Is Facebook Stock Immune to Political Fallout?
As Facebook Inc. (NASDAQ: FB) deals with fallout over how it handles President Trump’s posts, the social media giant is moving to rein in content from foreign state-controlled media outlets. The Menlo Park, California-based company has faced scrutiny for years over how some governments use the platform to spread propaganda and mislead audiences.
Negative sentiment over how Facebook controls (or doesn’t control) messages from people in power has led to small boycott movements at various times. This dovetails with complaints about how personal data has been used.
On Thursday, Business Insider ran a scathing opinion column with the headline, “There Has Never Been a Better Time to Quit Facebook.” Front page editor Dave Smith wrote: “Facebook refuses to police information on its own vast network, despite being the largest media company in the world … Refusing to police the content on your platform is inexcusable, especially when certain figures on that site have thousands or even millions of followers.”
It’s the kind of sentiment that can’t be good for the Facebook brand. But to date, Facebook hasn’t suffered a major loss in users. It remains the largest social media platform in the world, with over 2.6 billion users. And Facebook CEO Mark Zuckerberg insists the platform is not a media company.
It’s hard to say if Wall Street is really concerned about this debate. Shares of Facebook closed down 1.7% Thursday, at $226.29. But the stock is up about 10.5% year to date, beating the S&P 500, which is down about 4%. For the last year, Facebook is up nearly 35%.
And Facebook stock has weathered previous crises, including the revelation that divisive Russian ads reached 126 million Facebook users during the 2016 election. Or the Cambridge Analytica scandal, in which digital consultants misused the data of millions of Facebook users.
On Thursday, the company announced it would begin labeling pages, posts and ads from government-affiliated media sites. Examples would include Russian- and Chinese-backed organizations that post information on Facebook without identifying their origin. The program will roll out to U.S. audiences first, and later to other countries.
“We’re providing greater transparency into these publishers because they combine the influence of a media organization with the strategic backing of a state, and we believe people should know if the news they read is coming from a publication that may be under the influence of a government,” Nathaniel Gleicher, head of cybersecurity policy, wrote in a blog post.
Gleicher told CNN that the label would be applied immediately to CCTV and Xinhua of China, and Russia Today and Sputnik of Russia. Organizations can appeal if they feel they’ve been mislabeled.
Later this year, Facebook will also start labeling any advertisements from these outlets. While the company says state-controlled media rarely advertise in the United States, Facebook will block them “out of an abundance of caution to provide an extra layer of protection against various types of foreign influence in the public debate ahead of the November 2020 election in the U.S.”
Facebook was in the news earlier this week when it declined to add a warning label or remove a controversial post by President Trump. The same post was notably flagged by Twitter (NYSE: TWTR) with a warning label for this language: “when the looting starts, the shooting starts.”
Angry at Twitter’s move, Trump has threatened to take action against social media platforms that remove his posts or add warning labels to them. Last week he signed an executive order encouraging the Federal Communications Commission to review Section 230, a law that is more than 20 years old and has been credited with allowing social media to flourish. Any substantial change to Section 230 could have a real business impact on Facebook, Twitter and others.
Zuckerberg seemed to defend not interfering with Trump’s post as a point of differentiation between Facebook and Twitter. In an interview with Fox News, he said, “I just believe strongly that Facebook shouldn’t be the arbiter of truth of everything that people say online. Private companies probably shouldn’t be, especially these platform companies, shouldn’t be in the position of doing that.”
But the decision has not gone down well internally, with some employees staging a virtual walkout on Monday. In a meeting with employees on Tuesday, Zuckerberg said the company’s policies on free speech “show that the right action where we are right now is to leave this up,” according to audio obtained by The New York Times.
It will be interesting to see if Facebook’s new Oversight Board weighs in on this topic. While announcing the independent board recently, Zuckerberg said, “Facebook should not make so many important decisions about free expression and safety on our own.”