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This week we had an overview of why technology giants like Facebook and Twitter seem so reluctant to clean their platforms. While they are facing an increasingly scrutiny by the media, users and regulators in Europe and the United States about privacy, how they monitor their sites and the fake news, they are Are worried about self-regulation. their platforms, or just the threat of them, have caused a huge backlash on Wall Street.
Facebook's action experienced its biggest one-day drop on Thursday, as $ 119 billion was erased following the release of lower-than-expected revenue growth for the second quarter 2018 and she hopes the declines will continue the second half of the year. The company based in Menlo Park, California has also shown signs of slow growth of users.
Then Friday, Twitter saw its own collapse of the market: its stock fell 20% after its earnings report. falls.
In the case of both companies, some of the weakness in their second-quarter numbers has been long in coming – for example, Facebook's market penetration in North America and Europe is already quite high. But also comes from the many controversies in which they were involved and from their attempts – or those of legislators – to repair them. And investors have panicked about it.
In a world of shareholding, where boards of directors give priority to maximizing profits and profits for shareholders, it is unreasonable to expect that Facebook and Twitter make negative movements on their activities. The advertising dollars – even if they're meant for controversial political ads coming from suspicious sources – are still dollars. The commitment – even led by armies of robots – is always a commitment. And a lot of money can talk pretty loud.
The Cambridge Analytica scandal put Facebook at the forefront of its privacy practices early in the year, with CEO Mark Zuckerberg appearing before lawmakers in the United States and Europe to try to explain the processing of user data by his company. Calls for the removal of Facebook have been scanned over the internet, and although the number of users (Facebook is rather tacky) is not clear, they have hardly been new ones users in the United States and Canada in the second quarter. .
Twitter has purged users of its platform in order to get rid of robots and fake accounts. The Washington Post reported that the company had suspended more than 70 million accounts in May and June . Then in July – so in the third quarter, and therefore not reflected in the company's second quarter report – Twitter began to serve tens of millions of suspicious accounts from its followers accounts.
and Twitter was also affected by the General Data Protection Regulation (GDPR), a new data protection law promulgated by the European Union on May 25. It aims to ensure that users know and understand the data collected and agree to share it. . (Remember the wave of emails about the privacy policies you received in May thanks the GDPR.)
At a call with badysts Wednesday, Zuckerberg acknowledged that the loss of about one million European users was the result of GDPR. Facebook's general manager, Sheryl Sandberg, said that GDPR had not yet allocated revenue, but that it was not fully deployed in the second quarter, which could be the case for other privacy protection changes
– in other words, get rid of some of the robots and bullies – could bring down its number of users in the future .
"We are making active decisions to prioritize health initiatives on short-term product improvements that could lead to more use of Twitter as a daily utility," writes the company in its results letter. Any sign that they could make some changes
Facebook and Twitter, although not exactly what Wall Street was waiting for, were not terrible . Facebook has beaten badysts' expectations in terms of earnings per share, and Twitter has matched them. Zuckerberg has announced that Facebook and its courier services have 2.5 billion users, and Twitter's CEO, Jack Dorsey, noted that revenues had increased 24% last year.
Both companies lost a fifth of their value in one day.
The message from investors is clear: they worry about what bad titles and subsequent changes social media platforms could do for their bottom line. If Twitter and Facebook are monitoring their sites in a way that affects the engagement or content, or if the privacy controls that require users to use their shared data lead to a larger number of refusals, advertising dollars could fall. It is expensive to hire workers to increase privacy protections and monitor activities.
The idea that they are abandoning the mindset of moving fast, growing at any price that they have adopted for years, even in the least, makes Wall Street nervous. Investors have embraced the tech giants for this particular mentality: Facebook is the most popular title among American hedge funds, according to a note from Goldman Sachs this week
This week offers a lesson that we do not necessarily want that executives withdraw: try to be better, and potentially be severely punished by investors.
This is also the reason why we can not expect technology companies to look into the idea of regulating themselves.
In the United States and Europe, there has been a lot of talk about the regulation of technology companies. In the United States, where lawmakers have generally been more reluctant to curb growth, some suggest that businesses might try to self-police, and lawmakers have asked for their views on how they think the regulation should work.
At a Senate hearing in April, Senator Orrin Hatch (R-UT) asked Zuckerberg what "kinds of legislative changes" he thought he should be adopting to prevent a repetition of Cambridge Analytica. Senator Lindsey Graham (R-SC), who also urged Zuckerberg to find out if Facebook is a monopoly, asked the executive to submit draft regulations.
But Facebook and Twitter have not given legislators reason to trust them. Zuckerberg has been excused since Facebook started, and he has no good answers about what he's going to and will not allow on his platform, no matter how bad he can be harmful or false. Twitter is making efforts to improve the conversation, but people are still being bullied and targeted so much that they leave.
There are surely a myriad of reasons technology companies are reluctant to monitor their platforms – freedom of expression, resources, accusations of bias. Money is certainly a factor as well, and this week we had a multi-billion dollar look at the issues.
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