free airfare, a visa, and $300 per month to work with ignation by Facebook and should be removed from
a cleaning service in Saudi Arabia. At the Nairobi air- platforms. After five months, some CJNG content
port, a recruiter provided the woman with a contract was removed although new CJNG pages and posts
to sign, which was 10 percent less pay than prom- appeared. Facebook officials told reporters at The
ised in the ad, told only the employer could terminate Wall Street Journal that “employees know that they
the contract, and that her visa would be canceled if can improve their anti-cartel efforts and that the com-
she quit. The young woman told the recruiter that she pany is investing in artificial intelligence to bolster
was not interested in the new terms and was backing enforcement against such groups.53
out. The recruiter stated that her contract had already
been sold to an employer and that she would need
to immediately provide the recruiter with $2,000 to
FINES AND LEGAL
terminate the contract. With no money, the woman SETTLEMENTS IN 2022
accepted the flight.50
Once in Saudi Arabia, the woman was forced to
AND 2023
sleep in a storage room with no air conditioning and In late-2022 and early-2023, Meta Platforms was hit
could not leave a locked courtyard on the property. with a series of fines and legal settlements related to
The young woman also was provided no medical care U.S. and European privacy law violations. Ireland’s
when she became sick and was never paid anything Data Protection Commissioner (DPC) levied a
for her work that began at 5:00 a.m. and ended at record $402 million fine against Meta Platforms in
dusk. Still with no money to terminate the contract, September 2022 after concluding a two-year investiga-
the woman posted about her plight on Facebook at tion into Instagram’s handling of children’s data. The
which point the employment agency retrieved her DPC found that Instagram had allowed teens aged 13
from the property and left her with no passport at a to 17 to operate business accounts and had disclosed
detention center. Eventually, her Facebook post was personal phone numbers and email addresses of teen
seen by an official at the United Nations International users, which was in violation of Europe’s privacy rules.
Organization for Migration which helped negotiate Meta Platforms officials had stated that the company
her release and return to Kenya in July 2021.51 planned to appeal the fine.54 The fine by Ireland’s
DPC followed the August 2022 announcement of
USE OF FACEBOOK, INC.’S the settlement of a class-action lawsuit filed in 2018
that involved Cambridge Analytica’s harvesting of
FAMILY OF APPS BY DRUG personal data of 87 million Facebook users. The data
CARTELS was collected from Facebook users who completed
an online poll along with the data of their Facebook
Facebook employees had discovered posts on friends.55 The attorneys representing Facebook users
Facebook and Instagram, as well as private mes- in the suit alleged that the privacy breach showed
sages using WhatsApp, by the notorious Cartél that Facebook was a ”data broker and surveillance
Jalisco Nueva Generación (CJNG) that captured firm,” as well as a social network.56 Just days earlier in
vast criminal activity. The employee group found that August 2022, Meta Platforms reached a $37.5 million
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Meta Platforms, Inc. in 2023: Will the Company's Name Change Resolve Ethical Issues at Facebook and Instagram? 11

CASE 26 Meta Platforms, Inc. in 2023: Will the Company’s Name Change Resolve Ethical Issues C-385

settlement of a lawsuit accusing Facebook of violat- groups, and lawmakers in the United States, the United
ing users’ privacy by gathering and selling data of Kingdom, and the European Union.
users who had turned off Location Services on their
smartphones. The lawsuit disclosed that despite
users’ intentions to block location tracking, Facebook THE FUTURE OF META
tracked and sold user locations via Wi-Fi IP addresses
to enable location-targeted advertising.57
PLATFORMS
Ireland’s Data Protection Commission again As the name change of Facebook, Inc. to Meta
found Meta Platforms in violation of the country’s Platforms, Inc. was announced in late-October
user data protection regulations in November 2022. 2021, Mark Zuckerberg concluded, “Today we’re
The company was fined $300 million for allow- seen as a social media company. But in our DNA,
ing Messenger and Instagram data belonging to we’re a company that builds technology to connect
533 million people in 106 countries to be extracted people, and the metaverse is the next frontier.”61 Jason
and used for potential spamming and phishing Zweig, an opinion writer for The Wall Street Journal
attacks.58 The DPC of Ireland also fined Meta cautioned that the name change may not resolve the
Platforms $414 million in January 2023 for the company’s declining numbers of users, slowing adver-
Facebook and Instagram terms of use language that tising revenue growth, or its extensive ethical failures.
required users to allow their data to be used for per- Mr. Zweig recalled that history had shown corporate
sonalized ads. European Union regulations require name changes could add to a company’s problems
social media firms to provide data collection and sale rather than make them disappear and that “the risk
“opt out” options.59 isn’t that people won’t like the name. It’s that they’ll
Late in 2022, Meta Platforms announced that it like it too well—as a pithy incarnation of everything
would disband its Responsible Innovation Team, which they dislike about the company.”62 Mr. Zweig also
had been tasked with assessing potential concerns about had doubts about the business prospects for the meta-
new products and changes to Facebook and Instagram. verse by commenting “Some consumers will love it.
A Meta spokesperson had stated that most of the 20 To others, it might sound like a dystopia of ‘living’
individuals making up the former task force would be on a video screen while eating cold pizza alone in
doing similar watchdog work elsewhere in the com- a windowless basement, almost never seeing another
pany but were not guaranteed continued employment human face-to-face.”63 Mr. Zuckerberg’s commitment
with Meta.60 Time would tell if Meta Platforms would to the transformation of Facebook as the platform
be able to resolve the ethical concerns expressed by for the metaverse was reflected in the company’s
The Wall Street Journal, employee whistleblowers, user $10 billion investment dedicated to the strategic goal.

