Remember back in 2014, when Facebook Inc (NASDAQ:FB) CEO Mark Zuckerberg was all the rage, and the FB stock price was at the onset of what would be a mostly-unfettered four-year rally? The kid just had his finger on the pulse of what consumers wanted from their social media platforms, delivering a “feel” that MySpace never did, and that Twitter Inc (NYSE:TWTR) never would. Zuck could do no wrong.
My how things have changed. At least that’s what he and likely millions of owners of Facebook stock will likely be thinking come Nov. 1, as the 33-year-old CEO is grilled by a Congressional committee concerning Facebook’s possible role in last year’s Presidential election.
Though any and all CEOs — even rockstar ones like Mark Zuckerberg — eventually fall from grace, this potential fall could prove painful for Facebook stock as well. See, the founding chief and the direction the FB stock price is moving are rather closely linked, and what’s bad, for one certainly isn’t good for the other.
Facebook News Scandal
Let’s call a spade a spade. It’s not really surprising that Russia’s government was somehow involved in using Facebook to, at a minimum, disrupt confidence in the American electoral process. Indeed, it would have been surprising if the geopolitical adversary didn’t tap into the massive reach of the giant social network in an attempt to sway voters. Why? Because it can.
Likewise, Facebook users could have (and arguably should have) recognized their Facebook news feed was subject to the fake news that’s caused so much trouble over the course of the past year. Realistically speaking, Facebook can’t possibly examine every single ad, validate every single news story and vet every single advertiser it handles… particularly when those ads, that news and those advertisers are making every effort to look legitimate. The platform is, for all intents and purposes, a proverbial Wild West. Welcome to the internet. Google, the search engine owned and operated by Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG), is feeling the same pain.
Zuckerberg hasn’t done himself or FB stock any favors on this front though, ignoring a problem when he first knew about it. Specifically, though Facebook had (very) good reason to suspect some sort of Russian-bought political ads were shown to Facebook’s users during the election. It’s only been recently, however, that Zuckerberg has conceded this — perhaps forced to do so, so that the revelation wouldn’t first be made during a Congressional grilling.
It’s even alarming that this company, unable to identify and ban some content, was somehow able to block access to relatively benign content like live footage from the Dakota Access pipeline protests. The list of disparate treatment of content from Facebook’s curators is not only lengthy, but the standard is curiously confusing.
The end result: As early as January, before all of the election meddling and inconsistent censorship was fully understood, only 18% of Facebook users surveyed by Ipsos Public Affairs said they trust news found on Facebook even only “some of the time”.
Along those same lines, 80% of consumers also generally don’t trust Facebook with their personal data, even without those users knowing exactly how that information could be used in an abusive way. They at least understand that Facebook is somehow using artificial intelligence behind the scenes to build a marketing-centric profile for each and every user.
That’s invasive, even if users submit to the process willingly.
Ad Revenue is Fine, For Now
And that’s the interesting dichotomy of the matter — users may distrust Facebook in a variety of ways, yet they continue to use it, driving more and more ad revenue for the company. Perhaps they feel there’s no other alternative, if they want to remain in-touch online. They swallowed their distrust enough to drive a 45% year-over-year improvement in Q2’s top line anyway. Clearly it’s not too big of a stumbling block.