What’s Happening With Facebook?
While the stock market has been dealing with potential economic risks, Facebook (NASDAQ: FB) has been facing other problems. In fact, the bad news for Facebook just keeps getting worse. Shares of Facebook took another dive on Monday along with the broader stock market. Just as Facebook was the subject of a whistleblower’s accusations, its entire network of services went offline.
The outage lasted for nearly six hours before it was resolved. For the record, this marks the worst outage for Facebook since a 2019 incident that took its site offline for more than 24 hours. With more than 3.5 billion monthly active users across its apps, the stakes are obviously much higher today than before.
The Potential Impact From The Outage
And it’s not just Facebook that we are talking about. The company’s Instagram, Whatsapp, Messenger, and even virtual-reality gaming arm Oculus have been affected by the outage. Inside Facebook, the outage has broken nearly all of the internal systems employees use to communicate and work. This had undoubtedly led to many users asking “why was facebook down today” or “is facebook gone forever”. While we know for a fact that’s temporary, the real impact comes from those who are looking at how to delete facebook accounts or how to deactivate facebook.
Not only are these platforms’ apps unavailable, but so are their websites. This means that users are unable to access these platforms in any way. On Twitter (NYSE: TWTR) , the hashtags #facebookdown, #instagramdown, and #whatsappdown were trending. As people were looking for alternatives to stay connected, many Twittersphere did not waste time in recommending alternatives. Facebook’s loss turned into a gain for other privacy-focused messaging apps Signal and Telegram.
Not to mention, the bulk of Facebook’s revenue comes from advertising. Based on analysts’ forecasts for Facebook to generate a total of $35 billion of revenue this quarter, the outage could cost the company nearly a half-billion dollars if it were to last a full day. With the advertising platforms being inaccessible for 6 hours, it may have already cost the company hundreds of millions in lost revenue. While this is only a tiny fraction of the company’s annual revenue, negative news back-to-back is enough to send Facebook stock tumbling.
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What Happened?
Before some of you begin to question if this is the end for Facebook, it makes sense to find out what actually happened. According to Facebook, the six-hour outage that took it offline was the result of a configuration change to its routers, not of a hack or an attempt to get at user data.
“Our engineering teams have learned that configuration changes on the backbone routers that coordinate network traffic between our data centers caused issues that interrupted this communication,” Facebook said in a blog post.
The problems appeared to begin with a routine Border Gateway Protocol (BGP) update that went wrong, wiping out the DNS routing information that Facebook needs to allow other networks to find its sites. At a very basic level, BGP is one of the systems that the internet uses to get your traffic to where it needs to go as quickly as possible. And for an unknown reason, BGP was suddenly “withdrawn from the internet”, making its network undiscoverable by other networks. For what it’s worth, that’s Facebook’s explanation. But that’s not the main reason why Facebook stock was down in the stock market Monday.
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Facebook Whistleblower Said Company Prioritized Profit Over Public Good
A Facebook whistleblower brought internal documents, research reports and online employee discussions detailing the company’s research to The Wall Street Journal. The whistleblower was revealed on ‘60 Minutes’ as Frances Haugen. The 37 year-old former Facebook product manager joined the company to protect against election interference on Facebook. According to Frances, Facebook’s lack of openness about its platforms’ potential for harm and unwillingness to address its flaws is putting people’s lives at risk.
By now you’re likely familiar with “The Facebook Files” published by The Wall Street Journal. The social media company has since been under fire after documents showed that Facebook was aware that Instagram has had negative impacts towards the mental health of young users. Haugen also shared new allegations about Facebook allegedly relaxing its standards on misinformation after the 2020 presidential elections. That was shortly ahead of the January 6 riots at the U.S. Capitol. It’s no secret that Facebook has faced public relations issues over the years. Investors may be keen to see how this latest development could affect FB stock. But if history is of any guide, any impact would likely be temporary.
“The thing I saw at Facebook over and over again was there were conflicts of interest between what was good for the public and what was good for Facebook, and Facebook over and over again chose to optimize for its own interests, like making more money,” Haugen told ‘60 Minutes’.
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Bottom Line On Facebook Stock
Looking at FB stock price movement, the news story that might actually impact Facebook’s bottom line is the whistleblower. The social media giant’s stock dropped nearly 5% after Haugen’s ‘60 Minutes’ interview. Such controversies swirling around Facebook could increase the likelihood of intervention by regulators. Whether Haugen’s revelation could be more than just a ripple for Facebook remains to be seen. Investors have to anticipate that there might be hearings on the allegations raised by Haugen. For this reason, Facebook stock could remain under pressure for the near future.
As for the outage, in the grand scheme of things, it will likely reiterate the importance of the platform to its users and advertisers rather than negatively impact the company. Facebook’s pre-market trading also suggests that the fear has subsided among investors. Most importantly, all its platform apps are now back online and its business continues to grow robustly.
Apart from social media, the company is also a leader in virtual reality space with its Oculus VR devices. For those unfamiliar, the company is also investing heavily in leveraging its VR capabilities to create the metaverse. Considering its growth potential, it is not surprising that many investors are shrugging off Facebook’s recent challenges. Could this be an opportune time to load up on FB stock?