ENDNOTES
1
As quoted in Deepa Seetharaman and https://www.facebook.com/about/ Center of Decision Making,” The Wall Street
Meghan Bobrowsky, “Mark Zuckerberg’s Meta privacyshield, accessed May 30, 2022. Journal, October 24, 2021.
6 16
Pivot Is Personal as Well as Strategic,” The Wall Ibid. As quoted in Deepa Seetharaman, Jeff
7
Street Journal, October 29, 2021. As quoted in Keach Hagey and Jeff Horwitz, Horwitz, and Justin Scheck, “Facebook Says AI
2
As quoted in Christopher Mims, “Facebook “Facebook Tried to Make Its Platform a Will Clean Up the Platform. Its Own Engineers
Joins a Crowded Field in the Race to Build Healthier Place. It Got Angrier Instead,” The Have Doubts,” The Wall Street Journal,
the ‘Metaverse.’ We All Have a Stake in the Wall Street Journal, September 15, 2021. October 17, 2021.
8 17
Outcome,” The Wall Street Journal, October Ibid. Ibid.
9 18
29, 2021. Ibid. Ibid.
3 10 19
As quoted in Sam Schechner and Stu Woo, Ibid. Jeff Horwitz, “Facebook Says Its Rules Apply
11
“Facebook Whistleblower Frances Haugen Ibid. to All. Company Documents Reveal a Secret
12
Calls for New Tech Laws in Europe,” The Wall Ibid. Elite That’s Exempt,” The Wall Street Journal,
13
Street Journal, October 25, 2022. Ibid. September 13, 2021.
4 14 20
Jeff Horowitz, Salvador Rodriguez, Sam Jeff Horwitz and Justin Scheck, “Facebook Ibid.
21
Schechner, and Newley Purnell, “Meta Plans New Increasingly Suppresses Political Movements Ibid.
22
Layoffs That Could Match Last Year’s in Scope,” It Deems Dangerous,” The Wall Street Journal, Ibid.
23
The Wall Street Journal, March 10, 2023. October 22, 2021. Ibid.
5 15 24
As quoted in “Meta Platforms, Inc. and Keach Hagey and Jeff Horwitz, “Facebook’s Jeff Horwitz, “Facebook Parent Delivers
the EU-U.S. and Swiss-U.S. Privacy Shield,” Internal Chat Boards Show Politics Often at Mixed Response to Suggestions on
12 BUS800 F24 Cases Final PDF to printer

