Facebook’s Fickle Finger of Fate

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Some years ago, there was a comedy show that had as a part of its weekly routine, the “Flying fickle Finger of Fate” award, which went to people in the news who accomplished “dubious achievements.” From The Wall Street Journal, Friday July 27, 2018: “Facebook shares fell 19% to $176.26, erasing about $119.1 billion in market value, after the Menlo Park Calif., company warned late Wednesday about slowing growth. Facebook’s loss in market value Thursday is larger than 457 of the 500 companies in the S&P 500. Facebook Chief Executive Mark Zuckerberg alone lost almost $16 billion in the value of his stock holdings.” But Mark Zuckerberg is a genius. Perhaps Zuckerberg will have to skip the Wadyu steak Friday night, and just have the regular filet mignon.

 

More from the article: “But Facebook’s main app, internally called “Big Blue” is starting to show signs of age. Facebook’s user base in the U.S. and Canada is stagnating, while in Europe it fell slightly in the second quarter partly due to stricter privacy laws enacted in May.”  Pestered by those pesky privacy laws, which were most likely enacted after Facebook allowed access to 87 million files by Cambridge Analytica. Let me be clear, I have no objection to anyone using or investing in Facebook, in fact I was looking to add it to my portfolio, but after its drop of another $1.37 Friday (the close was -$1.37, during the day it was around -$2.00) I’m still just looking at it.

 

Those who have not been on the internet very long are not aware that social media has been around a long time, longer than the fourteen years that Facebook has been around, and certainly no one wants to listen to my explanation of its evolution. Suffice to say, the early social media firms didn’t understand how to squeeze money out of what they thought was just a nice internet service. The internet is littered with broken dreams and would-be genius millionaires who just barely missed hitting it big. The would-be genius Winklevoss twins, who were able to milk the genius Zuckerberg out of an undisclosed sum, are trying to make it big with Bitcoin now. While I admire the Winklevoss twin’s persistence, they remind me of a twenty-first century snake-oil salesman, whose traveling wagon has been replaced by keyboards, servers and screens.

 

History is for old people, and Mark Zuckerberg is a genius, not just someone like Theranos’s Sunny Balwani, in the right place at the right time. Netflix, Microsoft and Amazon are all in double digits, thank you very much, and as investments, I missed the boat on Google, which I could tell was going to hit it big, but the high IPO cost was scary. The search engines that Google sank are sitting on the bottom of the internet, rusting away, with their frustrated entrepreneurs who had to go to other startups or a corporate giant like Sun Microsystems, where they only make a few hundred thousand a year. Surely a fate worse than death, just ask any blue-collar worker whose hourly wages have been stagnated for decades.

 

Using the terms of management, Facebook may have reached “market saturation” where everyone who wants it has it. In the business cycle, after the “peak” comes the “contraction” along with opposing competitors who pilfer your clients and challenge your firm to find something to give your firm a more “competitive advantage.” You can do what Microsoft did, and start charging monthly fees, even for those who thought that when they shelled out a few hundred for Microsoft Office, and loaded it on to their system they could use it as long as they had it on their computer. But the high fees for buying the Windows software package just wasn’t enough for Microsoft. Nothing like changing the rules in the middle of the game, especially admirable to a firm like Microsoft whose genius founder Bill Gates is barely scraping by with a net worth of only $92.3 billion. (Just a bit more history.) By the way, in case you didn’t know it, the European Windows platform is different from the American version, because the European Union hauled Microsoft into court when it refused to allow European software makers to use the Windows platform for software. The EU claimed Microsoft was a monopoly. After spending millions in the courtroom, Microsoft lost and was fined $794 million in 2004.

 

Surely, Facebook will overcome this setback. Let’s hope genius Zuckerberg can maybe get a second job and make back some of those losses. A billion here, a billion there, eventually, you’ll be talking real money. There is the looming possibility that Facebook has saturated the market, and more specialized services will pilfer its customers, and that it may have peaked, and is on a downward trend. As stated, the internet is littered with failures, so they won’t be all alone. Financially, this may be an opportunity for Facebook to acquire a lot of shares and bring the price back up. Or, perhaps the genius Zuckerberg will finally be forced out, to try to survive in this cold world without a steady income. Please include genius Zuckerberg in your prayers, while reading the second quarter financials.

