The Great Facebook Fumble – And The Economic Damage Done

The Facebook Outage's Economic Damage

Every day, in nearly every corner of the world, 1.4 billion people log onto Facebook and 500 million people log onto Instagram. On Wednesday (March 13), that audience of almost two billion – roughly a quarter of the planet’s population – got something of a nasty shock. When they tried to log on, neither Facebook nor Instagram was available.

Or, at least, that is the impression one might have gotten had they only read the headlines on the subject. In truth, Facebook didn’t crash entirely; it was only a partial outage. But given the size and scope of Facebook and Instagram, even a partial outage was enough to cause total outrage. And this was a big one, reportedly the largest outage in Facebook’s history, and it went on for quite some time – it was a little over 22 hours before the services were fully functioning again (though most of the damage was cleaned up within 14 hours).

Plus, to add insult to injury, because its social media channels were all on the fritz, Team Facebook spent much of the day on Twitter to keep its users posted. In fact, many people were on Twitter talking about the outage on Wednesday. Of course, on the downside, those people were less than wholly understanding of the situation.

And though reactions were dramatic at the time – the outage spawned a host of memes that went viral as soon as Facebook and Instagram were fully operational again – it seems that by and large, things have mostly gone back to normal. Facebook may have earned consumers’ ire, but given the turmoil the social media company has seen over the last 18 months, this latest tempest barely ranks at tea cup level. Consumers were miffed and Facebook lost some advertising revenue, but they’ve taken bigger hits over bigger issues recently.

And consumers, though temporarily horrified at their lack of channels to post food pictures and half-baked political theories, seem to have recovered admirably from the strain and found a way to keep calm and carry on.

But while for most people, Wednesday’s event was just a bump in the road, for an entire economy of small businesses that leverage Facebook as a sales channel, the outage was a big deal – and meant a big loss of dollars. Jason Wong, CEO of Wonghaus Ventures, estimates he lost $10,000 as a result.

“Looking at our prior revenue for the past seven or eight days, and looking at what happened today, we can kind of estimate how much money we lost based on our past week’s history,” he told The Verge.

Wong was far from the only small business owner telling a similar story. New Jersey real estate agent Maatie Alcindor told USA Today that she runs most of her business through Facebook and Instagram, and found herself scrambling through most of Wednesday trying to hammer out other ways to connect with clients. Laura Faint, head of performance marketing at product design studio AJ&Smart, told The Verge her firm saw a 4 to 6 percent decline in clicks and engagement during the outage, meaning less overall reach for her social media-reliant brand.

“Based on how our campaigns are set up, it’s likely that during the weekend, we’ll see the impact of this in our revenue,” she said.

The stories are all over the web this week from small retailers and service providers who lost a day of sales, who had planned advertising campaigns launch with no audience, and whose monthly budget and performance goals were crushed by a single day’s Facebook outage.

And small firms weren’t the only ones affected. Madeline Aaronson, thredUP’s senior manager of organic growth, noted that since Instagram added shopping features a year ago, the social site has become an incredibly powerful sales channel for the brand.

“thredUp reaches millions of people organically on Instagram, beyond our current followers. Because of this, we think of Instagram as our second home page, where many shoppers stop to check out our brand,” she told USA Today.

Having that second home page effectively down for the day was not good for the firm, though Aaronson declined to enumerate their specific losses.

Influencers also likely had a rough day, noted Mae Karwowski, founder of the influencer marketing company Obviously – though not as rough as it was for business owners and brands. She added that these contracts often include a clause about a “force majeure,” or an unforeseen circumstance, like Instagram going down, which allows brands and influencers to reschedule posts. Because of that, Karwowski said she’s “pretty confident no influencers were harmed in the outage,” directly.

However, Karwowski noted, if an influencer posted right before the outage and the post didn’t perform well because of it, the underperforming post could damage the influencer’s brand, as the success (or lack thereof) of every post counts. That could have consequences for the relationships the influencer could form down the line, and could cost them some money, she added – although it’s hard to quantify exactly how much.

But for all of those who have lost money, or who anticipate losing a bit more down the line as a consequence of Wednesday’s outage, it is interesting to note that almost no one is talking about pulling up stakes from Facebook or Instagram and moving on.

As Wong noted, while the outage certainly cost him money, it is not going to put him out of business. Removing his company from Facebook, on the other hand, would certainly put him out of business, and quickly.

“Facebook is huge for our business, and we’ve had fantastic success using it as an advertising channel, but I’m even more aware than ever of the need to make ourselves less vulnerable,” he said, adding that Facebook could probably have made the situation less scary for merchants by being more clear about what was happening on the back-end.

“They should be a little bit more transparent with the advertisers, especially since we are the ones funding their platform,” Wong said.

Will Facebook go on to achieve greater clarity and transparency at the request of its merchants? Well, there’s a first time for everything, we suppose – though given the volume of similar requests the company has received over the last year or two, we probably wouldn’t put any money on it.

But we suspect Facebook will work double-time to prevent more outages. We also suspect that many more merchants will have Facebook-failsafe plans moving forward.