Is Facebook Inc (NASDAQ:FB) Focus on Security Good for Shareholders?

November 08, 2017, 11:38 am ET, BY Simon M.- Contributor| Editor: Thomas H. Kee Jr. (Follow on LinkedIn)

Facebook Inc (NASDAQ:FB) recently announced its Q3 earnings, which beat expectations by a large margin, pleasantly surprising shareholders with higher earnings per share and revenues. However, the social media giant announced that its operating costs would increase by 60-80% in 2018 as the firm intends to hire about 10,000 employees to monitor the content posted on its platforms.

Article Summary

Facebook announced a new security initiative aimed at monitoring content on the site.

The company’s initiative is aimed at protecting its user communities.

Opinion is widely divided on the merits and demerits of this initiative.

Here’s the trading report on FB.

Opinion among analysts is extremely divided with one group stating that the security controls will be good for Facebook users and shareholders, while the other camp decries this new focus on security as a move that could sink the company. Those arguing against the tough security measures that Facebook is likely to implement in order to stop fake news and other content deemed inappropriate state that one person’s security is another person’s free speech.

The group supporting the new security measures being initiated by Facebook tout the fact that this move is aimed at protecting Facebook users, hence it will be supported by most users. However, the social media giant runs the risk of alienating some of its core users in the developed nations who might view the restriction of some content on the site as an attack on their values.

Many who oppose Facebook’s move cite the example of Twitter Inc (NYSE:TWTR), a social media giant that took similar steps to curtail free speech and lost numerous users. Other examples include the declining views of NFL games on Walt Disney Co (NYSE:DIS) ESPN network due to the leftist commentary during most games.

It is highly likely that some users might boycott the Facebook platform due the new security restrictions being implemented by the company. This is a thin line that the company should tread carefully in order to avoid alienating some of its users who might have high disposable incomes, hence, making them a target for most advertisers.

The fact that the company is increasing its monthly active users on a consistent basis might not necessarily be a good thing given that most of its advertising revenues are generated from the developed markets. The company continues to grow its ad revenues, but it remains to be seen whether this shall continue being the case even with the new security measures.

Facebook shareholders should brace themselves for a bumpy ride even as the effects of the increased monitoring start being felt as from next year.

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