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Facebook and Other FANG Companies Under Pressure: Data Mining Scandal Could Burst Tech Bubble

Facebook stock lost about 11% of its value in less than 48 hours. Is Wall Street about to experience the implosion of a new tech bubble? Or are the FANG stocks, which have made double-digit gains since the start of 2018, going to blow up? FANG is an acronym for the market’s biggest leading technology companies: Facebook Inc (NASDAQ:FB), Amazon.com, Inc. (NASDAQ:AMZN), Netflix, Inc. (NASDAQ:NFLX), and Alphabet Inc (NASDAQ:GOOG), the parent company of Google.

Many analysts have avoided the subject of a tech bubble. After all, the last such event provoked a major stock market crash (in 2000). Thus, the focus of the explanation for Facebook stock’s dramatic bearish turn rests on a scandal involving data manipulation and privacy. The case touches on “Russiagate.”

But it also shows two things. The first is that social media platforms are used for new forms of “mining.” The treasure they produce is information and, depending on the level of manipulation, the information can become highly valuable.

Facebook Was Always Going to Be a Target for Data Miners

Facebook is the largest data mining operation in the world, containing the most precious nuggets of information. Still, government officials—and investors—may prefer the discussion to remain in the realm of data privacy because there are other problems that it helps to mask. The main one is the insignificant amount of tax that many FANG companies pay. The subject has come up at the G20 summit in Argentina.

Few are aware that companies like Facebook, Google, or even Amazon pay too little in taxes, exploiting their multinational standings. This is at a time when the governments of the richest countries in the world are growing more concerned about the rising income disparities or inequalities. (Source: “Australia warns G20 leaders the digital economy is ‘no tax-free club’,” ZDNet, March 20, 2018.)

These exacerbate social tensions. For the time being, mainstream politicians are realizing that almost all recent political elections in the West have produced problematic results for their parties (left, center, or right). Those among them who have done their homework will stress the need for fair taxation of FANG companies. Others—and they will prevail for the immediate future—will focus on the media angle and the breach of privacy.