Despite facing numerous scandals and suffering alongside the broader market in 2018’s end-of-year slump, Facebook (NASDAQ:FB) has managed to power through the chaos, up 27% year-to-date in 2019. But the comeback in Facebook stock hasn’t been without hurdles, and FB may have just been thrown back in the doghouse thanks to CEO Mark Zuckerburg’s jarring pivot from open communication to private messaging.
Today, FB stock is down 1.7% after Zuckerburg hinted at a change to FB’s business that would transition the company to a model more closely resembling Tencent’s (OTCMKTS:TCEHY) WeChat, and possibly damaging FB’s current business model in the process.
Cultivating a more privacy-focused Facebook Inc is a response to privacy concerns that were amplified last year after the Cambridge Analytica scandal and additional scrutiny over its questionable use of user data spooked many FB stock investors.
Specifically, a more privacy-minded version of Facebook would cover everything from Facebook’s public space to a private space — or more eloquently titled, “town square” and “living room.”
The town square would feature the traditional News Feed and other familiar, open social features like Facebook groups, while the living room would mainly be used for messaging and other, more private uses.
According to Business Insider, the “tectonic shift for Facebook’s business model” could affect its revenue, which primarily comes from advertising. Specifically:
“End-to-end encryption — along with other plans to give people more control over their data such as a clear history too and disappearing posts — would make it harder for Facebook to gather the user information on which its business model relies.”
The Impact on Facebook Stock
For a long time, FB stock was considered by many investors as a “sure thing” to bet on and it was often touted as an ideal long-term investment. After all, the social media giant had a platform that was seemingly imbued deep within our culture and constantly expanding throughout the world’s collective mindshare. But the popularity of FB’s current platform design is increasingly becoming less popular as “people are now demanding privacy and ephemerality.”
Although it would be premature to say that this change could hurt Facebook stock, a significant change to its business model in the years ahead could alter the company’s growth and durability. And whether a FB with less access to user metadata will better serve the company over the long run is something that’s still to be determined.
Whatever the future holds, one thing is certain: The long-term case for FB stock just got murkier.
Robert Waldo is an Assistant Editor for InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.