Will Facebook Inc (FB) News Bias Affect Investors?

Facebook Inc (FB) is an increasingly popular and important source of news for many internet denizens. So, when tech blog Gizmodo broke news that Facebook contractors were told to suppress conservative news stories from the trending news section, it made a bit of a stir.

Will Facebook Inc (FB) News Bias Affect Investors?

FB’s management rebutted the accusations surround Facebook news, noting it has “rigorous guidelines in place for the review team to ensure consistency and neutrality”, and it “found no evidence that the anonymous allegations are true.”

Still, this isn’t the first time Facebook has faced trust issues. It previously manipulated users’ timelines as part of a psychological experiment in conjunction with UCSF and Cornell University. Additionally, it has been the focus of many internet privacy debates as it has access to unprecedented amounts of user data.

Even so, FB’s user growth, engagement and earnings have all continued to climb. Is there any reason investors should think differently this time around?

Last summer, the Pew Research Center conducted a survey that found that the same percentage of Facebook users use the social network to keep up with news as users on Twitter Inc‘s platform (TWTR).

Indeed, over the past few years FB has taken several steps to increase its value as a news source, including the trending news section. As such, it has grown to become as big of a news source as the news-centric Twitter.

But the importance of trending stories shouldn’t be overstated when it comes to the general discussion of Facebook news.

First of all, only 31% of Facebook news readers keep up with breaking news stories on Facebook, compared to 59% on Twitter, where trending stories are much more important and easier to follow. Overall, less than one out of five Facebook users is even remotely impacted by the alleged bias of Facebook news.

Second, the trending feature is only available on desktop, and most of Facebook’s users access the site through mobile. Over 91% of users access the site through mobile, and 82% of FB’s ad revenue came from mobile last quarter.

So, while the controversy over the alleged bias sheds light on continuous trust issues at Facebook, the actual number of users that may have been impacted negatively is minimal. Worst case scenario, Facebook news readers reduce the amount of engagement on the social network, switching to other news sources.

As such, there’s not much reason to believe users will adjust their behavior based on this allegation.

FB Management Isn’t Worried

As mentioned at the top of this article, Facebook has faced numerous trust issues in the past. Each and every time they’ve blown over, and the number of users, their engagement and FB’s ad revenue all continued to grow.

There’s a huge percentage of Facebook users that are blissfully unaware of issues like the psychology experiment it ran from 2012 to 2014, or the alleged bias in its trending stories. There’s a small percentage of users that know about it, but simply don’t care enough to make them stop using Facebook (I count myself in that group). And there’s an even smaller percentage that will stop using Facebook because of it.

Nobody has better insight into those data than Facebook’s management. If Facebook users stop engaging with content or start leaving the platform altogether, management will know before the investors. It can take steps to try to rebuild trust with users and suspend products that produce trust issues.

Facebook did that with Beacon, a product that allowed users to share information from other websites. The product eventually led to a class-action lawsuit against FB, which the company settled for a few million dollars in 2009. It then produced Facebook Connect, which resolved some of the privacy issues surrounding Beacon, but maintained a similar functionality. Everybody uses Facebook Connect now.

All I can say is, Mark Zuckerberg’s a smart guy and has a way of getting what he wants.

As of this writing, Adam Levy did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/05/facebook-inc-fb-news-bias/.

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