The trouble for Facebook stock is not going away

The trouble for Facebook stock is not going away

Facebook stock continues to decline during Monday trading as more advertisers continue to join a growing boycott of the social media platform.

 

The sell-off started on Friday, June 26 when Facebook stock dropped 8.3%.

 

The two-day decline has decreased Facebook’s market value by $60 billion.

 

So far names like PepsiCo (NASDAQ:PEP)Coca-Cola (NYSE:KO)Starbucks (NASDAQ:SBUX)Unilever (NYSE:UN) and Verizon (NYSE:VZ) have all suspended their advertising in the United States. And it’s unlikely to stop there.

 

“Stop Hate for Profit” the campaign that has already received a significant amount of support from U.S. companies is committed to take their battle worldwide in an effort to increase pressure on Facebook to remove hate speech.

 

The global aspect of this is significant when you consider that a company such as Unilever has only agreed to pause its U.S. spending.

 

That accounts for approximately 10% of the estimated $250 million that the company spends annually advertising on Facebook.

 

 

ALSO READ: Facebook, Google, Twitter grilled by US panel on election security

 

 

Despite the walloping that Facebook stock is taking, at least one analyst seems non-plussed.

 

Daniel Salmon an analyst for BMO Capital Markets says the boycott won’t significantly hurt Facebook’s revenue because the social media giant has over 8 million advertisers.

 

‘That’s a fair point. It also sounds a bit like damage control to me.

 

This is a problem that isn’t going to go away anytime soon. And at some point, being subject to a potential loss of billions of dollars has to make a difference.

 

Worse, Facebook is already a company that regulators have been eyeing for its business practices.

 

This is certainly going to increase pressure for reform. But what will that reform look like?

 

 

 Are Facebook’s Troubles the Canary in the Coal Mine?

 

The combination of freedom of speech and social media has always been an incendiary mix.

 

When you give anybody and everybody a platform to express their thoughts and feelings, what could possibly go wrong?

 

Facebook is finding out that plenty can go wrong, and the social media giant is now in a battle that could very well reshape how investors think about the social media business model.

 

Most social media platforms generate revenue because advertisers pay to list on their platforms.

 

When you look at it from the advertiser’s point of view it makes sense.

 

Their ads are seen by millions and millions of users.

 

And the advertisers pay significantly less than they would from a commercial that airs on broadcast airwaves or cable.

 

This is why when companies like Facebook and Twitter (NYSE:TWTR) report their quarterly earnings investors pay attention to daily active users (DAUs) and monthly active users (MAUs). Because these numbers are the denominator (so to speak) for how companies assess how many viewers will be exposed to its ads.

Post source : Marketbeat

About The Author

Lilian Osigwe

Osigweh Lilian Oluchi is a graduate of the University of Lagos where she obtained a B.A (Hons) in English, Masters in Public and International affairs (MPIA). Currently works with 1stnews as a Database Manager / Writer. lilian.osigweh@1stnews.com

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