Comments

Leroy Added Jul 28, 2018 - 7:38am
Maybe it is just tech weakness in general, but it sure seems like any company that has gone up against Trump has suffered consequences: Facebook, Twitter, Tesla...Maybe it is a coincidence.  Amazon is still going strong but Trump is threatening anti-trust enforcement.  I really don't Bezos is his enemy.  Perhaps, like Musk, he is a closet Conservative.
Dino Manalis Added Jul 28, 2018 - 7:55am
 Facebook has to make money, that's the bottom line.  Privacy is personal, people go online to search and share, that's why we need to be very careful with our data and other personal material.
Stephen Hunter Added Jul 28, 2018 - 7:59am
Nice article Jeff, I certainly learned some facts about the current state of affairs with Social media. 
Certainly all of the bad press lately on FB does not help, and the stock market is imo a giant casino game based on speculation. And not the best barometer of how well a company is doing. I am with you and think FB will rebound. They have too many aunts, cousins, grandma's etc, who may not jump to the latest platform quickly, so connectivity will keep many on FB. 
Jeff Jackson Added Jul 28, 2018 - 8:05am
Thanks Leroy. Could it be possible Trump resents Bezos and Musk, because as entrepreneurs they made more money than him? These billionaires can be very competitive, that's what drives them. In terms of anti-trust, Microsoft has been dragged into court more than once by holding out opportunities for other software firms, as their fight with the EU illustrates. Thanks for the comment Leroy.
Jeff Jackson Added Jul 28, 2018 - 8:08am
Dino, you got it! Privacy is personal, and Facebook is selling these folks' dreams down the river. I love all the folks who defend FB with what little brains they have, unaware of the rather shady behavior, such as changing privacy rules time and again, only to make more money. Dino, you are brilliant, a true thinker. Thanks for a  very wise comment, hard to find lately on WB.
Jeff Jackson Added Jul 28, 2018 - 8:15am
Thanks for comments Stephen. Yes, the stock market sure is a big casino game, especially lately with IQ, SFIX, and ZS, whom for which you can't even set a stop loss, as all bids and positions are taken and executed immediately. Facebook could take this opportunity to buy back shares and boost their stock back up, should they choose to do so. I love how FB is actually old now, and the old people are going to stick with them rather than change to something new. Facebook may be "over the hump" and not in a good way, with a saturated market and not enough new products to increase its competitive advantage. Thanks for your comments Stephen.
Ian Thorpe Added Jul 28, 2018 - 9:38am
Leroy,
Bezos is currently facing problems from Trump and the EU.
Jeff,
Social media stocks are all bubble stocks and Facebook's bubble has been one of the biggest (a hot air balloon in fact.) With a P/E ratio over 30 you're wise to be cautious. Another thing to consider is the effect buybacks have on tech stock prices. When you're buying in your own stocks that were handed out to senior employees, driving down prices would not go down well with those employees.
Bill H. Added Jul 28, 2018 - 11:41am
Good one, Jeff!
Maybe loss of profits to these "data miners" will result in some return of privacy, or at least making these companies be more honest with their privacy statements and intentions.
FB and most of the other social media outfits are constantly working to find out as much as they can about their users, and while constantly finding new ways to invade our privacy, they also find ways to just walk the fine line of legality to get away with it. The recent elimination of the Internet Privacy Rules will most like prove to be a field day for those companies that would love to eventually talk us into having a camera in every room of our house. They are one step below this with the introduction of both the Amazon Alexa and Google Home systems, as now they can listen to, and analyze virtually every conversation that takes place in the "privacy" of our homes (and now cars).
Having worked in this industry most of my life before retiring some years back, it became quite obvious that acquisition of personal data was a key venture of virtually everyone in the industry.
Hopefully some loss of profits will help counteract the recent efforts of the administration to eliminate privacy in the name of "more jobs".
This is not something that the people asked our government for, it is something that the ISP's have wanted since the inception of the Internet Privacy Rules during the last days of the Obama Administration.
And of course, since it was signed by Obama, it needed to be eliminated, Right?
Jeff Jackson Added Jul 28, 2018 - 12:08pm
Thanks Ian. I'm sure that a lot of Facebook employees are pretty unhappy about the falling price. Yes, a P/E Ratio of 30 is real high, but then, everyone thought so much of it to drive it that high. CMG's P/E is 70.59, and it went up $25.54 just Friday. CMG went up $68.00 in one day last April, a very very overpriced stock, yet no one knows why it keeps flying so high. (In April it changed CEOs.)
I'm thinking that if genius Zuckerberg can't make the numbers, he's going to be out of FB, even if he is the founder. The investors (and probably senior employees looking to cash out and retire rich) are more and more looking for returns, and they will slash and burn anyone or anything to get them, even cut up the firm and sell it off like a butchered cow. The short-term thinking is destroying our jobs and economy. Investors think that they have a "right" or are "entitled" to take profits, even if they take away from reinvesting in the firm. What the investors should do is insist that CEOs make reasonable wages, and not the $25 million that people like Ells of Chipotle made. Thanks for your comment Ian, insightful as always.
Jeff Jackson Added Jul 28, 2018 - 12:14pm
Thanks Bill. It is good to hear from an industry insider who understands what they are doing and what they are taking from us. I'm sure you've read other essays of mine that warn of the tech firms getting and selling more and more of our information. My warnings are disparaged as paranoia, except as more and more information about their practices become public, the more we know that they are selling everything they can learn about us, and nothing we give them is private. I love FB's recent PR campaign, trying to reassure us that they're "going back to the way things were." FB certainly isn't going to do that if their revenues fall, and this past quarter is not looking good for FB or genius Zuckerberg.
As for Facebook, if it wants any information about me, they'll have to read my essays! Thanks Bill.
Even A Broken Clock Added Jul 28, 2018 - 12:22pm
Good one, Jeff. Hope this gets posted on SlantedMedia like some of your recent posts. As for me, I'll stick with AltaVista and Ask Jeeves!
 
