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Google, Facebook, Twitter Face Growing Financial Risks From Political Controversies

In their own ways, the three firms could see financial hits from the many controversies that they're currently dealing with.
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As the number of political controversies involving tech companies continues swelling, so is the magnitude of the potential financial fallout from these controversies.

The DOJ added more fuel to the fire on Wednesday when it proposed new rules that -- if passed by Congress and signed by President Trump -- would reduce the legal protections possessed by tech platforms via Section 230 of the Communications Decency Act. Among other things, tech companies would be held liable if their platforms were deemed to purposefully facilitate or solicit illicit user-generated content, and also if content moderation actions were taken that didn’t fit with a platform’s terms of service.

The proposals come three weeks after Trump signed -- in the wake of Twitter  (TWTR) - Get Twitter, Inc. Report adding links to a pair of his tweets about mail-in ballots that lead to a page countering the tweets’ claims -- an executive order that sought to remove an internet platform’s Section 230 protections if the platform was deemed to “engage in deceptive or pretextual actions stifling free and open debate by censoring certain viewpoints.” The order also called for the DOJ to spearhead an effort to reduce ad spend by federal agencies on platforms that it sees as “problematic vehicles for government speech due to viewpoint discrimination, deception to consumers, or other bad practices.”

Even if Congress doesn’t sign off on the DOJ’s proposed rule changes, Twitter (and potentially other platforms in the DOJ’s crosshairs) could see financial consequences from Trump’s executive order in the form of reduced federal ad spend. Also, if a platform such as Twitter feels the need to more extensively combat perceived misinformation on its platform in order to avoid accusations that it’s singling out one or a handful of accounts, that will require it to spend more on content safety.

Lower political ad sales are another way in which tech platforms could be stung by political controversy and their efforts to cope with it. On Tuesday, a few months after Jack Dorsey said that Twitter will stop running political ads, Mark Zuckerberg disclosed through a USA Today op-ed that Facebook  (FB) - Get Meta Platforms Inc. Class A Report will give users the ability to stop seeing political ads.

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Also, though it’s worth noting that past boycotts of Alphabet/Google’s  (GOOG) - Get Alphabet Inc. Class C Report YouTube over its user-generated content didn’t do much long-term damage, Facebook has seen some calls lately for advertiser boycotts from groups that consider its content-moderation policies related to hate speech and misinformation to be too lax.

And at a time when tech giants are collectively dealing with a number of antitrust probes from U.S. and E.U. regulators, the extent to which political controversies are driving broader concerns from both the right and left about whether tech giants have become too powerful can’t be overlooked.

The controversy that flared up on Tuesday regarding the actions of Google’s third-party ad business towards conservative website The Federalist and right-leaning financial/political website Zero Hedge is a good case in point. Google ended its ad relationship with Zero Hedge over its user comments, and threatened to do the same to The Federalist over its user comments.

This sparked accusations of double standards, given that the well-monetized YouTube’s comments section has drawn considerable criticism over the years. And just two weeks after it was reported that a group of state attorneys general are thinking about calling for Google’s third-party ad business to be split from its parent company, Google’s actions have reignited an ongoing debate about the enormous power it wields over media companies.

Ultimately, this general mood -- that tech companies have come to wield too much political, economic and cultural power, and that action needs to be taken to rein them in -- might be the biggest long-term financial consequence of the various political controversies that they’re now dealing with.

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