Why Facebook Dropped 4% Today
What happened
Last week was a rough week for Facebook (NASDAQ: FB) investors, as The Wall Street Journal unleashed a five-part (and counting?) expose against the world's biggest social media company. Highlights include:
- Facebook's XCheck program, which exempts "VIP" Facebook users from the company's usual rules against posting abusive content.
- Instagram's negative effects on the mental health of teenage girls.
- How controversial content posted on Facebook has tended to make Americans "angrier."
- Facebook's inability to prevent human traffickers and armed groups from manipulating its platform to nefarious ends.
- How Facebook failed perhaps its most crucial test in 2020 -- Mark Zuckerberg's desire to use the platform to encourage Americans to seek vaccination against COVID-19 -- sowing divisiveness and conspiracy theories instead.
So yes, thanks to The Wall Street Journal, last week was a rough week for Facebook stock -- and this week might not be much better, because as we just learned this morning, The New York Times has joined in the attack.
Image source: Getty Images.
So what
In an article this morning, The New York Times drew back the curtain on yet another little-known Facebook project, this one dubbed Project Amplify. As the paper explains, the goal of Project Amplify is "to show people positive stories about the social network" by "pushing pro-Facebook news items" directly into users' News Feeds.
Project Amplify was first discussed in January, says the Times, but only approved last month -- around about the time one imagines Facebook would have learned that The Wall Street Journal was planning its series of investigative journalism pieces. As one ex-Facebook public policy worker, Katie Harbath, explained: "They're realizing that no one else is going to come to their defense, so they need to do it and say it themselves."
This latest move by Facebook, notes the Times, comes on top of moves by the company to more publicly dispute criticism by government officials, "stamp out employee leaks," limit outsiders' access to internal Facebook data on its operations, and in particular, suppress reports such as one the company prepared, which revealed that Facebook's top-viewed link in the first quarter of 2021 "was a news story with a headline that suggested a doctor had died after receiving the Covid-19 vaccine."
Now what
In contrast to The Wall Street Journal's series last week, The New York Times' article appears to be a one-off, i.e., not the initial salvo in a week-long investigative journalism series of its own. That's good news for Facebook investors, because it sounds like the Journal's series seriously rattled the company. The Times quoted Facebook VP for global affairs Nick Clegg complaining that the Journal's articles "contained deliberate mischaracterizations of what we are trying to do."
"He did not detail what the mischaracterizations were," however, observed the Times observed. And now Facebook stock is down another 4.3%, on top of the more than 5% it lost last week.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Rich Smith has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Facebook. The Motley Fool has a disclosure policy.
