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Twitter, Facebook and other social media stocks are feeling the heat when an analyst says the rules of online engagement are about to change.
Gabby Jones / Bloomberg
Social media stocks fell on Monday as they face fresh scrutiny for their roles in last week’s deadly attack by supporters of President Donald Trump on U.S. Capitol Hill, while Congress was certifying the Electoral College’s victory for the elected president. Biden.
After months – years – of pressure,
Twitter
(ticker: TWTR) on Friday finally suspended President Trump’s account and removed all of his previous tweets, citing concerns that he was inciting violence.
Facebook
(FB) suspended him from at least until the end of his term. Meanwhile,
Amazon.comin
(AMZN) Amazon Web Services, or AWS, on Sunday night suspended its relationship as a host for the right-wing chat service Parler, taking it off the Internet. Both
Alphabetin
(GOOGL) Google and
Apple
(AAPL) had previously removed the Parler app from app stores. Visits to parler.com now generate an error message “this site cannot be accessed”.
Bernstein internet analyst Mark Shmulik believes there may be a ramification for companies in Washington in 2021.
“While the week is certainly remembered for much more shocking events, we have not forgotten that we may be on the precipice of a change in the rules of engagement for the long-standing Internet,” he wrote in a research note on Monday.
Shmulik believes that an increase in potential regulatory activity seems likely.
“We hope that much of the activity will focus on Section 230, although that ignores the point of contention,” he writes, referring to the provision of federal law that protects online businesses from being sued for content posted by users.
But he notes that changing liability laws does not resolve the question of what content is and is not allowed. “It is telling that Facebook has been vocal about seeking regulatory guidance here, going so far as to create its own Supervisory Board in the absence of formal regulation,” he notes. “What we do know is that Internet companies probably don’t want to make that kind of decision. Incremental moderation may be welcome, but it is not cheap and could benefit Facebook, which already employs an army of moderation [that is about] 6 times larger than Twitter’s workforce. “
As to whether social media companies have the right to block Trump or others from their platforms, their answer is that “of course” they can.
“Private companies with clear terms and conditions can remove and suspend violators as they see fit,” he writes. “On the social media front, detractors point to the subjectivity of free speech and moderation – it’s not difficult to find other social media accounts in violation of those same terms and conditions – yet, no other account has authority (as president of the United States ), nor the reach (6th most followed Twitter account) of Donald Trump. “
As for the risks, he notes that there may be a slight drop in the user on Twitter, but adds that there may be other tradeoffs on the advertising side. “Trump’s ban could offer a catalyst for incremental advertising revenue,” he writes. “’Trump’ is the second keyword most blocked by advertisers, after ‘Coronavirus’ …. Remove ‘Trump’ and there will be more brand safe stock available.”
Evercore ISI analyst Benjamin Black points out in a research note on Monday that there are now new and more complex issues surrounding Internet regulation. For example, he asks whether Jack Dorsey, as CEO of Twitter, should ban potentially dangerous groups, while Dorsey, as CEO of Square, should provide payment services to the same groups. “What we know for sure is that the answer is much more about politics and philosophy than about economics,” writes Black.
Black raises more questions than answers – but the questions are interesting. For example, he asks whether social platforms like Facebook, Twitter and Alphabet’s YouTube should be subject to different moderation responsibilities than those of infrastructure providers like AWS, app stores and payment processors.
He also asks whether individual nation-states are able to govern social platforms, “given incentives for ruling parties to abuse this authority to promote their own political ambitions”. Black adds that, although the same problem has arisen in other countries, “the spectacle of rebels on the US Capitol, summoned by an incumbent US President, crystallizes the deficiencies of regulation led by the nation-state.”
As for the potential to break the tech giants, he notes that these moves would do little to deal with the abuse of platforms. “For example, if Facebook and Instagram were separated, this would not have reduced the troublemakers’ ability to organize,” he notes. “Alternatively, if AWS and Amazon were separated, it would not reduce Amazon’s ability to stop providing infrastructure to Parler. In our view, this creates an important challenge for regulators: the most frequently discussed solution does little to directly address key social issues.
In Monday afternoon trading, Twitter closed down 6.4% to $ 48.18, rebounding from a previous 10% drop. Facebook fell 4% to $ 256.84, Alphabet shares fell 2.2% to $ 1,766.72, and Amazon shares fell 2.2% to $ 3,114.21.
Write to Eric J. Savitz at [email protected]