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Facebook’s Slippery Slope – Is It Only Going To Be Downhill From Here?

The social media giant, who also owns WhatsApp and Instagram, was recently accused of privacy breach and misusing personal data;

a particularly notable one was when they inadvertently exposed up to 87 million users’ information to the political analysis firm Cambridge Analytica.

The US$5billion is the highest fine that has ever been levied on a tech firm, and this is on top of a handful of other restrictions that was recently imposed on the company.

According to Business Insider, the fine alone is Reddit’s approximate market value at the moment and even having an NFL team would cost less.

Still, most have argued that the US$5billion fine is almost insignificant, considering Facebook’s last quarter’s earning of US$17billion.

This essentially means that the US$5billion fine is merely Facebook’s revenue for one month.

On top of that, the company have foreseen this fine coming their way and even readily set aside a total of US$3billion to prepare for it.

In fact, on the day of the fine announcement, Mark Zuckerberg was made richer as investors started buying into the company and hiking their share price.

People were….

Celebrating.

Looking at these preparedness and financial capability, it’s hard not to see Facebook as an entity that is almost invincible and undefeated.

And looking at their numbers, it is undeniable that their business HAS been improving, in spite of everything.

Many don’t know realize this, but WealthPark allows you to see a company’s Quarterly figures in one place as well as the Yearly figures.

Admittedly, their net profit margins that used to hover around 40% has dropped below 20% in the last 2 quarters.

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However, their operating income has been improving if compared to March 2018.

Around the same time last year, Facebook recorded around US$5 billion income for each quarter
At a first glance, it seems like their Operating Income have significantly decreased this year.

However, looking at the situation,

it could just have been affected by the fact that Facebook were setting money aside in preparation for the fine.

Should we add US$3 billion to Q1 2019 and US$2 billion to Q2 2019 respectively (amounting to the US$5 billion fine), it seems like the operating income had in fact, increased by around US$1 billion for both quarters from last year.

Not surprisingly, this first-of-its-kind saga have sparked numerous debates on data privacy legislation.

As this was not a problem that needed to be dealt with more than a decade ago, lawmakers are now left scratching their heads as to where to even begin creating laws surrounding tech companies.

There have also been calls to create to a new data-protection agency, rather than the sole reliance on FTC as they are deemed too small in capacity to handle the uprising of tech companies.

Regardless of what it is, Facebook investors are still not out of the woods.

US$5 billion may be a small price to pay financially…

However, will users continue to trust the platform considering how their data have been breached, sold and used by third parties?

And if they don’t, will Facebook be able to turn things around in time before an equally influential new player comes by to pull the rug from under them in the coming few years?

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Disclaimer: All facts and opinions presented are for educational purposes only. This is not a recommendation to buy or to sell. The author(s) involved in the writing of this piece do not have current vested interest of the company. Please consult a competent professional for expert financial, or other assistance or legal advice.

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Yen Hung Chua

Yen Hung Chua

I became an advocate of money management and value investing at the age of 27 for a simple reason. Money management, investing and MOST IMPORTANTLY, emotional stability – was never something that was taught in school. We end up a bunch of workers who are taught to only work for money but not the other way around, and to treat investing like a game of chance. And it was time to change that. Being with WealthPark, not only do I have the opportunity the spread the money-consciousness further and wider, but the platform on its own, is also wickedly useful for anyone who wants to invest in stocks.

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