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Facebook Inc (FB) Is Losing the War Against Fake News

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Facebook Inc (NASDAQ: FB ) has begun fighting a war against fake news and, so far at least, it's losing. Failure could have profound implications for Facebook's bottom line, and even threaten its ability to remain in business.

Facebook Inc (FB) Is the Dark Horse of the Cloud Space

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The threat is deeper than Donald Trump. The power of Facebook's software tools, and communication capabilities, is a two-way street that benefits the darker side of human nature, as well as its better angels.

For example, Facebook's Graph Search tool, introduced in 2013, can help you search the site efficiently. It can also help you stalk someone .

Facebook Live, which lets users stream live video on the site from their camera phones, can let you show grandparents your kid's birthday party, as it happens. It can also let you show the child being killed .

CEO Mark Zuckerberg promised to do something about this in November, on his own Facebook page, but has not come out with much useful beyond tags on disputed items and a vague statement from an underling that sharing fake news is your prerogative .

FB stock holders need to be worried.

Facebook Is a Media Company, Like It or Not

Facebook has continually denied it is a media company, subject to responsibility for what it posts, fearing the need in that case for human intervention that simply would not scale .

The latest statement from its vice president for partnerships, Dan Rose, is that Facebook is "a new type of platform …where people discovery a lot of media content." That's about as mealy-mouthed as anything that could come from a corrupt politician.

For FB, however, fake news is a global problem, and most countries don't have regulations separating a "telecommunications service" from the responsibilities of a "media outlet." Thus, Facebook's efforts at self-censorship are showing up first in international markets.

The European Commission, for instance, has already warned Facebook, and other networks, that they face legal action if the issue of fake news is not dealt with. Alongside Alphabet Inc (NASDAQ: GOOGL ), Facebook is testing a system called CrossCheck for flagging fake news in France, which holds a presidential election this spring.

This is being done in cooperation with local media, but the reporting on it shows the difficulty.

A Russian story on the system calls the problem "so-called fake news" and calls CrossCheck a plot by the "mainstream media."

Germany, which holds its own elections this September, is also threatening to impose a 500,000-euro fine for each fake news story it runs.

How Bad Can It Get?

To see how bad things can get with fake news and the abuse of Facebook Live, Zuckerberg might look at South Sudan, where expatriates are turning a civil conflict into genocide with social media messages or the Dominican Republic, where two journalists were recently killed on Facebook Live as a message from crime gangs.

A recent Pew Research study showed 44% of Americans get their news through Facebook, and that most users get news from only one site, meaning Facebook has political and media power commensurate with its financial power.

That power: fourth-quarter revenue of $8.8 billion, with $4.27 billion going to net income. FB stock has no debt but nearly $30 billion in cash on the books, supporting a market cap of $385 billion - almost twice that of Wal-Mart Stores Inc. (NYSE: WMT ).

All this is severely threatened if Facebook can't get its arms around the problem of lies and abuse.

Real lives are on the line, not just cyber lives. Real dollars need to be invested.

Dana Blankenhorn is a financial and technology journalist. He is the author of the sci-fi novella Into the Cloud , available at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn . As of this writing, he did not hold a position in any of the aforementioned securities.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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