Facebook made history overnight, with shares of the company managing the largest-ever single-day loss of value for a publicly-listed US company. After falling as much as 20%, shares were holding steady in trading on Thursday.
The selloff was triggered by disappointing quarterly results and an earnings call on Wednesday, during which executives dramatically lowered expectations for future growth.
In the fallout of various scandals, at stake for the company is the very nature of their business model, which depends on finding new ways to collect and monetize user data as well as ways to monetize news dissemination. Both of those things, essential to growth, have come increasingly under fire from users, following the revelation that troves of personal information got into the hands of political consulting firm Cambridge Analytica, and amid the ongoing allegations of Russian disinformation campaigns in the US that have exploited news feed algorithms to influence elections.
In addition to a steady stream of controversies, the company must cope with the reality that they have fewer places to find new users. China, which would theoretically be the company’s biggest potential untapped market, has shut Facebook out despite CEO Mark Zuckerberg’s high-profile efforts to court government officials. Beijing made clear this was not about to change on Wednesday when they pulled approval for a Facebook partner, which had modest plans to do research and development in the country.
Fake news scandals in countries such as Sri Lanka and Myanmar have also sparked widespread public outrage, after they led to mob violence and killings.
In Vietnam, where Facebook has decided to comply with government demands on censorship – something Zuckerberg appeared eager to do in exchange for access to China – their acquiescence has created its own controversy among some, who are opting to use other social media platforms.
All of this has been developing for months, including indications that the company was ready to take concrete steps in response to scandals that would weigh on growth prospects. But the disappointing results were far beyond what investors had expected.
Facebook is a one trick pony. It can only make money if the government of the world do not regulate it. After the Cambridge Analytical fiasco and the pogroms on Muslim minority in Myanmar and Sri Lanka caused by hate speech and fake news spread by Facebook – government of the world are putting pressure on Facebook to police it platform or be penalized. Facebook is hiring alot of human vetters and using AI to weed out terrorist materials and hate speech – but with over 2 billion users – it is being overwhelmed by the task of policing its platform where they get billions of updates by users per second. Facebook is coming to a breaking point – it cannot grow anymore as they already have 2 billion users globally and China is out of bound . The EU and US are exerting strong pressures on them to police their network or be penalized. AI is unreliable and human vetters are costly. The younger generation sees FB as a social network for their parents and aunts and are using much "cooler" network like Snapchat or Instagram.
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