Facebook, Google and False Markets

This week, a class action lawsuit was filed against Facebook related to falsified data promoted by Facebook regarding viewership of their video content. The suit filed stems from a report in 2016 where Facebook claimed they had “accidentally” reported false numbers for over two years. At that time, they claimed they had “recently” identified this “error”.

In the original report Facebook claimed they had inflated the numbers by roughly 80%. However, documentation released this week indicate that they had inflated the numbers between 150% and 900%. That’s a pretty wide range, isn’t it?

So, what is the problem with this?

First of all, advertisers pay more for advertising that they assume will reach a certain number of people. If the actual numbers were known, they would have focused advertising efforts and money elsewhere.

Then there are investors, who believe that FB is profitable due to accurate metrics for advertising revenue. If the metrics are false, the revenue is unfounded.

This report comes immediately on the heels of a massive data breach which exposed many millions of FB users to possible privacy issues, up to and including identity theft.

It also comes days after FB and Twitter removed the pages of hundreds of very popular groups, many of which were Progressive groups. In other words, censorship.

This also comes shortly after Google was struck with an antitrust judgement in the EU forcing them to break the Android operating system into components and they paid a massive fine. Again.

For some time, the stock market has been artificially inflated by the FANG stocks- Facebook, Amazon, Netflix, Google. Almost the entire stock market has seemed far more profitable due to the numbers of those four companies, who do not do any manufacturing. They are purely electronic services companies.

So the combined effect of the reports of censorship, data breaches, false metrics and antitrust issues, along with lawsuits and changes these issues bring into being are having an effect on the stock market. Compounding the effects of tariffs and sanctions.

Something many people don’t realize is that inflation may well cause an initial temporary rise in the stock market. Because higher prices make investors eyes light up. However, when inflation is generalized, that rise is short lived as the investors figure out that consumers cannot afford to spend money on as many different products and services, so they shift their spending to essentials.

In the end, these issues have helped bring an end to the claims that the market will keep growing. There is no place for the market to expand any further. The system has been feeding on itself for some time and the FB revelation is an illustration of that. This has been a cycle of false information leading to advertising revenue and investments which have all been an illusion.

The veil is lifting. The show is just beginning.

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