Social Media Expert Kenneth Wisnefski discusses how regulatory scrutiny is dampening Facebook’s growth, and its new “Supreme Court” for internal oversight review doesn’t help.
On Tuesday, Facebook CEO Mark Zuckerberg announced the company has formed an internal oversight board whose primary focus is to govern appeals from its users and from the company as well. Zuckerberg likened this to their version of a “Supreme Court”.
Kenneth Wisnefski, social media expert and founder / CEO of WebiMax, says “Facebook has been under intense scrutiny as of late with respect to content moderation and privacy concerns”. Wisnefski furthers “while I’m still bullish on the company, we’ve recently seen their margins cut in half due to rising costs of legal expenses which has definitely impacted their stock price. My question is how much will this internal oversight board cost the company in valuation and distraction?”
Wisnefski’s additional thoughts on the internal oversight board:
- This is a cautious time for Facebook and the fact that they are spending more time on fending off scrutiny and regulation, could hamper their ability to innovate and grow. When the company released their Q2 earning in July, their operating margins dropped to 27% versus 44% at the same time last year, in large part due to legal costs and fines.
- While the new internal oversight board is slated to begin in early 2020, Zuckerberg stated they will have 40 members who will be fully compensated and can hire additional support staff. Unless Facebook grows into other revenue channels, these rising costs will only further erode their margins and impact future valuation.
- Investors should pay close attention to possible acquisitions, such as Yelp, which would thrust Facebook immediately into the consumer food delivery market and expand their current advertising channels.