Copyright/privacy notices have resurfaced on Facebook Inc. (FB) based on a hoax that has been doing the rounds for the last two years on the social networking site.
The hoax text alleges Facebook of planning to grab and sell users’ photographs. In response to this text, thousands of Facebook users worldwide have reposted the status on their timelines.
Facebook retaliated to the aforementioned allegations by saying that it does not own its users’ photographs but only has the right to distribute them. Moreover, if users do not want Facebook to distribute their content they can modify their privacy settings accordingly.
We believe that if the circulation of this hoax text is not stopped, then it will impact Facebook’s reputation in an adverse manner, going forward. This, in turn, may even lead to loss of users, which again will slow down its growth in the near term.
Meanwhile. Facebook recently acquired video compression company, Quickfire Networks. Based in San Diego, Quickfire can convert video formats in a short span and allow them to be downloaded with less bandwidth and without compromising on video quality.
We believe that the timing of this acquisition is impeccable as it came a few days after the social networking giant announced that it has had more than 1 billion video views every day since Jun 2014.
Further, we believe that this acquisition will enable Facebook to cope up with the video revolution. Recently, Facebook has been making a push to get its users to upload video directly to its site, instead of linking to videos on other sites like Google’s (GOOGL) Youtube.
Hosting the videos, in turn, is expected to give the company more control over how the videos can be viewed and placed around advertising. Quickfire’s technology is anticipated to enhance the speed of the aforementioned process.
While competition from Yahoo (YHOO), Twitter (TWTR), LinkedIn and Google remains a concern, Facebook is doing rather well with its flagship mobile messaging service, WhatsApp reportedly reaching the 700 million monthly active user mark recently in Jan, 2015.
However, we believe that heightened competition will make it difficult for WhatsApp to restructure its business model for profits and financial viability.
Currently, Facebook has a Zacks Rank #3 (Hold).
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