3 Reasons Facebook, Inc. Will Thrive After Its Latest Overhaul

If you're concerned that political bickering is the only thing propping up Facebook's user engagement, don't worry

By James Brumley, InvestorPlace Feature Writer

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3 Reasons Facebook, Inc. Will Thrive After Its Latest Overhaul

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It’s official. Facebook, Inc. (NASDAQ:FB) has conceded that its social networking venue — boasting two billion regular (monthly) users — doesn’t necessarily make voter-driven democracies better. Rather, the open-ended social media site may make it easier to spread fake news and post misleading ads that dissuade voters from making intelligent choices.

Most everyone already knew this, of course. Facebook’s admission that its platform doesn’t always lend itself to great democracy is akin to saying a dumpster fire isn’t good for democracy — or that a schoolyard scuttlebutt isn’t good for democracy. Everyone knows they’re often ugly and resolve nothing of consequence. That’s not the point.

Regardless, Facebook is moving in a direction that current and would-be owners of FB stock may not be thrilled with. Going forward, Facebook will be shoving more posts from friends and family into its primary newsfeed and showing less news from traditional media sources.

Some users, worn down from nearly two years of heated political debates, are thrilled. Investors, conversely, may be concerned that without all the digital arguing in play, Facebook’s “engagement” levels will subside, crimping revenue. As CEO Mark Zuckerberg explained of the move just a couple of weeks ago, “by making these changes, I expect the time people spend on Facebook and some measures of engagement will go down.”

Somehow, though, it’s not too terribly difficult to think none of the intended consequences of the overhaul are going to make a big dent in any of the targeted behaviors.

3 Reasons Not to Worry

Facebook product manager Samidh Chakrabarti said it quite plainly in a recent blog post describing the impending changes, explaining: “I wish I could guarantee that the positives [of Facebook] are destined to outweigh the negatives, but I can’t.”

Chakrabarti added that Facebook has a “moral duty to understand how these technologies are being used and what can be done to make communities like Facebook as representative, civil and trustworthy as possible.”

Fair enough. Though Microsoft Corporation (NASDAQ:MSFT), Alphabet Inc (NASDAQ:GOOGL, NASDAQ:GOOG) and Twitter Inc (NYSE:TWTR) have all arguably done more — and done it sooner — than Facebook has on this front, it wouldn’t be unfair to say any delay in taking action indicates hesitation to overreach.

As for what this may mean to users, it’s not yet entirely clear. Broadly speaking it means Facebookers will be seeing fewer paid insertions from diametrically opposite news sources like CNN and Fox News, and seeing more of what their friends had for dinner. One can only assume fewer political ads will be displayed in the future — and the ones that do show up will be better vetted. Unfortunately, FB shareholders fear, it’s the bickering over the most contentious news that may be driving the bulk of Facebook’s revenue.

The thing is, that concern may not be deserve the credence it’s been given for three reasons:

1. Facebook IS an Echo Chamber

Part of the overhaul includes a plan to democratize news by letting users vote on which news sources are “trustworthy.”

In any other environment, this premise might work. Politics has become a full-contact sport, though, and calling a spade a spade, the identification of media sources you trust has morphed into one of favoring media sources you agree with. Conservatives and Republicans are going to, by and large, vote Fox News as a trusted source, while liberals and Democrats are — again, in general — going to support outfits like CNN.

Even to the extent users can agree on trustworthy news and commentary sources though, our social circles are still mostly echo chambers. Users can still (and most certainly will) inject one-sided stories they come across into their own feeds. Digital lynch mobs will continue to exist.

2. Hate, Controversy Finds a Way

For better or worse, extremists and the painfully-biased political groups that create controversy will find a way to make themselves found on the social media platform. They will do so because they have the time and motivation to do so. Indeed, creating and manipulating outrage has become an art and science. Staying in the Facebook loop is easy by comparison.

While Facebook’s new efforts are a respectable game of Whack-a-Mole, designed to extinguish those efforts as they surface, the open-ended nature of social networking, by definition, leaves the door open to messaging that most everyone else deems despicable.

3. Angry Users Look Past Ads

While concerns #1 and #2 suggest little will effectively change going forward, to the extent either or both headwinds are about to blow, there’s still a ray of sunshine breaking through that should encourage FB shareholders. That is, angry users are more likely to ignore ads and skip the clicks that would otherwise drive revenue for Facebook. If users aren’t irate all the time, they might actually turn out to be more fruitful for Facebook’s advertisers.

Any empirical evidence to that end? Not a whit. In fact, “rage clicks” are a real thing, capitalizing on anger rather than commercial interest.

This reporter has to believe, however, that angry people are too busy being angry to click on one of the banners ads in the right hand column of Facebook’s page, or too overwhelmed by a lengthy argument thread to notice the sponsored ads that occasionally show up in the main middle column.

Bottom Line on FB Stock

In other words, the headlines about the new-and-improved Facebook may be a superficial cause for alarm. They’re just headlines, though. The same user-defined Wild West that makes Facebook so much fun for people in the same social circles is the same one that will allow others to use and abuse the social networking site.

It’s kind of like a public park. Like it or not, the ruffians are going to stake their claim somewhere. It’s just the nature of the beast.

And even to the extent Facebook can weed out some of humankind’s worst societal participants, the remaining crowd may be ready to move away from the bickering and do some more clicking. That shift comes at a time when it looks like Zuckerberg is about to turn up the heat on e-commerce anyway.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities. You can follow him on Twitter, at @jbrumley.


Article printed from InvestorPlace Media, https://investorplace.com/2018/01/3-reasons-facebook-will-thrive-overhaul/.

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