PS - noted just a slight cheek hernia in this post. Enjoyed it.
Jeff Jackson Added Jul 28, 2018 - 12:34pm
Even, you mean AltaVista is still around? Good Lord, I thought it was gone. I liked Ask Jeeves, I just started Googling because it seemed easier. Yes, SlantedMedia has this one, too, and I am pretty sure it will make it there, thanks for noticing. Thanks for your comments Even.
Ian Thorpe Added Jul 28, 2018 - 2:38pm
Jeff, I vaguely remember reading something about alta Vista having been absorbed by Yahoo. Webcrawler, the world's first metasearch engine is still going.
http://www.web.crawler.com/
opher goodwin Added Jul 28, 2018 - 4:11pm
Leroy - gosh - maybe it is Trump?
Jeff Jackson Added Jul 28, 2018 - 5:03pm
Ian, I think it was one of the AltaVista team that went to work for Google and they gave him some grief because he was "old." He won the lawsuit. Knowing the internet for decades is not a good thing, apparently.
Ryan Messano Added Jul 28, 2018 - 8:29pm
Good post,
 
The internet has dumbed down mankind considerably, and diffused stupidity and corruption through a wide swath of humanity.  Recovering will be difficult.  Zuckerberg is a moral midget, who is utterly unfit for the wealth he possesses.  A fool and his money are soon parted.  He and his tech giant partners in Google, Twitter, Amazon, and YouTube, will soon be relieved of their ill-gotten gains.  They have benefited America not at all, and are simply social parasites, eating away at the freedom and liberty that were given us by men who weren't ahistorical dunces and libertines like the Tech Titans. 
 
Anyone who is honest will admit that the intellect and the virtue of America have both deteriorated badly since the internet's inception. 
 
While reading has gone away, 30% of all searches on Google are for porn.  This is the debauchery that the stupid tech titans call, "freedom and Muh First Amendment".  These dimwits will sell America out for money in a heartbeat, and you have to be a fool to doubt it.  Just look at their actions in China, where they bow to the totalitarian government, but in America they suppress conservatives.  It doesn't take an Einstein to figure out how that will end up. 
 
