April 24, 2018

Late Wednesday afternoon, Mark Zuckerberg — fresh from two days of hammering by Congressional committees  — will face another tough audience as Wall Street gets a look at the company's first quarter earnings report.

Zuckerberg has a lot of explaining to do. The company will again show great growth and huge profits, although Facebook has cautioned that some slowdown in the rate of those increases is to be expected. That's not the problem.

In contrast to the smooth sailing for many quarters and years, the company has experienced hugely embarrassing setbacks since the start of 2018 — some would even say existential threats. Can Facebook police the vast array of content it publishes? Will millions of U.S. users and many millions more abroad forgive and forget breaches of what they thought were private data? 

And might the digital darling mantle pass to new players before long, rendering Facebook the MySpace or Yahoo of the 2010s?

With the slower growth and those uncertainties, Facebook stock has declined by about 11 percent over the last six weeks.

Wednesday's format includes the release of financial results after the market closes at 4 p.m. EDT, followed by an hour conference call. Look for CEO Zuckerberg and COO Sheryl Sandberg to apologize again and tick off remedial actions, some in place, more coming. (Just today, for instance, Facebook published an updated 27-page manual — formerly internal — on how and when it removes content).

Financial analysts (but not journalists listening in) then get to ask some questions, likely a few hard-hitting but predominantly softballs.

Top issues for the financial community include:

  • Has the stock peaked? One analyst opined that once a glamor growth stock falls more than a few points, that marks the end of the upward trajectory.
  • Can Zuckerberg make any sort of case that the company is getting a handle on privacy breaches or its role in spreading fake news, thus being the main enabler of Russian election meddling?.
  • What regulation is coming? In his Congressional testimony, Zuckerberg said that maybe it is time for Facebook to be regulated. But he didn't say how and definitely did not embrace the European model, where both Facebook and Google potentially face huge fines if they fail to promptly remove objectionable content.

For what it's worth, my take is that regulators would find taming Facebook just as difficult or more so than Zuckerberg and his team have.  

It's easy to say "there ought to be a law against that." But just as disruption of old communication channels (phone, mail, legacy news) made Facebook what it is today, laws and policies mandating how it ought to do business don't fit an obvious framework.

It took the FTC more than three years, as I wrote about last fall, to get a handle on the comparatively simple problem of enforceable standards for sponsored content (clear labeling and no under-the-table payoffs for "influencers" who endorse products and services).

So while I am a non-fan of the sit-there-and-take-it lectures in so-called Congressional "hearings," it may not be such a bad strategy to keep the heat on Facebook to self-regulate — or else. Without providing the particulars of what "or else" might be.

Journalists are entitled to view the proceeding through a different lens. Of course, a share of the advertising gains to be reported Wednesday come at the expense, not only of newspaper and magazine sites, but also digital startups that chose as a business model to pursue audience-building with free content and then monetize it with ads.

Then there is the question of whether Facebook can help journalism enterprises in their hour of distress. That could mean either paying for content as well as distributing it (and don't hold your breath for that) or providing important tools to journalists and philanthropic support. 

The latest of a string of talented Google interns and fellows arrived at Poynter this week, leading me to share the common perception that Google is years ahead in this sort of peace-making.

I am focused, I hope not obsessively, on what Zuckerberg thinks and says about journalism and Facebook's impact on supporting the best of what we do informing communities.

A low-light two quarters ago, as I reported, was Zuckerberg's comment in the analysts' call that circulating pictures of your kids trick-or-treating was superior content to feeds of "public" news.

Tough push-back to this sort of thing from our side of the divide is understandable. Zuckerberg has contempt for us, one tweeter opined recently, so I have contempt for him.

My take is only a little milder. Despite recent nods to the value of journalism to communities and employing Campbell Brown as a PR ambassador to news professionals and publishers, Zuckerberg shows no particular understanding or appreciation for what journalists do. 

That's okay; lots of people don't. But Zuckerberg is the only one deciding what 2 billion people see in an omnipresent worldwide communications channel.

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Rick Edmonds is media business analyst for the Poynter Institute where he has done research and writing for the last fifteen years. His commentary on…
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