Facebook's stock dropped following the resignations of its top executives, Chris Cox, and Chris Daniels. But this is not just the reason for FB's plummeting shares as its involvement in scandals and other controversial issues proved to be negatively affecting its sales and brand reputation.
Trust issues also became a problem now that Facebook has been accused of breaching its users' privacy too. Moreover, just this week, the company received criticisms again after some people were able to upload photos of the mass shootings that took place in New Zealand. There were even live streaming of the massacre and regulatory concerns were brought up in this case.
"Together, we believe these risks are causing a 'Negative Network Effect', as evidenced by senior management departures," Laura Martin and Dan Medina, analysts at Needham wrote. "Referring to this case, the negative impact each additional Facebook user potentially brings to the social network to potentially sway other users."
As it was reported that the New Zealand video of the mass shooting was viewed about 4,000 before it was deleted by Facebook, the social networking site has been ordered by the NZ police to turn in the users who illegally shared the footage, The Daily Mail reported.
Facebook took down the footage when the police informed the company about it. Since then, Facebook deleted over 1.5 million copies that were spread through re-sharing.
"We continue to work around the clock to remove violating content from our site using a combination of technology and people," FB's Chief Censor David Shanks said. "Our priority is to mitigate the harm caused by this material to the New Zealand public, and in particular to the families and loved ones of those who lost their lives in the Christchurch terror attacks."
Due to this incident on top of the executives' departures, Mercury News reported that Facebook shares went down by 3.3 percent this week. Describing why these events have caused Facebook's shares to plummet, Medina and Martin explained, "Network effects act as flywheel accelerator for both value creation and value destruction. The bad news is that network effects can act as either a positive or negative valuation accelerator."
Meanwhile, the authorities already arrested n 18-year-old for the distribution of the Christchurch massacre clip online and more may be indicted after the order has been issued to Facebook. The company has come under fire after a 17-minute video of the Christchurch shooting has emerged on FB's feed.
