Facebook Inc (FB) Is the King of Media. Now It’s Acting Like It.

FB - Facebook Inc (FB) Is the King of Media. Now It’s Acting Like It.

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Does Facebook Inc (NASDAQ:FB) deserve to be worth as much — or more? — than, say, a gigantic energy company like Exxon Mobil Corporation (NYSE:XOM), which has physical operations across the world?


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FB doesn’t carry $29 billion in debt, like Exxon does. It doesn’t carry any debt. Facebook’s profit margin is over 25% against Exxon’s 4%, and its operating cash flow is accelerating, even if it’s still $4 billion per quarter short of Exxon’s. XOM doesn’t have the two most popular mobile apps in the world, either.

The point is that Facebook, and other “tech majors” such as Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOGL) and Apple Inc. (NASDAQ:AAPL), now dominate the business world in the way oil majors did when 40 years ago, the way manufacturers did 80 years ago, the way infrastructure builders like General Electric Company (NYSE:GE) did over a century ago. They have the power.

But with power comes responsibility. Facebook ignored this through last year, and a flood of fake news hacked the Internet, creating a government opposed to its business interests.

For Facebook, then, 2017 is a year for taking responsibility.

A Content Business Model

This starts with creating a viable business model for credible content.

This week, Facebook will let big publishers put ads in the middle of videos they push to the site, and take over half the resulting revenue. This follows two years of experiments that delivered cash to cutting-edge publishers like Buzzfeed.

Facebook wants videos with “mid-roll” ads to run at least 90 seconds, and Bloomberg speculates this could reduce Facebook’s margins. But the site has little choice. FB has killed older models of media advertising and the company knows it.

For credible publishing to survive, Facebook must deliver a business model that allows them to.

Content Responsibility

Facebook also is spending on what might be called its “news responsibility,” hiring Campbell Brown as an “interface” with publishers.

Brown is married to Republican political operative Dan Senor, and has been working against teacher unions since leaving TV. She knows the intersection between fact, what is seen on TV and propaganda that controls how people vote and how government acts.

She also knows how to make money online. She’s an olive branch both to the media and the new administration; someone who can make introductions among old media, new media,  and political power.

Brown’s contacts today are demanding Facebook take more direct responsibility for content it features, like the torturing of a Chicago man broadcast on Facebook Live recently. The perpetrators were arrested, but governments are growing increasingly angry over such outrages, while the outrages themselves are becoming ever-more profitable.

Maintaining its freedom to publish is essential to Facebook’s growth, but so is maintaining good relations with government. That dance has just begun.

Seeking a Center

The mid-roll ads and the hiring of Brown are defensive moves. They cost money without delivering much revenue. They are necessary for Facebook to show it takes its responsibilities as an outlet for powerful video seriously.

In 2017, CEO Mark Zuckerberg is taking responsibility for the world’s media, its political views, and even the stock market itself, as our Josh Enomoto notes. What’s good for general Facebook is good for the U.S. of A.

What investors want to know is that Facebook continues to innovate, as with a new video chat feature on Facebook Messenger that brings up to 50 people together. They’re looking in the wrong direction.

In the last decade, Facebook has gone from being a raw startup to a core holding in the stock market, from the outskirts to the center of power. Zuckerberg himself reportedly has political ambitions and the company’s latest moves seem an attempt to find a new political center, in both American and global politics, that he and FB can occupy.

Finding that center, defining it, is essential to Facebook’s continued growth. Facebook has become the king of all media, and uneasy hangs the crown.

Dana Blankenhorn is a financial and technology journalist. His latest novel is Bridget O’Flynn vs. Something Big & Ugly. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media, https://investorplace.com/2017/01/facebook-inc-fb-stock-king-of-media/.

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