Facebook Takes the Stand
Over the past couple of weeks, Facebook (FB), the world’s largest social media network, has weathered one of the highest-profile corporate scandals in recent memory.
Facebook has come under fire for releasing data on 50 million of its users to Cambridge Analytica, a political consulting and data mining firm that worked for the Trump campaign.
In response to public backlash over the issue, Facebook CEO Mark Zuckerberg traveled to Capitol Hill this week to testify before Congress.
Zuckerberg was grilled by legislators across the board over issues ranging from Facebook’s ability to keep customer data secure from malicious hackers to giving users more control over what data they share and who it’s shared with.
Since the scandal came to light a few weeks back, Facebook stock, one of this year’s strongest performing tech stocks, has taken a beating, falling over 11% since mid-March.
Despite market sentiment taking a heavy toll on Facebook, Zuckerberg’s testimony seemed to reassure investors they have little to fear. This week has seen the stock price rebound nearly 5% since testimonies began on Tuesday.
Realistically, its unlikely investors had too much to worry about at all. At around 2 billion, Facebook claims the world’s largest user base (on any social network).
Each of those users produces just over $20 of profit for Facebook each year. The short-lived #deletefacebook campaign, which had a negligible effect on its user base, is estimated to have lost Facebook at most 20 million users. For a company whose pre-tax income sits at around $20.5 billion, $400 million is a small price to pay.
Additionally, Facebook makes more money from mobile ad revenue than almost any other company in the world and owns numerous other social media companies. It owns Instagram, a mobile marketing powerhouse and another one of the world’s largest social media platforms, and What’s App, a mobile messaging app with a massive international user base and growing revenue stream.
While public distrust and bad press can wipe billions of dollars off of a company’s valuation overnight, that doesn’t always change what the company is actually worth, and the market tends to eventually correct itself. And after this week, it seems certain the market thinks Facebook is here to stay.