Facebook Chief Executive Mark Zuckerberg testifies before two congressional panels this week on data privacy issues from the Cambridge Analytica scandal. Social Media and FANG giant $FB has lost around 15% in value since the crisis.
Facebook Chief Executive Mark Zuckerberg testifies before two congressional panels this week on data privacy issues from the Cambridge Analytica scandal. Social Media and FANG giant $FB has lost around 15% in value since the crisis.
Those infamous words of Zuckerberg
Expect more countries and groups to join in going after Facebook, the guy had a knack for making enemies. Australia announced last week that it is launching a formal investigation into $FB). Of interest will be just how many users privacy was breeched and how many political and corporate campaigns have seen similar.
Update: Mark Zuckerberg’s prepared testimony ahead of Wednesday’s hearing
We know it isn’t just the Trump campaign but the Obama and Clinton campaigns. How many corporations paid for similar data or government agencies?
The Initial reports said that the data analytics firm had improper access to about 50 million users. Facebook upped the number up to 87 million users may have been affected. What is the bet it is significantly more?
Don’t forget Zuckerberg called facebook users “dumb fucks” from day one so it isn’t a far reach to suggest the data was an open secret to the highest bidder. Zuckerberg has been described as the most social inept tech billionaire known to man. To underscore that he was indeed right about dumbfucks, there was a sizebale pervcantage thinking he would and could run for presidents. At least we know zuck was right about something.
$FB has also confirmed that it uses automated tools to scan Messenger chats for abuse. Logically Zuckerberg’s testimony could see data abd social media CEOs such as those from Twitter $TWTR, SnapChat $SNAP and Google (GOOG) told to testify.
So what is a fair value for Facebook going forward? Just last month there were concerns about Facebook’s Price vs. Volume Drivers following FB’s earnings last month. Concerns existed prior to the Cambridge news with both the advertising drivers and duplicate accounts. With the #DeleteFacebook movement these concerns have grown legs with many citing how quickly MySpace collapsed from relevance.
In light of recent weeks it is worth looking at Barclays note titled “Why We Think FB Can Modestly Beat 2018 Consensus”. The note begins with “We now estimate core “real” Facebook user growth is currently 10% Y/Y after stripping out duplicate & false accounts and backing out Messenger, in contrast to the 15% overall disclosed figure exiting 2017, and down from 17% in 2016.” In other words the analysts were already trying to remodel to justify owning the stock, and then this.
From Barclay’s Note (Remeber this was BEFORE the Cambridge scandal – I will let you decide:
This deceleration in real user growth, along with management commentary about ad load reaching its natural ceiling in 2H17, plus the impact of video in newsfeed, explains why impressions are only growing 4% and should stay mid-single digits in 2018. Last quarter we took a granular view of the history of FB’s ad trajectory, breaking down the price vs. volume trends over the past few years (see: Unpacking Facebook Price vs. Volume, 11/28/17), and we are updating our framework for new disclosures.
Stepping back, we think FB shares are in a consolidation period from the heightened regulatory and society noise, and we’d take advantage and accumulate on weakness. The temporary narrative is focused on fixing problems and impact to engagement, and will likely shift back to growth initiatives at some point, at which point FB’s multiple is likely to expand again from today’s 20.4x FY19 consensus GAAP EPS.
Is Single-Digit Impression Growth A Problem? Not Really, Price Has Room To Run Impression growth in 2018 (our estimate now +5%, down from 15% previously) is going to increasingly be driven by IG & Messenger, while core newsfeed decelerates. Consensus estimates bake in ~29% price inflation for FB in 2018 (ex- fx), which we think is beatable considering what FB posted in 2H17.
The first stage of price inflation is where FB can drive higher yield (eCPM) by optimizing which ads it shows to which users, while keeping advertiser ROI stable. FB is investing aggressively in machine learning to improve ad ranking & relevance. This could last several quarters, if not years. Once relevancy improvements are tapped out, FB should be in a position to increase unit price, which will erode advertiser ROI to some degree but is likely to be sustained given FB’s volume advantage vs. other mobile display channels.
A lot of ifs and buts there but is relevant to keep an eye on any new competitors we havent heard of yet or existing valuations for $SNAP and $TWTR.
Source: Barclays, TradersCommunity