Feb 1, 2018 ยท 5 minutes

Facebook has gone through something of an existential crisis in the past year as evidence of its cancerous effect on democracies emerged and as former developers and loyal users alike decried its soul-corroding potential.

Mark Zuckerberg's response journeyed from denial to contrition to a commitment to fix the social machine he created. In doing so, he's aspiring to take Facebook down a path investors don't always like: a company doing the right thing.

All along, Zuckerberg got one thing right, the only one that matters in the blinkered eyes of investors. Facebook kept getting better at generating ad dollars from the attention of its 1.4 billion daily users. Investors never cared a whit about Zuckerberg's mantra of bringing us closer together. They just wanted him to extract ad revenue from our global digital communion. Which he did. And so Facebook's stock has risen 46% in the past year even as Zuckerberg has wrestled with his conscience.

Things kind of came to a head Wednesday when Facebook discussed its performance in the fourth quarter of last year. Zuckerberg again expressed his earnest wish to raise Facebook above the wasteland of viral media it was turning into. “2017 was also a hard year,” he told investors. “The world feels anxious and divided - and that played out on Facebook. We've seen abuse on our platform, including interference from nation states, the spread of news that is false, sensational and polarizing, and debate about the utility of social media.”

Abuse, check. Russian manipulation, check. Doubting the very utility of Facebook, check. Nothing to worry about here! Until Zuckerberg said that time spent on Facebook fell 5% last quarter, equal to 50 million hours of engagement a day. Daily active users in North America declined to 184 million from 185 million in the third quarter, the first ever such drop in Facebook's most lucrative region. Facebook's stock quickly lost 5% of its value in after-hours trading.

Zuckerberg said that changes to the news feed, eliminating low-quality viral videos, accounted for that decline. “That's how serious we are about this,” he said. What's more, Facebook would make more changes this year and increase spending to make the platform less dysfunctional. Already, Facebook has doubled to 14,000 the staff that works on keeping Facebook secure. More spending is coming, which Zuckerberg warned will “significantly impact our profitability.”

Suddenly, Wall Street did care about Facebook's existential crisis. They didn't like it one bit. Facebook was introducing a new metric – meaningful social interactions – to measure the success of its business. Not only is it a mouthful – Sheryl Sandberg has taken to simply calling it “MSI” – it's infuriatingly vague. How do you measure meaning? Analysts probing Zuckerberg on this new guiding principle ended up straying into conversational terrain more typical to 3 a.m. dorm-room philosophy debates: “But what do you mean by mean?”

It turns out that Facebook has started surveying thousands of its members to find out what content was “the most meaningful” to them. The consensus seemed to be content that was the opposite of what Facebook's algorithms were generally serving. Human judgment being imperfect, the content we click on may not be good for us, may in fact be so many micro-doses of poison, as we scroll for hours further down the news feed into a deepening despair.

Facebook spun the decline in engagement as the result of news feed changes. But what if the real cause was that people were simply tiring of Facebook? The Facebook-has-peaked narrative pops up every now and then, but this is the first time the company's own data has backed it up. What if the news feed changes was simply a desperate attempt to keep more people from moving to other social networks?

To calm such fears, Facebook offered evidence that it's raking in more ad revenue than ever – up 48% last quarter. Daily users in North America may have dropped, but average revenue per user grew by 26% from the previous quarter. Advertisers are still pouring money into Facebook, so even with a decline in engagement, the amount paid per ad is growing as advertiser demand for user attention exceeds the supply Facebook can deliver.

That was enough to dispel investor concerns. Facebook's stock not only recovered its initial losses but was trading 4% above its official closing price Wednesday as analysts shrugged off the lower engagement and focused on its ability to monetize users. Forget meaningful social interaction. The only MSI metric Wall Street wants to hear about is monetizable social interaction – and here Facebook was delivering as well as it ever has.

But this gets at a tension inside Facebook's operations that will likely play out on a larger scale throughout 2018. The money being spent on fixing Facebook argues that Zuckerberg is sincere in his intentions. The question is whether he can follow through in a way that doesn't slow down the flow of ad revenue coming into the company.

It also gets at another question that has lingered for a while: At what point will Instagram start to become the real engine for growth inside the company? Facebook refuses to break out revenue for Instagram, but the service, along with WhatsApp, is better suited for the kinds of “meaningful” interactions Zuckerberg wants.

The few data tidbits Sandberg offered about Instagram on the earnings call suggest it's ready to deliver on its monetizing potential. It has drawn 2 million active advertisers, versus 6 million on Facebook. More than 25 million businesses had set up Instagram profiles by November, up from 15 million in July. Facebook is putting a big emphasis on Snapchat-like Stories inside Instagram, which draw engagement that the company wants to brag about. Sandberg said 60% of mobile video ads on Instagram stories are viewed with the sound on.

Instagram may one day become to Facebook what PayPal once was for eBay – a smart acquisition that eventually made up the majority of the combined company's profit. Anecdotal evidence suggests that people who are tired of Facebook are spending more time on Instagram. If the blowback against Facebook's core app continues and more users grow weary of using it, Instagram may be the company's secret weapon to keep monetizing hundreds of millions of users.

For now, Facebook is keeping its investors satisfied with ad-revenue growth while fixing the site in a way that, just maybe, starts to fulfill its mission of bringing the world closer together. If those roads diverge too wildly, Facebook may have to make a difficult choice. 2018 may be the year when we find out what kind of company Facebook, at its very heart, truly is.

So far, it's not looking good. Even as Zuckerberg was advocating for meaningful social interactions, Facebook's “People Are Saying” section trended a set of bizarre conspiracy theories surrounding an accident of a train conveying Republican members of Congress. All were promoted via meaningful social interactions on Facebook.

One might wonder: “Meaningful” means what, exactly, in a world that's slowly losing its mind? That's a koan for Facebook to solve. Good luck with that one, Zuckerberg.