Anyone who uses Google, Facebook, Twitter, or YouTube is not too bright.  I used Facebook from 2013, and deleted my account in a few weeks back after leaving in January.  The Five years I spent on there were the worst five years of my life.  I was banned at least ten times for 30 days each.  I did take a hiatus from January 2015 until November 2016, but even so, it was a horrible tool.  Every Tom, Dick, and Harry are allowed to blurt out their opinions, porn and profanity are tolerated, while conservative ideas are ruthlessly suppressed.  It was a Communist dictators dream. 
Let me repeat the note in your article, Jeff, that Zuckerberg lost 1/6th of his worth, or $15 billion in five minutes.  It was glorious.  It was the biggest one day loss in American stock market history.  May these tech titans, a cancer on our society be speedily destroyed. 
 
Not sure if you were being facetious about Zuckerberg being a genius.  He most decidedly is not.   He is a libertine, who started Facebook to rate women on how hot they were from 1-10.  A total disgrace that a degenerate like this is able to accumulate any wealth at all with his corrupt ideology, and it is a testament of the naivete, gullibility, and corruption of the American citizen, who values pleasure, ease, and wealth over industry, virtue, and self discipline. 
Jeffry Gilbert Added Jul 30, 2018 - 8:48am
$100,000,000,000 loss in one day. A shareholder lawsuit. A $16,000, 000,000 personal loss and he's dumping stock like there's no tomorrow. Ain't looking good for the genius or anyone holding his stock. 
Ian Thorpe Added Jul 30, 2018 - 9:21am
Jeff, a few comments back I said you were wise to be cautious about investing in Facebook stock. On the strength of this mornings news I'd say now is a good time to start shorting Facebook. When investors start suing senior executives for making misleading statements about the company's financial position, things are not likely to improve any time soon.
I've no sympathy for investors however, if they can't see a bubble when it's right in front of them they deserve to lose money.
Jeff Jackson Added Jul 30, 2018 - 9:53am
Jeffry, it appears Mr. Zuckerberg, excuse me, genius Zuckerberg, is beginning to have some self-doubt going on, and it appears some of his sycophants are dashing for the exits. On his program "Last Week Tonight" John Oliver gets it right when he says "Facebook was always all about selling every bit of information they could get from you, and all of your friends, and all of your friends' friends..."
Thanks for the your comments Jeffry.
Jeff Jackson Added Jul 30, 2018 - 10:05am
Ian, Facebook never cared about anyone or anything but money, and now, I think anyway, people are starting to realize what game they have been played, while all of the Facebook posters lost and Facebook won big, very big. Perhaps many of the Facebookers (is that what they are called?) of information have realized that they have been played for chumps. I will have to bring this up: I told them that they were giving up important information so that Facebook could make a fortune a long time ago. I have also said that eventually, people will learn that their information is being sold  and they will realize they deserve a piece of the action. We are inching towards that time. Thanks for your comments Ian, insightful as ever.
Bill Kamps Added Jul 30, 2018 - 11:35am
FB is playing a difficult game, and it is unclear yet whether they will find  their way through the thicket they created.  They have been selling people's private information, technically with the people's knowledge, but effectively without their  knowledge.  This private information is what makes their advertising platform more valuable, it is their business model.  So they can "say" they are going to stop, but they really cant.  They can trim back what they do, but if they are not giving their advertisers access to targeted demographics, then they cant charge their premium advertising prices.
 
The other problem they have is potential censorship.  They want to be a platform for all people.  But what happens when the  unscrupulous use the platform, like the Russians blogging in our campaign, or others spouting fake news.  Should FB censor these people? and if so, how do they determine fake news from real news?  hire a bunch of investigators to study everything before it is published?  not very real time there.
 
