What realistically happens next to Facebook

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  • Facebook investors and advertisers did not flee after whistleblower Frances Haugen testified that the company harms the mental health of teenage girls and profits from outrage.
  • Facebook made $29 billion in the second quarter of 2021, up 56% from a year earlier, with a net profit of more than $10 billion, and advertisers can’t get enough of the company’s goals and scale .
  • But the wave of criticism could encourage more people to opt out of tracking in iOS, prompt European regulators to push for regulation, and make it difficult for Facebook to recruit good people.

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The following is a selection from Big Technology, a newsletter by Alex Kantrowitz. To get it in your inbox each week, you can register here.

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The question of whether the rounds of the scandal would be immediate, a direct loss to Facebook, was settled soon after the Senate adjourned Tuesday’s hearing. Facebook’s two most important stakeholders – investors and advertisers – did not run away after whistleblower Frances Haugen testified that it harms the mental health of teenage girls and profits from resentment. They already knew the drill.

“It’s effectively going to be a hurricane,” said Jeffries analyst Brent Thilo. told Businesshala Wednesday morning. “And in past storms, this has been a great buying opportunity.”

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Facebook scandals get hot and cool quickly. About once a year, something startling about the social network comes to the fore: a campaign illegally uses its data to psychologically profile voters; The company lies to advertisers and publishers about important metrics; Its own researchers think it is dividing a society it hopes to bring closer together. Then, after a round of outcry from US lawmakers, everything returns to normal. The scandal proceeds like a passing storm.

For all of Facebook’s disadvantages, advertisers — its actual customers — can’t get enough of its targeting and scale. Facebook $29 billion. Make In the second quarter of 2021, up 56% from the previous year, a . with Net Profit over $10 billion. The company’s advertising system works so well that advertisers didn’t even bother to pretend to be a boycott Facebook Files dropped it. They are inclined. “I’m trying to find an advertiser — any advertiser — to tell me they’re increasing spend,” said Jeremy Goldman, director of Insider Intelligence. said. “I still haven’t found any.”

With such loyal customers, Facebook has commanded the loyalty of Wall Street. Although the company’s stock is down 12% this month (and trading at a discount Compared to Google), it has outperformed the S&P 500 this year, up 23% compared to the S&P’s 19%. Facebook stock pops up reliably after every hit, so Thill and his counterparts are directing their customers to buy. “How do investors make money?” Thiel said. “At times like these, usually when the stock takes a hit, that’s when you make a lot of money.”

As the money comes in, Facebook fills Washington with cash to prevent lawmakers from taking a tough stand. Black money is put into “associations”, or third party group who will reveal sometimes – but will rather not — That Big Tech Fund Them.

Richard Blumenthal, who led this week’s hearing with Haugen, knows that this money is working to prevent him from taking concrete action. “Big tech’s big money and an army of lobbyists are standing against us,” he said on Thursday. But it’s not clear how he plans to retaliate. Sen. Blumenthal’s office declined to elaborate or make him available for interview. And so the status quo remains.

what can change

Even if advertisers, users, Washington and Wall Street don’t take action, the scam could exacerbate some of Facebook’s current problems.

For Facebook, the most important part of this wave of criticism is that it may encourage more people to opt out of its tracking in iOS. Facebook had already given guidance Revenue is expected to take a hit Many people stopped tracking it on the web after this quarter, making life more difficult for its advertisers. Facebook has earned those “ask not to be tracked” designations after years of privacy scandals, and it’s unlikely to help from this moment on.

Facebook may struggle further to recruit good people after taking another hit in its brand. In his testimony, Haugen said“Facebook is caught in a cycle where it struggles to get hired – which causes it to have trouble understanding projects, which lead to scandals, which then make it harder to get hired.” Facebook is still considered a “prestige” brand among many tech workers, but it’s hard for recruiters to take a call when the company is on blast before Congress.

Finally, European regulators are likely to push for regulation, and Haugen is already working with the EU to get something done. Should the EU enact something, it could have a material impact on Facebook’s business. But that’s only if the rules don’t inadvertently harm Facebook’s competition, which is not given.

In the time since the Wall Street Journal published its first Facebook Files story, the company has, some might say casually, without a hint of introspection. This may be because it actually believes that it is correct. But it’s also likely that Facebook is responding to the incentives. The company has seen some results for its actions so far. so it’s like this adopt the ascending mantra In the face of criticism today: Never apologize and move on.

this post was running before Alex Kantrowitz’s Big Tech Newspaper.


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