• by Steven Rosenbaum , Featured Contributor, October 30, 2023

Depending on how you look at it, Oct. 25 was either a very good or a very bad day for Meta and its two primary products, Instagram and Facebook.

First, the bad part.

On Oct. 24, 42 states and the District of Columbia decided to take legal action against Meta. They're basically saying that Meta is causing harm to kids by invading their privacy and not being honest about the potential dangers of kids using their apps. It's not the first time some states have gone after Meta and other social media giants to protect young users, but this lawsuit is the biggest effort of its kind to ensure child safety on a social network.

“Kids and teenagers are suffering from record levels of poor mental health and social media companies like Meta are to blame,” said New York Attorney General Letitia James in a statement. “Meta has profited from children’s pain by intentionally designing its platforms with manipulative features that make children addicted to their platforms while lowering their self-esteem.

There’s a hefty 233-page complaint claiming that Meta has been running a sneaky operation to make money off young users. The complaint says Meta has been fibbing about safety features and how much bad stuff is on its platforms, scooping up kids' data without following the rules for children's privacy, and even messing with things to keep the kids hooked, all while breaking consumer protection laws.

This whole lawsuit has been brewing for almost two years, and it kicked off after whistleblower Frances Haugen spilled the beans with some inside info. Her leaks included research that showed some teenage girls were having a rough time with their mental health on Instagram. The U.S. Surgeon General Vivek Murthy also stepped in a few months back, saying that social media is a risk factor for some teens.

Now there are two big questions on the table. One is whether Meta really broke the law, and that's something the courts will sort out. The other is more critical: Can this lawsuit actually make things safer for young folks?

But here's an interesting point from Section B-3 of the complaint: Meta's recommendation algorithms seem to push people to keep using its platforms nonstop. The lawsuit also says Meta doesn't bother to get proper permission from parents before grabbing kids' personal info on Instagram and Facebook.

You can read the lawsuit here (it has a ton of redactions, but there doesn't seem to be a clean version available that I could find,  not sure why).

Then there’s Meta as the financial world sees it. 

Said CEO Mark Zuckerberg, just hours after being sued by virtually every state in the nation:  "We had a good quarter for our community and business," after its third-quarter earnings beat expectations on top and bottom lines.

Revenues rose 23% to $34.15 billion, with costs and expenses declining 7%, operating income for the quarter increasing 143% to $13.75 billion. And net income correspondingly jumped 164% to $11.58 billion from a year-ago $4.4 billion.

And where are these profits going?  According to Investopedia: 

• Michael Schroepfer, Meta's chief technology officer
• David Fischer, Meta's chief revenue officer  
• David Wehner, Meta's chief financial officer  
• Mark Zuckerberg, CEO, and Meta's largest shareholder by far
• Vanguard Group Inc.,Vanguard holds approximately 182.9 million shares of Meta, representing 7.7% of total shares outstanding.
• BlackRock Inc, BlackRock holds about 155.9 million shares of Meta, representing 6.6% of total shares outstanding.
• T Rowe Price, JP Morgan Chase, and Fidelity Contrafund, and more.

The platform’s rewarded with extraordinary growth and profits, even as the growing state of its impact on the mental health of its users is the focus of bipartisan criticism.                                                                                                                                                                         
“Meta saw American kids as a ‘valuable and untapped market’—nameless factors on a bottom line to maximize profits,” said Connecticut Attorney General William Tong. “They enabled kids to access addictive platforms riddled with harmful messages built to override self-control that one developer likened to ‘behavioral cocaine.’ Their abusive practices have unleashed a youth mental health catastrophe."

The suit filed last week will take years to wind its way through the courts. The question now hanging in the air is, will advertisers demand that their dollars call for changes in the addictive and cohesive nature of the platforms they are funding. The profits, after all, come from brands we know and trust.