Facebook Has a Problem — CEO Daily, Tuesday, 17th October

Good morning.

My Friday post—which argued Facebook is a media company, despite its protestations otherwise, and needs to accept the responsibilities that go along with that—provoked dozens of responses from CEO Daily readers. Only one of them was favorable to Facebook’s position. In the interest of fairness, let me start this feedback post with the one defender, who is a financier whose analytical responsibilities I respect. He wrote:

FB is an information pipeline, a delivery vehicle in the marketplace of ideas. Is it not up to the consumers of Information to either diligence its veracity themselves, or otherwise turn to professionally curated sources like Time Inc. for confirmation? Why is it necessary or desirable to expect or impose editorial responsibility to the pipeline? Isn’t that like asking the road to maintain itself?

Reasonable, perhaps, but not my view—which is that the Facebook algorithms act as editor, choosing the news you see. Most of those who wrote in agreed. A sampling of the responses:

There’s a responsibility that should attach, at least at some level to the distributor of “facts.” Yet, somehow, Facebook has managed to establish itself as a “fact” distributor, collecting massive revenues, without any of the associated responsibility/liability.”—BW

I think this story is one of the most important of the decade. I say this because this is the first time in human history that two billion have been connected across boundaries in a direct way. The upside and downside is as great as when the railways took over from canals.—DS

This is a very big issue that does not get enough attention. It is why the journalism you and I care about is dying…. It all goes back to the exemption from liability established (in Section 230 of the 1996 Telecommunications Act.)—DB

It seems to me a series of common sense regulations are in order. First, know your customer (same as financial services.) Second, if someone is publishing demonstrably false advertisements on a large scale…further ads from that entity should not be accepted. Third, foreign governments are not protected by the first amendment.—PE

If CEO Daily readers are any guide, Facebook is losing this argument.

More news below.


Alan Murray

Top News

Activist Targets Credit Suisse Breakup

Could Credit Suisse be broken up? RBR, a little-known Swiss-based fund managed by activist Rudolf Bohli, is touting such a plan to senior management after taking a 0.2% stake in the bank, according to Bloomberg’s sources. Bohli is declining to confirm that, and was rebuffed with some ease by a much less complex target earlier this year (asset manager GAM Holding). However, the Financial Times noted that Bohli has some influential supporters, including Gael de Boissard, a former co-head of CS’s investment bank. FT, metered access

Airbus Rides to Bombardier’s Rescue

Airbus has agreed to take a 50.01% stake in Bombardier’s CSeries regional jet program for a nominal sum, rescuing a project that appeared to have been crippled by the imposition of 300% U.S. import tariffs at Boeing’s request. Airbus CEO Tom Enders said his company may be able to perform a critical amount of assembly at its plant in Alabama, thus allowing it to escape the import duties. Boeing called the move a “questionable deal between two state-subsidized competitors.” Fortune

Netflix Surprises Again

Netflix’s rate of growth again beat market expectations. The streaming company added nearly a million more users than it had expected in the third quarter (5.3 million net of churn, as opposed to 4.4 million). The company also raised its estimated spending on original content next year to $8 billion from $7 billion. Netflix now has total content obligations of $17 billion. If revenue continues growing at 30% next year, it will still be around $3 billion short of that. The stock market continues to value Netflix at twice the industry average on a price/sales metric. Fortune

Daimler Prepares for the New Age

Daimler, the parent of Mercedes-Benz, Smart, and Freightliner, announced its plans for the most thorough restructuring since it disposed of Chrysler 10 years ago. It will create three legally separate business units (Cars & Vans, Trucks & Buses, and Services), making it easier to form alliances with ride-hailing or autonomous technology companies, and to divest underperforming businesses. The administrative cost is put at 100 million euros. However, to keep its unions sweet, it’s throwing 3 billion euros at the company pension fund.  Fortune

Around the Water Cooler

Facebook Goes After Teens With App Buy

Facebook bought ‘tbh’, an anonymous messaging app for teens, in an effort to reclaim market share among that age bracket from rivals such as Snap. Terms weren’t disclosed. Apparently, tbh’s founders have no plans to monetize a service that aspires to suppress the kind of bitchy gossiping that other teen-focused apps have encouraged. Facebook reportedly intends to operate it as on a standalone basis. Fortune

Equality Is a Tough Sell

Despite a growing body of research to the contrary, more than a quarter of company directors are still not convinced that diversity in the boardroom helps company performance. A PwC survey of 900 directors found that 16% said gender and racial diversity has no benefit at all, while another 11% said they couldn’t comment because they have no diversity in their boardroom. Fortune

A Picture of Health

UnitedHealth, the country’s biggest health insurer, has gone from strength to strength after abandoning the Affordable Care Act’s individual insurance markets. It raised its full-year forecast Tuesday after posting a larger-than-expected profit in the third quarter. Revenue at its core Optum business, which manages drug benefits and provides data analytics services, rose 8.4%, as overall revenue topped $50 billion. Reuters

Kurds’ Independence Dream Dies as Kirkuk Falls

The battle for Kirkuk was short and, for the Kurdish Regional Government, bitter. Iraqi government troops re-claimed the city Monday, to cheers from its non-Kurdish population. The oilfields around Kirkuk, which were also overrun by government forces, were central to the KRG’s plans for independence (despite being outside of the territory officially under the KRG’s jurisdiction). “We don’t like the fact that they’re clashing, but we’re not taking sides,” President Donald Trump said. TIME

Summaries by Geoffrey Smith; geoffrey.smith@fortune.com


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