Breakingviews - Facebook's long-term problem just got shorter

Facebook Founder and CEO Mark Zuckerberg speaks on stage during the annual Facebook F8 developers conference in San Jose, California, U.S., April 18, 2017. REUTERS/Stephen Lam

NEW YORK (Reuters Breakingviews) - Facebook’s long-term problem just got shorter. Chief Executive Mark Zuckerberg vowed to do more to combat fake content in response to the fallout from Russia-backed ads. As government scrutiny grows, he warned profitability will take a hit at the $500 billion firm.

Zuckerberg’s absence in Washington on Wednesday was widely noted by politicians. Earlier in the day, Facebook’s general counsel was raked over the coals by U.S. senators probing how the Kremlin could effectively push propaganda on social media as it tried to sway the presidential election.

Lawmakers were quick to say it appeared Facebook’s first priority was its business as opposed to national security. California Democrat Kamala Harris even brandished a 10-Q form. Several senators expressed disappointment that Zuckerberg, in addition to his missing counterparts at Twitter and Alphabet unit Google, decided to skip out on the hearings.

It would be a glaring error, even by Silicon Valley’s happy standards, to brush aside the Russian problem on earnings day. Sure, the firm reported its profit jumped almost 80 percent in the third quarter from a year earlier, to nearly $5 billion. That topped analysts’ expectations and fueled a 2.6 percent rise in the stock. But Zuckerberg also said he was “dead serious” about fixing security and that doing so “will significantly impact our profitability going forward.” The shares shed the day’s gain, and a bit more, in after-hours trading.

The company plans to hire more people to police dubious content, doubling the number of such staff to 20,000. As a result, expenses are expected to mushroom by as much as 60 percent next year. That’s a big number even for Facebook. But as the political heat increases, it has little choice but to respond.


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