Facebook’s executive exodus

The surprise departure from Facebook of two executives may herald a turbulent few years for the social-networking giant. Matthew Partridge reports.


Chris Cox: instrumental in establishing Facebook
(Image credit: © 2016 Bloomberg Finance LP)

Two senior Facebook executives, Chris Daniels and Chris Cox, have left the company less than a year after being promoted to new roles. This has come as a surprise, says Hannah Murphy in the Financial Times. Cox, who joined in 2005 and was one of Facebook's first software engineers, played an "instrumental" part in building the company, helping to develop the news-feed feature, and was widely considered to be Facebook's "number three". Daniels has been overseeing the WhatsApp messaging service.

All this upheaval suggests that Facebook boss Mark Zuckerberg wants to make radical changes, says Shira Ovide for Bloomberg. These include fully integrating all of the core apps that Facebook owns, such as WhatsApp and Instagram, but also the recently announced "privacy pivot". This would shift Facebook towards "more private communications or interactions among small groups of people", rather than "the mass broadcasts to the world via people's newsfeeds for which Facebookis known".

Zuckerberg's idea of moving Facebook's resources from the "town square" of news feeds to the "living room" of private groups may be a "pragmatic shift towards where the market is already headed", says Bhaskar Chakravorti for Salon.com. Facebook's user base is declining while the number using messenger apps is climbing steadily. However, there are two problems: "the changes will be difficult to execute and will not happen soon or at least not soon enough for many users". At the same time, "most of the company's billions were generated by the town square version of Facebook" and it hasn't got any ideas for how it can make the living room platform "even remotely as profitable".

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New problems are piling up

This new direction isn't without its dangers, says Kurt Wagner in Recode. Zuckerberg himself has admitted that, while end-to-end encryption "will create privacy for users, it comes with some serious trade-offs", including the risk that its services could be used for things such as "child exploitation,terrorism, and extortion". More broadly, the shift towards private groups is an implicit admission that "Facebook, the social network,has finally plateaued".

Meanwhile, the group has other problems, says Kara Swisher in The New York Times. Federal prosecutors in the US are now conducting a new criminal investigation into deals Facebook made with other companies giving them access to data without user consent. This is "new and worrisome territory". Meanwhile, a British government report has accused Facebook of interfering with consumer choice and stifling innovation, and has called for "strong regulation". All of this "is a reminder of what happened in the early 2000s when Microsoft was under investigation for anti-competitive behaviour". The probe "drastically slowed its momentum".

Former boss campaigns to "Save Superdry"

Julian Dunkerton, co-founder and former boss of Superdry, has launched a "Save Superdry" campaign, says Sophie Smith in The Daily Telegraph. He aims to persuade shareholders to reinstate him to the board of directors. Dunkerton, who resigned as CEO in 2014, and then stepped down from the board in 2018, wants to "take control of its design process to revive the brand which has suffered months of torrid trading". Since January 2018 the share price has plunged by 75%.

"It is easy to see why Dunkerton is upset," says Zoe Wood in The Guardian. He has an 18% stake in the company, so the plunge in the value of the company's shares has cost him £230m. Meanwhile, "morale has been hit by cost-cutting plans", with 20% of the 1,000 staff at company headquarters set to lose their jobs and current staff and former employees lining up online to "vent" about the state of the company. But with big institutional investors "rallying behind management", Dunkerton faces a tough fight.

He may be right that the current boss, whom he handpicked, "has the wrong strategies and that he has the right answers", says Patience Wheatcroft in The Sunday Times. After all, "excuses blaming poor performance on the weather are rarely the only explanation for what has gone wrong". But even if Dunkerton is justified in suggesting "that there are more deep-seated problems", he may not be the person to rectify them. After all, Superdry is no longer the business that he started on a market stall, but "a leading retailer with outlets in 46 countries".

City talk

The US Security and Exchange Commission's lawsuit against VW for allegedly misleading investors over the potential scale of the emissions scandal will probably add millions to the $30bn the imbroglio has cost the company, says Stephen Wilmot in The Wall Street Journal. However, the longer-term benefits to the world's biggest carmaker could "end up outweighing the expense". The scandal has provided VW with "an invaluable kick in the pants". The CEO brought in after the scandal has started to bring in a "cultural transformation" that investors appreciate: the shares have outperformed most peers since 2015.

Sainsbury's needs to learn to pick its fights properly if it is going to get regulatory approval for its mega-merger with Asda, says Aimee Donnellan on Breakingviews. Sainsbury's promises that post-merger it will keep fuel prices stable, cut the cost of grocery staples and "hire an independent auditor to make sure the pair are not stiffing customers". But the Competition and Markets Authority is more concerned that UK shoppers will still "have less choice in the round". Perhaps the best strategy is to emphasise that any dominant position is "unlikely to last for long" thanks to competition from German discounters and online delivery services.

"Put away the faux-fur gilet and bring out the flak jacket," says Lex in the Financial Times. Shares in online fashion retailer Asos are down 60% in a year following a profits warning three months ago and this week's news that sales growth halved to 13% in the first half. A botched US expansion the group failed to meet demand will irritate customers there, while margins are slipping. "And the number of smaller rivals is growing." With the stock still on 55 times next year's earnings, the share-price slide may not be over just yet.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri