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Facebook investment faces hurdles from privacy concerns, politics

Ron Walter looks at Facebook's challenges
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Bizworld by Ron Walter

What started out 15 years ago to meet hot college girls has become one of the hottest investments ever – Facebook.

Creator Mark Zuckerberg began a site call Facesmash, comparing the photos of two women side by side. Some of his documented comparisons were outright brutal, comparing some girls to farm animals.

The Harvard student was arrogant then as now when under fire at government hearings about Facebook.

Following trouble, near expulsion from Harvard over a slew of matters, the Facesmash site was revived as Facebook, a site student directory.

Within months, Zuckerberg and a partner each invested $1,000 in the new Facebook. From that humble beginning Facebook became a company valued at $162 billion.

Zuckerberg’s stake, worth $60.6 billion, fluctuates by millions every day. In one day last July, his shares lost almost $19 billion value.

Facebook became the leading social media, surging from 500,000 members in 2007 to 2.3 billion. Just about one in every three people on the globe subscribes to Facebook.

Growth of the site was fantastic. Members shared their insights from the contents of breakfast to photos of grandchildren, kittens, dogs and, of  course, personal attitudes – ethnic/racial slurs. Meanwhile Facebook pulled in billions in revenue on the “free” site from advertising.

While users were happy posting daily activities on their “free” page, Facebook vacuumed up their personal information, using it to make billions. If you talked about your baby your site was targeted with advertising for baby food, diapers and the like. If you discussed bulls, you saw ads for cattle and related products.

Facebook posts took the place of newspapers for millions, who trusted their friends, and who mostly believed: if it’s posted it’s true.

Everybody seemed happy with this relationship until the Facebook miracle came into sharp focus following the 2016 United States presidential election and allegations of Russian lies on Facebook.

Disturbing evidence surfaced on Facebook use, as a tool to spread lies during the campaign. Many Facebook users became even more concerned when it was revealed the Republicans had hired a firm called Cambridge Analytica to use Facebook data to spread lies.

The concern grew when, after denials, Facebook admitted it had shared users’ personal information widely with commercial operators.

Instead of a few privacy keeners, many of Facebook’s users began wondering how their highly personal posts were being used or abused.

The outcome: Facebook still faces legal action and slower growth. Evidence shows younger users are drifting to other social media like Instagram, owned by Facebook. Facebook may become your grandparents’ site.

Voters have learned from the scandal. Seven in 10 Canadians believe Facebook will be used in the federal election to influence their vote.

Given worldwide use and markets, Facebook has yet to be fully exploited, the company seems assured of a future. With uncertainty created by lawsuits and government inquiries, this is not an investment for the fainthearted.

Stock was a recent $162.50 US, down from a yearly high of $218.62. Facebook shares sell at a strong 22 times earning – no bargain.

Remember technology companies that fell out of consumer favour? – Nortel, Motorola, Blackberry, AOl, Netscape. The eclipse for most was swift and sudden. Will Facebook join them?
          
CAUTION: Remember when investing, consult your adviser and do your homework before buying any security. Bizworld does not recommend investments.
 
Ron Walter can be reached at ronjoy@sasktel.net

 

The views expressed in this column are solely those of the author and do not necessarily reflect those of Moose Jaw Today, the Moose Jaw Express, its management, or its subsidiaries.




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