The Coming Financial Backlash For Silicon Valley And Much, Much More

Silicon Valley has a problem, a very big problem. And it’s not rooted in just the geographic location. Everything (and I do mean everything) that was once assumed “a given” or, “totally worth it” or, the more memorable “it’s different this time” rationales as it pertained to startups, social media, valuations, user metrics, IPOs, unicorns, etc., etc. Is about to be piled onto the ever burgeoning trash-bin of history. Right atop 2016’s polling data. For if this election proved one thing – it was this:

This is what happens when one assumes they’re breathing rarefied air – only to find they’ve been doing nothing more than inhaling their own exhaust fumes.

Now if you think I’m going to speak about the election results? You’d be wrong. That’s for others to discuss. No, what I have been watching is far more fascinating.

I can only imagine how many businesses must be viewing much of the latest uproar with absolute horror when trying to decide whether they will, or will not spend ad dollars on any social platform going forward.

I would wager to guess there are many a marketing team, or ad-buy executive sitting back shell-shocked with ranging thoughts on the likes of: “Do I want to subject ourselves, our products, or customers to boycotting, protests, trolling, or worse, which has absolutely nothing to do with us?” I’d list more – but there’s not enough digital ink to type them all.

So using the above “revelation” let’s put some context around it on what has transpired over the last week, and see how this all might shape up in the not so distant future. And how appropriate the word “revelation” fits when using one of the metaphorical four horsemen of the “markets” to do just that: e.g., Facebook™ (FB.)

Suddenly FB finds itself on very unfamiliar ground. It would seem the “torches and pitchforks” this time are wanting to rally and surround 1 Hacker Way, rather than some other entity. It would appear “Zuck and crew” have a revolt on their hands. And in their panic (“their” meaning FB) are providing some very unsettling reasoning, commentary, and future plans on how to deal with it.

Let’s try to square-a-few-circles, shall we? And just to remind you: this is about business, not the political.

Remember when FB was accused of censoring conservative news or views? First: FB made statements that its news feed (or whatever they called it) was purely algorithm based. i.e., No human real-time meddling. Only to be found out: Oh yeah, sorry, we forgot about those humans who actually curate in real-time censoring via their personal political bias which seems to be of the exact opposite viewpoint.

So, gee-whiz, by-golly, they’re going to stop doing that. And, from this day forth, you can be assured (because they had a meeting and it was said Mark really looked like “he cared”) it’s algorithms are us! The problem?

Well, if they did just that (taking them at their word.) How did so many “fake news” stories, or “conservative viewpoints” get shared, posted, and read on FB that may have caused such an upset? After all, that’s what all the outcries are about, correct?

Oh, oh! That would indicate FB has far more users of “that” political spectrum than to the liking of the other. And what is FB going to do about it?

Basically, in a nutshell – add humans and any other filter it deems appropriate and censor them (“them” being only those of the sanctioned viewpoint) via their “approved” metrics.

Can you see a very, very, (did I say very?) big problem here? Hint: Goodbye user metrics and revenue projections.

To the horror of one side of the political spectrum. A call (more like setting torches ablaze) has gone out to FB as to change its policy. Which, for the record; is absolutely their right to do as a private company. That policy change?

Basically, if you read between the lines it’s a reversal of their previous “Oh, by-golly, gee-whiz” promise to be fair and impartial, to reconstituting something which may even be more partial, and biased than the previous.

So now if you’re one of this newly targeted content creators or sharer, or consumer pariah. It’s now been made crystal clear by both the current users – as well as the management: what you post; share; or possibly even pay for when it comes to “reach.” Will; can; or may be censored without your knowledge or consent.

So with the above inferred: Are you going to remain there? Or, better yet: Pay? As in “eyeballs for ads.” And, with all of the above, are you going to blindly trust what you’re being told, or sold in any forthcoming ad-buy based upon just the latest ooopsy?

(On an aside: When it comes to “fake?” It’s getting harder, and harder to control my laughing at all the irony.)

What if just 10% of the users, and/or 10% of the ad-buyers (and that could be a best case scenario) decides – “Thanks, but no thanks!” And jettisons the platform altogether? Especially after witnessing both the outpouring hostility, along with managements stated reaction to this angry cohort. All with a response that, for all appearances, is totally one-sided. i.e., If you’re not of the approved political view – all is fair game to vanquish you, your business, your ad-buy, _______ (fill in the blank.)

