Investors were initially unruffled by U.S. lawmakers grilling Facebook, Google, and Twitter on Wednesday over Russia’s alleged manipulation of their services leading up to the 2016 presidential elections.
But later in the day, reality set in after Facebook CEO Mark Zuckerberg revealed that his company planned to increase spending to combat fake news and that it would hurt profits. Facebook’s shares, which had risen based on optimism about the company’s third quarter results and a bit more after a stellar report, fell 2.1% in after-hours trading to $178.85.
“I want to be clear what our priority is,” Zuckerberg said in a call with analysts. “Protecting our community is more important than maximizing our profits.”
Part of Facebook’s spending will include hiring 10,000 more workers—a mixture of full-time and contract employees—to review questionable ads and other postings.
One analyst told Zuckerberg that the spending increase was “highly unfortunate,” but added that it made “eminent sense.” Another asked if Facebook’s artificial intelligence technologies could be used instead to help to screen for deceptive content and “mitigate the cost of hiring people.”
Zuckerberg responded that current AI technology is not as good as humans at screening “sensitive content when the stakes are pretty high.” For this reason, Facebook must hire more people while at the same time investing in security technology, which could potentially slow work on some of Facebook’s unrelated products, he explained.
Earlier in the day, before talk of big spending, it was a different story. Shares of the three technology companies hectored by the Senate Intelligence Committee for failing to block bad actors from using their platforms were relatively flat.
In regular trading, Facebook’s (FB) shares had gained 1.44% to $182.66 while Google’s (GOOG) were up roughly 1% to $1,025 (they were flat in after hours). Twitter’s (TWTR) shares fell less than 1% to $20.61 (plus another .5% in after hours).
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Investors had mostly dismissed concerns that increased scrutiny by lawmakers would lead to fundamental changes by Facebook, Google, and Twitter. Now they know better.