Commentary

Scandals, Stock Drops May Hit Facebook Where It Counts: Its Pocketbook

I'm Rob Williams, a longtime business reporter and Publishing Insider's newest blogger. I'll be sending you my thoughts about the current state of publishing — digital or otherwise — every day.

The latest Facebook scandal erupted this week after The New York Timesreported on the social network’s efforts to discredit critics and cover up the discovery of Russian propaganda on its platform. It will blow over — unless it hits the company where it hurts most: its pocketbook.

That’s why Facebook should be worried.

Investors are discounting its stock to a 20-month low, and advertising executives question the company’s morality and safeguards for brands, according to a follow-up report by the Times. Such criticism adds to past advertiser complaints about the accuracy of Facebook’s audience measurement, alongside worries about legal liabilities that may arise from sharing user data with the platform.

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Some of these complaints may be a routine negotiating stance designed to exact better terms from Facebook on ad placements. So far, no major advertiser has announced plans to pull ads from the social network, especially as Black Friday looms and marketers prepare to cash in on the shopping bonanza.

Despite the outrage directed at Facebook’s arrogance, ineptitude and moral vacuity, the company still draws a massive audience. It has detailed information about its users that helps marketers reach target groups with laser-like precision.

That market power is frustrating among publishers that have lost revenue to Facebook or have grown more dependent on the social network to reach readers. The resentment Facebook fosters in the journalism community is palpable. Reporters believe the company drains funds out of news organizations and lets misinformation run unchecked among viral threads.

Critics say the company has been slow to recognize its social responsibility as a media platform. Facebook CEO Mark Zuckerberg has repeatedly described the social network he founded as a “technology company” – because who in their right mind would want to invest in a media business?

Yet, its near-total dependence on ad revenue aligns the company more closely with publishing.

A key challenge for the broader publishing industry is that overall ad spending can only grow so much every year, and that’s not including economic recessions that compel cuts to marketing budgets. For several years, Facebook has warned that its growth would slow.

Those cautionary statements were never intended to be a self-fulfilling prophecy resulting from unceasing scandals.

2 comments about "Scandals, Stock Drops May Hit Facebook Where It Counts: Its Pocketbook".
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  1. Henry Blaufox from Dragon360, November 19, 2018 at 11:30 a.m.

    In reporting on trouble at Facebook, is the NY Times shedding some crocodile tears?

  2. Paula Lynn from Who Else Unlimited, November 19, 2018 at 11:41 p.m.

    Lying to congress is a federal offense. Ask Martha Stewart. And she didn't cross fbeast kind of lines.

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