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Will Focus on Security Benefit Facebook (FB) in Q2 Earnings?

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Will Focus on Security Benefit Facebook (FB) in Q2 Earnings?

Facebook's (FB) second-quarter 2018 results are likely to be driven by the company's focus on securing the social network platform.

Facebook FB is one of the largest custodians of user data, globally. However, the social media giant has been battered by negative headlines related to data privacy, sharing and handling issues in recent times.

The Russian interference in 2016 U.S. Presidential elections, Cambridge Analytica scandal that impacted 87 million subscribers, and rapid proliferation of fake news and terrorism related content have severely tarnished Facebook’s brand image.

However, Facebook has undertaken a number of initiatives to improve security of the platform. These are expected to boost user confidence and positively impact top-line growth in the second-quarter, which the company is set to report on Jul 25.

Click here to know how the company’s overall Q2 performance is likely to be.

AI Strengthens Facebook’s Security Initiatives

Facebook’s CEO, Mark Zuckerberg had earlier stated that “Protecting our community is more important than maximizing our profits.” The company is investing in artificial intelligence (AI) to prevent false news, hate speech, suicide attempts and other abuses spreading rapidly. Facebook noted that its AI technology is successful in identifying 99% of terror content, before anyone notices it.

Facebook has also appointed employees to keep a close watch on the online campaigns. The company stated that beginning May 24, all ads related to elections and other political issues on either Facebook or its photo sharing application, Instagram, would have to be labeled with the payer’s name in the disclaimer section.

Facebook, Inc. Revenue (TTM)

Facebook, Inc. Revenue (TTM) | Facebook, Inc. Quote


The respective label will redirect the user to a “searchable archive” to provide information on the budget of the campaign, number of viewers and the demographic details of the audience. People buying political advertisements would have to mention their identity and location.

This apart, the company removed accounts and pages from its platform, which were allegedly involved in influencing the election results, and has also backed the Honest Ads Act.

Moreover, as part of the Privacy Checkup, Facebook has asked its users to review the Application Dashboard. This is to keep a vigil on the information used by third-party application providers.

Facebook also collaborated with Atlantic Council and the Digital Forensic Research Lab, owned by the latter, for better monitoring of dis-informative campaigns on the platform.

We believe these recent developments and investments from Facebook will tactfully handle the data breach-related risks to further aid in increasing user engagement and instilling investors’ confidence.

For the second-quarter Monthly Active Users (MAUs) worldwide are expected to be 2.25 billion as compared with 2 billion reported in the year-ago quarter.

Zacks Rank and Key Picks

Facebook carries a Zacks Rank #2 (Buy).

Twitter TWTR, Upland Software UPLD and F5 Networks FFIV are stocks worth considering in the broader Computer & Technology sector. While both Upland and F5 Networks carry a Zacks Rank #2 (Buy), Twitter sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

F5 Networks and Twitter is set to report quarterly results on Jul 25 and 27, respectively. Upland is expected to report on Aug 9.

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