Facebook Tamping Down On Fake Accounts
At year-end 2017 Facebook had $2.1 billion monthly active users, which grew 14% Y/Y. The chance to reach billions of users on one platform is almost too lucrative for advertisers to pass up. The account growth is also attractive to investors who still see FB as a growth stock. A key question is, “How many of those accounts are fake?” I have heard this question asked about Facebook in the past; however, I never believed the company had an incentive to root out fake accounts.
Per Recode Facebook is creating a detailed plan to fight interference in the 2018 midterm elections, including blocking fake accounts:
Facebook is trying to prevent bad actors from getting started at all. The company says it’s blocking “millions of fake accounts each day at the point of creation.”
If the company blocks millions of fake accounts then it could cause the growth in “reported” MAUs to slow or even reduce the MAU count. This could make the site less valuable to advertisers and potentially cause investors to cool to the stock.
Conclusion
The changes being contemplated by Facebook could reduce the value of its social network and/or hurt MAU growth. FB is up over 10% Y/Y, but the stock could fall now that its business model has come under scrutiny. Sell FB.
