Ex-Facebook & Pinterest Exec Tim Kendall on Extractive Business Models

During a recent House hearing concerning the potential harms of social media, Tim Kendall, a former executive at both Facebook and Pinterest, explained to Congress that the addictive nature of Facebook’s products is directly linked to its advertising-based revenue model, which prioritizes maximizing user engagement. He voiced similar concerns in the Netflix documentary “The Social Dilemma,” where Kendall, alongside other early employees from major technology companies, cautioned about the risks Facebook and similar platforms pose to contemporary society.

Kendall, who currently leads Moment, an application designed to help individuals track their device usage and encourage healthier screen time habits, continues to advocate against his previous employer. He recently discussed the Federal Trade Commission’s (FTC) potential antitrust lawsuit against Facebook regarding its dominance in social networking, the Department of Justice’s (DOJ) new antitrust case against Google, and the role of venture capital in fostering the attention-grabbing – and financially driven – strategies employed by these companies.

The following is an excerpt from that conversation. The complete discussion can be accessed here.

TC: Many people struggle with app addiction on their phones. When did you decide to publicly address this issue and potentially contribute to finding solutions?

TK: I’ve always had an interest in the factors that influence willpower and those that diminish it. Having witnessed addiction within my family and extended family, including experiences with substance and drug abuse, I began to recognize striking similarities. The experience mirrors the patterns seen in addictions to drugs, food, or shopping. However, it seemed that this issue wasn’t being treated with the same level of seriousness.

TC: How have your former colleagues responded to your critical stance towards the industry?

TK: The response has shifted over time. Initially, I was more lenient towards Facebook. When I began publicly discussing my work with Moment, I expressed the belief that those within the company were focused on the right issues and would ultimately resolve the problem. I maintained this view throughout 2018. However, I’ve since become more outspoken, asserting that I don’t believe they are doing enough, or acting quickly enough. I consider their approach negligent, stemming from a failure to fully grasp the impact their platforms have on individuals and society as a whole. They simply don’t seem to have a comprehensive understanding of the situation.

Is this a deliberate oversight? Is it a result of being misinformed? I cannot say for certain. However, the consequences are significant, and their perception of the severity of those consequences differs greatly from that of the broader public.

I believe everyone at Facebook experiences confirmation bias, much like my own. I might focus on a family at a restaurant absorbed in their phones, attributing it to Facebook’s detrimental effects on relationships. That’s my bias. Their bias, conversely, likely centers on the positive contributions Facebook has made and continues to make to the world. I suspect leaders there prioritize these positive aspects while downplaying the severity of concerns like potential election interference, the spread of conspiracy theories, and the dissemination of misinformation.

TC: Do you believe Facebook requires regulation by the FTC?

TK: I believe a change is necessary. Ideally, I’d like to see leaders from government, concerned consumers, and the company itself engage in a dialogue to establish a shared understanding of the situation. If we could agree on a common set of facts regarding the impact these platforms are having, we might find a path towards a collaborative solution. This could involve acknowledging that the current business model is incompatible with the long-term well-being of society – similar to how fossil fuels are incompatible with the long-term health of the planet – and then charting a new course.

I’m not convinced that strictly adversarial regulation will solve the problem. It risks becoming a protracted battle, with more individuals becoming addicted and companies continuing to negatively impact society.

TC: If this antitrust action isn’t the solution, what regulatory measures could be considered, assuming these parties cannot reach a consensus independently?

TK: Congress and the Senate are currently examining Section 230 of the Communications Decency Act, which, since 1996, has allowed platforms like Google and Facebook to operate differently than traditional media companies by shielding them from liability for content posted on their networks.

This initially seemed like a beneficial approach, fostering innovation by allowing these bulletin board and portal-like services to grow without facing liability issues for every piece of content. However, today, it appears that modifying Section 230 could be a way to address misinformation, conspiracy theories, and the tribalism that seems to flourish on social networks.

Looking back five to ten years, privacy was the primary concern regarding Facebook and, to a lesser extent, Google. The government repeatedly threatened Facebook, but took no concrete action. Finally, in 2019, a $5 billion fine, along with ongoing penalties, was assessed for privacy violations. Interestingly, since then, we haven’t experienced significant privacy issues with Facebook.

TC: You were responsible for developing Facebook’s advertising model and devising a monetization strategy for Pinterest. Given your expertise in advertising, what are your thoughts on the DOJ’s case against Google?

TK: Launching an online business and monetizing it through advertising is challenging, though not impossible.

Pinterest achieved success in this area during my tenure as president, but the dominance of Google and Facebook in advertising creates significant hurdles for new competitors. Advertisers often prefer to utilize Google and Facebook due to their extensive reach and effectiveness. This raises the question: what value do platforms like Pinterest or Snap offer? Why would advertisers invest in a new startup?

Regarding search, Google has been suppressing competition for years. This isn’t necessarily about preventing new search engines from emerging, although the government may be asserting that point. Rather, it’s about content providers and publishers. Google has consistently attempted to create universal search boxes that replicate the local information provided by platforms like Yelp, displaying its own results above Yelp’s organic listings to undermine Yelp’s business and promote its own local services. This is anti-competitive behavior.

TC: You’re currently involved with Moment and are in discussions with startups addressing issues like news outlet bias, offering readers information about potential leanings. Would you consider accepting external funding for investment purposes? We’re seeing solo GPs raising substantial first-time funds.

TK: I believe traditional venture capital, with its typical seven-year investment horizon, has contributed to some of the problems we face today. Companies that secure traditional venture capital often feel pressured to prioritize rapid user growth and accelerated monetization, leading to extractive business models. The social networks that received venture capital funding experienced this pressure from their boards to expand their user base and increase revenue quickly, ultimately resulting in the current business model that is now under scrutiny.

If I were to pursue more serious professional investing, I would only accept funding from individual investors and would include a clause explicitly stating that there is no fixed time horizon for returns. I believe this is essential to avoid the misaligned incentives and problematic practices that have contributed to the current situation.