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Zuckerberg Got Grilled Before Congress, But What's The Valuation Impact?

Apr. 12, 2018 2:17 PM ETMeta Platforms, Inc. (META)AAPL, GOOG, TWTR35 Comments
Erich Reimer profile picture
Erich Reimer


  • Zuckerberg faced Congress in two days of wide-ranging questioning on Facebook's history, business practices, the potential regulatory framework to implement on it.
  • The Cambridge Analytica's risks to Facebook are real, but it is increasingly seeming like the manifestations of the fallout may not be too impactful on the revenue/growth trajectory.
  • The implementation of advertising disclosures and data use consent seem the most predictable results from the United States. Such measures are not likely to damage user activity or revenue significantly.
  • The fallout in terms of user activity will need to be watched closely, particularly in Facebook's upcoming Q1 2018 earnings. Until then, past inertia is likely to predict future platform stickiness.
  • Europe remains unpredictable however, with regulators far more unfriendly in the past to Facebook and very concerned about user privacy. The fallout there needs to be watched closely.

While Zuckerberg's testimony provided a lot of media theatrics and the regulatory risks are real, the likely manifestations of Facebook's (FB) political risks at the moment are unlikely to be so dramatic as to shift its growth trajectory significantly.

"The Social Network" Part Two

This past week Mark Zuckerberg testified personally for the first time before a joint committee session of the United States Senate on Tuesday and the House of Representatives on Wednesday.

Facebook is facing regulatory concerns from across the world, including the implementation in May of the impending General Data Protection Regulation for data use consent in Europe (whose origin was well before the Camrbridge Analytica scandal).

Even Facebook's fellow tech giants have been throwing it under the bus, with Apple (AAPL) taking this opportunity to allege that its data protection practices are far more pro-user than Facebook's.

The U.S. political risk remains the most important however because that is where the bulk of Facebook's advertising currently comes from, where it's the most profitable, where it's publicly traded, and where its headquarters and personal eco-system are based.

(Source: Facebook Q4 2017 Earnings)

While the Cambridge Analytica events were the catalyst for the hearings and undoubtedly are a significant scandal on their own, the hearings clearly were a vent for many long built-up policymaker and public concerns over Facebook's, and other social media and Internet services companies, various practices.

Lawmakers largely abandoned focusing on just the Cambridge Analytica events and questioned Facebook on everything from protecting the platform against bots and misinformation to viewpoint censorship, from usage of user data to whether users had proper knowledge of the data they were providing, from political influence by Facebook itself to even anti-trust monopoly and competition concerns.

In terms of market reaction, Facebook stock gained heavily in the midst of the

ChartFB Price data by YCharts

ChartFB data by YCharts

ChartFB PE Ratio (TTM) data by YCharts

This article was written by

Erich Reimer profile picture
I primarily write on cryptocurrencies and other frontier technology topics. I hosted "Tech Investment Insights" here at Seeking Alpha, exploring emerging technologies with some of the world's most innovative corporate leaders and entrepreneurs. My professional background is in public policy, financial regulation, and the business side of the technology sector. I'm a licensed lawyer in the District of Columbia and the State of New York. I earned my Bachelor's degree from the University of Pennsylvania, to include training at Wharton, and my law degree from the University of Virginia.

Analyst’s Disclosure: I am/we are long FDN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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