Can Facebook Weather The Storm?

More than a week has passed since the Cambridge Analytica controversy engulfed Facebook, and as yet, there is no end in sight.

The FTC just made its investigation into the company official, the attorneys general from 37 states and territories are now demanding answers, and lawmakers on the Senate Judiciary Committee want CEO Mark Zuckerberg to testify at an upcoming hearing on data and privacy.

And, that’s just in this country.

For now, it’s unclear if all this scrutiny will translate into a significant decline in usership, engagement or ad dollars. As evidenced by Facebook’s sinking stock price, investors are worried about the tech titan’s future.

Analysts and advertisers also have their concerns.

After Zuckerberg waited days before addressing the Cambridge Analytica story last week, Pivotal Research analyst Brian Wieser accused Facebook of “exhibiting signs of systemic mismanagement.”

In a new note to investors, Baird & Co. analyst Colin Sebastian says he’s seeing “some moderation in Facebook usage,” while suggesting that brands may “pause some Facebook campaigns until headlines subside.”

At the moment, Sebastian said he sees no indication that the #deletefacebook movement is resulting in membership declines. Sebastian also found that, while younger users are cooling to Facebook, a larger share is flocking to Instagram.

In other words, he is describing a continuation of the same trend we’ve been watching for years, i.e., consumers shifting from Facebook to Instagram.

Last week, eMarketer’s Debra Aho Williamson said she didn’t foresee brands abandoning Facebook anytime soon. Yet, its privacy problems “will cause [advertisers] to think twice about how data about Facebook’s users is handled.”

So far, eMarketer has no plans to adjust its ad forecast for Facebook. The research firm still expects the company to rake in $48.85 billion in worldwide ad sales, this year — which would represent a healthy 22% increase year-over-year.

Oh, and for what’s it worth, I have no plans to delete my Facebook account. Honestly, I wouldn’t remember my Mom’s birthday without it.

by Gavin O’Malley
Courtesy of mediapost