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The Week Ahead: What's in a name? It shouldn't matter to Facebook shareholders

Tom Hudson, Miami Herald on

Published in Business News

Facebook, by any other name, has a problem. It’s not a profit growth problem – at least not right now. It is a bruised and battered corporate image as a social media bully.

Facebook is used to the spotlight, and it has thrived under pressure from the public and politicians for its laissez-faire approach, even though it’s the company’s own algorithm decisions drawing the criticism and scrutiny.

The company faces shareholders Monday in the week ahead when it releases its third quarter financial results. Previously, Facebook has warned investors to expect revenue growth to slow “significantly,” mainly due to the big sales jumps in the year earlier periods.

It’s the regulatory environment and reputational challenges that present bigger obstacles for Facebook. A whistleblower has told U.S. senators — and is due to testify to a British parliamentary committee on Monday — how the firm puts “profits before people.”

Without diving into a debate over what, if any, social responsibilities a corporation has, evidence about Facebook’s actions running counter to CEO’s Mark Zuckerberg’s public assurances that the company is taking steps to reduce mis- and disinformation and to shield young users from harmful practices have no doubt harmed the stock price. Since the Wall Street Journal published the first of its investigation, The Facebook Files, shares have fallen about 10 percent while the S&P 500 is flat.

 

That’s the short-term cost of a bad reputation. Monday’s quarterly data on total unique visitors to the company’s platforms (Facebook, Instagram and WhatsApp), daily active users, and enviable operating profit margins around 40 percent are important. The company's business outlook for ad spending over the holidays and into the 2022 mid-term election year also will be noteworthy. However, the rhetoric around new rules for social media platforms poses a meaningful and increasing risk.

On Thursday, Facebook holds its annual Connect conference, where it hopes to shift the focus to its innovations with augmented and virtual reality. It is expected to unveil a new corporate name. Technology news website The Verge describes the name change as “the tech giant’s ambition to be known for more than social media and all the ills that entail.”

Facebook by any other name will still have to address the stink of the company’s troubled reputation.

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