Both of these things are undermining their users faith in the platform.  The platform is not essential to people's lives.  People can live without FB much easier than they can live without electricity, or cars or most of modern conveniences.  If people decide that the downside of using FB is not worth the connectiveness, then FB has a big problem.  
Jeff Jackson Added Jul 30, 2018 - 2:59pm
Nice assessment Bill, and precisely my point. You are exactly right when you state that FB can't give up its position, and yes, they are not about to give up anything at all, because they will miss the revenue that they have so perceptively (or is that deceitfully?) carved out. The Europeans have seen what they have done, and are taking legal measures to contain FB. I think FB is at a crossroad, and they are going to have to do more than just run advertisements about how they are going to change, they are going to have to do it, and that means less money, and less money means less revenue, lower stock prices, and giving up things.
We are witnessing an awakening of a public played for chumps, and if the people do not see it, the legislatures are seeing it an moving to protect the ignorant. While this is certainly not the end of Facebook, it is a monumental shift, a shift that I thought would have come much sooner. Thanks for the insightful comments, Bill.
Bill Kamps Added Jul 30, 2018 - 5:04pm
Jeff, my guess is that FB will change at the margins.  They will allow people to opt out of some of the direct information disclosure, and they will be thinking they are opting out of all of it, but wont be. 
 
The real  insidious stuff, is where they know what you were talking about on the phone, and suddenly you get an advertisement for that product, or restaurant or what have you.  We are somewhat used to advertising coming as a result of web searches, but to do it as a result of a phone call is a little unnerving.
 
I expect they will say they have cleaned this up, but wont really have  done that.  They will be more careful.  Then something else will blow up, or someone will file suit because disclosures are still done when people think they  are not.  The fine print still says they own your information, and as everyone should know, if you own something you can sell it. 
 
The censorship is a tough nut, because they are getting more heat for the dubious players on their platform, and these players are not hidden, they are in plain sight to see.  How do they draw the line?
 
I dont predict them going out of business, as some have.  I predict their high flying stock days are over, because that price was built on a rapidly expanding user base, and that is going to slow.  People now are asking the questions they should have been asking for the past ten years. 
 
By the way, I have never had a FB account, for reasons we are discussing. 
Jeff Jackson Added Jul 30, 2018 - 5:47pm
Excellent analysis Bill, and I concur almost without reservation. Facebook is here, and isn't going away, but we both see some changes, necessary for its survival. Yes, they (FB users) should have been asking those questions some time ago, but they signed up and gave out lots of information. I warned many of them at the time, they ignored me. As for the charlatans and propaganda promoters, a company that makes billions has enough money to screen their postings and behavior. It is time for FB to consider the ramifications of their clients' actions, and not to just look at the money. They now know what just looking at the money will do. Thanks Bill.
Mark Hunter Added Jul 31, 2018 - 2:29am
"Only make a few hundred thousand a year." Wow. Poor guys might have to go on food stamps.
Of course, all the money Zuckerberg lost was kind of ethereal to begin with. Open the box up to observe, and maybe the money will be there ... or maybe it won't.
Ian Thorpe Added Jul 31, 2018 - 2:01pm
Just a thought on the subject of how much info people reveal to social media. have they never heard of lying? It's a good option when some social media site will not accept MYOFB as a response.
My old school, St. Custard's, for example, only exists in a children's story titled Down With Skool that I read probably 60ish years ago.
Jeff Jackson Added Jul 31, 2018 - 2:32pm
Thanks Mark. Yes, a few hundred thousand in Palo Alto California will definitely put you in the low-rent district. We have no way of knowing how much Genius Zuckerberg cashed out, so his losses are not readily discernible. Hopefully he cashed some of the stocks, though I believe that regulations required him to keep them for a specific amount of time. That's the problem will all of the startups. Think of all the folks that invested in Theranos and got burned by Sunny Bagwano, or whatever his name is. Theranos burned through some $800 million, and left a lot of burned victims, but then, people with names like Walton can risk that, they just write it off. Thanks for your comments Mark.
Jeff Jackson Added Jul 31, 2018 - 2:44pm
Thanks Ian. My evangelical Christian upbringing really gets in the way of not telling the truth, but I am slowly overcoming that bad habit. When I get unsolicited "questionaires" I will usually tell them awkward stuff because it really isn't any of their business, they're just trying to target me for more advertising. I have read that Facebook has somewhere around 82 million false profiles, which were placed there by people doing "research." I'm wondering how many "researchers" can claim that they got their information by lying online. Certainly, the validity of such research would be questionable.
I'm thinking that we need more honesty on the internet. There are too many people making claims and providing "information" that isn't true. I'm thinking if you get on the internet, you must register with a valid verifiable name that can be traced back to you, and if you tell a bunch of lies, your internet access is denied. Though you might think that is impossible, there are people who by legal judgment, cannot get on the internet because of what they did on the internet. Ross Ulbricht, the founder of the Silk Road, will never be on the internet again, as he is locked up in prison for the rest of his life, and I am sure that the prison will not let him near a computer of any kind. While that is an extreme point of view, if more people were denied access because of what they have done, there would be a lot more people thinking a long time before they tried to spread lies again. This is another essay that I haven't written yet. Thanks Ian. I'm sure you were summa cum laude at St. Custard's.
Kristen Foley Added Aug 2, 2018 - 8:08am
Let’s put things into perspective, at one time Facebook was worth $640 billion and after the crash it’s now worth $500 billion.  $140 billion is a lot of money, however Facebook is smashing success story and I would say that even if it lost another $499 billion.  Being fabulously wealthy doesn’t make Zuckerberg a genius, but he does deserve a lot more respect than what I just read. 
 
