The cry among politicians to “break up Facebook (NASDAQ:FB)” has been met by the owners of FB stock with a collective “meh.”
Since the start of 2019, Facebook stock price is up 42%, adding over $100 billion to the market cap of FB stock, which stands at about $534 billion. FB stock sells for 28 times last year’s earnings and nine times last year’s revenue.
Facebook’s vice president for corporate affairs, former British Deputy Prime Minister Nick Clegg, has become the public face of the company’s opposition. He writes that a breakup “wouldn’t fix what’s wrong with social media.”
Sadly, he’s right.
The Thought Police
Facebook and Alphabet (NASDAQ:GOOGL) became dominant on the globe’s “free web,” using their cash flow to build networks of cloud computers and fiber lines. Since the 2016 election, even Facebook has come to recognize the limits of this approach.
But no one, not even Facebook co-founder Chris Hughes, whose New York Times screed calling for its breakup pushed the current debate into overdrive, has a clear plan for keeping what makes Facebook great while containing its potential harm.
If the Facebook service is separated from FB’s Instagram and Whatsapp services, that may just create three speech overlords, instead of one. Separating the cloud Facebook built from the services that fund it would create a dilemma about how to pay for the cloud network.
Down with Chokepoints
The chokepoint for the world’s regulators is the “last mile” of every internet transmission, the regulated wired and wireless networks that can be used to prevent a freedom fighter or a terrorist from marketing his ideas.
That chokepoint, too, may be about to disappear. Facebook is in a race with Amazon.com (NASDAQ:AMZN), Tesla (NASDAQ:TSLA) founder Elon Musk’s SpaceX, and venture-funded OneWeb to launch satellite networks aimed at giving remote villages fast internet access. Or, you might say, giving Abu Bakr al-Baghdadi the same web access that Donald Trump has.
Public vs. Private Rights
When the web was launched 25 years ago, internet activists liked to point out that the First Amendment “is just a local ordinance,” arguing that the web would enable worldwide free speech.
Government can be repressive, but private companies can enable repression. Facebook’s claim to allow free debate within arbitrary limits, is just as absurd as the contentions of Chinese President Xi Jinping’s.
The Bottom Line on FB stock
Facebook is trying to square this circle by becoming a global common carrier, offering communication that’s both private and ubiquitous.
But common carriers are controlled by shareholders. Facebook and Google, with their dual share structures, are controlled entirely by their founders and would, in theory, be controlled by their founders’ heirs, just as The New York Times (NYSE:NYT) is now on its fifth generation of Sulzbergers.
What’s clear is that there are no easy answers. One man’s terrorist is another man’s freedom fighter. One woman’s scam artist is another woman’s hard-working marketer.
The hard questions that existed at the internet’s birth have yet to be answered. A process for answering them must still be created. It will be imperfect, and it will cost money to administer, money that the free web may be unable to afford.
Dana Blankenhorn is a financial and technology journalist. He is the author of a new environmental story, Bridget O’Flynn and the Bear, available now at the Amazon Kindle store. Write him at [email protected] or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in AMZN.