Data Manipulation Shouldn’t Hurt Facebook Inc (NASDAQ:FB) Stock

In a research note issued this morning, Needham believes the economic consequences of Facebook Inc (NASDAQ:FB) manipulating emotional content will be minimal.  They are maintaining their Buy rating on the stock and $80 price target.

For one week in January of 2012, Facebook  manipulated the news feeds of 689,000 of its users without their knowledge, whereby they reduced 1 group of FB users’ exposure to their social networks’ negative comments, and then compared that to a second group where they reduced exposure to their social network’s positive comments.

Facebook then published the results in collaboration with Cornell and UCLA that the tenor of posts received changed the nature of the posts FB users made, implying “a massive-scale emotional contagion”. Lawyers, ethicists, activists, and politicians are calling this work “scandalous”, “spooky” and “disturbing”.

In the worst case, Facebook could be used to incite riots in foreign countries by not forwarding positive comments to those citizens. In the US, politicians are wondering if FB could impact election outcomes given its power to edit what shows up in voters’ newsfeeds.

Facebook (NASDAQ:FB) is the largest social network with 1.276B users. In the US, FB plus Instagram represents one of every eight minutes spent on desktop and one of every five minutes spent on mobile devices. According to comScore, FB plus Instagram represents more mobile time spent than YouTube, Pandora, Yahoo!, Twitter, Pinterest, Tumblr, AOL, Snapchat plus LinkedIn.



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