What caused Facebook’s decline wasn’t market saturation, as there is no reason everyone on the planet couldn’t have a Facebook account one day.  The articles you quoted don’t even mention market saturation.  I happen to think the stock will never be worth what it used to be worth as what caused it to get that high was irrational exuberance. 
Jeff Jackson Added Aug 2, 2018 - 10:37am
Hmm, Kristen, I guess I’ll have to apologize to Zuckerberg the next time I see him at the country club. I guess my sarcasm means no more rounds of golf with him and his cohorts. My bad. If you consider my calling Zuckerberg a genius as an insult, you should see what I call people I really dislike. I find Zuckerberg and his ageist discriminatory policies and statements revolting. He lost me and any respect I would ever give him with his speech on the value of the “young and technical” and his backhanded disparagement of older workers. In the politically correct atmosphere of today, sexist, racist, homophobe and other insults are unforgivable, but ageism is fine, no problem. I could use far more colorful descriptions of him, I just respect the decorum in this platform.
Kristen, you are correct, Facebook’s decline was due to a combination of events, not the least of which was countries passing laws that protect the rights of people too ignorant to understand what Facebook was selling. After fourteen years in the marketplace, Facebook’s position, while secure, might diminish, and that would not be an unusual event in the business world. From the article, an excerpt from The Wall Street Journal: “But Facebook’s main app, internally called “Big Blue” is starting to show signs of age.” Facebook lives in a world of innovation and more and more specialization, which is why Facebook bought Instagram and other companies. Facebook’s business environment is one of rapid change.  The “rapid change” environment can mean that rapid rises can also mean rapid declines; that is the social media business environment, and any business analyst will tell you that fact.  I would speculate that if you held a substantial position in FB as an investment, then you probably wouldn’t be as calm about the loss. Easy come, easy go huh?
Facebook’s stock rise and policy of selling almost every bit of information that clients volunteered to them were, in my opinion, the result of wanting more money. You may not know this, but Facebook changed their privacy policy at least twice that I know of, and possibly more than twice. Why would Facebook change their privacy policy, making more of the information given to them available for sale? Um, well, golly, it was to make more money off its users.  But weren’t they already making money good when they changed the rules and sold more of clients’ information? Sure they were, they just wanted more money. Lessee, now, a person already incredibly rich, wanting even more money; I just can’t seem to think of the word that describes that tendency, but I know it will come to me. Those changes did nothing for the people who posted in Facebook, those changes were to line the pockets of Facebook, thank you very much.
I stated in paragraph number two: Let me be clear, I have no objection to anyone using or investing in Facebook. I still have nothing against anyone wanting to be on Facebook. Some of my friends are on Facebook. I do find fault in your statement that “there is no reason everyone on the planet couldn’t have a Facebook account one day.” When Facebook can make me money, I’ll be signing on real soon. Until such time as it can make me money, no thanks. There are other people in the world who think the same way.  As unbelievable and inconceivable as it may seem, I’m not interested in giving Facebook more revenue, but again, if it can make me money, sign me up.  Unless and until Facebook can payoff for me, I’m out. Thanks for your comments Kristen.

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