Jim Collins, in his book How the Mighty Fall, outlines the stages that often precede the decline of once-great enterprises. The first stage is hubris born of success – the dangerous overconfidence that can arise when companies believe their growth and dominance are unbeatable.

With all the attention social media companies are receiving around regulation, it begs the question: Is their resistance and growth at all costs cause for shareholder concern?

In recent times, companies like Facebook and TikTok have reaped enormous financial rewards, with Meta’s stock surging by more than 60 per cent in the last year alone. But as they race for more and more eyeballs, their unchecked drive for profit is eroding the very user experience they depend on. 

In the scramble for dominance, social media companies have adopted increasingly aggressive tactics to keep users engaged. Addictive algorithms, more ads, more notifications, more personalisation around clickbait content may boost short-term metrics, but erode trust over time. As trust deteriorates, so does user satisfaction.

There is the well-documented concern about social media's detrimental impact on mental health, particularly among younger users. Numerous studies link its use to rising levels of anxiety, depression, and self-doubt. Despite being aware of these risks – and making token efforts to address them – platforms continue to feed the very algorithms that intensify the problem.

Of all examples, the most concerning was the Blackout Challenge that surfaced on TikTok a few years ago. This challenge, where participants are encouraged to asphyxiate themselves until they pass out, resulted in multiple deaths, including those of young children. The algorithm's role in promoting such harmful trends has been repeatedly flagged. While TikTok has faced lawsuits from grieving parents, it continues to struggle with moderating harmful content that spreads rapidly on its platform.

Another troubling trend is the rise of gambling ads, particularly in the sports betting industry. Elmer Funke Kupper, former CEO of Tabcorp, recently called for an outright ban on social media gambling ads, citing the vulnerability of younger users. Gambling companies may claim they aren’t targeting children, but the reality is that these ads often reach young audiences.

The spread of misinformation is the latest concern. Take the deepfakes of actor Tom Cruise that surfaced a few years ago – convincing enough to fool millions of viewers. Now, rapidly advancing tools make it even easier to manipulate audiences, especially in more malicious contexts. With elections looming, the risk of these manipulations influencing public opinion is more real than ever. And yet, platforms seem slow to act, allowing these dangerous trends to spread unchecked.

Governments are beginning to step in where platforms have failed. The EU's Digital Services Act (DSA) is one example of regulators holding social media companies accountable for their content. In Australia, the Government has announced plans to impose age restrictions on social media access, following growing concerns about the impact on youth. Prime Minister Anthony Albanese signalled a significant intervention in curbing social media's negative influence, particularly on younger users.

Regulatory and social pressure is mounting, but platforms remain largely resistant to change.

At the core of these issues is the tension between financial growth and social responsibility. Social media companies face constant pressure from shareholders to deliver profits, but they are also under increasing scrutiny to address the societal harms their platforms perpetuate. The big question is whether they can balance these competing demands – or whether their refusal to change signals a deeper, more troubling problem.

Resolving this tension won’t be easy. It’ll require recalibrating the metrics of success – shifting from engagement and revenue at all costs to a more holistic approach that values user well-being and ethical considerations. Companies must embrace content moderation, scale back on ads, and invest in healthier ways to engage users, even if that means sacrificing short-term financial gains. Otherwise, the cumulative effect of a deteriorating user experience will take its toll on the business.

Ultimately, what made these companies successful today won’t guarantee their future. User attitudes and behaviours change. Disruption often comes from unexpected places, and while social media feels indispensable today, without a change in strategy, it’s only a matter of time before new, innovative companies emerge to challenge them.

The resistance and opposition to change should concern shareholders, as platforms that continue to prioritise growth at all costs risk eroding their most valuable asset – user trust. 

As more users become disillusioned they will seek alternatives. Governments are stepping in. If platforms don’t adapt, they won’t just lose users; they’ll face a regulatory landscape that could limit their ability to operate freely and grow.

The history of once-dominant companies teaches us that hubris leads to complacency, and complacency invites competitors. For social media companies to avoid this fate, they must act now. Otherwise, they might be remembered not for their once prevalent lead, but for their inability to evolve.