social media

Social media companies took a beating on Wall Street.

Wall Street severely punished social media giants Facebook and Twitter after the two companies revealed slowing growth and increasing security costs.

Facebook disappointed the Street with its second-quarter earnings, and warned that spending on security and privacy enhancements would cut into profits in the future. According to the New York Times:

Investors responded Thursday by hammering the stock of Facebook, one of the world’s most valuable companies. Shares of the social media giant fell 19 percent, wiping out roughly $120 billion of shareholder wealth, among the largest one-day destruction of market value that a company has ever suffered.

Twitter’s value sank 17 percent Friday after it released disappointing growth numbers as well.

CNet argues that the beatings investors delivered to social media companies were a long time coming. Fake news, online bullying and cavalier treatment of users’ private information are finally taking a toll in the form of increased costs and a slowdown in users. The outlet writes:

While it’s easy to diagnose the problem, it’s much harder to find a cure. And it’s only in the past year or so that Facebook and Twitter have begun to meaningfully address concerns about their respective services.

Zuckerberg in particular was publicly dismissive after the 2016 US presidential election that hoaxes and false news stories had impacted voting trends. Then he was slow to address concerns about abuse and harassment campaigns by some Facebook users, most recently the popular conspiracy theorist Alex Jones. And Facebook has been blamed as well for not watching its service closely enough to stop the spread of misinformation that led to violence in other countries.

Vox, meanwhile, argues that Wall Street’s reaction to the companies’ earnings is evidence that social media won’t change their behavior without regulation, because it’s too costly to do so:

In a world of shareholder primacy, where corporate boards prioritize maximizing profits and returns to shareholders above all else, it’s not reasonable to expect Facebook and Twitter to make moves that might affect their businesses negatively. Advertising dollars — even if they’re for divisive political ads from suspicious sources — are still dollars. Engagement — even it’s driven by bot armies — is still engagement. And big money can speak pretty loud.

Around the web 🙂

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