RBC's Mahaney: Facebook Was Blindsided by Russia

November 8, 2017

Mark Mahaney, lead internet analyst at RBC Capital Markets, said that although reports have emerged that Russia did, in fact, wield its influence on last year's presidential election, buying ads on Facebook and other social media platforms, he thinks that CEO Mark Zuckerberg’s initial rejection was genuine.

“I think Facebook was as surprised as anybody else,” Mahaney said, adding that the company did not know how serious the issue was.

In its latest earnings release, Zuckerberg said "our community continues to grow and our business is doing well, but none of that matters if our services are used in ways that don't bring people closer together. We're serious about preventing abuse on our platforms. We're investing so much in security that it will impact our profitability. Protecting our community is more important than maximizing our profits."

Mahaney said that this is the correct response and that Facebook is “doing what it should be doing.” But he points out that there is probably much more that can be done.

“They’re doubling capex next year … and then they’re increasing their operating expenses by 50 percent,” Mahaney said. He notes that he does agree this would impact Facebook earnings in the future, but it’s a necessary measure in order to ramp up its security system.