The Economic Impact of Facebook Outage

Facebook is one of the largest social media firms in the world. The Facebook family of apps, i.e. Facebook, WhatsApp, Instagram, and Messenger are used by over a billion people from all across the world. Most of these services have been in operation for over a decade. All these services seem to function seamlessly almost all of the time.

This is what makes Facebook’s first ever outage a subject of debate across the United States and the world. In this article, we will discuss the economic consequences that this outage in great detail.

The Facebook Outage

There are conflicting accounts about the severity of this outage. Many critics claim that the Facebook outage went on for as long as 22 hours. However, most reliable sources seem to agree that most of Facebook’s network was fully functional within 14 hours.

Also, there is debate whether this outage was faced all across the globe. However, Facebook has stated that its services were affected only in some parts of the globe, i.e. the downtime was not the same all across the globe.

Questions have also been raised about whether this is some sort of an attack by hackers and whether Facebook has relevant systems in place in order to defend against such attacks. Up until now, Facebook has remained tight-lipped about the root cause of this attack. At the present moment, it is more focused on ensuring that the services continue to function seamlessly.

The Lost Revenue

The revenue impact of this outage is difficult to ascertain. However, even if last year’s numbers are simply extrapolated, Facebook seems to have lost a lot of money. According to the last year’s figures released by Facebook, the company earns around $56 billion per annum in revenues. Hence, its hourly revenue can be considered to be close to $6.5 million. Given that the services were down for close to 14 hours, the loss can be put somewhere in the ballpark of $90 million.

However, these numbers are very vague estimates which do not take into account many complexities. Firstly, as mentioned above, all global systems of Facebook were not down for 14 hours. Hence these numbers could be inaccurate. Also, the revenue is not the same throughout the year or even the week. The day and time will also have a huge influence on the actual loss number. The accuracy of the number is not really important here. If the number is even close to $90 million, Facebook has suffered a major setback, and this outage cannot be considered to be inconsequential.

It seems like investors were already aware of these realities. This is why the 14-hour outage has translated into an investor outrage, which has resulted in Facebook’s stock declining by 2%. Facebook has already apologised to users and investors alike for its “worst ever downtime.” At the present moment, the company is in full crisis management mode trying to minimize the monetary impact of this disaster.

New Products

The problem with this outage is that it has removed the aura of infallibility that once surrounded Facebook’s brand. Investors and users no longer believe that Facebook’s systems are rock-solid. This belief could cause the company to lose billions of dollars in terms of lost revenue.

This is because Facebook was planning to venture into cryptocurrency. Facebook had plans to launch Facebookcoin, i.e. a form of cryptocurrency which could be used to facilitate payments via the messenger and other apps. Now, since users are not sure about the security that Facebook’s systems offer, they may prefer not to conduct financial transactions via Facebook. Facebook was planning to rapidly scale up its cryptocurrency business. However, now that might have to be shelved because of this unforeseen event.

Conclusion

The 14 hour outage at Facebook has had a massive economic impact on its financials. Firstly, it has broken the trust which investors had placed in the company’s products. The company’s systems are no longer seen as being infallible. This change in perception is likely to cause a decrease in valuation.

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Authorship/Referencing - About the Author(s)

The article is Written By “Prachi Juneja” and Reviewed By Management Study Guide Content Team. MSG Content Team comprises experienced Faculty Member, Professionals and Subject Matter Experts. We are a ISO 2001:2015 Certified Education Provider. To Know more, click on About Us. The use of this material is free for learning and education purpose. Please reference authorship of content used, including link(s) to ManagementStudyGuide.com and the content page url.


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