Facebook’s Investors Get Trumped, Apple’s Get Richer
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Facebook’s stock rose along with Donald Trump; its fall came when it took the blame for him.
As Donald Trump rose to power in American politics, Facebook rose along with him. The day he announced his run for president, Facebook’s stock closed at $80.71. The day he was elected president, it closed at $124.22. And last week it hit its all-time high of $217.50 — just before it recorded the largest single-day market capitalization loss in history, cleaving $119 billion off its total value by the ding of the closing bell. And it’s all because of Trump.
More accurately, Facebook’s drastic fall from grace is a direct result of an influential faction of the American populace seemingly incapable of accepting the election of President Trump as legitimate, and resolved to reconcile this perceived paradox by casting blame on someone or something. Anything but an honest reflection of popular political wills sufficient to win the Electoral College.
These recent troubles for the social network stand in stark contrast to other technology companies. Amazon recently announced stellar earnings results from ever expanding integration that powered its stock higher and cemented its founder, Jeff Bezos, as the richest man in the world. The juggernaut Apple, with its ubiquitous iPhone sales continuing to impress investors, has just become the first publicly traded company to eclipse an astounding $1 trillion market capitalization. That’s trillion, with a “T.”
The juxtaposition speaks to the effects of political risk for technology companies and the varied exposures and approaches to an increasing volatility in public discourse. Facebook seems to wallow in it by its very nature, at the mercy of its changing currents, while the Apples of the world wallow in its purely capitalist ethos that elevates them above the din. Even when thrust into political debates over encryption and national security, as it was caught in the spotlight after the San Bernardino terrorist attack, Apple was unwavering in its commitment to a product feature valued by its consumers, rather than to politicians who would readily sacrifice the company’s intellectual property to appease security hawks no matter the efficacy.
Zuckerberg wasn’t kidding when he talked of sacrificing growth.
Facebook could be described as a fall guy, except for the fact that it publicly and willfully fell on its own sword more than six months ago. While the extent of the wounds was laid out in the recent earnings call — a revenue deceleration of “high-single digits for the next couple quarters,” according to the chief financial officer, alarming investors — Facebook founder and CEO Mark Zuckerberg had already forecast the coming injuries in remarkably straightforward terms.
Before Trump even took his oath of office, reports of Russian interference in the election were swirling. After months of multiple official investigations, the election interference manifested in the form of fake social media accounts, most notably Facebook accounts, operated by Russian agents whose aim was to rile up partisan division, exploit and magnify base political motivations, and generally erode confidence in our democracy. Facebook was cast in the role of facilitator for a stolen election. Instead of refuting it, the company owned it.
In a letter to investors, Zuckerberg, after boasting about growth, said, “But none of that matters if our services are used in ways that don’t bring people closer together. We’re serious about preventing abuse on our platforms. We’re investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits.”
He doubled down on the earnings call with investors. After being blamed by multiple lawmakers for smoothing the way for Russian interference that led to Trump’s victory, Zuckerberg said to investors: “I’m dead serious about this.… Protecting our community is more important than maximizing our profit.”
The following months brought indictments of 13 Russians who used fake Facebook accounts to influence the election. Those didn’t dent Facebook’s stock surge, along with other technology stocks, or Trump’s approval ratings. Then Zuckerberg was hauled in front of Congress to testify for two days about Cambridge Analytica’s data harvesting from Facebook users on the Trump campaign’s behalf. Zuckerberg’s response to questions about data privacy and Russian interference? “It was my mistake, and I’m sorry.”
With this, Facebook effectively accepted blame, not only for the unfair exploitation of its platform but also for the results of that exploitation as alleged by political factions, lawmakers and the media — the presidency of Donald J. Trump.
The bill didn’t come due for the apology, as the stock rose again after a short slump. But all the while, Facebook followed its acceptance with a committed effort to change its platform machinations in ways so fundamental to its business model that it would meaningfully impact its growth.
For his ostensibly good deed of taking at least partial blame for what many view to be Trump’s illegitimate election, Zuckerberg’s company was punished with the largest capital market haircut in history and caused investors to wonder if it will ever really be the same.
Jeffrey Moore II is editor of Dynamic Global Insights.