Do you think that will effect metrics in a negative way? Metrics that keep a stock valuation at “priced for perfection” levels? Do you think others haven’t noticed or thought through the same?

Remember: Did you see this kind of visceral reaction from “Zuck and crew” when it was about the “other political view-point?” Far from it, and trust me – people are not only noticing – they’ve noticed.

Want to see just how dedicated some of social media’s management is as to the ethics of “Making minds right” as opposed to making business decisions based on business ethics? To wit:

Jack Dorsey Exposed: How Twitter’s CEO Restricted Advertising For Trump’s Campaign

Ah yes, just what every fledgling social media (or canary-in-a-coalmine) songbird needs to do: Restrict access and ad-dollars from its platform during one of media’s (in general) most profitable times: i.e., During an election period.

This move ranks up with one of the more stupid, ill-advised, and ill-informed business decisions I’ve seen by a CEO. Especially one that is supposedly in “media.” I mean, seriously. forget your political stance: Can you see the NYTimes™ turning down millions of ad $dollars during an election cycle from any candidate? Repeat – any?

And Twitter™ in the sh___er that it is, unable to find a buyer, a business model that for all intents and purposes is on the bottom of the cage sprawled out, comatose, decides it’s above taking ad revenue from any side of the political spectrum? During an election? I ask only this: How’s all that propaganda on having a part-time CEO working out for any of you “investors?”

If you think metrics for Twitter go up from here? I have some wonderful oceanfront property in Kentucky that can be yours. Just “Trust me.”

Already you’re seeing some high-profile users and others banishing their accounts. You think they’ll be the only ones?

And this (again, all in my opinion) is only the beginning of what I believe will turn into an “apocalypse” for social media as a whole. For if you thought with this meteoric rise in the “markets” off the latest “lock-limit-down” bounce portends great things for “the Valley?” I would also like you to ponder a few other revelations I’ve been warning about that seemed to have been missed (or blind eye turned) by most of the financial press.

Remember when it was all about “2016 was the year of the rebirth of the IPO?” How’s that all been working out? You know, since the Twilio™ IPO to save the IPO world has happened. Here’s a “picture” as they like to say in “the Valley.” To wit:

Twilio as of Friday's close.
Twilio as of Friday’s close.

Remind you of anyone? Hint: As I posted last month to “cat calls” everywhere, to wit:

Left is Twitter, on right is Twilio, in about the same time period after IPO.

And for those whom may not have noticed (but those who are “investors” I know you are painfully aware) or, are one of those only concerned with headlines touted across the main-stream business/financial press. Twilio was up something like 20% from the lows this week. Sounds great!

Unless – you understand that up 20% only brings you “up” to still being down over 20% from when I posted that chart less than 30 days ago. Never-mind from those highs less than 60 days ago. (That’s Ouch territory)

But at least it stopped where it ended on the day it IPO’d. right? So, things aren’t that bad, right? Right?

But not too worry, 2017 is gonna fix all this. Why? Snapchat™ is going to file for its IPO.

What? You haven’t heard? How can this be? How can one of the most anticipated IPO’s along with a market that’s at all-time-record-highs not be teaming with unbridled “unicorn” exuberance? It’s been many (if not all) a Silicon Valley’s unicorn raison d’être. i.e., To announce to the world its arrival of “it’s different this time” in-your-face metrics as to be worth $Billions, upon $Billions of market cap.

Sorry, just not this time. This time it’s “confidential.”  Why would this be one might presume? Nobody knows but for the players themselves. Yet, with that said, I know what it screams to those looking from the outside: There wasn’t any confidence there were going to be takers. i.e., buyers. (Much like the fear of how markets react after it’s announced “X looked at the books and decided, Thanks, but no thanks!)

Doesn’t that just signal “it’s different this time” in more ways than one? Hint: You bet it does.

But you know what the real “secret” is?

It screams caution for anyone just chomping-at-the-bit to get-in on another of these “social darlings” prancing out of the unicorn stables into the public arena. An arena which is beginning to look more like a “glue factory” with every passing day.

Yes, 2017 sure will be one to watch. For if Twitter and Twilio are anything resembling clues?

Your “chat” or “picture” might not be the only thing that vanishes into the ether, never to be seen again. But not too worry, after all: “It’s different this time.”

Just ask FB.

© 2016 Mark St.Cyr