Global Equities Research - Facebook is Now a 'Zero Sum Game'

When you talk about social media platforms disappointing their shareholders, Facebook isn't typically the first name that springs to mind. Let me preface this by saying that, financially speaking, Facebook are as secure as they've ever been, the information which has come to light here is far more damaging in the long term than the short, not just for them but for basically the entirety of social media as an entity.

The Wall Street headline is that Facebook posted disappointing third-quarter earnings, and expect a continuing shortfall running into the end of the year. They are more than stable for the time being, but it suggests that their stock value may have peaked, and will soon start moving into the other direction.

Twitter has proven that significant drops in stock are not the death knell for social media, you can still give platforms the A Weekend at Bernie's treatment even when nobody is willing to invest. The more important thing to consider is exactly why Facebook are experiencing this dip in stock valuation.

Well, according to Global Equities Research analyst Trip Chowdry, it's because social media is becoming a 'zero sum game', at least from an economic standpoint. The value of the information being gathered on Facebook is weighted against how it can be used, and this has started to split off into various fragile, doomed fragments.

As the Admiral controversy has proven, Facebook have no tolerance for companies trawling through personal data, but once targeted advertising reaches its logical limit, what else do they really have to offer? Obviously their vast user-base will always keep them relevant, but big numbers like that matter less and less as time goes by, the key word is engagement.

Simply put, investors aren't sure how to directly benefit from social media in the way they used to, and it's having a direct effect on stock. How this will play out in the future is unclear, but it could mean that even platforms as vast as Facebook have to rethink their approach.

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