The Aftermath of Facebook's Public Relations Firestorm

David MacNeil, Marketing Officer

KEY TAKEAWAYS

• Facebook (now known as “Meta”) was faced with a global user outage on October 4th, alongside alarming whistleblower allegations stating that the company was responsible for prioritizing profits over safety by relaxing its election-related safeguards prior to the riot of the US Capitol Building in January, leaving users across the globe dissatisfied.

• Facebook experienced a significant blow to its ESG performance. According to Orenda’s metrics, its overall ESG standing dropped consistently throughout the month of October – except for a brief period of a few days when Facebook announced its plan to rebrand to “Meta”, which was quickly pushed aside.

• Facebook’s stock price followed suit, as it plummeted a total of 9% from October 1st to October 27th.

CONTEXT

In today’s ever-expanding electronic universe, individuals rely on the internet, video communications software and social media more than ever before. So much so, that their uses have grown far beyond just personal purposes. These applications are now being used by millions of people across the world to conduct business, both at home and in an office environment, which has only been amplified by the COVID-19 pandemic and the corresponding physical distancing measures that have been put in place.

On October 4th, 2021, we witnessed a massive outage of numerous social media applications impacting users across the globe when Facebook’s services became completely unavailable to most users for approximately 6-7 hours. This outage also impacted Instagram and WhatsApp – both of which are owned and operated by Meta (at the time of the incident, still known as “Facebook”).

A small outage here or there is not uncommon for any networking service and is usually forgiven so long as they are resolved in a timely matter. This is the public’s expectation for such a massive social media service hosting millions of daily users. However, as the October 4th outage continued to drag on without resolution, many took to Twitter, which was still up-and-running, to voice their displeasure.

At Orenda, we can determine how Facebook’s reputation and social standing was impacted by community voice by analyzing our unique ESG scores calculated using public Twitter data.

Facebook’s average daily engagement on Twitter over the 30-day period prior to the outage totaled 4,062- a relatively modest number for a brand so large. However, on October 4th, engagement began to rise, spiking to a daily total of over 100,000 – the largest engagement spike that Facebook has seen on Twitter in almost four years, according to Orenda’s metrics.

When analyzing the impact that this outage had on Facebook’s ESG standing, we also witness a noticeable downtrend in scores since the beginning of the month: prior to the October 4th outage. This can be attributed to whistleblower allegations that came out at the beginning of the month from a former employee who accused Facebook of “enabling” the riot on the US Capitol which took place on January 6th 2021 by relaxing its election-related safeguards too soon following the voting process. The whistleblower also stated that the social networking app was responsible for prioritizing profits over safety, and proceeded to leak documents to confirm her claims. She then went on to conduct a television interview in the following days to reveal even more damaging details. This statement, coupled with thousands of documents backing the claims, was enough to erode Facebook’s ESG scores across the board. As it turns out, the global outage was just another layer to what would turn out to be a very damaging month for the Facebook brand.

ESG & STOCK PRICE ANALYSIS

Figure 1 displayed below shows the trend in Facebook’s Overall ESG scores vs the trend in its stock price for the month of October. As you can see, since the 1st of the month, both Facebook’s scores and stock price were already eroding as a result of the whistleblower allegations, and were even further impacted when the outage occurred on the 4th. Each ESG data point represented are an average of the previous 30 days, resulting in a smooth representation of Facebook’s decline.

Between October 1st and October 27th, the company’s stock price dropped approximately 9%.

While Facebook’s Overall ESG score suffered a massive dip throughout the first half of the month, it experienced a brief period of recovery during the week of October 13-20. The reason? Facebook decided to go public with the announcement to officially rebrand the company to “Meta”, and hire thousands of new employees to build what they are calling the “Metaverse”. As a result, its scores and price experienced a sudden boost for almost a week. This boost, however, was short lived as the PR firestorm picked back up on the 21st of October. Many even claimed that the timing of the “Meta rebrand” was in an attempt to blow over the whistleblower allegations and suppress media attention.

Figures 2, and 3 below represent the impact on Facebook’s Social and Governance scores respectively.

First, its social scores experienced consistent erosion all month as tens of thousands of Twitter users discussed the topics online. Specifically, the allegations of Facebook being in-part responsible for the January riots of the US Capitol Building, and of course the frustrations of the October 4th global outage.

As it relates to Facebook’s governance score, we see a slightly different trend. It appears that in the early days of October, it experienced erosion similar to that witnessed in the other categories. However, the decision to rebrand to “Meta” and the announcement of the plans to create the “Metaverse” had a far more adverse impact on its governance scores.

Nonetheless, its score proceeded to dip around October 20th when community voice refused to be silenced by the rebranding announcement, and media attention once again returned to the whistleblower’s revelations.

CONCLUSION

As discussed throughout this case, Facebook was caught up in an extremely eventful month, and as such, experienced unfavorable impact to both its stock price and ESG performance.

Consumers expect a level of trust, decency, and quality of performance from the products and services that they subject themselves to on a daily basis. In October, Facebook failed on all three fronts. As a result, we would expect its stock price to struggle, and in this case that is exactly what occurred.

This isn’t the first time Facebook was faced with very serious allegations impacting consumers, and if they aren’t careful its userbase may consider the use of alternative platforms. For now, the company now known as Meta has appeared to have weathered the storm, however there is no doubt that investors felt the very real impact of the events of October, and should be very wary of such events taking place in the future.