If Facebook is in the middle of a crisis, you wouldn’t know it by looking at the stock market.
As revelations continue to pile up over Russian agents leveraging the social network to blast fake news to millions of American users, the company’s standing with investors has remained Teflon with shares of Facebook hovering near an all-time high of about $174 on Monday.
Brian Wieser, senior analyst with Pivotal Research Group, told TheWrap the Russia story is white noise to Wall Street. Until its impact is reflected in the bottom line, investors won’t care.
“It’s not clear that it shows up in the numbers,” said Wieser. “I’d say that’s the primary reason the market hasn’t reacted to any of this.”
Wieser called the story a “road bump” for the company, pointing to the relatively small amount of money — about $150,000 — spent on ads by pro-Kremlin pages. In comparison to Facebook’s massive ad revenue, it’s a drop in the bucket. (Facebook raked in $26.9 billion in ad revenue in 2016.) From a business standpoint, “[Facebook] and Google continue to dominate the [advertising] industry — there’s just nothing that gets in the way of that,” said Wieser.
Still, the analyst doesn’t believe it’s a static situation. Facebook could be facing two pitfalls down the line, stemming from the Russia fallout. The first is potential regulations being put in place to monitor its ads. Congress is weighing legislation that would compel sites like Facebook and Twitter to disclose who pays for political ads. This, according to Wieser, would add a “little cost,” but ultimately be navigated.
The bigger consequence, however, could be the overall mosaic the Russian tile helps put together. Facebook has already drawn heat this year for allowing anti-Semitic ads to go live. The inflation of its ad reach wasn’t a good look, either. Coupled with its admission the platform was exploited by Russian meddlers — and that the company washed away any mention of this in an April report — creates an impression the company is losing command of the wheel.
“The issue from all of this is, it’s not like Facebook is willfully doing all these things. All of these things have happened despite their intentions to the contrary, and that’s the problem,” said Wieser. “It’s not just a picture of a company that doesn’t have a handle on its operations, but they’ve created a circumstance where everything has to be called into question.”
USC marketing Professor Ira Kalb recently echoed this sentiment, saying Facebook’s business could be impacted if it’s incapable of weeding out fake news in the future.
“The main thing you have with the public is trust,” Kalb told TheWrap. “And if there’s any reason for people no to trust you, that’s really going to hurt your business.”
To be sure, this could be the very-public growing pains of a company expanding at an unprecedented rate — an aftershock stemming from CEO Mark Zuckerberg’s old “move fast and break things” motto. And, unfortunately, spotting every fake news post is “not realistic,” as Zuckerberg said last month. But the potential for fake news to undermine the trust of advertisers and, more importantly, its users, should have both Facebook and its shareholders on notice.
On Nov. 1, Facebook execs will head to Washington, D.C., to testify in front of congressional investigators on the impact of fake news on the 2016 election. Later that same afternoon, the company will report its third quarter earnings. For now, what the company reveals to Congress will likely be immaterial to major investors. Unless the problem persists — calling into question the company’s leadership and shaking the confidence of its one true asset — it’ll continue to be a juggernaut.
“Until you see it in the numbers,” said Wieser, “you’re not going to see a meaningful [Wall Street] reaction.”