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Facebook's New Privacy Control Tool to Boost User Confidence

Zacks Equity Research

Facebook FB has been undertaking a number of initiatives to improve privacy and security on its platform and services. These are primarily aimed at improving user engagement, which is crucial for the company’s growth.

The company is rolling out a tool called Off-Facebook Activity, which enables users to better control their privacy. The tool will help users to see apps and websites that share information related to their activities on Facebook.

Moreover, users can opt out of off-Facebook activity tracking or selectively stop certain websites from sending browsing activity to Facebook.

However, this feature will not delete user information from Facebook servers. The data collected will be anonymized and disconnected from individual user accounts.

The company is launching the feature in select geographies including Ireland, South Korea and Spain.

Facebook, Inc. Price and Consensus

Facebook, Inc. Price and Consensus

Facebook, Inc. price-consensus-chart | Facebook, Inc. Quote

Privacy Initiatives to Help Regain Trust

Facebook uses information acquired from third-parties to help advertisers target their campaigns or track off-platform performance of its ads.

However, if users decide to clear Off-Facebook Activity from their accounts, it is expected to reduce the potency of the company’s data for advertisers. This may eventually hurt top-line growth as Facebook derives a significant part of revenues from ads.

The company’s top line is already threatened by privacy laws as suggested by CFO Dave Wehner on the company’s second-quarter earnings call. Management expects revenue growth rates to decline sequentially throughout the rest of 2019 due to “ad targeting-related headwinds.”

Moreover, Facebook faces increasing governmental scrutiny over its privacy practices. The company has been fined $5 billion by the U.S. Federal Trade Commission for mishandling user data.

Nevertheless, Facebook’s recent privacy friendly initiatives are noteworthy. The company is working on making its products and services end-to-end encrypted and ephemeral so that user information is not available for long.

The company has launched a feature that helps users remove messages sent on Messenger. Within a 10-minute window, users can ‘unsend’ any message delivered through Messenger, whether it was sent to a single person or to a group chat.

Notably, Facebook-owned WhatsApp already offers a “delete for everyone” feature.

Also, Facebook launched a tool that will help Android users turn off location tracking. Notably, Apple’s AAPL iOS already offers tools that help users allow, partially allow or totally disallow tracking.

These initiatives are expected to boost user trust and eventually drive engagement across the company’s “Family” of services, which includes Facebook, WhatsApp, Instagram and Messenger.

Zacks Rank & Stocks to Consider

Currently, Facebook carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Computer & Technology sector are Alphabet GOOGL and Microsoft MSFT, both carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here

Long-term earnings growth rate for Alphabet and Microsoft is pegged at 17.5% and 11%, respectively.

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