Less liking now for Twitter, Facebook on Wall Street
The massive drops in Facebook and Twitter stocks this week came after disappointing financial results amid a menagerie of user distrust over privacy, fake accounts, fake news and Wall Street expectations, experts said.
“Americans are willing to cede a certain amount of privacy to a company like Facebook, but when they find their trust is being abused and Facebook becomes more of an afterthought than a necessity, then you tend to say I don’t need this anymore,” said William Connor, executive director of Open Mic, a group that helps push tech companies to address privacy and other issues. “These companies don’t have a guaranteed lifespan, so they have a reason to be concerned.”
Twitter said yesterday its active users fell by 1 million in the last quarter and likely will continue to fall. Earlier this year, the company said it has started deleting and deactivating fake accounts. Yesterday, shares of Twitter fell more than 20 percent. Chief executive Jack Dorsey said the decisions were made in the best interests of the company in the long run.
“Our second quarter results reflect the work we’re doing to ensure more people get value from Twitter every day,” Dorsey said. “We want people to feel safe freely expressing themselves and have launched new tools to address problem behaviors that distort and distract from the public conversation.”
Both Twitter and Facebook have been facing increased scrutiny and skepticism, including for their use in spreading fake news and propaganda during the presidential election and their handling of user data.
Facebook also reported disappointing earnings Thursday, saying the company is taking steps to improve user experience that will come at the expense of short-term earnings.
“We’re investing so much in security that it will significantly impact our profitability,” CEO Mark Zuckerberg told analysts.
The dramatic slides for both companies could test the CEOs’ resolve to continue to address the problems, Connor said.
It will be interesting to see how the companies handle this latest news or whether they see it as an excuse to not do what they’ve committed to do,” he said.
Facebook stock cratered 19 percent Thursday, lopping off $119 billion in value, and fell slightly again yesterday. Thursday’s loss was the alltime biggest single-day decline in value.
“Those expenses are a reasonable consequence of trying to create a long-term improvement in the safety and longevity of the platform’s existence,” said Andrea Matwyshyn, a technology policy professor at Northeastern University. “There is a risk of these platforms devolving into a place that is perceived by consumers as so overrun with false content or advertising that inhibits their ability to use the platform.”