While a slip from $71 billion to $62.3 billion may not seem substantial to the rest of the world, it’s a concerning trend.
After six or seven years, Mark Zuckerberg could be as rich as the rest of us (not likely). Regardless of the scope, it’s an unfortunate pattern. And it’s also not a great sign for Facebook as a company, regardless of how resilient it may appear.
So, how is one of the world’s youngest billionaires losing so much money? Let’s take a look.
A Year Full of Turmoil
Facebook’s just had a bad time of it lately. Beginning with the Cambridge Analytica debacle, there’s been scandal after scandal:
- In March of 2018, Facebook publicly apologized for the Cambridge Analytica scandal, in which up to 87 million Facebook users may have had their data misused and resold for commercial purposes.
- In May of 2018, a group of Android users filed a lawsuit against Facebook for harvesting user information through the Facebook Android app.
- In June of 2018, Facebook reported that 14 million users may have had some of their data compromised.
- In September of 2018, Facebook experienced a major data breach in its login and credential system, which exposed the information of 50 million users.
- In January of 2019, it was reported by TechCrunch that Facebook Research had been purchasing private information from users as young as 13.
- In February of 2019, it was reported that Facebook allowed users to be looked up by their private phone number, used for two-factor authentication.
Facebook’s major issues have been data privacy. Despite this, Facebook’s daily active user accounts have still been going up, though there have been movements among consumers to delete the app.
Facebook’s Profit Lies in its Data
Facebook has found itself in a difficult position, because its data profiles are actually its major selling point. Customers pay nothing for the platform itself: in fact, they cost the platform money in terms of resources. The money Facebook makes is through its advertisers—advertisers who want to be able to target customers based on specific facts.
With the sharing of data being intrinsic in Facebook’s profitability, it becomes necessary for Facebook to push this data as well. This has created a number of privacy-related concerns.
Mark Zuckerberg’s Wealth Lies in Facebook
While Mark Zuckerberg certainly has a lot of money liquid and in other investments, a not insubstantial amount of his fortune is tied to Facebook stock. As Facebook stock fluctuates, so does Zuckerberg’s worth. Zuckerberg hasn’t lost physical money: he’s lost the net worth he has on paper. And that’s directly related to Facebook.
But year-over-year, Facebook really hasn’t suffered that much. While Facebook’s stock fell from $217.50 on July 25, 2018 to as low as $124.06 on Dec 24, 2018, it’s since bounced back to $171.26 as of March. If it can continue to rise, he should be able to recover. The question is whether these stock increases will continue.
Every time there has been a substantial issue with Facebook, the stock has tanked… but it’s also bounced back shortly thereafter. Facebook has become so extremely ubiquitous that few people are interested in stopping their use. Advertisers know this and are still willing to buy into the now troubled platform.
The Party Isn’t Over Yet
With Facebook’s active users still climbing, and the company itself seeming remarkably resilient, investors may actually feel more confident after these scandals. And though Zuckerberg may have lost a lot of net worth over the last year, it’s coming back. Some investors may be bolstered by the fact that Facebook seems to be able to do no wrong; the public appears to have become jaded over the continual privacy scandals, and some interest in privacy itself has waned.
The largest threat to Facebook and to Zuckerberg’s fortune is likely not going to be consumer frustration (as apathy is growing), but rather the fines and penalties Facebook may face due to government intervention.
If Facebook continues to compromise user security, it’s likely to garner privacy fines—most significantly in European countries. These fines will likely grow to be even larger over time: Facebook has previously faced up to $1.6 billion in fines. All of this has made FB a particularly volatile stock with a lot of room for loss and growth.
Regards,
Ethan Warrick
Editor
Wealth Authority
