Our first thought in regard to how far high tech will fall is that the stocks are overpriced. And, passive investors are pouring money into index funds that do nothing but bid up the prices of the FANG darlings. The market has started to correct and, based on earnings reports, tech stocks will either continue to fade or will recover a bit. But, there are a couple of other issues that bear consideration in regard specifically to Amazon.com and Facebook. There is the possibility that Trump will want to go after Amazon in order to protect and bring back small businesses in the retail sector. And congress is looking into the use of personal data of up to 50 million Facebook users by a market firm working to get Trump elected. Are Amazon and Facebook in trouble? In the case of Amazon its problems are brought on by its success. People are happy going online to buy things for less and not having to go to the store. A billion people around the world love the use Facebook making it perhaps the most influential social platform in history. These two companies have changed the way society operates and may be hit by a backlash.
The founder of Facebook, Mark Zuckerberg, is going to testify before congress according to US News.
Facebook CEO Mark Zuckerberg plans to testify before Congress about the company’s privacy practices in coming weeks, according to a person familiar with the matter.
Wednesday’s announcement follows revelations that a Trump-affiliated consulting firm got data on millions of unsuspecting Facebook users. Facebook is also facing criticism for collecting years of data on call and text histories from Android users.
In response to the bad press, Facebook is making it easier for users to see their personal data and to delete it. The issue for most folks is one of privacy although for the government is may be one of helping the Russians tamper with the American political process. This is an unforeseen outcome of people posting photos of their kids and cats for friends to see. Six years ago we asked is Facebook a good investment? A major issue was how Facebook could monetize its social media following. Facebook earned just under $40 billion in advertising revenue in 2017. They have learned how to monetize their product. But, have they done this while going against their social goals? This quote is from Facebook’s year end report.
“2017 was a strong year for Facebook, but it was also a hard one,” said Mark Zuckerberg, Facebook founder and CEO. “In 2018, we’re focused on making sure Facebook isn’t just fun to use, but also good for people’s well-being and for society. We’re doing this by encouraging meaningful connections between people rather than passive consumption of content. Already last quarter, we made changes to show fewer viral videos to make sure people’s time is well spent. In total, we made changes that reduced time spent on Facebook by roughly 50 million hours every day. By focusing on meaningful connections, our community and business will be stronger over the long term.”
If the government comes to believe that Facebook represents a threat to privacy and to our electoral system instead of a social positive, they could be in trouble and it would hurt their bottom line.
The issue with Amazon.com is pretty straightforward. They have been extremely successful and are becoming a monopoly. This has had huge societal effects and might not be tolerated in the long run. The best example going forward might be the court ordered breakup of AT&T or the trust busting of Standard Oil and the railroad, coal, and steel giants at the beginning of the 20th century. The question if you own Amazon.com is if you will do better selling before or after a breakup.