C-386 PART 2 Cases in Crafting and Executing Strategy

Controversial VIP Program,” The Wall Instagram Kids, Documents Show,” The Wall over-chidrens-data-2022-09-05/ (accessed
Street Journal, March 3, 2023, https:// Street Journal, September 28, 2021. September 9, 2022).
33 55
www.wsj.com/articles/facebook-parent- Ibid. Kronenberg, Jerry, ”Meta Platforms agrees
34
delivers-mixed-response-to-suggestions- Ibid. to settle lawsuit over 2018 Facebook/
35
on-controversial-vip-program-ea6fe0ad, Ibid. Cambridge Analytica scandal,” Seeking
36
(accessed April 4, 2023). Ibid. Alpha, August 27, 2022, seekingalpha.com/
25 37
As quoted in Rajesh Roy and Newley Ibid. news/3877229-meta-platforms-to-settle-
38
Purnell, “Facebook Faces Official Questions in Ibid. lawsuit-over-facebook-cambridge-analytica-
39
India Over Policing of Hate Speech,” The Wall As quoted in Georgia Wells, Jeff Horwitz scandal, (accessed September 9, 2022).
56
Street Journal, October 28, 2021. and Deep Seetharaman, “Facebook Knows Levine, Jon, ”Facebook parent company
26
Newly Purnell and Jeff Horwitz, “Facebook Instagram Is Toxic for Teen Girls, Company Meta settles Cambridge Analytica lawsuit,”
Services Are Used to Spread Religious Hatred Documents Show,” The Wall Street Journal, New York Post, August 27, 2022, nypost.
in India, Internal Documents Show,” The Wall September 14, 2021. com/2022/08/27/facebook-parent-
40
Street Journal, October 23, 2021. Ibid. company-settles-cambridge-analytica-
27 41
Ibid. Ibid. lawsuit/ (accessed September 9, 2022).
28 42 57
Justin Scheck, Newley Purnell, and Jeff Ibid. . ”Meta reaches $37.5 million settlement
43
Horwitz, “Facebook Employees Flag Drug Ibid. of Facebook location tracking lawsuit,” CNN
44
Cartels and Human Traffickers. The Company’s Ibid. Business, August 23, 2022, www.cnn.
45
Response Is Weak, Documents Show,” The Ibid. com/2022/08/23/tech/meta-settlement-
46
Wall Street Journal, September 16, 2022. “Forced Labour, Modern Slavery, and Human facebook-location-tracking/index.html,
29
David D. Luxton, Jennifer D. June, and Trafficking,” International Labour Organization, (accessed September 9, 2022).
58
Jonathan M. Fairall, “Social Media and Suicide: https://www.ilo.org/global/topics/forced- “Meta fined €265m by Irish Data Watchdog over
A Public Health Perspective,” American labour/lang--en/index.htm accessed June Breach,” BBC News, November 28, 2022, https://
Journal of Public Health, 102(Suppl 2), 1, 2022. www.bbc.com/news/technology-63784393,
47
May 2012, 195–200, accessed https:// “ICE arrests 43 in anti-child sex trafficking (accessed April 4, 2023).
59
www.ncbi.nlm.nih.gov/pmc/articles/ operation,” Just the News, May 31, 2022, “Meta’s Ad Practices Ruled Illegal Under E.U.
PMC3477910/, accessed May 31, 2022. https://justthenews.com/nation/crime/ice- Law, The New York Times, January 4, 2023,
30
As quoted in, Christie Allen, “10-Year BYU arrests-43-child-sex-trafficking-prostitution- https://www.nytimes.com/2023/01/04/
Study Shows Elevated Suicide Risk from drugs-and-weapons accessed on June 1, technology/meta-facebook-eu-gdpr.html,
Excess Social Media Time for Young Teen 2022. (accessed April 4, 2023).
48 60
Girls,” BYU News, https://news.byu.edu/ Justin Scheck, Newley Purnell and Jeff Horwitz, Lumb, David, ”Meta disbands team study-
intellect/10-year-byu-study-shows- “Facebook Employees Flag Drug Cartels and ing potential negative impacts of Facebook,
elevated-suicide-risk-from-excess-social- Human Traffickers. The Company’s Response Instagram,” CNET, September 8, 2022, www.
media-time-for-young-teen-girls, on May is Weak, Documents Show,” The Wall Street cnet.com/news/social-media/meta-disbands-
31, 2022. Journal, September 16, 2022. team-studying-negative-impacts-of-facebook-
31 49
Samantha Murphy Kelly, “Their Teenage Ibid. instagram/, (accessed September 9, 2022.)
50 61
Children Died by Suicide. Now These Families Ibid. As quoted in Deepa Seetharaman and
51
Want to Hold Social Media Companies Ibid. Meghan Bobrowsky, “Mark Zuckerberg’s Meta
52
Accountable,” CNN Business, April 19, 2022, Ibid. Pivot is Personal as Well as Strategic,” The Wall
53
https://www.cnn.com/2022/04/19/tech/ Ibid. Street Journal, October 29, 2021.
54 62
social-media-lawsuits-teen-suicide/index. ”Ireland fines Instagram a record $400 mln As quoted in Jason Zweig “Donald Trump’s
html accessed on May 31, 2022. over children’s data,” Reuters, September Ageless Advice for Mark Zuckerberg,” The Wall
32
Georgia Wells and Jeff Horwitz, “Facebook’s 6, 2022, www.reuters.com/technology/ Street Journal, November 5, 2021.
63
Effort to Attract Preteens Goes Beyond irish-regulator-fines-instagram-400-million- Ibid.