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IT’S been reported that Mark Zuckerberg saw more than $6bn wiped from his personal fortune when Facebook, Instagram and WhatsApp stopped working on Monday.
And yet that may not have been the worst thing to happen to the social network founder this week.
The outage across the Facebook-owned apps lasted just six hours but when you consider it affected an estimated 3.5bn people across the world the financial impact was always likely to be significant, and Facebook stock fell around 5% as a result.
But the news at Facebook HQ only got worse on Tuesday when, in front of US lawmakers, whistleblower Frances Haugen, a former employee, accused the company of putting profits before the wellbeing of its users and wider society.
In her testimony to senators, Haugen laid out a case that has been building against Facebook for some time, but never before confirmed by anyone so well-placed. Namely, that its algorithms work to amplify content which is most likely to be read, shared and reacted to, even when that content risks dividing communities or harming users.
She claimed that documents in her possession show the company has been aware of the negative effects of its platforms on young people, in particular, but has worked to obscure such findings. She also said that measures to restrict disinformation ahead of the 2020 US Election were quickly reversed after polling day.
Such accusations are not new, but what made the markets sit up and take notice was the cross-party condemnation of the company that met Haugen’s evidence.
It’s a toxic mix for what is still the fifth largest company in the world’s largest stock market. It has led some to question whether we have now seen ‘peak Facebook’ - the moment when its inexorable rise is halted and put in reverse. The share price tells an ugly story, with the falls this week contributing to a more than 13% fall in Facebook stock over the past month.
Comparisons have been made between Haugen’s evidence and similar reckonings for the tobacco and sugar-laden food industries, when companies’ long-running protestations were finally set aside and draconian rules imposed by regulators. That sort of action still seems a long way off, but investors are in the business of anticipating negative impacts and may conclude the ceiling for Facebook is somewhat lower after this week.
Paradoxically, Facebook itself may not be wholly opposed to extra oversight of its operations. It may conclude that any measures it can come up with to deal with toxic content will inevitably fall short, and so be willing for the authorities to do the hard thinking instead. That would also have the benefit (to Facebook) of extending oversight to rival platforms. Facebook’s huge scale and wealth means it could probably deal with the extra regulatory burden much more easily and new rules could work to raise the barriers to entry for potential competitors.
It has been a tough week for Zuckerberg and Facebook - it may not be the last.
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to a Fidelity adviser or an authorised financial adviser of your choice.
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